UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2011
OR
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission file number 001-32954
CLEVELAND BIOLABS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
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20-0077155
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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73 High Street, Buffalo, New York
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14203
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(Address of principal executive offices)
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(Zip Code)
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(Registrant’s telephone number, including area code) (716) 849-6810
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(Former name, former address and former fiscal year,
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if changed since last report)
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ¨
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Accelerated filer x
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Non-accelerated filer ¨
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Smaller reporting company ¨
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of August 5, 2011, there were 35,427,650 shares outstanding of registrant's common stock, par value $0.005 per share.
CLEVELAND BIOLABS INC. AND SUBSIDIARY
10-Q
8/10/2011
TABLE OF CONTENTS
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PAGE
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PART I - FINANCIAL INFORMATION
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ITEM 1:
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Consolidated Financial Statements
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Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010
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3
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Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2011 and 2010
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5
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Consolidated Statement of Stockholders' Equity from January 1, 2010 to December 31, 2010 and to June 30, 2011
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6
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Consolidated Statement of Comprehensive Income/(Loss) for the Three and Six Months Ended June 30, 2011 and 2010
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8
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Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2011 and 2010
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9
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Consolidated Notes to Financial Statements
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11
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ITEM 2:
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Management's Discussion and Analysis of Financial Condition and Results of Operations
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17
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ITEM 3:
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Quantitative and Qualitative Disclosures About Market Risk
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26
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ITEM 4:
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Controls and Procedures
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26
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PART II - OTHER INFORMATION
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ITEM 1:
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Legal Proceedings
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27
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ITEM 1A:
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Risk Factors
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27
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ITEM 2:
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Unregistered Sales of Equity Securities and Use of Proceeds
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28
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ITEM 3:
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Defaults Upon Senior Securities
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28
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ITEM 4:
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Removed and Reserved
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28
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ITEM 5:
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Other Information
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28
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ITEM 6:
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Exhibits
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28
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Signatures
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29
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In this report, except as otherwise stated or the context otherwise requires, the terms “Cleveland BioLabs” and “CBLI” refer to Cleveland BioLabs, Inc., but not its consolidated subsidiary and the “Company,” “we,” “us” and “our” refer to Cleveland BioLabs, Inc. together with its consolidated subsidiary. Our common stock, par value $0.005 per share, is referred to as “common stock.”
CLEVELAND BIOLABS, INC. AND SUBSIDIARY
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CONSOLIDATED BALANCE SHEETS
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June 30, 2011 (unaudited) and December 31, 2010
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June 30
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December 31
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2011
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2010
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ASSETS
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CURRENT ASSETS
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Cash and equivalents
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$ |
30,996,271 |
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$ |
10,918,537 |
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Short-term investments
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712,357 |
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459,364 |
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Accounts receivable
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140,409 |
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5,382,121 |
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Other current assets
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1,209,511 |
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991,062 |
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Total current assets
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33,058,548 |
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17,751,084 |
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EQUIPMENT
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Computer equipment
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543,881 |
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400,892 |
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Lab equipment
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1,579,233 |
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1,528,066 |
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Furniture
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472,060 |
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397,013 |
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2,595,174 |
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2,325,971 |
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Less accumulated depreciation
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1,594,929 |
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1,384,847 |
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1,000,245 |
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941,124 |
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OTHER ASSETS
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Intellectual property
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1,488,908 |
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1,162,287 |
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Other long term assets
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15,376 |
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- |
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Deposits
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33,697 |
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32,108 |
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1,537,981 |
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1,194,395 |
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TOTAL ASSETS
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$ |
35,596,774 |
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|
$ |
19,886,603 |
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See Notes to Consolidated Financial Statements
CLEVELAND BIOLABS, INC. AND SUBSIDIARY
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CONSOLIDATED BALANCE SHEETS
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June 30, 2011 (unaudited) and December 31, 2010
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June 30,
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December 31
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2011
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2010
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
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CURRENT LIABILITIES
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Accounts payable
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$ |
655,180 |
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$ |
1,261,493 |
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Deferred revenue
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201,556 |
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349,111 |
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Accrued expenses
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241,121 |
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136,163 |
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Accrued bonuses
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- |
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3,321,131 |
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Accrued warrant liability
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10,006,733 |
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25,350,733 |
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Total current liabilities
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11,104,590 |
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30,418,631 |
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LONG TERM LIABILITIES
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Deferred revenue
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2,107,236 |
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1,968,107 |
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Total long term liabilities
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2,107,236 |
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1,968,107 |
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Commitments and contingencies - See Note 9
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STOCKHOLDERS' EQUITY (DEFICIT)
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Common stock, $.005 par value
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Authorized - 80,000,000 shares at June 30, 2011 and December 31, 2010
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Issued and outstanding 35,373,096 and 28,959,176 shares at June 30, 2011 and December 31, 2010, respectively
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176,866 |
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144,796 |
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Additional paid-in capital
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107,298,224 |
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80,241,717 |
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Accumulated other comprehensive income (loss)
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160,711 |
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(30,544 |
) |
Accumulated deficit
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(90,184,813 |
) |
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(96,053,977 |
) |
Total Cleveland BioLabs, Inc. stockholders' equity (deficit)
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17,450,988 |
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(15,698,008 |
) |
Noncontrolling interest in stockholders' equity
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4,933,960 |
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3,197,873 |
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Total stockholders' equity (deficit)
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22,384,948 |
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(12,500,135 |
) |
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
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$ |
35,596,774 |
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$ |
19,886,603 |
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See Notes to Consolidated Financial Statements
CLEVELAND BIOLABS, INC. AND SUBSIDIARY
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CONSOLIDATED STATEMENTS OF OPERATIONS
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Three and Six Months Ended June 30, 2011 and 2010 (unaudited)
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Three Months Ended
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Six Months Ended
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June 30
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June 30
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June 30
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June 30
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2011
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2010
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2011
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2010
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REVENUES
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Grant and contract
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$ |
569,049 |
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$ |
4,210,763 |
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$ |
3,043,031 |
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$ |
8,381,111 |
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|
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|
569,049 |
|
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4,210,763 |
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3,043,031 |
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8,381,111 |
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OPERATING EXPENSES
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Research and development
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5,209,194 |
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4,170,115 |
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10,918,127 |
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7,867,895 |
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General and administrative
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|
1,987,451 |
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2,661,200 |
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3,864,653 |
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4,590,701 |
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Total operating expenses
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|
7,196,645 |
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|
6,831,315 |
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14,782,780 |
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12,458,596 |
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LOSS FROM OPERATIONS
|
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|
(6,627,596 |
) |
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(2,620,552 |
) |
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(11,739,749 |
) |
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|
(4,077,485 |
) |
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OTHER (INCOME)/EXPENSE
|
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|
|
|
|
|
|
|
|
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|
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|
|
|
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Interest income
|
|
|
(67,071 |
) |
|
|
(7,639 |
) |
|
|
(105,330 |
) |
|
|
(13,412 |
) |
Other income
|
|
|
(49,287 |
) |
|
|
(50,205 |
) |
|
|
(113,248 |
) |
|
|
(100,430 |
) |
Other expense
|
|
|
174,578 |
|
|
|
- |
|
|
|
195,060 |
|
|
|
231,980 |
|
Change in value of warrant liability
|
|
|
(17,815,964 |
) |
|
|
(33,800 |
) |
|
|
(17,101,013 |
) |
|
|
1,697,296 |
|
Total other (income)/expense
|
|
|
(17,757,744 |
) |
|
|
(91,644 |
) |
|
|
(17,124,531 |
) |
|
|
1,815,434 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME/(LOSS)
|
|
$ |
11,130,148 |
|
|
$ |
(2,528,908 |
) |
|
$ |
5,384,782 |
|
|
$ |
(5,892,919 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS
|
|
|
238,076 |
|
|
|
89,248 |
|
|
|
484,383 |
|
|
|
89,248 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME/(LOSS) ATTRIBUTABLE TO CLEVELAND BIOLABS, INC.
