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General

Basis of Presentation

The condensed financial statements included herein have been prepared by GenVec, Inc. (GenVec, we, our, or the Company) without audit pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. We believe the disclosures are adequate to make the information presented not misleading. The condensed financial statements included herein should be read in conjunction with the financial statements and the notes thereto included in our 2012 Annual Report on Form 10-K filed with the SEC.

In the opinion of management, the accompanying financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position of the Company as of June 30, 2013 and December 31, 2012 the results of its operations for the three-month and six-month periods ended June 30, 2013 and June 30, 2012, and cash flows for the six-month periods ended June 30, 2013 and June 30, 2012. The results of operations for any interim period are not necessarily indicative of the results of operations for any other interim period or for a full fiscal year.

Business

GenVec, Inc. is a biopharmaceutical company with differentiated, proprietary technologies that we believe could be used to create superior therapeutics and vaccines. GenVec has been working with leading companies and organizations such as Novartis AG, Merial Limited, and the U.S. Government to support a portfolio of product programs that address the prevention and treatment of a number of significant human and animal health concerns.

On May 24, 2013, the Company’s Board of Directors approved a Plan of Complete Liquidation and Dissolution of the Company (the “Plan of Dissolution”), subject to stockholder approval. The Board of Directors concluded, after extensive and careful consideration of our strategic alternatives and the terms and conditions of the Plan of Dissolution, that the liquidation and dissolution of the Company, pursuant to the Plan of Dissolution, is in the best interests of the Company and our stockholders.

Since announcing the approval of the Plan of Dissolution by the Board of Directors, the Company received several proposals for transactions with the Company, including transactions to purchase all or portions of the Company’s assets or to engage in mergers with private companies that are looking to use the company principally as a means to become publicly traded. As part of the Board of Directors’ efforts to seek to maximize the value for stockholders and to provide stockholders with appropriate information for their consideration, the Board of Directors considered these proposals. Given that it was considering these proposals, the Board of Directors also authorized Cannacord Genuity to solicit additional proposals for the acquisition of our assets, and on June 24, 2013, the Company announced publicly that it had received and was considering proposals. The Board of Directors viewed the ability of the counterparties to complete the proposed transactions, in a timely manner, if at all, as extremely risky, the prospects for preserving value as very uncertain and the likelihood of receiving significant consideration in an asset sale as unlikely. Accordingly, at a meeting on August 7, 2013, the Board of Directors unanimously concluded that proceeding with seeking stockholder approval for the liquidation and dissolution of the Company, and receiving that approval, was in the best interests of the Company and its stockholders.

If the Company's stockholders approve the Plan of Dissolution, the Board of Directors will have the discretion to, at such times as the Board of Directors deems appropriate or advisable, file a certificate of dissolution with the Delaware Secretary of State, complete the liquidation of the Company’s assets, satisfy the Company’s remaining obligations and make distributions to the Company’s stockholders of any available liquidation proceeds. Following stockholder approval of the Plan of Dissolution and the filing of the certificate of dissolution, the Company would seek to delist its common stock from NASDAQ. The Company may, however, abandon the Plan of Dissolution if the Board of Directors determines that, in light of new proposals presented or changes in circumstances, liquidation and dissolution pursuant to the Plan of Dissolution are no longer advisable and in the best interests of the Company and its stockholders.

Taking into account the approval of the Plan of Dissolution by the Board of Directors and the proposals received, and in anticipation of potentially winding down all of our business, we are currently working to terminate or further curtail a significant portion of our operations. In furtherance of these efforts,we announced on June 28, 2013, that we terminated the employment of 30 of our then remaining 41 employees.

As of the date of this report, and in light of the Plan of Dissolution discussed above, the termination of the substantial number of our employees, and our efforts to terminate or further curtail a significant portion of our operations, much of our development programs are not being supported by us at the levels at which they were previously supported, or at all, and we are actively seeking to terminate ongoing contractual obligations. On July 29, 2013, for example, we entered into a modification with the U.S. Naval Medical Logistics Command to terminate contractual obligations under our agreement related to dengue fever and malaria vaccine development efforts at the U.S. Naval Medical Research Center.

Our core technology has the important advantage of localizing protein delivery in the body. This is accomplished by using our adenovector platform to locally deliver genes to cells, which then direct production of the desired protein. This approach reduces side effects typically associated with systemic delivery of proteins. For vaccines, the goal is to induce an immune response against a target protein or antigen. This is accomplished by using an adenovector to deliver a gene that causes production of an antigen, which then stimulates the desired immune reaction by the body.

Our research and development activities have been focused on identifying product candidates that utilize our technology platform and represent potential commercial opportunities. For example, preclinical research in hearing loss and balance disorders has indicated that the delivery of the atonal gene using GenVec’s adenovector technology may have the potential to restore hearing and balance function. We are working with Novartis Institutes for BioMedical Research, Inc. (together with Novartis AG and its subsidiary corporations, including Novartis Pharma AG, Novartis), on the discovery and development of novel treatments for hearing loss and balance disorders. There are currently no effective therapeutic treatments available for patients who have lost all balance function, and hearing loss remains a major unmet medical problem.

