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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended March 31, 2023

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 No. 001-14778

SOLIGENIX, INC.

(Exact name of registrant as specified in its charter)

DELAWARE

  

41-1505029

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification Number)

29 EMMONS DRIVE, SUITE B-10 PRINCETON, NJ

  

08540

(Address of principal executive offices)

(Zip Code)

(609) 538-8200

(Registrant’s telephone number, including area code)

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

Title of each class

  

Trading Symbol(s)

  

Name of each exchange on which registered

Common Stock, par value $.001 per share

SNGX

The Nasdaq Capital Market

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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

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

As of May 9, 2023, 8,115,854 shares of the registrant’s common stock (par value, $.001 per share) were outstanding.

Table of Contents

SOLIGENIX, INC.

Index

    

Description

    

Page

Part I

FINANCIAL INFORMATION

Item 1

Consolidated Financial Statements

Consolidated Balance Sheets as of March 31, 2023 (unaudited) and December 31, 2022

1

Consolidated Statements of Operations for the Three Months Ended March 31, 2023 and 2022 (unaudited)

2

Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2023 and 2022 (unaudited)

3

Consolidated Statements of Changes in Mezzanine Equity and Shareholders’ Deficit for the Three Months Ended March 31, 2023 and 2022 (unaudited)

4

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023 and 2022 (unaudited)

5

Notes to Consolidated Financial Statements (unaudited)

6

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

23

Item 3

Quantitative and Qualitative Disclosures About Market Risk

51

Item 4

Controls and Procedures

51

Part II

OTHER INFORMATION

Item 1

Legal Proceedings

52

Item 1A

Risk Factors

53

Item 6

Exhibits

54

SIGNATURES

55

i

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

Soligenix, Inc. and Subsidiaries

Consolidated Balance Sheets

March 31, 

December 31, 

    

2023

    

2022

Assets

 

(unaudited)

 

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

10,265,850

$

13,359,615

Contracts and grants receivable

 

218,008

 

115,130

Research and development incentives receivable, current

 

24,774

 

104,198

Prepaid expenses and other current assets

 

213,315

 

274,209

Total current assets

 

10,721,947

 

13,853,152

Security deposit

 

22,777

 

22,777

Office furniture and equipment, net of accumulated depreciation of $116,551 and $114,766

 

16,696

 

18,481

Deferred issuance cost

 

20,153

 

20,206

Right-of-use lease assets

 

314,051

 

340,987

Research and development incentives receivable, net of current portion

 

6,193

 

24,114

Total assets

$

11,101,817

$

14,279,717

Liabilities, mezzanine equity and shareholders' deficit

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

2,768,999

$

3,865,796

Accrued expenses

 

2,451,139

 

2,307,746

Accrued compensation

 

44,492

 

336,692

Lease liabilities, current

 

112,051

 

108,948

Convertible debt, net of debt discount of $0 and $102,309

6,000,000

9,897,691

Total current liabilities

 

11,376,681

 

16,516,873

Non-current liabilities:

 

  

 

  

Convertible debt, net of debt discount of $92,067

 

2,907,933

 

Lease liabilities, net of current portion

 

204,268

 

233,627

Total liabilities

 

14,488,882

 

16,750,500

Commitments and contingencies

 

  

 

  

Mezzanine equity:

Series D preferred stock, $.001 par value; 0 and 50,000 shares authorized, none issued or outstanding as of March 31, 2023 and December 31, 2022, respectively

43

Shareholders’ deficit:

 

  

 

  

Preferred stock, 350,000 and 300,000 shares authorized as of March 31, 2023 and December 31, 2022, respectively; none issued or outstanding

Common stock, $.001 par value; 75,000,000 shares authorized; 2,929,773 and 2,908,578 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively¹

 

2,930

 

2,909

Additional paid-in capital

 

217,206,966

 

217,064,964

Accumulated other comprehensive income

 

12,594

 

24,747

Accumulated deficit

 

(220,609,555)

 

(219,563,446)

Total shareholders’ deficit

 

(3,387,065)

 

(2,470,826)

Total liabilities, mezzanine equity and shareholders’ deficit

$

11,101,817

$

14,279,717

(1)Adjusted to reflect the reverse stock split of one-for-fifteen effective February 10, 2023

1

Table of Contents

The accompanying notes are an integral part of these consolidated financial statements.

Soligenix, Inc. and Subsidiaries

Consolidated Statements of Operations

For the Three Months Ended March 31, 2023 and 2022

(Unaudited)

Three Months Ended

March 31, 

    

2023

    

2022

Revenues:

 

  

 

  

Licensing revenue

$

$

50,000

Grant revenue

 

257,178

 

138,063

Total revenues

 

257,178

 

188,063

Cost of revenues

 

(226,040)

 

(92,213)

Gross profit

 

31,138

 

95,850

Operating expenses:

 

  

 

  

Research and development

 

946,451

 

1,746,768

General and administrative

 

1,235,376

 

2,541,468

Total operating expenses

 

2,181,827

 

4,288,236

Loss from operations

 

(2,150,689)

 

(4,192,386)

Other income (expense):

 

  

 

  

Foreign currency transaction loss

 

(366)

 

(108,293)

Interest expense, net

 

(103,568)

 

(211,714)

Research and development incentives

6,448

163,372

Other income

 

40,869

 

Total other income (expense)

(56,617)

(156,635)

Net loss before income taxes

 

(2,207,306)

 

(4,349,021)

Income tax benefit

 

1,161,197

 

Net loss applicable to common stockholders

$

(1,046,109)

$

(4,349,021)

Basic and diluted net loss per share (1)

$

(0.36)

$

(1.52)

Basic and diluted weighted average common shares outstanding (1)

 

2,914,929

 

2,861,351

(1)Adjusted to reflect the reverse stock split of one-for-fifteen effective February 10, 2023

The accompanying notes are an integral part of these consolidated financial statements.

2

Table of Contents

Soligenix, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Loss

For the Three Months Ended March 31, 2023 and 2022

(Unaudited)

Three Months Ended

March 31, 

    

2023

    

2022

Net loss

$

(1,046,109)

$

(4,349,021)

Other comprehensive income (loss):

 

 

Foreign currency translation adjustments

(12,153)

82,650

Comprehensive loss

$

(1,058,262)

$

(4,266,371)

The accompanying notes are an integral part of these consolidated financial statements.

3

Table of Contents

Soligenix, Inc. and Subsidiaries

Consolidated Statements of Changes in Mezzanine Equity and Shareholders’ Deficit

For the Three Months Ended March 31, 2023 and 2022

    

    

    

    

Accumulated

    

    

Mezzanine Equity-

Additional

Other

Series D Preferred Stock

Common Stock

Paid–In

Comprehensive

Accumulated

Shares

Par Value

  

  

Shares

Par Value

Capital

Income (Loss)

Deficit

Total

Balance, December 31, 2022

 

$

43

2,908,578

$

2,909

$

217,064,964

$

24,747

$

(219,563,446)

$

(2,470,826)

Sale of common stock pursuant to B. Riley At Market Issuance Sales Agreement

 

21,195

 

21

 

70,709

 

 

 

70,730

Issuance costs associated with B. Riley At Market Issuance Sales Agreement

 

 

 

(2,341)

 

 

 

(2,341)

Redemption of Series D preferred stock

(43)

Share-based compensation expense

 

 

 

73,634

 

 

 

73,634

Foreign currency translation adjustment

 

 

 

 

(12,153)

 

 

(12,153)

Net loss

 

 

 

 

 

(1,046,109)

(1,046,109)

Balance, March 31, 2023

 

$

2,929,773

$

2,930

$

217,206,966

$

12,594

$

(220,609,555)

$

(3,387,065)

    

    

    

    

Accumulated

    

    

Mezzanine Equity-

Additional

Other

Series D Preferred Stock

Common Stock

Paid–In

Comprehensive

Accumulated

Shares

Par Value

Shares

Par Value

Capital

Income

Deficit

Total

Balance, December 31, 2021

 

$

2,858,244

$

2,859

$

216,442,904

$

41,942

$

(205,765,107)

$

10,722,598

Issuance of common stock to vendors

 

5,377

 

5

 

49,996

 

 

 

50,001

Share-based compensation expense

 

 

 

78,271

 

 

 

78,271

Foreign currency translation adjustment

 

 

 

 

82,650

 

 

82,650

Net loss

 

 

 

 

 

(4,349,021)

 

(4,349,021)

Balance, March 31, 2022

 

$

2,863,621

$

2,864

$

216,571,171

$

124,592

$

(210,114,128)

$

6,584,499

Adjusted to reflect the reverse stock split of one-for-fifteen effective February 10, 2023.

The accompanying notes are an integral part of these consolidated financial statements.