|
|
$ |
11,368,224 |
|
|
$ |
(2,439,660 |
) |
|
$ |
5,869,165 |
|
|
$ |
(5,803,671 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME/(LOSS) AVAILABLE TO COMMON SHAREHOLDERS PER SHARE OF COMMON STOCK BASIC
|
|
$ |
0.38 |
|
|
$ |
(0.09 |
) |
|
$ |
0.20 |
|
|
$ |
(0.23 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
NET INCOME/(LOSS) AVAILABLE TO COMMON SHAREHOLDERS PER SHARE OF COMMON STOCK DILUTED
|
|
$ |
0.30 |
|
|
$ |
(0.09 |
) |
|
$ |
0.16 |
|
|
$ |
(0.23 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF SHARES USED IN CALCULATING NET INCOME/(LOSS) PER SHARE, BASIC
|
|
|
30,033,049 |
|
|
|
26,734,076 |
|
|
|
29,574,561 |
|
|
|
25,132,246 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF SHARES USED IN CALCULATING NET INCOME/(LOSS) PER SHARE, DILUTED
|
|
|
37,588,006 |
|
|
|
26,734,076 |
|
|
|
36,685,508 |
|
|
|
25,132,246 |
|
See Notes to Consolidated Financial Statements
CLEVELAND BIOLABS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Period From January 1, 2010 to December 31, 2010 and to
June 30, 2011 (unaudited)
|
|
Stockholders' Equity
|
|
|
|
Common Stock
|
|
|
Preferred Stock
|
|
|
|
|
|
|
|
|
|
Series D
|
|
|
Series D
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
Balance at January 1, 2010
|
|
|
20,203,508 |
|
|
$ |
101,018 |
|
|
|
467 |
|
|
$ |
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of options
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Issuance of shares
|
|
|
461,196 |
|
|
|
2,306 |
|
|
|
- |
|
|
|
- |
|
Recapture of expense for nonvested options forfeited
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Amortization of restricted stock awards
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Exercise of options
|
|
|
336,674 |
|
|
|
1,683 |
|
|
|
- |
|
|
|
- |
|
Issuance of shares - February 2010 financing
|
|
|
1,538,462 |
|
|
|
7,692 |
|
|
|
- |
|
|
|
- |
|
Allocation of financing proceeds to fair value of warrants
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Fees associated with February 2010 financing
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Issuance of shares - December 2010 financing
|
|
|
1,400,000 |
|
|
|
7,000 |
|
|
|
- |
|
|
|
- |
|
Fees associated with December 2010 financing
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Conversion of Series D preferred shares to common shares
|
|
|
4,576,979 |
|
|
|
22,885 |
|
|
|
(467 |
) |
|
|
(2 |
) |
Exercise of warrants
|
|
|
442,357 |
|
|
|
2,212 |
|
|
|
- |
|
|
|
- |
|
Warrant exercise fees
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Noncontrolling interest capital contribution to Incuron, LLC
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
|
28,959,176 |
|
|
$ |
144,796 |
|
|
|
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of options
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Issuance of shares
|
|
|
75,917 |
|
|
|
380 |
|
|
|
- |
|
|
|
- |
|
Recapture of expense for nonvested options forfeited
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Exercise of options
|
|
|
184,092 |
|
|
|
920 |
|
|
|
- |
|
|
|
- |
|
Exercise of warrants
|
|
|
281,411 |
|
|
|
1,407 |
|
|
|
- |
|
|
|
- |
|
Warrant exercise fees
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Noncontrolling interest capital contribution to Incuron, LLC
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Issuance of shares - June 2011 financing
|
|
|
5,872,500 |
|
|
|
29,363 |
|
|
|
- |
|
|
|
- |
|
Allocation of financing proceeds to fair value of warrants
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Fees associated with June 2011 financing
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net income/(loss)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2011
|
|
|
35,373,096 |
|
|
$ |
176,866 |
|
|
|
- |
|
|
$ |
- |
|
See Notes to Consolidated Financial Statements
CLEVELAND BIOLABS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Period From January 1, 2010 to December 31, 2010 and to
June 30, 2011 (unaudited)
|
|
Stockholders' Equity
|
|
|
|
Additional
|
|
|
Accumulated Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid-in
|
|
|
Comprehensive
|
|
|
Accumulated
|
|
|
Noncontrolling
|
|
|
|
|
|
|
Capital
|
|
|
Income (loss)
|
|
|
Deficit
|
|
|
Interests
|
|
|
Total
|
|
Balance at January 1, 2010
|
|
$ |
62,786,418 |
|
|
$ |
- |
|
|
$ |
(69,687,932 |
) |
|
$ |
- |
|
|
$ |
(6,800,494 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of options
|
|
|
2,947,209 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,947,209 |
|
Issuance of shares
|
|
|
1,716,785 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,719,091 |
|
Recapture of expense for nonvested options forfeited
|
|
|
(39,483 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(39,483 |
) |
Amortization of restricted stock awards
|
|
|
13,333 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
13,333 |
|
Exercise of options
|
|
|
900,228 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
901,911 |
|
Issuance of shares - February 2010 financing
|
|
|
4,992,310 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5,000,002 |
|
Allocation of financing proceeds to fair value of warrants
|
|
|
(2,629,847 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2,629,847 |
) |
Fees associated with February 2010 financing
|
|
|
(578,118 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(578,118 |
) |
Issuance of shares - December 2010 financing
|
|
|
8,379,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
8,386,000 |
|
Fees associated with December 2010 financing
|
|
|
(659,980 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(659,980 |
) |
Conversion of Series D preferred shares to common shares
|
|
|
(22,883 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Exercise of warrants
|
|
|
2,438,558 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,440,770 |
|
Warrant exercise fees
|
|
|
(1,813 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,813 |
) |
Noncontrolling interest capital contribution to Incuron, LLC
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,509,564 |
|
|
|
3,509,564 |
|
Net loss
|
|
|
- |
|
|
|
- |
|
|
|
(26,366,045 |
) |
|
|
(305,812 |
) |
|
|
(26,671,857 |
) |
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
|
- |
|
|
|
(30,544 |
) |
|
|
- |
|
|
|
(5,879 |
) |
|
|
(36,423 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
$ |
80,241,717 |
|
|
$ |
(30,544 |
) |
|
$ |
(96,053,977 |
) |
|
$ |
3,197,873 |
|
|
$ |
(12,500,135 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of options
|
|
|
4,678,166 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
4,678,166 |
|
Issuance of shares
|
|
|
460,929 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
461,309 |
|
Recapture of expense for nonvested options forfeited
|
|
|
(39,656 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(39,656 |
) |
Exercise of options
|
|
|
521,339 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
522,259 |
|
Exercise of warrants
|
|
|
1,978,261 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,979,668 |
|
Warrant exercise fees
|
|
|
(34,448 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(34,448 |
) |
Noncontrolling interest capital contribution to Incuron, LLC
|
|
|
176,092 |
|
|
|
- |
|
|
|
- |
|
|
|
2,164,282 |
|
|
|
2,340,374 |
|
Issuance of shares - June 2011 financing
|
|
|
23,460,637 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
23,490,000 |
|
Allocation of financing proceeds to fair value of warrants
|
|
|
(2,525,175 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2,525,175 |
) |
Fees associated with June 2011 financing
|
|
|
(1,619,638 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,619,638 |
) |
Net income/(loss)
|
|
|
- |
|
|
|
- |
|
|
|
5,869,165 |
|
|
|
(484,383 |
) |
|
|
5,384,782 |
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
|
- |
|
|
|
191,255 |
|
|
|
- |
|
|
|
56,188 |
|
|
|
247,443 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2011
|
|
$ |
107,298,224 |
|
|
$ |
160,711 |
|
|
$ |
(90,184,813 |
) |
|
$ |
4,933,960 |
|
|
$ |
22,384,948 |
|
See Notes to Consolidated Financial Statements
CLEVELAND BIOLABS, INC. AND SUBSIDIARY
|
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
|
|
Three and Six Months Ended June 30, 2011 and 2010 (unaudited)
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30
|
|
|
June 30
|
|
|
June 30
|
|
|
June 30
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss) including noncontrolling interests
|
|
$ |
11,130,148 |
|
|
$ |
(2,528,908 |
) |
|
$ |
5,384,782 |
|
|
$ |
(5,892,919 |
) |
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
43,344 |
|
|
|
(119,591 |
) |
|
|
247,443 |
|
|
|
(119,591 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income/(loss) including noncontrolling interests
|
|
|
11,173,492 |
|
|
|
(2,648,499 |
) |
|
|
5,632,225 |
|
|
|
(6,012,510 |
) |
Comprehensive loss attributable to noncontrolling interests
|
|
|
227,591 |
|
|
|
108,551 |
|
|
|
428,195 |
|
|
|
108,551 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income/(loss) attributable to Cleveland BioLabs, Inc.
