UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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
STATERA BIOPHARMA, INC.
(Exact name of registrant as specified in its charter)
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(Registrant’s telephone number, including area code)
Cytocom, Inc.
(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.
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).
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 | ☐ |
| | ☒ | Smaller reporting company | |
| Emerging Growth Company | |
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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
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
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As of November 11, 2021, there were
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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STATERA BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| September 30, 2021 | December 31, 2020 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Short-term investments | ||||||||
| Accounts receivable | ||||||||
| Due from subsidiary | ||||||||
| Prepaid expenses | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Non-current assets: | ||||||||
| Operating lease right-of-use assets | ||||||||
| Restricted cash | ||||||||
| Goodwill | ||||||||
| Intangible assets, net | ||||||||
| Property and equipment, net | ||||||||
| Contract asset | ||||||||
| Total non-current assets | ||||||||
| Assets of discontinued operation | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Current portion of operating lease liabilities | ||||||||
| Deferred revenue | ||||||||
| Stock issuances due | ||||||||
| Notes payable | ||||||||
| Advances from related party | ||||||||
| Total current liabilities | ||||||||
| Operating lease liabilities, net of current portion | ||||||||
| Long-term debt | ||||||||
| Total long-term liabilities | ||||||||
| Liabilities of discontinued operation | ||||||||
| Total liabilities | ||||||||
| Stockholders’ equity (deficit): | ||||||||
| Preferred stock, $ par value; shares authorized as of September 30, 2021 and December 31, 2020; shares issued and outstanding as of September 30, 2021 and December 31, 2020 | ||||||||
| Common stock, $ par value; shares authorized as of September 30, 2021 and shares authorized as of December 31, 2020; shares issued and outstanding as of September 30, 2021 and shares issued and outstanding as of December 31, 2020 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Statera Biopharma, Inc. stockholders’ equity (deficit) | ( | ) | ||||||
| Noncontrolling interest in stockholders’ equity | ||||||||
| Total stockholders’ equity (deficit) | ( | ) | ||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See Notes to Condensed Consolidated Financial Statements
December 31, 2020 capital structure is not retroactively restated for the recapitalization as a result of the merger
STATERA BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| For the Three Months Ended | For the Nine Months Ended | ||||||||||||||
| September 30, | September 30, | ||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Revenues: | |||||||||||||||
| Grants and contracts | $ | $ | $ | $ | |||||||||||
| Cost of Revenue: | |||||||||||||||
| Cost of goods sold | |||||||||||||||
| Gross Profit | |||||||||||||||
| Operating expenses: | |||||||||||||||
| Research and development | |||||||||||||||
| Sales and marketing expense | |||||||||||||||
| General and administrative | |||||||||||||||
| Total operating expenses | |||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
| Other income (expense): | |||||||||||||||
| Interest and other income (expense) | ( | ) | ( | ) | ( | ) | |||||||||
| Total other income (expense) | ( | ) | ( | ) | ( | ) | |||||||||
| Income from discontinued operations, net of income taxes | ( | ) | ( | ) | |||||||||||
| Net loss | ) | ) | ) | ) | |||||||||||
| Net loss attributable to noncontrolling interests | |||||||||||||||
| Net loss attributable to Statera Biopharma, Inc. | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Net loss attributable to common stockholders per share of common stock, basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Weighted average number of shares used in calculating net loss per share, basic and diluted | |||||||||||||||
See Notes to Condensed Consolidated Financial Statements
STATERA BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
| For the Three Months Ended |
For the Nine Months Ended |
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| September 30, |
September 30, |
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| 2021 |
2020 |
2021 |
2020 |
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| Net loss including noncontrolling interests |
$ | ) | $ | ) | $ | ) | $ | ) | |||||||
| Other comprehensive loss: |
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| Foreign currency translation adjustment |
( |
) | ( |
) | |||||||||||
| Comprehensive loss including noncontrolling interests |
( |
) | ( |
) | ( |
) | ( |
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| Comprehensive loss attributable to noncontrolling interests |
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| Comprehensive loss attributable to Statera Biopharma, Inc. |
$ | ) | $ | ) | $ | ) | $ | ) | |||||||
See Notes to Condensed Consolidated Financial Statements
STATERA BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
| Additional |
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| Common Stock |
Paid-In |
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| Shares |
Amount |
Capital |
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| Balance at December 31, 2019 |
$ | $ | ||||||||||
| Retroactive application of recapitalization |
( |
) | ||||||||||
| Adjusted balance, beginning of period |
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| Issuance of common stock |
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| Issuance of common stock |
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| Exercise of warrants |
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| Exercise of warrants |
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| Exercise of warrants |
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| Foreign currency translation |
— | |||||||||||
| Net loss |
— | |||||||||||
| Balance at September 30, 2020 |
$ | $ | ||||||||||
| Balance at December 31, 2020 |
$ | $ | ||||||||||
| Exercise of warrants |
( |
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| Issuance of common stock |
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| Statera merger & recapitalization |
( |
) | ||||||||||
| Shares to be issued for services |
— | |||||||||||
| Shares to be issued for stock based compensation |
— | |||||||||||
| Restricted stock |
— | |||||||||||
| Panacela net loss |
— | |||||||||||
| Net loss |
— | |||||||||||
| Balance at September 30, 2021 |
$ | $ | ||||||||||
| Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Noncontrolling Interests | Total | |||||||||||||
| Balance at December 31, 2019 | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Retroactive application of recapitalization | ( | ) | ||||||||||||||
| Adjusted balance, beginning of period | ( | ) | ( | ) | ||||||||||||
| Issuance of common stock | ||||||||||||||||
| Issuance of common stock | — | — | — | | ||||||||||||
| Exercise of warrants | ||||||||||||||||
| Exercise of warrants | ||||||||||||||||
| Exercise of warrants | ||||||||||||||||
| Foreign currency translation | ( | ) | ( | ) | ( | ) | ||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||
| Balance at September 30, 2020 | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||
| Balance at December 31, 2020 | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||
| Exercise of warrants | ||||||||||||||||
| Issuance of common stock | ||||||||||||||||
| Statera merger & recapitalization | ( | ) | ( | ) | ||||||||||||
| Shares to be issued for services | ||||||||||||||||
| Shares to be issued for stock based compensation | ||||||||||||||||
| Restricted stock | ||||||||||||||||
| Panacela net loss | — | ( | ) | — | - | |||||||||||
| Net loss | — | ( | ) | ( | ) | ( | ) | |||||||||
| Balance at September 30, 2021 | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||
See Notes to Condensed Consolidated Financial Statements
As retroactively restated for the recapitalization as a result of the merger
STATERA BIOPHARMA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Nine Months Ended September 30, | ||||||||
| 2021 |
2020 |
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| Cash flows from operating activities: |
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| Net loss |
$ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
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| Depreciation expense |
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| Amortization expense |
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| Stock based compensation |
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| Noncash interest expense |
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| Noncash lease expense |
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| Services obtained for common shares |
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| Noncash equity expenses |
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| Changes in operating assets and liabilities: |
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| Other current assets |
( |
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| Accounts receivable |
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| Short term investments |
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| Due from subsidiary |
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| Prepaid expenses |
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| Contract asset |
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| Contract liability |
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| Deferred revenue |
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| Stock issuances due |
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| Investment in subsidiary |
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| Liabilities of discontinued operations |
( |
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| Accounts payable and accrued expenses |
( |
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| Net cash used in operating activities |
( |
) | ( |
) | ||||
| Cash flows from investing activities: |
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| Purchase of property and equipment |
( |
) | ( |
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| Cash acquired, ImQuest acquisition |
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| Cash acquired, CBLI merger |
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| Net cash provided by (used in) investing activities |
( |
) | ||||||
| Cash flows from financing activities: |
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| Proceeds from issuance of common stock |
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| Common stock issued for license agreement |
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| Proceeds from issuance of preferred shares |
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| Proceeds from issuance of common stock due |
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| Proceeds from advance from related party |
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| Repayments on notes payable |
( |
) | ||||||
| Payment of debt issuance costs |
( |
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| Proceeds from issuance of long-term debt |
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| Net cash provided by financing activities |
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| Effect of exchange rate change on cash and equivalents |
( |
) | ||||||
| Increase in cash and cash equivalents |
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| Cash, cash equivalents, and restricted cash, beginning of year |
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| Cash, cash equivalents, and restricted cash, end of year |
$ | $ | ||||||
| SUPPLEMENTAL CASH FLOW INFORMATION: |
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| Cash paid for interest |
$ | $ | ||||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES: |
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| Right of use asset exchanged for lease liability |
$ | $ | ||||||
| Shares to be issued for services |
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| Debt principal converted to equity |
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| Merger non-cash APIC |
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| Noncontrolling interest acquired |
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| Cleveland BioLabs merger, net of cash received |
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| Acquisition of ImQuest, net of cash received |
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See Notes to Condensed Consolidated Financial Statements
STATERA BIOPHARMA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Description of Business
On July 27, 2021, Statera Biopharma, Inc., formerly known as Cleveland BioLabs, Inc. (the "Company" or "Statera"), High Street Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of the Company ("Merger Sub"), and Cytocom Inc., a Delaware corporation ("Old Cytocom"), completed their previously announced merger transaction. The merger transaction was completed pursuant to an Agreement and Plan of Merger (the “Merger Agreement”), dated as of October 16, 2020, pursuant to which Merger Sub merged with and into Old Cytocom, with Old Cytocom continuing as a wholly owned subsidiary of the Company and the surviving corporation of the merger (the "Merger"). In connection with the closing of the Merger, Old Cytocom was renamed “Cytocom Subsidiary Inc.” and the Company was renamed “Cytocom, Inc.” Effective September 1, 2021, the Company changed its corporate name to "Statera Biopharma, Inc.", and the Company’s common stock began trading on The Nasdaq Capital Market with the symbol “STAB.”
The Company was incorporated in Delaware in June 2003 and is headquartered in Fort Collins, Colorado. Prior to the Merger, the Company conducted business in the United States ("U.S.") directly and in the Russian Federation ("Russia") through subsidiaries: wholly owned subsidiary, BioLab 612, LLC ("BioLab 612"), which began operations in 2012 and was dissolved in November 2020; 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, or the context otherwise requires, the terms "Statera Biopharma," the "Company," "we," "us," and "our" refer to Statera Biopharma, Inc., known as "Cleveland BioLabs, Inc." prior to the Merger, BioLab 612, and Panacela.
On June 24, 2021, Old Cytocom completed the acquisition of ImQuest Life Sciences, Inc. and its subsidiaries (“ImQuest”) in accordance with the Agreement and Plan of Merger by and among Old Cytocom and ImQuest dated as of July 17, 2020, and gained control of ImQuest. The purchase consideration due under this merger to the ex-shareholders of ImQuest consisted of
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
Statera Biopharma is a clinical-stage biopharmaceutical company developing novel immunotherapies targeting autoimmune, neutropenia/anemia, emerging viruses and cancers based on a proprietary platform designed to rebalance the body’s immune system and restore homeostasis. Statera has one of the largest platforms of toll-like receptor (TLR) agonists in the biopharmaceutical industry with TLR4 and TLR9 antagonists, and the TLR5 agonists, Entolimod and GP532. TLRs are a class of protein that play a key role in the innate immune system.
Statera is developing therapies designed to directly elicit within patients a robust and durable response of antigen-specific killer T-cells and antibodies, thereby activating essential immune defenses against autoimmune, inflammatory, and infectious diseases and cancers. In the next 12 months, the Company expects to initiate clinical trials covering Crohn’s disease (STAT-201), hematology (Entolimod), pancreatic cancer (STAT-401) and COVID-19 (STAT-205).
Going Concern
At September 30, 2021, the Company had cash and cash equivalents of $
Management intends to fund future operations through additional private or public debt or equity offerings and may seek additional capital through arrangements with strategic partners or from other sources. Based on the Company’s operating plan, existing working capital as of September 30, 2021 was not sufficient to meet the cash requirements to fund planned operations for a period of one year after issuance of condensed financial without additional sources of cash. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern and do not include adjustments that might result from the outcome of this uncertainty. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business.
The accompanying condensed consolidated financial statements for the nine months ended September 30, 2021 and 2020 have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. During the next 12 months from the issuance of these condensed financial statements, management intends to raise additional debt and/or equity financing to fund future operations and to provide additional working capital. However, there is no assurance that such financing will be consummated or obtained in sufficient amounts necessary to meet the Company’s needs.
2. Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
These unaudited interim condensed consolidated financial statements reflect the historical results of Old Cytocom prior to the completion of the Merger, and do not include the historical results of the Company prior to the completion of the Merger. All share and per share disclosures have been adjusted to reflect the exchange of shares in the Merger. Under U.S. generally accepted accounting principles ("GAAP"), the Merger is treated as a “reverse merger” under the purchase method of accounting. For accounting purposes, Old Cytocom is considered to have acquired Cleveland BioLabs, Inc. See Note 3, Merger with Old Cytocom, for further details on the Merger and the U.S. GAAP accounting treatment.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America pursuant to the requirements of the Securities and Exchange Commission (“SEC”) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for the fair presentation of results for the periods presented, have been included. The results of operations of any interim period are not necessarily indicative of the results of operations for the full year or any other interim period. These condensed consolidated 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, 2020, as filed with the SEC.
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 September 30, 2021, along with its results of operations for the three and nine month periods ended September 30, 2021 and 2020 and cash flows for the nine-month periods ended September 30, 2021 and 2020. Interim results are not necessarily indicative of results that may be expected for any other interim period or for an entire year.
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.
Other Comprehensive Income (Loss)
The Company applies the Accounting Standards Codification ("ASC") 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 nine months ended September 30, 2021.
| Gains and losses on foreign exchange translations | ||||
| Beginning balance | $ | |||
| Other comprehensive income (loss) before reclassifications | ( | ) | ||
| Amounts reclassified from accumulated other comprehensive loss | ||||
| Ending balance | $ | ( | ) | |
Accounting for Stock-Based Compensation
The Cleveland Biolabs, Inc. Equity Incentive Plan, adopted in 2018 (the "Plan"), authorizes the Company to grant (i) options to purchase common stock, (ii) stock appreciation rights, (iii) awards of restricted or unrestricted stock, (iv) restricted stock units, and (v) performance awards, 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 September 30, 2021, an aggregate of
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 September 30, 2021, there are
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.
Income Taxes
At September 30, 2021, the Company had U.S. federal net operating loss carryforwards of approximately $
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 September 30, 2021.
| As of September 30, | ||||||||
| Common Equivalent Securities | 2021 | 2020 | ||||||
| Warrants | ||||||||
| Restricted Stock Units | ||||||||
| Options | ||||||||
| Total | ||||||||
Contingencies
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.
Revenue Recognition
Upon the integration of the newly acquired ImQuest, the Company has implemented the five steps to recognize revenue from contracts with customers under ASC 606, Revenue from Contracts with Customers (“ASC 606”), which are:
• Step 1: Identify the contract(s) with a customer
• Step 2: Identify the performance obligations in the contract
• Step 3: Determine the transaction price
• Step 4: Allocate the transaction price to the performance obligations in the contract
• Step 5: Recognize revenue when (or as) a performance obligation is satisfied
In the nine months ended September 30, 2021, the Company generated revenue from its Clinical Research Organization services (“CRO services”) provided by ImQuest.
The Company provides preclinical CRO services to evaluate the potential of new and novel pharmaceutical products for the treatment and prevention of viruses, bacteria, cancer and inflammatory diseases. These preclinical research services include compound screening, efficacy analysis, drug target validations, mechanism of action research, and toxicity studies in multiple pharmaceutical areas.
The Company has concluded that each provision of its CRO services is a distinct and single performance obligation as the customer benefits from the services once they have the opportunity to question the findings and receive the final report which summarizes the research results. Management determined each promised good and service in the contract related to its CRO services should be bundled into a single performance obligation because even though the contract explicitly states individual promises such as consultation services combined with a range of tests that are carried out in order to conduct the preclinical research, the culmination of the individual promises is the CRO services which is a single performance obligation.
The amount the Company earns for its CRO services is typically a fixed fee per project. Revenue from the project is recognized at the point in time when the final report is delivered to the customer and thus the performance obligation is satisfied. At the time the final report is delivered: (a) the Company has the right to payment for the report, (b) the customer has legal title to the report, (c) physical transfer of the report has occurred and the customer has taken possession of the report, (d) the customer now has benefit and the risk of ownership of the report, and (e) the customer has accepted the report. Revenue collected in advance of delivery of the final report is classified as a contract liability on the consolidated balance sheet
At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
Collaborative Arrangements
The company accounts for transactions under collaborative arrangements under the same method as described above under ASC 606.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities at the date of purchase of three months or less to be cash equivalents. Cash and cash equivalents include bank demand deposits, marketable securities with maturities of three months or less at purchase, and money market funds that invest primarily in certificates of deposits, commercial paper and U.S. government and U.S. government agency obligations. Cash equivalents are reported at fair value. As of September 30, 2021 and December 31, 2020 there were
Restricted Cash
The Company considers all cash held for specific reasons and not available for immediate, normal business use as restricted cash. As of September 30, 2021 and December 31, 2020 the Company had $
Accounts Receivable
Accounts receivable are recorded net of an allowance for credit losses, which is recorded as an offset to accounts receivable and changes in such are classified as general and administrative expense in the consolidated statements of operations. The Company assesses collectability by reviewing accounts receivable on an individual basis when the Company identifies specific customers with known disputes or collectability issues. The Company assesses past due amounts by reviewing the payment terms of the contracts with the Company’s customers. In determining the amount of the allowance for credit losses, the Company makes judgments about the creditworthiness of customers based on ongoing credit evaluations. The Company writes off uncollectable accounts receivable against the allowance based on facts and circumstances for specific customers when management determines that collectability is remote. There is
Goodwill
We test goodwill for impairment in our fourth quarter each year, or more frequently if indicators of an impairment exist, to determine whether it is more likely than not that the fair value of the reporting unit with goodwill is less than its carrying value. For reporting units for which this assessment concludes that it is more likely than not that the fair value is more than its carrying value, goodwill is considered not impaired and we are not required to perform the goodwill impairment test. Qualitative factors considered in this assessment include industry and market considerations, overall financial performance, and other relevant events and factors affecting the fair value of the reporting unit. For reporting units for which this assessment concludes that it is more likely than not that the fair value is below the carrying value, goodwill is tested for impairment by determining the fair value of each reporting unit and comparing it to the carrying value of the net assets assigned to the reporting unit. If the fair value of the reporting unit exceeds its carrying value, goodwill is considered not impaired. If the carrying value of the reporting unit exceeds its fair value, we would record an impairment loss up to the difference between the carrying value and implied fair value.
Intangible Assets
The Company has
The Company reviews all finite lived intangible assets for impairment when circumstances indicate that their carrying values may not be recoverable. If the carrying value of an asset group is not recoverable, the Company recognizes an impairment loss for the excess carrying value over the fair value in its consolidated statements of operations.
3. Merger with Old Cytocom
On July 27, 2021, the Company, formerly known as Cleveland BioLabs, Inc., Merger Sub, and Old Cytocom completed their previously announced merger transaction. The merger transaction was completed pursuant to the Merger Agreement, pursuant to which Merger Sub merged with and into Old Cytocom, with Old Cytocom continuing as a wholly owned subsidiary of the Company and the surviving corporation of the Merger. Immediately upon completion of the Merger, the former stockholders of Old Cytocom stockholders held a majority of the voting interest of the combined company.
Under the terms of the Merger, at the effective time of the Merger, the Company issued shares of its common stock to Old Cytocom stockholders (but excluding those Old Cytocom stockholders who had been holders of stock of ImQuest prior to merger between Old Cytocom and ImQuest in June 2021), at an exchange ratio of
At the effective time of the Merger, the Company also became party to a number of warrants that had been issued by Old Cytocom. At the time of the Company’s first draw under the Loan and Security Agreement, dated as of April 26, 2021, between Avenue Venture Opportunities Fund, L.P. (“Avenue”) and Old Cytocom, as supplemented by the Supplement to the Loan and Security Agreement, dated as of April 26, 2021, between Avenue and Old Cytocom (the “Avenue Facility”), which occurred July 30, 2021, the Company issued a warrant (the “Avenue Warrant”) to purchase an aggregate of
In connection with the Company’s entry into the Amended and Restated Share Purchase Agreement, dated as of July 27, 2021, by and among GEM Global Yield LLC SCS, GEM Yield Bahamas Limited (such entities together, “GEM”) and the Company, as successor to Old Cytocom (the “GEM Agreement”), Old Cytocom issued a warrant (the “GEM Warrant”) to GEM. At the closing of the Merger, the GEM Warrant automatically became an obligation of the Company. The GEM Warrant is exercisable for an aggregate of
Immediately after the closing of the Merger, the Company issued warrants (the “2021 Warrants”) to the purchasers of Old Cytocom’s Series A-3 Preferred Stock and Series A-4 Preferred Stock, each of which were converted immediately prior to the closing of the Merger, exercisable for up to an aggregate of
The Company’s management has evaluated all the terms of the warrant agreements and determined that the warrants shall be accounted for as equity instruments as no conditions exist under ASC 480 to account for these as liabilities.
All Old Cytocom vested restricted stock units outstanding prior to the effective time of the Merger were exchanged for shares of the Company’s common stock in accordance with the Exchange Ratio. Each unvested Old Cytocom restricted stock unit was converted into a number of restricted stock units of the Company, as determined in accordance with the exchange ratio formula described above. The terms (including, without limitation, the vesting terms) of each such substitute restricted stock unit are substantially equivalent to those of the Old Cytocom restricted stock unit being replaced.
Cleveland BioLabs, Inc. equity awards issued and outstanding at the time of the Merger remained issued and outstanding and were not impacted by the Merger. As of July 27, 2021, Cleveland BioLabs, Inc. had outstanding stock options to purchase
Allocation of Purchase Consideration
Pursuant to business combination accounting, the Company applied the acquisition method, which requires the assets acquired and liabilities assumed be recorded at fair value with limited exceptions.
The purchase price for Cleveland BioLabs, Inc. on July 27, 2021, the closing date of the Merger, was as follows:
| July 27, 2021 | ||||
| Number of shares of the combined company owned by Cleveland BioLabs, Inc. stockholders | (1 | ) | ||
| Multiplied by the price per share of Cleveland BioLabs, Inc. common stock | $ | (2 | ) | |
| Total purchase price | $ | |||
| 1. |
Represents the number of shares of common stock of the combined company that Cleveland BioLabs, Inc. stockholders owned as of the closing of the Merger pursuant to the Merger Agreement. This amount is calculated as |
| 2. |
The fair value of Cleveland BioLabs, Inc. common stock used in determining the purchase price was $ |
Under the acquisition method of accounting, the total purchase price was allocated to tangible and identifiable intangible assets acquired and liabilities assumed of Cleveland BioLabs, Inc. on the basis of their estimated fair values as of the transaction closing date on July 27, 2021.
The following table summarizes the allocation of the purchase consideration to the assets acquired and liabilities assumed based on their fair values as of July 27, 2021:
| July 27, 2021 | ||||
| Tangible Assets Acquired | ||||
| Cash and cash equivalents | $ | |||
| Other receivables | ||||
| Other current assets | ||||
| Fixed assets - net | ||||
| Panacela (% ownership) | ||||
| Total Tangible Assets | ||||
| Assumed Liabilities | ||||
| Accounts payable | ( | ) | ||
| Accrued expenses | ( | ) | ||
| Total Liabilities | ( | ) | ||
| Net Tangible Assets/Liabilities | ||||
| Intangible Assets Acquired | ||||
| In-process R&D | ||||
| Total Intangible Assets Acquired | ||||
| Goodwill | ||||
| Total Net Assets Acquired | $ | |||
The Company believes that the historical values of Cleveland BioLabs, Inc.’s current assets and current liabilities approximate fair value based on the short-term nature of such items. The final allocation of the purchase price is dependent on the finalization of the valuation of the fair value of assets acquired and liabilities assumed and may differ from the amounts included in these financial statements. The Company expects to complete the final allocation as soon as practical but no later than one year from the acquisition date.
The Accumulated Cost Method was used to value the Intellectual Property/Technology (in–process research & development) intangible assets based on historical costs.
Goodwill
The excess of the purchase price over the assets acquired and liabilities assumed represents goodwill. The goodwill is primarily attributable to the synergies expected to arise after the acquisition and is expected to be deductible for tax purposes.
Transaction Costs
Transaction costs associated with the Merger of approximately $
Pro Forma Results in connection with the Merger
The Company’s operating results include $
The unaudited financial information in the following table summarizes the combined results of operations of the Company and Cleveland BioLabs, Inc., on a pro forma basis, as if the Merger occurred at the beginning of the periods presented.
| Nine Months Ended September 30, |
||||||||
| 2020 |
2021 |
|||||||
| Revenue |
$ | $ | ||||||
| Net loss |
$ | ( |
) |
$ | ( |
) | ||
The above unaudited pro forma information was determined based on historical GAAP results of Old Cytocom, ImQuest and Cleveland BioLabs, Inc. The unaudited pro forma combined results do not necessarily reflect what the Company’s combined results of operations would have been, if the acquisition was completed on January 1, 2020. The unaudited pro forma combined net loss includes pro forma adjustments primarily related to the following non-recurring items directly attributable to the business combinations:
| • |
Combined transaction costs of $ |
4. Other Current Assets
Other current assets consist of the following:
| September 30, 2021 |
December 31, 2020 |
||||||
| Vendor escrow |
$ | ||||||
| Deferred debt issuance costs |
|||||||
| Security deposits |
|||||||
| Other current assets |
|||||||
| $ | $ | ||||||
5. Prepaid Expenses
Prepaid expenses consist of the following:
| |
|
September 30, 2021 |
December 31, 2020 |
|||||||
| Insurance |
|
|
$ | |||||||
| Dues and subscriptions |
||||||||||
| Clinical research costs |
||||||||||
| Consultants and contractors |
||||||||||
| $ | $ | |||||||||
6. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of the following:
| September, 2021 |
December 31, 2020 |
||||||
| Accounts payable |
$ | $ | |||||
| Accrued warrant liability |
|||||||
| Accrued payroll |
|||||||
| Accrued interest and fees |
|||||||
| Accrued legal settlement fee | |||||||
| Other accrued expenses |
|||||||
| $ | $ | ||||||
7. Notes Payable and Advances from Related Party
Notes payable consist of the following:
| September 30, 2021 | December 31, 2020 | ||||||
| Short-term portion of Avenue Ventures note payable | $ | $ | |||||
| Short-term notes payable | |||||||
| $ | $ | ||||||
As of September 30, 2021 and December 31, 2020, Statera had accrued $
Advances from related party consist of the following:
| | September 30, 2021 | December 31, 2020 | ||||||
| Advance from Noreen Griffin | $ | $ | ||||||
| $ | $ | |||||||
Refer to Note 16 for further information regarding the advance received from Noreen Griffin.
8. Long-term debt
Long-term debt consists of the following:
| September 30, 2021 |
December 31, 2020 |
|||||||
| Long-term portion of Avenue Ventures note payable |
$ | $ | ||||||
| $ | $ | |||||||
9. Leases
The Company’s leases do not provide an implicit rate that can be readily determined. Therefore, the Company uses discount rates based on the incremental borrowing rate of its current external debt of
The Company’s weighted-average remaining lease term relating to its operating leases is
The Company incurred lease expense for its operating leases of $
The following table presents information about the future maturity of the lease liability under the Company’s operating leases as of September 30, 2021.
| Maturity of Lease Liability |
Total |
|||
| 2021 |
$ | |||
| 2022 |
||||
| 2023 |
||||
| 2024 |
||||
| 2025 |
||||
| Thereafter |
||||
| Total undiscounted lease payments |
||||
| Less: Imputed interest |
||||
| Present value of lease liabilities |
$ | |||
| Remaining lease term (years) |
||||
10. Equipment
Equipment, net as of September 30, 2021 and December 31, 2020, consists of the following:
| September 30, 2021 |
December 31, 2020 |
|||||||
| Computer equipment |
$ | $ | ||||||
| Furniture and Fixtures |
||||||||
| Laboratory Equipment |
||||||||
| Accumulated depreciation |
( |
) | ( |
) | ||||
| Net carrying value |
$ | $ | ||||||
During the nine months ended September 30, 2021 and 2020, the Company recorded total depreciation expense of $
11. Business Combination – ImQuest Acquisition
On June 24, 2021, Old Cytocom closed its acquisition and gained control of ImQuest Life Sciences and its subsidiaries (“ImQuest”). Old Cytocom acquired a
At close, as consideration for the acquisition Old Cytocom was required to issue up to a maximum of
The Company recorded Goodwill in the amount of $
12. Intangible assets
Intangible assets, net as of September 30, 2021 and December 31, 2020, consists of the following:
| September 30, 2021 |
December 31, 2020 |
|||||||
| Customer base |
$ | $ | ||||||
| Trade-names/marks |
||||||||
| Accumulated amortization |
( |
) | ||||||
| Net carrying value |
$ | $ | ||||||
The purchase price allocation accounting for the Imquest acquisition is preliminary, as the Company is still undergoing fair value studies. Any purchase price accounting may be adjusted in future accounting periods once consideration is paid and actual amounts are known.