4

Table of Contents

Soligenix, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

For the Three Months Ended March 31, 2023 and 2022

(Unaudited)

    

2023

    

2022

Operating activities:

 

  

 

  

Net loss

$

(1,046,109)

$

(4,349,021)

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

 

  

 

  

Amortization and depreciation

 

1,785

 

8,232

Non-cash lease expense

 

26,936

 

30,925

Share-based compensation

 

73,634

 

78,271

Issuance of common stock to vendors for services

 

 

50,001

Amortization of deferred issuance costs associated with convertible debt

 

10,242

 

10,242

Change in operating assets and liabilities:

 

 

Licensing, contracts and grants receivable

 

(102,878)

 

15,197

Prepaid expenses and other current assets

 

60,894

 

(70,732)

Research and development incentives receivable

 

98,456

 

55,466

Operating lease liability

 

(26,256)

 

(30,921)

Accounts payable and accrued expenses

 

(970,757)

 

1,228,383

Accrued compensation

 

(292,200)

 

(264,886)

Net cash used in operating activities

 

(2,166,253)

 

(3,238,843)

Investing activities:

 

  

 

  

Purchases of office furniture and equipment

 

 

(9,823)

Net cash used in investing activities

 

 

(9,823)

Financing activities:

 

  

 

  

Proceeds from issuance of common stock pursuant to B. Riley At Market Issuance Sales Agreement

 

70,730

 

Costs associated with B. Riley At Market Issuance Sales Agreement

 

(2,288)

 

Convertible debt repayment

 

(1,000,000)

 

Net cash used in financing activities

 

(931,558)

 

Effect of exchange rate on cash and cash equivalents

 

4,046

 

80,448

Net decrease in cash and cash equivalents

 

(3,093,765)

 

(3,168,218)

Cash and cash equivalents at beginning of period

 

13,359,615

 

26,043,897

Cash and cash equivalents at end of period

$

10,265,850

$

22,875,679

Supplemental information:

 

  

 

  

Cash paid for state income taxes

$

2,110

$

Cash paid for interest

$

213,490

$

223,901

Cash paid for lease liabilities:

 

 

  

Operating lease

$

33,325

$

33,325

Non-cash investing and financing activities:

 

  

 

  

Deferred issuance cost reclassified to additional paid-in capital

$

53

$

Redemption liability for Series D preferred stock

$

43

$

The accompanying notes are an integral part of these consolidated financial statements.

5

Table of Contents

Soligenix, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

Note 1. Nature of Business

Basis of Presentation

Soligenix, Inc. (the “Company”) is a late-stage biopharmaceutical company focused on developing and commercializing products to treat rare diseases where there is an unmet medical need. The Company maintains two active business segments: Specialized BioTherapeutics and Public Health Solutions.

The Company’s Specialized BioTherapeutics business segment is developing and moving toward commercialization of HyBryte™ (a proposed proprietary name of SGX301 or synthetic hypericin sodium), a novel photodynamic therapy (“PDT”) utilizing safe visible light for the treatment of cutaneous T-cell lymphoma (“CTCL”). With successful completion of the Phase 3 FLASH (Fluorescent Light And Synthetic Hypericin) study, regulatory approval is being pursued in the United States (“U.S.”) and Europe. Following submission of a new drug application (“NDA”) for HyBryte™ in the treatment of CTCL, the Company received a refusal to file (“RTF”) letter from the U.S. Food and Drug Administration (“FDA”). The Company had a Type A meeting with the FDA to clarify and respond to the issues identified in the RTF letter and to seek additional guidance concerning information that the FDA would require for a resubmitted NDA to be deemed acceptable to file, in order to advance HyBryte™ towards U.S. marketing approval and commercialization. In order to accept an NDA filing for HyBryte™, the FDA is requiring positive results from a second clinical study in addition to the Phase 3, randomized, double-blind, placebo-controlled FLASH study previously conducted in this orphan indication. The FDA indicated that it is open to engaging in protocol discussions regarding the second clinical study. Based on this feedback, the Company has decided to collaboratively engage in discussions with the FDA in order to define the protocol and evaluate the feasibility of conducting the additional clinical trial. The Company recently has been granted a Type A Meeting with the FDA to initiate formal discussions regarding the design of a second Phase 3 pivotal study evaluating HyBryte™ in the treatment of CTCL in support of potential FDA marketing approval.

Development programs in this business segment also include expansion of synthetic hypericin sodium (SGX302) into psoriasis, the Company’s first-in-class innate defense regulator (“IDR”) technology, dusquetide (SGX942) for the treatment of inflammatory diseases, including oral mucositis in head and neck cancer, and proprietary formulations of oral beclomethasone 17,21-dipropionate (“BDP”) for the prevention/treatment of gastrointestinal (“GI”) disorders characterized by severe inflammation, including pediatric Crohn’s disease (SGX203).

The Company’s Public Health Solutions business segment includes active development programs for RiVax®, its ricin toxin vaccine candidate and SGX943, its therapeutic candidate for antibiotic resistant and emerging infectious disease, and vaccine programs, including a program targeting filoviruses (such as Marburg and Ebola) and a program developing CiVax™, its vaccine candidate for the prevention of COVID-19 (caused by SARS-CoV-2). The development of the vaccine programs is currently supported by the heat stabilization platform technology, known as ThermoVax®. To date, this business segment has been supported with grant and contract funding from the National Institute of Allergy and Infectious Diseases (“NIAID”), the Biomedical Advanced Research and Development Authority (“BARDA”) and the Defense Threat Reduction Agency (“DTRA”).

The Company primarily generates revenues under government grants and contracts principally from the National Institutes of Health (“NIH”). The Company has a subcontract of approximately $1.5 million from a NIAID grant over two years for development of CiVax™ and a subcontract of approximately $1.1 million from a  FDA grant over four years for an expanded study of HyBryte™ in the treatment of CTCL. The Company will continue to apply for additional government funding.

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The Company is subject to risks common to companies in the biotechnology industry including, but not limited to, development of new technological innovations, dependence on key personnel, protections of proprietary technology, compliance with the FDA regulations, and other regulatory authorities, litigation, and product liability.

Results for the three months ended March 31, 2023 are not necessarily indicative of results that may be expected for the full year.

Liquidity

In accordance with Accounting Standards Codification 205-40, Going Concern, the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the consolidated financial statements are issued. As of March 31, 2023, the Company had an accumulated deficit of $220,609,555. During the three months ended March 31, 2023, the Company incurred a net loss of $1,046,109 and used $2,166,253 of cash in operating activities. The Company expects to continue to generate losses in the foreseeable future. The Company’s liquidity needs will be determined largely by the budgeted operational expenditures incurred in regards to the progression of its product candidates. The Company’s plans to meet its liquidity needs primarily include its ability to control the timing and spending on its research and development programs and raising additional funds through potential partnership and/or financings. Based on the Company’s operating budget, current rate of cash outflows, cash on hand (inclusive of the proceeds from the Company’s May 2023 public offering and sales pursuant to the At Market Issuance Sales Agreement (“B. Riley Sales Agreement”) with B. Riley Securities, Inc. (“B. Riley”) which resulted in extending the interest only period for the Pontifax Medison Finance (“Pontifax”) convertible debt financing agreement to June 30, 2024 – see Note 11), proceeds from government contract and grant programs, and proceeds available from the sale of shares of its common stock via the B. Riley Sales Agreement, management believes that its current cash will be sufficient to meet the anticipated cash needs for working capital and capital expenditures for at least the next twelve months from issuance of these financial statements on this Quarterly Report on Form 10-Q.

As of March 31, 2023, the Company had cash and cash equivalents of $10,265,850 as compared to $13,359,615 as of December 31, 2022, representing a decrease of $3,093,765 or 23%. As of March 31, 2023, the Company had a working capital deficit of $654,734 as compared to a working capital deficit of $2,663,721 as of December 31, 2022, representing a decreased deficit of $2,008,987 or 75%. The decrease in cash and cash equivalents was primarily related to cash used in operating activities and repayment of $1 million of debt principal during the quarter ended March 31, 2023. The decrease in working capital deficit was primarily a result of $3 million of the convertible debt balance and related debt discount being reclassified as a non-current liability during the quarter ended March 31, 2023 based on the amendment to the Pontifax loan and security agreement – see Note 11.

Management’s business strategy can be outlined as follows:

Following positive primary endpoint results for the Phase 3 FLASH (Florescent Light Activated Synthetic Hypericin) clinical trial of HyBryte™ in CTCL as well as further statistically significant improvement in response rates with longer treatment (18 weeks compared to 12 and 6 weeks of treatment), collaboratively engage in discussions with the FDA in order to define the protocol and evaluate the feasibility of conducting a second clinical study in order to advance HyBryte™ towards U.S. marketing approval and commercialization while continuing to explore potential marketing approval and partnership in Europe.
Expanding development of synthetic hypericin under the research name SGX302 into psoriasis with the conduct of a Phase 2a clinical trial, following the positive Phase 3 FLASH study and positive proof-of-concept demonstrated in a small Phase 1/2 pilot study in mild-to-moderate psoriasis patients.

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Following execution of an exclusive option agreement with Silk Road Therapeutics, Inc. (see Note 11), granting the Company the right to acquire a novel topical formulation of Pentoxifylline (“PTX”) for treatment of Behçet’s Disease (“BD”), complete remaining diligence activities including discussion with the FDA on the appropriate Phase 2/3 trial design to advance PTX in BD to allow the Company to determine whether to exercise the option to acquire the PTX asset.
Following feedback from the United Kingdom (“UK”) Medicines and Healthcare products Regulatory Agency (“MHRA”) that a second Phase 3 clinical trial of SGX942 in the treatment in oral mucositis would be required to support a marketing authorization; design a second study and attempt to identify a potential partner(s) to continue this development program.
Continue development of the Company’s heat stabilization platform technology, ThermoVax®, in combination with its programs for RiVax® (ricin toxin vaccine), CiVax™ (COVID-19 vaccine) and filovirus vaccines for Ebola, Sudan, and Marburg Viruses, with U.S. government funding support.
Continue to apply for and secure additional government funding for each of the Company’s Specialized BioTherapeutics and Public Health Solutions programs through grants, contracts and/or procurements.
Pursue business development opportunities for the Company’s pipeline programs, as well as explore merger/acquisition strategies.
Acquire or in-license new clinical-stage compounds for development, as well as evaluate new indications with existing pipeline compounds for development.