|
|
$ |
11,401,083 |
|
|
$ |
(2,539,948 |
) |
|
$ |
6,060,420 |
|
|
$ |
(5,903,959 |
) |
See Notes to Consolidated Financial Statements
CLEVELAND BIOLABS, INC. AND SUBSIDIARY
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
Six Months Ended June 30, 2011 and 2010 (unaudited)
|
|
|
|
June 30
|
|
|
June 30
|
|
|
|
2011
|
|
|
2010
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
Net income/(loss)
|
|
$ |
5,384,782 |
|
|
$ |
(5,892,919 |
) |
Adjustments to reconcile net income/(loss) to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
210,068 |
|
|
|
192,996 |
|
Amortization
|
|
|
13,147 |
|
|
|
6,681 |
|
Noncash salaries and consulting expense
|
|
|
5,099,819 |
|
|
|
3,193,103 |
|
Warrant issuance costs
|
|
|
150,827 |
|
|
|
231,980 |
|
Change in value of warrant liability
|
|
|
(17,101,013 |
) |
|
|
1,697,296 |
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
5,241,712 |
|
|
|
(1,146,318 |
) |
Other current assets
|
|
|
(211,702 |
) |
|
|
42,021 |
|
Other long term assets
|
|
|
(15,376 |
) |
|
|
- |
|
Deposits
|
|
|
(835 |
) |
|
|
- |
|
Accounts payable
|
|
|
(614,846 |
) |
|
|
(133,040 |
) |
Deferred revenue
|
|
|
(8,426 |
) |
|
|
(8,357 |
) |
Accrued expenses
|
|
|
102,512 |
|
|
|
(951,944 |
) |
Accrued bonuses
|
|
|
(3,321,131 |
) |
|
|
- |
|
Net cash used in operating activities
|
|
|
(5,070,462 |
) |
|
|
(2,768,501 |
) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Purchase of short-term invesments
|
|
|
(213,707 |
) |
|
|
(1,378,408 |
) |
Purchase of equipment
|
|
|
(269,017 |
) |
|
|
(250,199 |
) |
Costs of patents pending
|
|
|
(322,544 |
) |
|
|
(92,621 |
) |
Net cash used in investing activities
|
|
|
(805,269 |
) |
|
|
(1,721,228 |
) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Issuance of common stock
|
|
|
23,490,000 |
|
|
|
5,000,002 |
|
Noncontrolling interest capital contribution to Incuron, LLC
|
|
|
2,340,374 |
|
|
|
3,509,402 |
|
Financing costs on common stock offering
|
|
|
(1,411,733 |
) |
|
|
(350,632 |
) |
Cash warrant issuance costs
|
|
|
(131,466 |
) |
|
|
(140,697 |
) |
Warrant exercise fees
|
|
|
(34,448 |
) |
|
|
- |
|
Exercise of options
|
|
|
522,259 |
|
|
|
99,645 |
|
Exercise of warrants
|
|
|
984,241 |
|
|
|
86,744 |
|
Net cash provided by financing activities
|
|
|
25,759,227 |
|
|
|
8,204,464 |
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate change on cash and equivalents
|
|
|
194,238 |
|
|
|
(119,591 |
) |
|
|
|
|
|
|
|
|
|
INCREASE IN CASH AND EQUIVALENTS
|
|
|
20,077,734 |
|
|
|
3,595,144 |
|
|
|
|
|
|
|
|
|
|
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD
|
|
|
10,918,537 |
|
|
|
963,100 |
|
|
|
|
|
|
|
|
|
|
CASH AND EQUIVALENTS AT END OF PERIOD
|
|
$ |
30,996,271 |
|
|
$ |
4,558,244 |
|
See Notes to Consolidated Financial Statements
CLEVELAND BIOLABS, INC. AND SUBSIDIARY
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
Six Months Ended June 30, 2011 and 2010 (unaudited)
|
|
|
|
June 30
|
|
|
June 30
|
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
Cash paid during the period for interest
|
|
$ |
- |
|
|
$ |
- |
|
Cash paid during the period for income taxes
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
Supplemental schedule of noncash financing activities:
|
|
|
|
|
|
|
|
|
Issuance of options
|
|
$ |
4,678,166 |
|
|
$ |
1,952,271 |
|
Issuance of shares
|
|
$ |
461,309 |
|
|
$ |
1,272,989 |
|
Recapture of expense for nonvested options forfeited
|
|
$ |
(39,656 |
) |
|
$ |
(38,787 |
) |
Amortization of restricted stock awards
|
|
$ |
- |
|
|
$ |
6,630 |
|
Conversion of warrant liability to equity upon warrant exercise
|
|
$ |
995,428 |
|
|
$ |
379,661 |
|
Noncash financing costs on common stock offering
|
|
$ |
277,206 |
|
|
$ |
227,486 |
|
Noncash warrant issuance costs
|
|
$ |
19,361 |
|
|
$ |
91,283 |
|
See Notes to Consolidated Financial Statements
CLEVELAND BIOLABS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Organization and Principles of Consolidation
Cleveland BioLabs, Inc. (“CBLI”) together with its subsidiary, Incuron, LLC (“Incuron”) (collectively, the “Company”) is a biotechnology company focused on developing biodefense, tissue protection and cancer treatment drugs based on the concept of modulation of cell death for therapeutic benefit. All intercompany balances and transactions have been eliminated in consolidation.
The Company’s financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and on a going concern basis which contemplates the realization of assets and the liquidation of liabilities in the ordinary course of business.
The Company believes it has sufficient cash and fully executed contracts to maintain ongoing operating activities beyond the next 12 months.
Note 2. Basis of Presentation
The information at June 30, 2011 and for the three and six months ended June 30, 2011 and June 30, 2010, has been prepared in accordance with GAAP for interim financial information and the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) for quarterly reports on Form 10-Q. In the opinion of management, these financial statements have been prepared on a basis consistent with the Company’s annual audited financial statements and include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year. These financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended December 31, 2010, which were contained in the Company’s Annual Report on Form 10-K. All terms used but not defined elsewhere herein have the meaning ascribed to them in the Company’s Annual Report on Form 10-K filed on March 15, 2011.
Note 3. Noncontrolling Interests
On January 20, 2011 and March 14, 2011, Bioprocess Capital Ventures, our joint venture partner and the holder of the noncontrolling interest in Incuron, contributed 68,000,000 Russian Rubles (approximately $2.3 million based on the current exchange rate) and 1,730,000 Russian Rubles (approximately $0.1 million based on the current exchange rate), respectively, to Incuron, which increased their ownership percentage from 16.1% to 24.2% and decreased CBLI’s ownership percentage from 83.9% to 75.8%.
The following disclosure provides detail regarding the change in the noncontrolling interest of Incuron during the six months ended June 30, 2011:
Net income attributable to CBLI
|
|
$ |
5,869,165 |
|
|
|
|
|
|
Net loss attributable to noncontrolling interests
|
|
|
(484,383 |
) |
|
|
|
|
|
Increase in CBLI’s additional paid-in capital related to the issuance of additional membership interests to the noncontrolling interest of Incuron
|
|
|
176,092 |
|
|
|
|
|
|
Change due to net income/(loss) and issuance of additional membership interests in Incuron
|
|
$ |
5,560,874 |
|
Note 4. Equity Transactions
During June 2011, CBLI issued 5,872,500 shares of its common stock and warrants to purchase a total of 2,936,250 shares of its common stock to certain accredited investors for gross proceeds of $23,490,000 (the “June 2011 Common Stock Equity Offering”). The common stock and warrants were sold in units, at a price of $4.00 per unit, with each unit consisting of: (i) one share of common stock; (ii) a Series E Warrant to purchase 0.25 of a share of common stock, with an exercise price of $4.50 per share; and (iii) a Series F Warrant to purchase 0.25 of a share of common stock, with an exercise price of $5.00 per share. The Series E Warrants will be exercisable beginning six months following issuance and will expire on the twelve month anniversary of issuance. The Series F Warrants will be exercisable beginning six months following issuance and will expire on the five year anniversary of issuance. The number of shares issuable upon exercise of the warrants and the exercise price of the warrants are adjustable in the event of stock splits, stock dividends, combinations of shares and similar recapitalization transactions. In total, there were 5,875,200 shares of common stock, 1,468,125 Series E Warrants and 1,468,125 Series F Warrants issued to investors in this offering.
The placement agent also received warrants to purchase up to 176,175 shares of common stock, equal to 3% of the aggregate number of shares of common stock sold in the offering. The placement agent’s warrants have an exercise price of $5.00 per share, an initial exercise date on the six month anniversary of issuance and an expiration date of June 17, 2015. The number of shares issuable upon exercise of the placement agent’s warrants and the exercise price of such warrants are adjustable in the event of stock splits, stock dividends, combinations of shares and similar recapitalization transactions.