During the nine months ended September 30, 2021 and 2020, the Company recorded total amortization expense of $
13. Fair Value of Financial Instruments
The Company has measured and recorded short-term investments and certain warrants as 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. |
Short-term investments primarily include certificates of deposit at commercial banking institutions, with maturities of three months or more at time of purchase. Certificates of deposit are carried at amortized cost, which approximates fair value and are included as a Level 2 measurement in the table below.
There were
| As of September 30, 2021 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: | ||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | ||||||||||||
| Short-term investments | — | | — | | ||||||||||||
| Total assets | $ | $ | $ | $ | ||||||||||||
| Liabilities: | ||||||||||||||||
| Accrued warrant liability | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||
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 | |||||||
| September 30, 2021 | September 30, 2020 | |||||||
| Accrued Warrant Liability | Accrued Warrant Liability | |||||||
| Beginning Balance | $ | ( | ) | $ | ||||
| Total (gains) or losses, realized and unrealized, included in earnings (1) | ||||||||
| Issuances | ||||||||
| Settlements | ||||||||
| Ending Balance | $ | ( | ) | $ | ||||
| (1) Unrealized gains or losses related to the accrued warrant liability were included as change in value of accrued warrant liability. There were |
The accrued warrant liability of $
As of September 30, 2021 and December 31, 2020, the Company had
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.
14. Stockholders’ Equity
On February 19, 2021, the Company entered into a Securities Purchase Agreement (the "Purchase Agreement") for the sale of
Following the closing of the Merger, Wainwright notified the Company of its election to cause the Company to repurchase the Placement Agent Warrants, as well as another series of warrants issued to Wainwright in 2020, for an amount of cash equal to the Black Scholes Value, as determined under the terms of the Placement Agent Warrants. The Company is in discussions with Wainwright about Wainwright’s purported exercise of the repurchase right.
The Company has granted options to employees and Board members to purchase shares of common stock. The following is a summary of option award activity during the nine months ended September 30, 2021:
| Total Stock Options Outstanding | Weighted Average Exercise Price per Share | |||||||
| December 31, 2020 | $ | |||||||
| Granted | — | — | ||||||
| Vested | — | — | ||||||
| Forfeited, Canceled | ( | ) | ||||||
| September 30, 2021 | $ | |||||||
The following is a summary of outstanding stock options as of September 30, 2021:
| As of September 30, 2021 | ||||||||
| Stock Options Outstanding | Vested Stock Options | |||||||
| Quantity | ||||||||
| Weighted Average Exercise Price | $ | $ | ||||||
| Weighted Average Remaining Contractual Term (in Years) | ||||||||
| Intrinsic Value | $ | $ | — | |||||
For the nine months ended September 30, 2021 and 2020, the Company granted
As of September 30, 2021, there was no total compensation cost yet recognized related to unvested stock options.
As of September 30, 2021, there are
15. 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 $
The following table summarizes the outstanding warrant activity during the nine months ended September 30, 2021:
| Number of Warrants | Weighted Average Exercise Price | |||||||
| December 31, 2020 | $ | |||||||
| Granted | ||||||||
| Exercised | ( | ) | ||||||
| Forfeited, Canceled | ( | ) | ||||||
| September 30, 2021 | $ | |||||||
Of the
16. Significant Alliances and Related Parties
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 Global Head of R&D, Dr. Andrei Gudkov, is the Senior Vice President of Research Technology and Innovation at RPCI. The Company incurred $
The Cleveland Clinic
The Company has entered into an exclusive license agreement with The Cleveland Clinic pursuant to which the Company was granted an exclusive license to The Cleveland Clinic’s research base underlying entolimod's therapeutic platform and certain product candidates licensed to Panacela. The Company has the primary responsibility to fund all newly developed patents. However, The Cleveland Clinic retains ownership of those patents covered by the agreement. The Company 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, the Company sublicensed the intellectual property underlying entolimod's composition that the Company licenses from The Cleveland Clinic to GPI. There were no milestone or royalty payments paid to The Cleveland Clinic during the nine months ended September 30, 2021 and 2020. The Company incurred
Buffalo BioLabs and Incuron
Our Global Head of Research and Development, 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
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 $
Genome Protection
GPI incurred $
Noreen Griffin
Noreen Griffin served as Chief Executive Officer of Old Cytocom from the date of its incorporation until June 30, 2020, and as President of Old Cytocom from April 1, 2020 until September 30, 2020. As of September 30, 2021, Ms. Griffin also owned directly
In April, 2021 the Company received an advance from Ms. Griffin in the amount of $
17. Commitments and Contingencies
On March 19, 2021, a putative class action complaint, captioned Litwin v. Cleveland BioLabs, Inc. et al., Case 2021-0242, was filed in the Delaware Court of Chancery in connection with the Merger (the “Litwin Action”). The Litwin Action names as defendants Cleveland BioLabs, each director on the Cleveland BioLabs board of directors, and the Vice President of Finance of Cleveland BioLabs. The complaint in the Litwin Action alleges that Defendants omitted and/or provided misleading information in the registration statement on Form S-4 filed with the SEC in connection with the Merger, of which this proxy statement/prospectus forms a part, in breach of their fiduciary duties. The Litwin Action seeks, among other things, an injunction preventing the closing of the Merger, rescission of the merger if it is consummated, the dissemination by Cleveland BioLabs of a revised registration statement on Form S-4 and an award of plaintiffs’ attorneys’ and experts’ fees. Plaintiff in the Litwin Action has filed a motion for expedited proceedings, which Defendants have opposed. Plaintiff’s motion for expedited proceedings was granted in part and denied in part by the court on April 30, 2021. Defendants have also filed a motion to dismiss the Litwin Action. On July 7, 2021, Plaintiff filed a stipulation and proposed order voluntarily dismissing the case but reserving the right to seek attorneys’ fees. On July 8, 2021, the Delaware Court of Chancery entered an order dismissing the case but reserving jurisdiction to determine whether to award Plaintiff’s counsel any fees, should Plaintiff’s counsel file a motion for such.
As of the balance sheet date management believes that it is probable that a settlement will be reached. Management estimates the likely settlement amount to be $
18. Subsequent Events
Management evaluated all events or transactions that occurred after September 30, 2021 through the date the financial statements were filed.
On November 9, 2021, at the Company’s annual meeting of stockholders, among other routine matters, the Company’s stockholders voted to amend the Plan to increase the number of shares of Common Stock authorized to be issued by
On November 9, 2021, and pursuant to a release dated November 8, 2021, the Company remitted cash payment of $
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, 2020. Factors that may cause such differences include, but are not limited to, the substantial doubt expressed about our ability to continue as a going concern, the outcome of any legal proceedings that have been or may be instituted against the Company related to the merger agreement or the Merger; unexpected costs, charges or expenses resulting from the Merger; 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 historical reliance on government funding for a significant portion of our operating costs and expenses; government contracting processes and requirements; the exercise of significant influence over our company by our largest individual stockholder; 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, 2020.
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, 2020.
OVERVIEW
We are a clinical-stage biopharmaceutical company developing multiple product candidates to address unmet medical needs. Prior to the closing of the Merger, we focused exclusively on developing novel approaches to activate the immune system. 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 in this field is entolimod, an immune-stimulatory agent, which we are developing as a radiation countermeasure and other indications in radiation oncology.
Following the closing of the Merger, as a result of the integration of Cytocom’s business, we are also now developing novel immunotherapies targeting autoimmune, inflammatory, infectious diseases and cancers based on a proprietary, multi receptor platform, or the AIMS platform, designed to rebalance the body’s immune system and restore homeostasis. These therapies are designed to elicit directly within patients a robust and durable response of antigen-specific killer T cells and antibodies, thereby activating essential immune defenses against autoimmune, inflammatory, infectious diseases, and cancers. We believe that our technologies can meaningfully leverage the human immune system for prophylactic and therapeutic purposes by eliciting killer T-cell response levels not achieved by other published immunotherapy approaches. Our immunomodulatory technology restores the balance between the cellular (Th1) and the humoral (Th2) immune systems. Immune balance is regulated through T-helper cells that produce cytokines. The Th1 lymphocytes help fight pathogens within cells like cancer and viruses through interferon-gamma and macrophages. The Th2 lymphocytes target external pathogens like cytotoxic parasites, allergens, toxins through the activation of B-cells and antibody production to effect to dendritic cells, which are natural activators of killer T cells, also known as cytotoxic T -cells, or CD8+ T cells. Furthermore, the Cytocom technology antagonizes the toll-like receptors to inhibit proinflammatory cytokines.
Prior to the closing of the Merger, we conducted business in the U.S. directly and in Russia through two subsidiaries, one of which is wholly owned, BioLab 612 (which was dissolved in November 2020), and one of which is owned in collaboration with a financial partner, Panacela. As of the closing of the Merger, we also now conduct business through Old Cytocom and its subsidiaries, ImQuest Life Sciences Inc, ImQuest BioSciences Inc., ImQuest Pharmaceuticals, Inc., and Lubrinovation Inc. 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").
The Company is developing therapies designed to directly elicit within patients a robust and durable response of antigen-specific killer T-cells and antibodies, thereby activating essential immune defenses against autoimmune, inflammatory, infectious diseases, and cancers. Statera has clinical or preclinical programs for Crohn’s disease (STAT-201), hematology (Entolimod), pancreatic cancer (STAT-401) and COVID-19 (STAT-205).
In the next 12 months, the Company expects to initiate several clinical trials, including a pivotal Phase 3 trial for its lead drug candidate, STAT-201, in pediatric Crohn’s disease, as well as studies of STAT-205 in ‘long haul’ COVID-19, STAT-401 in pancreatic cancer, and the TLR5 agonist entolimod as a treatment for anemia and neutropenia in cancer patients.
Recent Developments
La Jolla Institute for Immunology
On August 1, 2021, the Company entered into a collaboration agreement to fund research and laboratory facilities at the La Jolla Institute for Immunology (LJI), a not-for-profit academic institution and a world leader in immunology research. The agreement is directed to research that will support the development of potential new immune-modulating agents targeting toll-like receptors for the treatment of cancer, infectious, autoimmune and chronic inflammatory diseases. The research will harness Statera’s proprietary drug discovery and development platform technology.
Under the terms of the research agreement, the La Jolla Institute may select up to four laboratories to participate in research. Statera will provide research funding to these laboratories for projects of mutual interest or for research projects commissioned by Statera that explore immune modulation and the action of therapeutics on target toll-like receptors. Toll-like receptors are central to an immune response, connecting innate and adaptive immune compartments, and thus key to fighting disease as well as restoring immune homeostasis. In addition to the research funding for the selected projects, Statera will pay to the La Jolla Institute $350,000 per year for each selected laboratory, for a total annual discretionary funding contribution of up to $1.4 million, in addition to the research funding itself. Statera will also provide researchers at the La Jolla Institute with samples and materials. In return, Statera will have a first option to negotiate a license to new discoveries by the La Jolla Institute that arise from the research projects of common interest funded by Statera, however Statera will own any new discoveries that arise from research projects of interest to Statera that have been commissioned to the La Jolla Institute as “work for hire.”
Change in the Company’s Certifying Accountant
On September 28, 2021, the Audit Committee of the Board of Directors of the Company approved the engagement of Turner, Stone & Company, LLP (“Turner Stone”) as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2021, subject to completion of Turner Stone’s standard client acceptance process and execution of an engagement letter, and dismissed Meaden & Moore (“M&M”) as the Company’s independent registered public accounting firm.
The report of M&M on the Company’s consolidated financial statements for the fiscal years ended December 31, 2020 did not contain an adverse opinion or a disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles. M&M's report on the Company's consolidated financial statements for the fiscal year ended December 31, 2019 did not contain an adverse opinion or a disclaimer of opinion but contained a modified opinion, as it included an explanatory paragraph describing the net capital deficiency that raised substantial doubt about its ability to continue as a going concern.
During the years ended December 31, 2020 and 2019 and the subsequent interim period through September 28, 2021: (i) the Company had no disagreements (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) with M&M on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to M&M’s satisfaction, would have caused M&M to make reference thereto in its reports on the Company’s financial statements for such years, and (ii) there were no “reportable events,” as that term is defined in Item 304(a)(1)(v) of Regulation S-K, other than with respect to the Company’s previously reported determination that as of December 31, 2019, the Company’s internal control over financial reporting was not effective.
During the years ended December 31, 2020 and 2019 and the subsequent interim period through September 28, 2021, neither the Company, nor anyone acting on the Company’s behalf, consulted Turner Stone regarding: (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, and neither a written report nor oral advice was provided to the Company that Turner Stone concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing, or financial reporting issue, or (ii) any matter that was either the subject of a disagreement as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions or a “reportable event” described in Item 304(a)(1)(v) of Regulation S-K.
COVID-19 Pandemic
The COVID-19 pandemic has continued to affect most countries around the world, including the United States, where a national emergency was declared in 2020. The continued spread of COVID-19 in the United States and worldwide, as well as the government-ordered shutdowns and shelter-in-place orders imposed to counter the pandemic, led to severe disruptions to the global economy, especially for the year ended December 31, 2020. 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 implemented a work-from-home policy for all employees based in our Buffalo, New York, which was then our headquarters office. Under new applicable New York state orders, our offices may be occupied at their normal capacity if other safety precautions are taken; however, very few of our employees have returned to the office. None of our other offices, including our new headquarters in Ft. Collins, Colorado, has been required to shut down due to COVID-19.
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. 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 effectiveness of vaccination efforts, ultimate geographic spread of the disease, the duration of the outbreak, the impact of any new variants of the virus, 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. Furthermore, if we or any of the third parties with whom we engage were to experience renewed 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.
Business After the Merger
We are a clinical-stage company and we have generated insignificant revenue from product sales to date. Our ability to generate revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our product candidates. Since inception, we have incurred significant operating losses. For the three months ended September 30, 2021 and 2020, we incurred net losses of $12.7 million and $5.7 million, respectively. As of September 30, 2021, we had an accumulated deficit of $52.3 million.
We expect to incur significant expenses and operating losses for the foreseeable future as we advance our lead candidates through clinical trials, progress our pipeline candidates from discovery through pre-clinical development, and seek regulatory approval and pursue commercialization of our candidates. In addition, if we obtain regulatory approval for any of our candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. In addition, we may incur expenses in connection with the in-license or acquisition of additional technology to augment or enable development of future candidates. Furthermore, we expect to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses that Old Cytocom, our predecessor for accounting purposes, did not incur as a private company prior to the Merger.
As a result, we will need additional financing to support our continuing operations. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity and debt financings or other sources, which may include collaborations with third parties. We do not expect that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements beyond the first quarter of 2022.
Adequate additional financing may not be available to us on acceptable terms, or at all. Our inability to raise capital as and when needed could have a negative impact on our financial condition and our ability to pursue our business strategy. We will need to generate significant revenue to achieve profitability, and we may never do so.
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. Additionally, we expect that as a result of the Merger, our business, financial condition, results of operations and cash flows will be materially different in future periods than in the past. Accordingly, our past results are not likely to be indicative of our future performance.
Revenue
The Company generates revenue from (i) its Clinical Research Organization services (“CRO services”) provided by its ImQuest subsidiary, and (ii) grant awards from the National Institutes of Health for multiple studies in research. We have no products approved for sale. Other than the sources of revenue described above, we do not expect to receive any revenue from any candidates that we develop until we obtain regulatory approval and commercializes such products, or until we potentially enter into collaborative agreements with third parties for the development and commercialization of such candidates.
At the inception of a contract for CRO services, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
There is no explicit guidance within ASC 606 to account for grant revenue, and since the Company is a for-profit entity, it must look to other Financial Accounting Standards Board guidance in order to account for funds received from grants. The Company has determined it is appropriate to apply ASC 450 - Contingencies.
Under ASC 450, the recognition of a gain contingency occurs at the earlier of when the gain has been realized or the gain is realizable. The gain is realized when the Company performs the research under the grant and submits the expense reimbursements to the NIH and is approved under the terms of the grant the funds are then received. The Company determined ASC 450 is appropriate because the realization of the gain is contingent on whether the Company meets the performance requirement. Once the Company performs the research, submits the financial report for approval, and the cash disbursement occurs, the contingency is thus resolved, and the recognition of grant revenue is realized.
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, benefits 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.
Advertising and Marketing Costs
Advertising costs are expensed as incurred and included in operating expenses on the statements of operations. The Company incurred advertising and marketing expense for the nine months ended September 30, 2021 and 2020 of $26,037 and $0, respectively, and for the three months ended September 30, 2021 and 2020 of $23,242 and $0, respectively.
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 Estimates
The condensed consolidated financial statements include estimates made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations. These significant accounting estimates include the inputs to level 3 valuation techniques for valuing the identified intangible assets in the ImQuest acquisition, valuation allowances associated with deferred tax assets, and revenue recognition in accordance with ASC 606.
Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020
Revenue
Revenue increased from $0 for the three months ended September 30, 2020 to $236,519 for the three months ended September 30, 2021. This increase is due entirely to the revenues recorded after July 1, 2021 from sales of CRO services by ImQuest BioSciences. There were no CRO services revenues in the corresponding period of 2020, as the merger with ImQuest only took place in June 2021. No revenues were generated from awards from the National Institutes of Health for studies in research in the three months ended September 30, 2021 or 2020.
Cost of Revenues
Cost of revenue increased from $0 for the three months ended September 30, 2020 to $115,927 for the three months ended September 30, 2021. This increase is due entirely to the cost of revenues recorded after July 1, 2021 from sales to CROs by ImQuest BioSciences. There were no cost of revenues in the corresponding period of 2020, as the ImQuest Merger only took place in June 2021.
Research and Development Expenses
R&D expenses decreased from $4.38 million for the three months ended September 30, 2020 to $3.43 million for the three months ended September 30, 2021, representing a decrease of $0.95 million, or 21.6%. Variances are noted in the table below. The net decrease is primarily attributable to one-time patent expenses totaling $3.8 million incurred for the three months ended September 30, 2020 related to the transfer of intellectual property to the Company by Immune Therapeutics, Inc., Old Cytocom’s former parent company, ($(0.1) million for the three months ended September 30, 2021), offset by increased spending on R&D programs for the three months ended September 30, 2021 ($3.4 million), compared to $0.5 million for the three months ended September 30, 2020.
| Three Months Ended September 30, |
||||||||||||
| 2021 |
2020 |
Variance |
||||||||||
| STAT-201: Crohn's disease |
$ | 1,642,041 | $ | 34,415 | $ | 1,607,626 | ||||||
| STAT-205: Acute and post-acute Covid-19 |
419,596 | 379,872 | 39,724 | |||||||||
| STAT-401: Pancreatic cancer |
384,025 | — | 384,025 | |||||||||
| STAT-601: Entolimod for acute radiation |
49,022 | — | 49,022 | |||||||||
| Other expenses |
940,293 | 3,969,037 | (3,028,744 | ) |
||||||||
| Total research & development expenses |
$ | 3,434,977 | $ | 4,383,325 | $ | (948,348 | ) |
|||||
General and Administrative Expenses
G&A expenses increased from $1.8 million for the three months ended September 30, 2020 to $6.3 million for the three months ended September 30, 2021, representing an increase of $4.5 million or 252.8%. Variances are noted in the table and discussed below.
| Three Months Ended September 30, |
||||||||||||
| 2021 |
2020 |
Variance |
||||||||||
| Payroll (including benefits) |
$ | 3,632,142 | $ | 1,079,978 | $ | 2,552,164 | ||||||
| Stock listing expenses |
835,145 | 223,808 | 611,337 | |||||||||
| Professional fees |
554,159 | 366,940 | 187,219 | |||||||||
| Consultants and contractors |
427,551 | 43,667 | 383,884 | |||||||||
| Insurance |
149,267 | 13,403 | 135,864 | |||||||||
| Travel |
51,483 | 36,687 | 14,796 | |||||||||
| Other G&A expenses |
656,577 | 22,850 | 633,727 | |||||||||
| Total general & administrative expenses |
$ | 6,306,323 | $ | 1,787,333 | $ | 4,518,990 | ||||||
Payroll (including benefits) incudes salaries, health benefits and related payroll costs. The increase in payroll expense was primarily attributable to the increase in the number of employees whose costs are accounted for as G&A expenses, plus an additional cost of $1,923,565 for stock-based compensation incurred in the third quarter of 2021 over the comparative cost in the same period in 2020. Employee headcount for G&A purposes at September 30, 2020 and 2021 was 13 and 22, respectively. Growth in headcount for G&A purposes between 2020 and 2021 reflects (i) the addition of four employees in 2021 as result of the Merger and the ImQuest Merger, and (ii) the addition of seven new employees in total, several of whom were hired in senior executive roles to complete the Company’s leadership team plus the addition of staff in finance, human resources, information technology and investor relations, offset by the transfer of two employees to R&D.
Stock listing expenses are made up of fees paid to maintain the listing of the Company’s common stock on The NASDAQ ($141,865 and $0 for the three months ended September 30, 2021 and 2020, respectively), the costs of an investor relations program using outside consultants and databases ($182,617 and $42,307 for the three months ended September 30, 2021 and 2020, respectively), costs incurred with advisors to raise new debt and equity required by the Company ($487,500 and $179,650 for the three months ended September 30, 2021 and 2020, respectively), and the costs charged by stock transfer agents to maintain the Company’s share registers ($23,162 and $1,850 for the three months ended September 30, 2021 and 2020, respectively).
Professional fees comprise fees paid for services to lawyers (other than lawyers who are engaged for services related to R&D), accountants, and the Company’s firm of auditors. Fees paid to lawyers in the three months ended September 30, 2021 and 2020 totaled $420,704 and $344,440, respectively. The higher in fees 2021 arose primarily from costs to close the Merger and the ImQuest Merger, and legal fees incurred in 2021 to defend lawsuits related to the Merger.
Fees paid to accountants in the three months ended September 30, 2021 and 2020 totaled $92,055 and $22,500, respectively. The higher in fees 2021 arose primarily from the use of outside accounting consultants to assist with the compilation of reports and filings required under securities laws to complete the Merger and the ImQuest Merger.
Fees paid to the audit firms engaged by the Company in the three months ended September 30, 2021 and 2020 totaled $41,400 and $0, respectively. The audit services were required filings required under securities laws to complete the Merger and the ImQuest Merger. Audit services only commenced in the fourth quarter of 2020.
Consultants and contractors are individuals and firms hired by the Company to provide certain investment banking and advisory services, to assist the Company with the implementation of a new enterprise resource planning (“ERP”) system, to provide valuation reports required to complete the accounting for the Merger and to assist with other general matters. Fees paid to consultants and contractors in the three months ended September 30, 2021 and 2020 totaled $427,551 and $43,667, respectively. The increase was attributable primarily to services required to complete the Merger in 2021.
Insurance expenses comprise fees and premiums paid to insurance companies from which the Company purchased policies to protect against loss or damage to its assets and intellectual property, to protect itself against claims for damage caused to third parties by its clinical trials or products used in trials or sold to customers, coverage for workers’ compensation payable for injuries suffered by its employees, and losses incurred by its directors and officers in certain circumstances in the performance of their duties. Insurance premiums and costs in the three months ended September 30, 2021 and 2020 totaled $149,267 and $13,403, respectively. The increase was attributable primarily to additional insurance added in 2021 to protect the Company against claims for damage caused to third parties by its clinical trials or products used in trials or sold to customers, and losses incurred by its directors and officers in certain circumstances in the performance of their duties.
Travel. The Company maintains offices in a number of locations in the United States. As a result of the Merger, new offices were added in 2021 in Colorado, California, Maryland, and New York, requiring an increase in travel between locations. Travel expenses increased accordingly between the three months ended September 30, 2020 and 2021 from $36,687 to $51,483, respectively.
Other G&A expenses comprise costs to operate and lease office space, non-capital expenditures incurred for office furniture and equipment, telecommunication and internet expenses, postage and courier costs, and bank charges. Other G&A expenses increased year over year primarily as a result of the addition of new office locations and employees in 2021 in Colorado, California, Maryland, and New York.
Other Income and Expenses
Interest and other income of $491,817 in the three months ended September 30, 2020 was made up of a $1,034,000 gain on reversal of accruals for prior period payrolls owed, resulting from the waiver by certain employees of their past-due payroll accruals in exchange for new employment contracts with the Company, plus a gain of $38,500 from the extinguishment of certain notes payable, offset by interest and other share-related expenses of $580,683.
Interest and other expense of ($3,089,301) in the three months ended September 30, 2021 was made up of an accrual for legal settlement costs of $2,065,835 and by interest and other share-related expenses of $1,023,466.
Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020
Revenue
Revenue increased from $0 for the nine months ended September 30, 2020 to $236,519 for the nine months ended September 30, 2021. This increase is due entirely to the revenues recorded after July 1, 2021 from sales of CRO services by ImQuest BioSciences. There were no CRO services revenues in the corresponding period of 2020, as the ImQuest Merger only took place in June 2021. No revenues were generated from awards from the National Institutes of Health for multiple studies in research in the nine months ended September 30, 2021 or 2020.
Cost of Revenues
Cost of revenue increased from $0 for the nine months ended September 30, 2020 to $115,927 for the nine months ended September 30, 2021. This increase is due entirely to the cost of revenues recorded after July 1, 2021 from sales to CROs by ImQuest BioSciences. There were no cost of revenues in the corresponding period of 2020, as the ImQuest Merger only took place in June 2021.
Research and Development Expenses
R&D expenses increased from $4.51 million for the nine months ended September 30, 2020 to $6.28 million for the nine months ended September 30, 2021, representing an increase of $1.77 million, or 39.1%. Variances are noted in the table below. The net increase is primarily attributable to (i) an increase in payroll and benefits costs, which rose from $293,815 for the nine months ended September 30, 2020 to $2,198,390 for the nine months ended September 30, 2021, and (ii) the cost of contractors hired for clinical trials, which rose from $0 to $3,461,855 for the nine months ended September 30, 2020 and 2021, respectively, offset by a decrease of one-time patent expenses related to the transfer of intellectual property to the Company by Immune Therapeutics, Inc., which fell from $3,838,130 for the nine months ended September 30, 2020 to $146,730 for the nine months ended September 30, 2021. The increase in payroll costs was attributable to (i) an increase in R&D-related headcount, which grew from three employees at September 30, 2020 to 19 at September 30, 2021, and (ii) the cost of $581,198 for stock-based compensation incurred for the nine months ended September 30, 2021 ($0 for corresponding period in 2020).
| Nine months Ended September 30, |
||||||||||||
| 2021 |
2020 |
Variance |
||||||||||
| STAT-201: Crohn's disease |
$ | 2,260,325 | $ | 44,327 | $ | 2,215,998 | ||||||
| STAT-205: Acute and post-acute Covid-19 |
2,041,271 | 457,348 | 1,583,923 | |||||||||
| STAT-401: Pancreatic cancer |
690,957 | - | 690,957 | |||||||||
| STAT-601: Entolimod for acute radiation |
49,022 | - | 49,022 | |||||||||
| Other expenses |
1,233,361 | 4,008,215 | (2,774,854 | ) |
||||||||
| Total research & development expenses |
$ | 6,274,936 | $ | 4,509,890 | $ | 1,765,046 | ||||||
General and Administrative Expenses
G&A expenses increased from $2.3 million for the nine months ended September 30, 2020 to $15.0 million for the nine months ended September 30, 2021, representing an increase of $12.7 million or 555.8%. Variances are noted in the table and discussed below.
| Nine months Ended September 30, |
||||||||||||
| 2021 |
2020 |
Variance |
||||||||||
| Payroll (including benefits) |
$ | 9,265,652 | $ | 1,372,278 | $ | 7,893,374 | ||||||
| Stock listing expenses |
1,220,052 | 238,722 | 981,330 | |||||||||
| Professional fees |
2,036,307 | 393,641 | 1,642,666 | |||||||||
| Consultants and contractors |
1,238,114 | 195,017 | 1,043,097 | |||||||||
| Insurance |
409,637 | 13,403 | 396,234 | |||||||||
| Travel |
97,758 | 37,886 | 59,872 | |||||||||
| Other G&A expenses |
713,566 | 33,630 | 679,936 | |||||||||
| Total general & administrative expenses |
$ | 14,981,086 | $ | 2,284,577 | $ | 12,696,509 | ||||||
Payroll (including benefits) incudes salaries, health benefits and related payroll costs. The increase in payroll expense was primarily attributable to the the number of employees whose costs are accounted for as G&A expense, plus the cost of $5,266,385 for stock-based compensation incurred in the nine months ended September 30, 2021 ($0 in the corresponding period in 2020). Employee headcount for G&A purposes at September 30, 2020 and 2021 was 13 and 22, respectively. Growth in headcount for G&A purposes between 2020 and 2021 reflects (i) the addition of four G&A employees in 2021 as result of the Merger and the ImQuest Merger, and (ii) the addition of seven new employees in total, several of whom were hired in senior executive roles to complete the Company’s leadership team plus the addition of staff in finance, human resources, information technology and investor relations, offset by the transfer of two employees to R&D.