The Company’s plans with respect to its liquidity management include, but are not limited to, the following:

The Company has up to $1.3 million in active government grant funding still available as of March 31, 2023 to support its associated research programs through May 2026, provided the federal agencies do not elect to terminate the grants for convenience. The Company plans to submit additional contract and grant applications for further support of its programs with various funding agencies. However, there can be no assurance that the Company will obtain additional governmental grant funding.
The Company has continued to use equity instruments to provide a portion of the compensation due to vendors and collaboration partners and expects to continue to do so for the foreseeable future.
The Company will continue to pursue Net Operating Loss (“NOL”) sales in the state of New Jersey pursuant to its Technology Business Tax Certificate Transfer Program if available.
The Company plans to pursue potential partnerships for pipeline programs as well as continue to explore merger and acquisition strategies. However, there can be no assurances that the Company can consummate such transactions.
The Company has up to $23.6 million remaining from the B. Riley Sales Agreement as of May 9, 2023 under the prospectus supplement updated August 13, 2021. The Company is currently subject to the limitations contained in General Instruction I.B.6 of Form S-3. As a result, the Company is limited to selling no more than one-third of the aggregate market value of the equity held by non-affiliates, or the public float, during any 12-month period. From April 1, 2023 through May 9, 2023, the Company sold 829,935 shares of common stock pursuant to the B. Riley Sales Agreement at a weighted average price of $3.64 per share for total gross proceeds of $3,020,732. As of May 9, 2023, the Company has approximately $875,000 remaining that is permitted to be sold under the Form S-3 pursuant to General Instruction I.B.6. If the Company’s public float increases, the Company will have additional availability under such limitations, and if the Company’s public float increases to $75 million or more, the Company

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will no longer be subject to such limitations. There can be no assurance that the Company’s public float will increase or that the Company will no longer be subject to such limitations.
The Company may seek additional capital in the private and/or public equity markets, to continue its operations, respond to competitive pressures, develop new products and services, and to support new strategic partnerships. The Company is evaluating additional equity/debt financing opportunities on an ongoing basis and may execute them when appropriate. However, there can be no assurances that the Company can consummate such a transaction, or consummate a transaction at favorable pricing.

The Company completed an equity financing in May 2023 from which the Company received total gross proceeds from a public offering of its common stock and common warrants of approximately $8.5 million, before deducting commissions and other estimated expenses – see Note 11. The Company plans to use the proceeds for further support of its programs, as well as for working capital.

Reverse Stock Split

On February 9, 2023, the Company completed a reverse stock split of its issued and outstanding shares of common stock at a ratio of one-for-fifteen, whereby every fifteen shares of the Company’s issued and outstanding common stock was converted automatically into one issued and outstanding share of common stock without any change in the par value per share. No fractional shares were issued as a result of the reverse stock split. Any fractional shares that would otherwise have resulted from the reverse stock split were rounded up to the next whole number. The Company’s common stock began trading on The NASDAQ Capital Market on a reverse split basis at the market opening on February 10, 2023. All share and per share data have been restated to reflect this reverse stock split.

Nasdaq Capital Market Listing Requirements

As previously reported, on December 20, 2022, the Company received a written notice from Nasdaq providing that the staff (the “Staff”) of Nasdaq determined to delist the Company’s common stock from The Nasdaq Capital Market because the closing bid price of the Company’s common stock had not been at least $1.00 per share as required by Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Requirement”) and because the Company’s shareholders’ equity had not been at least $2,500,000 nor had the alternatives of market value of listed securities or net income from continuing operations been met, as required by Listing Rule 5550(b) (the “Shareholders’ Equity Requirement”). On February 2, 2023, the Company had an oral hearing with a Nasdaq Hearings Panel to appeal the Staff’s delisting determination. On February 21, 2023, the Company received a letter from Nasdaq, stating that the Nasdaq Hearings Panel granted the Company’s request to continue its listing on Nasdaq, on the condition that (1) on February 24, 2023, the Company had demonstrated compliance with the Bid Price Requirement, by evidencing a closing bid price of $1.00 or more per share for a minimum of ten consecutive trading sessions; and (2) on or before March 31, 2023, the Company had demonstrated compliance with the Shareholders’ Equity Requirement. As of the close of the market on February 24, 2023, the Company satisfied the first condition – compliance with the Bid Price Requirement for a minimum of ten consecutive trading sessions. On April 6, 2023, Nasdaq granted the Company’s request for an extension of the deadline by which it must regain compliance with the Shareholders’ Equity Requirement from March 31, 2023 to May 15, 2023. As of the close of the market on May 9, 2023, the Company satisfied the second condition – compliance with the Shareholders’ Equity Requirement based on recent capital raising activities – see Note 11.

Note 2. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include Soligenix, Inc., and its wholly and majority owned subsidiaries. All significant intercompany accounts and transactions have been eliminated as a result of consolidation.

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Operating Segments

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated on a regular basis by the chief operating decision maker, or decision-making group, in deciding how to allocate resources to an individual segment and in assessing the performance of the segment. The Company divides its operations into two operating segments: Specialized BioTherapeutics and Public Health Solutions.

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents.

Contracts and Grants Receivable

Contracts and grants receivable consist of amounts due from various grants from the NIH and contracts from NIAID, an institute of NIH, for costs incurred prior to the period end under reimbursement contracts. The amounts were billed to the respective governmental agencies in the month subsequent to period end and collected shortly thereafter. Accordingly, no allowance for doubtful accounts has been established. If amounts become uncollectible, they are charged to operations.

Impairment of Long-Lived Assets

Office furniture and equipment and right of use assets with finite lives are evaluated and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company recognizes impairment of long-lived assets in the event the net book value of such assets exceeds the estimated future undiscounted cash flows attributable to such assets. If the sum of the expected undiscounted cash flows is less than the carrying value of the related asset or group of assets, a loss is recognized for the difference between the fair value and the carrying value of the related asset or group of assets. Such analyses necessarily involve significant judgment.

The Company did not record any impairment of long-lived assets for the three months ended March 31, 2023 and 2022.

Fair Value of Financial Instruments

FASB ASC 820 — Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FASB ASC 820 requires disclosures about the fair value of all financial instruments, whether or not recognized, for financial statement purposes. Disclosures about the fair value of financial instruments are based on pertinent information available to the Company on March 31, 2023. Accordingly, the estimates presented in these financial statements are not necessarily indicative of the amounts that could be realized on disposition of the financial instruments.

FASB ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).

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The three levels of the fair value hierarchy are as follows:

Level 1 — Quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as exchange-traded instruments and listed equities.
Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 includes financial instruments that are valued using models or other valuation methodologies. These models consider various assumptions, including volatility factors, current market prices and contractual prices for the underlying financial instruments. Substantially all of these assumptions are observable in the marketplace, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.
Level 3 — Unobservable inputs for the asset or liability. Financial instruments are considered Level 3 when their fair values are determined using pricing models, discounted cash flows or similar techniques and at least one significant model assumption or input is unobservable.

The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, licensing, contracts and/or grants receivable, research and development incentives receivable, accounts payable, accrued expenses, and accrued compensation approximate their fair value based on the short-term maturity of these instruments.

The carrying amount reported in the consolidated balance sheets for convertible debt approximates its fair value based on its interest rate and maturity date.

Deferred Offering Costs

The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated. After consummation of the equity financing, these costs are recorded in shareholders’ equity as a reduction of additional paid-in capital generated as a result of the offering.

Revenue Recognition

The Company’s revenues include revenues generated from government contracts and grants. The revenue from government contracts and grants is based upon subcontractor costs and internal costs incurred that are specifically covered by the contracts and grants, plus a facilities and administrative rate that provides funding for overhead expenses and management fees. These revenues are recognized when expenses have been incurred by subcontractors or when the Company incurs reimbursable internal expenses that are related to the government contracts and grants.

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The Company also records revenue from contracts with customers in accordance with Accounting Standards Codification Topic 606 (“ASC 606”), Revenue From Contracts with Customers. Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. 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.

Certain amounts received from or billed to customers in accordance with contract terms are deferred and recognized as future performance obligations are satisfied. All amounts earned under contracts with customers other than sales-based royalties are classified as licensing revenue. Sales-based royalties under the Company’s license agreements would be recognized as royalty revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied or partially satisfied. To date, the Company has not recognized any royalty revenue.

Research and Development Costs

Research and development costs are charged to expense when incurred in accordance with FASB ASC 730, Research and Development. Research and development includes costs such as clinical trial expenses, contracted research and license agreement fees with no alternative future use, supplies and materials, salaries, share-based compensation, employee benefits, equipment depreciation and allocation of various corporate costs.

Share-Based Compensation

Stock options are issued with an exercise price equal to the market price on the date of grant. Stock options issued to directors upon re-election vest quarterly for a period of one year (new director issuances are fully vested upon issuance). Stock options issued to employees generally vest 25% on the grant date, then 25% each subsequent year for a period of three years. These options have a ten year life for as long as the individuals remain employees or directors. In general, when an employee or director terminates their position, the options will expire within three months, unless otherwise extended by the Board.

From time to time, the Company issues restricted shares of common stock to vendors and consultants as compensation for services performed under the Company’s 2015 Equity Incentive Plan (the “2015 Plan”). The 2015 Plan provides for the grant of stock options, restricted stock, deferred stock and unrestricted stock to the Company’s employees and non-employees (including consultants). The shares issued under the 2015 Plan are registered on Form S-8 (SEC File No. 333-208515). However, as shares of common stock are not covered by a reoffer prospectus, the certificates reflecting such shares reflect a Securities Act of 1933, as amended restrictive legend. Stock compensation expense for equity-classified awards to non-employees is measured on the date of grant and is recognized when the services are performed.

There were no options issued during the three months ended March 31, 2023. The fair value of options issued during the three months ended March 31, 2022 was estimated using the Black-Scholes option-pricing model and the following assumptions:

a dividend yield of 0%;

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an expected life of 4 years;
volatility of 85%; and
risk free interest rates ranging from 1.12% - 2.15%.