The Series F warrants contain provisions that could require the Company to settle the warrants in cash. Accordingly, the Series F warrants have been classified as liability instruments since their issuance. The fair value of the Series F warrants at the issuance date amounted to $2,525,175 and was determined based on the following assumptions using the Black-Scholes valuation model.
Stock price
|
|
$ |
4.45 |
|
Exercise price
|
|
$ |
5.00 |
|
Term in years
|
|
|
2.50 |
|
Volatility
|
|
|
69.36 |
% |
Annual rate of quarterly dividends
|
|
|
- |
|
Discount rate- bond equivalent yield
|
|
|
0.53 |
% |
Immediately after the completion of the June 2011 Common Stock Equity Offering, pursuant to weighted-average anti-dilution provisions of the Series B Warrants, the Series C Warrants and the warrants issued in March 2010, the following adjustments were made:
|
·
|
the exercise price of CBLI’s Series B Warrants was reduced from $5.99 to approximately $5.28 per share and the aggregate number of shares of common stock issuable upon exercise of the Series B Warrants was increased from 3,918,376 to 4,445,276 shares;
|
|
·
|
the exercise price of the CBLI’s Series C Warrants was reduced from $6.32 to approximately $5.54 per share and the aggregate number of shares of common stock issuable upon exercise of the Series C Warrants was increased from 464,852 to 530,297 shares; and
|
|
·
|
the exercise price of CBLI’s warrants issued in March 2010 was decreased from $4.50 to $4.00 per share.
|
Note 5. Equity Incentive Plan
During the three months ended June 30, 2011, the Company issued 252,962 stock options and 30,556 shares of common stock under the Company’s Equity Incentive Plan (the “Plan”) as follows:
|
·
|
102,962 stock options were issued to employees and consultants under the Company’s incentive bonus plan;
|
|
·
|
50,000 stock options were issued to three new employees as part of their compensation;
|
|
·
|
100,000 stock options were issued to two consultants for payment of corporate strategy consulting services rendered;
|
|
·
|
6,480 shares of common stock valued at $32,950 were issued to two new employees as part of their compensation;
|
|
·
|
19,276 shares of common stock valued at $108,005 were issued to four consultants for payment of corporate strategy consulting services rendered; and
|
|
·
|
4,800 shares of common stock valued at $36,420 were issued to two consultants for payment of financial consulting services rendered.
|
During the six months ended June 30, 2011, the Company issued 1,013,635 stock options and 58,970 shares of common stock under the Plan as follows:
|
·
|
198,199 stock options were issued to employees and consultants under the Company’s incentive bonus plan;
|
|
·
|
110,000 stock options were issued to five new employees as part of their compensation;
|
|
·
|
7,000 stock options were issued to a consultant for payment of accounting services rendered;
|
|
·
|
598,436 stock options were issued to the executive management team for the 2010 Executive Compensation Plan;
|
|
·
|
100,000 stock options were issued to two consultants for payment of corporate strategy consulting services rendered;
|
|
·
|
6,480 shares of common stock valued at $32,950 were issued to two new employees as part of their compensation;
|
|
·
|
45,565 shares of common stock valued at $299,766 were issued to five consultants for payment of corporate strategy consulting services rendered; and
|
|
·
|
6,925 shares of common stock valued at $51,423 were issued to two consultants for payment of financial consulting services rendered.
|
Note 6. Stock-Based Compensation
During the three months ended June 30, 2011 and 2010, the Company granted 252,962 and 702,404 stock options, respectively. The Company recognized a total of $1,030,657 and $614,025 in expense related to stock options for the three months ended June 30, 2011 and 2010, respectively. The Company also recaptured $23,430 and $0 of previously recognized expense due to the forfeiture of non-vested stock options during the three months ended June 31, 2011 and 2010, respectively.
During the six months ended June 30, 2011 and 2010, the Company granted 1,013,635 and 846,433 stock options, respectively. The Company recognized a total of $1,685,986 and $944,271 in expense related to stock options for the six months ended June 30, 2011 and 2010, respectively. The Company also recaptured $17,953 and $0 of previously recognized expense for stock options awarded under the 2010 Executive Compensation Plan during the six months ended June 30, 2011 and 2010, respectively. The Company also recaptured $39,656 and $38,787 of previously recognized expense due to the forfeiture of non-vested stock options during the six months ended June 30, 2011 and 2010, respectively.
The weighted average of the estimated grant date fair values of stock options granted during the three months ended June 30, 2011 and 2010 were $5.19 and $2.32, respectively.
The assumptions used to value option grants using the Black-Scholes option valuation model are as follows:
|
|
For the six months ended
|
|
|
For the six months ended
|
|
|
|
June 30, 2011
|
|
|
June 30, 2010
|
|
|
|
|
|
|
|
|
Risk-free interest rate
|
|
|
1.89-2.61 |
% |
|
|
1.98-2.75 |
% |
Expected dividend yield
|
|
|
0 |
% |
|
|
0 |
% |
Expected life
|
|
5-6 years
|
|
|
5-6 Years
|
|
Expected volatility
|
|
|
84.28-88.69 |
% |
|
|
84.23-89.55 |
% |
The following tables summarize the stock option activity for the six months ended June 30, 2011 and 2010, respectively.
|
|
|
|
|
Weighted
|
|
Weighted
|
|
|
|
|
|
Average
|
|
Average
|
|
|
|
|
|
Exercise
|
|
Remaining
|
|
|
Stock
|
|
|
Price per
|
|
Contractual
|
|
|
Options
|
|
|
Share
|
|
Term (in Years)
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2010
|
|
|
3,264,440 |
|
|
$ |
5.10 |
|
|
Granted
|
|
|
1,013,635 |
|
|
$ |
7.27 |
|
|
Exercised
|
|
|
(184,092 |
) |
|
$ |
2.84 |
|
|
Forfeited, Canceled
|
|
|
(55,314 |
) |
|
$ |
3.61 |
|
|
Outstanding, June 30, 2011
|
|
|
4,038,669 |
|
|
$ |
5.76 |
|
7.92
|
Exercisable, June 30, 2011
|
|
|
3,635,352 |
|
|
$ |
5.56 |
|
7.89
|
|
|
|
|
|
Weighted
|
|
Weighted
|
|
|
|
|
|
Average
|
|
Average
|
|
|
|
|
|
Exercise
|
|
Remaining
|
|
|
Stock
|
|
|
Price per
|
|
Contractual
|
|
|
Options
|
|
|
Share
|
|
Term (in Years)
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2009
|
|
|
2,517,007 |
|
|
$ |
5.46 |
|
|
Granted
|
|
|
846,433 |
|
|
$ |
3.39 |
|
|
Exercised
|
|
|
(63,541 |
) |
|
$ |
1.57 |
|
|
Forfeited, Canceled
|
|
|
(64,427 |
) |
|
$ |
7.47 |
|
|
Outstanding, June 30, 2010
|
|
|
3,235,472 |
|
|
$ |
4.95 |
|
8.15
|
Exercisable, June 30, 2010
|
|
|
2,963,097 |
|
|
$ |
4.72 |
|
8.16
|
Note 7. Fair Value of Financial Instruments
The Company values its financial instruments in accordance with the Codification on fair value measurements and disclosures which establishes a hierarchy for the inputs used to measure fair value. The fair value hierarchy prioritizes the valuation inputs into three broad levels as follows: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly; and Level 3 inputs are unobservable inputs in which little or no market data exists, therefore requiring a company to develop its own assumptions. The Company does not have any significant assets or liabilities measured at fair value using Level 1 or Level 2 inputs as of June 30, 2011 and December 31, 2010.
