VCNX 10-Q
Vaccinex, Inc. (VCNX)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of November 12, 2024, the registrant had
VACCINEX, INC.
FORM 10-Q
TABLE OF CONTENTS
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Item 1. |
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3 |
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3 |
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Condensed Statements of Operations and Comprehensive Loss (Unaudited) |
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4 |
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Condensed Statements of Stockholders’ Equity (Deficit) (Unaudited) |
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5 |
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6 |
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7 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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25 |
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Item 3. |
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37 |
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Item 4. |
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37 |
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Item 1A. |
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38 |
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Item 6. |
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40 |
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41 |
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
VACCINEX, INC.
Condensed Balance Sheets (Unaudited)
(in thousands, except share and per share data)
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As of |
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As of |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable |
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Prepaid expenses and other current assets |
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Derivative asset |
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- |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use asset |
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TOTAL ASSETS |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses |
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Deferred revenue |
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Current portion of long-term debt |
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Operating lease liability |
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Warrant liability |
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Total current liabilities |
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Long-term debt |
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- |
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TOTAL LIABILITIES |
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Stockholders’ equity (deficit): |
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Convertible preferred stock (Series A), par value of $ |
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Common stock, par value of $ |
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Additional paid-in capital |
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Treasury stock, at cost; |
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( |
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( |
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Accumulated deficit |
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( |
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( |
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TOTAL STOCKHOLDERS’ EQUITY/(DEFICIT) |
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( |
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( |
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed financial statements.
3
VACCINEX, INC.
Condensed Statements of Operations and Comprehensive Loss (Unaudited)
(in thousands, except share and per share data)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Revenue |
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$ |
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$ |
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$ |
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$ |
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Costs and expenses: |
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Research and development |
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General and administrative |
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Total costs and expenses |
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Loss from operations |
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( |
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( |
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( |
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Interest expense |
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- |
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- |
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- |
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( |
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Loss on settlement of warrants |
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( |
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- |
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( |
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- |
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Financing costs - warrant liabilities |
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- |
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- |
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( |
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- |
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Change in fair value of warrant liabilities |
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( |
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- |
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- |
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Change in fair value of derivative asset |
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- |
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( |
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- |
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Other income (expense), net |
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( |
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Loss before provision for income taxes |
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( |
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( |
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( |
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Provision for income taxes |
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Net loss attributable to Vaccinex, Inc. common stockholders |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Comprehensive loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Net loss per share attributable to Vaccinex, Inc. common |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Weighted-average shares used in computing net loss per share |
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The accompanying notes are an integral part of these condensed financial statements.
4
VACCINEX, INC.
Condensed Statements of Stockholders’ Equity (Deficit) (Unaudited)
(in thousands, except share data)
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Preferred Stock |
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Common Stock |
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Treasury Stock |
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Shares |
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Amount |
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Shares |
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Amount |
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Additional |
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Common |
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Amount |
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Accumulated |
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Total |
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Balance as of January 1, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Issuance of common stock |
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- |
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- |
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- |
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- |
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- |
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- |
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Stock-based compensation |
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- |
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- |
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- |
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- |
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- |
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- |
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- |
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Net loss |
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- |
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- |
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- |
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- |
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- |
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- |
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- |
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( |
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( |
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Balance as of March 31, 2023 |
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( |
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( |
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Issuance of Common Shares |
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- |
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- |
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- |
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- |
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- |
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- |
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Stock-based compensation |
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- |
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- |
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- |
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- |
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- |
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- |
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- |
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Net loss |
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- |
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- |
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- |
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- |
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- |
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- |
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- |
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( |
) |
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( |
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Balance as of June 30, 2023 |
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( |
) |
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( |
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( |
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Issuance of Common Shares |
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- |
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- |
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- |
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- |
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- |
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- |
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Stock-based compensation |
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- |
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- |
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- |
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- |
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- |
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- |
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- |
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Net loss |
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- |
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- |
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- |
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- |
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- |
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- |
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- |
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( |
) |
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( |
) |
Balance as of September 30, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Preferred Stock |
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Common Stock |
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Treasury Stock |
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Shares |
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Amount |
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Shares |
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Amount |
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Additional |
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Common |
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Amount |
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Accumulated |
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Total |
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Balance as of January 1, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
( |
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Issuance of common stock |
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- |
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- |
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- |
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- |
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- |
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- |
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Stock-based compensation |
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- |
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- |
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- |
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- |
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- |
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- |
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- |
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Issuance of common stock and pre-funded warrants in private placement offerings |
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- |
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- |
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- |
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- |
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- |
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Issuance of warrants in private placement offerings |
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- |
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- |
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- |
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- |
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- |
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- |
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- |
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Issuance of warrants |
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- |
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- |
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- |
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- |
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- |
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- |
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- |
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Issuance of preferred stock |
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- |
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- |
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- |
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- |
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- |
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- |
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Reclassification of public warrants, as amended |
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- |
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- |
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- |
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- |
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- |
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- |
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- |
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Reclassification of private placement warrants, as amended |
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- |
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- |
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- |
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- |
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- |
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- |
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- |
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Net loss |
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- |
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- |
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- |
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- |
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- |
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- |
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- |
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( |
) |
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( |
) |
Balance as of March 31, 2024 |
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( |
) |
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( |
) |
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Stock-based compensation |
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- |
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- |
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- |
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- |
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- |
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- |
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- |
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Amortization of preferred stock discount |
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- |
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- |
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- |
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( |
) |
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- |
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- |
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- |
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- |
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Issuance of restricted stock |
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- |
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- |
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- |
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- |
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- |
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- |
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- |
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- |
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Net loss |
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- |
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- |
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- |
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- |
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- |
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- |
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- |
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( |
) |
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( |
) |
Balance as of June 30, 2024 |
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( |
) |
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( |
) |
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( |
) |
||||||
Stock-based compensation |
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- |
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- |
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- |
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- |
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- |
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- |
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- |
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Amortization of preferred stock discount |
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- |
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- |
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- |
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( |
) |
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- |
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- |
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- |
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- |
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Exercise of warrants |
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- |
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- |
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- |
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- |
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- |
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- |
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Issuance of warrants |
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- |
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- |
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- |
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- |
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- |
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- |
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- |
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Net loss |
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- |
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- |
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- |
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- |
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- |
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- |
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- |
|
|
|
( |
) |
|
|
( |
) |
Balance as of September 30, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
||||||
The accompanying notes are an integral part of these condensed financial statements.
5
VACCINEX, INC.
Condensed Statements of Cash Flows (Unaudited)
(in thousands)
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
|
|
|
|
|||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
||
Depreciation |
|
|
|
|
|
|
||
Stock-based compensation |
|
|
|
|
|
|
||
Change in fair value of warrant liability |
|
|
( |
) |
|
|
- |
|
Change in fair value of derivative asset |
|
|
|
|
|
- |
|
|
Loss on settlement of warrants |
|
|
|
|
|
- |
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
( |
) |
|
|
( |
) |
Prepaid expenses and other current assets |
|
|
|
|
|
|
||
Accounts payable |
|
|
|
|
|
|
||
Accrued expenses |
|
|
( |
) |
|
|
|
|
Deferred revenue |
|
|
( |
) |
|
|
- |
|
Net cash used in operating activities |
|
|
( |
) |
|
|
( |
) |
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
||
Purchase of property and equipment |
|
|
( |
) |
|
|
( |
) |
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
||
Proceeds from issuance of common stock, and |
|
|
|
|
|
- |
|
|
Proceeds from exercise of warrants |
|
|
|
|
|
- |
|
|
Proceeds from issuance of warrants in private placement offerings |
|
|
|
|
|
- |
|
|
Proceeds from private offering of common stock |
|
|
- |
|
|
|
|
|
Payments of long-term debt |
|
|
( |
) |
|
|
( |
) |
Proceeds from issuance of preferred stock and accompanying warrants |
|
|
|
|
|
- |
|
|
Proceeds from issuance of common stock, and |
|
|
|
|
|
- |
|
|
Proceeds from issuance of common stock |
|
|
- |
|
|
|
|
|
Net cash provided by financing activities |
|
|
|
|
|
|
||
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS |
|
|
|
|
|
( |
) |
|
CASH AND CASH EQUIVALENTS–Beginning of period |
|
|
|
|
|
|
||
CASH AND CASH EQUIVALENTS–End of period |
|
$ |
|
|
$ |
|
||
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND |
|
|
|
|
|
|
||
Warrant inducement (transaction costs incurred but not paid) |
|
$ |
|
|
|
|
||
The accompanying notes are an integral part of these condensed financial statements.
6
VACCINEX, INC.
Notes to Condensed Financial Statements (Unaudited)
Note 1. COMPANY AND NATURE OF BUSINESS
Vaccinex, Inc. (the “Company”) was incorporated in Delaware in April 2001 and is headquartered in Rochester, New York. The Company is a clinical-stage biotechnology company engaged in the discovery and development of targeted biotherapeutics to treat serious diseases and conditions with unmet medical needs, including neurodegenerative diseases, cancer, and autoimmune disorders. Since its inception, the Company has devoted substantially all of its efforts toward product research, manufacturing and clinical development, and raising capital.
The Company is subject to a number of risks and uncertainties common to other early-stage biotechnology companies including, but not limited to, dependency on the successful development and commercialization of its product candidates, rapid technological change and competition, dependence on key personnel and collaborative partners, uncertainty of protection of proprietary technology and patents, clinical trial uncertainty, fluctuation in operating results and financial performance, the need to obtain additional funding, compliance with governmental regulations, technological and medical risks, management of growth and effectiveness of marketing by the Company. If the Company does not successfully commercialize or partner any of its product candidates, it will be unable to generate product revenue or achieve profitability.