Stock listing expenses are made up of fees paid to maintain the listing the Company’s stock on The NASDAQ ($159,463 and $0 for the nine months ended September 30, 2021 and 2020, respectively), the costs of an investor relations program using outside consultants and databases ($270,899 and $55,022 for the nine months ended September 30, 2021 and 2020, respectively), costs incurred with advisors to raise new debt and equity required by the Company ($759,753 and $179,650 for the nine months ended September 30, 2021 and 2020, respectively), and the costs charged by stock transfer agents to maintain the Company’s share registers ($29,938 and $4,050 for the nine months ended September 30, 2021 and 2020, respectively).
Professional fees comprise fees paid for services to lawyers (other than lawyers who are engaged for services related to R&D), accountants, and the Company’s firm of auditors. Fees paid to lawyers in the nine months ended September 30, 2021 and 2020 totaled $1,707,353 and $363,641, respectively. The higher in fees 2021 arose primarily from costs to close the Merger and the ImQuest Merger, and legal fees incurred in 2021 to defend lawsuits related to the Merger.
Fees paid to accountants in the nine months ended September 30, 2021 and 2020 totaled $131,101 and $30,000, respectively. The higher in fees 2021 arose primarily from the use of outside accounting consultants to assist with the compilation of reports and filings required under securities laws to complete the Merger and the ImQuest Merger, and to prepare the Company’s income tax filings in 2021.
Fees paid to the audit firms engaged by the Company in the nine months ended September 30, 2021 and 2020 totaled $197,853 and $0, respectively. The audit services were required filings required under securities laws to complete the Merger and ImQuest Merger. Audit services only commenced in the fourth quarter of 2020.
Consultants and contractors are individuals and firms hired by the Company to provide certain investment banking and advisory services, to assist the Company with the implementation of a new ERP system, to provide valuation reports required to complete the accounting for the Merger and to assist with other general matters. Fees paid to consultants and contractors in the nine months ended September 30, 2021 and 2020 totaled $1,238,114 and $195,017, respectively. The increase was attributable primarily to services required to complete the Merger in 2021.
Insurance expenses comprise fees and premiums paid to insurance companies from which the Company purchased policies to protect against loss or damage to its assets and intellectual property, to protect itself against claims for damage caused to third parties by its clinical trials or products used in trials or sold to customers, coverage for workers’ compensation payable for injuries suffered by its employees, and losses incurred by its directors and officers in certain circumstances in the performance of their duties. Insurance premiums and costs in the nine months ended September 30, 2021 and 2020 totaled $409,637 and $13,403, respectively. The increase was attributable primarily to additional insurance added in 2021 to protect the Company against claims for damage caused to third parties by its clinical trials or products used in trials or sold to customers, and losses incurred by its directors and officers in certain circumstances in the performance of their duties.
Travel. The Company maintains offices in a number of locations in the United States. As a result of the Merger, new offices were added in 2021 in Colorado, California, Maryland and New York, requiring an increase in travel between locations. Travel expenses increased accordingly between the nine months ended September 30, 2020 and 2021 from $37,886 to $97,758, respectively.
Other G&A expenses comprise costs to operate and lease office space, non-capital expenditures incurred for office furniture and equipment, telecommunication and internet expenses, postage and courier costs, and bank charges. Other G&A expenses increased year over year primarily as a result of the addition of new office locations and employees in 2021 in Colorado, California, Maryland and New York.
Other Income and Expenses
Interest and other expense of ($1,069,403) in the nine months ended September 30, 2020 was made up of a $1,034,000 gain on reversal of accruals for prior period payrolls owed, resulting from the waiver by certain employees of their past-due payroll accruals in exchange for new employment contracts with the Company, offset by loan origination fees of $1,000,000, interest expense of $133,903, a loss on extinguishment of debt of $461,500, and other share-related expenses of $508,000.
Interest and other expense of ($3,463,572) in the nine months ended September 30, 2021 was made up of an accrual for legal settlement costs of $2,065,835, interest expense of $1,115,578, and other share-related expenses of $282,158. The year-over-year increase in interest expense was caused by a $15 million increase in notes payable in April 2021 and the interest incurred on the Decathlon note payable acquired through the merger with ImQuest.
Liquidity and Capital Resources
At September 30, 2021, we had cash and cash equivalents of $9.2 million, which represents an increase of $8.6 million since the end of our last fiscal year. This increase was caused by our capital raise in the first quarter of 2021 together with cash contributed through the process of the Merger, offset by our net cash used in operations of $20.1 million during the nine months ended September 30, 2021. As discussed above, we are a clinical-stage company, have generated only insignificant revenues to date, and have incurred cumulative net losses and expect to incur significant expenses and operating losses for the foreseeable future as we advance our lead candidates through clinical trials, progress our pipeline candidates from discovery through pre-clinical development, and seek regulatory approval and pursue commercialization of our candidates. We do not have commercial products other than CRO services, we have limited capital resources, and our contracts and grants with the Department of Defense were completed in 2020, meaning that we are currently generating limited revenues and cash from operations. We do not expect our cash and cash equivalents will be sufficient to fund our projected operating requirements or allow us to fund our operating plan, in each case, beyond the first quarter of 2022. As a result, we will need additional financing to support our continuing operations. Historically, we have funded our operations through the sale of equity and debt securities, as well as the receipt of funded grants. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity and debt financings or other sources, which may include collaborations with third parties, 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. However, we can provide no assurance that we will be able to raise cash in sufficient amounts, when needed or at acceptable terms. We do not expect that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements beyond the first quarter of 2022. 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 included elsewhere in this Quarterly Report on Form 10-Q 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.
Since the end of the fiscal quarter ended June 30, 2021, as a result of the Merger, we have become party to several new financing arrangements, including a credit facility and equity line-of-credit agreement, that have provided us with additional cash in the aggregate amount of approximately $10 million (see “ – Sources of Liquidity”). We have the capacity to make further borrowings and drawings under these facilities, which can provide us with additional working capital.
Cash Flows
The following table provides information regarding our cash flows for the nine months ended September 30, 2021 and 2020:
| For the Nine Months Ended September 30, |
||||||||||||
| 2021 |
2020 |
Variance |
||||||||||
| Cash flows used in operating activities |
$ | (20,064,262 | ) |
$ | (8,363,019 | ) |
$ | (11,701,243 | ) |
|||
| Cash flows provided by (used in) investing activities |
13,559,901 | (6,613 | ) |
13,566,514 | ||||||||
| Cash flows provided by financing activities |
20,128,855 | 8,688,090 | 11,440,765 | |||||||||
| Effect of exchange rate on cash and cash equivalents | (2,014 | ) | - | (2,014 | ) | |||||||
| Increase in cash and cash equivalents |
13,622,480 | 318,458 | 13,304,022 | |||||||||
| Cash and cash equivalents at beginning of period |
593,869 | 1,650 | 592,219 | |||||||||
| Cash, restricted cash and cash equivalents at end of period |
$ | 14,216,349 | $ | 320,108 | $ | 13,896,241 | ||||||
Operating Activities
Net cash used in operating activities increased by $11.7 million to $20.1 million for the nine months ended September 30, 2021 from $8.4 million for the nine months ended September 30, 2020. Net cash used in operating activities for the period ending September 30, 2021 consisted of a reported net loss of $24.6 million, which was further increased by $1.9 million of changes in operating assets and liabilities, partially decreased by $6.45 million of net non-cash operating activities. The $1.9 million of changes in operating assets and liabilities was due primarily to an increase in prepaid expenses, liabilities of discontinued operations, other current assets, and contract assets, partially offset by increases in deferred revenues, stock issuances due, and accounts payable and accrued expenses.
Net cash used in operating activities for the nine months ended September 30, 2020 of $8.4 million consisted of a reported net loss of $7.9 million, which was further increased by $0.1 million of net non-cash operating activities and $0.4 million of changes in operating assets and liabilities. The $0.4 million of changes in operating assets and liabilities was due primarily to a decrease in other current assets.
Investing Activities
Net cash provided by investing activities increased to $13.56 million for the nine months ended September 30, 2021 from $(0.01) million for the nine months ended September 30, 2020, reflecting the $13.65 million acquisition of net assets primarily through the Merger, partially offset by the purchase of $0.1 million of property and equipment.
Financing Activities
Net cash provided by financing activities increased to $20.1 million for the nine months ended September 30, 2021 from $8.7 million for the nine months ended September 30, 2020 due to the issuance of $14.7 million of long-term notes payable and $5.7 million due to the issuance of common stock, partially offset by note repayments and payment of deferred debt issuance costs totaling $0.4 million during the nine months ended September 30, 2021.
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 the closing date of the Merger on July 27, 2021 and September 30, 2021, this rate fluctuated by 1.4%. For calendar year 2020, our results were not affected by any such fluctuations. 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 (a loss of $0.02 million for the nine months ended September 30, 2021) are recorded as other comprehensive income or loss in the equity section of the balance sheet.
Sources of Liquidity
Avenue Facility
Under the terms of the Avenue Facility, Avenue agreed to make a term loan to Old Cytocom in the aggregate principal amount of $15,000,000. The loan bears interest at a variable rate of interest equal to the sum of (i) the greater of (A) the Prime Rate and (B) 3.25% plus (ii) 7.74%. Repayment of the loan owed under the Avenue Facility is secured by a security interest in substantially all of Old Cytocom’s assets, including equipment, fixtures, inventory, deposit accounts and personal property, as well as the securities it holds in its wholly owned subsidiaries.
The $15 million aggregate loan amount was deposited by Avenue into a controlled account in May 2021. Old Cytocom transferred $10 million into its general operating account, which was assigned to the Company at the time of the closing of the Merger, and accordingly, the Company’s assets are subject to a security interest in favor of Avenue. The Company will be able to transfer the $5 million in the controlled account into its general operating account upon the Company raising at least $20 million in additional capital in the form of subordinated indebtedness or equity from a follow-on transaction entered into after the Merger. As of September 30, 2021, the Company had used approximately $8.3 million of the Avenue Facility. The Company is required to make only monthly interest payments, calculated as described above, until April 2022 (which may be extended to April 2023 upon the Company’s raising of an additional $20 million in capital). Thereafter, the Company will be required to make monthly payments of principal in equal installments until the maturity date of May 1, 2024.
The Avenue Facility documents contain customary representations and warranties of Old Cytocom, as well as various affirmative and negative covenants. Among such covenants are requirements that the Company:
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provide notice of certain events; |
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deliver monthly financial statements to Avenue, until the Company has a market capitalization of at least $250 million and maintains at least a minimum of $4 million in unrestricted cash, after which it will only need to provide quarterly statements; |
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execute regular compliance certificates; |
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provide copies of all board of directors materials and minutes of meetings to Avenue; |
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maintain its existence and comply with all applicable laws; |
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may not become indebted for borrowed money, the deferred purchase price for property or enter into any leases that would be capitalized in accordance with GAAP, subject to certain exceptions, including indebtedness for the acquisition of supplies, subordinated indebtedness and certain other items; |
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maintain a minimum of $5 million in unrestricted cash and cash equivalents in accounts subject to control agreements with Avenue; |
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may not create, incur or assume any liens on its property; |
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may not undergo any fundamental or change-in-control transactions or sell all its assets; |
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may not make any loans or investments, subject to certain exceptions; |
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may not enter into any transactions with related parties; |
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may not prepay any other indebtedness; or |
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may not create, acquire or sell any subsidiaries. |
The Avenue Facility documents also grant certain additional rights to Avenue. Under the Avenue Facility, Avenue has a preemptive right to purchase up to $1 million of Company equity securities on the same terms, conditions and prices offered by the Company to any investor in connection with any equity or debt financing until October 16, 2022. Additionally, Avenue has the right to convert up to $3 million of outstanding principal into shares of Company common stock. The number of shares issuable upon conversion will be determined by dividing the amount of indebtedness being converted by 120% of the 5-day volume weighted average price (VWAP) of Company common stock prior to the date of the issuance of the Avenue Warrant.
GEM Agreement
Under the terms of the GEM Agreement, the agreement became immediately binding upon the Company at the effective time of the Merger. Under the GEM Agreement, the Company may elect to issue and sell to GEM up to $75 million of its common stock. Upon the election of the Company to make such a sale, it will deliver a draw-down notice to GEM, and, if all applicable conditions are satisfied, GEM will purchase newly issued shares for the amount specified in the draw-down notice. The purchase price of the shares to be sold is set at 90% of the recent average daily closing price of the Company’s common stock on the Nasdaq Capital Market or other market on which the stock may be listed. The Company is not permitted to make a draw-down request in an amount that exceeds 400% of the average daily trading volume of the Company’s stock for the 30 trading days preceding the draw-down date. Each draw down is subject to certain closing conditions, including (i) the continued accuracy of the representations and warranties made in the GEM Agreement, (ii) a registration statement registering the resale of the shares sold under the GEM Agreement having been declared effective by the SEC, (ii) the absence of any law, order, ruling or injunction prohibiting the consummation of the transactions contemplated by the GEM Agreement, (iii) the Company’s common stock not being suspended from trading by the Nasdaq Capital Market or other market on which the shares are then listed, (iv) the absence of any litigation commenced, or governmental investigation commenced or threated, against the Company in connection with the GEM Agreement transactions and (v) with respect to the first draw down only, the delivery by the Company’s counsel of a negative assurance letter and delivery by the Company’s independent auditors of a comfort letter. However, the Company will be permitted to make a draw-down request for the sale of up to $15 million of shares in the period immediately following the effective time of the Merger without having to have an effective resale registration statement in effect. The resale of the shares sold pursuant to this initial drawdown request will not be required to be registered immediately. Upon the Company’s issuance of shares in connection with any draw-down purchase made by GEM, the Company will be required to pay GEM, in cash or additional shares of stock, a commitment fee in an amount equal to 2% of the amount purchased in such drawdown.
The GEM Agreement terminates on the earliest to occur of (i) three years from the effective time of the Merger, (ii) May 21, 2026 or (iii) the date on which GEM has purchased $75 million in the aggregate of Company stock. Upon payment of $1.5 million to GEM, the Company may terminate the GEM Agreement following the settlement in full of the issuance of the shares made for the first $15 million draw-down purchase.
The GEM Agreement contains customary representations and warranties of the Company, as well as various affirmative and negative covenants. Among such covenants are requirements that the Company:
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comply with applicable laws, including the securities laws; |
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file a registration statement with the SEC to register the resale of the shares sold under the GEM Agreement and undertake best efforts to maintain the effectiveness of the registration statement; |
| ● | keep reserved an adequate number of shares for issuance under the GEM Agreement; and | |
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not enter into any other agreement that would restrict or impair the Company’s ability to perform under the GEM Agreement, including any other equity line arrangement. |
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 Chief Executive Officer and Chief 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 September 30, 2021. 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 September 30, 2021, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were 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 Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
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 September 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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, other than those set forth below, as of September 30, 2021, 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.
On March 12, 2021, a complaint, captioned Teo v. Cleveland BioLabs, Inc. et al., Case 1:21-cv-02187, was filed in the U.S. District Court for the Southern District of New York in connection with the Merger (the "Teo Action"). The Teo Action names as defendants Cleveland BioLabs, each director on the Cleveland BioLabs board of directors, Merger Sub and Cytocom. The complaint in the Teo Action alleges that (i) the Cleveland BioLabs board of directors breached its fiduciary duties to the plaintiff stockholder in entering into the Merger Agreement and (ii) Cleveland BioLabs and the Cleveland BioLabs board of directors omitted and/or provided misleading information in the registration statement on Form S-4 filed with the SEC in connection with the Merger, of which this proxy statement/prospectus forms a part, in violation of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and related SEC regulations. On July 14, 2021, Plaintiff Teo filed a notice of dismissal. On July 16, 2021, the Southern District entered an order dismissing the case.
On March 17, 2021, a complaint, captioned Steudte v. Cleveland BioLabs, Inc. et al., Case 1:21-cv-02314, was filed in the U.S. District Court for the Southern District of New York in connection with the Merger (the "Steudte Action"). The Steudte Action names as defendants Cleveland BioLabs and each director on the Cleveland BioLabs board of directors. The complaint in the Steudte Action alleges that Cleveland BioLabs and the Cleveland BioLabs board of directors omitted and/or provided misleading information in the registration statement on Form S-4 filed with the SEC in connection with the Merger, of which this proxy statement/prospectus forms a part, in violation of their fiduciary duties and the Exchange Act and related SEC regulations. The Steudte Action seeks, among other things, an injunction preventing the closing of the merger, rescission of the merger if it is consummated, the dissemination by the Company of a revised registration statement on Form S-4 and an award of plaintiffs’ attorneys’ and experts’ fees. Defendants have filed a letter seeking permission to file a motion to dismiss. On October 13, 2021, Plaintiff Steudte filed a notice of dismissal. On October 20, 2021,the Southern District entered an order dismissing the case..
On March 19, 2021, a putative class action complaint, captioned Litwin v. Cleveland BioLabs, Inc. et al., Case 2021-0242, was filed in the Delaware Court of Chancery in connection with the Merger (the “Litwin Action”). The Litwin Action names as defendants Cleveland BioLabs, each director on the Cleveland BioLabs board of directors, and the Vice President of Finance of Cleveland BioLabs. The complaint in the Litwin Action alleges that Defendants omitted and/or provided misleading information in the registration statement on Form S-4 filed with the SEC in connection with the Merger, of which this proxy statement/prospectus forms a part, in breach of their fiduciary duties. The Litwin Action seeks, among other things, an injunction preventing the closing of the Merger, rescission of the merger if it is consummated, the dissemination by Cleveland BioLabs of a revised registration statement on Form S-4 and an award of plaintiffs’ attorneys’ and experts’ fees. Plaintiff in the Litwin Action has filed a motion for expedited proceedings, which Defendants have opposed. Plaintiff’s motion for expedited proceedings was granted in part and denied in part by the court on April 30, 2021. Defendants have also filed a motion to dismiss the Litwin Action. On July 7, 2021, Plaintiff filed a stipulation and proposed order voluntarily dismissing the case, but reserving the right to seek attorneys’ fees. On July 8, 2021, the Delaware Court of Chancery entered an order dismissing the case, but reserving jurisdiction to determine whether to award Plaintiff’s counsel any fees, should Plaintiff’s counsel file a motion for such. On November 4, 2021, the parties reached an agreement in principle to resolve the case, the details of which are still being finalized. As described in Note 17 the Company has established an accrual of $275,000 for potential costs to settle.
On March 18, 2021, a complaint, captioned Wang v. Cleveland BioLabs, Inc. et al., Case 1:21-cv-02395, was filed in the U.S. District Court for the Southern District of New York in connection with the Merger (the "Wang Action"). The Wang Action names as defendants the Company, each director on the Company’s board of directors, Merger Sub and Cytocom. The complaint in the Wang Action alleges that the Company and the Company’s board of directors omitted and/or provided misleading information in the registration statement on Form S-4 filed with the SEC in connection with the Merger, of which this proxy statement/prospectus forms a part, in violation of the Exchange Act and related SEC regulations. The Wang Action seeks, among other things, an injunction preventing the closing of the Merger, rescission of the Merger if it is consummated, the dissemination by the Company of a revised registration statement on Form S-4 and an award of plaintiffs’ attorneys’ and experts’ fees. On July 29, 2021, Plaintiff Wang filed a notice of dismissal. On August 2, 2021, the Southern District entered an order dismissing the case.
On March 23, 2021, a complaint, captioned Morgan v. Cleveland BioLabs, Inc. et al., Case 1:21-cv-00418, was filed in the U.S. District Court for the District of Delaware in connection with the Merger (the "Morgan Action"). The Morgan Action names as defendants Cleveland BioLabs and each director on the Cleveland BioLabs board of directors. The complaint in the Morgan Action alleges that Cleveland BioLabs and the Cleveland BioLabs board of directors omitted and/or provided misleading information in the registration statement on Form S-4 filed with the SEC in connection with the Merger, of which this proxy statement/prospectus forms a part, in violation of the Exchange Act and related SEC regulations. The Morgan Action seeks, among other things, an injunction preventing the closing of the Merger, rescission of the Merger if it is consummated, the dissemination by Cleveland BioLabs of a revised registration statement on Form S-4 and an award of plaintiffs’ attorneys’ and experts’ fees. On September 22, 2021, Plaintiff Morgan filed a notice of dismissal. On September 22, 2021, the District of Delaware closed the case.
On March 24, 2021, a complaint, captioned Bednar v. Cleveland BioLabs, Inc. et al., Case 1:21-cv-02546, was filed in the U.S. District Court for the Southern District of New York in connection with the Merger (the "Bednar Action"). The Bednar Action names as defendants Cleveland BioLabs and each director on the Cleveland BioLabs board of directors. The complaint in the Bednar Action alleges that Cleveland BioLabs and the Cleveland BioLabs board of directors omitted and/or provided misleading information in the registration statement on Form S-4 filed with the SEC in connection with the Merger, of which this proxy statement/prospectus forms a part, in violation of their fiduciary duties and the Exchange Act and related SEC regulations. The Bednar Action seeks, among other things, an injunction preventing the closing of the Merger, rescission of the Merger if it is consummated, the dissemination by the Company of a revised registration statement on Form S-4 and an award of plaintiffs’ attorneys’ and experts’ fees. On October 13, 2021, Plaintiff Bednar filed a notice of dismissal. On October 20, 2021, the Southern District entered an order dismissing the case.
On March 23, 2021, a complaint captioned Stickel v. Cleveland Biolabs, Inc., et al., Case 1:21-cv-02489, was filed in the U.S. District Court for the Southern District of New York in connection with the Merger (the “Stickel Action”). The Stickel Action names as defendants Cleveland BioLabs and each director on the Cleveland BioLabs board of directors. The complaint alleges that Cleveland BioLabs and the Cleveland BioLabs board of director omitted and/or provided misleading information in the registration statement on Form S-4 filed with the SEC in connection with the Merger, in violation of the Exchange Act and SEC regulations. Stickel seeks to enjoin the company from consummating the Merger, to force the Company to amend the registration statement, and to collect damages and attorneys’ fees. On July 15, 2021, Plaintiff filed a notice of dismissal. On July 16, 2021, the Southern District entered an order dismissing the case.
On April 1, 2021, a complaint, captioned Hoenecke v. Cleveland BioLabs, Inc., et al., Case 1:21-cv-1789, was filed in the U.S. District Court for the Eastern District of New York in connection with the Merger (the “Hoenecke Action”). The Hoenecke Action names as defendants Cleveland BioLabs and each director on the Cleveland BioLabs board of directors. The complaint in the Hoenecke Action alleges that Cleveland BioLabs and the Cleveland BioLabs board of directors omitted and/or provided misleading information in the registration statement on Form S-4 filed with the SEC in connection with the Merger, of which this proxy statement/prospectus forms a part, in violation of the Exchange Act and related SEC regulations. The Hoenecke Action seeks, among other things, an injunction preventing the closing of the Merger, rescission of the Merger if it is consummated, the dissemination by the Company of a revised registration statement on Form S-4 and an award of plaintiffs’ attorneys’ and experts’ fees. On June 29, 2021, Plaintiff filed a notice of dismissal. That same day, the Southern District entered an order dismissing the case.
The Company cannot predict the outcome of these lawsuits.
None.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Other than as set forth below or as previously disclosed in the Company’s prior filings with the SEC, Statera did not sell any equity securities during the three months ended September 30, 2021 in transactions that were not registered under the Securities Act. The issuance of securities in the transactions described below were each exempt from registration under Section 4(a)(2) of the Securities Act.
On October 24, 2021, the board of directors of the Company approved the offer and sale of:
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100,000 shares of the Company’s common stock to a natural person and/or a trust controlled by such natural person in consideration of such person’s release of certain claims against Old Cytocom; |
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Up to 450,000 shares of the Company’s common stock, of which 150,000 shares will be issued during November 2021, to a consultant in consideration of the consultant’s provision of consulting services related to the Company’s management, governance, debt structure, capital structure, business plans, and business development in connection with any capitalization transactions involving the Company; |
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101,520 shares of the Company’s common stock to an institutional investor to repay certain indebtedness of Old Cytocom; and |
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23,688 shares of the Company’s common stock to a consultant that provided medical and scientific advisory services to the Company in connection with the Merger. |
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
None.
| (a) |
The following exhibits are included as part of this report: |
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.
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STATERA BIOPHARMA, INC. |
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| Dated: November 15, 2021 |
By: |
/s/ Peter Aronstam |
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Peter Aronstam |
| Chief Financial Officer | ||
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(Principal Financial Officer) |
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Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
CLEVELAND BIOLABS, INC.
The Board of Directors of Cleveland BioLabs, Inc., in accordance with Section 245 of the General Corporation Law of Delaware, duly adopted the following Restated Certificate of Incorporation. This document only restates and integrates and does not further amend the provisions of the Certificate of Incorporation of Cleveland BioLabs Inc., duly filed with the Secretary of State of Delaware on June 5, 2003, as heretofore amended or supplemented, and there is no discrepancy between those provisions and the provisions of this Restated Certificate of Incorporation.
FIRST: The name of the corporation is Cleveland BioLabs, Inc. (the “Corporation”).
SECOND: The address of the Corporation’s registered office the State of Delaware is 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808 in the county of New Castle. The name of the Corporation’s registered agent is LexisNexis Document Solutions Inc.
THIRD: The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware (the “GCL”).
FOURTH: The total number of shares of capital stock of all classes which the Corporation shall have authority to issue is 90,000,000 shares, which shall be divided as follows: (i) 80,000,000 shares of Common Stock, par value $0.005 per share (“Common Stock”), and (ii) 10,000,000 shares of Preferred Stock, par value $0.005 per share (“Preferred Stock”).
Each share of Common Stock shall have the right to one vote with respect to any question upon which holders of Common Stock have the right to vote, except as set forth herein or any limitations required by law. The holders of shares of Common Stock shall not have cumulative voting rights.