The fair value of each option grant made during the three months ended March 31, 2022 was estimated on the date of each grant and recognized as share-based compensation expense ratably over the option vesting periods, which approximates the service period.

Foreign Currency Transactions and Translation

In accordance with FASB ASC 830 Foreign Currency Matters, the UK subsidiary expresses its U.S. dollar and Euro denominated transactions in its functional currency, the British Pound, with related transaction gains or losses included in net loss. On a quarterly basis, the financial statements of the UK subsidiary are translated into U.S. dollars and consolidated into the Company’s financials, with related translation adjustments reported as a cumulative translation adjustment (“CTA”), which is a component of accumulated other comprehensive loss. During the three months ended March 31, 2023 and 2022, the Company recognized foreign currency transaction losses of $366 and $108,293, respectively, in the accompanying consolidated statements of operations.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. A valuation allowance is established when it is more likely than not that all or a portion of a deferred tax asset will not be realized. A review of all available positive and negative evidence is considered, including the Company’s current and past performance, the market environment in which the Company operates, the utilization of past tax credits, and the length of carryback and carryforward periods. Deferred tax assets and liabilities are measured utilizing tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company recognized an income tax benefit of $1,161,197 from the sale of 2021 New Jersey NOL carryforwards during the three months ended March 31, 2023. The Company did not recognize an income tax benefit from the sale of New Jersey NOL carryforwards for the three months ended March 31, 2022. The Company recognizes accrued interest and penalties associated with uncertain tax positions, if any, as part of income tax expense. There were no tax related interest and penalties recorded for the three months ended March 31, 2023 and 2022. Additionally, the Company has not recorded an asset for unrecognized tax benefits or a liability for uncertain tax positions at March 31, 2023 or December 31, 2022.

Research and Development Incentive Income and Receivable

The Company recognizes other income from UK research and development incentives when there is reasonable assurance that the income will be received, the relevant expenditure has been incurred, and the consideration can be reliably measured. The small or medium sized enterprise (“SME”) research and development tax relief program supports companies that seek to research and develop an advance in their field and is governed through legislative law by HM Revenue & Customs as long as specific eligibility criteria are met.

Management has assessed the Company’s research and development activities and expenditures to determine which activities and expenditures are likely to be eligible under the SME research and development tax relief program described above. At each period end, management estimates the refundable tax offset available to the Company based on available information at the time. As the tax incentives may be received without regard to an entity’s actual tax liability, they are not subject to accounting for income taxes. As a result, amounts

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realized under the SME research and development tax relief program are recorded as a component of other income.

The research and development incentive receivable represents an amount due in connection with the above-described tax relief program. The Company has recorded a research and development incentive receivable of approximately $31,000 and $128,000 as of March 31, 2023 and December 31, 2022, respectively, in the consolidated balance sheets.

The following table shows the change in the UK research and development incentives receivable from December 31, 2022 to March 31, 2023:

    

Current

    

Long-Term

 

Total

Balance at December 31, 2022

 

$

104,198

$

24,114

$

128,312

UK research and development incentives, transfer

 

24,114

(24,114)

 

UK research and development incentives

6,023

6,023

Additional 2021 incentive earned

425

425

UK research and development incentives cash receipt

 

(104,422)

 

 

(104,422)

Foreign currency translation

 

459

 

171

 

630

Balance at March 31, 2023

$

24,774

$

6,193

$

30,967

Loss Per Share

Basic earnings per share (“EPS”) excludes dilution and is computed by dividing loss applicable to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that shared in the earnings of the entity. Since there is a significant number of options and warrants outstanding, fluctuations in the actual market price can have a variety of results for each period presented.

The following table summarizes potentially dilutive adjustments to the number of common shares which were excluded from the diluted calculation because their effect would be anti-dilutive due to the losses in each period:

As of March 31, 

    

2023

    

2022

    

Common stock purchase warrants

3,992

Stock options

 

192,273

 

146,285

 

Convertible debt

 

146,342

 

162,602

 

Total

 

338,615

 

312,879

 

The weighted average exercise price of the Company’s stock options outstanding at March 31, 2023 was $27.56 per share. The weighted average exercise prices of the Company’s warrants and stock options outstanding at March 31, 2022 were $36.12 and $34.49 per share, respectively. 217,880 of the Company’s common stock warrants associated with the July 2018 public offering expired on January 2, 2022 and 667 of the Company’s common stock warrants associated with the opening of the first clinical site in the United Kingdom expired on March 28, 2023.

Use of Estimates and Assumptions

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions such as the fair value of warrants and stock options and to accrue for clinical trials in process that affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates.

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Note 3. Leases

The Company classifies a lease for its office space at 29 Emmons Drive, Suite B-10 in Princeton, New Jersey as an operating lease, and recorded a related right-of-use lease asset and lease liability accordingly. Pursuant to an amendment executed on June 21, 2022, the lease has been extended to October 2025. The current rent of $11,108 per month will be maintained until November 2023 when it will be increased to $11,367 and then will increase to $11,625 in November 2024 where it will remain until expiration. As of March 31, 2023 and December 31, 2022, the Company’s consolidated balance sheets included a right-of-use lease asset of $314,051 and $340,987 for the office space, respectively. The Company’s consolidated balance sheets as of March 31, 2023 and December 31, 2022 included corresponding lease liabilities of $316,319 and $342,575 for the office space, respectively.

The following represents a reconciliation of contractual lease cash flows to the right-of-use lease asset and liability recognized in the financial statements:

Operating

    

Lease

    

Right-of-use lease asset:

 

  

Right-of-use lease asset, January 1, 2023

$

340,987

Less: reduction/amortization

 

26,936

Right-of-use lease asset, March 31, 2023

$

314,051

Lease liability:

 

  

Lease liability, January 1, 2023

$

342,575

Less: repayments

 

26,256

Lease liability, March 31, 2023

$

316,319

Lease expense for the three months ended March 31, 2023:

 

  

Lease expense

$

34,005

Total

$

34,005

Lease expense for the three months ended March 31, 2022:

Lease expense

$

33,330

Total

$

33,330

Contractual cash payments for the remaining lease term as of March 31, 2023:

2023

$

100,492

2024

136,917

2025

116,250

Total

$

353,659

Remaining lease term (months) as of March 31, 2023

 

31

Note 4. Accrued Expenses

The following is a summary of the Company’s accrued expenses:

March 31, 

December 31, 

    

2023

    

2022

    

Clinical trial expenses

$

2,014,026

$

1,884,117

Other

 

437,113

 

423,629

Total

$

2,451,139

$

2,307,746

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Note 5. Debt

In December 2020, the Company entered into a $20 million convertible debt financing agreement with Pontifax. Under the terms of the agreement with Pontifax, the Company had access to up to $20 million in convertible debt financing in three tranches, which will mature on June 15, 2025 and had an interest-only period for the first two years with a fixed interest rate of 8.47% on borrowed amounts and an interest rate of 1% on amounts available but not borrowed as an unused line of credit fee. After the interest-only period, the outstanding principal was to be repaid in quarterly payments of $1 million each commencing in the first quarter of 2023. The agreement is secured by a lien covering substantially all of the Company’s assets, other than intellectual property. The agreement contains customary representations, warranties and covenants, including covenants by the Company limiting additional indebtedness, liens, including on intellectual property, guaranties, mergers and consolidations, substantial asset sales, investments and loans, certain corporate changes, transactions with affiliates and fundamental changes. Affirmative covenants included, among others, covenants requiring the Company to protect and maintain its intellectual property and comply with all applicable laws, deliver certain financial reports, maintain a minimum cash balance and maintain its insurance coverage.

Upon the closing of this transaction, the Company borrowed the first tranche of $10 million, had the option to draw the second tranche of $5 million at any time during the initial 12 months of the loan and the third tranche of $5 million upon filing of the HyBryte™ NDA, subject to certain conditions. The Company elected to let the options to borrow both the second and third tranches expire as of December 15, 2021 and March 15, 2022, respectively.

On April 19, 2023, the Company entered into an amendment to the Pontifax loan and security agreement (See Note 11). Based on this amendment and the Company’s capital raising activity during May 2023 (See Note 11), the Company has reclassified $3 million of the principal balance and the debt issuance costs as long-term and is not subject to any minimum cash balance requirements.

Interest expense incurred during the three months ended March 31, 2023 and 2022 was $187,964 and $208,849, respectively. Interest expense paid during the three months ended March 31, 2023 and 2022 was $213,490 and $223,901, respectively.

Annual principal and interest payments due as of March 31, 2023 in accordance with the amended terms of the Pontifax agreement (see Note 11), assuming no conversion is as follows:

Year

    

Principal

    

Interest

    

Total

2023

$

6,000,000

$

402,615

$

6,402,615

2024

 

2,250,000

 

206,761

 

2,456,761

2025

 

750,000

 

16,012

 

766,012

Total

$

9,000,000

$

625,388

$

9,625,388

Note 6. Income Taxes

The Company had gross NOLs at December 31, 2022 of approximately $124 million for federal tax purposes, approximately $13.2 million for state tax purposes and approximately $1.4 million for foreign tax purposes. Federal losses generated in 2018 or later will carry forward indefinitely. In addition, the Company has approximately $8.8 million of various tax credits which credit the Company may be able to utilize its NOLs to reduce future federal and state income tax liabilities. However, these NOLs are subject to various limitations under Internal Revenue Code (“IRC”) Section 382. IRC Section 382 limits the use of NOLs to the extent there has been an ownership change of more than 50 percentage points. In addition, the NOL carryforwards are subject to examination by the taxing authority and could be adjusted or disallowed due to such exams. Although the Company has not undergone an IRC Section 382 analysis, it is likely that the utilization of the NOLs may be substantially limited.