Going Concern
These condensed financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
The Company has incurred significant losses and negative cash flows from operations since inception and expects to incur additional losses until such a time it can generate significant revenue from the commercialization of its product candidates. The Company reported cash used in operations of $
In response to these conditions, management is currently evaluating different strategies to obtain the required funding of future operations. Financing strategies may include, but are not limited to, the public or private sale of equity, debt financing or funds from other capital sources, such as government funding, collaborations, strategic alliances, divestment of non-core assets, or licensing arrangements with third parties. There can be no assurances that the Company will be able to secure additional financing, or if available, that it will be sufficient to meet its needs or on favorable terms. Because management’s plans have not yet been finalized and are not within the Company’s control, the implementation of such plans cannot be considered probable. As a result, the Company has concluded that management’s plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern.
The condensed financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.
7
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Consolidation
The accompanying unaudited condensed financial statements reflect the accounts and operations of the Company and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information (Accounting Standards Codification (“ASC”) 270, Interim Reporting) and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, these financial statements do not include all of the information necessary for a full presentation of financial position, results of operations, and cash flows in conformity with GAAP. In the opinion of management, the condensed financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the results of the Company for the periods presented.
These condensed financial statements should be read in conjunction with the Company’s audited financial statements and related notes included in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2023, filed with the SEC on April 25, 2024.
Common Stock Reverse Splits
On September 25, 2023, the
Use of Estimates
These condensed financial statements have been prepared in conformity with U.S. GAAP. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the condensed financial statements and the reported amount of expenses during the reporting period. Such management estimates include those relating to assumptions used in the valuation of stock option awards, valuation of the warrant liabilities, valuation of the derivative asset, and valuation allowances against deferred income tax assets. Actual results could differ from those estimates.
Convertible Preferred Stock
In March 2024, the Company issued shares of a newly designated series of convertible preferred stock (see Note 9). The convertible preferred stock contained embedded redemption features requiring bifurcation and separate accounting apart from the convertible preferred stock host instrument. The Company recorded the fair value of the embedded redemption features as a derivative asset on the Company’s balance sheets in accordance with ASC Topic 815, Derivatives and Hedging. See Note 4 for the key inputs used in the fair value measurements of the derivative asset.
Fair Value of Financial Instruments
Financial instruments consist of cash, accounts receivable, derivative asset, accounts payable, accrued liabilities, long-term debt, warrant liabilities, and convertible preferred stock. Cash, accounts receivable, accounts payable, accrued liabilities, debt, and convertible preferred stock are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment date of such amounts. Warrant liabilities and the derivative asset are measured at fair value on a recurring basis with the assumptions discussed in Note 4.
8
Concentration of Credit Risk, Other Risks and Uncertainties
The Company is subject to a number of risks, including, but not limited to, the lack of available capital; the possible delisting of our common stock from Nasdaq; possible failure of preclinical testing or clinical trials; inability to obtain regulatory approval of product candidates; competitors developing new technological innovations; potential interruptions in the manufacturing and commercial supply operations; unsuccessful commercialization strategy and launch plans for its proprietary drug candidates; risks inherent in litigation, including purported class actions; market acceptance of the Company’s products; and protection of proprietary technology.
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. Cash equivalents are deposited in interest-bearing money market accounts. Although the Company deposits its cash with multiple financial institutions, cash balances may occasionally be in excess of the amounts insured by the Federal Deposit Insurance Corporation. Management believes the financial risk associated with these balances is minimal and has not experienced any losses to date.
The Company has historically raised capital in transactions with investors that include members of its board of directors and entities controlled by certain board members. As such, the Company's directors, directly and indirectly, control a significant ownership percentage of the Company. The Company can provide no assurances that future financing will be available in sufficient amounts or on terms acceptable to it or that its directors or entities controlled by certain board members will be willing or able to participate in future capital raises by the Company.
The Company depends on third-party manufacturers for the manufacture of drug substances and drug product for clinical trials. The Company also relies on certain third parties for its supply chain. Disputes with these third- party manufacturers or shortages in goods or services from third-party suppliers could delay the manufacturing of the Company’s product candidates and adversely impact its results of operations.
Recently Issued Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires disclosure of additional categories of information about federal, state, and foreign income taxes in the rate reconciliation table and more details about the reconciling items in some categories if items meet a quantitative threshold. The ASU requires entities to disclose income taxes paid, net of refunds, disaggregated by federal (national), state and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a quantitative threshold. The guidance makes several other changes to the disclosure requirements. The ASU is required to be applied prospectively, with the option to apply it retrospectively. The ASU is effective for fiscal years beginning after December 15, 2024. The Company is currently assessing the impact of the adoption of this guidance on its financial statements and disclosures.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the ASU enhances interim disclosure requirements, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss, and contains other disclosure requirements. The ASU does not change how an entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments. The ASU is required to be applied retrospectively to all periods presented in the financial statements. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company is currently assessing the impact of the adoption of this guidance on its financial statements and disclosures.
9
Note 3. BALANCE SHEET COMPONENTS
Property and Equipment
Property and equipment consist of the following (in thousands):
|
|
As of |
|
|
As of |
|
||
Leasehold improvements |
|
$ |
|
|
$ |
|
||
Research equipment |
|
|
|
|
|
|
||
Furniture and fixtures |
|
|
|
|
|
|
||
Computer equipment |
|
|
|
|
|
|
||
Property and equipment, gross |
|
|
|
|
|
|
||
Less: accumulated depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
Property and equipment, net |
|
$ |
|
|
$ |
|
||
Depreciation expense related to property and equipment was $
Accrued Expenses
Accrued expenses consist of the following (in thousands):
|
|
As of |
|
|
As of |
|
||
|
|
|
|
|
|
|
||
Accrued clinical trial cost |
|
$ |
|
|
$ |
|
||
Accrued payroll and related benefits |
|
|
|
|
|
|
||
Accrued consulting and legal |
|
|
|
|
|
|
||
Accrued other |
|
|
|
|
|
|
||
Accrued expenses |
|
$ |
|
|
$ |
|
||
Note 4. FAIR VALUE MEASUREMENTS OF FINANCIAL MEASUREMENTS
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Assets and liabilities recorded at fair value on a nonrecurring basis in the condensed balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Financial instruments consist of cash, accounts receivable, accounts payable, accrued liabilities, and long-term debt. Cash, accounts receivable, accounts payable, accrued liabilities, and debt are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment date of such amounts.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Fair value measurement standards also apply to certain financial assets and liabilities that are measured at fair value on a recurring basis (each reporting period). For the Company, these financial assets and liabilities include its cash equivalents deposited in money market funds, warrant liabilities, and the derivative asset. The Company does not have any nonfinancial assets or liabilities that are measured at fair value on a recurring basis.
The assets’ or liabilities’ fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
10
The following tables set forth the fair value of the Company’s financial assets and liabilities by level within the fair value hierarchy (in thousands):
|
|
As of September 30, 2024 |
|
|||||||||||||
|
|
Fair Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Financial Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market fund |
|
$ |
|
|
$ |
|
|
$ |
- |
|
|
$ |
- |
|
||
Derivative asset |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Total Financial Assets |
|
$ |
|
|
$ |
|
|
$ |
- |
|
|
$ |
|
|||
|
|
As of December 31, 2023 |
|
|||||||||||||
|
|
Fair Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Financial Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market fund |
|
$ |
|
|
$ |
|
|
$ |
- |
|
|
$ |
- |
|
||
Total Financial Assets |
|
$ |
|
|
$ |
|
|
$ |
- |
|
|
$ |
- |
|
||
|
|
As of September 30, 2024 |
|
|||||||||||||
|
|
Fair Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Financial Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Warrant liabilities - public warrants |
|
$ |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
|
||
Warrant liabilities - private placement warrants |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Total Financial Liabilities |
|
$ |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
|
||
|
|
As of December 31, 2023 |
|
|||||||||||||
|
|
Fair Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Financial Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Warrant liabilities - public warrants |
|
$ |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
|
||
Warrant liabilities - private placement warrants |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Total Financial Liabilities |
|
$ |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
|
||
The Company did
Fair Value Measurement of Warrant Liabilities
The Company uses the Black-Scholes pricing model to determine the fair value of its warrant liabilities using Level 3 inputs. Inputs used to determine the estimated fair value of the warrant liabilities include the fair value of the underlying stock at the valuation date, the term of the warrants, and the expected volatility of the underlying stock. The significant unobservable input used in the fair value measurement of the warrant liabilities is the estimated term of the warrants.
The key inputs into the respective valuation models used to estimate the fair value of the warrant liabilities at September 30, 2024, were as follows:
|
|
|
|
|
||||||||||||
|
|
Public Warrants |
|
|
Private Placement Warrants |
|
||||||||||
|
|
Low |
|
|
High |
|
|
Low |
|
|
High |
|
||||
Risk-free interest rate |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Volatility |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Dividend yield |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Expected term (years) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Share price |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The key inputs into the respective valuation models used to estimate the fair value of the warrant liabilities at December 31, 2023, were as follows:
11
|
|
|
|
|
||||||||||||
|
|
Public Warrants |
|
|
Private Placement Warrants |
|
||||||||||
|
|
Low |
|
|
High |
|
|
Low |
|
|
High |
|
||||
Risk-free interest rate |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Volatility |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Dividend yield |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Expected term (years) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Share price |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The following table summarizes the changes in fair value of the Company’s warrant liabilities that are recognized in the change in fair value of the warrant liabilities in the accompanying condensed statements of operations and comprehensive loss during the nine months ended September 30, 2024 (in thousands):
|
|
|
|
|||||||||
|
|
Public Warrants |
|
|
Private Placement Warrants |
|
|
Total |
|
|||
Warrant liabilities as of January 1, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Issuance of warrants |
|
|
- |
|
|
|
|
|
|
|
||
Reclassified as equity |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Cancellation of warrants |
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
Exercise of warrants |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Change in fair value |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Warrant liabilities as of September 30, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
There were
Fair Value Measurement of the Derivative Asset
The fair value of the derivative asset is determined using a binomial lattice valuation model (“BLM”). The application of the BLM requires the use of several inputs and significant unobservable assumptions, including volatility. Significant judgment is required in determining the expected volatility of the Company’s derivative asset.