Preferred Stock may be issued from time to time in one or more series. Subject to the other provisions of this Certificate of Incorporation and any limitations prescribed by law, the Board of Directors of the Corporation (the “Board”) is authorized to provide for the issuance of and issue shares of Preferred Stock in series and, by filing a certificate pursuant to the laws of the State of Delaware, to establish from time to time the number of shares to be included in each such series and to fix the designation, powers, preferences and rights of the shares of each such series and any qualifications, limitations or restrictions thereof. Subject to the other provisions of this Certificate of Incorporation (the “Certificate”) and any limitations prescribed by law, shares of each such series may (i) rank senior to shares of any capital stock as to the payment of the distribution of assets on liquidation; (ii) bear a stated dividend and/or rank senior to shares of any capital stock as to the payment of dividends; (iii) be redeemable by the holder thereof; (iv) have voting or other rights with respect to the control of the Corporation which rank senior to shares of any outstanding capital stock; or (v) otherwise have rights, powers or preferences which are senior or otherwise superior to shares of any outstanding capital stock. Subject to the other provisions of this Certificate and any limitations prescribed by law, no consent of the holders of Common Stock or any outstanding series of Preferred Stock, shall be required in connection with such authorization and issuance by the Board of Directors of any such series of Preferred Stock.
FIFTH: RESERVED.
SIXTH: The Board of Directors of the Corporation is expressly authorized to adopt, amend or repeal the by-laws of the Corporation (the “By-Laws”).
SEVENTH:
(a) The business and affairs of the Corporation shall be managed by or under the direction of the Board.
(b) The Board shall consist of not less than five nor more than fifteen members, the exact number of which shall be fixed from time to time by the Board.
(c) Any vacancy on the Board that results from an increase in the number of directors may be filled by a majority of the Board then in office, provided that a quorum is present, and any other vacancy occurring on the Board may be filled by a majority of the Board then in office, even if less than a quorum, or by a sole remaining director. Any director elected to fill a vacancy shall hold office for a term that shall coincide with the remaining term of the other directors. Any director or the entire Board may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least two-thirds of the voting power of the issued and outstanding shares of capital stock of the Corporation entitled to vote in connection with the election of directors.
(d) In addition to the powers and authority hereinabove or by statute expressly conferred upon them, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject nevertheless to the GCL, the Certificate, as amended, and the By-Laws of the Corporation.
EIGHTH: The Corporation is to have perpetual existence.
NINTH:
(a) Any action required or permitted to be taken by the stockholders of the Corporation shall be effected only at a duly called annual or special meeting of the stockholders of the Corporation and shall not be effected by consent in writing by the holders of outstanding stock pursuant to Section 228 of the GCL or any other provision of the GCL.
(b) Meetings of the stockholders may be held within or without the State of Delaware as the By-Laws of the Corporation may provide. The books of the Corporation may be kept (subject to any provision contained in the GCL) outside the State of Delaware at such place orplaces as may be designated from time to time by the Board or in the By-Laws of the Corporation.
(c) Unless otherwise required by law, special meetings of the stockholders, for any purpose or purposes, may be called by either (i) the Chairman of the Board, if there be one, or (ii) the Board. The ability of the stockholders to call a special meeting of the stockholders is specifically denied.
TENTH: Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between the Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the Corporation or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 291 of Title 8 of the GCL or on the application of trustees in dissolution or of any receiver or receivers appointed for the Corporation under the provisions of Section 279 of Title 8 of the GCL, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of the Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of the Corporation, as the case may be, and also on this Corporation.
ELEVENTH: No director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the GCL, as the same exists or hereafter may be amended, or (iv) for any transaction from which the director derived an improper personal benefit. If the GCL is amended to authorize the further elimination or limitation of liability of directors, then the liability of a director of the Corporation, in addition to the limitation on personal liability provided herein, shall be limited to the fullest extent permitted by the amended GCL. Any repeal or modification of this Article Eleventh by the stockholders of the Corporation shall be prospective only and shall not adversely affect any limitation on the personal liability of a director of the Corporation existing at the time of such repeal or modification.
TWELFTH: The Corporation shall indemnify its directors and officers to the fullest extent authorized or permitted by applicable law, as now or hereafter in effect, and such right to indemnification shall continue as to a person who has ceased to be a director or officer of the Corporation and shall inure to the benefit of his or her heirs, executors and personal and legal representatives; provided, however, that except for proceedings to enforce rights to indemnification, the Corporation shall not be obligated to indemnify any director or officer (or his or her heirs, executors or personal or legal representatives) or advance expenses in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized or consented to by the Board. The right to indemnification conferred by this Article Twelfth shall include the right to be paid by the Corporation the expenses incurred in defending or otherwise participating in any proceeding in advance of its final disposition upon receipt by the Corporation of an undertaking by or on behalf of the director or officer receiving advancement to repay the amount advanced if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation under this Article Twelfth.
The Corporation may, to the extent authorized from time to time by the Board provide rights to indemnification and to the advancement of expenses to employees and agents of the Corporation similar to those conferred in this Article Twelfth to directors and officers of the Corporation.
The rights to indemnification and to the advancement of expenses conferred in this Article Twelfth shall not be exclusive of any other rights which any person may have or hereafter acquire under this Certificate, the By-Laws, any statute, agreement, vote of stockholders or disinterested directors or otherwise.
Any repeal or modification of this Article Twelfth by the stockholders of the Corporation shall not adversely affect any rights to indemnification and to the advancement of expenses of a director, officer, employee or agent of the Corporation existing at the time of such repeal or modification with respect to any acts or omissions occurring prior to such repeal or modification.
THIRTEENTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this certificate of incorporation in the manner now or hereafter prescribed herein and by the laws of the State of Delaware, and all rights conferred herein upon stockholders are granted subject to this reservation.
The undersigned hereby acknowledges that the foregoing Restated Certificate of Incorporation is the Corporation’s act and deed, and that the facts stated therein are true.
Dated: March 18 , 2010
Cleveland BioLabs, Inc.
/s/ Michael Fonstein
Michael Fonstein
President and Chief Executive Officer
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
CLEVELAND BIOLABS, INC.
Cleveland Biolabs, Inc. (the “Corporation”), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “Act”), DOES HEREBY CERTIFY THAT:
1. The first paragraph of Article FOURTH of the Restated Certificate of Incorporation of the Corporation (the “Restated Certificate”) is hereby amended and restated to read in its entirety as follows:
“FOURTH: The total number of shares of capital stock of all classes which the Corporation shall have authority to issue is 170,000,000 shares, which shall be divided as follows: (i) 160,000,000 shares of Common Stock, par value $0.005 per share (“Common Stock”), and (ii) 10,000,000 shares of Preferred Stock, par value $0.005 per share (“Preferred Stock”).”
2. The aforementioned amendment was duly adopted in accordance with the provisions of Section 242 of the Act and has been consented to by the stockholders, with proper notice given, in accordance with Section 228 of the Act.
* * *
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed by its duly authorized officer this 20th day of June, 2013.
Cleveland Biolabs, Inc.
/s/ Yakov Kogan
Yakov Kogan
Chief Executive Officer
CERTIFICATE OF AMENDMENT OF
RESTATED CERTIFICATE OF INCORPORATION
OF CLEVELAND BIOLABS, INC.
It is hereby certified that:
1. The name of the corporation (hereinafter called the “Corporation”) is Cleveland BioLabs, Inc. The date of the filing of its Certificate of Incorporation with the Secretary of State of the State of Delaware was June 5, 2003 under the name “Cleveland BioLabs, Inc.” A Restated Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on March 18, 2010, and a Certificate of Amendment was filed on June 20, 2013.
2. The Restated Certificate of Incorporation, filed on March 18, 2010, as amended, is hereby further amended to change the capitalization of the Corporation by adding the following to the end of Article FOURTH:
“Upon the effectiveness of the Certificate of Amendment to the Restated Certificate of Incorporation, as amended, to effect a plan of recapitalization of the Common Stock by effecting a 1-for-20 reverse stock split with respect to the issued and outstanding shares of the Common Stock (the “Reverse Stock Split”), without any change in the powers, preferences and rights or qualifications, limitations or restrictions thereof, such that, without further action of any kind on the part of the Corporation or its stockholders, every twenty (20) shares of Common Stock outstanding or held by the Corporation in its treasury on January 28, 2015 (the “Effective Date”) shall be changed and reclassified into one (I) share of Common Stock, $0.005 par value per share, which shares shrill be fully paid and nonassessable shares of Common Stock There shall be no fractional shares issued. A holder of record of Common Stock on the Effective Date who would otherwise be entitled to a fraction of a share shall, in lieu thereof, be entitled to receive one full share.”
3. The Amendment of Restated Certificate of Incorporation herein certified has been duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.
EXECUTED, this 27th day of January, 2015.
Cleveland BioLabs, Inc.
By: /s/ Yakov Kogan
Yakov Kogan
Chief Executive Officer
CLEVELAND BIOLABS, INC.
CERTIFICATE OF DESIGNATION OF PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES A CONVERTIBLE PREFERRED STOCK
PURSUANT TO SECTION 151 OF THE
DELAWARE GENERAL CORPORATION LAW
The undersigned, Yakov Kogan and C. Neil Lyons, do hereby certify that:
1. They are the Chief Executive Officer and Chief Financial Officer, respectively, of Cleveland BioLabs, Inc., a Delaware corporation (the “Corporation”).
2. The Corporation is authorized to issue 10,000,000 shares of preferred stock, zero (0) of which have been issued.
3. The following resolutions were duly adopted by the board of directors of the Corporation (the “Board of Directors”):
WHEREAS, the certificate of incorporation of the Corporation provides for a class of its authorized stock known as preferred stock, consisting of 10,000,000 shares, $0.005 par value per share, issuable from time to time in one or more series;
WHEREAS, the Board of Directors is authorized to fix the dividend rights, dividend rate, voting rights, conversion rights, rights and terms of redemption and liquidation preferences of any wholly unissued series of preferred stock and the number of shares constituting any series and the designation thereof, of any of them; and
WHEREAS, it is the desire of the Board of Directors, pursuant to its authority as aforesaid, to fix the rights, preferences, restrictions and other matters relating to a series of the preferred stock, which shall consist of, except as otherwise set forth in the Purchase Agreement, up to 718 shares of the preferred stock which the Corporation has the authority to issue, as follows:
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide for the issuance of a series of preferred stock for cash or exchange of other securities, rights or property and does hereby fix and determine the rights, preferences, restrictions and other matters relating to such series of preferred stock as follows:
TERMS OF PREFERRED STOCK
Section 1. Definitions. For the purposes hereof, the following terms shall have the following meanings:
“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 of the Securities Act.
“Alternate Consideration” shall have the meaning set forth in Section 7(e).
“Bankruptcy Event” means any of the following events: (a) the Corporation or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Corporation or any Significant Subsidiary thereof, (b) there is commenced against the Corporation or any Significant Subsidiary thereof any such case or proceeding that is not dismissed within 60 days after commencement, (c) the Corporation or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the Corporation or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 calendar days after such appointment, (e) the Corporation or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors, (0 the Corporation or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts, or (g) the Corporation or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.
“Base Conversion Price” shall have the meaning set forth in Section 7(b).
“Beneficial Ownership Limitation” shall have the meaning set forth in Section 6(d).
“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.
“Buy-In” shall have the meaning set forth in Section 6(c)(iv).
“Change of Control Transaction” means the occurrence after the date hereof of any of (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Corporation, by contract or otherwise) of in excess of 33% of the voting securities of the Corporation (other than by means of conversion or exercise of Preferred Stock and the Securities issued together with the Preferred Stock), (b) the Corporation merges into or consolidates with any other Person, or any Person merges into or consolidates with the Corporation and, after giving effect to such transaction, the stockholders of the Corporation immediately prior to such transaction own less than 66% of the aggregate voting power of the Corporation or the successor entity of such transaction, (c) the Corporation sells or transfers all or substantially all of its assets to another Person and the stockholders of the Corporation immediately prior to such transaction own less than 66% of the aggregate voting power of the acquiring entity immediately after the transaction, (d) a replacement at one time or within a one year period of more than one-half of the members of the Board of Directors which is not approved by a majority of those individuals who are members of the Board of Directors on the Original Issue Date (or by those individuals who are serving as members of the Board of Directors on any date whose nomination to the Board of Directors was approved by a majority of the members of the Board of Directors who are members on the Original Issue Date), or (e) the execution by the Corporation of an agreement to which the Corporation is a party or by which it is bound, providing for any of the events set forth in clauses (a) through (d) above.
“Closing” means the closing of the purchase and sale of the Securities pursuant to Section 2.1 of the Purchase Agreement.
“Closing Date” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable parties thereto and all conditions precedent to (i) each Holder’s obligations to pay the Subscription Amount and (ii) the Corporation’s obligations to deliver the Securities have been satisfied or waived.
“Commission” means the United States Securities and Exchange Commission.
“Common Stock” means the Corporation’s common stock, par value $0.005 per share, and stock of any other class of securities into which such securities may hereafter be reclassified or changed.
“Common Stock Equivalents” means any securities of the Corporation or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
“Conversion Amount” means the sum of the Stated Value at issue.
“Conversion Date” shall have the meaning set forth in Section 6(a).
“Conversion Price” shall have the meaning set forth in Section 6(b).
“Conversion Shares” means, collectively, the shares of Common Stock issuable upon conversion of the shares of Preferred Stock in accordance with the terms hereof.
“Dilutive Issuance” shall have the meaning set forth in Section 7(b).
“Dilutive Issuance Notice” shall have the meaning set forth in Section 7(b).
“Effective Date” means the date that the Resale Registration Statement filed by the Corporation pursuant to the Registration Rights Agreement is first declared effective by the Commission.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Exempt Issuance” means the issuance of (a) shares of Common Stock or options to purchase Common Stock (and shares of Common Stock underlying such options) to directors, officers, employees or consultants (provided that issuances of Common Stock and Common Stock Equivalents to consultants shall not exceed, in the aggregate over any 12 month period, 5% of the then issued and outstanding shares of Common Stock as of the date hereof and provided further that consultants shall not include attorneys, law firms, accountants or accounting firms) of the Corporation in their capacity as such pursuant to an Approved Share Plan, provided that no issuances under this clause (a) shall occur prior to the Shareholder Approval Date and provided, further, that (1) all such issuances (taking into account the shares of Common Stock issuable upon exercise of such options) after the date hereof pursuant to this clause (a) do not, in the aggregate, exceed more than 7.5% of the Common Stock issued and outstanding immediately prior to the date hereof in any 12 month period (provided that, for purposes of this clause (a)(1), on each 12 month anniversary of the date hereof, the number of issued and outstanding shares shall be reset and such cap of 10% shall be calculated based on such reset number of issued and outstanding shares) and (2) the exercise price of any such options is not lowered, none of such options are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any such options are otherwise materially changed in any manner that adversely affects any of the Holders, (b) securities upon the exercise of any Securities issued hereunder, (c) shares of Common Stock issued upon the conversion or exercise of Common Stock Equivalents (other than options to purchase Common Stock issued pursuant to an Approved Share Plan that are covered by clause (a) above) issued prior to the date hereof, provided that the conversion or exercise price of any such Common Stock Equivalents (other than options to purchase Common Stock issued pursuant to an Approved Share Plan that are covered by clause (a) above) is not lowered (other than in accordance with the terms of such Common Stock Equivalents and the transaction documents pursuant to which they were issued as they existed on the date hereof), none of such Common Stock Equivalents (other than options to purchase Common Stock issued pursuant to an Approved Share Plan that are covered by clause (a) above) are amended to increase the number of shares issuable thereunder (other than in accordance with the terms of such Common Stock Equivalents and the transaction documents pursuant to which they were issued as they existed on the date hereof) and none of the terms or conditions of any such Common Stock Equivalents (other than options to purchase Common Stock issued pursuant to an Approved Share Plan that are covered by clause (a) above) are otherwise materially changed in any manner that adversely affects any of the Purchasers, or (d) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Corporation, provided that any such issuance shall only be to a Person (or the equity holders of a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset in a business synergistic with the business of the Corporation and shall provide to the Corporation additional benefits in addition to the investment of funds, but shall not include a transaction in which the Corporation is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.
“Fundamental Transaction” shall have the meaning set forth in Section 7(e). “GAAP” means United States generally accepted accounting principles. “Holder” shall have the meaning given such term in Section 2.
“Indebtedness” means (a) any liabilities for borrowed money or amounts owed in excess of $50,000 (other than trade accounts payable incurred in the ordinary course of business), (b) all guaranties, endorsements and other contingent obligations in respect of indebtedness of others, whether or not the same are or should be reflected in the Corporation’s balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business, and (c) the present value of any lease payments in excess of $50,000 due under leases required to be capitalized in accordance with GAAP.
“Issuable Maximum” shall have the meaning set forth in Section 6(e).
“Junior Securities” means the Common Stock and all other Common Stock Equivalents of the Corporation other than those securities which are explicitly senior or pari passu to the Preferred Stock in dividend rights or liquidation preference.
“Liens” means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.
“Liquidation” shall have the meaning set forth in Section 5.
“New York Courts” shall have the meaning set forth in Section 11(d). 5
“Notice of Conversion” shall have the meaning set forth in Section 6(a).
“Original Issue Date” means the date of the first issuance of any shares of the Preferred Stock regardless of the number of transfers of any particular shares of Preferred Stock and regardless of the number of certificates which may be issued to evidence such Preferred Stock.
“Permitted Indebtedness” means (a) the Indebtedness existing on the Original Issue Date and set forth on Schedule 3.1(z) attached to the Purchase Agreement, (b) Indebtedness solely in connection with the financing of insurance premiums following the termination of, in replacement of and in a substantially similar amount as the Indebtedness set forth on Schedule 3.1(z)(6) attached to the Purchase Agreement, (c) letters of credit or bank guarantees in connection with required deposits of money solely for the Company to receive funded or to-be-funded Russian government grants or contracts substantially similar to the Indebtedness set forth on Schedule 3.1(z)(3) attached to the Purchase Agreement, (d) extensions, refinancings, modifications, amendments or restatements of Permitted Indebtedness, provided that the terms of such extensions, refinancings, modifications, amendments or restatements are substantially similar or more favorable to the Company than such Permitted Indebtedness, and (e) lease obligations and purchase money indebtedness of up to $250,000, in the aggregate, incurred in connection with the acquisition of capital assets and lease obligations with respect to newly acquired or leased assets.
“Permitted Lien” means the individual and collective reference to the following: (a) Liens for taxes, assessments and other governmental charges or levies not yet due or Liens for taxes, assessments and other governmental charges or levies being contested in good faith and by appropriate proceedings for which adequate reserves (in the good faith judgment of the management of the Corporation) have been established in accordance with GAAP, (b) Liens imposed by law which were incurred in the ordinary course of the Corporation’s business, such as carriers’, warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in the ordinary course of the Corporation’s business, and which (x) do not individually or in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Corporation and its consolidated Subsidiaries or (y) are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing for the foreseeable future the forfeiture or sale of the property or asset subject to such Lien, (c) Liens incurred in connection with Permitted Indebtedness under clause (a) thereunder, (d) Liens incurred in connection with Permitted Indebtedness under clause (e) thereunder, provided that such Liens are not secured by assets of the Corporation or its Subsidiaries other than the assets so acquired or leased, (e) Liens incurred in connection with Permitted Indebtedness under clause (b) thereunder and (f) Lien in connection with indebtedness related to a capital lease set forth on Schedule 3.1(n)(ii) attached to the Purchase Agreement.
“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“Preferred Stock” shall have the meaning set forth in Section 2.
“Purchase Agreement” means the Securities Purchase Agreement, dated as of the date of or about the date of the Original Issue Date, among the Corporation and the original Holders, as amended, modified or supplemented from time to time in accordance with its terms.
“Registration Rights Agreement” means the Registration Rights Agreement, dated as of the date of the Purchase Agreement, among the Corporation and the original Holders, in the form of Exhibit B attached to the Purchase Agreement.
“Resale Registration Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement and covering the resale of the Conversion Shares and the Series A Warrant Shares by each Holder as provided for in the Registration Rights Agreement.
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.
“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“Securities” means Shares, the Preferred Stock, the Warrants, the Warrant Shares and the Conversion Shares.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Share Delivery Date” shall have the meaning set forth in Section 6(c).
“Shareholder Approval” means such approval as may be required by the applicable rules and regulations of the Nasdaq Stock Market (or any successor entity) from the shareholders of the Corporation with respect to the transactions contemplated by the Transaction Documents, including the issuance of all of the Shares, Series B Prefunded Warrant Shares and Conversion Shares in excess of 19.99% of the issued and outstanding Common Stock on the Closing Date.
“Stated Value” shall have the meaning set forth in Section 2, as the same may be increased pursuant to Section 3.
“Subscription Amount” shall mean, as to each Holder, the aggregate amount to be paid for the Preferred Stock purchased pursuant to the Purchase Agreement as specified below such Holder’s name on the signature page of the Purchase Agreement and next to the heading “Subscription Amount,” in United States dollars and in immediately available funds.
“Subsidiary” means any subsidiary of the Corporation as set forth on Schedule 3.1(a) of the Purchase Agreement and shall, where applicable, also include any direct or indirect subsidiary of the Corporation formed or acquired after the date of the Purchase Agreement.
“Successor Entity” shall have the meaning set forth in Section 7(e).
“Trading Day” means a day on which the principal Trading Market is open for business.
“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, the OTCQX, or the OTCQB (or any successors to any of the foregoing).
“Transaction Documents” means this Certificate of Designation, the Purchase Agreement, the Warrants, the Registration Rights Agreement, the Voting Agreement, all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated pursuant to the Purchase Agreement.
“Transfer Agent” means Continental Stock Transfer & Trust Company, the current transfer agent of the Corporation, with a mailing address of 17 Battery Place, New York, New York 10004, and a facsimile number of (212) 509-5150, and any successor transfer agent of the Corporation.
“Triggering Event” shall have the meaning set forth in Section 10(a).
“Triggering Redemption Amount” means, for each share of Preferred Stock, the sum of (a) the greater of (i) 130% of the Stated Value and (ii) the product of (y) the VWAP on the Trading Day immediately preceding the date of the Triggering Event and (z) the Stated Value divided by the then Conversion Price, (b) any accrued but unpaid dividends thereon and (c) all liquidated damages and other costs, expenses or amounts due in respect of the Preferred Stock.
“Triggering Redemption Payment Date” shall have the meaning set forth in Section 10(b).
“Variable Rate Transaction” shall have the meaning ascribed to such term in Section 4.13(b) of the Purchase Agreement.
“Voting Agreement” means the written agreement, in the form of Exhibit E attached to the Purchase Agreement, of all of the officers, directors and stockholders holding more than 10% of the issued and outstanding shares of Common Stock on the date of the Purchase Agreement to vote all Common Stock over which such Persons have voting control as of the record date for the meeting of stockholders of the Corporation, amounting to, in the aggregate, at least 4.5% of the issued and outstanding Common Stock.
“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if the Common Stock is not then listed or quoted for trading on a Trading Market and if prices for the Common Stock are then reported in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (c) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holders of a majority in interest of the Securities then outstanding and reasonably acceptable to the Corporation, the fees and expenses of which shall be paid by the Corporation.
“Warrants” means, collectively, the Common Stock purchase warrants delivered to the Holder at the Closing pursuant to the Purchase Agreement.
“Warrant Shares” means the shares of Common Stock issuable upon exercise of the Warrants.
Section 2. Designation, Amount and Par Value. The series of preferred stock shall be designated as its Series A Convertible Preferred Stock (the “Preferred Stock”) and the number of shares so designated shall be up to 718 (which shall not be subject to increase without the written consent of all of the holders of the Preferred Stock (each, a “Holder” and collectively, the “Holders”)). Each share of Preferred Stock shall have a par value of $0.005 per share and a stated value equal to $1,000, subject to increase set forth in Section 3 below (the “Stated Value”).
Section 3. Dividends.
(a) Dividends. Holders shall be entitled to receive, and the Corporation shall pay, dividends on shares of Preferred Stock equal (on an as-if-converted-to-Common-Stock basis) to and in the same form as dividends (other than dividends in the form of Common Stock) actually paid on shares of the Common Stock when, as and if such dividends (other than dividends in the form of Common Stock) are paid on shares of the Common Stock. Other than as set forth in the previous sentence, no other dividends shall be paid on shares of Preferred Stock; and the Corporation shall pay no dividends (other than dividends in the form of Common Stock) on shares of the Common Stock unless it simultaneously complies with the previous sentence. At the election of the Holder, any unpaid dividends hereunder shall be accreted to, and shall increase, the outstanding Stated Value.
(b) Other Securities. So long as any Preferred Stock shall remain outstanding, neither the Corporation nor any Subsidiary thereof shall redeem, purchase or otherwise acquire directly or indirectly any Junior Securities except as expressly permitted by Section 10(a)(ix). So long as any Preferred Stock shall remain outstanding, neither the Corporation nor any Subsidiary thereof shall directly or indirectly pay or declare any dividend or make any distribution upon (other than a dividend or distribution described in Section 6 or dividends due and paid in the ordinary course on preferred stock of the Corporation at such times when the Corporation is in compliance with its payment and other obligations hereunder), nor shall any distribution be made in respect of, any Junior Securities as long as any dividends due on the Preferred Stock remain unpaid, nor shall any monies be set aside for or applied to the purchase or redemption (through a sinking fund or otherwise) of any Junior Securities or shares a.’ passu with the Preferred Stock.
(c) Special Reserves. The Corporation acknowledges and agrets that the capital of the Corporation (as such term is used in Section 170 of the Delaware General Corporation Law) in respect of the Preferred Stock and any future issuances of the Corporation’s capital stock shall be equal to the aggregate par value of such Preferred Stock or capital stock, as the case may be, and that, on or after the date of the Purchase Agreement, it shall not increase the capital of the Corporation with respect to any shares of the Corporation’s capital stock issued and outstanding on such date. The Corporation also acknowledges and agrees that it shall not create any special reserves under Section 171 of the Delaware General Corporation Law without the prior written consent of each Holder.
Section 4. Voting Rights. Except as otherwise provided herein or as otherwise required by law, the Preferred Stock shall have no voting rights. However, as long as any shares of Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote of the Holders of a majority of the then outstanding shares of the Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Preferred Stock or alter or amend this Certificate of Designation, (b) authorize or create any class of stock ranking as to dividends, redemption or distribution of assets upon a Liquidation (as defined in Section 5) senior to, or otherwise pad passu with, the Preferred Stock, (c) amend its certificate of incorporation or other charter documents in any manner that adversely affects any rights of the Holders, (d) increase the number of authorized shares of Preferred Stock, or (e) enter into any agreement with respect to any of the foregoing.
Section 5. Liquidation. Upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary (a “Liquidation”), the Holders shall be entitled to receive out of the assets, whether capital or surplus, of the Corporation an amount equal to the Stated Value, plus any other fees, liquidated damages or dividends then due and owing thereon under this Certificate of Designation, for each share of Preferred Stock before any distribution or payment shall be made to the holders of any Junior Securities, and if the assets of the Corporation shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the Holders shall be ratably distributed among the Holders in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full. A Fundamental Transaction or Change of Control Transaction shall not be deemed a Liquidation. The Corporation shall mail written notice of any such Liquidation, not less than 45 days prior to the payment date stated therein, to each Holder.
Section 6. Conversion
(a) Conversions at Option of Holder. Each share of Preferred Stock shall be convertible, at any time and from time to time from and after the Original Issue Date at the option of the Holder thereof, into that number of shares of Common Stock (subject to the limitations set forth in Section 6(d) and Section 6(e)) determined by dividing the Stated Value of such share of Preferred Stock by the Conversion Price. Holders shall effect conversions by providing the Corporation with the form of conversion notice attached hereto as Annex A (a “Notice of Conversion”). Each Notice of Conversion shall specify the number of shares of Preferred Stock to be converted, the number of shares of Preferred Stock owned prior to the conversion at issue, the number of shares of Preferred Stock owned subsequent to the conversion at issue and the date on which such conversion is to be effected, which date may not be prior to the date the applicable Holder delivers by facsimile such Notice of Conversion to the Corporation (such date, the “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion to the Corporation is deemed delivered hereunder. No ink-original Notice of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be required. The calculations and entries set forth in the Notice of Conversion shall control in the absence of manifest or mathematical error. To effect conversions of shares of Preferred Stock, a Holder shall not be required to surrender the certificate(s) representing the shares of Preferred Stock to the Corporation unless all of the shares of Preferred Stock represented thereby are so converted, in which case such Holder shall deliver the certificate representing such shares of Preferred Stock promptly following the Conversion Date at issue. Shares of Preferred Stock converted into Common Stock in accordance with the terms hereof shall be canceled and shall not be reissued.
