20-F 1 ea0201981-20f_altamirather.htm ANNUAL REPORT

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 20-F

 

(Mark One)

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

 

OR

 

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

 

for the fiscal year ended December 31, 2023

 

OR

 

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

 

For the transition period from ___________ to ___________

 

OR

 

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

 

Date of event requiring this shell company report

 

Commission file number: 001-36582

 

ALTAMIRA THERAPEUTICS LTD.

(Exact name of Registrant as specified in its charter)

 

Bermuda

(Jurisdiction of Incorporation or Organization)

 

Clarendon House

2 Church Street

Hamilton HM11

Bermuda

(Address of principal executive offices)

 

Thomas Meyer

Tel: +1 (441) 295 59 50

Clarendon House

2 Church Street

Hamilton HM11

Bermuda

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

 

Copies to:

 

Michael J. Lerner, Esq.
Steven M. Skolnick, Esq.

Lowenstein Sandler LLP

1251 Avenue of the Americas

New York, NY 10020

Tel: (212) 262-6700

 

Securities registered or to be registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Shares, par value USD 0.002 per share   CYTO   The Nasdaq Stock Market LLC

 

Securities registered or to be registered pursuant to Section 12(g) of the Act:

 

None
(Title of Class)

 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

 

None
(Title of Class)

 

 

 

Indicate the number of outstanding shares of each of the issuer’s classes of capital stock or common stock as of the close of the period covered by the annual report.

 

Common shares: 1,477,785

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

 

☐ Yes ☒ No

 

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

 

☐ Yes ☒ No

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Yes ☐ No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

 

Yes ☐ No

 

Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer”, “non-accelerated filer” or “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

  Large accelerated filer ☐   Accelerated filer ☐   Non-accelerated filer  
          Emerging Growth Company  

 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

 

The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

 

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

 

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐

 

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

 

  International Financial Reporting  
Standards as issued by the International
U.S. GAAP ☐ Accounting Standards Board ☒ Other ☐

 

If “Other” has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow.

 

☐ Item 17 ☐ Item 18

 

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

☐ Yes No

 

 

 

 

 

 

ALTAMIRA THERAPEUTICS LTD.

 

TABLE OF CONTENTS

 

  Page
FORWARD-LOOKING STATEMENTS iv
   
PART I 1
   
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS 1
A. Directors and senior management 1
B. Advisers 1
C. Auditors 1
   
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE 1
A. Offer statistics 1
B. Method and expected timetable 1
   
ITEM 3. KEY INFORMATION 1
A. [Reserved] 1
B. Capitalization and indebtedness 1
C. Reasons for the offer and use of proceeds 1
D. Risk factors 1
   
ITEM 4. INFORMATION ON THE COMPANY 22
A. History and development of the Company 22
B. Business overview 23
C. Organizational structure 31
D. Property, plants and equipment 31
   
ITEM 4A. UNRESOLVED STAFF COMMENTS 31
 
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS 31
A. Operating results 32
B. Liquidity and capital resources 39
C. Research and development, patents and licenses, etc. 46
D. Trend information 46
E. Critical Accounting Estimates 46
F. Safe harbor 46
   
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES 47
A. Directors and senior management 47
B. Compensation 49
C. Board practices 51
D. Employees 52
E. Share ownership 52
F. Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation 52
   
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS 52
A. Major shareholders 52
B. Related party transactions 53
C. Interests of experts and counsel 53
   
ITEM 8. FINANCIAL INFORMATION 54
A. Consolidated statements and other financial information 54
B. Significant changes 54
   
ITEM 9. THE OFFER AND LISTING 54
A. Offering and listing details 54
B. Plan of distribution 54
C. Markets 54
D. Selling shareholders 54
E. Dilution 54
F. Expenses of the issue 54

 

i

 

 

ITEM 10. ADDITIONAL INFORMATION 55
A. Share capital 55
B. Memorandum and articles of association 55
C. Material contracts 68
D. Exchange controls 68
E. Taxation 68
F. Dividends and paying agents 72
G. Statement by experts 72
H. Documents on display 72
I. Subsidiary information 73
J. Annual Report to Security Holders 73
   
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 73
   
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES 73
A. Debt securities 73
B. Warrants and rights 73
C. Other securities 73
D. American Depositary Shares 73
   
PART II 74
   
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES 74
A. Defaults 74
B. Arrears and delinquencies 74
   