The following table provides quantitative information regarding measurement inputs used to estimate the fair value of the Level 3 asset at:
|
|
September 30, 2024 |
|
|
Risk-free interest rate |
|
|
% |
|
Expected volatility |
|
|
% |
|
Expected term (in years) |
|
|
|
|
Exercise price (per share) |
|
$ |
|
|
Number of shares |
|
|
|
|
The following table presents the changes in the derivative asset during the nine months ended September 30, 2024 (in thousands):
|
|
|
|
|
Derivative asset as of January 1, 2024 |
|
$ |
- |
|
Issuance of convertible preferred stock |
|
|
|
|
Change in fair value |
|
|
( |
) |
Derivative asset as of September 30, 2024 |
|
$ |
|
|
12
Note 5. COLLABORATION AGREEMENTS
Surface Oncology, Inc.
In November 2017, the Company entered into a research collaboration and license option agreement with Surface Oncology, Inc. (“Surface”) to identify and select antibodies against
Under the research collaboration and license option agreement, Surface paid an upfront technology access fee of $
Note 6. COMMITMENTS AND CONTINGENCIES
Nasdaq Deficiency Notice
On April 11, 2024, the Company received a letter from the Listing Qualifications staff of Nasdaq notifying the Company that based on the financial statements contained in its Form 10-K for the year-ended December 31, 2023, it no longer complies with the requirement under Nasdaq Listing Rule 5550(b)(1) to maintain a minimum of $
On June 5, 2024, Nasdaq notified the Company that it has been provided an extension to regain and evidence compliance with the Equity Standard on or before September 30, 2024. As of September 30, 2024, we have a stockholders' deficit of $
13
time. However, there can be no assurance that the Hearings Panel will grant the Company’s request for continued listing or that the Company will be able to demonstrate compliance with the Equity Standard or the Alternative Standards within any additional compliance period that may be granted by the Hearings Panel.
Cancellation of Warrants
A holder of certain of the warrants that we called for cancellation has notified the Company that it believes that the warrants it held are still outstanding. The number of shares represented by these canceled warrants represents approximately
Other Contingencies
The Company is subject to claims and assessments from time to time in the ordinary course of business. The Company records a provision for a liability when it believes that it is both probable that a liability has been incurred and the amount can be reasonably estimated. Significant judgment is required to determine both probability and the estimated amount.
In the normal course of business, the Company may become involved in legal proceedings. The Company will accrue a liability for such matters when it is probable that a liability has been incurred and the amount can be reasonably estimated. When only a range of possible loss can be established, the most probable amount in the range is accrued. If no amount within this range is a better estimate than any other amount within the range, the minimum amount in the range is accrued. The accrual for a litigation loss contingency might include, for example, estimates of potential damages, outside legal fees and other directly related costs expected to be incurred. As of September 30, 2024, and December 31, 2023 the Company was not involved in any material legal proceedings.
Note 7. LEASES
The Company leases its facilities from 1895 Management, Ltd., a New York corporation controlled by an entity affiliated with a director of the Company, under non-cancellable operating leases. The lease agreement requires monthly rental payments of $
The Company accounts for its leases under ASC 842, Leases. Leases with an initial term of 12 months or less are not recorded on the condensed balance sheet. The Company determines if an arrangement is a lease at inception. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease right-of-use assets and lease liabilities are recognized based on the present value of lease payments over the lease term.
As of September 30, 2024, the future minimum payments for the operating leases total $
Lease expense incurred under the operating lease for each of the three-month and nine-month periods ended September 30, 2024 and 2023 was $
14
Note 8. LONG-TERM DEBT
On May 8, 2020, the Company received a loan under the Small Business Administration's Paycheck Protection Program (the "PPP Loan") in the amount of $
Note 9. CONVERTIBLE PREFERRED STOCK
On March 28, 2024, the Company entered into a securities purchase agreement with the Alzheimer’s Drug Discovery Foundation pursuant to which the Company sold shares of a newly designated series of convertible preferred stock, the Series A Preferred Stock, and warrants to purchase up to
In addition, the Series A Preferred Stock has a liquidation preference equal to the greater of (i) $
The Company also agreed that so long as the Series A Preferred Stock is outstanding, the Company will not, without the written consent of the holders of
The Company has the right to redeem the Series A Preferred Stock at a price equal to the Original Share Price per share at any time after a public announcement of an increase in pepinemab-treated patients relative to placebo-treated patients, with statistical significance having a p-value of less than or equal to
15
The Series A Preferred Stock have similar characteristics of an “Increasing Rate Security” as described by SEC Staff Accounting Bulletin Topic 5Q, Increasing Rate Preferred Stock. As a result, the discount on Series A Preferred Stock is considered an unstated dividend cost that is amortized over the period preceding commencement of the perpetual dividend using the effective interest method, by charging imputed dividend cost against retained earnings, or additional paid in capital in the absence of retained earnings and increasing the carrying amount of the Series A Preferred Stock by a corresponding amount, to accrete the initial recognized value to its expected settlement value on the expected redemption date. The amortization in each period is the amount which, together with the stated dividend in the period, results in a constant rate of effective cost with regard to the carrying amount of the Series A Preferred Stock.
Each share of Series A Preferred Stock contains redemption features which allow for the redemption of the Series A Preferred Stock in the event of a voluntary or involuntary liquidation, dissolution, winding up of the Company, or Deemed Liquidation Event, as defined in the certificate of designations (“liquidation events”). Upon the occurrence of such qualifying liquidation event, the Series A Preferred Stock holder shall be entitled to receive cash or assets of the Company before any distribution or payment may be made to or set apart for the holders of common stock in an amount per share of Series A Preferred Stock equal to, or greater of, (i) $
The embedded redemption features require the Company to settle the Series A Preferred Stock at the Liquidation Preference amount upon the occurrence of certain qualifying liquidation events. The holder’s exercise of the embedded conversion feature when the volume weighted average price of the Common Stock for the last three trading days is greater than $
Under ASC 815, certain contractual terms that meet the accounting definition of a derivative must be accounted for separately from the financial instrument in which they are embedded (Note 2). The Company has concluded that the redemption features and the holder’s option to convert when the volume weighted average price of the Common Stock for the last three trading days is greater than $
In the event of any liquidation or deemed liquidation event, as defined in the certificate of designations, before any distribution or payment may be made to or set apart for the holders of common stock, the Series A Preferred Stock holder is entitled to receive assets from the Company equal to $
Upon initial issuance, the Company recorded the fair value of the embedded derivatives in the amount of $
Accordingly, based upon the relative fair values of the instruments on the date of issuance, the Company allocated approximately $
Note 10. WARRANTS
Public Warrants
On
16
to purchase up to
In the event of a fundamental transaction, the public warrants required the Company to make a payment based on a Black-Scholes pricing model valuation, using specific inputs that precluded the instruments from being considered indexed to the Company’s own stock in accordance with ASC 815. The public warrants also contained certain terms that provided for an adjustment in response to the occurrence or nonoccurrence of a specified event that is inconsistent with an implicit assumption in a standard valuation model, which also precluded the instruments from being considered indexed to the Company’s stock in accordance with ASC 815. Therefore, upon issuance, the Company accounted for the public warrants as liabilities, which were recorded at the issuance date fair value of approximately $
In March 2024, the Company entered into warrant amendment agreements with holders of approximately
Private Placement Warrants
In November 2023, pursuant to securities purchase agreements entered into with certain investors, the Company issued and sold private placement warrants to purchase
17
On
In March 2024, the Company entered into warrant amendment agreements with holders of
On March 27, 2024, the Company entered into a securities purchase agreement pursuant to which the Company issued and sold
The Company evaluated the March 2024 private placement warrants and concluded that they met the criteria to be classified within stockholders’ equity within additional paid-in-capital. These private placement warrants are equity classified because they (1) are freestanding financial instruments that are legally detachable and separately exercisable from the common stock, (2) are immediately exercisable, (3) do not embody an obligation for the Company to repurchase its shares, (4) permit the holder to receive a fixed number of shares of common stock upon exercise, (5) are indexed to the Company's common stock and (6) meet the equity classification criteria.