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The Company and one or more of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various state and local jurisdictions. During 2022 and 2021, the Company sold New Jersey NOL carryforwards in accordance with the State of New Jersey’s Technology Business Tax Certificate Program, which allowed certain high technology and biotechnology companies to sell unused NOL carryforwards to other New Jersey-based corporate taxpayers. During the three months ended March 31, 2023, the Company recognized $1,161,197 of income tax benefit, net of transaction costs from the sale of its 2021 NOL carryforwards. The Company did not recognize a corresponding income tax benefit from such sale during the three months ended March 31, 2022. The Company has not yet sold its 2022 New Jersey NOL carryforwards but may do so in the future. There can be no assurance as to the continuation or magnitude of this program in future years.

Note 7. Shareholders’ Equity

Preferred Stock

The Company has 350,000 shares of preferred stock authorized, of which 50,000 were designated as Series D preferred stock as of December 31, 2022.

Series D Preferred Stock

On December 21, 2022, the Board of Directors of the Company declared a dividend for the stockholders of record on January 3, 2023. The dividend consisted of one one-thousandth of a share of Series D preferred stock, par value $0.001 per share, for each outstanding share of the Company's common stock. The Series D preferred stock had the following rights and restrictions:

General; Transferability - Series D preferred stock shares will be in book-entry form without certificates. Transfers can only happen alongside common stock transfers, with 1/1,000th of a Series D preferred stock share transferred for each common stock share transferred.

Voting Rights - Each Series D preferred stock share gives the holder 1,000,000 votes. If a shareholder owns a fraction of a share, they will have a proportional number of votes. Series D preferred stock and common stock shares only vote together on two specific matters:

1.Any plan to change the Company's Certificate of Incorporation for a reverse stock split.
2.Any plan to delay a stockholders' meeting to vote on a reverse stock split (the "Adjournment Proposal").

When voting on the reverse stock split or the Adjournment Proposal, each Series D preferred stock share (or fraction of a share) will vote the same way as the common stock share it was issued from.

Dividend Rights - The holders of Series D preferred stock will not be entitled to receive dividends of any kind.

Liquidation Preference - If the Company undergoes liquidation, dissolution, or winding up, Series D preferred stock has priority over common stock for asset distribution. In such a situation, Series D preferred stockholders will receive a cash payment of $0.001 per share before any distribution is made to common stockholders.

Redemption - If Series D preferred stockholders do not attend or vote by proxy at a meeting for the reverse stock split and Adjournment Proposal, their shares will be automatically redeemed by the Company. If any Series D preferred stock remains after this redemption, it can be redeemed in one of two ways:

1.The Board decides to redeem the shares at a time and date of their choosing.
2.The shares will be automatically redeemed when the Company's stockholders approve the reverse stock split during a meeting for this purpose.

When Series D preferred stock is redeemed, stockholders receive a cash payment based on the number of shares they own. For every 100 whole shares redeemed, the stockholder will get $0.10 in cash.

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The Series D preferred stock shares were classified as mezzanine equity as of December 31, 2022 since they were not mandatorily redeemable but were redeemable based on an event not entirely controlled by the Company. All Series D preferred stock were redeemed in conjunction with the special meeting of the shareholders’ on February 8, 2023.

Common Stock

The following items represent transactions in the Company’s common stock for the three months ended March 31, 2023:

The Company sold 21,195 shares of common stock pursuant to the B. Riley Sales Agreement at a weighted average price of $3.34 per share.    

The issuance of the Company’s common stock pursuant to the B. Riley Sales Agreement described above was registered on a Registration Statement on Form S-3.

B. Riley At Market Issuance Sales Agreement

On August 11, 2017, the Company entered into the B. Riley Sales Agreement to sell shares of the Company’s common stock from time to time, through an “at-the-market” equity offering program under which B. Riley acts as sales agent. Under the B. Riley Sales Agreement, the Company sets the parameters for the sale of shares, including the number of shares to be issued, the time period during which sales may be requested to be made, limitation on the number of shares that may be sold in any one trading day and any minimum price below which sales may not be made. The B. Riley Sales Agreement provides that B. Riley is entitled to compensation for its services in an amount equal to 3% of the gross proceeds from the sale of shares sold under the B. Riley Sale Agreement. The Company has no obligation to sell any shares under the B. Riley Sales Agreement, and may suspend solicitation and offers under the B. Riley Sales Agreement at any time. The B. Riley Sales Agreement expires on December 31, 2023.

On August 13, 2021, the Company filed a prospectus supplement relating to the B. Riley Sales Agreement to offer and sell shares of Company common stock having an aggregate offering price of up to $30 million under the July 2020 Registration Statement. As of May 9, 2023, there was $23.6 million available for future sale of common stock under the B. Riley Sales Agreement. The Company is currently subject to the limitations contained in General Instruction I.B.6 of Form S-3. As a result, the Company is limited to selling no more than one-third of the aggregate market value of the equity held by non-affiliates, or the public float, during any 12-month period.  As of May 9, 2023, the Company has approximately $875,000 remaining that is permitted to be sold under the Form S-3 pursuant to General Instruction I.B.6. If the Company’s public float increases, the Company will have additional availability under such limitations, and if the Company’s public float increases to $75 million or more, the Company will no longer be subject to such limitations. There can be no assurance that the Company’s public float will increase or that the Company will no longer be subject to such limitations.

Note 8. Concentrations

At March 31, 2023 and 2022, the Company had deposits in major financial institutions that exceeded the amount under protection by the Federal Deposit Insurance Corporation (“FDIC”). Currently, the Company is covered up to $250,000 by the FDIC and at times maintains cash balances in excess of the FDIC coverage. Although the Company currently believes that the financial institutions with whom it does business will be able to fulfill their commitments to the Company, there is no assurance that those institutions will be able to continue to do so. The Company has not experienced any credit losses associated with its balances in such accounts through March 31, 2023.

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Note 9. Commitments and Contingencies

Contractual Obligations

The Company has commitments of approximately $230,000 as of March 31, 2023 over the next five years for several licensing agreements with partners and universities. Additionally, the Company has collaboration and license agreements, which upon clinical or commercialization success, may require the payment of milestones of up to approximately $13.2 million, royalties on net sales of covered products ranging from 2% to 3%, sub-license Investigational New Drug (“IND”) milestones on covered products of up to approximately $200,000, sub-license income royalties on covered products up to 15% and sub-license global net sales royalties on covered products ranging from 1.5% to 2.5%, if and when achieved. However, there can be no assurance that clinical or commercialization success will occur.

The Company currently leases approximately 6,200 square feet of office space at 29 Emmons Drive, Suite B-10 in Princeton, New Jersey. This office space currently serves as the Company’s corporate headquarters, and both of the Company’s business segments (Specialized BioTherapeutics and Public Health Solutions), operate from this space. Pursuant to an amendment on June 21, 2022, the lease has been extended from November 2022 to October 2025. The current rent of $11,108 per month will be maintained until November 2023 when it will be increased to $11,367 and then will increase to $11,625 in November 2024 where it will remain until expiration.

In September 2014, the Company entered into an asset purchase agreement with Hy Biopharma Inc. (“Hy Biopharma”) pursuant to which the Company acquired certain intangible assets, properties and rights of Hy Biopharma related to the development of Hy BioPharma’s synthetic hypericin product. As consideration for the assets acquired, the Company paid $275,000 in cash and issued 12,328 shares of common stock with a fair value based on the Company’s stock price on the date of grant of $3.75 million. These amounts were charged to research and development expense during the third quarter of 2014 as the assets will be used in the Company’s research and development activities and do not have alternative future use pursuant to generally accepted accounting principles in the U.S. In March 2020, the Company issued 130,413 shares of common stock to Hy Biopharma as payment for achieving a milestone: the Company determining the Phase 3 clinical trial of HyBryte™ to be successful in the treatment of CTCL. The number of shares of common stock issued to Hy Biopharma was calculated using an effective price of $38.40 per share, based upon a formula set forth in the purchase agreement.

Provided the sole remaining future success-oriented milestone of FDA approval is attained, the Company will be required to make an additional payment of $5 million, if and when achieved. Such payment will be payable in restricted securities of the Company provided such number of shares does not exceed 19.9% ownership of the Company’s outstanding stock. As of March 31, 2023, no other milestone or royalty payments have been paid or accrued.

As a result of the above agreements, the Company has the following contractual obligations:

    

Research and

    

Property and

    

    

Year

    

Development

    

Other Leases

    

Total

April 1 through December 31, 2023

$

46,000

$

100,492

$

146,492

2024

 

46,000

 

136,917

 

182,917

2025

 

46,000

 

116,250

 

162,250

2026

46,000

46,000

2027

46,000

46,000

Total

$

230,000

$

353,659

$

583,659

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Contingencies

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. A liability is only recorded if management determines that it is both probable and reasonably estimable.

COVID-19

Based on the current outbreak of SARS-CoV-2, the pathogen responsible for COVID-19, which has already had an impact on financial markets, there could be additional repercussions to the Company’s operating business, including but not limited to, the sourcing of materials for product candidates, manufacture of supplies for preclinical and/or clinical studies, delays in clinical operations, which may include the availability or the continued availability of patients for trials due to such things as quarantines, conduct of patient monitoring and clinical trial data retrieval at investigational study sites.

COVID-19 affected the Company’s operations but did not have a material impact on its business, operating results, financial condition or cash flows as of and for the three months ended March 31, 2023 and 2022.