The Company used Level 3 inputs for valuation of the Company’s outstanding warrants that are accounted for as derivative instruments. Fair values were determined using the Black-Scholes valuation model based on the following assumptions as of June 30, 2011:
|
|
Series D Private
|
|
|
March 2010 Common
|
|
|
June 2011 Common
|
|
|
June 2011 Common
|
|
|
|
Placement Warrant
|
|
|
Stock Equity Offering
|
|
|
Stock Equity Offering
|
|
|
Stock Equity Offering Placement
|
|
|
|
Value at
|
|
|
Warrant Value at
|
|
|
Series F Warrant Value at
|
|
|
Agent Warrant Value at
|
|
|
|
June 30, 2011
|
|
|
June 30, 2011
|
|
|
June 30, 2011
|
|
|
June 30, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock price
|
|
$ |
3.41 |
|
|
$ |
3.41 |
|
|
$ |
3.41 |
|
|
$ |
3.41 |
|
Exercise price
|
|
$ |
1.60 |
|
|
$ |
4.00 |
|
|
$ |
5.00 |
|
|
$ |
5.00 |
|
Term in years
|
|
|
2.37 |
|
|
|
1.84 |
|
|
|
2.48 |
|
|
|
1.98 |
|
Volatility
|
|
|
69.46 |
% |
|
|
56.77 |
% |
|
|
70.37 |
% |
|
|
61.36 |
% |
Annual rate of quarterly dividends
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Discount rate- bond equivalent yield
|
|
|
0.58 |
% |
|
|
0.44 |
% |
|
|
0.62 |
% |
|
|
0.44 |
% |
The following table shows the fair value measurements for the financial instruments as of June 30, 2011:
|
|
Fair Value
|
|
|
Fair Value Measurements at
|
|
|
|
As of
|
|
|
June 30, 2011
|
|
|
|
June 30, 2011
|
|
|
Using Fair Value Hierarchy
|
|
Liabilities
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Series D Private Placement
|
|
$ |
7,494,492 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
7,494,492 |
|
March 2010 Common Stock Equity Offering
|
|
|
795,077 |
|
|
|
- |
|
|
|
- |
|
|
|
795,077 |
|
June 2011 Series F and Placement Agent Warrants
|
|
|
1,717,164 |
|
|
|
- |
|
|
|
- |
|
|
|
1,717,164 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
10,006,733 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
10,006,733 |
|
The following tables set forth a summary of changes in the fair value of the Company’s Level 3 fair value measurements for the three months and six months ended June 30, 2011.
|
|
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) For the Three Months
Ended
|
|
|
|
June 30, 2011
|
|
|
|
Series D Private
Placement
|
|
|
March 2010 Common
Stock Equity Offering
|
|
|
June 2011 Series F and
Placement Agent
Warrants
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$ |
21,526,268 |
|
|
$ |
3,591,878 |
|
|
$ |
- |
|
|
$ |
25,118,146 |
|
Total gains or losses (realized/unrealized)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in earnings as Change in value of warrant liability
|
|
|
(13,983,887 |
) |
|
|
(2,796,801 |
) |
|
|
(1,035,277 |
) |
|
|
(17,815,964 |
) |
Issuances
|
|
|
- |
|
|
|
- |
|
|
|
2,752,441 |
|
|
|
2,752,441 |
|
Settlements
|
|
|
(47,890 |
) |
|
|
- |
|
|
|
- |
|
|
|
(47,890 |
) |
Ending balance
|
|
$ |
7,494,492 |
|
|
$ |
795,077 |
|
|
$ |
1,717,164 |
|
|
$ |
10,006,733 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The amount of total gains or losses for the period included in earnings as Change in value of warrant liability attributable to the change in unrealized gains or losses relating to assets still held at the reporting date
|
|
$ |
(13,978,098 |
) |
|
$ |
(2,796,801 |
) |
|
$ |
(1,035,277 |
) |
|
$ |
(17,810,176 |
) |
|
|
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) For the Six Months
Ended
|
|
|
|
June 30, 2011
|
|
|
|
Series D Private
Placement
|
|
|
March 2010 Common
Stock Equity Offering
|
|
|
June 2011 Series F and
Placement Agent
Warrants
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$ |
21,223,779 |
|
|
$ |
4,126,954 |
|
|
$ |
- |
|
|
$ |
25,350,733 |
|
Total gains or losses (realized/unrealized)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in earnings as Change in value of warrant liability
|
|
|
(13,113,611 |
) |
|
|
(2,952,125 |
) |
|
|
(1,035,277 |
) |
|
|
(17,101,013 |
) |
Issuances
|
|
|
- |
|
|
|
- |
|
|
|
2,752,441 |
|
|
|
2,752,441 |
|
Settlements
|
|
|
(615,676 |
) |
|
|
(379,752 |
) |
|
|
- |
|
|
|
(995,428 |
) |
Ending balance
|
|
$ |
7,494,492 |
|
|
$ |
795,077 |
|
|
$ |
1,717,164 |
|
|
$ |
10,006,733 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The amount of total gains or losses for the period included in earnings as Change in value of warrant liability attributable to the change in unrealized gains or losses relating to assets still held at the reporting date
|
|
$ |
(13,104,467 |
) |
|
$ |
(2,927,755 |
) |
|
$ |
(1,035,277 |
) |
|
$ |
(17,067,499 |
) |
The Company does not have any other non-recurring assets and liabilities that are required to be presented on the balance sheets at fair value.
Note 8. Net Income (Loss) Per Share
Basic and diluted earnings (loss) per share has been computed using the weighted-average number of shares of common stock outstanding for the period. The following table presents the calculation of basic and diluted earnings (loss) per share for the three and six months ended June 30, 2011 and 2010:
|
|
Three Months
Ended June 30,
2011
|
|
|
Three Months
Ended June 30,
2010
|
|
|
Six Months Ended
June 30, 2011
|
|
|
Six Months Ended
June 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Available to Common Shareholders
|
|
$ |
11,368,224 |
|
|
$ |
(2,439,660 |
) |
|
$ |
5,869,165 |
|
|
$ |
(5,803,671 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Number of Common Shares Outstanding
|
|
|
30,033,049 |
|
|
|
26,734,076 |
|
|
|
29,574,561 |
|
|
|
25,132,246 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments for Dilutive Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Stock Options
|
|
|
1,127,015 |
|
|
|
- |
|
|
|
1,000,176 |
|
|
|
- |
|
- Warrants
|
|
|
6,427,942 |
|
|
|
- |
|
|
|
6,110,771 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Weighted Average Number of Common Shares Outstanding
|
|
|
37,588,006 |
|
|
|
26,734,076 |
|
|
|
36,685,508 |
|
|
|
25,132,246 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings/(Loss) Per Share
|
|
$ |
0.38 |
|
|
$ |
(0.09 |
) |
|
$ |
0.20 |
|
|
$ |
(0.23 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings/(Loss) Per Share
|
|
$ |
0.30 |
|
|
$ |
(0.09 |
) |
|
$ |
0.16 |
|
|
$ |
(0.23 |
) |
The dilutive securities above represent only those stock options and warrants whose exercise prices were less than the average market price of the Company’s common stock during the respective periods and therefore were dilutive. Stock options to purchase 1,796,635 shares of common stock and warrants to purchase 225,000 shares of common stock are not included in the diluted calculation during the six months ended June 30, 2011. These options and warrants were excluded from the diluted earnings per share calculation as their exercise prices exceeded the average market price of the stock during the respective periods and, hence, would be anti-dilutive.
Note 9. Commitments and Contingencies
From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of business. The Company accrues for liabilities when it is probable that future expenditures will be made and such expenditures can be reasonably estimated. For all periods presented, the Company is not a party to any pending material litigation or other material legal proceedings.
The Company has issued warrants to strategic partners, consultants and investors with exercise prices ranging from $1.60 to $9.19. The warrants expire between one and seven years from the date of grant, subject to the terms applicable in the agreement. A list of the total warrants awarded and exercised for the six months ended June 30, 2011 and 2010 appears below:
|
|
Number of
|
|
|
Weighted Average
|
|
|
Number of Common
|
|
|
|
Warrants
|
|
|
Exercise Price
|
|
|
Shares Exerciseable Into
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2010
|
|
|
7,530,689 |
|
|
$ |
3.79 |
|
|
|
9,450,633 |
|
Granted
|
|
|
3,112,425 |
|
|
|
4.76 |
|
|
|
3,112,425 |
|
Exercise Price Adjustment
|
|
|
- |
|
|
|
(0.70 |
) |
|
|
591,501 |
|
Exercised
|
|
|
(301,895 |
) |
|
|
3.96 |
|
|
|
(371,206 |
) |
Outstanding at June 30, 2011
|
|
|
10,341,219 |
|
|
$ |
3.86 |
|
|
|
12,783,353 |
|
|
|
Number of
|
|
|
Weighted Average
|
|
|
Number of Common
|
|
|
|
Warrants
|
|
|
Exercise Price
|
|
|
Shares Exerciseable Into
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2009
|
|
|
6,956,673 |
|
|
$ |
3.71 |
|
|
|
8,641,893 |
|
Granted
|
|
|
1,138,461 |
|
|
|
4.50 |
|
|
|
1,138,461 |
|
Exercise Price Adjustment
|
|
|
- |
|
|
|
(0.14 |
) |
|
|
272,127 |
|
Exercised
|
|
|
(208,939 |
) |
|
|
1.52 |
|
|
|
(243,144 |
) |
Forfeited, Canceled
|
|
|
(3,973 |
) |
|
|
1.39 |
|
|
|
(5,718 |
) |
Outstanding at June 30, 2010
|
|
|
7,882,222 |
|
|
$ |
3.88 |
|
|
|
9,803,619 |
|
Note 10. Subsequent Events
The Company has analyzed its operations subsequent to June 30, 2011 through the date the financial statements were submitted to the SEC and has determined that it does not have any additional material subsequent events to disclose in these financial statements.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This management's discussion and analysis of financial condition and results of operations and other portions of this filing contain forward-looking information that involves risks and uncertainties. Our actual results could differ materially from those anticipated by the forward-looking information. Factors that may cause such differences include, but are not limited to, availability and cost of financial resources, results of our research and development efforts and clinical trials, product demand, market acceptance and other factors discussed below and in our other SEC filings, including our Annual Report on Form 10-K for the year ended December 31, 2010. See also the Risk Factors discussed under Part II, Item 1A. of this Form 10-Q and Item 1A. of our Annual Report on Form 10-K for the year ended December 31, 2010. This management's discussion and analysis of financial condition and results of operations should be read in conjunction with our financial statements and the related notes included elsewhere in this filing and in our Annual Report on Form 10-K for the year ended December 31, 2010.