18
Accordingly, the Company allocated approximately $
Call of Public Warrants and Private Placement Warrants
In August 2024, the Company called for cancellation the public warrants and the private placement warrants, pursuant to terms of the warrants permitting the Company to call the warrants for cancellation following the announcement of a statistically significant increase in FDG-PET signal in patients in the Company’s SIGNAL-AD trial of pepinemab for the treatment of Alzheimer’s disease. All of the public warrants and private placement warrants not exercised pursuant to the Inducement Letter Agreements were thereafter canceled in September 2024. As of September 30, 2024,
Inducement Transaction
On September 17, 2024, the Company entered into inducement letter agreements (the “Inducement Letter Agreements”) with holders (the “Holders”) of existing warrants to purchase up to an aggregate of
The exercise of the Existing Warrants resulted in the Company issuing
The gross proceeds to the Company from the exercise of the Existing Warrants and the sale of the New Warrants are approximately $
ADDF Warrants
In connection with the securities purchase agreement with the Alzheimer’s Drug Discovery Foundation, the Company sold ADDF Warrants to purchase up to
The Company evaluated the ADDF Warrants and concluded they met the criteria to be classified within stockholders’ equity within additional paid-in-capital. The ADDF Warrants are equity classified because they (1) are freestanding financial instruments that are legally detachable and separately exercisable from the common stock, (2)
19
are immediately exercisable, (3) do not embody an obligation for the Company to repurchase its shares, (4) permit the holder to receive a fixed number of shares of common stock upon exercise, (5) are indexed to the Company's common stock and (6) meet the equity classification criteria.
As of September 30, 2024, all of the ADDF warrants were outstanding.
Pre-Funded Warrants
In connection with the exercise of Existing Warrants in the September 2024 inducement transaction, the Company pre-funded
In connection with the February 2024 SPA, the Company sold pre-funded warrants exercisable for
The Company evaluated the pre-funded warrants and concluded that they met the criteria to be classified within stockholders’ equity within additional paid-in-capital. The pre-funded warrants are equity classified because they (1) are freestanding financial instruments that are legally detachable and separately exercisable from the common stock, (2) are immediately exercisable, (3) do not embody an obligation for the Company to repurchase its shares, (4) permit the holder to receive a fixed number of shares of common stock upon exercise, (5) are indexed to the Company's common stock and (6) meet the equity classification criteria.
Accordingly, the Company allocated approximately $
As of September 30, 2024, all of the February 2024 SPA pre-funded warrants and pre-funded shares in connection with the September 2024 inducement transaction were outstanding.
Note 11. COMMON STOCK RESERVED FOR ISSUANCE
Common stock has been reserved for the following potential future issuance:
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Note 12. STOCK-BASED COMPENSATION
2011 Employee Equity Plan
In connection with the adoption of the Company’s 2018 Omnibus Incentive Plan in August 2018, the Company ceased granting stock options under the Company’s 2011 Employee Equity Plan (the “2011 Plan”). However, the 2011 Plan will continue to govern the terms and conditions of the outstanding stock options previously granted thereunder. Any shares of stock related to awards outstanding under the 2011 Plan that terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of such shares will become available for grant under the 2018 Omnibus Incentive Plan. Stock options granted under the 2011 Plan expire in five or
2018 Omnibus Incentive Plan
In August 2018, the Company’s board of directors adopted, and its stockholders approved, the 2018 Omnibus Incentive Plan, which allows for the granting of restricted stock, stock options, and stock appreciation rights awards to employees, advisors, and consultants.
On June 22, 2018, the Company’s Board of Directors adopted the First Amendment to the 2018 Omnibus Incentive Plan, subject to stockholder approval, to (i) add a one-time automatic increase in the shares of common stock issuable under the 2018 Plan, (ii) increase the percentage by which the shares of common stock issuable under the 2018 Plan automatically increase each year, and (iii) extend the term of the 2018 Plan to March 21, 2034. On May 9, 2024, the Company’s stockholders approved the First Amendment to the 2018 Omnibus Incentive Plan.
Stock options granted under the 2018 Omnibus Incentive Plan, as amended (the “2018 Plan”) may be either incentive stock options or non-statutory stock options. Incentive stock options may be granted to employees, advisors, and consultants at exercise prices of no less than the fair value of the common stock on the grant date. If at the time of grant, the optionee owns stock representing more than
The Company initially reserved
21
A summary of the Company’s stock option activity and related information is as follows:
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Exercised |
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The weighted-average grant date fair value of stock options granted to employees and directors for the nine months ended September 30, 2024, and 2023 was $
The intrinsic value of stock options vested and exercisable and expected to vest and become exercisable is calculated based on the difference between the exercise price and the fair value of the Company’s common stock as of September 30, 2024, and December 31, 2023. The intrinsic value of exercised stock options is the difference between the fair value of the underlying common stock and the exercise price as of the exercise date.
As of September 30, 2024, and December 31, 2023, total unrecognized compensation cost related to stock options granted to employees was $
The grant date fair value of employee stock options was estimated using a Black-Scholes option-pricing model with the following weighted-average assumptions:
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Note 13. INCOME TAXES
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The Company evaluates tax positions for recognition using a more-likely-than-not recognition threshold, and those tax positions eligible for recognition are measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon the effective settlement with a taxing authority that has full knowledge of all relevant information. As of September 30, 2024, and December 31, 2023, the Company had
Note 14. NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS
The following weighted-average common stock equivalents were excluded from the calculation of diluted net loss per share for the periods presented as they had an anti-dilutive effect:
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Note 15. SEGMENT AND GEOGRAPHIC INFORMATION
The Company’s chief operating decision maker, its Chief Executive Officer, reviews its operating results on an aggregate basis for purposes of allocating resources and evaluating financial performance. The Company has
Note 16. RELATED PARTY TRANSACTIONS
As discussed in Note 7, the Company leases its facility from 1895 Management, Ltd., a New York corporation controlled by an entity affiliated with the Company’s chairman and major stockholder of the Company. Lease expense incurred under the operating lease for each of the three-month and nine-month periods ended September 30, 2024 and 2023 was $
On
On
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placement warrant, for aggregate gross proceeds of approximately $
On
On September 17, 2024, the Company entered into the Inducement Letter Agreements as described in Note 10 above. FCMI and Vaccinex (Rochester), L.L.C. participated in the transactions contemplated by the Inducement Letter Agreements.
Note 17. SUBSEQUENT EVENTS
On
The Pre-Funded Warrants have an initial exercise price of $
24
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References in this Quarterly Report on Form 10-Q, or this Report, to the “Company,” “we,” “our,” or “us” mean Vaccinex, Inc. and its subsidiaries except where the context otherwise requires You should read the following discussion and analysis of financial condition and results of operations together with our condensed financial statements and related notes included elsewhere in this Report, as well as the audited financial statements, related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations and other disclosures included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, or the Annual Report.
Cautionary Note Regarding Forward-Looking Statements
The following discussion and other parts of this Report contain forward-looking statements that involve risk and uncertainties, such as statements of our plans, objectives, expectations, and intentions. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “expects,” “plans,” “anticipate,” “believes,” “estimates,” “potential,” or “continue,” or the negative of these terms or other comparable terminology. Forward-looking statements include, but are not limited to, statements about:
25
Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. These statements are only current predictions and are subject to known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance, or achievements to be materially different from those anticipated by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the risk factors identified in the “Risk Factors” section of this Report, and in Part I, Item 1A of the Annual Report on Form 10-K, as well as in our other filings with the Securities and Exchange Commission, or SEC. The forward-looking statements speak only as of the date they were made. Except as required by law, after the date of this Report, we are under no duty to update or revise any of the forward-looking statements, whether as a result of new information, future events or otherwise. We qualify all of our forward-looking statements by the foregoing cautionary statements.
Common Stock Reverse Splits
On September 25, 2023, the Company effected a 1-for-15 reverse stock split of its issued shares of common stock. On February 19, 2024, the Company effected a second reverse split of shares of the Company's common stock on a 1-for-14 basis. All per share amounts, common shares outstanding, warrants, and stock-based compensation amounts for all periods presented have been retroactively adjusted to reflect these reverse stock splits. The shares of common stock retain a par value of $0.0001 per share.
Company Overview
We are a clinical-stage biotechnology company engaged in the discovery and development of targeted biotherapeutics to treat serious diseases and conditions with unmet medical needs, including neurodegenerative diseases, cancer, and autoimmune disorders. We believe we are the leader in the field of semaphorin 4D, or SEMA4D, biology and that we are the only company targeting SEMA4D as a potential treatment for neurodegenerative diseases, cancer, and autoimmune disorders. SEMA4D is an extracellular signaling molecule that regulates the activity of immune and inflammatory cells at sites of injury, cancer, or infection. We are leveraging our SEMA4D antibody platform and our extensive knowledge of SEMA4D biology to develop our lead product candidate, pepinemab, an antibody that we believe utilizes novel mechanisms of action. We are focused on developing pepinemab for the treatment of Alzheimer’s disease, Huntington’s disease, head and neck cancer, and pancreatic cancer. Additionally, third party investigators are studying pepinemab in clinical trials in breast cancer, as well as in “window of opportunity” studies in other indications, including head and neck cancer, and melanoma. We have developed multiple proprietary platform technologies and are developing product candidates to address serious diseases or conditions that have a substantial impact on day-to-day functioning and for which treatment is not addressed adequately by available therapies. We employ our proprietary platform technologies, including through our work with our academic collaborators, to identify potential product candidates for sustained expansion of our internal product pipeline and to facilitate strategic development and commercial partnerships.
Our lead platform technologies include our SEMA4D antibody platform and our ActivMAb antibody discovery platform. Our lead product candidate, pepinemab, is currently in clinical development for the treatment of Alzheimer’s disease, head and neck, pancreatic and breast cancer, through our efforts or through investigator-sponsored trials. Our additional product candidates, VX5 (CXCL13 Mab) and CXCR5 Mab are in earlier stages of development and were selected using our ActivMAb platform. We believe our multiple platform technologies position us well for continued pipeline expansion and partnership opportunities going forward.