(b) Conversion Price. The conversion price for the Preferred Stock shall equal $3.00, subject to adjustment herein (the “Conversion Price”).
(c) Mechanics of Conversion
(i) Delivery of Conversion Shares Upon Conversion. Not later than three (3) Trading Days after each Conversion Date (the “Share Delivery Date”), the Corporation shall deliver, or cause to be delivered, to the converting Holder (A) the number of Conversion Shares being acquired upon the conversion of the Preferred Stock which, on or after the earlier of (i) the six month anniversary of the Original Issue Date or (ii) the Effective Date, the Conversion Shares shall be free of restrictive legends and trading restrictions (other than those which may then be required by the Purchase Agreement), and (B) a bank check in the amount of accrued and unpaid dividends. On or after the earlier of (i) the six month anniversary of the Original Issue Date or (ii) the Effective Date, the Corporation shall deliver the Conversion Shares electronically through the Depository Trust Company or another established clearing corporation performing similar functions.
(ii) Failure to Deliver Conversion Shares. If, in the case of any Notice of Conversion, such Conversion Shares are not delivered to or as directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice to the Corporation at any time on or before its receipt of such Conversion Shares, to rescind such Conversion, in which event the Corporation shall promptly return to the Holder any original Preferred Stock certificate delivered to the Corporation and the Holder shall promptly return to the Corporation the Conversion Shares issued to such Holder pursuant to the rescinded Conversion Notice.
(iii) Obligation Absolute; Partial Liquidated Damages. The Corporation’s obligation to issue and deliver the Conversion Shares upon conversion of Preferred Stock in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by a Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by such Holder or any other Person of any obligation to the Corporation or any violation or alleged violation of law by such Holder or any other person, and irrespective of any other circumstance which might otherwise limit such obligation of the Corporation to such Holder in connection with the issuance of such Conversion Shares; provided however that such delivery shall not operate as a waiver by the Corporation of any such action that the Corporation may have against such Holder. In the event a Holder shall elect to convert any or all of the Stated Value of its Preferred Stock, the Corporation may not refuse conversion based on any claim that such Holder or any one associated or affiliated with such Holder has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and/or enjoining conversion of all or part of the Preferred Stock of such Holder shall have been sought and obtained, and the Corporation posts a surety bond for the benefit of such Holder in the amount of 150% of the Stated Value of Preferred Stock which is subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the underlying dispute and the proceeds of which shall be payable to such Holder to the extent it obtains judgment. In the absence of such injunction, the Corporation shall issue Conversion Shares and, if applicable, cash, upon a properly noticed conversion. If the Corporation fails to deliver to a Holder such Conversion Shares pursuant to Section 6(c)(i) on the second Trading Day after the Share Delivery Date applicable to such conversion, the Corporation shall pay to such Holder, in cash, as liquidated damages and not as a penalty, for each $5,000 of Stated Value of Preferred Stock being converted, $50 per Trading Day (increasing to $100 per Trading Day on the third Trading Day and increasing to $200 per Trading Day on the sixth Trading Day after such damages begin to accrue) for each Trading Day after such second Trading Day after the Share Delivery Date until such Conversion Shares are delivered or Holder rescinds such conversion. Nothing herein shall limit a Holder’s right to pursue actual damages or declare a Triggering Event pursuant to Section 10 hereof for the Corporation’s failure to deliver Conversion Shares within the period specified herein and such Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit a Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.
(iv) Compensation for Buy-In on Failure to Timely Deliver Conversion Shares Upon Conversion. In addition to any other rights available to the Holder, if the Corporation fails for any reason to deliver to a Holder the applicable Conversion Shares by the Share Delivery Date pursuant to Section 6(c)(i), and if after such Share Delivery Date such Holder is required by its brokerage firm to purchase (in an open market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by such Holder of the Conversion Shares which such Holder was entitled to receive upon the conversion relating to such Share Delivery Date (a “Buy-In”) then the Corporation shall (A) pay in cash to such Holder (in addition to any other remedies available to or elected by such Holder) the amount, if any, by which (x) such Holder’s total purchase price (including any brokerage commissions) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that such Holder was entitled to receive from the conversion at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions) and (B) at the option of such Holder, either reissue (if surrendered) the shares of Preferred Stock equal to the number of shares of Preferred Stock submitted for conversion (in which case, such conversion shall be deemed rescinded) or deliver to such Holder the number of shares of Common Stock that would have been issued if the Corporation had timely complied with its delivery requirements under Section 6(c)(i). For example, if a Holder purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of shares of Preferred Stock with respect to which the actual sale price of the Conversion Shares (including any brokerage commissions) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence, the Corporation shall be required to pay such Holder $1,000. The Holder shall provide the Corporation written notice indicating the amounts payable to such Holder in respect of the Buy-In and, upon request of the Corporation, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Corporation’s failure to timely deliver the Conversion Shares upon conversion of the shares of Preferred Stock as required pursuant to the terms hereof.
(v) Reservation of Shares Issuable Upon Conversion. The Corporation covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of the Preferred Stock free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other holders of the Preferred Stock), not less than such aggregate number of shares of the Common Stock as shall (subject to the terms and conditions set forth in the Purchase Agreement) he issuable (taking into account the adjustments and restrictions of Section 7) upon the conversion of the then outstanding shares of Preferred Stock. The Corporation covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable and, if the Resale Registration Statement is then effective under the Securities Act, shall be registered for public resale in accordance with such Resale Registration Statement (subject to such Holder’s compliance with its obligations under the Registration Rights Agreement).
(vi) Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of the Preferred Stock. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, the Corporation shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Price or round up to the next whole share.
(vii) Transfer Taxes and Expenses. The issuance of Conversion Shares on conversion of this Preferred Stock shall be made without charge to any Holder for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such Conversion Shares, provided that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such Conversion Shares upon conversion in a name other than that of the Holders of such shares of Preferred Stock and the Corporation shall not be required to issue or deliver such Conversion Shares unless or until the Person or Persons requesting the issuance thereof shall have paid to the Corporation the amount of such tax or shall have established to the satisfaction of the Corporation that such tax has been paid. The Corporation shall pay all Transfer Agent fees required for same-day processing of any Notice of Conversion and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Conversion Shares.
(d) Beneficial Ownership Limitation. The Corporation shall not effect any conversion of the Preferred Stock, and a Holder shall not have the right to convert any portion of the Preferred Stock, to the extent that, after giving effect to the conversion set forth on the applicable Notice of Conversion, such Holder (together with such Holder’s Affiliates, and any Persons acting as a group together with such Holder or any of such Holder’s Affiliates) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by such Holder and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of the Preferred Stock with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of the remaining, unconverted Stated Value of Preferred Stock beneficially owned by such Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Corporation subject to a limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation, the Preferred Stock or the Warrants) beneficially owned by such Holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this Section 6(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 6(d) applies, the determination of whether the Preferred Stock is convertible (in relation to other securities owned by such Holder together with any Affiliates) and of how many shares of Preferred Stock are convertible shall be in the sole discretion of such Holder, and the submission of a Notice of Conversion shall be deemed to be such Holder’s determination of whether the shares of Preferred Stock may be converted (in relation to other securities owned by such Holder together with any Affiliates) and how many shares of the Preferred Stock are convertible, in each case subject to the Beneficial Ownership Limitation. To ensure compliance with this restriction, each Holder will be deemed to represent to the Corporation each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Corporation shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 6(d), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (i) the Corporation’s most recent periodic or annual report filed with the Commission, as the case may be, (ii) a more recent public announcement by the Corporation or (iii) a more recent written notice by the Corporation or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Corporation shall within two Trading Days confirm orally and in writing to such Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Corporation, including the Preferred Stock, by such Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of Preferred Stock held by the applicable Holder. A Holder, upon notice to the Corporation, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 6(d) applicable to its Preferred Stock, provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Preferred Stock held by the Holder and the provisions of this Section 6(d) shall continue to apply. Any such increase of the Beneficial Ownership Limitation will not be effective until the 61s` day after such notice is delivered to the Corporation and shall only apply to such Holder and no other Holder. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 6(d) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of Preferred Stock.
(e) Issuance Limitations. Notwithstanding anything herein to the contrary, if the Corporation has not obtained Shareholder Approval, then the Corporation may not issue, upon conversion of the Preferred Stock, a number of shares of Common Stock which, when aggregated with any shares of Common Stock issued on or after the Original Issue Date and prior to such Conversion Date (i) in connection with the issuance of shares of Common Stock pursuant to the Purchase Agreement (such shares, the “Shares”), (fi) in connection with any prior conversion of Preferred Stock, and (Hi) in connection with the exercise of any Series B Prefunded Warrants issued pursuant to the Purchase Agreement would exceed 572,207 shares of Common Stock (subject to adjustment for forward and reverse stock splits, recapitalizations and the like) (such number of shares, the “Issuable Maximum”). Each Holder shall be entitled to a portion of the Issuable Maximum equal to the quotient obtained by dividing (x) the Holder’s original Subscription Amount pursuant to the Purchase Agreement by (y) the aggregate original Subscription Amount of all holders pursuant to the Purchase Agreement. In addition, each Holder may allocate its pro-rata portion of the Issuable Maximum among the Shares, the Preferred Stock and Series B Prefunded Warrants held by it in its sole discretion. Such Holder’s portion shall be adjusted upward ratably in the event that a holder no longer holds any Shares, Preferred Stock or Series B Prefunded Warrants and the amount of shares issued to such Holder in connection with its Shares pursuant to the Purchase Agreement and pursuant to such Holder’s Preferred Stock and Series B Prefunded Warrants was less than such Holder’s pro-rata share of the Issuable Maximum. For avoidance of doubt, unless and until Shareholder Approval is obtained and effective, warrants issued to any registered broker-dealer as a fee in connection with the Securities issued pursuant to the Purchase Agreement shall provide that such warrants shall not be allocated any portion of the Issuable Maximum and shall be unexercisable unless and until such Shareholder Approval is obtained and effective.
Section 7. Certain Adjustments.
(a) Stock Dividends and Stock Splits. If the Corporation, at any time while this Preferred Stock is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any other Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Corporation upon conversion of this Preferred Stock), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Corporation, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Corporation) outstanding immediately before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section 7(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
(b) Subsequent Equity Sales. If, at any time while this Preferred Stock is outstanding, the Corporation or any Subsidiary, as applicable sells or grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any sale, grant or any option to purchase or other disposition), any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock at an effective price per share that is lower than the then Conversion Price (such lower price, the “Base Conversion Price” and such issuances, collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be reduced to equal the Base Conversion Price. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. Notwithstanding the foregoing, no adjustment will be made under this Section 7(b) in respect of an Exempt Issuance. If the Corporation enters into a Variable Rate Transaction, despite the prohibition thereon in the Purchase Agreement, the Corporation shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion price at which such securities may be converted or exercised. The Corporation shall notify the Holders in writing (by facsimile or e-mail), no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this Section 7(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the “Dilutive Issuance Notice”).For purposes of clarification, whether or not the Corporation provides a Dilutive Issuance Notice pursuant to this Section 7(b), upon the occurrence of any Dilutive Issuance, the Holders are entitled to receive a number of Conversion Shares based upon the Base Conversion Price on or after the date of such Dilutive Issuance, regardless of whether a Holder accurately refers to the Base Conversion Price in the Notice of Conversion.
(c) Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 7(a) above, if at any time the Corporation grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”) then the Holder of will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of such Holder’s Preferred Stock (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
(d) Pro Rata Distributions. During such time as this Preferred Stock is outstanding, if the Corporation declares or makes any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Preferred Stock, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Preferred Stock (without regard to any limitations on conversion hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however to the extent that the Holder’s right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
(e) Fundamental Transaction. If, at any time while this Preferred Stock is outstanding, (i) the Corporation, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Corporation with or into another Person, (ii) the Corporation, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Corporation or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Corporation, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Corporation, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent conversion of this Preferred Stock, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation in Section 6(d) and Section 6(e) on the conversion of this Preferred Stock), the number of shares of Common Stock of the successor or acquiring corporation or of the Corporation, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Preferred Stock is convertible immediately prior to such Fundamental Transaction (without regard to any limitation in Section 6(d) and Section 6(e) on the conversion of this Preferred Stock). For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Corporation shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Preferred Stock following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Corporation or surviving entity in such Fundamental Transaction shall file a new Certificate of Designation with the same terms and conditions and issue to the Holders new preferred stock consistent with the foregoing provisions and evidencing the Holders’ right to convert such preferred stock into Alternate Consideration. The Corporation shall cause any successor entity in a Fundamental Transaction in which the Corporation is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Corporation under this Certificate of Designation and the other Transaction Documents in accordance with the provisions of this Section 7(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the holder of this Preferred Stock, deliver to the Holder in exchange for this Preferred Stock a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Preferred Stock which is convertible for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon conversion of this Preferred Stock (without regard to any limitations on the conversion of this Preferred Stock) prior to such Fundamental Transaction, and with a conversion price which applies the conversion price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such conversion price being for the purpose of protecting the economic value of this Preferred Stock immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Certificate of Designation and the other Transaction Documents referring to the “Corporation” shall refer instead to the Successor Entity), and may exercise every right and power of the Corporation and shall assume all of the obligations of the Corporation under this Certificate of Designation and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Corporation herein.
(f) Calculations. All calculations under this Section 7 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 7, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Corporation) issued and outstanding.
(g) Notice to the Holders.
(i) Adjustment to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 7, the Corporation shall promptly deliver to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.
(ii) Notice to Allow Conversion by Holder. If (A) the Corporation shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Corporation shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Corporation shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Corporation shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Corporation is a party, any sale or transfer of all or substantially all of the assets of the Corporation, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property or (E) the Corporation shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, then, in each case, the Corporation shall cause to be filed at each office or agency maintained for the purpose of conversion of this Preferred Stock, and shall cause to be delivered to each Holder at its last address as it shall appear upon the stock books of the Corporation, at least twenty (20) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Corporation or any of the Subsidiaries, the Corporation shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to convert the Conversion Amount of this Preferred Stock (or any part hereof) during the 20-day period commencing on the date of such notice through the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.
Section 8. [RESERVED]
Section 9. Negative Covenants. Until the date that (i) Shareholder Approval has been obtained and deemed effective, (ii) the Series B Prefunded Warrants are no longer outstanding and (iii) there is an effective registration statement registering the resale of all of the Conversion Shares underlying the Preferred Stock, unless the holders of at least 67.5% in Stated Value of the then outstanding shares of Preferred Stock shall have otherwise given prior written consent, the Corporation shall not, and shall not permit any of the Subsidiaries to, directly or indirectly:
(a) other than Permitted Indebtedness, enter into, create, incur, assume, guarantee or suffer to exist any indebtedness for borrowed money of any kind (other than trade accounts payable incurred in the ordinary course of business), including but not limited to, a guarantee, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom;
(b) b)other than Permitted Liens, enter into, create, incur, assume or suffer to exist any Liens of any kind, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom;
(c) amend its charter documents, including, without limitation, its certificate of incorporation and bylaws, in any manner that materially and adversely affects any rights of the Holder;
(d) repay, repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of its Common Stock, Common Stock Equivalents or Junior Securities, other than as to (i) the Conversion Shares or Warrant Shares as permitted or required under the Transaction Documents and (ii) repurchases of Common Stock or Common Stock Equivalents of departing officers and directors of the Corporation, provided that such repurchases shall not exceed an aggregate of $100,000 for all officers and directors for so long as the Preferred Stock is outstanding;
(e) pay cash dividends or distributions on Junior Securities of the Corporation;
(f) enter into any transaction with any Affiliate of the Corporation which would be required to be disclosed in any public filing with the Commission, unless such transaction is made on an arm’s-length basis and expressly approved by a majority of the disinterested directors of the Corporation (even if less than a quorum otherwise required for board approval); or
(g) enter into any agreement with respect to any of the foregoing.
Section 10. Redemption Upon Triggering Events.
(a)“ Triggering Event” means, wherever used herein any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):
(i) the failure of the initial Resale Registration Statement to be declared effective by the Commission on or prior to the 180th day after the Original Issue Date;
(ii) if, during the Effectiveness Period (as defined in the Registration Rights Agreement), the effectiveness of the Resale Registration Statement lapses for more than an aggregate of 60 calendar days (which need not be consecutive calendar days) during any 12 month period, or the Holders shall not otherwise be permitted to resell Registrable Securities under the Resale Registration Statement for more than an aggregate of 60 calendar days (which need not be consecutive calendar days) during any 12 month period;
(iii) the Corporation shall fail to deliver Conversion Shares issuable upon a conversion hereunder that comply with the provisions hereof prior to the fifth Trading Day after such shares are required to be delivered hereunder, or the Corporation shall provide written notice to any Holder, including by way of public announcement, at any time, of its intention not to comply with requests for conversion of any shares of Preferred Stock in accordance with the terms hereof;
(iv) one of the Events (as defined in the Registration Rights Agreement) described in subsections (i), (ii), (iii) or (iv) of Section 2(d) of the Registration Rights Agreement shall not have been cured to the satisfaction of the Holders prior to the expiration of 30 calendar days from the Event Date (as defined in the Registration Rights Agreement) relating thereto (other than an Event resulting from a failure of a Resale Registration Statement to be declared timely effective by the Commission on or prior to the 180th day after the Original Issue Date, which shall be covered by Section 10(a)(i));
(v) the Corporation shall fail for any reason to pay in full the amount of cash due pursuant to a Buy-In within five calendar days after notice therefor is delivered hereunder or shall fail to pay all amounts owed on account of any Event (as defined in the Registration Rights Agreement) within five days of the date due and payable;
(vi) the Corporation shall fail to have available a sufficient number of authorized and unreserved shares of Common Stock to issue to such Holder upon a conversion hereunder;
(vii) unless specifically addressed elsewhere in this Certificate of Designation as a Triggering Event, the Corporation shall fail to observe or perform any other covenant, agreement or warranty contained in, or otherwise commit any breach of the Transaction Documents, and such failure or breach shall not, if subject to the possibility of a cure by the Corporation, have been cured within 30 calendar days after the date on which written notice of such failure or breach shall have been delivered;
(viii) any breach of the agreements delivered to the initial Holders at the Closing pursuant to Section 2.2(a)(vii) of the Purchase Agreement;
(ix) the Corporation shall redeem more than a de minimis number of Junior Securities other than as to repurchases of Common Stock or Common Stock Equivalents from departing officers and directors, provided that, while any of the Preferred Stock remains outstanding, such repurchases shall not exceed an aggregate of $100,000 from all officers and directors;
(x) the Corporation shall be party to a Change of Control Transaction;
(xi) there shall have occurred a Bankruptcy Event;
(xii) the Common Stock shall fail to be listed or quoted for trading on a
(xiii) Trading Market for more than five Trading Days, which need not be consecutive Trading Days;
(xiv) the electronic transfer by the Corporation of shares of Common Stock through the Depository Trust Company or another established clearing corporation is no longer available or is subject to a “chill”; or
(xv) any monetary judgment, writ or similar final process shall be entered or filed against the Corporation, any subsidiary or any of their respective property or other assets for more than $150,000, and such judgment, writ or similar final process shall remain unvacated, unbonded or unstayed for a period of 45 calendar days.
(b) Upon the occurrence of a Triggering Event, each Holder shall (in addition to all other rights it may have hereunder or under applicable law) have the right, exercisable at the sole option of such Holder, to require the Corporation to, (A) with respect to the Triggering Events set forth in Sections 10(a)(iii), (v), (vii), (ix), (x) (as to Changes of Control approved by the Board of Directors of the Corporation) and (xi) (as to voluntary filings only), redeem all of the Preferred Stock then held by such Holder for a redemption price, in cash, equal to the Triggering Redemption Amount or (B) at the option of each Holder and with respect to the Triggering Events set forth in Sections 10(a)(i), (ii), (iv), (vi), (viii), (x) (as to Changes of Control not approved by the Board of Directors of the Corporation), (xi) (as to involuntary filings only), (xii), (xiii) and (xiv), either (a) redeem all of the Preferred Stock then held by such Holder for a redemption price, in shares of Common Stock, equal to a number of shares of Common Stock equal to the Triggering Redemption Amount divided by 75% of the average of the 10 VWAPs immediately prior to the date of election hereunder or (b) increase the dividend rate on all of the outstanding Preferred Stock held by such Holder to 18% per annum thereafter. The Triggering Redemption Amount, in cash or in shares, shall be due and payable or issuable, as the case may be, within five Trading Days of the date on which the notice for the payment therefor is provided by a Holder (the “Triggering Redemption Payment Date”). If the Corporation fails to pay in full the Triggering Redemption Amount hereunder on the date such amount is due in accordance with this Section (whether in cash or shares of Common Stock), the Corporation will pay interest thereon at a rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable law, accruing daily from such date until the Triggering Redemption Amount, plus all such interest thereon, is paid in full. For purposes of this Section, a share of Preferred Stock is outstanding until such date as the applicable Holder shall have received Conversion Shares upon a conversion (or attempted conversion) thereof that meets the requirements hereof or has been paid the Triggering Redemption Amount in cash.
Section 11. Miscellaneous.
(a) Notices. Any and all notices or other communications or deliveries to be provided by the Holders hereunder including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile or e-mail, or sent by a nationally recognized overnight courier service, addressed to the Corporation, at the address set forth above Attention: Corporate Secretary, facsimile number: 716-849-6820, e-mail address: notices@cbiolabs.com or such other facsimile number, e-mail address or address as the Corporation may specify for such purposes by notice to the Holders delivered in accordance with this Section 11.Any and all notices or other communications or deliveries to be provided by the Corporation hereunder shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number or address of such Holder appearing on the books of the Corporation, or if no such facsimile number or address appears on the books of the Corporation, at the principal place of business of such Holder, as set forth in the Purchase Agreement. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of 0) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth in this Section prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth in this Section on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.
(b) Absolute Obligation. Except as expressly provided herein, no provision of this Certificate of Designation shall alter or impair the obligation of the Corporation, which is absolute and unconditional, to pay liquidated damages and any accrued dividends on the shares of Preferred Stock at the time, place, and rate, and in the coin or currency, herein prescribed.
(c) Lost or Mutilated Preferred Stock Certificate. If a Holder’s Preferred Stock certificate shall be mutilated, lost, stolen or destroyed, the Corporation shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the shares of Preferred Stock so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such certificate, and of the ownership hereof reasonably satisfactory to the Corporation.
(d) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Certificate of Designation shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without regard to the principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan (the “New York Courts”). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts arc improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Certificate of Designation and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Certificate of Designation or the transactions contemplated hereby. If any party shall commence an action or proceeding to enforce any provisions of this Certificate of Designation (a “Legal Proceeding”), then the prevailing party in such Legal Proceeding shall be reimbursed by the other party for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding. A party that successfully moves to dismiss a Legal Proceeding is, without limitation, a prevailing party.
(e) Waiver. Any waiver by the Corporation or a Holder of a breach of any provision of this Certificate of Designation shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Certificate of Designation or a waiver by any other Holders. The failure of the Corporation or a Holder to insist upon strict adherence to any term of this Certificate of Designation on one or more occasions shall not be considered a waiver or deprive that party (or any other Holder) of the right thereafter to insist upon strict adherence to that term or any other term of this Certificate of Designation on any other occasion. Any waiver by the Corporation or a Holder must be in writing.
(f) Severability. If any provision of this Certificate of Designation is invalid, illegal or unenforceable, the balance of this Certificate of Designation shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law.
(g) Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.
(h) Headings. The headings contained herein are for convenience only, do not constitute a part of this Certificate of Designation and shall not be deemed to limit or affect any of the provisions hereof.
(i) Status of Converted or Redeemed Preferred Stock. Shares of Preferred Stock may only be issued pursuant to the Purchase Agreement. If any shares of Preferred Stock shall be converted, redeemed or reacquired by the Corporation, such shares shall resume the status of authorized but unissued shares of preferred stock and shall no longer be designated as Series A Convertible Preferred Stock.
*********************
RESOLVED, FURTHER, that the Chairman, the Chief Executive Officer, the Chief Financial Officer, and the Secretary, of the Corporation be and they hereby are authorized and directed to prepare and file this Certificate of Designation of Preferences, Rights and Limitations in accordance with the foregoing resolution and the provisions of Delaware law.
IN WITNESS WHEREOF, the undersigned have executed this Certificate this 5th day of February 2015.
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/s/ Yakov Kogan |
/s/ C. Neil Lyons |
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__________________________________ |
__________________________________ |
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Name: Yakov Kogan |
Name: C. Neil Lyons |
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Title: Chief Executive Officer |
Title: Chief Financial Officer |
ANNEX A
NOTICE OF CONVERSION
(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES OF PREFERRED STOCK)
The undersigned hereby elects to convert the number of shares of Series A Convertible Preferred Stock indicated below into shares of common stock, par value $0.005 per share (the “Common Stock”), of Cleveland BioLabs, Inc., a Delaware corporation (the “Corporation”), according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in the name of a Person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as may be required by the Corporation in accordance with the Purchase Agreement. No fee will be charged to the Holders for any conversion, except for any such transfer taxes.
Conversion calculations:
Date to Effect Conversion: _____________________________________________________
Number of shares of Preferred Stock owned prior to Conversion: ______________________
Number of shares of Preferred Stock to be Converted: _______________________________
Stated Value of shares of Preferred Stock to be Converted: ____________________________
Number of shares of Common Stock to be Issued: __________________________________
Applicable Conversion Price: ___________________________________________________
Number of shares of Preferred Stock subsequent to Conversion: ________________________
Address for Delivery: _________________________________________________________
or
DWAC Instructions:
Broker no: _____________
Account no: ____________
[HOLDER]
By: ___________________
Name:
Title:
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF DESIGNATION OF PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES A CONVERTIBLE PREFERRED STOCK
OF
CLEVELAND BIOLABS, INC.
_________________________________________
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
__________________________________________
CLEVELAND BIOLABS, INC., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows:
ONE: The name of this corporation is Cleveland BioLabs, Inc. (the “Corporation”).
TWO: The original Certificate of Designation of the Series A Convertible Preferred Stock (the “Certificate of Designation”) was filed with the Secretary of State of Delaware on February 5, 2015.
THREE: As of the date hereof, the Corporation has not issued any shares of the Series A Convertible Preferred Stock authorized under the Certificate of Designation.
FOUR: Pursuant to the provisions of Section 151 of the General Corporation Law of the State of Delaware and the authority vested in the board of directors of the Corporation (the “Board of Directors”) by the Amended and Restated Certificate of Incorporation of the Corporation (the “Restated Certificate”), the Board of Directors has duly adopted resolutions providing for the amendment of the Certificate of Designation as provided for hereunder, and such resolutions are set forth below in pertinent part:
WHEREAS, it is the intention of the Corporation to modify the terms of the Series A Convertible Preferred Stock and to amend the Certificate of Designation.
NOW, THEREFORE, BE IT RESOLVED, that pursuant to the authority vested in the Board of Directors in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware and the Restated Certificate, Section 6(e) under the “Terms of Preferred Stock” of the Certificate of Designation shall be amended and restated to read in its entirety as follows:
“e) Issuance Limitations. Notwithstanding anything herein to the contrary, if the Corporation has not obtained Shareholder Approval, then the Corporation may not issue, upon conversion of the Preferred Stock, a number of shares of Common Stock which, when aggregated with any shares of Common Stock issued on or after the Original Issue Date and prior to such Conversion Date (i) in connection with the issuance of shares of Common Stock pursuant to the Purchase Agreement (such shares, the “Shares”), (ii) in connection with any prior conversion of Preferred Stock, (iii) in connection with the exercise of any Series A Warrants issued pursuant to the Purchase Agreement and (iv) in connection with the exercise of any Series B Prefunded Warrants issued pursuant to the Purchase Agreement, would exceed 572,207 shares of Common Stock (subject to adjustment for forward and reverse stock splits, recapitalizations and the like) (such number of shares, the “Issuable Maximum”). Each Holder shall be entitled to a portion of the Issuable Maximum equal to the quotient obtained by dividing (x) the Holder’s original Subscription Amount pursuant to the Purchase Agreement by (y) the aggregate original Subscription Amount of all holders pursuant to the Purchase Agreement. In addition, each Holder may allocate its pro-rata portion of the Issuable Maximum among the Shares, the Preferred Stock, Series A Warrants and Series B Prefunded Warrants held by it in its sole discretion. Such Holder’s portion shall be adjusted upward ratably in the event that a holder no longer holds any Shares, Preferred Stock, Series A Warrants or Series B Prefunded Warrants and the amount of shares issued to such Holder in connection with its Shares pursuant to the Purchase Agreement and pursuant to such Holder’s Preferred Stock, Series A Warrants and Series B Prefunded Warrants was less than such Holder’s pro-rata share of the Issuable Maximum. For avoidance of doubt, unless and until Shareholder Approval is obtained and effective, warrants issued to any registered broker-dealer as a fee in connection with the Securities issued pursuant to the Purchase Agreement shall provide that such warrants shall not be allocated any portion of the Issuable Maximum and shall be unexercisable unless and until such Shareholder Approval is obtained and effective. Capitalized terms used in this paragraph are as specified in the Purchase Agreement.”; and
RESOLVED FURTHER, that the officers of the Corporation are each authorized and directed, for and on behalf of the Company, to execute this Certificate of Amendment and to file it with the Delaware Secretary of State in the form and manner as required by the laws of the State of Delaware, with such additional changes as the Secretary of State may require.