The future impact of the outbreak is highly uncertain and cannot be predicted, and the Company cannot provide any assurance that the outbreak will not have a material adverse impact on the Company’s operations or future results or filings with regulatory health authorities. The extent of the impact to the Company, if any, will depend on future developments, including actions taken to contain the coronavirus.

Emergent BioSolutions Legal Proceedings

In July 2020, the Company filed a demand for arbitration against Emergent BioSolutions, Inc. and certain of its subsidiaries (collectively, “Emergent”) with the American Arbitration Association in Mercer County, New Jersey. The Company alleges in the arbitration various breaches of contracts and warranties as well as acts of fraud. Emergent has answered that demand for arbitration denying the allegations and asserting affirmative defenses. The Company presented its case at an arbitration hearing over 12 days in January 2022. Following submission of post-hearing briefs, the arbitration panel heard closing oral arguments in April 2022 (see Part II, Item 1 – Legal Proceedings). The Company was seeking to recover damages in excess of $19 million from Emergent.

On July 6, 2022, the American Arbitration Association entered a final decision in connection with this arbitration.  Despite the arbitration panel ruling that Emergent had committed a number of breaches of the parties’ contracts, the panel did not award monetary damages to the Company. On September 30, 2022, the Company filed a petition to vacate the arbitration decision with the Delaware Court of Chancery, requesting that the Court vacate the arbitration decision and remand the matter to the arbitration panel for rehearing. The Court of Chancery held oral argument on cross-motions for summary judgment on April 17, 2023, and took the matter under advisement. The Company cannot offer any assurances as to any result of the challenge of the arbitration decision or that the Company will recover any damages from Emergent.

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Note 10. Operating Segments

The Company maintains two active operating segments: Specialized BioTherapeutics and Public Health Solutions. Each segment includes an element of overhead costs specifically associated with its operations, with its corporate shared services group responsible for support functions generic to both operating segments.

    

Three Months Ended

    

March 31, 

    

2023

    

2022

Revenues

  

 

  

Specialized BioTherapeutics

$

155,365

$

Public Health Solutions

101,813

188,063

Total

$

257,178

$

188,063

Income (loss) from Operations

 

  

 

  

Specialized BioTherapeutics

$

(910,377)

$

(1,539,728)

Public Health Solutions

427

(120,621)

Corporate

 

(1,240,739)

 

(2,532,037)

Total

$

(2,150,689)

$

(4,192,386)

Amortization and Depreciation Expense

 

  

 

  

Specialized BioTherapeutics

$

1,071

$

2,614

Public Health Solutions

178

436

Corporate

 

536

 

5,182

Total

$

1,785

$

8,232

Other (Expense) Income, Net

 

  

 

  

Specialized BioTherapeutics

$

6,082

$

55,079

Corporate

 

(62,699)

 

(211,714)

Total

$

(56,617)

$

(156,635)

Share-Based Compensation

 

  

 

  

Specialized BioTherapeutics

$

27,427

$

28,504

Public Health Solutions

994

1,054

Corporate

 

45,213

 

48,713

Total

$

73,634

$

78,271

    

As of

As of

    

March 31, 

December 31, 

    

2023

    

2022

    

Identifiable Assets

 

  

 

  

 

Specialized BioTherapeutics

$

71,689

$

103,742

Public Health Solutions

 

223,573

 

121,290

Corporate

 

10,806,555

 

14,054,685

Total

$

11,101,817

$

14,279,717

Note 11. Subsequent Events

Amendment to the Pontifax Loan and Security Agreement

On April 19, 2023, the Company entered into an amendment to the convertible debt financing agreement dated December 15, 2020 with Pontifax. The amendment called for the immediate payment of $5 million of the outstanding principal balance and any accrued interest, waived any prepayment charge in connection with the

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repayment of this amount and resulted in an outstanding principal balance of $3 million. The amendment also provides for a new interest only period from the date of the amendment through December 31, 2023 and reduced the minimum cash covenant to $1.5 million. Since the Company raised $10 million or more in gross proceeds by December 31, 2023, the interest-only period has been extended to June 30, 2024 and the minimum cash balance requirement has been eliminated. Further, the amendment reduces the conversion price with respect to the remaining principal amount under the agreement to (i) 90% of the closing price of the Company’s common stock on the day before the delivery of the conversion notice with respect to the first 588,599 shares of the Company’s common stock issuable upon conversion and to (ii) $1.70 with respect to all shares of the Company’s common stock issuable upon conversion in excess of the first 588,599 shares so issued. The amendment provides that Pontifax waive their right to execute any remedies available to them in connection with the FDA’s refusal to file the NDA for HyBryteTM indefinitely. Pontifax further agreed to defer delivery of any conversion notice during the six months following the closing of the May 2023 public offering. The remaining terms of the agreement remain in effect without modification.

Exclusive Option Agreement with Silk Road Therapeutics

On April 27, 2023, the Company entered into an exclusive option agreement with Silk Road Therapeutics, Inc., (“Silk Road”). The option agreement grants the Company an exclusive option to purchase all assets and rights, including intellectual property and regulatory documents, related to Silk Road’s Pentoxifylline product candidate, a non-biological anti-TNF-alpha inhibitor, for the treatment of mucocutaneous ulcers in patient’s suffering from Behcet’s Disease. Certain directors of the Company have an ownership interest in Silk Road.

Sales Pursuant to the B. Riley Sales Agreement

From April 1, 2023 through May 9, 2023, the Company sold 829,935 shares of common stock pursuant to the B. Riley Sales Agreement at a weighted average price of $3.64 per share for total gross proceeds of $3,020,732.

$8.5 million Public Offering

On May 9, 2023, the Company completed a public offering of 6,538,500 shares of its common stock (or common stock equivalents in lieu thereof) and common warrants to purchase up to 6,538,500 shares of its common stock at a combined public offering price of $1.30. The common warrants have an exercise price of $1.50 per share, are exercisable immediately and expire five years from the issuance date. The total gross proceeds to the Company from this offering were approximately $8.5 million before deducting commissions and other estimated offering expenses payable by the Company.

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ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis provides information to explain our results of operations and financial condition. You should also read our unaudited consolidated interim financial statements and their notes included in this Form 10-Q, and our audited consolidated financial statements and their notes, Risk Factors and other information included in our Annual Report on Form 10-K for the year ended December 31, 2022. We provide addresses to internet sites solely for the information to investors. We do not intend any addresses to be active links or to otherwise incorporate the contents of any website into this report.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that reflect our current expectations about our future results, performance, prospects and opportunities. These forward-looking statements are not guarantees of future performance and are subject to significant risks, uncertainties, assumptions and other factors, which are difficult to predict and may cause actual results to differ materially from those expressed in, or implied by, any forward-looking statements. The forward-looking statements within this report may be identified by words such as “believes,” “anticipates,” “expects,” “intends,” “may,” “would,” “will” and other similar expressions. However, these words are not the exclusive means of identifying these statements. Statements that are not historical facts are based on our current expectations, beliefs, assumptions, estimates, forecasts and projections for our business and the industry and markets related to our business and are forward-looking statements.

Actual outcomes and results may differ materially from what is expressed in such forward-looking statements. Important factors which may affect these actual outcomes and results include, without limitation:

uncertainty as to whether our product candidates will be sufficiently safe and effective to support regulatory approvals;
uncertainty inherent in developing therapeutics and vaccines, and manufacturing and conducting preclinical and clinical trials;
our ability to obtain future financing or funds when needed, either through the raising of capital, the incurrence of convertible or other indebtedness or through strategic financing or commercialization partnerships;
that product development and commercialization efforts will be reduced or discontinued due to difficulties or delays in clinical trials or a lack of progress or positive results from research and development efforts;
maintenance and progression of our business strategy;
the possibility that our products under development may not gain market acceptance;
our expectations about the potential market sizes and market participation potential for our product candidates may not be realized;
our expected revenues (including sales, milestone payments and royalty revenues) from our product candidates and any related commercial agreements of ours may not be realized;
the ability of our manufacturing partners to supply us or our commercial partners with clinical or commercial supplies of our products in a safe, timely and regulatory compliant manner and the ability of such partners to timely address any regulatory issues that have arisen or may arise in the future;

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competition existing today or that may arise in the future, including the possibility that others may develop technologies or products superior to our products;
our ability to comply with listing requirements and maintain the listing of our common stock on The Nasdaq Capital Market;
the effect that global pathogens could have on financial markets, materials sourcing, service providers, patients, clinical study sites, governments and population (e.g. Coronavirus Disease 2019 (“COVID-19”)); and
other factors, including those “Risk Factors” set forth under Part II, Item 1A. “Risk Factors” in this Quarterly Report and in our Annual Report on Form 10-K for the year ended December 31, 2022.

Except as expressly required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances occurring subsequent to the filing of this Form 10-Q with the United States (“U.S.”) Securities and Exchange Commission (the “SEC”) or for any other reason. You should carefully review and consider the various disclosures we make in this report and our other reports filed with the SEC that attempt to advise interested parties of the risks, uncertainties and other factors that may affect our business.

Note Regarding Reverse Stock Split

On February 9, 2023, we completed a reverse stock split of our issued and outstanding shares of common stock at a ratio of one-for-fifteen, whereby every fifteen shares of our issued and outstanding common stock was converted automatically into one issued and outstanding share of common stock without any change in the par value per share. No fractional shares were issued as a result of the reverse stock split. Any fractional shares that would otherwise have resulted from the reverse stock split were rounded up to the next whole number. Our common stock began trading on The NASDAQ Capital Market on a reverse split basis at the market opening on February 10, 2023. All share and per share data have been restated to reflect this reverse stock split.

