VACCINOGEN INC - FORM 10-Q - August 14, 2015

Attached files

file	filename
EX-31 - EXHIBIT 31 - VACCINOGEN INC	v417168_ex31.htm
EX-32 - EXHIBIT 32 - VACCINOGEN INC	v417168_ex32.htm
EX-10.1 - EXHIBIT 10.1 - VACCINOGEN INC	v417168_ex10-1.htm

UNITED STATES securities and exchange commission

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2015

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to _____________

Commission File Number: 0-54997

VACCINOGEN, inc.

(Exact Name of Registrant as Specified in Its Charter)

Maryland	14-1997223
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

949 Fell Street, Baltimore, MD	21231
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s Telephone Number, Including Area Code: (410) 387-4000

(Former name, Former Address and
Former Fiscal Year, if changed since last report)

__________

Indicate by check mark whether the registrant(1) has filed all reports required 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 day.

x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

x Yes ¨ No

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

Large accelerated filter	¨	Accelerated filter ¨

Non-accelerated filter	¨ (Do not check if a smaller reporting company)	Smaller reporting company x

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

As of August 10, 2015, 36,931,533 shares of our common stock were issued and outstanding.

VACCINOGEN, INC.

FORM 10-Q

June 30, 2015

TABLE OF CONTENTS

		Page
PART I— FINANCIAL INFORMATION

Item 1.	Financial Statements	3

	Condensed Consolidated Balance Sheets as of June 30, 2015 (Unaudited) and December 31, 2014	3

	Unaudited Condensed Consolidated Statements of Operations For the three and six months ended June 30, 2015 and 2014	4

	Unaudited Condensed Consolidated Statements of Comprehensive Loss For the three and six months ended June 30, 2015 and 2014	5

	Unaudited Condensed Consolidated Statement of Changes in Stockholder’s Equity For the six months ended June 30, 2015	6

	Unaudited Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2015 and 2014	7

	Notes to Unaudited Condensed Consolidated Financial Statements	8-33

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46
Item 4.	Control and Procedures	46

PART II— OTHER INFORMATION

Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	47
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47
Item 3.	Defaults Upon Senior Securities	47
Item 4.	Mine Safety Disclosures	47
Item 5.	Other Information	47
Item 6.	Exhibits	47

SIGNATURES		48

ITEM 1. FINANCIAL STATEMENTS

VACCINOGEN INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

	June 30, 2015
	(Unaudited)			December 31, 2014
Assets

Current Assets
Cash and cash equivalents	$	928,130		$	3,040,942
Restricted cash		36,452			39,563
Inventory		98,125			99,250
Prepaid expenses and other current assets		4,031,595			2,910,476
Total Current Assets		5,094,302			6,090,231

Long-Term Assets
Prepaid income taxes		6,884,163			8,575,810
Property and equipment, net		416,032			393,046
Intangible assets, net		52,670,996			56,022,289
Total Long-Term Assets		59,971,191			64,991,145

Total Assets	$	65,065,493		$	71,081,376

Liabilities and Stockholders' Equity

Current Liabilities
Accounts payable	$	3,364,029		$	2,709,551
Financial instruments		2,571,535			1,798,184
Accrued compensation		715,459			653,294
Accrued expenses and other liabilities		647,218			374,106
Obligation under capital lease - current portion		6,076			-
Total Current Liabilities		7,304,317			5,535,135

Long-Term Liabilities
Income tax payable		7,408,899			8,814,027
Notes payable		3,000,000			3,000,000
Accrued interest		920,000			856,666
Deferred rent		66,860			-
Obligation under capital lease		36,690			-
Total Long-Term Liabilities		11,432,449			12,670,693
Total Liabilities		18,736,766			18,205,828

Commitments and Contigencies

Stockholders' Equity
Preferred stock, $0.0001 par value: 50,000,000 shares authorized; 0 shares issued and oustanding		-			-
Common stock, $0.0001 par value; 200,000,000 shares authorized; 36,912,595 and 34,962,172 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively.		3,691			3,496
Additional paid-in capital		174,991,669			164,844,066
Accumulated deficit		(128,445,275	)		(111,806,126	)
Accumulated other comprehensive loss		(221,358	)		(165,888	)
Total Stockholders' Equity		46,328,727			52,875,548
Total Liabilities and Stockholders' Equity	$	65,065,493		$	71,081,376

See accompanying notes to unaudited condensed consolidated financial statements.

VACCINOGEN INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Operations

	*Three months ended June 30,*						*Six months ended June 30,*
	2015			2014			2015			2014
Revenues	$	-		$	-		$	-		$	-

Operating Expenses:
Research and development		3,461,816			2,102,699			6,424,382			4,122,828
General and administrative expenses		7,396,248			986,842			9,302,506			1,694,768

Total Operating Expenses		10,858,064			3,089,541			15,726,888			5,817,596

Loss From Operations		(10,858,064	)		(3,089,541	)		(15,726,888	)		(5,817,596	)

Gain (Loss) on Financial Instruments		1,665,930			2,841,816			(369,018	)		4,744,639

Interest Expense & Other Expenses		(170,182	)		(875,395	)		(256,719	)		(1,728,280	)

Net Loss before Income Taxes		(9,362,316	)		(1,123,120	)		(16,352,625	)		(2,801,237	)

Provisions for income taxes		(150,794	)		-			(286,524	)		-

Net loss available to commmon stockholders	$	(9,513,110	)	$	(1,123,120	)	$	(16,639,149	)	$	(2,801,237	)

Net loss per common share
Basic	$	(0.26	)	$	(0.04	)	$	(0.47	)	$	(0.09	)
Diluted	$	(0.26	)	$	(0.12	)	$	(0.47	)	$	(0.24	)

Weighted average shares outstanding
Basic		36,690,712			32,048,075			35,556,995			31,777,420
Diluted		36,690,712			32,048,075			35,556,995			31,777,420

See accompanying notes to unaudited condensed consolidated financial statements.

VACCINOGEN INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Comprehensive Loss

	*Three months ended June 30,*						*Six months ended June 30,*
	2015			2014			2015			2014

Comprehensive Loss

Net loss	$	(9,513,110	)	$	(1,123,120	)	$	(16,639,149	)	$	(2,801,237	)
Foreign currency translation adjustments		(20,977	)		2,946			(55,470	)		3,033

Total Comprehensive Loss	$	(9,534,087	)	$	(1,120,174	)	$	(16,694,619	)	$	(2,798,204	)

See accompanying notes to unaudited condensed consolidated financial statements.

VACCINOGEN INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the Six Months Ended June 30, 2015

	Stockholders' Equity
	Common Stock												Total
	Shares		Amount		Additional Paid- In Capital		Accumulated Deficit			Accumulated Other Comprehensive Loss			Stockholders' Equity

Balance, January 1, 2015		34,962,172	$	3,496	$	164,844,066	$	(111,806,126	)	$	(165,888	)	$	52,875,548
Issuance of common stock for cash		934,580		94		4,245,575		-			-			4,245,669
Stock-based compensation		1,015,843		101		5,829,129		-			-			5,829,230
Service-based warrants		-		-		72,899		-			-			72,899
Other comprehensive income		-		-		-		-			(55,470	)		(55,470	)
Net Loss		-		-		-		(16,639,149	)		-			(16,639,149	)
Balance, June 30, 2015		36,912,595	$	3,691	$	174,991,669	$	(128,445,275	)	$	(221,358	)	$	46,328,727

See accompanying notes to unaudited condensed consolidated financial statements.

VACCINOGEN INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows

Six months ended June 30,	2015			2014

Cash Flows From Operating Activities
Net loss	$	(16,639,149	)	$	(2,801,237	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		57,131			22,940
Amortization of intangible assets		3,351,293			3,351,633
Loss (gain) on financial instruments		369,018			(4,744,639	)
Stock based compensation - employees		5,829,230			33,669
Warrants issued for services		72,899			73,814
Non-cash interest expense		-			1,640,570
Changes in operating assets and liabilities, net:
Accrued interest		63,333			69,870
Prepaid income tax		1,691,646			-
Accrued taxes payable		(1,405,128	)		-
Changes in restricted cash		3,110			(133	)
Inventory		1,125			-
Prepaid expenses and other assets		(854,497	)		5,687
Accounts payable and accrued expenses and liabilities		723,136			496,332
Defered Rent		66,860			-
Net Cash Used In Operating Activities		(6,669,993	)		(1,851,494	)

Cash Flows From Investing Activities
Purchases of property and equipment		(73,800	)		(1,500	)
Net Cash Used In Investing Activities		(73,800	)		(1,500	)

Cash Flows From Financing Activities

Proceeds from issuance of common stock and warrants net of issuance costs		4,650,000			2,405,000
Repayments of related party notes payable		-			(44,099	)
Repayments of Abell Loan and Bridge Loan		-			(557,101	)
Net Cash Provided by Financing Activities		4,650,000			1,803,800

Impact of foreign currency translation on cash and cash equivalents		(19,019	)		12,371

Net Decrease in Cash and Cash Equivalents		(2,112,812	)		(36,823	)
Cash and Cash Equivalents, beginning of period		3,040,942			73,096

Cash and Cash Equivalents, end of period	$	928,130		$	36,273

Supplemental Disclosure of Non-Cash Information:
Purchase of property and equipment under capital lease	$	43,400		$	-

See accompanying notes to unaudited condensed consolidated financial statements.

VACCINOGEN INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

Organization

The Business

Vaccinogen, Inc. (the “Company” or “Vaccinogen”), a biotechnology Company headquartered in Baltimore, Maryland, was incorporated in the State of Delaware during 2007 for the purpose of developing therapies and vaccines to combat cancer by using the body’s own immune system. On November 23, 2010, the Company changed its domicile from Delaware to Maryland by means of a merger of the Company with and into its wholly owned subsidiary Vaccinogen I, Inc., a Maryland corporation.

On October 10, 2007, the Company entered into a license agreement with Intracel Holdings Corporation (“Intracel”), a related party, for the exclusive and indefinite rights to use the OncoVAX® technology platform. OncoVAX® is an active specific immunotherapy (“ASI”) that uses the patient’s own cancer cells to create a vaccine that in turn is used to block the return of cancer following surgery. On October 23, 2007, Vaccinogen acquired out of bankruptcy, certain tangible assets that had been previously owned and used by Intracel’s wholly owned subsidiary in the Netherlands. These assets will be used to conduct research and development and in the commercialization of OncoVAX® to produce vaccines. In connection with the acquisition of these assets, the Company formed a wholly owned subsidiary, Vaccinogen BV, for the purposes of continuing development of OncoVAX®. In June 2010, the Company entered into an agreement with Intracel (the “Asset Transfer Agreement”) whereby the Company acquired title to the patents associated with the OncoVAX® (See Note 4).

During September 2014, three new-wholly owned entities were formed by Vaccinogen, Inc. The three entities are Vaccinogen (US) R&D, Inc. a Delaware corporation; Vaccinogen International Partners, Ltd. a Bermuda partnership and Vaccinogen Bermuda, Ltd., a Bermuda company. During January 2015, one new wholly-owned entity, Vaccinogen Ireland R&D Company, Limited was established in Ireland. The purpose of the entities is to facilitate the global commercialization of OncoVAX® and other products as they are developed and marketed by the Company.

Going Concern

The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has recurring losses and as of June 30, 2015, the Company had an accumulated deficit of approximately $128.4 million and negative working capital of approximately $2.2 million. Since inception, the Company has financed its activities principally from the proceeds from the issuance of equity and debt securities and loans from officers.

The Company’s ability to continue as a going concern is dependent upon the Company’s ability to raise additional debt and equity capital. There can be no assurance that such capital will be available in sufficient amounts or on terms acceptable to the Company. These factors raise substantial doubt about the Company's ability to continue as a going concern. The accompanying unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability of the recorded assets or the classification of liabilities that may be necessary should the Company be unable to continue as a going concern.