IN WITNESS WHEREOF, the undersigned have executed this Certificate this 6th day of February 2015.
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/s/ Yakov Kogan |
/s/ C. Neil Lyons |
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__________________________________ |
__________________________________ |
|
Name: Yakov Kogan |
Name: C. Neil Lyons |
|
Title: Chief Executive Officer |
Title: Chief Financial Officer |
STATE OF DELAWARE
CERTIFICATE OF AMENDMENT
OF RESTATED CERTIFICATE OF INCORPORATION
OF CLEVELAND BIOLABS, INC.
I, the undersigned, being the officer designated by the board of directors to execute this Certificate of Amendment to the Restated Certificate of Incorporation of Cleveland BioLabs, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware do hereby certify:
FIRST: That at a meeting of the Board of Directors of Cleveland BioLabs, Inc. resolutions were duly adopted setting forth a proposed amendment to the Restated Certificate of Incorporation, as amended, of said corporation, declaring said amendment to be advisable and calling a meeting of the stockholders of said corporation for consideration thereof.
The text of the Restated Certificate of Incorporation, as amended, is hereby amended as follows:
1. Paragraph (c) of ARTICLE SEVENTH of the Restated Certificate of Incorporation, as amended, is hereby amended and restated in its entirety to read as follows:
“Any vacancy on the Board that results from an increase in the number of directors may be filled by a majority of the Board then in office, provided that a quorum is present, and any other vacancy occurring on the Board may be filled by a majority of the Board then in office, even if less than a quorum, or by a sole remaining director. Any director elected to fill a vacancy shall hold office for a term that shall coincide with the remaining term of the other directors. Any director or the entire Board may be removed from office at any time, with or without cause, only by the affirmative vote of the holders of at least a majority of the voting power of the issued and outstanding shares of capital stock of the Corporation entitled to vote in connection with the election of directors.”
2. Paragraph (c) of ARTICLE NINTH of the Restated Certificate of Incorporation, as amended, is hereby amended and restated in its entirety to read as follows:
“Unless otherwise required by law, special meetings of stockholders, for any purpose or purposes, may be called by (i) the Chairman of the Board, if there be one, (ii) the Board or (iii) any holder or holders of 10% or more of the outstanding voting power of the issued and outstanding shares of capital stock of the Corporation entitled to vote in connection with the election of directors.”
3. The Restated Certificate of Incorporation, as amended, is hereby amended by adding the following new ARTICLE FOURTEENTH to read as follows:
“FOURTEENTH:
The Corporation shall not be governed by or subject to Section 203 of the Delaware General Corporation Law.”
SECOND: That said amendments were duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. The foregoing amendments shall be effective upon filing with the Secretary of State of the State of Delaware.
[Signature Page Follows.]
By: /s/ Yakov Kogan
Name: Yakov Kogan
Title: Chief Executive Officer
STATE OF DELAWARE
CERTIFICATE OF AMENDMENT
OF RESTATED CERTIFICATE OF INCORPORATION
OF CLEVELAND BIOLABS, INC.
I, the undersigned, being the officer designated by the board of directors to execute this Certificate of Amendment to the Restated Certificate of Incorporation of Cleveland BioLabs, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware do hereby certify:
FIRST: That at a meeting of the Board of Directors of Cleveland BioLabs, Inc. resolutions were duly adopted setting forth a proposed amendment to the Restated Certificate of Incorporation, as amended, of said corporation, declaring said amendment to be advisable and directing that the amendment be considered at the next annual meeting of the stockholders of said corporation.
The text of the Restated Certificate of Incorporation, as amended, is hereby amended as follows:
1. The first paragraph of ARTICLE FOURTH of the Restated Certificate of Incorporation, as amended, is hereby amended and restated in its entirety to read as follows:
“FOURTH: The total number of shares of capital stock of all classes which the Corporation shall have authority to issue is 26,000,000 shares, which shall be divided as follows: (i) 25,000,000 shares of Common Stock, par value $0.005 per share (“Common Stock”), and (ii) 1,000,000 shares of Preferred Stock, par value $0.005 per share (“Preferred Stock”).”
SECOND: That said amendments were duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. The foregoing amendments shall be effective upon filing with the Secretary of State of the State of Delaware.
[Signature Page Follows.]
IN WITNESS WHFREOF, said corporation has caused this certificate to be signed this ___ day of April, 2017.
By: /s/ John Szydl
Name: John Szydl
Title: Principal Financial Officer
[Signature Page to Certificate of Amendment]
Amendment to Cleveland BioLabs, Inc. Certificate of Incorporation
STATE OF DELAWARE
CERTIFICATE OF AMENDMENT
OF RESTATED CERTIFICATE OF INCORPORATION
OF CLEVELAND BIOLABS, INC.
Cleveland BioLabs, Inc. (the “Corporation”), a corporation organized and existing under the General Corporation Law of the State of Delaware, hereby certifies as follows:
1. This Certificate of Amendment (the “Certificate of Amendment”) amends the provisions of the Corporation’s Restated Certificate of Incorporation filed with the Secretary of State of the State of Delaware on March 18, 2010, as amended (the “Certificate of Incorporation”).
2. The first paragraph of Article Fourth of the Certificate of Incorporation is hereby amended and restated in its entirety to read as follows:
“FOURTH: The total number of shares of capital stock of all classes which the Corporation shall have authority to issue is 151,000,000 shares, which shall be divided as follows: (i) 150,000,000 shares of Common Stock, par value $0.005 per share (“Common Stock”), and (ii) 1,000,000 shares of Preferred Stock, par value $0.005 per share (“Preferred Stock”).”
3. This amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. This Certificate of Amendment shall be effective upon filing with the Secretary of State of the State of Delaware.
4. All other provisions of the Certificate of Incorporation shall remain in full force and effect.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed by Christopher Zosh, Vice President of Finance, this 6th day of July, 2021.
By: /s/ Christopher Zosh
Name: Christopher Zosh
Title: Vice President of Finance
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
CLEVELAND BIOLABS, INC.
Cleveland BioLabs, Inc., a corporate organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “Corporation”), in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware, does hereby certify:
1. The name of the corporation is Cleveland BioLabs, Inc.
2. The Corporation’s Restated Certificate of Incorporation is hereby amended to change the name of the Corporation to “Cytocom, Inc.”
3. This Certificate of Amendment shall become effective as of 11:50 p.m. on the date first set forth below.
IN WITNESS WHEREOF, the undersigned, being an authorized officer, has executed this Certificate of Amendment as of July 27, 2021.
By: /s/ Christopher Zosh
Name: Christopher Zosh
Title: Authorized Officer
Certificate of Amendment
STATE OF DELAWARE
CERTIFICATE OF AMENDMENT
OF RESTATED CERTIFICATE OF INCORPORATION
OF CYTOCOM, INC.
Cytocom, Inc. (the “Corporation”), a corporation organized and existing under the General Corporation Law of the State of Delaware, hereby certifies as follows:
1. This Certificate of Amendment (the “Certificate of Amendment”) amends the provisions of the Corporation’s Restated Certificate of Incorporation filed with the Secretary of State of the State of Delaware on March 18, 2010, as amended (the “Certificate of Incorporation”).
2. The first paragraph of Article First of the Certificate of Incorporation is hereby amended and restated in its entirety to read as follows:
“FIRST: The name of the corporation is Statera Biopharma, Inc. (the “Corporation”).”
3. This amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. This Certificate of Amendment shall be effective September 1, 2021.
4. All other provisions of the Certificate of Incorporation shall remain in full force and effect.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed by Michael K. Handley, Chief Executive Officer, this the ____ day of ___________, 2021.
By: /s/ Michael K. Handley
Name: Michael K. Handley
Title: Chief Executive Officer
Exhibit 31.1
Certification
I, Michael K. Handley, certify that:
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1. |
I have reviewed this quarterly report on Form 10-Q of Statera Biopharma, Inc.; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared; |
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(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. |
The registrant’s other certifying officer and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
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Dated: November 15, 2021 |
By: |
/s/ Michael K. Handley |
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|
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Michael K. Handley |
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|
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Chief Executive Officer |
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|
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(Principal Executive Officer) |
Exhibit 31.2
Certification
I, Peter Aronstam, certify that:
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1. |
I have reviewed this quarterly report on Form 10-Q of Statera Biopharma, Inc.; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared; |
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(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. |
The registrant’s other certifying officer and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
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Dated: November 15, 2021 |
By: |
/s/ Peter Aronstam |
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Peter Aronstam |
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|
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Chief Financial Officer |
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(Principal Financial Officer) |
Exhibit 32.1
Certification*
In connection with the Quarterly Report on Form 10-Q of Statera Biopharma, Inc. (the “Company”) for the quarter ended September 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Quarterly Report”), pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), each of Michael K. Handley, Chief Executive Officer of the Company, and Peter Aronstam, Chief Financial Officer of the Company, hereby certifies that, to the best of his knowledge:
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1. |
The Quarterly Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and |
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2. |
The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the period covered by the Quarterly Report. |
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Dated: November 15, 2021 |
By: |
/s/ Michael K. Handley |
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Michael K. Handley |
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Chief Executive Officer |
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(Principal Executive Officer) |
| Dated: November 15, 2021 | By: | /s/ Peter Aronstam |
| Peter Aronstam | ||
| Chief Financial Officer | ||
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* |
This certification accompanies the Quarterly Report to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Quarterly Report). It will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. |
Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares |
Sep. 30, 2021 |
Dec. 30, 2020 |
|---|---|---|
| Preferred stock, par value (in dollars per share) | $ 0.005 | $ 0.005 |
| Preferred stock, shares authorized (in shares) | 1,000,000 | 1,000,000 |
| Preferred stock, shares issued (in shares) | 0 | 0 |
| Preferred stock, shares outstanding (in shares) | 0 | 0 |
| Common stock, par value (in dollars per share) | $ 0.005 | $ 0.005 |
| Common stock, shares authorized (in shares) | 150,000,000 | 25,000,000 |
| Common stock, shares issued (in shares) | 32,095,520 | 13,376,062 |
| Common stock, shares outstanding (in shares) | 32,095,520 | 13,376,062 |
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
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| Revenues: | ||||
| Grants and contracts | $ 236,519 | $ 0 | $ 236,519 | $ 0 |
| Cost of Revenue: | ||||
| Cost of goods sold | 115,927 | 0 | 115,927 | 0 |
| Gross Profit | 120,592 | 0 | 120,592 | 0 |
| Operating expenses: | ||||
| Research and development | 3,434,977 | 4,383,325 | 6,274,936 | 4,509,890 |
| Sales and marketing expense | 23,242 | 0 | 26,037 | 0 |
| General and administrative | 6,306,323 | 1,787,333 | 14,981,086 | 2,284,577 |
| Total operating expenses | 9,764,542 | 6,170,658 | 21,282,059 | 6,794,467 |
| Loss from operations | (9,643,950) | (6,170,658) | (21,161,467) | (6,794,467) |
| Other income (expense): | ||||
| Interest and other income (expense) | (3,089,301) | 491,817 | (3,463,572) | (1,069,403) |
| Total other income (expense) | (3,089,301) | 491,817 | (3,463,572) | (1,069,403) |
| Income from discontinued operations, net of income taxes | (1) | 0 | (1) | 0 |
| Net loss | (12,733,250) | (5,678,841) | (24,625,038) | (7,863,870) |
| Net loss attributable to noncontrolling interests | 13,419 | 0 | 13,419 | 0 |
| Net loss attributable to Statera Biopharma, Inc. | $ (12,719,831) | $ (5,678,841) | $ (24,611,619) | $ (7,863,870) |
| Net loss attributable to common stockholders per share of common stock, basic and diluted (in dollars per share) | $ (0.47) | $ (1.84) | $ (0.86) | $ (1.13) |
| Weighted average number of shares used in calculating net loss per share, basic and diluted (in shares) | 27,036,583 | 3,081,294 | 28,671,422 | 6,957,095 |
Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
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| Net Income (Loss), Including Portion Attributable to Noncontrolling Interest, Total | $ (12,733,250) | $ (5,678,841) | $ (24,625,038) | $ (7,863,870) |
| Other comprehensive loss: | ||||
| Foreign currency translation adjustment | (2,014) | 0 | (2,014) | 0 |
| Comprehensive loss including noncontrolling interests | (12,735,264) | (5,678,841) | (24,627,052) | (7,863,870) |
| Comprehensive loss attributable to noncontrolling interests | 13,419 | 0 | 13,419 | 0 |
| Comprehensive loss attributable to Statera Biopharma, Inc. | $ (12,721,845) | $ (5,678,841) | $ (24,613,633) | $ (7,863,870) |
Condensed Consolidated Statement of Stockholders' Equity (Unaudited) - USD ($) |
Cumulative Effect, Period of Adoption, Adjustment [Member]
AOCI Attributable to Parent [Member]
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Cumulative Effect, Period of Adoption, Adjustment [Member]
Retained Earnings [Member]
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Cumulative Effect, Period of Adoption, Adjustment [Member]
Noncontrolling Interest [Member]
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Cumulative Effect, Period of Adoption, Adjustment [Member]
Common Stock [Member]
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Cumulative Effect, Period of Adoption, Adjustment [Member]
Additional Paid-in Capital [Member]
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Cumulative Effect, Period of Adoption, Adjustment [Member] |
Cumulative Effect, Period of Adoption, Adjusted Balance [Member]
AOCI Attributable to Parent [Member]
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Cumulative Effect, Period of Adoption, Adjusted Balance [Member]
Retained Earnings [Member]
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Cumulative Effect, Period of Adoption, Adjusted Balance [Member]
Noncontrolling Interest [Member]
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Cumulative Effect, Period of Adoption, Adjusted Balance [Member]
Common Stock [Member]
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Cumulative Effect, Period of Adoption, Adjusted Balance [Member]
Additional Paid-in Capital [Member]
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Cumulative Effect, Period of Adoption, Adjusted Balance [Member] |
AOCI Attributable to Parent [Member]
Common Stock One [Member]
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AOCI Attributable to Parent [Member]
Common Stock Two [Member]
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AOCI Attributable to Parent [Member]
Class of Warrant or Right, Warrant One [Member]
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AOCI Attributable to Parent [Member]
Class of Warrant or Right, Warrant Two [Member]
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AOCI Attributable to Parent [Member] |
Retained Earnings [Member]
Common Stock One [Member]
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Retained Earnings [Member]
Common Stock Two [Member]
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Retained Earnings [Member]
Class of Warrant or Right, Warrant One [Member]
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Retained Earnings [Member]
Class of Warrant or Right, Warrant Two [Member]
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Retained Earnings [Member] |
Noncontrolling Interest [Member]
Common Stock One [Member]
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Noncontrolling Interest [Member]
Common Stock Two [Member]
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Noncontrolling Interest [Member]
Class of Warrant or Right, Warrant One [Member]
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Noncontrolling Interest [Member]
Class of Warrant or Right, Warrant Two [Member]
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Noncontrolling Interest [Member] |
Common Stock [Member]
Common Stock One [Member]
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Common Stock [Member]
Common Stock Two [Member]
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Common Stock [Member]
Class of Warrant or Right, Warrant One [Member]
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Common Stock [Member]
Class of Warrant or Right, Warrant Two [Member]
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Common Stock [Member] |
Additional Paid-in Capital [Member]
Common Stock One [Member]
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Additional Paid-in Capital [Member]
Common Stock Two [Member]
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Additional Paid-in Capital [Member]
Class of Warrant or Right, Warrant One [Member]
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Additional Paid-in Capital [Member]
Class of Warrant or Right, Warrant Two [Member]
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Additional Paid-in Capital [Member] |
Common Stock One [Member] |
Common Stock Two [Member] |
Class of Warrant or Right, Warrant One [Member] |
Class of Warrant or Right, Warrant Two [Member] |
Total |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance (in shares) at Dec. 31, 2019 | (9,048,760) | 11,298,239 | 20,346,999 | |||||||||||||||||||||||||||||||||||||||
| Beginning balance at Dec. 31, 2019 | $ (568,030) | $ 0 | $ 5,039,878 | $ 36,144 | $ 151,854,270 | $ 156,362,262 | $ (568,030) | $ (15,537,460) | $ 5,039,878 | $ 56,491 | $ 163,161,523 | $ 152,152,402 | $ 0 | $ (15,537,460) | $ 0 | $ 20,347 | $ 11,307,253 | $ (4,209,860) | ||||||||||||||||||||||||
| Issuance of common stock (in shares) | 1,515,878 | 6,000 | ||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock | $ 0 | $ 0 | $ 0 | $ 7,579 | $ 30 | $ 2,775,846 | $ 13,470 | $ 2,783,425 | $ 13,500 | |||||||||||||||||||||||||||||||||
| Exercise of warrants (in shares) | 8,871 | 82,399 | 105,000 | |||||||||||||||||||||||||||||||||||||||
| Exercise of warrants | $ 0 | $ 0 | 0 | $ 0 | $ 0 | 0 | $ 0 | $ 0 | 0 | $ 44 | $ 412 | $ 525 | $ 61,219 | $ 248,138 | 504,381 | $ 61,263 | $ 248,550 | 504,906 | ||||||||||||||||||||||||
| Foreign currency translation | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||
| Net loss | 0 | (7,863,870) | 0 | $ 0 | 0 | (7,863,870) | ||||||||||||||||||||||||||||||||||||
| Balance (in shares) at Sep. 30, 2020 | 13,016,387 | |||||||||||||||||||||||||||||||||||||||||
| Ending balance at Sep. 30, 2020 | (645,022) | (23,401,330) | 4,970,313 | $ 65,081 | 166,764,577 | 147,753,619 | ||||||||||||||||||||||||||||||||||||
| Foreign currency translation | (76,992) | 0 | (69,565) | (146,557) | ||||||||||||||||||||||||||||||||||||||
| Net loss attributable to noncontrolling interests | 0 | |||||||||||||||||||||||||||||||||||||||||
| Balance (in shares) at Dec. 31, 2020 | 13,376,062 | |||||||||||||||||||||||||||||||||||||||||
| Beginning balance at Dec. 31, 2020 | (685,680) | (27,631,323) | 4,973,465 | $ 66,876 | 166,762,778 | 143,486,116 | ||||||||||||||||||||||||||||||||||||
| Issuance of common stock (in shares) | 2,000,000 | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock | 0 | 0 | 0 | $ 10,000 | 12,713,074 | 12,723,074 | ||||||||||||||||||||||||||||||||||||
| Exercise of warrants (in shares) | 92,883 | |||||||||||||||||||||||||||||||||||||||||
| Exercise of warrants | 0 | 0 | 0 | $ 464 | (464) | 0 | ||||||||||||||||||||||||||||||||||||
| Foreign currency translation | 0 | 13,419 | (2,014) | |||||||||||||||||||||||||||||||||||||||
| Net loss | (24,611,619) | (13,419) | $ 0 | (24,625,038) | ||||||||||||||||||||||||||||||||||||||
| Statera merger & recapitalization (in shares) | 16,626,575 | |||||||||||||||||||||||||||||||||||||||||
| Statera merger & recapitalization | 683,666 | 0 | (4,887,848) | $ 83,138 | (58,924,898) | (63,045,942) | ||||||||||||||||||||||||||||||||||||
| Shares to be issued for services | 0 | 0 | 0 | 0 | 464,703 | 464,703 | ||||||||||||||||||||||||||||||||||||
| Shares to be issued for stock based compensation | 0 | 0 | 0 | 0 | 234,000 | 234,000 | ||||||||||||||||||||||||||||||||||||
| Restricted stock | 0 | 0 | 0 | $ 0 | 4,957,707 | 4,957,707 | ||||||||||||||||||||||||||||||||||||
| Net loss | 0 | |||||||||||||||||||||||||||||||||||||||||
| Balance (in shares) at Sep. 30, 2021 | 32,095,520 | |||||||||||||||||||||||||||||||||||||||||
| Ending balance at Sep. 30, 2021 | $ (2,014) | (52,256,361) | $ 72,198 | $ 160,478 | $ 126,220,319 | 74,194,620 | ||||||||||||||||||||||||||||||||||||
| Net loss attributable to noncontrolling interests | $ (13,419) | $ 13,419 |
Note 1 - Description of Business |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Notes to Financial Statements | |
| Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block] |
1. Description of Business
On July 27, 2021, Statera Biopharma, Inc., formerly known as Cleveland BioLabs, Inc. (the "Company" or "Statera"), High Street Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of the Company ("Merger Sub"), and Cytocom Inc., a Delaware corporation ("Old Cytocom"), completed their previously announced merger transaction. The merger transaction was completed pursuant to an Agreement and Plan of Merger (the “Merger Agreement”), dated as of October 16, 2020, pursuant to which Merger Sub merged with and into Old Cytocom, with Old Cytocom continuing as a wholly owned subsidiary of the Company and the surviving corporation of the merger (the "Merger"). In connection with the closing of the Merger, Old Cytocom was renamed “Cytocom Subsidiary Inc.” and the Company was renamed “Cytocom, Inc.” Effective September 1, 2021, the Company changed its corporate name to "Statera Biopharma, Inc.", and the Company’s common stock began trading on The Nasdaq Capital Market with the symbol “STAB.”
The Company was incorporated in Delaware in June 2003 and is headquartered in Fort Collins, Colorado. Prior to the Merger, the Company conducted business in the United States ("U.S.") directly and in the Russian Federation ("Russia") through subsidiaries: wholly owned subsidiary, BioLab 612, LLC ("BioLab 612"), which began operations in 2012 and was dissolved in November 2020; 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, or the context otherwise requires, the terms "Statera Biopharma," the "Company," "we," "us," and "our" refer to Statera Biopharma, Inc., known as "Cleveland BioLabs, Inc." prior to the Merger, BioLab 612, and Panacela.
On June 24, 2021, Old Cytocom completed the acquisition of ImQuest Life Sciences, Inc. and its subsidiaries (“ImQuest”) in accordance with the Agreement and Plan of Merger by and among Old Cytocom and ImQuest dated as of July 17, 2020, and gained control of ImQuest. The purchase consideration due under this merger to the ex-shareholders of ImQuest consisted of 3,282,089 shares of common stock of Statera Biopharma. ImQuest is now a wholly-owned subsidiary of the Company.
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 September 30, 2021 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.
Statera Biopharma is a clinical-stage biopharmaceutical company developing novel immunotherapies targeting autoimmune, neutropenia/anemia, emerging viruses and cancers based on a proprietary platform designed to rebalance the body’s immune system and restore homeostasis. Statera has one of the largest platforms of toll-like receptor (TLR) agonists in the biopharmaceutical industry with TLR4 and TLR9 antagonists, and the TLR5 agonists, Entolimod and GP532. TLRs are a class of protein that play a key role in the innate immune system.
Statera is developing therapies designed to directly elicit within patients a robust and durable response of antigen-specific killer T-cells and antibodies, thereby activating essential immune defenses against autoimmune, inflammatory, and infectious diseases and cancers. In the next 12 months, the Company expects to initiate clinical trials covering Crohn’s disease (STAT-201), hematology (Entolimod), pancreatic cancer (STAT-401) and COVID-19 (STAT-205).
Going Concern
At September 30, 2021, the Company had cash and cash equivalents of $9.2 million in the aggregate. The Company has incurred recurring losses from operations since inception, accumulating a deficit of approximately $52.3 million as of September 30, 2021. For the nine months ended September 30, 2021 and 2020, the Company incurred net losses of approximately $24,625,038 and $7,863,870, respectively. The Company may incur additional losses and negative operating cash flows in the future. Failure to generate sufficient revenues, reduce spending or raise additional capital could adversely affect its ability to achieve its intended business objectives. These matters, among others, raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these condensed financial statements.
Management intends to fund future operations through additional private or public debt or equity offerings and may seek additional capital through arrangements with strategic partners or from other sources. Based on the Company’s operating plan, existing working capital as of September 30, 2021 was not sufficient to meet the cash requirements to fund planned operations for a period of one year after issuance of condensed financial without additional sources of cash. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern and do not include adjustments that might result from the outcome of this uncertainty. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business.
The accompanying condensed consolidated financial statements for the nine months ended September 30, 2021 and 2020 have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. During the next 12 months from the issuance of these condensed financial statements, management intends to raise additional debt and/or equity financing to fund future operations and to provide additional working capital. However, there is no assurance that such financing will be consummated or obtained in sufficient amounts necessary to meet the Company’s needs. |
Note 2 - Summary of Significant Accounting Policies |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Significant Accounting Policies [Text Block] |
2. Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
These unaudited interim condensed consolidated financial statements reflect the historical results of Old Cytocom prior to the completion of the Merger, and do not include the historical results of the Company prior to the completion of the Merger. All share and per share disclosures have been adjusted to reflect the exchange of shares in the Merger. Under U.S. generally accepted accounting principles ("GAAP"), the Merger is treated as a “reverse merger” under the purchase method of accounting. For accounting purposes, Old Cytocom is considered to have acquired Cleveland BioLabs, Inc. See Note 3, Merger with Old Cytocom, for further details on the Merger and the U.S. GAAP accounting treatment.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America pursuant to the requirements of the Securities and Exchange Commission (“SEC”) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for the fair presentation of results for the periods presented, have been included. The results of operations of any interim period are not necessarily indicative of the results of operations for the full year or any other interim period. These condensed consolidated 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, 2020, as filed with the SEC.
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 September 30, 2021, along with its results of operations for the three and nine month periods ended September 30, 2021 and 2020 and cash flows for the nine-month periods ended September 30, 2021 and 2020. Interim results are not necessarily indicative of results that may be expected for any other interim period or for an entire year.
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.
Other Comprehensive Income (Loss)
The Company applies the Accounting Standards Codification ("ASC") 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 nine months ended September 30, 2021.
Accounting for Stock-Based Compensation
The Cleveland Biolabs, Inc. Equity Incentive Plan, adopted in 2018 (the "Plan"), authorizes the Company to grant (i) options to purchase common stock, (ii) stock appreciation rights, (iii) awards of restricted or unrestricted stock, (iv) restricted stock units, and (v) performance awards, 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 September 30, 2021, an aggregate of 597,557 shares of common stock were authorized for issuance under the Plan, of which a total of 536,089 shares of common stock remained available for future awards. However, on November 9, 2021, the Company’s stockholders approved amendments to the Plan that increased the number of shares of common stock authorized to be issued by 3,000,000 shares, removed the limit on the maximum number of shares covered by an award that may be issued in any calendar year to any single recipient and renamed the Plan the "Statera Biopharma Equity Incentive Plan." In addition, a total of 45,468 shares of common stock reserved for issuance are 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. 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 September 30, 2021, there are 925,000 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 nine months ended September 30, 2021 and September 30, 2020.
Income Taxes
No income tax expense was recorded for the three and nine months ended September 30, 2021 and 2020 as the Company does not expect to have taxable income for 2021 and did not have taxable income in 2020. A full valuation allowance has been recorded against the Company’s net deferred tax asset.
