2. Significant Accounting Policies

Basis of Consolidation

The consolidated financial statements include the accounts of Oragenics, Inc. and our wholly-owned subsidiaries Noachis Terra, Inc and Oragenics Australia Pty Ltd. All intercompany balances and transactions have been eliminated.

New Accounting Standards

ASU 2022-03

In June 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2022-03, which states that a contractual restriction on the sale of an equity security is not considered in measuring fair value. Furthermore, it requires an entity to disclose the fair value of equity securities subject to contractual sale restrictions, the nature and remaining duration of the restrictions and the circumstances that could cause a lapse in the restrictions. ASU 2022-03 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023. The adoption of ASU 2022-03 effective January 1, 2024 did not have any effect on our financial statements.

ASU 2023-07

In November 2023, the FASB issued ASU No. 2023-07, which provides amendments to reportable segment disclosure requirements requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. All disclosure requirements of ASU 2023-07 are required for entities with a single reportable segment. The new segment disclosures are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

ASU 2023-09

In December 2023, the FASB issued ASU 2023-09 related to improvements to income tax disclosures. The amendments in this update require enhanced jurisdictional and other disaggregated disclosures for the effective tax rate reconciliation and income taxes paid. The amendments in this update are effective for fiscal years beginning after December 15, 2024. We plan to adopt this pronouncement and make the necessary updates to our disclosures for the year ending December 31, 2025, and, aside from these disclosure changes, we do not expect the amendments to have a material effect on our financial statements.

ASU 2024-03

In November 2024, the FASB issued ASU 2024-03 related to the disaggregation of certain income statement expenses. The amendments in this update require public entities to disclose incremental information related to purchases of inventory, team member compensation and depreciation, which will provide investors the ability to better understand entity expenses and make their own judgements about entity performance. The amendments in this update are effective for fiscal years beginning after December 15, 2026. We plan to adopt this pronouncement and make the necessary updates to our disclosures for the year ending December 31, 2027, and, aside from these disclosure changes, we do not expect the amendments to have a material effect on our financial statements.

Use of Estimates

The preparation of financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions that affect reported amounts and related disclosures. There are certain critical estimates that we believe require significant judgment in the preparation of our financial statements. We consider an accounting estimate to be critical if:

Our critical accounting policies and estimates include accounting for stock-based awards and accounting for business combinations or asset purchases as described below.

Cash and Cash Equivalents

Cash and cash equivalents consist of all cash balances and highly liquid investments with an original maturity of three months or less. Our cash and cash equivalents are deposited in a financial institution and consist of demand deposits and overnight repurchase agreements and at times deposits are in excess of federally insured limits.

Business Segments

The Company operates in one reportable segment, which includes all activities related to advancing the development of our concussion drug, ONP-002. The determination of a single reportable segment is consistent with the consolidated financial information regularly provided to our chief operating decision maker (CODM). In 2024, our CODM was our President, Mr. Micheal Redmond. On December 16, 2024 our CODM became, and is presently, our Chief Financial Officer and Interim Chief Executive Officer, who reviews and evaluates consolidated net loss for purposes of assessing performance, making operating decisions, allocating resources and planning and forecasting for future periods. The measure of segment assets is reported on the balance sheet as total assets. During the twelve-month periods ended December 31, 2024, and 2023 there was no segment revenue. The accounting policies for the development of our concussion drug are the same as those described in the summary of significant accounting policies.

Stock-Based Awards

Generally, all forms of stock-based awards, including stock option grants and warrants, are measured at fair value on the grant date typically using a Black-Scholes Option Pricing Model, which requires us to make certain assumptions and estimates related to the risk-free interest rate, expected stock price volatility, expected life of the award and expected dividends.

The expense resulting from stock-based awards is recognized in Research and development or General and administrative in our Consolidated Statements of Operations, depending on the nature of the services provided, on a straight-line basis over the requisite service period. To the extent the stock-based awards do not vest at the grant date they are subject to forfeiture.

For performance-based awards, we record share-based compensation expense only when the performance-based milestone is deemed probable of achievement. We utilize both quantitative and qualitative criteria to judge whether milestones are probable of achievement.

For awards with market-based performance conditions, we recognize the grant-date fair value of the award over the derived service period regardless of whether the underlying performance condition is met.

We account for forfeitures of stock-based awards as a component of stock-based compensation expense as the forfeitures occur.

Impairment of Long-Lived Assets

We periodically review our long-lived assets for impairment and reduce the carrying value to fair value whenever events or changes in circumstances indicate that the carrying value may not be recoverable. There were no impairment losses recorded during the years ended December 31, 2024 and 2023.

Research and Development Expenses

Research and development consist of expenses incurred in connection with the discovery and development of our product candidates and are expensed as incurred on our Consolidated Statements of Operations. Prepayments and upfront payments to third-party vendors for work to be completed in the future are recorded as a prepaid expense on our Consolidated Balance Sheet.

Income Tax

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in operations in the period that includes the enactment date. Deferred tax assets are reduced to estimated amounts expected to be realized by the use of a valuation allowance. Based on our historical operating losses, a valuation allowance has been recognized for all deferred tax assets.

Under US GAAP, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, US GAAP provides guidance on derecognition, classification, interest and penalties, accounting for interim periods, disclosure and transition.

Concentrations

Financial instruments which potentially subject us to concentrations of credit risk consist principally of cash and cash equivalents. We maintain cash accounts in commercial banks, which may, at times, exceed federally insured limits. We have not experienced any losses in such accounts. We believe we are not exposed to any significant credit risk on cash and cash equivalents. As of December 31, 2024 and 2023, the uninsured portion of this balance was $0.6 million and $3.1 million, respectively.

Grant Revenue

Grant revenue in 2023 was derived from a small business innovation research grant in the amount of $250,000 (“Computer-aided Design for Improved Lantibiotics”) that was completed in September 2023. We recognized grant revenue as reimbursable grant costs were incurred up to the pre-approved award limits within the budget period. The costs associated with these reimbursements were reflected as a component of Research and development in the accompanying Consolidated Statements of Operations.