VACCINOGEN INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

Except for the short-term loan referenced below, since January 28, 2015 and as of August 14, 2015, no additional funding has been received and without receipt of additional capital resources and/or a substantial reduction in the Company’s cash requirements, the Company does not expect to be able to fund operations beyond September 30, 2015. The Company’s ability to continue to fund operations until September 30, 2015 assumes the Company is able to continue to delay payments consistent with its practices described below.

The Company incurred significant operating losses and negative cash flows since inception. The Company does not expect to be profitable in the next several years, but rather expect to incur additional operating losses. The Company has limited liquidity and capital resources and must obtain significant additional capital resources in order to sustain its product development efforts, for its phase IIIb clinical trial, pursuit of regulatory approvals, acquisition of capital equipment, costs to maintain office and manufacturing facilities, for general and administrative expenses and other working capital requirements. The Company relies on cash balances, the proceeds from the offering of its securities and debt financing to fund its operations. As of June 30, 2015 the Company had approximately $0.9 million in cash to fund operations. Without delaying the payment of expenses, the Company’s current monthly cash requirement has been and continues to be approximately $1,000,000. Notwithstanding this cash requirement and as a result of delayed payment of expenses, immediately prior to receipt of the funds under the loan discussed below, the Company had approximately $250,000 of cash on hand.

As discussed in more detail below in Note 14 “Subsequent Events”, the Company received an unsecured loan in the principal amount of $800,000. The loan accrues interest at 9% per annum and is required to be repaid in full by the Company, plus accrued interest, by November 10, 2015. As of August 12, 2015, including the proceeds of this loan, the Company had approximately $1.04 million of cash on hand.

The Company has recurring losses and negative cash flows from operating activities and have significant future commitments, and as a result substantial doubt exists regarding its ability to remain in operation at its current level without additional debt or equity financing. The report of BDO USA, LLP, the Company’s independent registered accounting firm, with respect to the Company’s audited consolidated financial statements at December 31, 2014 contains an explanatory paragraph as to the Company’s potential inability to continue as a going concern. Additionally, this may adversely affect the Company’s ability to obtain new financing on reasonable terms or at all.

In April 2014, the Company entered into a binding agreement (as amended, in August 2014, the “TIS Agreement”) with a Stockholm-based investor group known as The Investment Syndicate (“TIS”) under which TIS members agreed to purchase up to $80 million of the Company’s common stock and warrants, all in up to five closings, subject to certain terms and conditions. To date, a total of $20 million in equity financing has closed following Vaccinogen’s satisfaction of certain closing conditions. The TIS Agreement calls for the remaining $60 million to be paid in three separate closings upon the completion of certain milestones.

The lead TIS representative continues to indicate the desire of an existing TIS member to meet the funding obligations of TIS. Nevertheless, management has significant doubt that the existing TIS member will be able to meet the TIS funding obligations in the manner and timeframe required to address the Company’s capital needs. As previously disclosed, the TIS representative has informed the Company that the timing of the TIS funding expected to be led by such TIS member continues to be dependent upon funds the TIS member expects to receive from a third party relating to investments made and services provided by the TIS member. Notwithstanding the verbal and written assurances from TIS, that such funding will be forthcoming, given the continued and substantial delays in receiving funds, Company management is operating under the assumption that funding from this source will not be received in a manner needed to address the Company’s current capital needs and the Company will have to find other sources of funding.

The Company is currently in discussions with other parties considering debt and equity financings. One potential source of equity financing would be made pursuant to the terms of the TIS Agreement, but the investment would be made by a new TIS member. The Company, TIS and the potential investor have been in discussions regarding a possible investment since May of 2015 and such potential investor has expressed an interest in becoming a member of TIS and funding the remaining $60 million due under the TIS Agreement. Such funding source has also indicated an interest in making an investment beyond the $60 million investment.

In addition, the Company is also seeking other sources of funding, including short-term debt financing. Concurrent with the above referenced potential equity financing through the TIS Agreement, the Company is engaged in discussions with possible sources of additional short-term debt financing.

The above referenced equity and debt financing opportunities might not be available to the Company, when needed, on acceptable terms, or at all. If the Company is unable to obtain additional financing in sufficient amounts or on acceptable terms under such circumstances, it will not be able to continue its operations. The Company does not currently have sufficient capital to fund its plan of operations beyond September 30, 2015.

VACCINOGEN INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements as of June 30, 2015 and for the three and six months ended June 30, 2015 and 2014, respectively include the accounts of Vaccinogen, Inc. and its subsidiaries and have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and, therefore, omit or condense certain disclosures and other information required under generally accepted accounting principles in the United States of America (“US GAAP”) for complete financial statements. These unaudited condensed consolidated financial statements therefore should be read in conjunction with the audited consolidated financial statements and the accompanying notes for the year ended December 31, 2014, filed with the SEC on April 15, 2015.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all the adjustments and reclassifications necessary for a fair presentation for the periods presented in accordance with US GAAP. The results for the three and six months ended June 30, 2015 are not necessarily indicative of the results to be expected for the full year.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of Vaccinogen, Inc. and its wholly owned subsidiaries, Vaccinogen BV (a company incorporated in the Netherlands); Vaccinogen (US) R&D, Inc.; Vaccinogen International Partners, LP; and Vaccinogen Bermuda, Ltd.; and Vaccinogen Ireland R&D Company, Ltd. All intercompany balances and transactions have been eliminated in consolidation.

New Accounting Standards

In September 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The amendments in this Update define when and how companies are required to disclose going concern uncertainties, which must be evaluated each interim and annual period. Specifically, the ASU requires management to determine whether substantial doubt exists regarding the entity’s going concern presumption. Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued (or available to be issued). If substantial doubt exists, certain disclosures are required; the extent of those disclosures depends on an evaluation of management’s plans (if any) to mitigate the going concern uncertainty. The new standard applies prospectively, to annual periods ending after December 15, 2016, and to annual and interim periods thereafter. Early adoption is permitted. The Company has evaluated the new standard and it is not expected to have an effect on its unaudited condensed consolidated financial statements.

VACCINOGEN INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

Use of Estimates

The preparation of unaudited condensed consolidated financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in its financial statements. On an ongoing basis, the Company evaluates the estimates used in recording common stock warrant related liabilities, derivative financial instruments, stock-based compensation, and where applicable, the fair value of assets. The Company may base such estimates on various assumptions which it believes to be reasonable under the circumstances. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid securities with a maturity of three months or less at acquisition to be cash equivalents. Cash and cash equivalents include demand deposits with financial institutions and at times the amounts may exceed federally insured deposit limits. The Company has not experienced any losses and does not believe it is exposed to any significant credit risk related to demand deposits.

Restricted Cash

Restricted cash represents monies pledged by the Company’s foreign subsidiary for a lease obligation related to the manufacturing facility and to the Dutch government as required for companies with irradiator equipment.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company maintains its cash and cash equivalents with high-credit-quality financial institutions in the United States and the Netherlands.

Cash and cash equivalents in the United States are maintained at financial institutions and, at times, balances may exceed federally insured limits. All non-interest bearing cash balances were fully insured to $250,000 per depositor at each financial institution, and noninterest bearing cash balances may again exceed federally insured limits.

Cash and cash equivalents in The Netherlands are maintained at a financial institution and, at times, balances may exceed insured limits. Insurance coverage is limited to 100.000€ for all company accounts at each financial institution.

The Company has not experienced any losses with respect to cash and cash equivalents.

VACCINOGEN INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

Inventory

Inventory is reported at the lower of cost or market value. The Company analyzes its inventory and writes down inventory that has become obsolete, or has a cost basis in excess of its expected net realizable value and inventory quantities in excess of expected requirements. Inventory primarily consists of a product used in creating vaccines using the OncoVAX® technology platform to be utilized in the planned phase IIIb clinical trial and for research and development activities.

Property and Equipment

Property and equipment are recorded at cost and are depreciated or amortized over their estimated useful lives using the straight-line method. Estimated useful lives are as follows:

Machinery and equipment		3 – 5 years
Automobile		3 – 5 years
Furniture and fixtures		5 years
Computers and software		3 years
Leasehold Improvements		Shorter of lease term or useful life

Maintenance and repairs are charged to expense as incurred. Major betterments and improvements, which extend the useful life of the underlying assets, are capitalized and depreciated.

Intangible Assets

Intangible assets consist primarily of the cost of acquired patents associated with OncoVAX® to be used in research and development and the commercialization of cancer related vaccines. The Company has capitalized the cost of the acquired patents because the Company has identified alternative future research and development efforts for numerous forms of cancer which it intends to pursue and for which management believes will result in commercialization of related vaccines. Acquired patents are carried at cost less accumulated amortization. Amortization is calculated on a straight-line basis, over the estimated useful economic life of the patent, which is 12.6 years for OncoVAX®.

Impairment of Long-Lived Assets

The Company accounts for the impairment of long-lived assets in accordance with ASC No. 360, Property, Plant and Equipment, which requires that long-lived assets and certain identifiable intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. No impairment losses have been recorded in the accompanying unaudited condensed consolidated statements of operations.

VACCINOGEN INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

Capital Leases

Leases in which the Company assumes all the risks and rewards of ownership are classified as capital leases. Assets acquired under capital lease are stated at the amount equal to the lower of its fair value and the present value of the minimum lease payments at the inception of the lease, less accumulated depreciation. Depreciation of capital leases is computed using the straight-line method over the shorter of the life of the contract for which the asset was purchased or the lease term.

Foreign Currency Translation

The financial statements of foreign subsidiaries are maintained in their functional currency, which generally is the local currency. The assets and liabilities are translated to U.S. dollars using the exchange rate in effect at the balance sheet date. Revenues, expenses and cash flows of these operations are translated using average exchange rates during the reporting period which they occur. The resulting translation adjustments are reflected in other comprehensive loss.

Revenue Recognition

To date, the Company has not earned any revenues as the use of OncoVAX® to create cancer related vaccines still requires additional clinical trials and has not received regulatory approval for commercialization and sale.

Research and Development Expense

Research and development costs are expensed as incurred. Research and development expenses primarily include the amortization of intangible assets, cost of conducting clinical trials, compensation and related overhead for employees, consultants, facilities costs and the cost of materials purchased for research and development.

Stock-Based Compensation

The Company measures the cost of employee services received in exchange for stock options or restricted stock awards based upon the fair value of the award on the date of the grant. The Company recognizes the estimated grant date fair value of the award as stock-based compensation expense on a straight-line basis over the requisite service period, which is generally the vesting period.

The Company initially measures the cost of awards granted to non-employees based on the fair value of the award on the date of grant however such cost is re-measured at the end of each reporting period until performance is fully satisfied or services are rendered by the non-employee.

The fair value of stock options granted is calculated using the Black-Scholes option-pricing model, which requires the use of subjective assumptions including volatility, expected term, risk-free rate, and the fair value of the underlying common stock. The fair value of non-vested stock awards is determined based upon the estimated fair value of the Company's common stock.

VACCINOGEN INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

Income Taxes

The Company accounts for income taxes in accordance with Accounting Standards Codification Topic 740, Income Taxes. Deferred income taxes are recorded for the expected tax consequences of temporary differences between the tax basis of assets and liabilities for financial reporting purposes and amounts recognized for income tax purposes. The Company records a valuation allowance to reduce the Company's deferred tax assets to the amount of future tax benefit that is more likely than not to be realized.

As of June 30, 2015 and December 31, 2014 the Company recorded a valuation allowance equal to the full recorded amount of the Company's net deferred tax assets since it was not more likely than not that such benefits would be realized. The valuation allowance is reviewed quarterly and is maintained until sufficient positive evidence exists to support its reversal.