We have generated a limited amount of service revenue from collaboration agreements but have not generated any revenue from sales of our product candidates to date. We continue to incur significant development and other expenses related to our ongoing operations. As a result, we are not and have never been profitable and have incurred losses in each period since our inception, resulting in substantial doubt in our ability to continue as a going concern. We reported a net loss of $5.7 million and $4.9 million for the three months ended September 30, 2024 and 2023, respectively, and a net loss of $15.3 million and $16.9 million for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, and December 31, 2023, we had cash and cash equivalents of $2.9 million and $1.5 million, respectively. We expect to continue to incur significant losses for the foreseeable future, and we expect these losses to increase as we continue our research and development of, and seek regulatory approvals for, our product candidates. We may also encounter unforeseen expenses, difficulties, complications,
26
delays, and other unknown factors which may adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenues, if any.
Our recurring net losses and negative cash flows from operations raised substantial doubt regarding our ability to continue as a going concern within one year after the issuance of our condensed financial statements for the three and nine months ended September 30, 2024. Until we can generate sufficient revenue from the commercialization of our product candidates, we expect to finance our operations through the public or private sale of equity, debt financing or other capital sources, such as government funding, collaborations, strategic alliances, divestment of non-core assets, or licensing arrangements with third parties. To date, we have relied on equity and debt financing to fund its operations, in addition to capital contributions from noncontrolling interests and a limited amount of service revenue from collaboration agreements.
In August 2024, we called for cancellation the public warrants and the private placement warrants pursuant to terms of the warrants permitting us to call the warrants for cancellation following the announcement of a statistically significant increase in FDG-PET signal in patients in our SIGNAL-AD trial of pepinemab for the treatment of Alzheimer’s disease. All of the public warrants and private placement warrants not exercised pursuant to the Inducement Letter Agreements were thereafter canceled in September 2024. As of September 30, 2024, none of the private placement warrants or the public warrants were outstanding. A holder of certain of the warrants that we called for cancellation has notified us that it believes that the warrants it held are still outstanding. The number of shares represented by these canceled warrants represents approximately 8% of our outstanding shares as of September 30, 2024, on a pre-issuance basis. Should this misunderstanding continue and a resolution be required and reached, there could be adverse impacts to the Company, including the payment of damages or the issuance of additional shares of common stock.
On September 17, 2024, we entered into the Inducement Letter Agreements with the Holders of the Existing Warrants. Pursuant to the Inducement Letter Agreements, the Holders agreed to exercise for cash the Existing Warrants at a reduced exercise price of $5.636 per share in consideration of our agreement to issue the New Warrants to purchase up to 1,601,238 shares of common stock, which were issued and sold in a private placement at a price of $0.125 per New Warrant. Each New Warrant had an initial exercise price equal to $5.636 per share, was immediately exercisable, and expires September 18, 2029. The gross proceeds to us from the exercise of the Existing Warrants and the sale of the New Warrants were approximately $6.2 million, prior to deducting financial advisory fees and estimated transaction expenses. FCMI Parent Co. (“FCMI”), which is controlled by Albert D. Friedberg, the chairman of our board of directors, and Vaccinex (Rochester) L.L.C., which is majority owned and controlled by Dr. Maurice Zauderer, our President, Chief Executive Officer, and a member of our board of directors, participated in the transactions contemplated by the Inducement Letter Agreements.
On March 28, 2024, we entered into a securities purchase agreement with Alzheimer’s Drug Discovery Foundation pursuant to which we sold shares of a newly designated series of convertible preferred stock, our Series A Preferred Stock, and warrants to purchase up to 229,057 shares of our common stock for an aggregate purchase price of $1.75 million.
On March 27, 2024, we entered into a securities purchase agreement pursuant to which we issued and sold 193,000 shares of our common stock in a public offering together with warrants to purchase up to 193,000 shares of common stock in a concurrent private placement at a combined price of $7.77 per share and accompanying warrant for an aggregate purchase price of approximately $1.5 million. Separately on March 27, 2024, we entered into a securities purchase agreement in a different form pursuant to which we sold 159,683 shares of common stock and warrants to purchase up to 159,683 shares of common stock in a private placement at a combined price of $7.77 per share and accompanying warrant for an aggregate purchase price of approximately $1.25 million. FCMI and Vaccinex (Rochester) L.L.C. purchased shares of our common stock and accompanying warrants in the latter transaction.
On February 6, 2024, we entered into a securities purchase agreement pursuant to which we issued and sold 274,182 shares of our common stock together with warrants to purchase up to 274,182 shares of common stock at a combined price of $10.15 per share and accompanying warrant and (ii) pre-funded warrants to purchase up to 90,363 shares of common stock together with warrants to purchase up to 90,363 shares of our common stock at a combined price of $10.1486 per pre-funded warrant and accompanying warrant, for aggregate gross proceeds of
27
approximately $3.7 million. FCMI and Vaccinex (Rochester) L.L.C. purchased 118,227 and 29,557 shares of our common stock and accompanying warrants, respectively, in the February 2024 offering for an aggregate purchase price of $1.5 million.
Our cash and cash equivalents were $2.9 million and total current assets were $4.8 million at September 30, 2024, which will be insufficient to fund our planned operations through one year of the date that these condensed financial statements are available for issuance. See Note 1 of our unaudited condensed financial statements. There can be no assurances that we will be able to secure additional financing when needed, or if available, that it will be sufficient to meet our needs or on favorable terms.
Nasdaq Deficiency Notice
On April 11, 2024, the Company received a letter from the Listing Qualifications staff of Nasdaq notifying the Company that based on the financial statements contained in its Form 10-K for the year-ended December 31, 2023, it no longer complies with the requirement under Nasdaq Listing Rule 5550(b)(1) to maintain a minimum of $2.5 million in stockholders’ equity for continued listing on the Nasdaq Capital Market (the “Equity Standard”) or the alternative requirements of having a market value of listed securities of $35.0 million or net income from continuing operations of $500,000 in the most recently completed fiscal year or two of the last three most recently completed fiscal years (the “Alternative Standards”) , and may be subject to delisting. The notification letter had no immediate effect on the Company’s listing on the Nasdaq Capital Market and the Company timely submitted a plan to regain compliance with the Equity Standard.
On June 5, 2024, Nasdaq notified the Company that it has been provided an extension to regain and evidence compliance with the Equity Standard on or before September 30, 2024. As of September 30, 2024, we had a stockholders' deficit of $1.3 million. On October 7, 2024, the Company received a letter from the Nasdaq Listing Staff stating that the Company had not regained compliance with the Equity Standard or the Alternatives Standards and that, as a result, unless the Company timely requested an appeal of this determination to a Nasdaq Hearings Panel, Nasdaq would move to suspend trading of the Company’s common stock and to have the Company’s securities delisted from the Nasdaq Capital Market. The Company timely appealed the determination, which automatically stayed any suspension or delisting action pending the Hearings Panel’s decision and the expiration of any additional extension period granted by the Hearings Panel following the hearing set for December 5, 2024. As a result, the Company’s common stock is expected to remain listed on the Nasdaq Capital Market through at least that time. However, there can be no assurance that the Hearings Panel will grant the Company’s request for continued listing or that the Company will be able to demonstrate compliance with the Equity Standard or the Alternative Standards within any additional compliance period that may be granted by the Hearings Panel.
Clinical Update
Alzheimer's Disease
The Company initiated a randomized, placebo-controlled, multi-center phase 1/2a clinical study of pepinemab in AD, or the SIGNAL-AD trial, in 2021. On March 28, 2024, we entered into a second agreement with Alzheimer’s Drug Discovery Foundation pursuant to which we sold shares of a newly designated series of convertible preferred stock, our Series A Preferred Stock, and warrants to purchase up to 229,057 shares of our common stock for an aggregate purchase price of $1.75 million. This trial is based on evidence from the SIGNAL clinical trial in HD that showed treatment with pepinemab reduced cognitive decline and induced a sharp increase in glucose metabolism in the brain during HD disease progression as detected by conventional FDG-PET imaging. Previous studies in AD have shown that decline in glucose metabolism correlates with cognitive decline. In April 2023, we reached our enrollment target for the Phase 1b/2 SIGNAL-AD study evaluating pepinemab as a potential treatment for people with Mild Cognitive Impairment (MCI) or mild dementia due to AD. On April 25, the Company provided an update regarding plans for analysis of biomarkers and clinical outcome measures during a presentation at 12th Annual Alzheimer’s & Parkinson’s Drug Development Summit. All 50 participants have completed 12-months of treatment on June 30, 2024, and SIGNAL-AD topline data was reported by Eric Siemers, MD, Principal Investigator of the SIGNAL-AD trial at the Alzheimer's Association International Conference in Philadelphia on July 31, 2024. Additional efficacy data for SIGNAL-AD was reported by Elizabeth Evans, PhD, Senior VP Discovery and
28
Translational Research and Chief Operating Officer on October 31, 2024, at the Clinical Trials on Alzheimer’s Disease Conference in Madrid, Spain.
An important secondary endpoint of the study was to determine whether pepinemab prevents decline in brain metabolic activity consistent with blocking astrocyte reactivity as evidenced by an increase in FDG-PET imaging signal in a major brain region known to be affected by disease progression. This was determined over the course of 12-months of treatment with pepinemab relative to placebo. Pepinemab treatment resulted in a statistically significant increase (p=0.0297) in FDG-PET signal in the medial temporal cortex of patients with Mild Cognitive Impairment (MCI) due to AD. The medial temporal region of brain includes hippocampus and entorhinal cortex, known to be affected during early disease progression in many patients with MCI. A similar significant result of pepinemab treatment on brain metabolic activity was previously shown in our phase 2 study of HD, which we believe highlights mechanistic similarities in the pathology of these two neurodegenerative diseases.