At September 30, 2021, the Company had U.S. federal net operating loss carryforwards of approximately $193.9 million, of which $140.6 million begins to expire if not utilized by 2023, and $53.3 million, which has no expiration, and approximately $4.3 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 $112.2 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 September 30, 2021.
Contingencies
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.
Revenue Recognition
Upon the integration of the newly acquired ImQuest, the Company has implemented the five steps to recognize revenue from contracts with customers under ASC 606, Revenue from Contracts with Customers (“ASC 606”), which are:
• Step 1: Identify the contract(s) with a customer • Step 2: Identify the performance obligations in the contract • Step 3: Determine the transaction price • Step 4: Allocate the transaction price to the performance obligations in the contract • Step 5: Recognize revenue when (or as) a performance obligation is satisfied
In the nine months ended September 30, 2021, the Company generated revenue from its Clinical Research Organization services (“CRO services”) provided by ImQuest.
The Company provides preclinical CRO services to evaluate the potential of new and novel pharmaceutical products for the treatment and prevention of viruses, bacteria, cancer and inflammatory diseases. These preclinical research services include compound screening, efficacy analysis, drug target validations, mechanism of action research, and toxicity studies in multiple pharmaceutical areas.
The Company has concluded that each provision of its CRO services is a distinct and single performance obligation as the customer benefits from the services once they have the opportunity to question the findings and receive the final report which summarizes the research results. Management determined each promised good and service in the contract related to its CRO services should be bundled into a single performance obligation because even though the contract explicitly states individual promises such as consultation services combined with a range of tests that are carried out in order to conduct the preclinical research, the culmination of the individual promises is the CRO services which is a single performance obligation.
The amount the Company earns for its CRO services is typically a fixed fee per project. Revenue from the project is recognized at the point in time when the final report is delivered to the customer and thus the performance obligation is satisfied. At the time the final report is delivered: (a) the Company has the right to payment for the report, (b) the customer has legal title to the report, (c) physical transfer of the report has occurred and the customer has taken possession of the report, (d) the customer now has benefit and the risk of ownership of the report, and (e) the customer has accepted the report. Revenue collected in advance of delivery of the final report is classified as a contract liability on the consolidated balance sheet
At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
Collaborative Arrangements
The company accounts for transactions under collaborative arrangements under the same method as described above under ASC 606.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities at the date of purchase of three months or less to be cash equivalents. Cash and cash equivalents include bank demand deposits, marketable securities with maturities of three months or less at purchase, and money market funds that invest primarily in certificates of deposits, commercial paper and U.S. government and U.S. government agency obligations. Cash equivalents are reported at fair value. As of September 30, 2021 and December 31, 2020 there were no cash equivalents. Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. At September 30, 2021 and December 31, 2020, the Company had $12,951,581 and $331,385 in excess of the FDIC insured limit, respectively.
Restricted Cash
The Company considers all cash held for specific reasons and not available for immediate, normal business use as restricted cash. As of September 30, 2021 and December 31, 2020 the Company had $5,000,000 and $0, respectively, classified as restricted cash. The Company incurred $15,000,000 of long-term debt via the Avenue Capital loan. The loan's maturity date is May 1, 2024 and carries a 10.99% interest rate. The Company has no principal payments due for the first 12 monthly periods, with the first payment due in June, 2022. As the restricted cash is currently held for the purpose of repayment of this long-term debt with no repayments due in the next 12 months, the cash is classified as a non-current asset.
Accounts Receivable
Accounts receivable are recorded net of an allowance for credit losses, which is recorded as an offset to accounts receivable and changes in such are classified as general and administrative expense in the consolidated statements of operations. The Company assesses collectability by reviewing accounts receivable on an individual basis when the Company identifies specific customers with known disputes or collectability issues. The Company assesses past due amounts by reviewing the payment terms of the contracts with the Company’s customers. In determining the amount of the allowance for credit losses, the Company makes judgments about the creditworthiness of customers based on ongoing credit evaluations. The Company writes off uncollectable accounts receivable against the allowance based on facts and circumstances for specific customers when management determines that collectability is remote. There is no allowance for doubtful account as of September 30, 2021 and December 31, 2020. During the nine months ended September 30, 2021 and 2020, the company did write off any accounts receivable.
Goodwill
We test goodwill for impairment in our fourth quarter each year, or more frequently if indicators of an impairment exist, to determine whether it is more likely than not that the fair value of the reporting unit with goodwill is less than its carrying value. For reporting units for which this assessment concludes that it is more likely than not that the fair value is more than its carrying value, goodwill is considered not impaired and we are not required to perform the goodwill impairment test. Qualitative factors considered in this assessment include industry and market considerations, overall financial performance, and other relevant events and factors affecting the fair value of the reporting unit. For reporting units for which this assessment concludes that it is more likely than not that the fair value is below the carrying value, goodwill is tested for impairment by determining the fair value of each reporting unit and comparing it to the carrying value of the net assets assigned to the reporting unit. If the fair value of the reporting unit exceeds its carrying value, goodwill is considered not impaired. If the carrying value of the reporting unit exceeds its fair value, we would record an impairment loss up to the difference between the carrying value and implied fair value.
Intangible Assets
The Company has two identified finite-lived intangible assets, its customer base and tradenames and trademarks. The customer base and tradenames have a useful life of 20 years and 3 years, respectively. The intangible assets are amortized on a straight-line basis over their useful lives.
The Company reviews all finite lived intangible assets for impairment when circumstances indicate that their carrying values may not be recoverable. If the carrying value of an asset group is not recoverable, the Company recognizes an impairment loss for the excess carrying value over the fair value in its consolidated statements of operations. No impairment losses have been recorded in the nine months ended September 30, 2021 and 2020.
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Note 3 - Merger with Old Cytocom |
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| Mergers, Acquisitions and Dispositions Disclosures [Text Block] |
3. Merger with Old Cytocom
On July 27, 2021, the Company, formerly known as Cleveland BioLabs, Inc., Merger Sub, and Old Cytocom completed their previously announced merger transaction. The merger transaction was completed pursuant to the Merger Agreement, pursuant to which Merger Sub merged with and into Old Cytocom, with Old Cytocom continuing as a wholly owned subsidiary of the Company and the surviving corporation of the Merger. Immediately upon completion of the Merger, the former stockholders of Old Cytocom stockholders held a majority of the voting interest of the combined company.
Under the terms of the Merger, at the effective time of the Merger, the Company issued shares of its common stock to Old Cytocom stockholders (but excluding those Old Cytocom stockholders who had been holders of stock of ImQuest prior to merger between Old Cytocom and ImQuest in June 2021), at an exchange ratio of 0.3384 shares of common stock (the “Exchange Ratio”), in exchange for each share of Old Cytocom common stock outstanding immediately prior to the Merger. The Company also set aside a number of shares of its common stock for issuance to the Old Cytocom stockholders who had been holders of stock of ImQuest prior to merger between Old Cytocom and ImQuest in June 2021 (the “ImQuest Merger”), in accordance with the terms of the Merger Agreement, which shares were issued after the passage of 30 trading days following the Merger. Immediately following the closing of the Merger on July 27, 2021, the former Cleveland BioLabs, Inc. stockholders owned approximately 46% of the aggregate number of shares of common stock of the Company and the former Old Cytocom and former ImQuest stockholders owned approximately 54% of the shares of common stock of the Company.
At the effective time of the Merger, the Company also became party to a number of warrants that had been issued by Old Cytocom. At the time of the Company’s first draw under the Loan and Security Agreement, dated as of April 26, 2021, between Avenue Venture Opportunities Fund, L.P. (“Avenue”) and Old Cytocom, as supplemented by the Supplement to the Loan and Security Agreement, dated as of April 26, 2021, between Avenue and Old Cytocom (the “Avenue Facility”), which occurred July 30, 2021, the Company issued a warrant (the “Avenue Warrant”) to purchase an aggregate of 154,004 shares of the Company’s common stock at an exercise price of $0.01 per share. Avenue may exercise the Avenue Warrant at any time and from time to time until April 30, 2026. The terms of the Avenue Warrant provide that the exercise price of the Avenue Warrant, and the number of shares of Common Stock for which the Avenue Warrant may be exercised, are subject to adjustment to account for increases or decreases in the number of outstanding shares of Common Stock resulting from stock splits, reverse stock splits, consolidations, combinations and reclassifications.
In connection with the Company’s entry into the Amended and Restated Share Purchase Agreement, dated as of July 27, 2021, by and among GEM Global Yield LLC SCS, GEM Yield Bahamas Limited (such entities together, “GEM”) and the Company, as successor to Old Cytocom (the “GEM Agreement”), Old Cytocom issued a warrant (the “GEM Warrant”) to GEM. At the closing of the Merger, the GEM Warrant automatically became an obligation of the Company. The GEM Warrant is exercisable for an aggregate of 1,720,083 shares of Company common stock, or 4.99% of the Company’s outstanding stock as of immediately after the effective time of the Merger, at an exercise price of $5.01 per share. The exercise price will increase to $5.51 if on the -year anniversary date of the effective time of the Merger, the warrant has not been exercised in full and the average closing price per share of the Company’s common stock for the 10 days preceding the anniversary date is less than 90% of the initial exercise price. GEM may exercise the GEM Warrant at any time and from time to time until July 28, 2024. The terms of the GEM Warrant provide that the exercise price of the GEM Warrant, and the number of shares of Common Stock for which the GEM Warrant may be exercised, are subject to adjustment to account for increases or decreases in the number of outstanding shares of Common Stock resulting from stock splits, reverse stock splits, consolidations, combinations and reclassifications. Additionally, the GEM Warrant contains weighted average anti-dilution provisions that provide that if the Company issues shares of common stock, or securities convertible into or exercisable or exchange for, shares of common stock at a price per share that is less than the volume-weighted average price of the common stock prior to that issuance, then the exercise price of the GEM Warrant will be proportionally reduced by application of a formula provided for in the GEM Warrant that takes into account such new issuance price in light of the number of shares issued and to be issued.
Immediately after the closing of the Merger, the Company issued warrants (the “2021 Warrants”) to the purchasers of Old Cytocom’s Series A-3 Preferred Stock and Series A-4 Preferred Stock, each of which were converted immediately prior to the closing of the Merger, exercisable for up to an aggregate of 952,000 shares of Company common stock. The 2021 Warrants are exercisable for an aggregate of 952,000 shares of Company common stock at an exercise price of $5.00 per share. The holders of the 2021 Warrants may exercise the 2021 Warrants at any time and from time to time until December 10, 2021. Upon exercise and payment of the applicable exercise price to the Company by a holder, the Company will issue to such holder (i) the underlying shares of Common Stock for which the exercise price is paid and (ii) a new warrant, in substantially the same form as the 2021 Warrants, that expires on December 10, 2022. The terms of the 2021 Warrants provide that the exercise price of the 2021 Warrants, and the number of shares of Common Stock for which the 2021 Warrants may be exercised, are subject to adjustment to account for increases or decreases in the number of outstanding shares of Common Stock resulting from stock splits, reverse stock splits, consolidations, combinations and reclassifications.
The Company’s management has evaluated all the terms of the warrant agreements and determined that the warrants shall be accounted for as equity instruments as no conditions exist under ASC 480 to account for these as liabilities.
All Old Cytocom vested restricted stock units outstanding prior to the effective time of the Merger were exchanged for shares of the Company’s common stock in accordance with the Exchange Ratio. Each unvested Old Cytocom restricted stock unit was converted into a number of restricted stock units of the Company, as determined in accordance with the exchange ratio formula described above. The terms (including, without limitation, the vesting terms) of each such substitute restricted stock unit are substantially equivalent to those of the Old Cytocom restricted stock unit being replaced.
Cleveland BioLabs, Inc. equity awards issued and outstanding at the time of the Merger remained issued and outstanding and were not impacted by the Merger. As of July 27, 2021, Cleveland BioLabs, Inc. had outstanding stock options to purchase 45,706 shares of common stock, of which stock options to purchase 45,706 shares were vested and exercisable at a weighted average exercise price of $14.46 per share.
Allocation of Purchase Consideration
Pursuant to business combination accounting, the Company applied the acquisition method, which requires the assets acquired and liabilities assumed be recorded at fair value with limited exceptions.
The purchase price for Cleveland BioLabs, Inc. on July 27, 2021, the closing date of the Merger, was as follows:
Under the acquisition method of accounting, the total purchase price was allocated to tangible and identifiable intangible assets acquired and liabilities assumed of Cleveland BioLabs, Inc. on the basis of their estimated fair values as of the transaction closing date on July 27, 2021.
The following table summarizes the allocation of the purchase consideration to the assets acquired and liabilities assumed based on their fair values as of July 27, 2021:
The Company believes that the historical values of Cleveland BioLabs, Inc.’s current assets and current liabilities approximate fair value based on the short-term nature of such items. The final allocation of the purchase price is dependent on the finalization of the valuation of the fair value of assets acquired and liabilities assumed and may differ from the amounts included in these financial statements. The Company expects to complete the final allocation as soon as practical but no later than one year from the acquisition date.
The Accumulated Cost Method was used to value the Intellectual Property/Technology (in–process research & development) intangible assets based on historical costs.
Goodwill
The excess of the purchase price over the assets acquired and liabilities assumed represents goodwill. The goodwill is primarily attributable to the synergies expected to arise after the acquisition and is expected to be deductible for tax purposes.
Transaction Costs
Transaction costs associated with the Merger of approximately $0.8 million and $0.3 million are included in general and administrative expense for nine-months ended September 30, 2021 and twelve-months ended December 31, 2021, respectively.
Pro Forma Results in connection with the Merger
The Company’s operating results include $0.2 million of operating expenses attributable to the former Cleveland BioLabs, Inc. business activities for the period of July 27, 2021 to September 30, 2021.
The unaudited financial information in the following table summarizes the combined results of operations of the Company and Cleveland BioLabs, Inc., on a pro forma basis, as if the Merger occurred at the beginning of the periods presented.
The above unaudited pro forma information was determined based on historical GAAP results of Old Cytocom, ImQuest and Cleveland BioLabs, Inc. The unaudited pro forma combined results do not necessarily reflect what the Company’s combined results of operations would have been, if the acquisition was completed on January 1, 2020. The unaudited pro forma combined net loss includes pro forma adjustments primarily related to the following non-recurring items directly attributable to the business combinations:
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Note 4 - Other Current Assets |
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| Other Current Assets [Text Block] |
4. Other Current Assets
Other current assets consist of the following:
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Note 5 - Prepaid Expenses |
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5. Prepaid Expenses
Prepaid expenses consist of the following:
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Note 6 - Accounts Payable and Accrued Expenses |
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6. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of the following:
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Note 7 - Notes Payable and Advances from Related Party |
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7. Notes Payable and Advances from Related Party
Notes payable consist of the following:
As of September 30, 2021 and December 31, 2020, Statera had accrued $921,527 and $647,393, respectively, in unpaid interest on notes payable. Included in this amount $870,332 was unpaid accrued interest related to the Decathlon note. During the nine months ended September 30, 2021, Statera made payments against previously unpaid interest in the amount of The full settlement of the remaining principal amount of $800,000 and remaining unpaid accrued interest balance of $870,332 will take place when the Company issues shares in accordance with the payoff and release of security agreement between Decathlon and the Company dated September 16, 2021.
Advances from related party consist of the following:
Refer to Note 16 for further information regarding the advance received from Noreen Griffin. |
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Note 8 - Long-term Debt |
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8. Long-term debt
Long-term debt consists of the following:
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Note 9 - Leases |
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9. Leases
The Company’s leases do not provide an implicit rate that can be readily determined. Therefore, the Company uses discount rates based on the incremental borrowing rate of its current external debt of 3%, 10%, and 17%, depending on the entity and timing of the lease implementation.
The Company’s weighted-average remaining lease term relating to its operating leases is 5.22 years, with a weighted-average discount rate of the 13.13%.
The Company incurred lease expense for its operating leases of $103,959 and $3,347, which was included in general and administrative expenses in the condensed consolidated statements of operation for the periods ended September 2021 and 2020, respectively. During the nine months ended September 30, 2021 and 2020, the Company made cash lease payments in the amount of $82,487 and $3,256, respectively.
The following table presents information about the future maturity of the lease liability under the Company’s operating leases as of September 30, 2021.
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Note 10 - Equipment |
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10. Equipment
Equipment, net as of September 30, 2021 and December 31, 2020, consists of the following:
During the nine months ended September 30, 2021 and 2020, the Company recorded total depreciation expense of $8,309 and $0, respectively. |
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Note 11 - Business Combination - ImQuest Acquisition |
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| Business Combination Disclosure [Text Block] |
11. Business Combination – ImQuest Acquisition
On June 24, 2021, Old Cytocom closed its acquisition and gained control of ImQuest Life Sciences and its subsidiaries (“ImQuest”). Old Cytocom acquired a 100% interest in ImQuest, which will therefore be a wholly owned subsidiary. As of June 30, 2021, consideration had not yet been paid to ImQuest for the purchase, and as such was reflected as a liability under the preferred stock payable line item on the Old Cytocom consolidated balance sheet.
At close, as consideration for the acquisition Old Cytocom was required to issue up to a maximum of 3 million shares of Old Cytocom Series A preferred stock, in accordance with the Agreement and Plan of Merger dated July 17, 2020. The value of the stock to be issued was not to exceed $12,000,000. As such, the Company issued 3,282,089 shares of common stock on September 30, 2021 as consideration for the ImQuest acquisition. The number of shares issued was based on the 30-day volume weighted average price of $3.656 and the value of the shares issued was $12,000,000.
The Company recorded Goodwill in the amount of $12,633,858 as a result of the acquisition. As of September 30, 2021 management does not note any indicators of potential impairment as of September 30, 2021 as there were no material changes in the acquired business since acquisition and there was no deterioration in the business and no key employees left or plan to leave. The Company plans to quantitatively test the Goodwill for impairment prior to its fiscal year end at December 31, 2021. The purchase price allocation accounting for the acquisition is preliminary, as the Company is still undergoing fair value studies. Any purchase price accounting may be adjusted in future accounting periods once consideration is paid and actual amounts are known. |
Note 12 - Intangible Assets |
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12. Intangible assets
Intangible assets, net as of September 30, 2021 and December 31, 2020, consists of the following:
The purchase price allocation accounting for the Imquest acquisition is preliminary, as the Company is still undergoing fair value studies. Any purchase price accounting may be adjusted in future accounting periods once consideration is paid and actual amounts are known.
During the nine months ended September 30, 2021 and 2020, the Company recorded total amortization expense of $134,022 and $0, respectively. |
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Note 13 - Fair Value of Financial Instruments |
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13. Fair Value of Financial Instruments
The Company has measured and recorded short-term investments and certain warrants as 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:
Short-term investments primarily include certificates of deposit at commercial banking institutions, with maturities of three months or more at time of purchase. Certificates of deposit are carried at amortized cost, which approximates fair value and are included as a Level 2 measurement in the table below.
There were no assets and liabilities measured at fair value as of December 31, 2020. As of September 30, 2021, the following items were measured at fair value:
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:
The accrued warrant liability of $0.95 million represented on the Company’s balance sheet for the period ending September 30, 2021 are amounts due to satisfy cash payments in accordance with change in control provisions specified in warrant agreements with the placement agent. The Company has received notice of intent to receive cash payment by the placement agent in accordance with the change in control provision. The Company believes the cash payment due to satisfy the 2020 warrant agreements are approximately $0.45 million and the cash payment due to satisfy the 2021 warrant agreements are approximately $0.5 million. While the amount paid may differ from the accrual the Company believes the accrual fairly represents the amounts due to the placement agent.
As of September 30, 2021 and December 31, 2020, the Company had no assets or liabilities that were measured at fair value on a nonrecurring basis.
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. |
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Note 14 - Stockholders' Equity |
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| Stockholders' Equity Note Disclosure [Text Block] |
14. Stockholders’ Equity
On February 19, 2021, the Company entered into a Securities Purchase Agreement (the "Purchase Agreement") for the sale of 2,000,000 shares (the "Registered Direct Shares") of common stock at a purchase price of $7.00 per share, in a registered direct offering. The closing of the sale of the Registered Direct Shares under the Purchase Agreement occurred on February 23, 2021. The gross proceeds to the Company from the transaction were $14 million, before deducting the placement agent’s fees and other estimated offering expenses. Under the Company’s engagement letter with H.C. Wainwright & Co., LLC ("Wainwright"), pursuant to which Wainwright agreed to serve as exclusive placement agent for the issuance and sale of the Registered Direct Shares, the Company also issued to designees of Wainwright warrants to purchase up to 150,000 shares of Common Stock (the "Placement Agent Warrants"). Subject to certain ownership limitations, the Placement Agent Warrants are immediately exercisable at a price of $8.75 per share of Common Stock, subject to customary adjustments as provided under the terms of the Placement Agent Warrants. The Placement Agent Warrants are exercisable for five years from the commencement of sales of the shares being offered.
Following the closing of the Merger, Wainwright notified the Company of its election to cause the Company to repurchase the Placement Agent Warrants, as well as another series of warrants issued to Wainwright in 2020, for an amount of cash equal to the Black Scholes Value, as determined under the terms of the Placement Agent Warrants. The Company is in discussions with Wainwright about Wainwright’s purported exercise of the repurchase right.
The Company has granted options to employees and Board members to purchase shares of common stock. The following is a summary of option award activity during the nine months ended September 30, 2021:
The following is a summary of outstanding stock options as of September 30, 2021:
For the nine months ended September 30, 2021 and 2020, the Company granted no stock options.
As of September 30, 2021, there was no total compensation cost yet recognized related to unvested stock options.
As of September 30, 2021, there are 1,387,368 restricted stock units outstanding to employees from the old Cytocom plan.
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Note 15 - Warrants |
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| Derivative Instruments and Hedging Activities Disclosure [Text Block] |
15. 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 $0.01 to $8.75. The warrants expire between and years from the date of grant, and are subject to the terms applicable in each agreement. These terms include for certain warrants the right to receive cash settlement upon the occurrence of a fundamental transaction. The Merger meets the definition of a fundamental transaction per the terms of these warrant agreements. The Company’s management has evaluated all the terms of the warrant agreements and determined that the warrants shall be accounted for as equity instruments as no conditions exist under ASC 480 to account for these as liabilities with the exception of those warrants identified in Note 12.
The following table summarizes the outstanding warrant activity during the nine months ended September 30, 2021:
Of the 3,171,859 warrants outstanding as of September 30, 2021, 154,004 were issued in connection with Avenue Capital debt with an exercise price of $0.01, 1,720,083 were issued in connection with the GEM agreement, with an exercise price of $5.01, 902,000 were issued in connection with old Cytocom preferred shares with a weighted average exercise price of $5.23, and 96,263 were issued to Bridgeway Capital under old Cytocom with a weighted average exercise price of $2.94. The remaining 299,519 outstanding warrants were issued to various holders with a weighted average exercise price of $5.62.
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Note 16 - Significant Alliances and Related Parties |
9 Months Ended |
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Sep. 30, 2021 | |
| Notes to Financial Statements | |
| Related Party Transactions Disclosure [Text Block] |
16. Significant Alliances and Related Parties
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 Global Head of R&D, Dr. Andrei Gudkov, is the Senior Vice President of Research Technology and Innovation at RPCI. The Company incurred $0 and $0 and $0 and $1,197 in research and development expense to RPCI for the three and nine months ended September 30, 2021 and 2020, respectively.
The Cleveland Clinic
The Company has entered into an exclusive license agreement with The Cleveland Clinic pursuant to which the Company was granted an exclusive license to The Cleveland Clinic’s research base underlying entolimod's therapeutic platform and certain product candidates licensed to Panacela. The Company has the primary responsibility to fund all newly developed patents. However, The Cleveland Clinic retains ownership of those patents covered by the agreement. The Company 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, the Company sublicensed the intellectual property underlying entolimod's composition that the Company licenses from The Cleveland Clinic to GPI. There were no milestone or royalty payments paid to The Cleveland Clinic during the nine months ended September 30, 2021 and 2020. The Company incurred no research and development expense to The Cleveland Clinic during the nine months ended September 30, 2021 and 2020.
Buffalo BioLabs and Incuron
Our Global Head of Research and Development, 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 nine months ended September 30, 2021 and 2020. The Company also recognized no sublease and other income from BBL for the three and nine months ended September 30, 2021 and September 30, 2020. Pursuant to our real estate sublease and equipment lease with BBL, the Company had gross accounts receivables of $0 and $6,285, and net accounts receivables of $0 and $0 from BBL at September 30, 2021 and 2020, 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 $0 and $0 and $0 and $49,357 for the three and nine months ended September 30, 2021 and 2020, respectively. In addition, the Company recognized no sublease and other income from Incuron for the three and nine months ended September 30, 2021 and 2020, respectively. Pursuant to these agreements, the Company had gross accounts receivables of $0 and $130,000, and net accounts receivables of $0 and $130,000 from Incuron at September 30, 2021 and 2020, respectively.
Genome Protection
GPI incurred $13,440 and $40,320 and $13,440 and $40,320 in consultant expenses with members of the Company's Board of Directors and management team during the three and nine months ended September 30, 2021 and 2020, respectively.
Noreen Griffin
Noreen Griffin served as Chief Executive Officer of Old Cytocom from the date of its incorporation until June 30, 2020, and as President of Old Cytocom from April 1, 2020 until September 30, 2020. As of September 30, 2021, Ms. Griffin also owned directly 1.0% of Statera’s common stock (1.2% as of June 30, 2020).
In April, 2021 the Company received an advance from Ms. Griffin in the amount of $200,000, which is outstanding as of September 30, 2021 and is classified as "advances from related party" on the Company’s consolidated balance sheet. |
Note 17 - Commitments and Contingencies |
9 Months Ended |
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Sep. 30, 2021 | |
| Notes to Financial Statements | |
| Commitments and Contingencies Disclosure [Text Block] |
17. Commitments and Contingencies
On March 19, 2021, a putative class action complaint, captioned Litwin v. Cleveland BioLabs, Inc. et al., Case 2021-0242, was filed in the Delaware Court of Chancery in connection with the Merger (the “Litwin Action”). The Litwin Action names as defendants Cleveland BioLabs, each director on the Cleveland BioLabs board of directors, and the Vice President of Finance of Cleveland BioLabs. The complaint in the Litwin Action alleges that Defendants omitted and/or provided misleading information in the registration statement on Form S-4 filed with the SEC in connection with the Merger, of which this proxy statement/prospectus forms a part, in breach of their fiduciary duties. The Litwin Action seeks, among other things, an injunction preventing the closing of the Merger, rescission of the merger if it is consummated, the dissemination by Cleveland BioLabs of a revised registration statement on Form S-4 and an award of plaintiffs’ attorneys’ and experts’ fees. Plaintiff in the Litwin Action has filed a motion for expedited proceedings, which Defendants have opposed. Plaintiff’s motion for expedited proceedings was granted in part and denied in part by the court on April 30, 2021. Defendants have also filed a motion to dismiss the Litwin Action. On July 7, 2021, Plaintiff filed a stipulation and proposed order voluntarily dismissing the case but reserving the right to seek attorneys’ fees. On July 8, 2021, the Delaware Court of Chancery entered an order dismissing the case but reserving jurisdiction to determine whether to award Plaintiff’s counsel any fees, should Plaintiff’s counsel file a motion for such.
As of the balance sheet date management believes that it is probable that a settlement will be reached. Management estimates the likely settlement amount to be $275,000, therefore we have accrued this amount in accounts payable and accrued expenses. |
Note 18 - Subsequent Events |
9 Months Ended |
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Sep. 30, 2021 | |
| Notes to Financial Statements | |
| Subsequent Events [Text Block] |
18. Subsequent Events
Management evaluated all events or transactions that occurred after September 30, 2021 through the date the financial statements were filed.
On November 9, 2021, at the Company’s annual meeting of stockholders, among other routine matters, the Company’s stockholders voted to amend the Plan to increase the number of shares of Common Stock authorized to be issued by 3,000,000 shares, remove the limit on the maximum number of shares covered by an award that may be issued in any calendar year to any single recipient and to make certain modifications to reflect the Company’s name change.
On November 9, 2021, and pursuant to a release dated November 8, 2021, the Company remitted cash payment of $2.1 million to a purchaser of Old Cytocom securities to satisfy obligations pursuant to a preferred stock subscription agreement.