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS 74
E. Use of Proceeds 74
   
ITEM 15. CONTROLS AND PROCEDURES 74
A. Disclosure Controls and Procedures 74
B. Management’s Annual Report on Internal Control over Financial Reporting 74
C. Attestation Report of the Registered Public Accounting Firm 75
D. Changes in Internal Control over Financial Reporting 76
   
ITEM 16. [RESERVED] 76
   
ITEM 16A. Audit committee financial expert 76
   
ITEM 16B. Code of ethics 76
   
ITEM 16C. Principal Accountant Fees and Services 76
   
ITEM 16D. Exemptions from the listing standards for audit committees 76
   
ITEM 16E. Purchases of equity securities by the issuer and affiliated purchasers 76
   
ITEM 16F. Change in registrant’s certifying accountant 76
   
ITEM 16G. Corporate governance 76
   
ITEM 16H. Mine safety disclosure 77
   
ITEM 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. 77
   
ITEM 16J. Disclosure Regarding Insider Trading Policy 77
   
ITEM 16K. Disclosure Regarding Cybersecurity 78
   
PART III 79
   
ITEM 17. Financial statements 79
   
ITEM 18. Financial statements 79
   
ITEM 19. Exhibits 79

 

ii

 

 

Unless otherwise indicated or the context otherwise requires, all references in this annual report on Form 20-F (the “Annual Report”) to “Altamira Therapeutics Ltd.”, or “Altamira”, the “Company,” “we,” “our,” “ours,” “us” or similar terms refer to (i) Auris Medical Holding Ltd. a Bermuda company, or Auris Medical (Bermuda), the successor issuer to Auris Medical Holding AG (“Auris Medical (Switzerland)”) under Rule 12g-3(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), after the effective time at which Auris Medical (Switzerland) continued its corporate existence from Switzerland to Bermuda (the “Redomestication”), which occurred on March 18, 2019, and (ii) to Altamira Therapeutics Ltd. after adoption of the new company name by resolution of Special General Meeting of Shareholders held on July 21, 2021. The trademarks, trade names and service marks appearing in this report are property of their respective owners.

 

On October 25, 2022, the Company effected a one-for-twenty reverse share split (the “2022 Reverse Share Split”) of the Company’s issued and outstanding common shares. Effective as of November 2, 2023, the Company changed the currency denomination of the Company’s authorized share capital from CHF to USD, reduced the issued share capital by reducing the par value of each common share in issue to USD 0.0001 (pre-2023 Reverse Share Split (as defined below)) and reduced the authorized share capital to USD 12,000 divided into 100,000,000 (pre-2023 Reverse Share Split) common shares of USD 0.0001 (pre-2023 Reverse Share Split) par value each and 20,000,000 preference shares of USD 0.0001 par value each. On December 13, 2023, the Company effected a one-for-twenty reverse share split (the “2023 Reverse Share Split”) of the Company’s issued and outstanding common shares, resulting in a par value of USD 0.002 per common share. Unless indicated or the context otherwise requires, all per share amounts and numbers of common shares in this report have been retrospectively adjusted for the 2022 Reverse Share Split and 2023 Reverse Share Split.

 

The terms “dollar,” “USD” or “$“ refer to U.S. dollars and the term “Swiss Franc” and “CHF” refer to the legal currency of Switzerland.

 

iii

 

 

FORWARD-LOOKING STATEMENTS

 

This Annual Report contains statements that constitute forward-looking statements. Many of the forward-looking statements contained in this Annual Report can be identified by the use of forward-looking words such as “anticipate,” “believe,” “could,” “expect,” “should,” “plan,” “intend,” “will,” “estimate” and “potential,” among others, or the negatives thereof.

 

Forward-looking statements appear in a number of places in this Annual Report and include, but are not limited to, statements regarding our intent, belief or current expectations. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. Such statements are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied in the forward-looking statements due to various factors, including, but not limited to, those identified under the section “Item 3. Key Information-D. Risk factors” in this Annual Report. These risks and uncertainties include factors relating to:

 

our operation as a drug development-stage company with limited operating history and a history of operating losses;

 

our need for substantial additional funding to continue the development of our RNA delivery platforms and product candidates before we can expect to become profitable from the out-licensing of our platform technology and products and the possibility that we may be unable to raise additional capital when needed;

 

the timing, scope, terms and conditions of a potential divestiture or partnering of the Company’s AM-125 development program in vertigo as well as the cash such transaction(s) may generate;

 

our dependence on the success of OligoPhore™, SemaPhore™, AM-401 and AM-411, which are still in preclinical development, and may eventually prove to be unsuccessful;

 

the chance that we may become exposed to costly and damaging liability claims resulting from the testing of our product candidates in the clinic;