GENERAL OVERVIEW
Cleveland BioLabs, Inc. (“CBLI”) together with its subsidiary, Incuron, LLC (“Incuron”) (collectively, the “Company”) is a biotechnology company focused on developing biodefense, tissue protection and cancer treatment drugs based on the concept of modulation of cell death for therapeutic benefit. CBLI was incorporated in Delaware and commenced business operations in June 2003. We have devoted substantially all of our resources to the identification, development and commercialization of new types of drugs for protection of normal tissues from exposure to radiation and other stresses, such as toxic chemicals and cancer treatments. Our pipeline includes products from two primary families of compounds: protectans and curaxins. We are developing protectans as drug candidates that protect healthy tissues from acute stresses such as radiation, chemotherapy and ischemia (pathologies that develop as a result of blocking blood flow to a part of the body) as well as act as direct anticancer agents by inducing the immune system to attack cancer cells. Curaxins are being developed by Incuron, our majority-owned Russian subsidiary, as anticancer agents that could act as mono-therapy drugs or in combination with other existing anticancer therapies. Our common stock is listed on the NASDAQ Capital Market under the symbol “CBLI.”
Technology
Our development efforts are based on discoveries made in connection with the investigation of the cell-level process known as apoptosis. Apoptosis is a highly specific and tightly regulated form of cell death that can occur in response to external events such as exposure to radiation or toxic chemicals or internal stresses. Apoptosis is a major determinant of tissue damage caused by a variety of medical conditions including cerebral stroke, heart attack and acute renal failure. Conversely, apoptosis is also an important protective mechanism that allows the body to shed itself of defective cells, which otherwise can cause cancerous growth.
Research has demonstrated that apoptosis is sometimes suppressed naturally. For example, most cancer cells develop resistance to apoptotic death caused by drugs or natural defenses of the human body. Our research is geared towards identifying the means by which apoptosis can be affected and manipulated depending on the need.
If the need is to protect healthy tissues against an external event such as exposure to radiation, we focus our research efforts on attempting to temporarily and reversibly suppress apoptosis in those healthy tissues, thereby imitating the apoptotic-resistant tendencies displayed by cancer cells. A drug with this effect would also be useful in ameliorating the toxicities of anticancer drugs and radiation that cause collateral damage to healthy tissues during cancer treatment. Because the severe toxicities of anticancer drugs and radiation often limit their dosage in cancer patients, an apoptosis suppressant drug may enable a more aggressive treatment regimen using chemo- and radiation therapy of cancer and thereby increase their effectiveness. In addition, the same mechanisms that suppress apoptosis may trigger an innate immune system response to cancers and, thus, have a direct anticancer effect.
On the other hand, if the need is to destroy cancerous cells, we focus our research efforts on restoring apoptotic mechanisms that are suppressed in tumors, so that those cancerous cells will once again become vulnerable to apoptotic death. In this regard, we believe that our drug candidates could have significant potential for improving, and becoming vital to, the treatment of cancer patients.
Through our research and development ("R&D"), and our strategic partnerships, we have established a technological foundation for the development of new pharmaceuticals and their rapid preclinical evaluation.
We have acquired rights to develop and commercialize the following prospective drugs:
|
·
|
Protectans - modified factors of microbes that protect cells from apoptosis, and which, therefore, have a broad spectrum of potential applications. The potential applications include both non-medical applications such as protection from exposure to radiation, whether as a result of military or terrorist action or as a result of a nuclear accident, as well as medical applications such as reducing cancer treatment toxicities inducing the immune system to attack cancer cells.
|
|
·
|
Curaxins - small molecules designed to kill tumor cells by simultaneously targeting two regulators of apoptosis. Initial test results indicate that curaxins can be effective against a number of malignancies, including hormone-refractory prostate cancer, renal cell carcinoma ("RCC") (a highly fatal form of kidney cancer), and soft-tissue sarcoma.
|
In the area of radiation protection and cancer treatment, we have achieved high levels of efficacy in numerous animal models. With respect to cancer treatment, the biology of cancer is such that there is no single drug that can be successfully used to treat a significant proportion of the large number of different cancers and there is wide variability in individual responses to most therapeutic agents. This means there is a continuing need for additional anticancer drugs for most cancers.
Our drug candidates demonstrate the value of our scientific foundation. Based on the accelerated review and approval status currently available for drugs qualifying for Fast Track status, we believe that our most advanced drug candidate, Protectan CBLB502 may be approved for treatment of acute radiation syndrome within 18 - 24 months. Another drug candidate, Curaxin CBLC102, demonstrated activity and safety in a Phase IIa clinical trial concluded in late 2008. In November 2010, the first patient was dosed in an ongoing multi-center clinical trial of Curaxin CBLC102 on patients with liver tumors in the Russian Federation.
RESEARCH AND DEVELOPMENT
We are highly dependent on the success of our R&D efforts and, ultimately, upon regulatory approval and market acceptance of our products under development.
There are significant risks and uncertainties inherent in the preclinical and clinical studies associated with our R&D projects. As a result, the costs to complete such projects, as well as the period in which net cash outflows from such programs are expected to be incurred, may not be reasonably estimated. From our inception to June 30, 2011, we spent $84,647,562 on R&D. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations— Three Months Ended June 30, 2011 Compared to June 30, 2010—Operating Expenses” for a more detailed discussion of our R&D spending.
Our ability to complete our R&D on schedule is, however, subject to a number of risks and uncertainties. In addition, we have sustained losses from operations in each fiscal year since our inception in June 2003, and we may exhaust our financial resources and be unable to complete the development of our products due to the substantial investment in R&D that will be required for the next several years. We expect to spend substantial additional sums on the continued R&D of proprietary products and technologies with no certainty that losses will not increase or that we will ever become profitable as a result of these expenditures.
The marketing of any product for use in the U.S. will require approval from the U.S. Food and Drug Administration (“FDA”). We cannot predict with any certainty the amount of time necessary to obtain such FDA approval and whether any such approval will ultimately be granted. Preclinical studies and clinical trials may reveal that one or more products are ineffective or unsafe, in which event further development of such products could be seriously delayed or terminated. Moreover, obtaining approval for certain products may require testing on human subjects of substances whose effects on humans are not fully understood or documented. Delays in obtaining FDA or any other necessary regulatory approvals of any proposed product or the failure to receive such approvals would have an adverse effect on the product’s potential commercial success and on our business, prospects, financial condition and results of operations. In addition, it is possible that a product may be found to be ineffective or unsafe due to conditions or facts that arise after development has been completed and regulatory approvals have been obtained. In this event, we may be required to withdraw such product from the market. To the extent that our success will depend on any regulatory approvals from government authorities outside of the U.S. that perform roles similar to that of the FDA, uncertainties similar to those stated above will also exist.
PRODUCTS IN DEVELOPMENT
Protectans
We are exploring a new natural source of factors that temporarily suppress the programmed cell death (apoptosis) response in human cells, which can be rapidly developed into therapeutic products. These inhibitors, known as protectans, are anti-apoptotic factors developed by microorganisms of human microflora throughout millions of years of co-evolution with mammalian hosts. We have established a technological process for screening of these factors and their rapid preclinical evaluation. These inhibitors may be used as protection from cancer treatment toxicities and antidotes against injuries induced by radiation and other stresses associated with severe pathologies (i.e., heart attack or stroke).