Our estimated future capital requirements are uncertain and could change materially as a result of many factors, including whether we obtain, and how long it takes us to obtain, stockholder approval of the Plan of Dissolution. Based on our current business operations, we estimate we have sufficient resources to fund our operations through at least the next twelve months. There is no certainty that the Plan of Dissolution will provide our stockholders with meaningful returns, or that we will be able to execute on any of the proposals that we have received. We anticipate that there will be significant costs associated with the winding down of our operations, which will reduce the portion of our cash and investments available for distribution to our stockholders. The interim condensed financial statements are prepared on a going concern basis and do not include adjustments, if any, that would be required if our stockholders approvedthe Plan of Dissolution.

Use of Estimates

The preparation of financial statements, in conformity with U.S. generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities on the date of the financial statements, and revenues and expenses during the period. Critical accounting estimates involved in applying our accounting policies are those that require management to make assumptions about matters that are highly uncertain at the time the accounting estimate was made and those for which different estimates reasonably could have been used for the current period. Critical accounting estimates are also those which are reasonably likely to change from period to period, and would have a material impact on the presentation of our financial condition, results of operations, or cash flows. Our most critical accounting estimates relate to accounting policies for strategic alliance and research contract revenues, clinical trial expenses and research and development activities, and stock-based arrangements. Management bases its estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances. Actual results could differ from these estimates.

Revenue Recognition

Revenue is recognized when all four of the following criteria are met (i) a contract is executed, (ii) the contract price is fixed and determinable, (iii) delivery of the services or products has occurred, and (iv) collectability of the contract amounts is considered probable.

Our collaborative research and development agreements can provide for upfront license fees, research payments, and/or substantive milestone payments. Upfront non-refundable fees associated with license and development agreements where we have continuing involvement in the agreement are recorded as deferred revenue and recognized over the estimated service period. If the estimated service period is subsequently modified, the period over which the upfront fee is recognized is modified accordingly on a prospective basis. Non-refundable research and development fees for which no future performance obligations exist are recognized when collection is assured. Substantive milestone payments are considered performance payments and are recognized upon achievement of the milestone if all of the following criteria are met: (i) achievement of the milestone involves a degree of risk and was not reasonably assured at the inception of the arrangement; (ii) substantive effort is involved in achieving the milestone; and (iii) the amount of the milestone payment is reasonable in relation to all of the deliverables and payment terms within the arrangement. Determination of whether a milestone meets the aforementioned conditions involves the judgment of management.

Research and development revenue from cost-reimbursement and cost-plus fixed- fee agreements is recognized as earned based on the performance requirements of the contract. Revisions in revenues, cost, and billing factors, such as indirect rate estimates, are accounted for in the period of change. Reimbursable costs under such contracts are subject to audit and retroactive adjustment. Contract revenues and accounts receivable reported in the financial statements are recorded at the amount expected to be received. Contract revenues are adjusted to actual upon final audit and retroactive adjustment. Estimated contractual allowances are provided based on management’s evaluation of current contract terms and past experience with disallowed costs and reimbursement levels. Payments received in advance of work performed are recorded as deferred revenue.

Research and development revenue from fixed-price best efforts arrangements is recognized as earned based on the performance requirements of the contract. Revenue under these arrangements is recognized when delivery to and acceptance by the customer has been received. During the period of performance, recoverable contract costs are accumulated on the balance sheet in other current assets, but no revenue or profit is recorded prior to customer acceptance of the contractually stated deliverables. Recoverable contract costs that are accumulated on the balance sheet include all direct costs associated with the arrangement and an allocation of indirect costs. Payments received in advance of customer acceptance are recorded as unearned revenue. Once customer acceptance has been received, revenue and recoverable contract costs are recognized. Over the course of the arrangement, we routinely evaluate whether revenue and profitability should be recognized in the current period. Any known or probable losses on projects are charged to operations in the period in which such losses are determined.

Recent Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (Topic 220). The standard requires that companies present either in a single note or parenthetically on the face of the financial statements, the effect of significant amounts reclassified from each component of accumulated other comprehensive income based on its source and the income statement line items affected by the reclassification. The Company’s adoption of the provisions of this guidance on January 1, 2013 did not have a material impact on our financial position, results of operations, or cash flows.

There were no other new pronouncements effective as of June 30, 2013 that had a material effect on our financial position, results of operations, or cash flows. Additionally, other new pronouncements issued but not effective until after June 30, 2013 are not expected to have a material effect on our financial position, results of operations, or cash flows.

Reclassifications

Certain reclassifications have been made to prior period amounts to conform to our current period presentation. Such reclassifications have no effect on net loss as previously reported.