As required under ASC 740-270 Interim Financial Reporting, the Company has estimated its annual effective tax rate for the full fiscal year and applied that rate to its year-to-date consolidated book pre-tax ordinary income/(loss) before income taxes in determining its provision/(benefit) for income taxes. The Company recorded a provision for income taxes of approximately $0.2 million and $0.3 million for the three month period ended June 30, 2015 and the six month period ended June 30, 2015, respectively.

The tax effect of an uncertain tax position is recognized in the financial statements only if the position is more likely than not to be sustained on audit, based on the technical merits of the position. For tax positions meeting the more likely than not threshold, the amount recognized in the consolidated financial statements is the largest benefit that had a greater than 50% likelihood of being realized. As of June 30, 2015 and December 31, 2014 the recorded liability for uncertain tax positions under the measurement criteria of ASC 740, Income Taxes, was approximately $7.4 million and $8.8 million, respectively. This change of $1.4 million is comprised of the benefit of the carryback of the 2015 first and second quarter net operating losses to tax year 2014, a year-to-date benefit of approximately $1.4 million, and the benefit of the abatement on June 8, 2015 by the Internal Revenue Service for previously accrued penalties assessed for late filing of foreign informational reporting forms for tax years 2009 and 2011, second quarter benefit of $60,000, $30,000 per tax year. Within the next 12 months, management expects a reduction to the recorded liability for uncertain tax positions of approximately $1.5 million. This change is due to the carryback of the projected net operating losses of the remaining 2015 quarters to tax year 2014. The total expected reduction to the recorded liability for uncertain tax positions related to the intercompany sale of intellectual property of approximately $2.9 million is complimented with a corresponding reduction to the prepaid tax asset. This change in uncertain tax positions is not recorded in the consolidated statements of profits and loss as the uncertain tax position is the result of the 2014 intercompany sale of intellectual property. The Company reports the accrued penalties for late filings of foreign informational returns as other liabilities. The total expected reduction of $60,000 related to assessed penalties is recorded in the consolidated statements of profit and loss. The Company has recorded approximately $0.3 million and $0 in penalties and interest on the unrecognized tax benefit as of June 30, 2015 and December 31, 2014, respectively. The penalties and interest recorded on the unrecognized tax benefit relate solely to the intercompany sale of intellectual property.

It is the Company's accounting policy to account for ASC 740-10 related penalties and interest in other liabilities/expenses and does not include it in the income tax provision of consolidated statements of operations. The Company has identified its U.S. Federal income tax return, its Maryland state return and its Netherlands corporate income tax returns as its major tax jurisdictions. Tax returns for fiscal years 2007 and forward are open for examination.

VACCINOGEN INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

Financial Instruments

Warrants and Options Accounted for as Liabilities

Abell Warrants

In October 2011, the Company entered into a borrowing arrangement with The Abell Foundation (“Abell”). In connection with that arrangement, the Company also agreed to issue warrants (the “Abell Warrants”) exercisable into common stock of the Company. In February 2012, the Company and Abell amended the agreement to provide for additional borrowings (the “Abell Loan”). Between January 2013 and August 2014, the maturity of the Abell Loan was extended on various occasions and additional warrants were issued.

In connection with the promissory note issued to The Abell Foundation, the Company granted The Abell Foundation a security interest in its patents related to OncoVAX®. The promissory note was paid in full on August 25, 2014 and Abell released its security interest in Vaccinogen’s patents.

The number of shares issuable pursuant to the Abell Warrants is based upon a fixed amount of $1.1 million divided by 85% of the per share price of stock sold in the next qualifying round of venture capital financing where the total proceeds are at least $35 million. The Abell Warrants have a contractual term of 10 years and will be fully vested upon issuance.

As of June 30, 2015 and December 31, 2014, the estimated fair value of the Abell Warrants was $564,259 and $438,537, respectively. The Company recorded a gain of $249,961 and a loss of $125,722 for the three and six months ended June 30, 2015 respectively.

The Company recorded a gain of $385,667 and $625,436 for the three and six months ended June 30, 2014 respectively.

The Abell Warrants represent a fixed obligation that is to be settled through the issuance of a variable number of shares of the Company’s common stock. Consistent with the provisions of ASC Topic 480, Distinguishing Liabilities from Equity, the Company has concluded that the Abell Warrants should be accounted for as a liability. The Company is required to record the Abell Warrants at their estimated fair value at the end of each reporting period, with changes in the estimated fair value recorded in the unaudited condensed consolidated statements of operations as a component of (Loss) Gain on Financial Instruments.

Derivative Financial Instruments

The Company may enter into transactions that represent free-standing or embedded derivative financial instruments as those terms are defined in ASC Topic 815 Derivatives and Hedging (“Topic 815”). The Company records the estimated fair value of derivative financial instruments in its unaudited condensed consolidated balance sheets and records changes in the estimated fair value of derivative financial instruments as income or expense in its unaudited condensed consolidated statements of operations.

VACCINOGEN INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

Round C Warrants

From October 2012 through March 2015, the Company issued warrants to certain investors in the common stock of the Company (the “Round C Warrants”). Round C Warrants to acquire 5,077,247 shares of common stock were issued through June 30, 2015. Round C Warrants to acquire share of common stock were issued during the six months ended June 30, 2015 and 2014 were 318,182 and 156,910, respectively. The Round C Warrants have an exercise price of $6.05, a contractual term of 5 years and were fully vested upon issuance.

As of June 30, 2015 and December 31, 2014, the estimated fair value of the Round C Warrants was $2,007,276 and $1,335,363, respectively. The Company recorded a gain of $1,415,969 and a loss of $243,296 for the three and six months ended June 30, 2015 respectively.

The Company recorded gains of $755,213 and $1,130,509 for the three and six months ended June 30, 2014, respectively.

Net Loss Per Share

Basic loss per share is determined by dividing the loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration of common stock equivalents. The following common stock equivalents were excluded in the calculation of diluted loss per share because their effect would be anti-dilutive:

Six months ended June 30,	2015		2014
Stock Options		1,726,624		77,000
Abell Investment Option		909,091		934,579
Convertible debt		-		106,838
Restricted stock awards		868,514		134,278
Warrants		5,077,247		3,820,769

Dilutive loss per share is determined by dividing loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration of common stock equivalents. The net loss available to common shareholders is adjusted for gains on financial instruments, as its effect would be anti-dilutive.

VACCINOGEN INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

	Three months ended June 30, 2015
				Weighted		Loss
				Average		Per
	Net Loss			Shares		Share

Basic loss per share	$	(9,513,110	)		36,690,712	$	(0.26	)
Gain on derivatives		-

Dilutive loss per share	$	(9,513,110	)		36,690,712	$	(0.26	)

	Three months ended June 30, 2014
				Weighted		Loss
				Average		Per
	Net Loss			Shares		Share

Basic loss per share	$	(1,123,120	)		32,048,075	$	(0.04	)
Gain on derivatives		(2,841,816	)

Dilutive loss per share	$	(3,964,936	)		32,048,075	$	(0.12	)

VACCINOGEN INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

	Six months ended June 30, 2015
				Weighted		Loss
				Average		Per
	Net Loss			Shares		Share

Basic loss per share	$	(16,639,149	)		35,556,995	$	(0.47	)
Loss on derivatives		-

Dilutive loss per share	$	(16,639,149	)		35,556,995	$	(0.47	)

	Six months ended June 30, 2014
				Weighted		Loss
				Average		Per
	Net Loss			Shares		Share

Basic loss per share	$	(2,801,237	)		31,477,420	$	(0.09	)
Gain on derivatives		(4,774,639	)

Dilutive loss per share	$	(7,575,876	)		31,477,420	$	(0.24	)

Agreements with Intracel

License Agreement

On October 10, 2007, the Company entered into an agreement (the “License Agreement”) with Intracel Holdings Corporation (“Intracel”), for the exclusive and indefinite rights to license and use the OncoVAX® technology platform. OncoVAX® is an active specific immunotherapy (“ASI”) that uses the patient’s own cancer cells to block the return of cancer following surgery. In exchange for the rights to OncoVAX®, the Company (i) agreed to issue equity securities equal to 10% of the fully diluted capitalization of the Company, (ii) assumed liabilities of Intracel to Organon Teknika Corporation (“Organon”) totaling $4.0 million under an October 31, 2007 Letter Agreement between Intracel and Organon (of which $3.0 million remains outstanding) (iii) agreed to pay $450,000 in cash for settling trade payable related to the OncoVAX intellectual property, and (iv) agreed to make royalty payments to Intracel and Organon based on future sales of OncoVAX®. The terms of the securities issued to Intracel provided Intracel with anti-dilution rights with respect to its 10% ownership interest. The License Agreement also contained a provision such that if the Company obtained specified levels of financing in a specified time period, that title to OncoVAX® would transfer to the Company without further consideration. If the Company did not reach the specified levels of financing in the specified period of time, Intracel could cancel the License Agreement and could re-purchase the rights to OncoVAX®. The Company did not obtain the necessary financing in the period specified. See “Asset Transfer Agreement and Stock Exchange Agreement” below for a description of subsequent events.

VACCINOGEN INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

In connection with the License Agreement, the Company issued 1,506,750 shares of common stock valued at approximately $984,000 and assumed liabilities with an estimated value of $4,450,000. The Company estimated the fair value of the liabilities assumed based upon their face amount as these liabilities were due currently and on demand.

Asset Transfer Agreement and Stock Exchange Agreement

As a result of the Company’s inability to raise the necessary capital under the License Agreement, the Company and Intracel negotiated amended terms to the License Agreement. On June 24, 2010, the Company and Intracel entered into the Asset Transfer Agreement pursuant to which the title to all of the intellectual property associated with OncoVAX® was transferred to the Company. Under the Asset Transfer Agreement, the Company also agreed to exchange the previously issued common stock and Series AA preferred stock representing a 10% interest in the Company for shares of its Series B preferred stock equal to a 20% interest in the Company on a fully diluted basis.

The terms and conditions of the Series B preferred stock provided Intracel with anti-dilution rights with respect to its 20% ownership interest. In addition, the Company agreed that Intracel’s ownership position (and corresponding anti-dilution rights) would increase to 50% upon failure of the Company to meet certain defined milestones (the “Series B Milestones”), which included, but were not limited to, the Company attaining specified levels of additional financing.

The Company accounted for the acquisition of the rights to the OncoVAX® technology platform under the License Agreement in 2007 and the Asset Transfer Agreement in 2010 as an asset acquisition in accordance with ASC Topic 805, Business Combinations. Furthermore, as described in Note 1 to these unaudited condensed consolidated financial statements, and in accordance with ASC Topic 730, Research and Development, the Company has capitalized the cost of acquiring the rights to the OncoVAX® technology platform as these rights represent intangible assets to be used in research and development activities and for which future alternative uses exist.

In June 2010, in connection with the Asset Transfer Agreement, the Company issued 3,452,766 shares of Series B preferred stock, with an estimated value of approximately $16.8 million. The Company estimated the fair value of the common stock issued pursuant to the License Agreement and the Series B Preferred Stock issued pursuant to the Asset Transfer Agreement by considering various commonly accepted valuation techniques, including the income and market approaches.

The Company ultimately relied on the income approach, specifically, the discounted cash flow method, to estimate the value of the Company’s equity. The Company further utilized commonly used option pricing techniques to estimate the fair value of the various equity classes. The use of the income approach, and specifically the discounted cash flow method, requires management to make significant assumptions about the future level and timing of revenues, direct and indirect costs associated with continued research and development, the conduct of clinical trials, and the production and commercialization of the intended cancer vaccines. The discounted cash flow method also requires the estimation of discount rates used to reflect the risk inherent in the projected cash flows, the terminal growth rate, among other factors.