Note Regarding Nasdaq Capital Market Listing Requirements

As previously reported, on December 20, 2022, we received a written notice from Nasdaq providing that the staff (the “Staff”) of Nasdaq determined to delist our common stock from The Nasdaq Capital Market because the closing bid price of our common stock had not been at least $1.00 per share as required by Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Requirement”) and because our shareholders’ equity had not been at least $2,500,000 nor had the alternatives of market value of listed securities or net income from continuing operations been met, as required by Listing Rule 5550(b) (the “Shareholders’ Equity Requirement”). On February 2, 2023, we had an oral hearing with a Nasdaq Hearings Panel to appeal the Staff’s delisting determination. On February 21, 2023, we received a letter from Nasdaq, stating that the Nasdaq Hearings Panel granted our request to continue our listing on Nasdaq, on the condition that (1) on February 24, 2023, we had demonstrated compliance with the Bid Price Requirement, by evidencing a closing bid price of $1.00 or more per share for a minimum of ten consecutive trading sessions; and (2) on or before March 31, 2023, we had demonstrated compliance with the Shareholders’ Equity Requirement. As of the close of the market on February 24, 2023, we satisfied the first condition – compliance with the Bid Price Requirement for a minimum of ten consecutive trading sessions. On April 6, 2023, Nasdaq granted our request for an extension of the deadline by which we must regain compliance with the Shareholders’ Equity Requirement from March 31, 2023 to May 15, 2023. As of the close of the market on May 9, 2023, we have satisfied the second condition – compliance with the Shareholders’ Equity Requirement based on our recent capital raising activities – see Note 11 in the footnotes to our consolidated financial statements.

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Our Business Overview

We are a late-stage biopharmaceutical company focused on developing and commercializing products to treat rare diseases where there is an unmet medical need. We maintain two active business segments: Specialized BioTherapeutics and Public Health Solutions.

Our Specialized BioTherapeutics business segment is developing and moving toward potential commercialization of HyBryte™ (a proposed proprietary name of SGX301 or synthetic hypericin sodium), a novel photodynamic therapy (“PDT”), utilizing topical synthetic hypericin activated with safe visible light for the treatment of cutaneous T-cell lymphoma (“CTCL”). With successful completion of the Phase 3 FLASH (Fluorescent Light And Synthetic Hypericin) study, regulatory approval is being pursued in the United States (“U.S.”) and Europe. Following submission of a new drug application (“NDA”) for HyBryte™ in the treatment of CTCL, we received a refusal to file (“RTF”) letter from the U.S. Food and Drug Administration (“FDA”). We had a Type A meeting with the FDA to clarify and respond to the issues identified in the RTF letter and to seek additional guidance concerning information that the FDA would require for a resubmitted NDA to be deemed acceptable to file, in order to advance HyBryte™ towards U.S. marketing approval and commercialization. In order to accept an NDA filing for HyBryte™, the FDA is requiring positive results from a second clinical study in addition to the Phase 3, randomized, double-blind, placebo-controlled FLASH study previously conducted in this orphan indication. The FDA indicated that it is open to engaging in protocol discussions regarding the second clinical study. Based on this feedback, we have decided to collaboratively engage in discussions with the FDA in order to define the protocol and evaluate the feasibility of conducting the additional clinical trial.  We recently have been granted a Type A Meeting Request with the FDA to initiate formal discussions regarding the design of a second, Phase 3 pivotal study evaluating HyBryte™ in the treatment of CTCL in support of potential FDA marketing approval.  

Development programs in this business segment also include expansion of synthetic hypericin (SGX302) into psoriasis, our first-in-class innate defense regulator (“IDR”) technology, dusquetide (SGX942) for the treatment of inflammatory diseases, including oral mucositis in head and neck cancer, and proprietary formulations of oral beclomethasone 17,21-dipropionate (“BDP”) for the prevention/treatment of gastrointestinal (“GI”) disorders characterized by severe inflammation including pediatric Crohn’s disease (SGX203).

Our Public Health Solutions business segment includes active development programs for RiVax®, our ricin toxin vaccine candidate and SGX943, our therapeutic candidate for antibiotic resistant and emerging infectious disease and our vaccine programs targeting filoviruses (such as Marburg and Ebola) and CiVax™, our vaccine candidate for the prevention of COVID-19 (caused by SARS-CoV-2). The development of our vaccine programs incorporates the use of our proprietary heat stabilization platform technology, known as ThermoVax®. To date, this business segment has been supported with government grant and contract funding from the National Institute of Allergy and Infectious Diseases (“NIAID”), the Biomedical Advanced Research and Development Authority (“BARDA”) and the Defense Threat Reduction Agency (“DTRA”).

An outline of our business strategy follows:

Following positive primary endpoint results for the Phase 3 FLASH (Florescent Light Activated Synthetic Hypericin) clinical trial of HyBryte™ in CTCL as well as further statistically significant improvement in response rates with longer treatment (18 weeks compared to 12 and 6 weeks of treatment), collaboratively engage in discussions with the FDA in order to define the protocol and evaluate the feasibility of conducting a second clinical study in order to advance HyBryte™ towards U.S. marketing approval and commercialization while continuing to explore potential marketing approval and partnership in Europe.
Expanding development of synthetic hypericin under the research name SGX302 into psoriasis with the conduct of a Phase 2a clinical trial, following the positive Phase 3 FLASH study and positive proof-of-concept demonstrated in a small Phase 1/2 pilot study in mild-to-moderate psoriasis patients.

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Following execution of an exclusive option agreement with Silk Road Therapeutics, Inc. granting us the right to acquire a novel topical formulation of Pentoxifylline (“PTX”) for treatment of Behçet’s Disease (“BD”), complete remaining diligence activities including discussion with the FDA on the appropriate Phase 2/3 trial design to advance PTX in BD to allow us to determine whether to exercise the option to acquire the PTX asset.
Following feedback from the United Kingdom (“UK”) Medicines and Healthcare products Regulatory Agency (“MHRA”) that a second Phase 3 clinical trial of SGX942 in the treatment of oral mucositis would be required to support a marketing authorization; design a second study and attempt to identify a potential partner(s) to continue this development program.
Continue development of our therapeutic SGX943 and our heat stabilization platform technology, ThermoVax®, in combination with our programs for RiVax® (ricin toxin vaccine), CiVax™ (COVID-19 vaccine) and filovirus vaccines (targeting Ebola, Sudan, and Marburg viruses), with U.S. government funding support.
Continue to apply for and secure additional government funding for each of our Specialized BioTherapeutics and Public Health Solutions programs through grants, contracts and/or procurements.
Pursue business development opportunities for our pipeline programs, as well as explore all strategic alternatives, including but not limited to merger/acquisition strategies.
Acquire or in-license new clinical-stage compounds for development, as well as evaluate new indications with existing pipeline compounds for development.

Corporate Information

We were incorporated in Delaware in 1987 under the name Biological Therapeutics, Inc. In 1987, we merged with Biological Therapeutics, Inc., a North Dakota corporation, pursuant to which we changed our name to “Immunotherapeutics, Inc.” We changed our name to “Endorex Corp.” in 1996, to “Endorex Corporation” in 1998, to “DOR BioPharma, Inc.” in 2001, and finally to “Soligenix, Inc.” in 2009. Our principal executive offices are located at 29 Emmons Drive, Suite B-10, Princeton, New Jersey 08540 and our telephone number is (609) 538-8200.Our Product Candidates in Development

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The following tables summarize our product candidates under development:

Specialized BioTherapeutics Product Candidates*

Soligenix Product Candidate

   

Therapeutic Indication

   

Stage of Development

HyBryte™

Cutaneous T-Cell Lymphoma

Phase 2 trial completed; demonstrated significantly higher response rate compared to placebo; Phase 3 trial completed; demonstrated statistical significance in primary endpoint in March 2020 (Cycle 1) and demonstrated continued improvement in treatment response with extended treatment in April 2020 (Cycle 2) and October 2020 (Cycle 3); NDA submitted December 2022; FDA RTF letter received February 2023; Type A meeting with the FDA convened April 2023, in which the FDA determined that a second positive Phase 3 study would be required to support a NDA submission; requested and granted a follow-on Type A meeting with FDA  to engage in formal protocol discussions with FDA to define the protocol for, and evaluate feasibility of conducting, an additional Phase 3 clinical trial (as requested by the FDA); feedback from this follow-on Type A meeting will be provided by or before the end of June 2023

SGX302

Mild-to-Moderate Psoriasis

Positive proof-of-concept demonstrated in a small Phase 1/2 pilot study; Phase 2a protocol and Investigation New Drug (“IND”) clearance received from the FDA; Phase 2a study initiated December 2022

SGX942

Oral Mucositis in Head and Neck Cancer

Phase 2 trial completed; demonstrated significant response compared to placebo with positive long-term (12 month) safety also reported; Phase 3 clinical trial results announced December 2020: the primary endpoint of median duration of severe oral mucositis (“SOM”) did not achieve the pre-specified criterion for statistical significance (p≤0.05); although biological activity was observed with a 56% reduction in the median duration of SOM from 18 days in the placebo group to 8 days in the SGX942 treatment group; analyze full dataset from Phase 3 study and design a second Phase 3 clinical trial; continued development contingent upon identification of partnership

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Soligenix Product Candidate

   

Therapeutic Indication

   

Stage of Development

SGX203†

Pediatric Crohn’s disease

Phase 1/2 clinical trial completed; efficacy data, pharmacokinetic(PK)/pharmacodynamic(PD) profile and safety profile demonstrated; Phase 3 clinical trial initiation contingent upon additional funding, such as through partnership

Public Health Solutions*†

Soligenix Product Candidate

   

Therapeutic Indication

   

Stage of Development

ThermoVax®

Thermostability of vaccines for Ricin toxin, Ebola, Marburg and SARS-CoV-2 (COVID-19) viruses

Pre-clinical

RiVax®

Vaccine against Ricin Toxin Poisoning

Phase 1a and 1b trials completed, safety and neutralizing antibodies for protection demonstrated; Phase 1c trial initiated December 2019, closed January 2020

SGX943

Therapeutic against Emerging Infectious Diseases

Pre-clinical

CiVax™

Vaccine against COVID-19

Pre-clinical

* Timelines subject to potential disruption due to COVID-19 outbreak.