Although the present study was not sufficiently powered to detect cognitive effects or changes in some additional secondary endpoints with statistical significance, we previously reported that, in a larger study that enrolled approximately 90 HD patients/arm with early symptoms of cognitive deficits, seemingly similar to MCI in AD, pepinemab treatment improved performance on key cognitive and psychological measures.
We believe that results of the SIGNAL-AD study demonstrate that pepinemab has a similar effect in Alzheimer’s to those we previously described for a key outcome in Huntington’s disease, preventing the characteristic disease-related decline of brain metabolic activity in a brain region known to be affected early in disease progression. This positive data release suggests that pepinemab has the potential to benefit patients with MCI due to AD. AD and HD share important pathological features and clinical symptoms, and we believe that our approach of confirming similar treatment effects of pepinemab in these two different neurodegenerative diseases is strongly supportive of pepinemab as a potentially well-tolerated and effective treatment for both Alzheimer’s and Huntington’s disease.
Our study indicates that pepinemab may be most effective in patients with early stage symptoms, e.g., Mild Cognitive Impairment (MCI) or Mild Dementia due to AD. This suggests that a promising treatment strategy would be to identify people with MCI as early as possible and to treat with pepinemab to keep them from progressing for as long as possible. We believe that, to date, no disease modifying therapy has been shown to be effective in later stages of AD dementia.
The Alzheimer’s Association estimates that 12% to 18% of people age 60 or older are living with MCI due to AD and that about one-third of these patients will develop dementia within five years. A drug that can slow progression of MCI could significantly extend a rewarding and productive life for people at risk.
Pepinemab has been well-tolerated in clinical trials that enrolled a total of more than 600 patients primarily in neurological indications, AD, HD, and MS. Current concerns about the limitations of treatment with approved anti-Aβ amyloid antibodies such as Leqembi™ (Eisai and Biogen) and Kisunla™ (Eli Lilly) might make pepinemab, if approved, attractive as either an alternative for patients at high risk for adverse events related to treatment with Leqembi or Kisunla, and could also be a complementary treatment to enhance benefit of such anti-Aβ antibodies to patients.
Cancer
As prespecified in the study protocol, the Company analyzed interim data from the first 36 patients in the open-label, single-arm, Phase 2 KEYNOTE B-84 study (NCT04815720) evaluating pepinemab and KEYTRUDA™ in immunotherapy naïve patients with recurrent or metastatic head and neck squamous cell carcinoma (HNSCC). The study was based on preclinical and clinical studies demonstrating that antibody blockade of semaphorin 4D (SEMA4D) in combination with immune checkpoint inhibitors (ICI) promotes infiltration of CD8+ cytotoxic T cells and inhibits the recruitment and function of myeloid derived suppressor cells (MDSC) in tumors, enabling enhanced ICI efficacy. The study results showed that pepinemab in combination with KEYTRUDA™ resulted in an approximately 2X increase in objective responses (ORR) and median progression free survival (PFS) in patients with hard-to-treat PD-L1-low tumors, those with combined positive score <20 (CPS<20), compared to historical response rates for ICI monotherapy in this population. ORR for the CPS<20 population was 21.1% with median PFS
29
of 5.79 months, which is almost 2X that of historical response to checkpoint monotherapy in this population, ORR 11.9% and PFS 2.2 months. In contrast, patients in the CPS>20 subgroup (n=17) responded similarly to historical ICI monotherapy data. Biopsy data suggest that treatment-induced formation of highly organized lymphoid aggregates, tertiary lymphoid structures (TLS), correlate with disease control. TLS are characterized by a high density of B cells, antigen-presenting dendritic cells and activated T cells including stem-like TCF-1+, PD-1+, CD8+ T cells whose expansion and differentiation has previously been shown to be central for response to checkpoint inhibitors. The safety of pepinemab in combination with KEYTRUDA is regularly reviewed by an independent safety committee and has to date been found to be well tolerated.
In January and March 2024, the Company and its collaborators presented posters at the ASCO Gastrointestinal Cancers Symposium and the Society for Surgical Oncology Annual Meeting, respectively:
Financial Overview
Revenue
To date, we have not generated any revenue from sales of our product candidates. The Company recorded service revenue of $52,000 and $20,000 during the three months ended September 30, 2024 and 2023, respectively. The Company recorded service revenue of $388,000 and $70,000 during the nine months ended September 30, 2024 and 2023, respectively, and $500,000 in revenue related to the achievement of a contractual milestone during the nine months ended September 30, 2023 from our collaboration agreement with Surface Oncology.
Our ability to generate revenue and become profitable depends on our ability to successfully obtain marketing approval of and commercialize our product candidates. We do not expect to generate product revenue in the foreseeable future as we continue our development of, and seek regulatory approvals for, our product candidates, and potentially commercialize approved products, if any.
Operating Expenses
Research and Development. Research and development expenses consist primarily of costs for our clinical trials and activities related to regulatory filings, employee compensation-related costs, supply expenses, equipment depreciation and amortization, consulting, and other miscellaneous costs. The following table sets forth the components of our research and development expenses and the amount as a percentage of total research and development expenses for the periods indicated.
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||||||||||||||||||
|
|
(in thousands) |
|
|
% |
|
|
(in thousands) |
|
|
% |
|
|
(in thousands) |
|
|
% |
|
|
(in thousands) |
|
|
% |
|
||||||||
Clinical trial costs |
|
$ |
1,578 |
|
|
|
50 |
% |
|
$ |
2,728 |
|
|
|
63 |
% |
|
$ |
5,173 |
|
|
|
50 |
% |
|
$ |
8,206 |
|
|
|
62 |
% |
Wages, benefits, and related costs |
|
|
1,184 |
|
|
|
37 |
% |
|
|
1,158 |
|
|
|
27 |
% |
|
|
3,586 |
|
|
|
34 |
% |
|
|
3,609 |
|
|
|
27 |
% |
Preclinical supplies and equipment depreciation |
|
|
318 |
|
|
|
10 |
% |
|
|
365 |
|
|
|
8 |
% |
|
|
1,203 |
|
|
|
12 |
% |
|
|
1,105 |
|
|
|
9 |
% |
Consulting, non-clinical trial services, and other |
|
|
84 |
|
|
|
3 |
% |
|
|
104 |
|
|
|
2 |
% |
|
|
449 |
|
|
|
4 |
% |
|
|
297 |
|
|
|
2 |
% |
Total research and development expenses |
|
$ |
3,165 |
|
|
|
|
|
$ |
4,355 |
|
|
|
|
|
$ |
10,412 |
|
|
|
|
|
$ |
13,217 |
|
|
|
|
||||
30
We expense research and development costs as incurred. We record costs for certain development activities, such as clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment. We do not allocate employee-related costs, depreciation, rental and other indirect costs to specific research and development programs because these costs are deployed across multiple product programs under research and development.
Our current research and development activities primarily relate to clinical development in the following indications:
31
Results of Operations
The following table set forth our results of operations for the periods presented (in thousands):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Revenue |
|
$ |
52 |
|
|
$ |
20 |
|
|
$ |
388 |
|
|
$ |
570 |
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
|
3,165 |
|
|
|
4,355 |
|
|
|
10,412 |
|
|
|
13,217 |
|
General and administrative |
|
|
1,439 |
|
|
|
1,499 |
|
|
|
5,324 |
|
|
|
5,250 |
|
Total costs and expenses |
|
|
4,604 |
|
|
|
5,854 |
|
|
|
15,736 |
|
|
|
18,467 |
|
Loss from operations |
|
|
(4,552 |
) |
|
|
(5,834 |
) |
|
|
(15,348 |
) |
|
|
(17,897 |
) |
Interest expense |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1 |
) |
Loss on settlement of warrants |
|
|
(1,106 |
) |
|
|
- |
|
|
|
(1,106 |
) |
|
|
- |
|
Financing costs - warrant liabilities |
|
|
- |
|
|
|
- |
|
|
|
(28 |
) |
|
|
- |
|
Change in fair value of warrant liabilities |
|
|
(71 |
) |
|
|
- |
|
|
|
1,291 |
|
|
|
- |
|
Change in fair value of derivative asset |
|
|
- |
|
|
|
- |
|
|
|
(81 |
) |
|
|
- |
|
Other (expense) income, net |
|
|
(3 |
) |
|
|
922 |
|
|
|
12 |
|
|
|
964 |
|
Loss before provision for income taxes |
|
|
(5,732 |
) |
|
|
(4,912 |
) |
|
|
(15,260 |
) |
|
|
(16,934 |
) |
Provision for income taxes |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net loss attributable to Vaccinex, Inc. |
|
$ |
(5,732 |
) |
|
$ |
(4,912 |
) |
|
$ |
(15,260 |
) |
|
$ |
(16,934 |
) |
Comparison of the Three Months Ended September 30, 2024 and 2023
Revenue
The Company recorded service revenue of $52,000 and $20,000 during the three months ended September 30, 2024 and 2023, respectively.
Operating Expenses
|
|
Three Months Ended September 30, |
|
|||||||||||||
|
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(in thousands) |
|
|
|
|
||||||||||
Research and development |
|
$ |
3,165 |
|
|
$ |
4,355 |
|
|
$ |
(1,190 |
) |
|
|
(27 |
)% |
General and administrative |
|
|
1,439 |
|
|
|
1,499 |
|
|
|
(60 |
) |
|
|
(4 |
)% |
Total operating expenses |
|
$ |
4,604 |
|
|
$ |
5,854 |
|
|
$ |
(1,250 |
) |
|
|
(21 |
)% |
Research and Development. Research and development expenses in the three months ended September 30, 2024 decreased by $1.2 million, or 27%, compared to the three months ended September 30, 2023. The decrease was primarily attributable to the winding down of the SIGNAL-AD trial, a pause in enrollment for the head and neck cancer trial, and less drug manufacturing costs.