VACCINOGEN INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

The Company did not meet the Series B Milestones and consequently, in December 2010, was required to increase Intracel’s total ownership interest in the Company to 50% through the issuance of additional shares of Series B preferred stock.

In December 2010, the Company issued 10,973,612 additional shares of Series B preferred stock to Intracel when the Company failed to meet certain conditions of the Asset Transfer Agreement. The estimated value of those additional shares of approximately $63.1 million was accounted for as additional consideration and is included in the total cost of acquiring the OncoVAX® technology platform.

All shares of Series B preferred stock were converted to common stock in 2012.

As of June 30, 2015 Intracel directly owns approximately 37% of the Company on a fully diluted basis, and all directors and executive officers of Vaccinogen collectively own approximately 37% of the Company on a fully diluted basis.

In connection with the Asset Transfer Agreement, the Company entered into an Amendment to License Agreement (the “License Amendment, and together with the License Agreement, the “Amended License Agreement”) upon which significant terms of the License Agreement were terminated except the provision for royalties on future sales and we agreed to certain additional licensing payments. Generally, the royalty provisions on future sales includes an agreement to pay Intracel a running royalty on net sales of the OncoVAX® Program vaccine and related products according to the following schedule: (x) 3% of net sales on the first $350 million of net sales occurring in a calendar year; (y) 4% of that portion of net sales in the calendar year in excess of $350 million and up to and including $750 million and (z) 5% of that portion of net sales in the calendar year in excess of $750 million. The royalty provisions are in effect for as long as the OncoVAX® Program vaccine and related products are being sold by the Company. Additionally, to the extent the Company receives prepayments on future royalties, or other payments that are credible against or in lieu of future royalties (the “Prepaid Royalties), made in respect of OncoVAX® Program vaccine and related products, the Company shall pay a royalty to Intracel at the percentages set forth in the immediately preceding sentence, with net sales being equal to the net sales level that would result in payment of royalties to the Company equal to the Prepaid Royalties. Additionally, the Company agreed to pay Intracel 25% of any and all compensation received by the Company in consideration for licensing or other transfer of rights with respect to certain licensed technology and know-how, but excluding any royalties received on sales that are included under net sales and any Prepaid Royalties.

In consideration of the asset transfer, we also agreed to assume all of Intracel’s obligations to Organon. The liabilities due Organon assumed by us were (A) the remaining $3.5 million (out of $4 million) in settlement payments due Organon from Intracel (plus any accrued interest from the date of the October 31, 2007 letter agreement based on the prime lending rate in effect on the anniversary of such letter agreement), of which $500,000 had been past due and payable, but as of November 1, 2014 was written off as the payment had passed the statute of limitations. The remaining $3,000,000 is due in equal annual payments of $1 million commencing the first year after the first marketing approval of OncoVAX by the FDA or EMA and (B) a royalty of (1) 10% of the net sales of OncoVAX® until the $3.0 million (and accrued interest) settlement payment is paid and (2) 3% for five years thereafter.

VACCINOGEN INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

In connection with The Investment Syndicate (“TIS”) funding Eighty Million Dollars ($80,000,000) as contemplated by the TIS Agreement , the Company and Intracel entered into Letter Agreement, dated August 22, 2014, pursuant to which both parties agreed that effective automatically at the time TIS pays to the Company the aggregate amount of $80,000,000 in accordance with the TIS Agreement, the Amended License Agreement shall terminate and no longer be of any force or effect, and the Company shall no longer have any obligation to pay Intracel any royalties or other payments under the Amended License Agreement. Additionally, in connection with the TIS Agreement, the Company and Intracel entered into that certain Rights of First Refusal Agreement (the “ROFR Agreement”), dated August 22, 2014, under which the Company agreed to offer any new securities (as defined therein) to Intracel prior to offering them to any new investor. This right provides Intracel with the right to purchase a pro-rata amount of such new securities based on the amount of securities held by Intracel prior to the offering of such new securities. These rights do not apply to the sale of certain exempted securities (as defined therein), or any securities being sold to TIS under the TIS Agreement, unless the terms of the TIS investment are revised to lower the price or in a manner materially adverse to Intracel. The rights under the ROFR Agreement expire upon the first to occur of: (a) an initial public offering (as defined therein); (b) a change of control (as defined therein); (c) liquidation, dissolution or winding up of the business affairs of Intracel; or (d) the listing of any capital stock of the Company on an exchange.

Property and Equipment

Property and equipment consisted of the following:

*Period ended*	June 30, 2015			December 31, 2014

Machinery and equipment	$	711,930		$	740,042
Automobile		65,163			-
Leasehold improvements		264,419			258,505
Furniture and fixtures		39,585			31,764
Computers and software		139,779			119,473
		1,220,876			1,149,784

Less accumulated depreciation		(804,844	)		(756,738	)

	$	416,032		$	393,046

Depreciation expense was $30,000 and $57,131 for the three and six months ended June 30, 2015 respectively. Depreciation expense was $13,436 and $22,940 for the three and six months ended June 30, 2014 respectively.

VACCINOGEN INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

Intangible Assets

Intangible assets consist of the capitalized costs associated with the acquisition of patents related to OncoVAX® (the “Intellectual Property”) and the costs associated with website development and domain names.

Intangible assets by major asset class were as follows at June 30, 2015:

	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount

Intellectual Property	$	84,481,856	$	(31,840,234	)	$	52,641,622
Other Intangible Assets		121,944		(92,570	)		29,374

	$	84,603,800	$	(31,932,804	)	$	52,670,996

Intangible assets by major asset class were as follows at December 31, 2014:

	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount

Intellectual Property	$	84,481,856	$	(28,490,967	)	$	55,990,889
Other Intangible Assets		121,944		(90,544	)		31,400

	$	84,603,800	$	(28,581,511	)	$	56,022,289

The amortization expense for intangible assets was approximately $1.7 million and $3.4 million for both the three and six months ended June 30, 2015 and 2014. The weighted average amortization period for intangible assets was 12.6 years.

VACCINOGEN INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

The estimated future amortization relating to all intangible assets that are recorded in the unaudited condensed consolidated balance sheets as of June 30, 2015 is as follows:

*Years ending December 31,*

2015	$	3,351,223
2016		6,702,449
2017		6,702,449
2018		6,702,449
2019		6,702,449
Thereafter		22,509,977
	$	52,670,996

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:

	June 30, 2015		December 31, 2014

Prepaid Clinical Trial expense	$	3,480,647	$	2,477,571
Prepaid Other		550,948		432,905
	$	4,031,595	$	2,910,476

The prepaid balance for 2015 and 2014 consists primarily of payments made under the Company’s contract with RXTRIALS, Inc. d/b/a OnPoint CRO of approximately $3.1 million. The prepaid balance will be expensed as services are rendered.

Notes Payable

Notes payable at June 30, 2015 and December 31, 2014 represents payable to Organon, currently owned by Merck & Co, Inc., an entity that manufactures a key component used with the OncoVAX® technology. In 2007, in conjunction with the Agreement with Intracel, the Company assumed $4.0 million of related liabilities from Intracel due to Organon (“Organon Obligation”). Of the $4.0 million due to Organon, $500,000 was paid at the time of the Agreement. The remaining $3.5 million was due in installments (with $500,000 (plus accrued interest) payable the first year but no later than one year after the License Agreement date of October 31, 2007. Commencing one year after the earlier of the first marketing approval of OncoVAX® by the United States Food and Drug Administration or the European Medicines Agency or October 31, 2007, Vaccinogen would make an annual payment of $1.0 million to Organon until repayment of the entire liability amount. The obligation accrued interest based on a simple annual interest rate based on the US prime lending rate in effect on the anniversary date of the agreement, or October 31, 2008, which was 4.00%. Interest expense under this agreement was approximately $33,000 and $63,000 for the three and six months ended June 30, 2015 respectively. Interest expense under this agreement was approximately $35,000 and $70,000 for the three and six months ended June 30, 2014 respectively. The accrued interest on this obligation is included on the unaudited condensed consolidated balance sheets as a component of Accrued Interest. This obligation was secured by the OncoVAX® Intellectual Property.

VACCINOGEN INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

While the Company did not pay the $500,000 installment due one year after the License Agreement, no event of default has been declared by Organon or its successors including Merck & Co, Inc. and the statute of limitations expired on November 1, 2014. As of that date, the $500,000 installment due was included in Other Income and the related accrued interest of $140,000 was recorded as a reduction in interest expense. Since payments are subject to future events which will not occur within the next twelve months, the principal and accrued interest has been classified as a long term liability in the accompanying unaudited condensed consolidated balance sheets.

Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction occurring in the most advantageous market. The Company determines fair value based on a hierarchy that priorities valuation techniques used to measure fair value based on observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources. Unobservable inputs reflect assumptions based on the best information available.

The three levels of the fair value hierarchy are:

Level 1 — Inputs are quoted prices for identical assets or liabilities in an active market

Level 2 — Inputs include quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (interest rates and yield curves), and inputs that are derived principally from or corroborated by observable market data correlation or other means

Level 3 — Inputs that are unobservable and significant to the fair value measurement

The Company is required to record or disclose the fair value of certain assets and liabilities. The fair value guidance described above is used in measuring and recording the fair value of the liability associated with the Abell and the Round C Warrants. This fair value guidance also applies to the disclosure of the fair value of financial instruments not otherwise recorded in the Company’s unaudited condensed consolidated balance sheets at fair value.

VACCINOGEN INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

The Company’s financial instruments measured on a recurring basis using fair value estimates are as follows:

			June 30, 2015
Description	Total		Level 1		Level 2		Level 3

Abell Warrants	$	564,259	$	-	$	-	$	564,259
Round C Warrants		2,007,276		-		-		2,007,276

	$	2,571,535	$	-	$	-	$	2,571,535

			December 31, 2014
Description	Total		Level 1		Level 2		Level 3

Abell Warrants	$	438,537	$	-	$	-	$	438,537
Round C Warrants		1,359,647		-		-		1,359,647

	$	1,798,184	$	-	$	-	$	1,798,184

The following is a reconciliation of the fair value measurements from January 1, 2015 to June 30, 2015:

	Abell Warrants		Round C Warrants

Balance, January 1, 2015	$	438,537	$	1,359,647
Issuance of securities		-		404,333
Fair value change included in earnings		125,722		243,296

Balance, June 30, 2015	$	564,259	$	2,007,276

VACCINOGEN INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

The following is a reconciliation of the fair value measurements from January 1, 2014 to December 31, 2014.

	Abell Warrants			Round C Warrants			Bridge Loan			Abell Option

Balance, January 1, 2014	$	1,615,835		$	1,796,427		$	990,000		$	7,392,528
Issuance of securities		37,529			2,025,313			-			-
Repayment/extinguishment of debt		-			-			(1,100,000	)		(3,168,224	)
Fair value change included in earnings		(1,214,827	)		(2,462,093	)		110,000			(4,224,304	)

Balance, December 31, 2014	$	438,537		$	1,359,647		$	-		$	-

Quantitative Information

Quantitative information as of June 30, 2015 with respect to financial instruments measured and carried at fair value on a recurring basis with the use of significant unobservable inputs (Level 3) are as follows:

Level 3 - Significant Unobservable Inputs
Description	Fair Value		Principal Valuation Techniques	Unobservable Inputs	Range (Weighted Average)

Abell Warrants	$	564,259	Black-Scholes	Strike price Equity volatility	N/A
Round C Warrants	$	2,007,276	Black-Scholes	Strike price Equity volatility	N/A

VACCINOGEN INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

Abell Warrants and Round C Warrants

The fair value of the Abell Warrants and the Round C Warrants are estimated at the end of each reporting period using an option pricing model. More specifically, the Black-Scholes option pricing model was utilized in the valuation of both the Abell Warrants and the Round C Warrants. The following assumptions were used:

	Abell Warrants						Round C Warrants
*Six months ended June 30,*	2015			2014			2015			2014

Volatility		93	%		85	%		72% - 86	%		85	%
Exercise price	$	4.55		$	4.55		$	5.88-$5.96		$	5.88
Stock price at March 31	$	2.79		$	4.68		$	2.79		$	4.68
Risk free interest rate		1.94	%		2.53	%		0.76% - 1.32	%		0.97% - 1.62	%
Dividend yield		0	%		0	%		0	%		0	%
Expected life		10			10			2.32 - 4.58			3.3 -5.0

The exercise price of the Abell Warrants is ultimately dependent upon the per share price and size of future rounds of equity financing. The Black-Scholes option pricing model was used to value the Abell Warrants as management believes that it can reasonably estimate the terms and conditions of future equity offerings that would impact the valuation of the Abell Warrants. Management’s ability to estimate these terms is based in part upon the terms and conditions of binding agreements to raise future equity capital in place at the time of each valuation.