 

the chance our clinical trials may not be completed on schedule, or at all, as a result of factors such as delayed enrollment or the identification of adverse effects;

 

our reliance on our current strategic relationship with Washington University and the potential success or failure of strategic relationships, joint ventures or mergers and acquisitions transactions;

 

our reliance on third parties to conduct certain of our nonclinical studies and on third-party, single-source suppliers to supply certain key ingredients for our RNA delivery platforms or produce our product candidates;

 

our ability to obtain, maintain and protect our intellectual property rights and operate our business without infringing or otherwise violating the intellectual property rights of others;

 

our ability to meet the continuing listing requirements of Nasdaq and remain listed on The Nasdaq Capital Market;

 

the chance that certain intangible assets related to our product candidates will be impaired; and

 

other risk factors discussed under “Item 3. Key Information-D. Risk factors”.

 

Our actual results or performance could differ materially from those expressed in, or implied by, any forward-looking statements relating to those matters. Accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what impact they will have on our results of operations, cash flows or financial condition. Except as required by law, we are under no obligation, and expressly disclaim any obligation, to update, alter or otherwise revise any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future events or otherwise.

 

iv

 

 

PART I

 

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

 

A.Directors and senior management

 

Not applicable.

 

B.Advisers

 

Not applicable.

 

C.Auditors

 

Not applicable.

 

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

 

A.Offer statistics

 

Not applicable.

 

B.Method and expected timetable

 

Not applicable.

 

ITEM 3. KEY INFORMATION

 

A.[Reserved]

 

B.Capitalization and indebtedness

 

Not applicable.

 

C.Reasons for the offer and use of proceeds

 

Not applicable.

 

D.Risk factors

 

You should carefully consider the risks and uncertainties described below and the other information in this Annual Report. Our business, financial condition or results of operations could be materially and adversely affected if any of these risks occurs, and as a result, the market price of our common shares could decline. This Annual Report also contains forward-looking statements that involve risks and uncertainties. See “Forward-Looking Statements.” Our actual results could differ materially and adversely from those anticipated in these forward-looking statements as a result of certain factors.

 

Summary of Risk Factors

 

An investment in our common shares is subject to a number of risks. The following summarizes some, but not all, of these risks. Please carefully consider all of the information discussed in “Item 3. Key Information-D. Risk Factors” in this annual report for a more thorough description of these and other risks.

 

We are a drug development-stage company and have a limited operating history and a history of operating losses. We anticipate that we will continue to incur losses for the foreseeable future.

 

We expect that we will need substantial additional funding before we can expect to become profitable from the out-licensing of our RNA delivery platforms and product candidates. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our research and development programs.

 

1

 

 

The Company has incurred recurring losses and negative cash flows from operations since inception and it expects to generate losses from operations for the foreseeable future primarily due to research and development costs related to its RNA delivery platforms and product candidates. We expect our research and development expenses to remain significant as we continue to develop our RNA delivery platforms and advance or initiate the pre-clinical and clinical development of AM-401, AM-411 or any other product candidate. To the extent that we will be unable to generate sufficient cash proceeds from the planned divestiture or partnering of our AM-125 development program and from our 49% stake in our associated company Altamira Medica AG or other partnering activities, we will need to raise additional equity and debt financing that may not be available, if at all, at terms acceptable to the Company to fund future operations. As a result, the Company could be required to delay, scale back or abandon some or all of its research and development programs and other operations, which could materially harm the Company’s business, prospects, financial condition and operating results. This could then result in bankruptcy, or the liquidation of the Company. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

We are working to reposition our Company around RNA delivery technology and to divest or partner our AM-125 development program. We cannot give any assurance that this repositioning will be successful and that we will be able to divest or partner our AM-125 business at attractive conditions and within a reasonable period of time.

 

  Apart from the planned divestiture or partnering of the AM-125 program and potential revenues from our 49% stake in Altamira Medica, we depend entirely on the success of OligoPhore™, SemaPhore™, AM-401 and AM-411 which are still in preclinical development. If our development programs are unsuccessful or we are unable to out-license OligoPhore™, SemaPhore™, AM-401 or AM-411, or we experience significant delays in doing so, our business, financial condition and results of operations will be materially adversely affected.

 

Drug development involves a lengthy and expensive process with uncertain timelines and uncertain outcomes, and results of earlier in vitro or in vivo studies may not be predictive of future results in humans. In addition, clinical trials with our product candidates may be prolonged or delayed, and therefore we may be unable to out-license our RNA delivery platforms or product candidates on a timely basis or at all.