We have accumulated preclinical data in numerous mouse and rat transplanted cancer models suggesting that the same mechanisms that suppress apoptosis may trigger an innate immune system response to cancers and, thus, have a direct anticancer effect. In one of the animal models using transplanted colon cancer, treatment with Protectan CBLB502, our lead protectan drug candidate, resulted in the complete tumor regression with no recurrence of the disease in a large percentage of animals. Experimental results suggest that Protectan CBLB502's anticancer effect involves tissue-specific activation of an innate immune system response mediated by Protectan CBLB502's interaction with its receptor, TLR5. In addition, experimental results suggest that antitumor effects of Protectan CBLB502 largely depend on the expression of TLR5 by the tumor. However, in the case of tumors residing in the liver, the organ which has been identified as the natural primary target site for Protectan CBLB502 activity, experimental results suggest that tumors become effectively suppressed as a result of host immune system attack regardless of their TLR5 status. This characteristic may make liver metastasis a favorable target for potential anticancer applications of Protectan CBLB502.
During the three months ended June 30, 2011, the Company received notices of allowance from the United States Patent and Trademark Office (the “USPTO”) and the Japan Patent Office for patent applications 11/722,682 and 2006-542849, respectively, covering Protectan CBLB502. Allowed claims of the U.S. Patent Application number 11/722,682, titled "Flagellin Related Polypeptides and Uses Thereof," cover composition of matter and use of Protectan CBLB502 for protecting a mammal from radiation. Allowed claims for the Japanese Patent Application cover the method of protecting a mammal from radiation using flagellin or its derivatives, including Protectan CBLB502. In addition, the Company received a notice of allowance from the USPTO for the Company’s Protectan CBLB612 patent application number 11/917,494 titled “Methods of Protecting against Apoptosis using Lipopeptides.” Allowed claims cover the various properties of Protectan CBLB612 and related compounds, including composition of matter and methods of use for protecting against apoptosis.
On June 23, 2011, a modification (the “Modification”) to the existing contract, awarded on September 16, 2010 (the “2010 DoD Contract”), between CBLI and the United States Department of Defense (“DoD”) Chemical Biological and Medical Systems Medical Identification and Treatment Systems (CBMS-MITS) was awarded. The Modification provides for an increased scope of work relating to service items under the 2010 DoD Contract for the advanced development of Protectan CBLB502 and project management in respect thereof, for an aggregate increase in funding of $1.3 million. In addition, as part of the Modification, a new option for $0.2 million was added to the 2010 DoD Contract. As a result of the Modification, the 2010 DoD Contract, as modified, is valued at up to $46.5 million, including all options provided thereunder.
For the three months ended June 30, 2011 and 2010, we spent $4,340,497 and $3,733,742, respectively, on R&D for protectans. For the six months ended June 30, 2011 and 2010, we spent $8,868,199 and $7,326,313, respectively, on R&D for protectans. From our inception to June 30, 2011, we spent $63,437,363 on R&D for protectans. The increase is mainly due to the increase in expenditures supporting the development of Protectan CBLB502, including an increase in employee compensation expense due to the hiring of additional drug development, regulatory affairs and quality assurance personnel.
For the three months ended June 30, 2011 and 2010, we spent $4,329,981 (all for non-medical applications) and $3,733,742 (all for non-medical applications), respectively, on R&D for Protectan CBLB502. For the six months ended June 30, 2011 and 2010, we spent $8,857,683 ($8,834,913 for non-medical applications and $22,770 for medical applications) and $7,326,313 (all for non-medical applications), respectively, on R&D for Protectan CBLB502. From our inception to June 30, 2011, we spent $60,284,766 ($58,428,939 for non-medical applications and $1,855,827 for medical applications) on R&D for Protectan CBLB502.
For the three months ended June 30, 2011 and 2010, we spent $10,516 and $0, respectively, on R&D for Protectan CBLB612. For the six months ended June 30, 2011 and 2010, we spent $10,516 and $0, respectfully, on R&D for Protectan CBLB612. From our inception to June 30, 2011, we spent $3,152,597 on R&D for Protectan CBLB612. Further development and extensive testing will be required to determine its technical feasibility and commercial viability.
Curaxins
Curaxins are small molecules that are intended to destroy tumor cells by simultaneously targeting two regulators of apoptosis. Our initial test results indicate that curaxins may be effective against a number of malignancies, including RCC, soft-tissue sarcoma, and hormone-refractory prostate cancer.
For the three months ended June 30, 2011 and 2010, we spent $858,231 and $333,458, respectively, on R&D for curaxins. For the six months ended June 30, 2011 and 2010, we spent $1,979,859 and $404,462, respectively, on R&D for curaxins. From our inception to June 30, 2011, we spent $15,786,770 on R&D for curaxins. The increase is mainly due to the increase in expenditures supporting the clinical development of Curaxin CBLC102 and the formal preclinical development of Curaxin CBLC137.
For the three months ended June 30, 2011 and 2010, we spent $602,130 and $166,729, respectively, on R&D for Curaxin CBLC102. For the six months ended June 30, 2011 and 2010, we spent $1,417,495 and $201,930, respectively, on R&D for Curaxin CBLC102. From our inception to June 30, 2011, we spent $8,545,682 on R&D for Curaxin CBLC102. The increase is mainly due to the increase in expenditures supporting the multi-center clinical trial of Curaxin CBLC102 in patients with liver tumors.
For the three months ended June 30, 2011 and 2010, we spent $256,101 and $166,729, respectively, on R&D for other curaxins. For the six months ended June 30, 2011 and 2010, we spent $562,364 and $202,532 respectively, on R&D for other curaxins. From our inception to June 30, 2011, we spent $7,241,088 on R&D for other curaxins.
General R&D
General R&D includes R&D expenses, such as overhead, shared project expenses and other expenses that are not considered part of the curaxin or protectan classes of research.
For the three months ended June 30, 2011 and 2010 we spent $10,466 and $102,915, respectively on general R&D expenses. For the six months ended June 30, 2011 and 2010 we spent $70,069 and $137,120, respectively, on general R&D expenses. From our inception to June 30, 2011 we spent $5,423,429 on general R&D expenses.
FINANCIAL OVERVIEW
Including several non-cash items, our net income increased from a net loss of $2,528,908 for the three months ended June 30, 2010 to net income of $11,130,148 for the three months ended June 30, 2011, an increase of $13,659,056 or 540.1%. We incurred non-cash charges of depreciation and amortization of $111,912 and $98,953, non-cash salaries and consulting fees of $1,184,603 and $1,274,180 and a change in the value of warrants of ($17,815,964) and ($33,800) for the three months ended June 30, 2011 and 2010, respectively. Excluding these non-cash charges, our net loss increased $4,198,816 or 353.0% from $1,189,575 for the three months ended June 30, 2010 to $5,389,301 for the three months ended June 30, 2011. This increase was primarily related to higher R&D costs due to an increase in expenditures to support preclinical animal studies as well as a reduction in revenue. In addition, our consolidated subsidiary, Incuron, also incurred higher costs in the three months ended June 30, 2011 as compared to the three months ended June 30, 2010 due to increased activity resulting from Incuron’s operations being established only in the second quarter of 2010, including the increase of expenditures supporting clinical development of Curaxin CBLC102 and formal preclinical development of Curaxin CBLC137.
Including several non-cash items, our net income increased from a net loss of $5,892,919 for the six months ended June 30, 2010 to net income of $5,384,782 for the six months ended June 30, 2011, an increase of $11,277,701 or 191.4%. We incurred non-cash charges of depreciation and amortization of $223,215 and $199,677, non-cash salaries and consulting fees of $2,107,639 and $2,210,871 and a change in the value of warrants of ($17,101,013) and $1,697,296 for the six months ended June 30, 2011 and 2010, respectively. Excluding these non-cash charges, our net loss increased $7,600,302 or 425.8% from $1,785,075 for the six months ended June 30, 2010 to $9,385,377 for the six months ended June 30, 2011. This increase was primarily related to higher R&D costs due to an increase in expenditures to support preclinical animal studies, an increase in employee compensation due to the hiring of additional drug development, regulatory affairs and quality assurance personnel, as well as a reduction in revenue. In addition, our consolidated subsidiary, Incuron, also incurred higher costs in the six months ended June 30, 2011 as compared to the six months ended June 30, 2010 due to increased activity resulting from Incuron’s operations being established only in the second quarter of 2010, including the increase of expenditures supporting clinical development of Curaxin CBLC102 and formal preclinical development of Curaxin CBLC137.
Our total cash and equivalents, short-term investments and accounts receivable increased from $16,760,022 at December 31, 2010 to $31,849,037 at June 30, 2011. This increase of $15,089,015 or 90.0% was primarily due to the proceeds from the June 2011 financing, capital contributions to Incuron from our joint venture partner, Bioprocess Capital Ventures, and cash proceeds from the exercise of warrants and options, partially offset by our operating losses.