The Round C Warrants include a form of anti-dilution protection that may result in future adjustments to the terms of the warrants.

The fair value calculations include the use of both observable and estimated inputs. There remains an inherent subjectivity in the development of the strike price used for both the Abell and Round C Warrants. Therefore, the Company considers the derived fair value to have been determined using Level 3 inputs.

Significant changes to the assumptions used in the Company’s model would result in changes in the fair value of the Abell Warrants and the Round C Warrants.

Disclosure of the Fair Value of Financial Instruments

Cash and cash equivalents and accounts payable, are carried at amounts that approximate their fair values due to the short term nature of these financial instruments. The fair value of the Organon Obligation approximates its carrying value as the note repayment schedule is contingent on future events, which are indeterminable.

VACCINOGEN INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

10.

Stockholders’ Equity

In August 2012, the Company amended and restated its Certificate of Incorporation to increase the number of shares authorized for issuance to 200,000,000 shares of common stock with a par value $.0001 and 50,000,000 shares of preferred stock with a par value of $.0001 per share.

Round C Common Stock

The subscription agreement for the Company’s most recent financing, beginning October 2012, through the issuance of common stock (“Round C”) provides a form of anti-dilution protection to subscribers. The anti-dilution rights are determined to be clearly and closely related to the Round C common stock as that term is defined in Topic 815 and as a result these rights are not required to be accounted for as a free standing derivative financial instrument.

The Company filed a Form S-1 Registration Statement with the SEC, which became effective on October 31, 2013. The Effectiveness Date Market Price of Vaccinogen stock as of that date was $5.35. Pursuant to the protection provided to subscribers prior to October 31, 2013, 27,213 adjustment shares were issued. All subscriptions subsequent to the October 31, 2013 effective date through June 30, 2015 have been issued adjustment shares, including 25,489 adjustment shares issued for the six months ended June 30, 2015. All of the adjustment shares are included in the calculation of total shares issued or outstanding for the periods ended June 30, 2015 and December 31, 2014.

The Company has closed the Round C Private Placement Offering of $30,800,000 (5,600,000 Units) as of January 31, 2015.

11.

Stock-Based Compensation

Restricted Stock

For the service period of August 2010 through August 2014, the Company authorized 179,969 shares of restricted common stock to directors. As of the date hereof, in lieu of restricted common stock, the Company has authorized 179,969 shares of common stock. As of June 30, 2015 the Company has issued 156,486 shares of the authorized common stock upon forfeiture of 156,486 restricted common stock shares.

The Company records compensation expense for the award of restricted stock based upon the awards fair value determined as the difference in the estimated fair value of the Company’s common stock and the price paid by the employee, if any, generally on the date of grant. The fair value of restricted stock awards is recognized as compensation expense over the service period which is generally the same as the vesting period. No compensation expense related to awards with service based vesting was recorded for the three and six months ended June 30, 2015, respectively.

The following table summarizes activity related to restricted-stock awards for the six months ended June 30, 2015 and 2014. The weighted average fair values for the awards below are based on the fair value at the grant date of the respective awards, which is equal to the value of the Company’s common stock on such date.

VACCINOGEN INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

*Six months ended June 30,*	2015					2014
	Shares			Weighted Average Fair Value		Shares		Weighted Average Fair Value

Balance, January 1		179,969		$	3.36		134,278	$	3.91
Granted		845,031		$	3.90		-	$	-
Vested		-		$	-		-	$	-
Forfeitures		(156,486	)	$	-		-	$	-

Balance, June 30		868,514		$	3.94		134,278	$	3.91

As of June 30, 2015 and 2014, total unrecognized compensation costs related to nonvested restricted stock awards to purchase 868,514 shares and 134,278 shares of common stock was approximately $3,237,540 and $430,000, respectively. The nonvested restricted stock awards have a weighted average remaining contractual term of 7.14 years and 6.96 years as of June 30, 2015 and 2014, respectively. During the three and six months ended June 30, 2015 156,486 share awards were issued as common stock, not restricted stock. No awards vested during the three and six months ended June 30, 2014, respectively.

On November 15, 2014, the Board of Directors (“BOD”) resolved to grant 179,969 common stock shares to former directors in lieu of restricted stock. The grant date is the date at which the former directors countersigned grant agreements, which as of June 30, 2015 ranged from April to June 2015. Total recognized value of the award amounted to $535,207 which was recorded as stock compensation expense, of which $535,192 is recognized as additional paid-in capital, in the three and six months ended June 30, 2015.

On April 20, 2015, the BOD awarded 716,291 restricted stock units (“RSU”) to the Company’s president with an exercise price of $3.90 per unit. The Company valued the RSU $2,793,535 using the Black-Scholes model. The RSU vests 25% on the second anniversary, 25% on the third anniversary and 50% on the fourth anniversary of the grant. For the three and six months ended June 30, 2015, the Company recognized $137,737 as compensation expense of which $137,665 was recorded as additional paid-in capital.

On the same date, the BOD awarded RSU to the Company’s president and Board Chairman Emeritus 61,432 and 67,308 RSU respectively, with an exercise price of $3.90 per unit. The Company valued the RSU $502,086 using the Black-Scholes model. The RSU vests 50% on the first anniversary and 50% on the second anniversary of the grant. For the three and six months ended June 30, 2015, the Company recorded $49,511 as compensation expense of which $49,498 was recorded as additional paid-in capital.

Common Stock

On April 20, 2015 date, the BOD awarded 14,326 common stock shares to the Company’s directors in lieu of certain director compensation totaling $55,871. The common stock vested on the grant date. For the three and six months ended June 30, 2015, the Company recorded $55,870 as additional paid-in capital.

Stock Option Pool

The Company recorded stock-based compensation in the amount of $47,165 and $78,478 for the three and six months ended June 30, 2015, respectively. For the three and six months ended June 30, 2015, $2,093 and $2,959 was allocated to General & Administrative expense with $45,072 and $75,519 was allocated to Research & Development, respectively.

The Company recorded stock based compensation in the amount of $11,066 and $33,669 for the three and six months ended June 30, 2014, respectively. For the three and six months ended June 30, 2014, $4,477 and $9,554 was allocated to General & Administrative expense with $6,589 and $24,115 allocated to Research & Development, respectively.

Total compensation cost for unvested stock option awards outstanding at June 30, 2015 was approximately $749,390 to be recognized over approximately 3.0 years.

The Company uses the Black-Scholes option pricing model to calculate the fair value of options. The significant assumptions for options issued in 2015, used in this model include:

VACCINOGEN INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

Annual Dividend	-
Expected life (in years)	6.25 – 10.00
Risk free interest rate	1.35% - 2.17%
Expected volatility	80% - 93%

On April 20, 2015, the BOD awarded stock options to the Company’s president and non-employee directors to purchase 1,493,374 and 145,000 of the Company’s stock with an exercise price of $5.50 and $3.90 per share respectively. The Company valued the stock options $4,940,000 and $493,243 using the Black-Scholes model, respectively. The option granted to the president is 100% vested upon issuance and the options granted to the directors vest in three years. These options are exercisable for a period of 10 years. The Company recorded $4,940,000 and $32,426, respectively as compensation expense and additional paid-in capital.

The following table summarizes the Stock Option pool activity for the six months ended June 30, 2015 and 2014.

	2015							2014
	Shares			Weighted Average Exercise Price		Weighted Average Remaining Life		Shares		Weighted Average Exercise Price		Weighted Average Remaining Life
Balance, January 1		177,000		$	6.44		8.72		77,000	$	7.00		3.45
Granted		1,698,374		$	5.31		9.68		-	$	-		-
Forfeited		(3,750	)	$	7.00		-		-	$	-		-
Balance, June 30		1,871,624		$	5.28		9.55		77,000	$	7.00		3.20

Stock Purchase Warrants

From time to time the Company has issued stock purchase warrants to non-employees in exchange for services. As of June 30, 2015 and 2014 there are 895,575 and 820,575, respectively, warrants issued and outstanding with exercise prices ranging from $1.00 to $7.50. To date, all warrants have been issued with the exercise price at least equal to the then estimated fair value of the underlying security, and had contractual terms ranging from 2.5 to 6.7 years.

The following table summarizes the stock purchase warrant activity for the six months ended June 30, 2015 and 2014.

	2015				2014
	Shares		Weighted Average Fair Value		Shares		Weighted Average Fair Value

Balance, January 1		820,575	$	1.60		785,575	$	1.48
Granted		75,000	$	2.01		35,000	$	4.22

Balance, June 30		895,575	$	1.64		820,575	$	1.72

VACCINOGEN INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

The following table summarizes information on warrants outstanding as of June 30, 2015:

Exercise price		Shares		Weighted Average Remaining Life		Weighted Average Exercise Price

$	1.00		705,575		0.55	$	1.00
$	5.50		80,000		3.24	$	5.50
$	6.05		75,000		4.95	$	6.05
$	7.50		35,000		3.84	$	7.50

Total			895,575		1.72	$	2.08

12.

Commitments and Contingencies

Leases

The Company leases office space, a manufacturing facility, and equipment under operating leases expiring in 2018. In addition, the Company leases storage facilities on a month to month basis. Rent expense was approximately $69,000 and $118,000 for the three and six months ended June 30, 2015, respectively. Rent expense was approximately $42,000 and $83,000 for the three and six months ended June 30, 2014, respectively.

Minimum future lease payments under non-cancelable operating leases, at June 30, 2015 were as follows:

For year ended		Amount
	2015	$	133,233
	2016		210,170
	2017		214,297
	2018		89,951
	Total	$	647,651

Royalty Agreement with Intracel

Pursuant to the Amended License Agreement, the Company agreed to pay Intracel the following royalties on the Net Sales of Royalty Bearing Products (as defined): (i) 3% of net sales on the first $350.0 million of Net Sales of Colon Cancer Products occurring in the calendar year; (ii) 4% of net sales of Net Sales of Royalty Bearing Products occurring in the calendar year in excess of $350.0 million and up to and including $750.0 million and (iii) 5% of net sales of Net Sales of Royalty Bearing Products occurring in the calendar year in excess of $750.0 million.

VACCINOGEN INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

On August 22, 2014 Intracel and Vaccinogen entered into a Letter Agreement, whereby the Amended License Agreement will terminate and no longer be of any force or effect once TIS invests in Vaccinogen the aggregate amount of $80,000,000. Vaccinogen shall no longer, from that point, have any obligation to pay to Intracel any royalties or other payments under the Amended License Amendment.

Royalty Agreement with Organon

The Company has agreed to pay Organon a royalty of 10% of the Net Sales of OncoVAX® (and all other TICE BCG related products, if any) until the Organon Obligation is paid in full, including interest, and 3% for 5 years thereafter.