General and Administrative. General and administrative expenses consist primarily of the necessary costs associated with maintaining the Company’s daily operations and administration of the Company’s business. General and administrative expenses in the three months ended September 30, 2024 were essentially the same when compared to the three months ended September 30, 2023.
32
Comparison of the Nine Months Ended September 30, 2024 and 2023
Revenue
The Company recorded service revenue of $388,000 and $70,000 during the nine months ended September 30, 2024 and 2023, respectively, and $500,000 in revenue during the nine months ended September 30, 2023 from our collaboration agreement with Surface Oncology.
Operating Expenses
|
|
Nine Months Ended September 30, |
|
|||||||||||||
|
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(in thousands) |
|
|
|
|
||||||||||
Research and development |
|
$ |
10,412 |
|
|
$ |
13,217 |
|
|
$ |
(2,805 |
) |
|
|
(21 |
)% |
General and administrative |
|
|
5,324 |
|
|
|
5,250 |
|
|
|
74 |
|
|
|
1 |
% |
Total operating expenses |
|
$ |
15,736 |
|
|
$ |
18,467 |
|
|
$ |
(2,731 |
) |
|
|
(15 |
)% |
Research and Development. Research and development expenses in the nine months ended September 30, 2024 decreased by $2.8 million, or 21%, compared to the nine months ended September 30, 2023. The decrease was primarily attributable to the winding down of the SIGNAL-AD trial, a pause in enrollment for the head and neck cancer trial, and less drug manufacturing costs.
General and Administrative. General and administrative expenses consist primarily of the necessary costs associated with maintaining the Company’s daily operations and administration of the Company’s business. General and administrative expenses in the nine months ended September 30, 2024 were essentially the same when compared to the nine months ended September 30, 2023.
Liquidity and Capital Resources
To date, we have not generated any revenue from sales of our product candidates. Our recurring net losses and negative cash flows from operations raised substantial doubt regarding our ability to continue as a going concern within one year after the issuance of our unaudited condensed financial statements. During the nine months ended September 30, 2024 and the year-ended December 31, 2023, we have generated a limited amount of revenue through the achievement of contractually stated milestones as well as grants, and the performance of services from collaboration agreements, including through our ActivMAb platform. See Note 1 of our unaudited condensed financial statements. Since our inception in 2001, we have relied on public and private sales of equity and debt financing to fund our operations, in addition to capital contributions from noncontrolling interests and limited-service revenue from collaboration agreements.
During the nine months ended September 30, 2024, the Company sold 208 shares of the Company’s common stock at a weighted average price per share of $10.30 through the Open Market Sale Agreement, for net proceeds of $2,077, respectively.
Additionally, during the nine months ended September 30, 2024 the Company received aggregate gross proceeds of approximately $14.1 million from (i) private placements of 433,865 shares of common stock, 90,363 pre-funded warrants and 717,228 warrants to purchase shares of common stock (ii) a public offering of 193,000 shares of common stock (iii) sale of 10 shares of our Series A Preferred Stock, and warrants to purchase up to 229,057 shares of our common stock, and (iv) exercise of warrants.
Series A Preferred Stock
On March 28, 2024, we sold shares of a newly designated series of our preferred stock, the Series A Preferred Stock. Our Series A Preferred Stock is convertible at the election of the holder at any time after the public announcement by the Company of top-line data from its SIGNAL-AD Alzheimer’s disease study (the “Data Release”) into shares of common stock at a conversion price equal to the greater of (a) $7.77 per share of common
33
stock and (b)(i) the volume weighted average price of the common stock for the last three trading days prior to delivery of the conversion notice if the common stock is traded on a trading market or if its prices are reported on OTCQB or OTCQX, (ii) the most recent bid price of the common stock if it is then traded on The Pink Open Market, or (iii) in all other cases the fair market value of the common stock as determined by an independent appraiser, which conversion right is subject to termination on the last full day preceding the proposed effective date for exercise of the Company’s redemption right or the date fixed for redemption upon a Deemed Liquidation Event (generally defined to include certain fundamental transactions involving the company including a merger or sale of substantially all of the Company’s assets) or on a liquidation, dissolution or winding up of the Company.
The Series A Preferred Stock is non-voting, has no mandatory redemption, and carries an annual 5% cumulative dividend, increasing by 2% each year, which dividend rate shall not exceed 12%. The Series A Preferred Stock will also participate on an as-converted basis in any regular or special dividends paid to holders of our common stock.
In addition, the Series A Preferred Stock has a liquidation preference equal to the greater of (i) $175,000 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A Preferred Stock (the “Original Share Price”), plus any accrued but unpaid dividends thereon, whether or not declared, together with any other dividends declared but unpaid thereon, or (ii) such amount per share as would have been payable had all shares of Series A Preferred Stock been converted into common stock immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event.
The Company also agreed that so long as the Series A Preferred Stock is outstanding, the Company will not, without the written consent of the holders of 50.1% of the Series A Preferred Stock, (i) amend, alter, or repeal any provision of the Company’s certificate of incorporation or bylaws in a manner adverse to the Series A Preferred Stock or (ii) until March 29, 2026, incur any indebtedness for borrowed money in excess of $1.0 million.
The Company has the right to redeem the Series A Preferred Stock at a price equal to the Original Share Price per share at any time after a public announcement of an increase in pepinemab-treated patients relative to placebo-treated patients, with statistical significance having a p-value of less than or equal to 0.05, in the change of the FDG-PET standard uptake value ratio for brain metabolism between baseline and month 12 as assessed by [18F]fluorodeoxyglucose (FDG)-PET in the resting state following administration of 40 mg/kg pepinemab or placebo, as applicable, as described in the protocol for the Company’s SIGNAL-AD Alzheimer’s disease study and the associated Statistical Analysis Plan, provided that (i) the holder is not in possession of any material nonpublic information that was provided by the Company or any of its directors, directors, employees, agents, or affiliates and (ii) there is an effective resale registration statement on file covering the underlying common stock.
The holders of outstanding shares of Series A Preferred Stock have no voting rights with respect to such shares of Series A Preferred Stock on any matter presented to the Company’s stockholders, except as required by law or as specifically set forth in the Certificate of Designation of Series A Preferred Stock.
Operating Capital Requirements
Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, third-party research services and amounts due to vendors for research supplies. As of September 30, 2024 and December 31, 2023, our principal source of liquidity was cash and cash equivalents in the amount of $2.9 million and $1.5 million, respectively. Given our projected operating requirements, our existing cash and cash equivalents and marketable securities, we will seek to complete an additional financing transaction or transactions in order to continue operations.
Since our inception in 2001, we have incurred significant net losses and negative cash flows from operations. For the nine months ended September 30, 2024 and 2023, we reported a net loss of $15.3 million and $16.9 million, respectively. For the nine months ended September 30, 2024 and 2023, we reported cash used in operations of $12.3 million and $13.6 million, respectively. As of September 30, 2024 and December 31, 2023, we had an accumulated deficit of $355.2 million and $339.9 million, respectively. We anticipate that we will continue to generate losses for the foreseeable future, and we expect the losses to increase as we continue the development of, and seek regulatory approvals for, our product candidates. We are subject to risks associated with the development of new
34
biopharmaceutical products, and we may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors, which may adversely affect our business.
Our recurring net losses and negative cash flows from operations, as well as forecast of continued losses and negative cash flows from operations, raised substantial doubt regarding our ability to continue as a going concern within one year after the issuance of our financial statements for the year ended December 31, 2023. Until we can generate a sufficient amount of revenue from the commercialization of our product candidates, we expect to finance our operations through the public or private sale of equity, debt financing, or other capital sources, such as government funding, collaborations, strategic alliances, divestment of non-core assets, or licensing arrangements with third parties. Our cash and cash equivalents were $2.9 million and total current assets were $4.8 million at September 30, 2024, which the Company is projecting will be insufficient to sustain its operations through one year following the date that the financial statements are issued.
Financing strategies we may pursue include, but are not limited to, the public or private sale of equity, debt financing or funds from other capital sources, such as government funding, collaborations, strategic alliances, or licensing arrangements with third parties. There can be no assurances additional capital will be available to secure additional financing, or if available, that it will be sufficient to meet our needs on favorable terms. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development of one or more of our product candidates. If we raise additional funds through the public or private sale of equity or debt financing, it could result in dilution to our existing stockholders or increased fixed payment obligations and these securities may have rights senior to those of our common stock and could contain covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license our intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Any of these events could significantly harm our business, financial condition, and prospects.
Cash Flows
The following table summarizes our cash flows for the periods presented:
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
|
|
(in thousands) |
|
|||||
Cash used in operating activities |
|
$ |
(12,254 |
) |
|
$ |
(13,642 |
) |
Cash used in investing activities |
|
|
(22 |
) |
|
|
(67 |
) |
Cash provided by financing activities |
|
|
13,647 |
|
|
|
7,445 |
|
Operating Activities. We have historically experienced negative cash flows as we have developed our product candidates and continued to expand our business. Our net cash used in operating activities primarily results from our net loss adjusted for non-cash expenses and changes in working capital components as we have continued our research and development and is influenced by the timing of cash payments for research related expenses. Our primary uses of cash from operating activities are compensation and related expenses, employee-related expenditures, third-party research services and amounts due to vendors for research supplies. Our cash flows from operating activities will continue to be affected principally by the extent to which we increase spending on personnel, research and development and other operating activities as our business grows.