Recent Developments
On June 22, 2011, CBLI issued 5,872,500 shares of its common stock and warrants to purchase a total of 2,936,250 shares of its common stock to certain accredited investors for gross proceeds of $23,490,000. The common stock and warrants were sold in units, at a price of $4.00 per unit, with each unit consisting of: (i) one share of common stock; (ii) a Series E Warrant to purchase 0.25 of a share of common stock, with an exercise price of $4.50 per share; and (iii) a Series F Warrant to purchase 0.25 of a share of common stock, with an exercise price of $5.00 per share. The Series E Warrants will be exercisable beginning six months following issuance and will expire on the twelve month anniversary of issuance. The Series F Warrants will be exercisable beginning six months following issuance and will expire on the five year anniversary of issuance. The number of shares issuable upon exercise of the warrants and the exercise price of the warrants are adjustable in the event of stock splits, stock dividends, combinations of shares and similar recapitalization transactions. In total, there were 5,875,200 shares of common stock, 1,468,125 Series E Warrants and 1,468,125 Series F Warrants issued to the investors in this offering.
In addition, the placement agent also received warrants to purchase up to 176,175 shares of common stock, equal to 3% of the aggregate number of shares of common stock sold in the offering. The placement agent’s warrants have an exercise price of $5.00 per share, an initial exercise date on the six month anniversary of issuance and an expiration date of June 17, 2015. The number of shares issuable upon exercise of the placement agent’s warrants and the exercise price of such warrants are adjustable in the event of stock splits, stock dividends, combinations of shares and similar recapitalization transactions.
Immediately after the completion of this offering, pursuant to anti-dilution provisions of the Series B Warrants, the Series C Warrants and the warrants issued in March 2010, the following adjustments were made:
|
·
|
the exercise price of CBLI’s Series B Warrants was reduced from $5.99 to approximately $5.28 per share, and the aggregate number of shares of common stock issuable upon exercise of the Series B Warrants was increased from 3,918,376 to 4,445,276;
|
|
·
|
the exercise price of CBLI’s Series C Warrants was reduced from $6.32 to approximately $5.54 per share, and the aggregate number of shares of common stock issuable upon exercise of the Series C Warrants was increased from 464,852 to approximately 530,297; and
|
|
·
|
the exercise price of CBLI’s warrants issued in March 2010 decreased from $4.50 to $4.00 per share.
|
Critical Accounting Policies
Our management's discussion and analysis of our financial condition and results of operations is based upon our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of our assets, liabilities, revenues, expenses and other reported disclosures. We believe that we consistently apply these judgments and estimates and the financial statements and accompanying notes fairly represent all periods presented. However, any differences between these judgments and estimates and actual results could have a material impact on our statements of income and financial position. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances.
While all decisions regarding accounting policies are important, we believe that our policies regarding revenue recognition, R&D expenses, intellectual property related costs, stock-based compensation expense and fair value measurements could be considered critical. For a discussion of our “Critical Accounting Policies and Estimates,” refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2010. There have been no material changes to our critical accounting policies since December 31, 2010.
Results of Operations
The following table sets forth our statement of operations data for the three and six months ended June 30, 2011 and 2010 and the years ended December 31, 2010 and 2009 and should be read in conjunction with our financial statements and the related notes appearing elsewhere in this filing and in our annual report on Form 10-K for the year ended December 31, 2010.
|
|
Three Months
|
|
|
Three Months
|
|
|
Six Months
|
|
|
Six Months
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
June 30, 2011
|
|
|
June 30, 2010
|
|
|
June 30, 2011
|
|
|
June 30, 2010
|
|
|
2010
|
|
|
2009
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
569,049 |
|
|
$ |
4,210,763 |
|
|
$ |
3,043,031 |
|
|
$ |
8,381,111 |
|
|
$ |
15,331,567 |
|
|
$ |
14,345,908 |
|
Operating expenses
|
|
|
7,196,645 |
|
|
|
6,831,315 |
|
|
|
14,782,780 |
|
|
|
12,458,596 |
|
|
|
26,068,765 |
|
|
|
20,728,837 |
|
Other expense (income)
|
|
|
(17,690,673 |
) |
|
|
(84,005 |
) |
|
|
(17,019,201 |
) |
|
|
1,828,846 |
|
|
|
16,033,770 |
|
|
|
6,463,208 |
|
Net interest expense (income)
|
|
|
(67,071 |
) |
|
|
(7,639 |
) |
|
|
(105,330 |
) |
|
|
(13,412 |
) |
|
|
(99,111 |
) |
|
|
(19,728 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
11,130,148 |
|
|
$ |
(2,528,908 |
) |
|
$ |
5,384,782 |
|
|
$ |
(5,892,919 |
) |
|
$ |
(26,671,857 |
) |
|
$ |
(12,826,409 |
) |
The following table summarizes R&D expenses for the three and six months ended June 30, 2011 and 2010 and the years ended December 31, 2010 and 2009 and since inception:
|
|
Three Months
|
|
|
Three Months
|
|
|
Six Months
|
|
|
Six Months
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Total
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
December 31,
|
|
|
December 31,
|
|
|
Since
|
|
|
|
June 30, 2011
|
|
|
June 30, 2010
|
|
|
June 30, 2011
|
|
|
June 30, 2010
|
|
|
2010
|
|
|
2009
|
|
|
Inception
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$ |
5,209,194 |
|
|
$ |
4,170,115 |
|
|
$ |
10,918,127 |
|
|
$ |
7,867,895 |
|
|
$ |
16,141,040 |
|
|
$ |
14,331,673 |
|
|
$ |
84,647,562 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
|
|
$ |
10,466 |
|
|
$ |
102,915 |
|
|
$ |
70,069 |
|
|
$ |
137,120 |
|
|
$ |
246,730 |
|
|
$ |
- |
|
|
$ |
5,423,429 |
|
Protectan CBLB502 - non-medical applications
|
|
$ |
4,329,981 |
|
|
$ |
3,733,742 |
|
|
$ |
8,834,913 |
|
|
$ |
7,326,313 |
|
|
$ |
14,316,540 |
|
|
$ |
13,676,289 |
|
|
$ |
58,428,939 |
|
Protectan CBLB502 - medical applications
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
22,770 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
56,127 |
|
|
$ |
1,855,827 |
|
Protectan CBLB612
|
|
$ |
10,516 |
|
|
$ |
- |
|
|
$ |
10,516 |
|
|
$ |
- |
|
|
$ |
5,140 |
|
|
$ |
6,567 |
|
|
$ |
3,152,597 |
|
Curaxin CBLC102
|
|
$ |
602,130 |
|
|
$ |
166,729 |
|
|
$ |
1,417,495 |
|
|
$ |
201,930 |
|
|
$ |
399,068 |
|
|
$ |
262,637 |
|
|
$ |
8,545,682 |
|
Other Curaxins
|
|
$ |
256,101 |
|
|
$ |
166,729 |
|
|
$ |
562,364 |
|
|
$ |
202,532 |
|
|
$ |
1,173,562 |
|
|
$ |
330,053 |
|
|
$ |
7,241,088 |
|
Three Months Ended June 30, 2011 Compared to Three Months Ended June 30, 2010
Revenue
Revenue decreased from $4,210,763 for the three months ended June 30, 2010 to $569,049 for the three months ended June 30, 2011, representing a decrease of $3,641,714 or 86.5% resulting primarily from a decrease in revenue from various federal grants and contracts including the DoD, NIH and the Biomedical Advanced Research and Development Authority of the Department of Health and Human Services (“BARDA”) contracts.
See the table below for further details regarding the sources of our government grant and contract revenue:
Agency
|
|
Program
|
|
Amount
|
|
Period of
Performance
|
|
Revenue
2011
(April 1 thru
June 30)
|
|
|
Revenue
2010
(April 1 thru
June 30)
|
|
|
Revenue
2010
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
|
DOD
|
|
CBMS-MITS Contract
|
|
$ |
14,800,000 |
|
09/2010-03/2013
|
|
$ |
46,718 |
|
|
$ |
- |
|
|
$ |
623,975 |
|
DTRA
|
|
DTRA Contract
|
|
$ |
1,589,106 |
|
01/2011-05/2012
|
|
$ |
518,118 |
|
|
$ |
- |
|
|
$ |
- |
|
HHS
|
|
BARDA Contract
|
|
$ |
15,600,000 |
|
09/2008-02/2011
|
|
$ |
- |
|
|
$ |
|