Litigation

The Company may be subject to certain claims arising in the ordinary course of business. The Company and a vendor were in dispute over amounts owed for services performed. A demand for payment under a written agreement was made against the Company in the amount of approximately $150,000 and was settled for $65,000 in November 2014.

VAT Taxes

The foreign subsidiary of the Company, located in The Netherlands, was presented with a VAT tax bill for the years 2010 and 2011 in the amount of 65,666€. The Company is appealing the decision as it believes that it should be VAT exempt. There has not yet been a decision made by the Dutch authorities and there is no estimate of when a decision will be made. In the event an unfavorable decision is made, the Company will be required to pay the full amount plus interest. The original bill at the June 30, 2015 exchange rate would have a USD equivalent of approximately $73,421. There has been no expense accrued on the accompanying unaudited condensed consolidated financial statements.

13.

Supplemental Disclosure of Cash Flow Information

For the three and six months ended June 30, 2015 the Company paid interest costs of approximately $200 and $1,300, respectively. For the three and six months ended June 30, 2014 the Company paid interest costs of approximately $40,767 and $233,937 respectively.

From January 1, 2015 through June 30, 2015, the Company raised additional capital totaling approximately $4.7 million (net of issuance costs) from the issuance of 909,091 shares of Common Stock, 25,489 adjustment shares and additional Round C warrants to purchase 272,727 shares of common stock. The Company allocated approximately $4.2 million of the total 2015 proceeds to the common stock and approximately $0.5 million of the total proceeds to the common stock warrants.

From January 1, 2014 through June 30, 2014 the Company raised additional capital totaling approximately $2.5 million (net of issuance costs) from the issuance of 463,963 shares of Round C Common Stock, 13,033 adjustment shares and additional Round C Warrants to purchase 139,184 shares of common stock. The Company allocated approximately $1.9 million of the total 2014 proceeds to the common stock and approximately $0.6 million of the total proceeds to the common stock warrants.

VACCINOGEN INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

In January 2014, the Company issues 54,545 shares of common stock to certain holders of the 2012 Bridge Loan that had elected to convert their rights, with a value of $300,000 into common stock in the Company. The Company also issued Round C Warrants exercisable into 16,363 shares of common stock of the Company, with an exercise price of $6.05 per share.

14.

Subsequent Events

On August 12, 2015, Dolphin Offshore Partners, LP (the “Lender”) made an unsecured loan (the “Loan”) to the Company in the principal amount of $800,000. To evidence the Loan, the Company issued to the Lender an Unsecured Promissory Note (the “Note”) bearing an interest rate of 9% per annum. The Loan shall be repaid in full by the Company, plus accrued interest, by November 10, 2015 (the “Maturity Date”). Prepayment of all unpaid principal and interest may be made by the Company prior to the Maturity Date, without penalty or additional interest. Pursuant to the Note, until the Loan is paid in full, the Company cannot incur, create or assume any additional debt unless such debt is subordinate to the prior payment in full of the Loan.

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

The following discussion should be read in conjunction with the consolidated financial statements and notes. In addition to historical information, this discussion and analysis contains forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks, uncertainties and assumptions, which could cause actual results to differ materially from management's expectations. Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided in addition to the accompanying unaudited condensed consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition and cash flows. Our MD&A is organized as follows:

	•	Overview —Discussion of our business and overall analysis of financial and other highlights affecting the Company in order to provide context for the remainder of MD&A.

	•	Trends & Outlook —Discussion of what we view as the overall trends affecting our business and the strategy for 2015 and beyond.

	•	Critical Accounting Policies—Accounting policies that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results and forecasts.

	•	Results of Operations—Analysis of our financial results comparing 2015 and 2014.

	•	Liquidity and Capital Resources—An analysis of changes in our balance sheet and cash flows and discussion of our financial condition and future liquidity needs.

The various sections of this MD&A contain a number of forward-looking statements. Words such as “expects,” “goals,” “plans,” “believes,” “continues,” “may,” and variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements. Such statements are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this filing and particularly in the “Overview” and “Trends & Outlook” section, and in our most recently filed Annual Report on Form 10-K under the caption “Risk Factors”. Our actual results may differ materially.

Overview

We are a biotechnology company founded in 2007 relying on over three decades of prior research by Dr. Michael G. Hanna, Jr., our director and Special Advisor to the Chief Executive Officer of the Company and his colleagues into combating cancer by using the body’s own immune system. Vaccinogen is the developer of OncoVAX®, which we believe is the only patient specific immunotherapy for Stage II colon cancer and our technology may also have application in other tumor types, notably melanoma and renal cell carcinoma.

Colon cancer represents the third most common form of cancer in both the U.S. and Europe. American Cancer Society statistics suggest there will be approximately 97,000 new cases of colon cancer diagnosed within the U.S. in 2014, resulting in approximately 50,000 deaths.

We have broad patents covering the OncoVAX® technology in the U.S. and eight other countries, Australia, Canada, Switzerland, Germany, France, Great Britain, Ireland and Italy. These patents and applications provide broad coverage for the production of autologous cancer vaccines. The key protection of OncoVAX®, in addition to considerable expertise protected as trade secrets, is the broad, issued patent protection around the production of autologous, sterile, metabolically active cancer vaccines developed by us. This patent, entitled “Sterile Immunogenic Non-Tumorigenic Tumor Cell Composition and Methods” was issued in 2009 and expires no sooner than 2025. We believe that sterility will be required for any product to reach the US market and likely in any other market with an approved sterile vaccine like the one we have developed. This could result in a regulatory barrier to entry to competitors.

We hold 1 U.S. patent to related technologies and including the sterility patent referred to above, 2 U.S. patents total.

We also rely upon unpatented proprietary know-how and continuing technological innovation and other trade secrets to develop and maintain our competitive position. We hold considerable proprietary expertise related to the OncoVAX® technology, including the production of autologous cancer vaccines. We have brand names for our OncoVAX® products and related technologies, and anticipate filing 5 trademark applications for these and related marks.

All of our research efforts to date are at the pre-clinical or clinical stage of development. We are focused on leveraging our key assets, including our intellectual property, our scientific team and our facilities, to advance our technologies.

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, or the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to five years after we make our first sale of securities pursuant to a registration statement filed with the SEC, although circumstances could cause us to lose that status earlier.

Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies.

Operating Strategy

We will maintain a cGMP facility and outsource clinical activities to contract research organizations (“CRO”) in an effort to achieve the following:

Complete our Autologous Colon Tumor Immunotherapy Validation Experiment (“Active”) in our pivotal phase IIIb clinical trial of OncoVAX®, an autologous cancer vaccine which prevents the recurrence of stage II colon cancer. The planned trial will closely replicate a successful prior phase IIIa study which study we believe demonstrated a 61% improvement in relative risk of recurrence and a 54% reduction in the relative risk of death in stage II patients as compared to surgery alone. The Company began its preparations for the phase IIIb clinical trial in September 2014. The Company also selected RXTRIALS, INC d/b/a as OnPoint CRO as its CRO to provide services of site selection, clinical operations, project management and trial enrollment for our phase IIIb clinical trial.

Develop revenues by establishing licensing arrangements for distribution of OncoVAX® in certain territories.

Investigate the role of OncoVAX® treatment in additional carcinomas with high post-surgical recurrence rates.

Develop diagnostic and therapeutic drug products as well as revenues by exploiting our distinctive Human Monoclonal Antibody (“HuMab”) technology.

Trends & Outlook

Revenue

To date, the Company has not earned any revenues as the use of OncoVAX® to create cancer related vaccines is still undergoing clinical trials and has not yet received regulatory approval for commercialization and sale.

We are mainly focused on preparing for the initiation of phase IIIb clinical trials relating to OncoVAX® and our research regarding human monoclonal antibodies (HuMabs).

On a long-term basis, we anticipate that our revenue will be derived primarily from global sales of our OncoVAX® product and licensing fees. Commercialization of the OncoVAX® product is dependent on successful completion of a phase IIIb clinical trial and subsequent approval by the FDA.

Research & Development Expenses

Our research and development costs consist of expenses incurred in activities connected with the development of a stage II colon cancer vaccine. These expenses consist primarily of the amortization of intangible assets, cost of conducting clinical trials, salaries and related expenses for personnel, fees paid to professional service providers and, costs of a manufacturing facility in The Netherlands. We expect that research and development expenses will increase in the near term with the onset of the phase IIIb clinical trial.

Clinical Trials

The FDA has requested a second confirmatory, randomized, controlled phase IIIb trial of OncoVAX® in stage II colon cancer and the principal objective of Vaccinogen is to organize a team to conduct this trial. The protocol for this trial, including endpoints and the statistical analysis plan, has been approved by the FDA and is the subject of a Special Protocol Assessment (“SPA”) agreement.

This study will be carried out under a SPA that was negotiated with the FDA in 2010. An SPA granted by the FDA provides a mechanism for the sponsors and the FDA to reach agreement on size, execution and analysis of a clinical trial that is intended to form the primary basis for regulatory approval. The primary endpoint of this pivotal phase IIIb trial is recurrence-free survival (“RFS”) with an interim analysis after 70 “events,” and a final primary analysis three years following completed enrollment. “Events” are incidents of either recurrent disease or death. The study is powered at 90% to detect a 50% improvement in RFS versus resection only for final analysis with an adjustment for interim analysis. The power calculations in the study assume an event rate and distribution that match those observed in the 8701 phase IIIa study. If the statistical probability of an significant increase in the recurrence free survival rate is achieved at the interim analysis, the Biologics License Application (“BLA”) can be filed with the FDA’s center for Biologics Evaluation and Research (“CBER”) at that point. Past clinical trials using the optimal regimen with four immunizations will be accepted as supportive studies during the FDA review of the BLA.

The phase IIIb study will enroll 550 patients, randomized 1:1 to receive surgery alone, or surgery plus OncoVAX®. Patients will be followed on a regular schedule to see whether and when their cancer might reappear. The experience with OncoVAX® in the 8701 study showed that in the relevant Stage II group, disease recurrence happened more quickly and more frequently in those patients who received surgery alone. If the phase IIIb trial replicates the experience of the 8701 patients, the interim analysis after 2/3 of the expected events should give a clear and statistically significant separation between the Kaplan-Meier curves at that point, and would form the basis for a BLA seeking marketing approval from the FDA.

It is important to emphasize that the FDA has agreed that RFS is the most appropriate endpoint to evaluate a trial in Stage II colon cancer. The alternative in cancer studies is often overall survival (“OS”). An OS endpoint has several drawbacks in this case. The average age of patients presenting with colon cancer is 65 years, so deaths from causes other than the tumor will dilute the outcome in both arms. Patients in either arm whose disease recurs will receive chemotherapy and other treatments for their metastatic disease, and the success of these treatments will dilute the impact of earlier therapies such as OncoVAX® on OS. From a patient perspective, being disease free is clearly a meaningful endpoint.

General and Administrative Expenses

Our general and administrative (“G&A”) expenses consist of the general costs, expenses and salaries for the operation and maintenance of our business. We anticipate that general and administrative expenses will increase as we progress through the clinical phase of development into commercialization.

Critical Accounting Policies

Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Note 3 of the Notes to consolidated financial statements describes the significant accounting policies used in the preparation of the consolidated financial statements. Certain of these significant accounting policies are considered to be critical accounting policies, as defined below.

A critical accounting policy is defined as one that is both material to the presentation of our financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on our financial condition and results of operations. Specifically, critical accounting estimates have the following attributes: (1) we are required to make assumptions about matters that are highly uncertain at the time of the estimate; and (2) different estimates we could reasonably have used, or changes in the estimate that are reasonably likely to occur, would have a material effect on our financial condition or results of operations.