During the nine months ended September 30, 2024 and 2023, operating activities used $12.3 million and $13.6 million, respectively, in cash, primarily as a result of our continued efforts of discovery and development of targeted biotherapeutics to treat serious diseases and conditions with unmet medical needs without any product revenue, resulting in a net loss of $15.3 million and $16.9 million, respectively.
Investing Activities. The investing activities during the nine months ended September 30, 2024 and 2023, were due to purchases of property and equipment.
Financing Activities. During the nine months ended September 30, 2024, financing activities provided $14.1 million, from the private placement of common stock and pre-funded warrants, with accompanying warrants, the
35
public offering of common stock and private placement of accompanying warrants, the sale of Series A Preferred Stock and accompanying warrants, and the exercise of warrants. During the nine months ended September 30, 2023, financing activities provided a net of $7.4 million, of which $6.3 million was due to private placements of common stock, $1.0 million through an award from the Alzheimer’s Drug Discovery Foundation in the form of an investment in our common stock and $0.2 million was due to the issuance of the Company’s common stock pursuant to the Open Market Sale Agreement.
Critical Accounting Policies and Estimates
Our unaudited condensed financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these condensed financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.
There have been no material changes to our critical accounting policies and significant judgments during the nine months ended September 30, 2024, other than those discussed in Note 2 of our unaudited condensed financial statements as of and for the nine months ended September 30, 2024, included elsewhere in this quarterly report on Form 10-Q.
Impact of Recent Accounting Pronouncements
For a discussion on the impact of recent accounting pronouncements on our business, see Note 2 to our unaudited condensed financial statements.
36
Item 3. Quantitative and Qualitative Disclosures about Market Risk
As a smaller reporting company, we are not required to provide the information required by this item.
Item 4. Controls and Procedures
Evaluation of disclosure controls and procedures
Our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal financial officer), with the participation of our management evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of September 30, 2024, the end of the period covered by this Form 10-Q. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2024, our disclosure controls and procedures were effective.
Changes in internal control over financial reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended September 30, 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
37
Part II - OTHER INFORMATION
Item 1A. Risk Factors
An investment in our stock involves a high degree of risk. You should carefully consider the risks set forth in this section, and in Part I, Item 1A of the Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the "Annual Report"), and all of the other information set forth in this Report, the Annual Report, and in the other reports we file with the SEC. If any of the risks contained in those reports actually occur, our business, results of operation, financial condition, and liquidity could be harmed, the value of our securities could decline, and you could lose all or part of your investment. Except as set forth below, there have been no material changes from risk factors disclosed in the Annual Report on Form 10-K. See the discussion of the Company’s risk factors under Part I, Item 1A. of the Annual Report.
We are currently not in compliance with the continued listing standards of the Nasdaq Capital Market, and if we are unable to regain compliance, our common stock will be delisted from the exchange.
Our common stock is currently listed for trading on the Nasdaq Capital Market under the symbol “VCNX." The continued listing of our common stock on Nasdaq is subject to our compliance with a number of listing standards, including Nasdaq Listing Rule 5550(b)(1) to maintain a minimum of $2.5 million in stockholders’ equity (the “Equity Standard”) or the alternative requirements of having a market value of listed securities of $35 million or net income from continuing operations of $500,000 in the most recently completed fiscal year or two of the last three most recently completed fiscal years (the “Alternative Standards”). On April 11, 2024, Nasdaq informed us that based on the financial statements contained in our Form 10-K for the year-ended December 31, 2023, the Company is no longer in compliance with the Equity Standard or the Alternative Standards and we may be subject to delisting. The notification letter had no immediate effect on the Company’s listing on the Nasdaq Capital Market and the Company timely submitted a plan to regain compliance with the Equity Standard.
On June 5, 2024, Nasdaq notified the Company that it has been provided an extension to regain and evidence compliance with the Equity Standard on or before September 30, 2024. As of September 30, 2024, we had a stockholders' deficit of $1.3 million. On October 7, 2024, the Company received a letter from the Nasdaq Listing Staff stating that the Company had not regained compliance with the Equity Standard or the Alternatives Standards and that, as a result, unless the Company timely requested an appeal of this determination to a Nasdaq Hearings Panel, Nasdaq would move to suspend trading of the Company’s common stock and to have the Company’s securities delisted from the Nasdaq Capital Market. The Company timely appealed the determination, which automatically stayed any suspension or delisting action pending the Hearings Panel’s decision and the expiration of any additional extension period granted by the Hearings Panel following the hearing set for December 5, 2024. As a result, the Company’s common stock is expected to remain listed on the Nasdaq Capital Market through at least that time. However, there can be no assurance that the Hearings Panel will grant the Company’s request for continued listing or that the Company will be able to demonstrate compliance with the Equity Standard or the Alternative Standards within any additional compliance period that may be granted by the Hearings Panel.
A delisting or even notification of failure to comply with such requirements would likely have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so. In addition, the delisting of our common stock could lead to a number of other negative implications such as a loss of media and analyst coverage, a determination that our common stock is a “penny stock” which will require brokers trading in our common stock to adhere to more stringent rules and likely result in a reduced level of trading activity in the secondary trading market for our securities, and materially adversely impact our ability to raise capital on acceptable terms or at all. Delisting from Nasdaq could also have other negative results, including the potential loss of confidence by our current or prospective third-party providers and collaboration partners, the loss of institutional investor interest, and fewer licensing and partnering opportunities. In the event of a delisting, we would take actions to restore our compliance with Nasdaq’s listing requirements, but we can provide no assurance that any such action would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq’s listing requirements.
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If our common stock were no longer listed on Nasdaq, investors might only be able to trade on one of the over-the-counter markets, if at all. There is no assurance that prices for our common stock would be quoted on one of these other trading systems or that an active trading market for our common stock would exist, which would materially and adversely impact the market value of our common stock and your ability to sell our common stock.
The Series A Preferred Stock ranks senior to the Company’s common stock with respect to rights on the distribution of assets upon liquidation, dissolution and winding up.
The Series A Preferred Stock has a liquidation preference before our common stockholders equal to the greater of (i) $175,000 per share for a total of $1.75 million, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A Preferred Stock (the “Original Share Price”), plus any accrued but unpaid dividends thereon, whether or not declared, together with any other dividends declared but unpaid thereon, or (ii) such amount per share as would have been payable had all shares of Series A Preferred Stock been converted into common stock immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event. As of September 30, 2024, the holder of the shares of Series A preferred stock were entitled to a liquidation preference of $1.75 million, in the event of any liquidation, dissolution or winding up of the Company. Further, upon the occurrence of Deemed Liquidation Event (generally defined to include certain fundamental transactions involving the Company including a merger or sale of substantially all of the Company’s assets) or other liquidation of the Company, the holders of the Series A Preferred Stock will receive a distribution of the Company’s assets per their liquidation preference before any holders of common stock receive a distribution. As a result, in the event of a liquidation of the Company the proceeds received by the common stockholder may be reduced.
Shares of common stock issuable upon conversion of our Series A Preferred Stock will be dilutive to our existing shareholders upon conversion and adversely affect the market price of our common stock.
As of September 30, 2024, we had outstanding 10 shares of Series A Preferred Stock with an aggregate liquidation preference of $1.75 million. No shares of the outstanding Series A Preferred Stock are convertible before the public announcement by the Company of top-line data from its study “SEMA4D Blockade Safety and Brain Metabolic Activity in Alzheimer’s Disease (AD)” (the “Data Release”). The Data Release was made on July 31, 2024, but no shares of Series A Preferred Stock have to date been converted into shares of common stock. The issuance of common stock upon conversion of the Series A Preferred Stock would result in immediate dilution to existing holders of our common stock.
The Alzheimer’s Drug Discovery Foundation may be able to sell shares of our common stock in the public market, which may cause the market price of our common stock to decrease, and therefore make it more difficult to raise equity financing or issue equity as consideration in an acquisition.
Our registration rights agreement with the Alzheimer’s Drug Discovery Foundation requires us to register all shares of common stock held by the Alzheimer’s Drug Discovery Foundation issuable upon conversion of the Series A Preferred Stock and upon the exercise of certain warrants issued in connection with the Series A Preferred Stock under the Securities Act of 1933, as amended. The registration rights for the Alzheimer’s Drug Discovery Foundation allows it to sell its shares without compliance with the volume and manner of sale limitations under Rule 144 promulgated under the Securities Act and facilitates the resale of such securities into the public market. The market value of our common stock could decline as a result of sales by the Alzheimer’s Drug Discovery Foundation from time to time. In particular, the future sale of a substantial number of the shares of our common stock by the Alzheimer’s Drug Discovery Foundation within a short period of time, or the perception that such sale might occur, could cause our stock price to decrease, make it more difficult for us to raise funds through future offerings of our common stock or acquire other businesses in the future using our common stock as consideration for the purchase price.
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Item 6. Exhibits
INDEX TO EXHIBITS
Exhibit No. |
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Description |
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4.1 |
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10.1 |
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31.1* |
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Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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31.2* |
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Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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32.1** |
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101.INS |
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Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
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101.SCH |
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Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents
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104 |
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The cover page for the Company’s Quarterly Report on Form 10-Q has been formatted in Inline XBRL and contained in Exhibit 101 |
* Filed herewith.
** Furnished herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Vaccinex, Inc. |
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(Registrant) |
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November 14, 2024 |
By: |
/s/ Maurice Zauderer |
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Maurice Zauderer, Ph.D. |
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President & Chief Executive Officer |
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(Principal Executive Officer) |
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November 14, 2024 |
By: |
/s/ Jill Sanchez |
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Jill Sanchez, CPA |
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Chief Financial Officer |
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(Principal Financial Officer) |
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