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Significant Accounting Policies (Policies) |
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| Basis of Accounting, Policy [Policy Text Block] | Basis of Presentation and Consolidation
These unaudited interim condensed consolidated financial statements reflect the historical results of Old Cytocom prior to the completion of the Merger, and do not include the historical results of the Company prior to the completion of the Merger. All share and per share disclosures have been adjusted to reflect the exchange of shares in the Merger. Under U.S. generally accepted accounting principles ("GAAP"), the Merger is treated as a “reverse merger” under the purchase method of accounting. For accounting purposes, Old Cytocom is considered to have acquired Cleveland BioLabs, Inc. See Note 3, Merger with Old Cytocom, for further details on the Merger and the U.S. GAAP accounting treatment.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America pursuant to the requirements of the Securities and Exchange Commission (“SEC”) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for the fair presentation of results for the periods presented, have been included. The results of operations of any interim period are not necessarily indicative of the results of operations for the full year or any other interim period. These condensed consolidated 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, 2020, as filed with the SEC.
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 September 30, 2021, along with its results of operations for the three and nine month periods ended September 30, 2021 and 2020 and cash flows for the nine-month periods ended September 30, 2021 and 2020. Interim results are not necessarily indicative of results that may be expected for any other interim period or for an entire year.
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| New Accounting Pronouncements, Policy [Policy Text Block] | 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.
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| Use of Estimates, Policy [Policy Text Block] | 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.
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| Comprehensive Income, Policy [Policy Text Block] | Other Comprehensive Income (Loss)
The Company applies the Accounting Standards Codification ("ASC") 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 nine months ended September 30, 2021.
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| Share-based Payment Arrangement [Policy Text Block] | Accounting for Stock-Based Compensation
The Cleveland Biolabs, Inc. Equity Incentive Plan, adopted in 2018 (the "Plan"), authorizes the Company to grant (i) options to purchase common stock, (ii) stock appreciation rights, (iii) awards of restricted or unrestricted stock, (iv) restricted stock units, and (v) performance awards, 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 September 30, 2021, an aggregate of 597,557 shares of common stock were authorized for issuance under the Plan, of which a total of 536,089 shares of common stock remained available for future awards. However, on November 9, 2021, the Company’s stockholders approved amendments to the Plan that increased the number of shares of common stock authorized to be issued by 3,000,000 shares, removed the limit on the maximum number of shares covered by an award that may be issued in any calendar year to any single recipient and renamed the Plan the "Statera Biopharma Equity Incentive Plan." In addition, a total of 45,468 shares of common stock reserved for issuance are 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. 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 September 30, 2021, there are 925,000 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 nine months ended September 30, 2021 and September 30, 2020.
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| Income Tax, Policy [Policy Text Block] | Income Taxes
No income tax expense was recorded for the three and nine months ended September 30, 2021 and 2020 as the Company does not expect to have taxable income for 2021 and did not have taxable income in 2020. A full valuation allowance has been recorded against the Company’s net deferred tax asset.
At September 30, 2021, the Company had U.S. federal net operating loss carryforwards of approximately $193.9 million, of which $140.6 million begins to expire if not utilized by 2023, and $53.3 million, which has no expiration, and approximately $4.3 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 $112.2 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.
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| Earnings Per Share, Policy [Policy Text Block] | 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 September 30, 2021.
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| Commitments and Contingencies, Policy [Policy Text Block] | Contingencies
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.
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| Revenue [Policy Text Block] | Revenue Recognition
Upon the integration of the newly acquired ImQuest, the Company has implemented the five steps to recognize revenue from contracts with customers under ASC 606, Revenue from Contracts with Customers (“ASC 606”), which are:
• Step 1: Identify the contract(s) with a customer • Step 2: Identify the performance obligations in the contract • Step 3: Determine the transaction price • Step 4: Allocate the transaction price to the performance obligations in the contract • Step 5: Recognize revenue when (or as) a performance obligation is satisfied
In the nine months ended September 30, 2021, the Company generated revenue from its Clinical Research Organization services (“CRO services”) provided by ImQuest.
The Company provides preclinical CRO services to evaluate the potential of new and novel pharmaceutical products for the treatment and prevention of viruses, bacteria, cancer and inflammatory diseases. These preclinical research services include compound screening, efficacy analysis, drug target validations, mechanism of action research, and toxicity studies in multiple pharmaceutical areas.
The Company has concluded that each provision of its CRO services is a distinct and single performance obligation as the customer benefits from the services once they have the opportunity to question the findings and receive the final report which summarizes the research results. Management determined each promised good and service in the contract related to its CRO services should be bundled into a single performance obligation because even though the contract explicitly states individual promises such as consultation services combined with a range of tests that are carried out in order to conduct the preclinical research, the culmination of the individual promises is the CRO services which is a single performance obligation.
The amount the Company earns for its CRO services is typically a fixed fee per project. Revenue from the project is recognized at the point in time when the final report is delivered to the customer and thus the performance obligation is satisfied. At the time the final report is delivered: (a) the Company has the right to payment for the report, (b) the customer has legal title to the report, (c) physical transfer of the report has occurred and the customer has taken possession of the report, (d) the customer now has benefit and the risk of ownership of the report, and (e) the customer has accepted the report. Revenue collected in advance of delivery of the final report is classified as a contract liability on the consolidated balance sheet
At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
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| Collaborative Arrangement, Accounting Policy [Policy Text Block] | Collaborative Arrangements
The company accounts for transactions under collaborative arrangements under the same method as described above under ASC 606.
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| Cash and Cash Equivalents, Policy [Policy Text Block] | Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities at the date of purchase of three months or less to be cash equivalents. Cash and cash equivalents include bank demand deposits, marketable securities with maturities of three months or less at purchase, and money market funds that invest primarily in certificates of deposits, commercial paper and U.S. government and U.S. government agency obligations. Cash equivalents are reported at fair value. As of September 30, 2021 and December 31, 2020 there were no cash equivalents. Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. At September 30, 2021 and December 31, 2020, the Company had $12,951,581 and $331,385 in excess of the FDIC insured limit, respectively.
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| Cash and Cash Equivalents, Restricted Cash and Cash Equivalents, Policy [Policy Text Block] | Restricted Cash
The Company considers all cash held for specific reasons and not available for immediate, normal business use as restricted cash. As of September 30, 2021 and December 31, 2020 the Company had $5,000,000 and $0, respectively, classified as restricted cash. The Company incurred $15,000,000 of long-term debt via the Avenue Capital loan. The loan's maturity date is May 1, 2024 and carries a 10.99% interest rate. The Company has no principal payments due for the first 12 monthly periods, with the first payment due in June, 2022. As the restricted cash is currently held for the purpose of repayment of this long-term debt with no repayments due in the next 12 months, the cash is classified as a non-current asset.
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| Accounts Receivable [Policy Text Block] | Accounts Receivable
Accounts receivable are recorded net of an allowance for credit losses, which is recorded as an offset to accounts receivable and changes in such are classified as general and administrative expense in the consolidated statements of operations. The Company assesses collectability by reviewing accounts receivable on an individual basis when the Company identifies specific customers with known disputes or collectability issues. The Company assesses past due amounts by reviewing the payment terms of the contracts with the Company’s customers. In determining the amount of the allowance for credit losses, the Company makes judgments about the creditworthiness of customers based on ongoing credit evaluations. The Company writes off uncollectable accounts receivable against the allowance based on facts and circumstances for specific customers when management determines that collectability is remote. There is no allowance for doubtful account as of September 30, 2021 and December 31, 2020. During the nine months ended September 30, 2021 and 2020, the company did write off any accounts receivable.
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| Goodwill and Intangible Assets, Goodwill, Policy [Policy Text Block] | Goodwill
We test goodwill for impairment in our fourth quarter each year, or more frequently if indicators of an impairment exist, to determine whether it is more likely than not that the fair value of the reporting unit with goodwill is less than its carrying value. For reporting units for which this assessment concludes that it is more likely than not that the fair value is more than its carrying value, goodwill is considered not impaired and we are not required to perform the goodwill impairment test. Qualitative factors considered in this assessment include industry and market considerations, overall financial performance, and other relevant events and factors affecting the fair value of the reporting unit. For reporting units for which this assessment concludes that it is more likely than not that the fair value is below the carrying value, goodwill is tested for impairment by determining the fair value of each reporting unit and comparing it to the carrying value of the net assets assigned to the reporting unit. If the fair value of the reporting unit exceeds its carrying value, goodwill is considered not impaired. If the carrying value of the reporting unit exceeds its fair value, we would record an impairment loss up to the difference between the carrying value and implied fair value.
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| Intangible Assets, Finite-Lived, Policy [Policy Text Block] | Intangible Assets
The Company has two identified finite-lived intangible assets, its customer base and tradenames and trademarks. The customer base and tradenames have a useful life of 20 years and 3 years, respectively. The intangible assets are amortized on a straight-line basis over their useful lives.
The Company reviews all finite lived intangible assets for impairment when circumstances indicate that their carrying values may not be recoverable. If the carrying value of an asset group is not recoverable, the Company recognizes an impairment loss for the excess carrying value over the fair value in its consolidated statements of operations. No impairment losses have been recorded in the nine months ended September 30, 2021 and 2020. |
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Note 2 - Summary of Significant Accounting Policies (Tables) |
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| Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block] |
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| Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block] |
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Note 3 - Merger with Old Cytocom (Tables) |
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| Schedule of Business Acquisitions, by Acquisition [Table Text Block] |
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| Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block] |
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| Business Acquisition, Pro Forma Information [Table Text Block] |
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Note 4 - Other Current Assets (Tables) |
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| Schedule of Other Current Assets [Table Text Block] |
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Note 5 - Prepaid Expenses (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Prepaid Expenses [Table Text Block] |
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Note 6 - Accounts Payable and Accrued Expenses (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Accounts Payable and Accrued Liabilities [Table Text Block] |
|
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Note 7 - Notes Payable and Advances from Related Party (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Short-term Debt [Table Text Block] |
|
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Note 8 - Long-term Debt (Tables) |
9 Months Ended | |||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | ||||||||||||||||||||||||||||
| Notes Tables | ||||||||||||||||||||||||||||
| Schedule of Long-term Debt Instruments [Table Text Block] |
|
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Note 9 - Leases (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lessee, Operating Lease, Liability, Maturity [Table Text Block] |
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Note 10 - Equipment (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Table Text Block] |
|
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Note 12 - Intangible Assets (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | ||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Finite-Lived Intangible Assets [Table Text Block] |
|
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Note 13 - Fair Value of Financial Instruments (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value, by Balance Sheet Grouping [Table Text Block] |
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| Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block] |
|
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Note 14 - Stockholders' Equity (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based Payment Arrangement, Option, Activity [Table Text Block] |
|
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| Share-based Compensation Arrangements by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding [Table Text Block] |
|
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Note 15 - Warrants (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Outstanding Warrants [Table Text Block] |
|
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Note 1 - Description of Business (Details Textual) |
3 Months Ended | 9 Months Ended | ||||
|---|---|---|---|---|---|---|
|
Jun. 24, 2021
shares
|
Sep. 30, 2021
USD ($)
|
Sep. 30, 2020
USD ($)
|
Sep. 30, 2021
USD ($)
|
Sep. 30, 2020
USD ($)
|
Dec. 30, 2020
USD ($)
|
|
| Number of Subsidiaries | 2 | |||||
| Cash and Cash Equivalents, at Carrying Value, Ending Balance | $ 9,216,349 | $ 9,216,349 | $ 593,869 | |||
| Retained Earnings (Accumulated Deficit), Ending Balance | (52,256,361) | (52,256,361) | $ (27,762,963) | |||
| Net Income (Loss), Including Portion Attributable to Noncontrolling Interest, Total | $ (12,733,250) | $ (5,678,841) | $ (24,625,038) | $ (7,863,870) | ||
| ImQuest [Member] | ||||||
| Business Acquisition, Equity Interest Issued or Issuable, Number of Shares (in shares) | shares | 3,282,089 | |||||
| BioLab 612 [Member] | ||||||
| Number of Wholly Owned Subsidiaries | 1 | |||||
| GPI [Member] | ||||||
| Equity Method Investment, Ownership Percentage | 50.00% | 50.00% | ||||
Note 2 - Summary of Significant Accounting Policies - Other Comprehensive Income (Loss) (Details) |
9 Months Ended |
|---|---|
|
Sep. 30, 2021
USD ($)
| |
| Beginning balance | $ 143,486,116 |
| Ending balance | 74,194,620 |
| Accumulated Foreign Currency Adjustment Attributable to Parent [Member] | |
| Beginning balance | 0 |
| Other comprehensive income (loss) before reclassifications | (2,014) |
| Amounts reclassified from accumulated other comprehensive loss | 0 |
| Ending balance | $ (2,014) |
Note 2 - Summary of Significant Accounting Policies - Antidilutive Securities (Details) - shares |
9 Months Ended | |
|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Antidilutive securities (in shares) | 4,784,695 | 0 |
| Warrant [Member] | ||
| Antidilutive securities (in shares) | 3,171,859 | 0 |
| Restricted Stock [Member] | ||
| Antidilutive securities (in shares) | 1,567,368 | 0 |
| Share-based Payment Arrangement, Option [Member] | ||
| Antidilutive securities (in shares) | 45,468 | 0 |
Note 3 - Merger with Old Cytocom - Purchase Price (Details) - Cleveland BioLabs, Inc. [Member] |
Jul. 27, 2021
USD ($)
$ / shares
shares
|
|||||
|---|---|---|---|---|---|---|
| Number of shares of the combined company owned by Cleveland BioLabs, Inc. stockholders (in shares) | shares | 15,478,945 | [1] | ||||
| Multiplied by the price per share of Cleveland BioLabs, Inc. common stock (in dollars per share) | $ / shares | $ 4.99 | [2] | ||||
| Total purchase price | $ | $ 77,239,936 | |||||
| ||||||
Note 3 - Merger with Old Cytocom - Purchase Price - Assets Acquired and Liabilities Assumed (Details) - USD ($) |
Sep. 30, 2021 |
Jul. 27, 2021 |
Dec. 30, 2020 |
|---|---|---|---|
| Goodwill | $ 76,972,668 | $ 0 | |
| Cleveland BioLabs, Inc. [Member] | |||
| Cash and cash equivalents | $ 13,116,460 | ||
| Other receivables | 25,142 | ||
| Other current assets | 44,507 | ||
| Fixed assets - net | 4,954 | ||
| Panacela (67.57% ownership) | 178,388 | ||
| Total Tangible Assets | 13,369,451 | ||
| Accounts payable | (426,570) | ||
| Accrued expenses | (41,755) | ||
| Total Liabilities | (468,325) | ||
| Net Tangible Assets/Liabilities | 12,901,126 | ||
| In-process R&D | 0 | ||
| Total Intangible Assets Acquired | 0 | ||
| Goodwill | 64,338,810 | ||
| Total Net Assets Acquired | $ 77,239,936 |
Note 3 - Merger with Old Cytocom - Purchase Price - Assets Acquired and Liabilities Assumed (Details) (Parentheticals) |
Jul. 27, 2021 |
|---|---|
| Panacela [Member] | Cleveland BioLabs, Inc. [Member] | |
| Noncontrolling Interest, Ownership Percentage by Parent | 67.57% |
Note 3 - Merger with Old Cytocom - Pro Forma Information (Details) - Cleveland BioLabs, Inc. [Member] - USD ($) |
9 Months Ended | |
|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Revenue | $ 1,665,992 | $ 2,214,344 |
| Net loss | $ (24,612,658) | $ (9,501,191) |
Note 4 - Other Current Assets - Other Current Assets (Details) - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
Dec. 30, 2020 |
|---|---|---|---|
| Vendor escrow | $ 300,000 | $ 0 | |
| Deferred debt issuance costs | 677,488 | 0 | |
| Security deposits | 33,577 | 0 | |
| Other current assets | 34,267 | 2,547 | |
| Other Assets, Current | $ 1,045,332 | $ 2,547 | $ 2,547 |
Note 5 - Prepaid Expenses - Prepaid Expenses (Details) - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
Dec. 30, 2020 |
|---|---|---|---|
| Insurance | $ 722,825 | $ 0 | |
| Dues and subscriptions | 468,804 | 0 | |
| Clinical research costs | 1,566,753 | 0 | |
| Consultants and contractors | 330,090 | 0 | |
| Prepaid Expense, Current, Total | $ 2,688,472 | $ 0 | $ 0 |
Note 6 - Accounts Payable and Accrued Expenses - Accounts Payable and Accrued Expenses (Details) - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
Dec. 30, 2020 |
|---|---|---|---|
| Accounts payable | $ 3,188,759 | $ 1,134,893 | |
| Accrued warrant liability | 945,736 | 0 | |
| Accrued payroll | 135,075 | 217,319 | |
| Accrued interest and fees | 921,527 | 647,393 | |
| Accrued legal settlement fee | 275,000 | 0 | |
| Other accrued expenses | 462,708 | 688,242 | |
| Accounts Payable and Accrued Liabilities, Current, Total | $ 5,928,805 | $ 2,687,847 | $ 2,687,847 |
Note 7 - Notes Payable and Advances from Related Party (Details Textual) - USD ($) |
9 Months Ended | |||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Dec. 31, 2020 |
Dec. 30, 2020 |
|
| Interest Paid, Excluding Capitalized Interest, Operating Activities | $ 279,329 | $ 0 | ||
| Notes Payable, Current, Total | 2,883,333 | $ 1,902,237 | $ 1,902,237 | |
| Short-term Notes Payable [Member] | ||||
| Notes Payable, Current, Total | 800,000 | 1,902,237 | ||
| Notes Payable [Member] | ||||
| Interest Payable | 921,527 | $ 647,393 | ||
| Interest Paid, Excluding Capitalized Interest, Operating Activities | 906,212 | |||
| Notes Payable [Member] | Decathlon Note [Member] | ||||
| Interest Payable | $ 870,332 | |||
Note 7 - Notes Payable and Advances from Related Party - Notes Payable and Advances from Related Party (Details) - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
Dec. 30, 2020 |
|---|---|---|---|
| Notes payable | $ 2,883,333 | $ 1,902,237 | $ 1,902,237 |
| Advance from related party | 200,000 | 0 | $ 0 |
| Avenue Ventures Note Payable [Member] | |||
| Notes payable | 2,083,333 | 0 | |
| Advance from Noreen Griffin [Member] | |||
| Advance from related party | 200,000 | 0 | |
| Short-term Notes Payable [Member] | |||
| Notes payable | $ 800,000 | $ 1,902,237 |
Note 8 - Long-term Debt - Long-term Debt (Details) - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Long-term debt | $ 12,916,667 | $ 0 |
| Avenue Ventures Note Payable [Member] | ||
| Long-term debt | $ 12,916,667 | $ 0 |
Note 9 - Leases (Details Textual) - USD ($) |
9 Months Ended | |
|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Operating Lease, Weighted Average Remaining Lease Term (Year) | 5 years 2 months 19 days | |
| Operating Lease, Weighted Average Discount Rate, Percent | 13.13% | |
| Operating Lease, Expense | $ 103,959 | $ 3,347 |
| Operating Lease, Payments | $ 82,487 | $ 3,256 |
| Lease Related to External Debt One [Member] | ||
| Lessee, Operating Lease, Discount Rate | 3.00% | |
| Lease Related to External Debt Two [Member] | ||
| Lessee, Operating Lease, Discount Rate | 10.00% | |
| Lease Related to External Debt Three [Member] | ||
| Lessee, Operating Lease, Discount Rate | 17.00% | |
Note 9 - Leases - Maturity of Lease Liability (Details) |
Sep. 30, 2021
USD ($)
|
|---|---|
| 2021 | $ 72,796 |
| 2022 | 299,888 |
| 2023 | 260,600 |
| 2024 | 165,375 |
| 2025 | 173,644 |
| Thereafter | 405,930 |
| Total undiscounted lease payments | 1,378,233 |
| Less: Imputed interest | 442,528 |
| Present value of lease liabilities | $ 935,705 |
| Remaining lease term (years) (Year) | 5 years 1 month 20 days |
Note 10 - Equipment (Details Textual) - USD ($) |
9 Months Ended | |
|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Depreciation, Total | $ 8,309 | $ 0 |
Note 10 - Equipment - Equipment (Details) - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
Dec. 30, 2020 |
|---|---|---|---|
| Accumulated depreciation | $ (39,569) | $ (947) | |
| Net carrying value | 119,133 | 8,690 | $ 8,690 |
| Computer Equipment [Member] | |||
| Equipment, gross | 78,322 | 9,637 | |
| Equipment, gross | 78,322 | 9,637 | |
| Furniture and Fixtures [Member] | |||
| Equipment, gross | 45,987 | 0 | |
| Equipment, gross | 45,987 | 0 | |
| Laboratory Equipment [Member] | |||
| Equipment, gross | 34,393 | 0 | |
| Equipment, gross | $ 34,393 | $ 0 |
Note 11 - Business Combination - ImQuest Acquisition (Details Textual) - USD ($) |
Sep. 30, 2021 |
Jun. 24, 2021 |
Dec. 30, 2020 |
|---|---|---|---|
| Goodwill, Ending Balance | $ 76,972,668 | $ 0 | |
| ImQuest [Member] | |||
| Business Acquisition, Percentage of Voting Interests Acquired | 100.00% | ||
| Business Acquisition, Equity Interest Issued or Issuable, Number of Shares (in shares) | 3,282,089 | ||
| Stock Issued During Period, Shares, Acquisitions (in shares) | 3,282,089 | ||
| Shares Issued, Price Per Share (in dollars per share) | $ 3.656 | ||
| Stock Issued During Period, Value, Acquisitions | $ 12,000,000 | ||
| Goodwill, Ending Balance | $ 12,633,858 | ||
| ImQuest [Member] | Maximum [Member] | |||
| Business Acquisition, Equity Interest Issued or Issuable, Number of Shares (in shares) | 3,000,000 | ||
| Business Combination, Consideration Transferred, Equity Interests Issued and Issuable | $ 12,000,000 |
Note 12 - Intangible Assets (Details Textual) - USD ($) |
8 Months Ended | 9 Months Ended | |
|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Amortization of Intangible Assets, Total | $ 134,022 | $ 134,022 | $ 0 |
Note 12 - Intangible Assets - Intangible Assets (Details) - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Accumulated amortization | $ (134,022) | $ 0 |
| Net carrying value | 1,575,278 | 0 |
| Customer Base [Member] | ||
| Customer base | 1,575,000 | 0 |
| Trade Names [Member] | ||
| Customer base | $ 134,300 | $ 0 |
Note 13 - Fair Value of Financial Instruments (Details Textual) - USD ($) |
3 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
Dec. 31, 2020 |
|
| Derivative Liability, Total | $ 945,736 | $ 945,736 | |||
| Assets, Fair Value Disclosure | 233,642 | 233,642 | |||
| 2020 Warrant Agreement [Member] | |||||
| Derivative Liability, Total | 450,000 | 450,000 | |||
| The 2021 Warrant Agreement [Member] | |||||
| Derivative Liability, Total | 500,000 | 500,000 | |||
| Fair Value, Recurring [Member] | |||||
| Financial and Nonfinancial Liabilities, Fair Value Disclosure | $ 0 | ||||
| Assets, Fair Value Disclosure | 0 | ||||
| Fair Value, Nonrecurring [Member] | |||||
| Financial and Nonfinancial Liabilities, Fair Value Disclosure | 0 | 0 | 0 | ||
| Fair Value Measurement with Unobservable Inputs, Liability, Realized Gain (Loss) | 0 | $ 0 | 0 | $ 0 | |
| Assets, Fair Value Disclosure | $ 0 | $ 0 | $ 0 | ||
Note 13 - Fair Value of Financial Instruments - Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Assets: | ||
| Cash and cash equivalents | $ 0 | |
| Short-term investments | 233,642 | |
| Total assets | 233,642 | |
| Liabilities: | ||
| Accrued warrant liability | (945,736) | |
| Fair Value, Recurring [Member] | ||
| Assets: | ||
| Total assets | $ 0 | |
| Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | ||
| Assets: | ||
| Cash and cash equivalents | 0 | |
| Short-term investments | ||
| Total assets | 0 | |
| Liabilities: | ||
| Accrued warrant liability | 0 | |
| Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | ||
| Assets: | ||
| Cash and cash equivalents | 0 | |
| Short-term investments | 233,642 | |
| Total assets | 233,642 | |
| Liabilities: | ||
| Accrued warrant liability | 0 | |
| Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | ||
| Assets: | ||
| Cash and cash equivalents | 0 | |
| Short-term investments | ||
| Total assets | 0 | |
| Liabilities: | ||
| Accrued warrant liability | $ (945,736) |
Note 13 - Fair Value of Financial Instruments - Changes in Fair Value of Level 3 Fair Value Measurements (Details) - Accrued Warrant Liability [Member] - USD ($) |
3 Months Ended | |
|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Beginning Balance | $ (945,736) | $ 0 |
| Total (gains) or losses, realized and unrealized, included in earnings (1) | 0 | 0 |
| Issuances | 0 | 0 |
| Settlements | 0 | 0 |
| Ending Balance | $ (945,736) | $ 0 |
Note 14 - Stockholders' Equity - Option Activity (Details) |
9 Months Ended |
|---|---|
|
Sep. 30, 2021
$ / shares
shares
| |
| Outstanding (in shares) | shares | 76,064 |
| Outstanding, weighted average exercise price (in dollars per share) | $ / shares | $ 27.35 |
| Forfeited, canceled (in shares) | shares | (30,596) |
| Forfeited, canceled, weighted average exercise price (in dollars per share) | $ / shares | $ 46.77 |
| Outstanding (in shares) | shares | 45,468 |
| Outstanding, weighted average exercise price (in dollars per share) | $ / shares | $ 14.28 |
Note 14 - Stockholders' Equity - Summary of Outstanding Options (Details) - USD ($) |
9 Months Ended | |
|---|---|---|
Sep. 30, 2021 |
Dec. 31, 2020 |
|
| Quantity, outstanding (in shares) | 45,468 | 76,064 |
| Quantity, vested (in shares) | 45,468 | |
| Weighted-average exercise price, outstanding (in dollars per share) | $ 14.28 | $ 27.35 |
| Weighted-average exercise price, vested (in dollars per share) | $ 14.28 | |
| Weighted average remaining contractual term, outstanding (Year) | 2 years 9 months 3 days | |
| Weighted average remaining contractual term , vested (Year) | 2 years 9 months 3 days | |
| Intrinsic value, outstanding | $ 0 |
Note 15 - Warrants - Outstanding Warrants (Details) |
9 Months Ended |
|---|---|
|
Sep. 30, 2021
$ / shares
shares
| |
| Warrants outstanding (in shares) | shares | 371,340 |
| Warrants outstanding, weighted average exercise price (in dollars per share) | $ / shares | $ 7.28 |
| Warrants granted (in shares) | shares | 3,022,340 |
| Warrants granted, weighted average exercise price (in dollars per share) | $ / shares | $ 4.94 |
| Warrants exercised (in shares) | shares | (92,883) |
| Warrants exercised, weighted average exercise price (in dollars per share) | $ / shares | $ 2.03 |
| Warrants forfeited, canceled (in shares) | shares | (128,938) |
| Warrants forfeited, canceled, weighted average exercise price (in dollars per share) | $ / shares | $ 16.63 |
| Warrants outstanding (in shares) | shares | 3,171,859 |
| Warrants outstanding, weighted average exercise price (in dollars per share) | $ / shares | $ 4.82 |
Note 17 - Commitments and Contingencies (Details Textual) |
Sep. 30, 2021
USD ($)
|
|---|---|
| Accounts Payable and Accrued Expenses [Member] | |
| Loss Contingency Accrual, Ending Balance | $ 275,000 |
Note 18 - Subsequent Events (Details Textual) - Subsequent Event [Member] $ in Millions |
Nov. 09, 2021
USD ($)
shares
|
|---|---|
| Stock Subscription Agreement, Cash Payment Remitted | $ | $ 2.1 |
| The Plan [Member] | |
| Share-based Compensation Arrangement by Share-based Payment Award, Number of Additional Shares Authorized (in shares) | shares | 3,000,000 |