Estimates and assumptions about future events and their effects cannot be determined with certainty. We base our estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as our operating environment changes. These changes have historically been minor and have been included in the financial statements as soon as they became known. Based on a critical assessment of our accounting policies and the underlying judgments and uncertainties affecting the application of those policies, management believes that our financial statements are fairly stated in accordance with accounting principles generally accepted in the United States, and present a meaningful presentation of our financial condition and results of operations. We believe the following critical accounting policies reflect our more significant estimates and assumptions used in the preparation of our financial statements:

Use of Estimate – Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States and, accordingly, require management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in the financial statements. On an ongoing basis, the Company evaluates the estimates used in recording common stock warrant related liabilities, derivative financial instruments, stock based compensation, and where applicable, the fair value of assets. The Company may base such estimates on various assumptions including information received from valuation consultants which it believes to be reasonable under the circumstances. Actual results could differ from those estimates.

Intangible Assets- Intangible assets consist primarily of the cost of the acquired patents associated with OncoVAX® to be used in research and development and the commercialization cancer related vaccines. The Company has capitalized the cost of OncoVAX® because the Company has identified alternative future research and development efforts for numerous forms of cancer which it intends to pursue and for which management believes will result in commercialization of related vaccines. Acquired patents are carried at cost less accumulated amortization. Amortization is calculated on a straight-line basis, over the estimated useful economic life of the patent, which is 12.6 years for OncoVAX®.

The carrying value of the Company’s intangible assets is $52,670,996 and $56,022,289 as of June 30, 2015 and December 31, 2014, respectively. Long-lived assets, including identifiable intangible assets with finite lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. When events or circumstances indicate that assets may not be recoverable, the Company prepares cash flows, undiscounted, for each asset or asset group. The Company groups assets for this purpose at the lowest level for which identifiable cash flows exist or are projected to exist. If the sum of the undiscounted cash flows exceeds the carrying value of the asset or asset group, no impairment is deemed present. If the sum of undiscounted cash flows is less than the carrying amount of the asset or asset group, the Company records an impairment charge, if any, for the amount by which the carrying value exceeds the estimated sum of undiscounted cash flows of the asset or asset group.

The Company considers various factors when evaluating whether there are indications that the carrying value of its intangible assets may not be recoverable. Among others, those factors include, adverse changes in marketplace conditions or in the regulatory or legal environment impacting the anticipated use of OncoVAX® and related patents for their intended purpose in research and development and eventual commercialization, significant increases as compared to budget in the level of investment necessary to conduct research and development, clinical trials, and eventual commercialization of OncoVAX®, significant negative variances to budget for operating losses and operating cash flow deficits, and indications of adverse changes in the value of the Company’s equity.

The Company considers these factors no less frequently than the end of each reporting period, including as of June 30, 2015. The Company has noted no adverse change in the demand for the development and commercialization of cancer related vaccines indicated in part by the continuing interest of new and existing investors to fund the Company’s ongoing research and development. The Company has considered the progress of its research and development activities against its operating plan noting the timing for the conduct of its clinical trials and recertification of its production facilities remains consistent with its operating plan. The Company has also evaluated its financial performance and cash flow results noting that the level of investment necessary to conduct its research and development, complete necessary testing for regulatory approval, and begin eventual commercialization of cancer related vaccines remains consistent with its operating plan and financial budgets. The Company also has noted no adverse change in the estimated fair value of the Company based upon values indicated in its ongoing capital raising activities.

Through June 30, 2015, the Company has determined that there have been no events or circumstances that would indicate that the carrying value of its intangible assets is not recoverable.

Fair Value of Financial Instruments - Fair value is defined as the price at which an asset could be exchanged or a liability transferred (an exit price) in an orderly transaction between knowledgeable, willing parties in the principal or most advantageous market for the asset or liability. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters.

Financial assets recorded at fair value in the accompanying financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, as defined by the new guidance related to fair value measurements and disclosures, and directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:

Level 1-		Inputs are unadjusted, quoted prices in active markets for identical assets at the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

		We carry no investments classified as Level 1.

Level 2-		Inputs are other than quoted prices included in Level 1, which are either directly or indirectly observable for the asset or liability through correlation with market data at the reporting date and for the duration of the instrument's anticipated life.

		We carry no investments classified as Level 2.

Level 3-		Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities and which reflect management's best estimate of what market participants would use in pricing the asset or liability at the reporting date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. Our Abell and Round C Warrants (as described in Note 3 to the Notes to the unaudited condensed consolidated financial statements) are considered Level 3.

For a further discussion regarding fair value measurements, see Note 9 on Fair Value in the Notes to unaudited condensed consolidated financial statements.

Accounting for Warrants – We have adopted FASB guidance related to determining whether an instrument or embedded feature is indexed to an entity’s own stock. This guidance applies to any freestanding financial instruments or embedded features that have the characteristics of a derivative, as defined in ASC Topic 815, Derivatives and Hedging, and to any freestanding financial instruments that are potentially settled in an entity’s own common stock. As a result, certain of our warrants were considered to be derivatives and were valued using various assumptions as they are recorded as liabilities.

Research and Development Costs – Research and development costs that do not have alternative future use are expensed as incurred. Research and development expenses primarily include the amortization of intangible assets, cost of conducting clinical trials, compensation and related overhead for employees, consultants, facilities costs and the cost of materials purchased for research and development.

Stock Based Compensation – The Company measures the cost of employee services received in exchange for stock options or restricted stock awards based upon the fair value of the award on the date of the grant. The Company recognizes the estimated grant date fair value of the award as stock-based compensation expense on a straight-line basis over the requisite service period, which is generally the vesting period.

Results of Operations

Consolidated Statements of Operations Data

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014

Revenues	$	-		$	-		$	-		$	-

Operating Expenses:
Research and development		3,461,816			2,102,699			6,424,382			4,122,828
General and administrative expenses		7,396,248			986,842			9,302,506			1,694,768

Total Operating Expenses		10,858,064			3,089,541			15,726,888			5,817,596

Loss From Operations		(10,858,064	)		(3,089,541	)		(15,726,888	)		(5,817,596	)

Gain (Loss) on Financial Instruments		1,665,930			2,841,816			(369,018	)		4,744,639

Interest Expense & Other Expenses		(170,182	)		(875,395	)		(256,719	)		(1,728,280	)

Net Loss Before Income Taxes	$	(9,362,316	)	$	(1,123,120	)	$	(16,352,625	)	$	(2,801,237	)

Benefit for income taxes		(150,794	)		-			(286,524	)		-

Net Loss	$	(9,513,110	)	$	(1,123,120	)	$	(16,639,149	)	$	(2,801,237	)

Revenue

Since inception, we have not earned any revenues as the use of OncoVax® to create cancer related vaccines is still undergoing clinical trials and has not yet received regulatory approval for commercialization and sale.

Operating Expenses – Three Months Ended June 30, 2015 and 2014

Our operating expenses totaled $10,858,064 and $3,089,541 in the three months ended June 30, 2015 and 2014, respectively. The operating expenses are discussed in further detail below.

Research and Development Expenses

	Three Months Ended June 30,				Change in 2015 v. 2014
	2015		2014		$		%

Research & Development	$	3,461,816	$	2,102,699	$	1,359,117		64.64	%

Research and development (R&D) expenses increased approximately $1,359,000, for the three months ended June 30, 2015 compared with the same period in 2014. R&D expenses include the operation and maintenance of the Netherlands facility and preparation for the phase IIIb clinical trial and approximately $1.7 million for amortization of intangibles, related to OncoVax® intellectual property, for the three months ended June 30, 2015 and 2014. The increase is the result of expenses to begin the phase IIIb clinical trial including increased research and development expenses ($506,000), CRO fees ($475,000) and expenses related to the clinical trial ($301,000), regulatory ($44,000) and manufacturing ($34,000).

General and Administrative Expenses

	Three Months Ended June 30,				Change in 2015 v. 2014
	2015		2014		$		%

General & Administrative	$	7,396,248	$	986,842	$	6,409,406		645.49	%

General and administrative expenses increased by approximately $6,409,000 in the three months ended June 30, 2015 over the three months ended June 30, 2014. The increase was primarily attributable to increased share-based compensation expense ($5,833,000) as the result of options in lieu of bonus and director payments, increased professional expenses: primarily consulting ($163,000), accounting ($153,000) and legal ($61,000); personnel expenses ($160,000) and occupancy ($63,000) due to the ramp up into the clinical phase of development into commercialization.

Nonoperating Income – Three Months Ended June 30, 2015 and 2014

Nonoperating income was $1,495,748 and $1,966,421 in the three months ended June 30, 2015 and 2014 respectively. The nonoperating income is discussed below.

Gain on Financial Instruments

	Three Months Ended June 30,				Change in 2015 v. 2014
	2015		2014		$			%

Gain on Financial Instruments	$	1,665,930	$	2,841,816	$	(1,175,886	)		-41.38	%

Recorded gains or losses on Financial Instruments may fluctuate from period to period as determination of fair value is based on Vaccinogen stock values and management’s assessment of the probability of qualifying events which may affect the fair value of the Financial Instrument.

Gains on Financial Instruments were generated due to changes in the estimated fair value during the three months ended June 30, 2015. Gains were recorded for the Round C Warrants in the amount of approximately $1,416,000 and the Abell Warrants of $250,000.

In the three months ended June 30, 2014 Gain on Financial Instruments were generated due to changes in the estimated fair value of the Abell Warrants ($386,000), Round C Warrants ($756,000) and the Abell Option ($1,701,000).

Interest Expense & Other Expenses

	Three Months Ended June 30,						Change in 2015 v. 2014
	2015			2014			$		%

Interest Expense & Other Expenses	$	(170,182	)	$	(875,395	)	$	705,213		80.56	%

Interest & Other Expenses decreased by $705,000 for the three months ended June 30, 2015 from $875,000 for the comparable period in 2014. The decrease is primarily due to 2014 non-cash interest expense relating to the issuance of contingent warrants under the Amendment No. 7 to the Note and Warrant Purchase Agreement with The Abell Foundation in the amount of approximately $864,000. This was only partially offset by decreased IRS penalties of approximately $102,000 and interest related to income taxes of approximately $66,000.

Operating Expenses – Six Months Ended June 30, 2015 and 2014

Our operating expenses totaled $15,726,888 and $5,817,596 in the six months ended June 30, 2015 and 2014, respectively. The operating expenses are discussed in further detail below.

Research and Development Expenses

	Six Months Ended June 30				Change in 2015 v. 2014
	2015		2014		$		%

Research & Development	$	6,424,382	$	4,122,828	$	2,301,554		55.82	%

Research and development (R&D) expenses increased approximately $2,302,000 for the six months ended June 30, 2015 compared with the same period in 2014. R&D expenses include the operation and maintenance of the Netherlands facility and preparation for the phase IIIb clinical trial and approximately $3.4 million for amortization of intangibles, related to OncoVax® intellectual property, for the six months ended June 30, 2015 and 2014. The increase is the result of expenses to begin the phase IIIb clinical trial including increased research and development ($927,000), CRO fees ($650,000) and expenses related to the clinical trial ($599,000).

General and Administrative Expenses

	Six Months Ended June 30				Change in 2015 v. 2014
	2015		2014		$		%

General & Administrative	$	9,302,506	$	1,694,768	$	7,607,738		448.90	%

General and administrative expenses increased by approximately $7,608,000 in the six months ended June 30, 2015 over the six months ended June 30, 2014. The increase was primarily attributable to increase share-based compensation expense $5,829,000 as the result of options granted in lieu of bonus and director payments, increased professional expenses: primarily legal ($742,000), accounting ($310,000) and consulting ($112,000); personnel expenses ($320,000), occupancy ($127,000) and insurance ($89,000) due to the ramp up into the clinical phase of development into commercialization.