Contingent upon continued government contract/grant funding or other funding source.

Specialized BioTherapeutics Overview

Synthetic Hypericin

Synthetic Hypericin is a potent photosensitizer that is topically applied to skin lesions, taken up by cutaneous T-cells and then activated by safe visible light. Hypericin is also found in several species of Hypericum plants, although this active moiety is chemically synthesized by a proprietary manufacturing process and not extracted from plants. Importantly, hypericin is optimally activated with visible light thereby avoiding the negative consequences of ultraviolet (“UV”) light. Other light therapies using UVA or UVB light can result in serious adverse effects including secondary skin cancers.

Combined with photoactivation, in clinical trials synthetic hypericin has demonstrated significant anti-proliferative effects on activated normal human lymphoid cells and inhibited growth of malignant T-cells isolated from CTCL patients. In both settings, it appears that the mode of action is an induction of cell death in a concentration as well as a light dose-dependent fashion. These effects appear to result, in part, from the generation of singlet oxygen during photoactivation of hypericin.

Synthetic hypericin is one of the most efficient known generators of singlet oxygen, the key component for phototherapy. The generation of singlet oxygen induces necrosis and apoptosis in adjacent cells. The use of topical synthetic hypericin coupled with directed visible light results in generation of singlet oxygen only at the treated site. We believe that the use of visible light (as opposed to cancer-causing UV light) is a major advance

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in photodynamic therapy. In a small published Phase 1/2 proof of concept pilot clinical study using synthetic hypericin twice weekly for six weeks, statistically significant efficacy was demonstrated in patients with CTCL (58.3% response, p=0.04) and psoriasis (80% response, p<0.02). Subsequently, a Phase 3 study in CTCL has further confirmed the biological efficacy of synthetic hypericin (termed HyBryte™ in the context of CTCL).

HyBryte™ – for Treating Cutaneous T-Cell Lymphoma

HyBryte™ is a novel, first-in-class, PDT that utilizes safe visible light for activation. The active ingredient in HyBryte™ is synthetic hypericin, a photosensitizer which is topically applied to skin lesions and then activated by visible fluorescent light 16 to 24 hours later.

Based on the positive and previously published Phase 1/2 results, we initiated our Phase 3 clinical study of HyBryte™ for the treatment of CTCL during December 2015 and completed the trial in 2020. This trial, referred to as the “FLASH” (Fluorescent Light Activated Synthetic Hypericin) study, aimed to evaluate the response to HyBryte™ as a skin directed therapy to treat early stage CTCL. We completed the study with approximately 35 CTCL centers across the U.S. participating in this trial. The Phase 3 protocol was a highly powered, double-blind, randomized, placebo-controlled, multicenter trial that enrolled 169 subjects (166 evaluable). The trial consisted of three treatment cycles, each of eight weeks duration. Treatments were administered twice weekly for the first six weeks and treatment response was determined at the end of the eighth week. In the first treatment cycle, approximately 66% of subjects received HyBryte™ and 33% received placebo treatment of their index lesions. In the second cycle, all subjects received HyBryte™ treatment of their index lesions, and in the third cycle, all subjects received HyBryte™ treatment of all of their lesions. The majority of subjects enrolled elected to continue into the third optional, open-label cycle of the study. Subjects were followed for an additional six months after their last evaluation visit. The primary efficacy endpoint was assessed on the percentage of patients in each of the two treatment groups (i.e., HyBryte™ and placebo) achieving a partial or complete response of the treated lesions, defined as a ≥ 50% reduction in the total Composite Assessment of Index Lesion Disease Severity (“CAILS”) score for three index lesions at the Cycle 1 evaluation visit (Week 8) compared to the total CAILS score at baseline. Secondary endpoints for the trial included the duration of responses, the extent of the regression of the tumors, and the safety of the treatment. We continue to work closely with the Cutaneous Lymphoma Foundation, as well as the National Organization for Rare Disorders.

Positive primary endpoint analysis for the Phase 3 study for HyBryte™ was completed in March 2020. The study enrolled 169 patients (166 evaluable) randomized 2:1 to receive either HyBryte™ (116 patients) or placebo (50 patients) and demonstrated a statistically significant treatment response (p=0.04) in the CAILS primary endpoint assessment at 8 weeks for Cycle 1. A total of 16% of the patients receiving HyBryte™ achieved at least a 50% reduction in their index lesions compared to only 4% of patients in the placebo group at 8 weeks. HyBryte™ treatment in the first cycle was safe and well tolerated.

Analysis of the second open-label treatment cycle (Cycle 2) was completed in April 2020, showing that continued treatment with HyBryte™ twice weekly for an additional 6 weeks (12 weeks total) increased the positive response rate to 40% (p<0.0001 compared to placebo and p<0.0001 compared to 6-weeks treatment). After the subsequent additional 6-week treatment, the response rate in patients receiving a total of 12 weeks treatment increased two and a half-fold. Treatment responses were assessed at Week 8 (after 6 weeks of treatment) and at Week 16 (after 12 weeks of treatment). A positive response was defined as an improvement of at least 50% in the CAILS score for the three index lesions evaluated in both Cycles 1 and 2. The data continued to indicate that HyBryte™ was safe and well tolerated.

Analysis of the optional third open-label treatment cycle (Cycle 3) was completed in October 2020. Cycle 3 was focused on safety and all patients could elect to receive HyBryte™ treatment of all their lesions for an additional 6 weeks or up to 18 weeks in total. Of note, 66% of patients elected to continue with this optional safety cycle of the study. Of the subset of patients that received HyBryte™ throughout all three cycles of treatment (18 weeks), 49% of them demonstrated a treatment response (p=0.046 vs. patients completing 12 weeks of HyBryte™ treatment in Cycle 2; p<0.0001 vs. patients receiving placebo in Cycle 1). Moreover, in a subset of patients evaluated in this cycle, it was demonstrated that HyBryte™ is not systemically available, consistent

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with the general safety of this topical product observed to date. At the end of Cycle 3, HyBryte™ continued to be well tolerated despite extended and increased use of the product to treat multiple lesions.

In addition, continued analysis of results from the protocol mandated efficacy cycles (Cycles 1 and 2) of the study revealed that 12 weeks of treatment (Cycle 2) with HyBryte™ is equally effective on both patch (response 37%, p=0.0009) and plaque (response 42%, p<0.0001) lesions when compared to Cycle 1 placebo lesion responses, further demonstrating the unique benefits of the more deeply penetrating visible light activation of hypericin.

HyBryte™ has received Orphan Drug designation as well as Fast Track designation from the FDA. The Orphan Drug Act is intended to assist and encourage companies to develop safe and effective therapies for the treatment of rare diseases and disorders. In addition to providing a seven-year term of market exclusivity for HyBryte™ upon final FDA approval, Orphan Drug designation also positions us to be able to leverage a wide range of financial and regulatory benefits, including government grants for conducting clinical trials, waiver of FDA user fees for the potential submission of a NDA for HyBryte™, and certain tax credits. In addition, Fast Track is a designation that the FDA reserves for a drug intended to treat a serious or life-threatening condition and one that demonstrates the potential to address an unmet medical need for the condition. Fast Track designation is designed to facilitate the development and expedite the review of new drugs. For instance, we were eligible to submit a NDA for HyBryte™ on a rolling basis, permitting the FDA to review sections of the NDA prior to receiving the complete submission. Additionally, NDAs for Fast Track development programs ordinarily will be eligible for priority review. HyBryte™ for the treatment of CTCL also was granted Orphan Drug designation from the European Medicines Agency (“EMA”) Committee for Orphan Medical Products and Promising Innovative Medicine (“PIM”) designation from the MHRA, as well as Innovation Passport under the Innovative Licensing and Access Pathway (“ILAP”) in the UK.

During January 2021, we signed an exclusive Supply, Distribution and Services Agreement with The Daavlin Distributing Co. (“Daavlin”), securing long-term supply and distribution of a commercially ready light device, which is an integral component of the regulatory and commercial strategy for HyBryte™ for the treatment of CTCL. Pursuant to the agreement, Daavlin will exclusively manufacture the proprietary light device for use with HyBryte™ for the treatment of CTCL. Upon approval of HyBryte™ by the FDA, we will promote HyBryte™ and the companion light device, and facilitate the direct purchase of the device from Daavlin. Daavlin will exclusively distribute and sell the HyBryte™ light device to us, physicians and patients.

In April 2021, the FDA conditionally accepted HyBryte™ as the proposed brand name for SGX301 or synthetic hypericin, in the treatment of early stage CTCL. The name HyBryte™ was developed in compliance with the FDA’s Guidance for Industry, Contents of a Complete Submission for the Evaluation of Proprietary Names. The FDA’s conditional approval validates HyBryte™ as a proprietary name that is consistent with the FDA’s goal of preventing medication errors and potential harm to the public by ensuring that only appropriate proprietary names are approved for use. Final approval of the HyBryte™ proprietary name is conditioned on FDA approval of the product candidate, SGX301.

In May 2021, HyBryte™ was awarded an "Innovation Passport" for the treatment of early stage CTCL in adults under the UK’s ILAP. The decision to award the Innovation