Nonoperating Income (Expense) – Six Months Ended June 30, 2015 and 2014

Nonoperating income and (expense) were ($625,737) and $3,016,359 in the six months ended June 30, 2015 and 2014 respectively. The nonoperating expenses are discussed below.

(Loss) Gain on Financial Instruments

	Six Months Ended June 30					Change in 2015 v. 2014
	2015			2014		$			%

(Loss) Gain on Financial Instruments	$	(369,018	)	$	4,744,639	$	(5,113,657	)		*

*Not meaningful

Losses on Financial Instruments were generated due to changes in the estimated fair value during the six months ended June 30, 2015. Losses were recorded for the Round C Warrants in the amount of approximately ($243,000) and the Abell Warrants of ($126,000).

In the six months ended June 30, 2014 Gain on Financial Instruments were generated due to changes in the estimated fair value of the Abell Warrants $625,436, Round C Warrants $1,130,509 and the Abell Option $3,018,694 offset by a loss on the Bridge Loan 2:1 of ($30,000).

Interest Expense and Other Expenses

	Six Months Ended June 30						Change in 2015 v. 2014
	2015			2014			$		%

Interest Expense and Other Expenses	$	(256,719	)	$	(1,728,280	)	$	1,471,561		-85.15	%

Interest Expense and Other Expenses decreased by $1,472,000 for the six months ended June 30, 2015 from $1,728,000 for the comparable period in 2014. The decrease is primarily due to 2014 non-cash interest expense relating to the issuance of contingent warrants under the Amendment No. 7 to the Note and Warrant Purchase Agreement with The Abell Foundation in the amount of approximately $1,567,000 and a correction of the fair value of the Abell Contingent Warrants of approximately $111,000. This was only partially offset by decreased IRS penalties of approximately $144,000 and interest related to income taxes of approximately $78,000.

Liquidity and Capital Resources

Since our inception, we have financed our operations through the private placement of our securities. During the six months ended June 30, 2015 and 2014 we raised gross proceeds of approximately $4.7 million and $2.6 million, respectively.

	Six Months Ended June 30						Change in 2015 v. 2014
	2015			2014			$			%
Net cash used in operating activities	$	(6,669,993	)	$	(1,851,494	)	$	(4,818,499	)		260.25	%
Net cash used in investing activities		(73,800	)		(1,500	)		(72,300	)		4820.00	%
Net cash provided by financing activities		4,650,000			1,803,800			2,846,200			157.79	%
Effect of foreign exchange rate changes on cash and equivalents		(19,019	)		12,371			(31,390	)		-253.77	%
Net increase (decrease) in cash and cash equivalents	$	(2,112,812	)	$	(36,823	)	$	(2,075,989	)		5637.75	%

Cash & Cash Equivalents

Total cash and cash equivalents were $928,130 at June 30, 2015, compared with $36,273 at June 30, 2014, for an increase of $891,857. Cash balances will fluctuate from one reporting period to another based on the amount and timing of the issuance of our common stock and warrants for cash. The increase of total cash and cash equivalents at June 30, 2015 over the same period in 2014 is due to an increase in capital raised of approximately $4.7 million and $2.6 million for the six months ended June 30, 2015 and 2014, respectively.

Net Cash Used in Operating Activities

Net cash used in operating activities was approximately $6,670,000 and $1,851,000 for the six months ended June 30, 2015 and 2014 respectively, inclusive of both cash and non-cash adjustments to net losses of $16,639,149 and $2,801,237 for the six months ended June 30, 2015 and 2014 respectively.

Non-cash adjustments to the net loss for the six months ended June 30, 2015 include Amortization of intangible assets for the amount of $3,351,000, Loss on Financial Instruments for the amount of $369,000, Stock based compensation for the amount of $5,902,000, Prepaid income tax for the amount of $1,692,000, and an increase in Accounts payable for the amount of $723,000, only partially offset by an increase in Prepaid expenses and other assets, primarily the Rx Trials, Inc. trial payments, of ($855,000) and Accrued Taxes Payable for the amount of ($1,405,000).

Non-cash adjustments to the net loss for the six months ended June 30, 2014 include Amortization of intangible assets, approximately $3,352,000, Non-cash interest expense related to the Abell Note and Warrant Purchase Agreement approximately $1,641,000, and Accounts Payable and accrued expenses and other liabilities, $496,000 , substantially offset by a Gain on Financial Instruments, approximately ($4,745,000).

Net Cash Used in Investing Activities

We invested $73,800 and $1,500 in the six months ended June 30, 2015 and 2014 respectively in purchases of property and equipment.

Net Cash Provided by Financing Activities.

During the six months ended June 30, 2015 we raised additional capital of approximately $4.7 million through the issuance of 909,091 Round C Units, (each Unit consisting of 1 share of common stock and a common stock purchase warrant to purchase 0.3 shares of common stock).

During the six months ended June 30, 2014 we raised additional capital of approximately $2.4 million through the issuance of 463,963 Round C Units, (each Unit consisting of 1 share of common stock and a common stock purchase warrant to purchase 0.3 shares of common stock) only partially offset by a principal reduction payment made on the Abell Loan, of approximately $557,000 and payment of placement agent and finders fees, of approximately $195,000.

Future Liquidity & Needs

Except for the short-term loan referenced below, since January 28, 2015 and as of August 14, 2015, no additional funding has been received and without receipt of additional capital resources and/or a substantial reduction in the Company’s cash requirements, the Company does not expect to be able to fund operations beyond September 30, 2015. Our ability to continue to fund operations until September 30, 2015 assumes we are able to continue to delay payments consistent with our practices described below.

We have incurred significant operating losses and negative cash flows since inception. We do not expect to be profitable in the next several years, but rather expect to incur additional operating losses. We have limited liquidity and capital resources and must obtain significant additional capital resources in order to sustain our product development efforts, for our phase IIIb clinical trial, pursuit of regulatory approvals, acquisition of capital equipment, costs to maintain office and manufacturing facilities, for general and administrative expenses and other working capital requirements. We rely on cash balances, the proceeds from the offering of our securities and debt financing to fund our operations. As of June 30, 2015 we had approximately $0.9 million in cash to fund operations. Without delaying the payment of expenses, our current monthly cash requirement has been and continues to be approximately $1,000,000. Notwithstanding this cash requirement and as a result of delayed payment of expenses, immediately prior to receipt of the funds under the loan discussed below, we had approximately $250,000 of cash on hand.

As discussed in more detail below in Part II, Item 5, on August 12, 2015, we received an unsecured loan in the principal amount of $800,000. The loan accrues interest at 9% per annum and is required to be repaid in full by the Company, plus accrued interest, by November 10, 2015. As of August 12, 2015, including the proceeds of this loan, we had approximately $1.04 million of cash on hand.

We have recurring losses and negative cash flows from operating activities and have significant future commitments, and as a result substantial doubt exists regarding our ability to remain in operation at our current level without additional debt or equity financing. The report of BDO USA, LLP, our independent registered accounting firm, with respect to our audited consolidated financial statements at December 31, 2014 contains an explanatory paragraph as to our potential inability to continue as a going concern. Additionally, this may adversely affect our ability to obtain new financing on reasonable terms or at all.

In April 2014, the Company entered into a binding agreement (as amended in August 2014, the “TIS Agreement”) with a Stockholm-based investor group known as The Investment Syndicate (“TIS”) under which TIS members agreed to purchase up to $80 million of the Company’s common stock and warrants, all in up to five closings, subject to certain terms and conditions. To date, a total of $20 million in equity financing has closed following Vaccinogen’s satisfaction of certain closing conditions. The TIS Agreement calls for the remaining $60 million to be paid in three separate closings upon the completion of certain milestones.

The lead TIS representative continues to indicate the desire of an existing TIS member to meet the funding obligations of TIS. Nevertheless, management has significant doubt that the existing TIS member will be able to meet the TIS funding obligations in the manner and timeframe required to address the Company’s capital needs. As previously disclosed, the TIS representative has informed the Company that the timing of the TIS funding expected to be led by such TIS member continues to be dependent upon funds the TIS member expects to receive from a third party relating to investments made and services provided by the TIS member. Notwithstanding the verbal and written assurances from TIS that such funding will be forthcoming, given the continued and substantial delays in receiving funds, Company management is operating under the assumption that funding from this source will not be received in a manner needed to address the Company’s current capital needs and the Company will have to find other sources of funding.

We are currently in discussions with other parties considering debt and equity financings. One potential source of equity financing would be made pursuant to the terms of the TIS Agreement, but the investment would be made by a new TIS member. The Company, TIS and the potential investor have been in discussions regarding a possible investment since May of 2015 and such potential investor has expressed an interest in becoming a member of TIS and funding the remaining $60 million due under the TIS Agreement. Such funding source has also indicated an interest in making an investment beyond the $60 million investment.

The above referenced equity and debt financing opportunities might not be available to us when needed, on acceptable terms, or at all. If we are unable to obtain additional financing in sufficient amounts or on acceptable terms under such circumstances we will not be able to continue our operations. We do not currently have sufficient capital to fund our plan of operations beyond September 30, 2015.

We do not have sufficient capital to fund our plan of operations over the next twelve months. In order to address our capital needs, including our planned phase IIIb clinical trial, we are actively pursuing additional equity or debt financing, in the form of either a private placement or a public offering. We have been in ongoing discussions with strategic institutional investors and investment banks with respect to such possible offerings. Such additional financing opportunities might not be available to us, when and if needed, on acceptable terms or at all. If we are unable to obtain additional financing in sufficient amounts or on acceptable terms under such circumstances, our operating results and prospects will be adversely affected.

Off-Balance Sheet Arrangements

We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in those types of relationships.

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

ITEM 4 - CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q.

Based on this evaluation, our chief executive officer and chief financial officer concluded that, as of June 30, 2015, our disclosure controls and procedures are effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II: OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

We are party to claims and litigation that arise in the normal course of business. Management believes that the ultimate outcome of these claims and litigation will not have a material impact on our financial position or results of operations.

ITEM 1A - RISK FACTORS

Not Applicable.

ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

As consideration for past services and upon completion of release agreements, as of the date hereof, we have issued a total of 179,969 shares of Company common stock (the “Former Director Shares”) to certain former members of the Board of Directors of the Company (the “Former Directors”), starting on April 1, 2015. The Former Director Shares have not been registered under the Securities Act of 1933, as amended, in reliance on the exemption provided in Rule 506(b). Our reliance on Rule 506(b) is based on facts confirmed by the Former Directors.

ITEM 3 - DEFAULT UPON SENIOR SECURITIES

Not Applicable.

ITEM 4 - MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5 - OTHER INFORMATION

ITEM 6 – EXHIBITS

Exhibit Number

10.1		Unsecured Note in favor of Dolphin Offshore Partners, LP (1)

31		Certification of Principal Executive and Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended (1)

32		Certification of Principal Executive Officer and Principal Financial Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350 (1)

101		The following materials from Vaccinogen, Inc.’s Quarterly Report on Form 10-Q for the period ended June 30, 2015, Formatted in XBRL: (1) Unaudited Condensed Consolidated Balance Sheet; (2) Unaudited Condensed Consolidated Statements of Operations; (3) Unaudited Condensed Consolidated Statements of Comprehensive Loss; (4) Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity; (5) Unaudited Condensed Consolidated Statements of Cash Flow; and (6) Notes to Unaudited Condensed Consolidated Financial Statements

(1)		Filed herewith.

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.

		VACCINOGEN, INC.

Dated:	August 14, 2015	By:	/s/ Andrew L. Tussing
			Andrew L Tussing
			President, Chief Executive Officer and acting Chief Financial Officer (Principal Executive Officer and Principal Financial Officer)

Attached files

VACCINOGEN INC Reports

Also read