 

If serious adverse, undesirable or unacceptable side effects are identified during the development of our product candidates, if any, we may need to abandon our development of such product candidates, or the commercial profile of any approved label may be limited, if any.

 

We may seek to form additional strategic alliances in the future with respect to our RNA delivery platforms and product candidates, and if we do not realize the benefits of such alliance, our business, financial condition, commercialization prospects and results of operations may be materially adversely affected.

 

We rely on third parties to conduct certain of our nonclinical studies and perform other tasks for us. If these third parties do not successfully carry out their contractual duties, meet expected deadlines, or comply with regulatory requirements, we may not be able to out-license our RNA delivery platforms or our product candidates and our business could be substantially harmed.

 

We currently rely on third-party suppliers and other third parties for production of certain key ingredients for our RNA delivery platforms and our product candidates, and our dependence on these third parties may impair the advancement of our research and development programs and the development of our product candidates.

 

If we or our licensors are unable to obtain and maintain effective patent rights for our technologies, product candidates or any future product candidates, or if the scope of the patent rights obtained is not sufficiently broad, we may not be able to compete effectively in our markets.

 

Our future growth and ability to compete depends on retaining our key personnel and recruiting additional qualified personnel.

 

The price of our common shares may be volatile and may fluctuate due to factors beyond our control.

 

2

 

 

Risks Related to Our Business and Industry

 

Our product candidates are still in the development-stage and we have a limited operating history and a history of operating losses. We anticipate that we will continue to incur losses for the foreseeable future.

 

We are a biopharmaceutical company with our product candidates still in the development stage and a limited operating history. Since inception, we have incurred significant operating losses. We incurred net losses (defined as net loss attributable to owners of the Company) of CHF 3.9 million, CHF 26.5 million, and CHF 17.1 million for the years ended December 31, 2023, 2022 and 2021, respectively. The 2022 net loss included a one-time non-cash write-off of capitalized development expenditures for our AM-125 project in the amount of CHF 12.4 million based on the impairment test performed under IFRS. As of December 31, 2023, we had an accumulated deficit of CHF 18.0 million.

 

Our losses have resulted principally from expenses incurred in research and development of our product candidates, pre-clinical and clinical research and general and administrative expenses that are required for maintaining our business infrastructure and operating as a publicly listed company. Although we lowered our operating expenses significantly in 2023 in the context of our repositioning to become a provider of RNA delivery technology, we still expect to continue to incur significant operating losses in the future as we continue our research and development efforts for our RNA delivery platforms and product candidates. We expect our total additional cash need in 2024 to be in the range of CHF 6.5 to 7.5 million.

 

To date, we have financed our operations through an initial public offering and follow-on offerings of our common shares, private placements of equity securities and short- and long-term loans.

 

Biopharmaceutical product development is a highly speculative undertaking and involves a substantial degree of risk. It may be several years, if ever, before we begin to generate meaningful revenues from the out-licensing of our RNA delivery platforms or product candidates or from income generated from our residual ownership in the Bentrio® business. Our failure to become and remain profitable would decrease the value of the Company and could impair our ability to raise capital, expand our business and/or continue our operations.

 

We have never generated meaningful revenue from out-licensing our RNA delivery technology and may never be profitable.

 

Our ability to generate meaningful revenue and achieve profitability depends on our ability to successfully complete the development of OligoPhore™, SemaPhore™, AM-401 and AM-411 and out-license them. Our ability to generate future revenue from out-licensing depends heavily on our success in many areas, including but not limited to:

 

generating data allowing to obtain Investigational New Drug (“IND”) clearance from the FDA for AM-401 and AM-411 or to allow a potential licensee use OligoPhore™ or SemaPhore™ for its own IND submissions;

 

developing a sustainable and scalable manufacturing process for OligoPhore™, SemaPhore™, AM-401 and AM-411 and maintaining supply and manufacturing relationships with third parties that can conduct the process and provide adequate (in amount and quality) products to support development and potential licensees’ demand for our product candidates or technologies, if out-licensed;

 

addressing any competing technological and market developments;

 

identifying, assessing, acquiring and/or developing new product candidates;

 

negotiating favorable terms in any collaboration, licensing, or other arrangements into which we may enter;

 

maintaining, protecting, and expanding our portfolio of intellectual property rights, including patents, trade secrets, and know-how; and

 

attracting, hiring, and retaining qualified personnel.

 

3

 

 

We may be unable to develop and out-license OligoPhore™, SemaPhore™, AM-401, AM-411 or any other product candidate, and, even if we do, may never achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a semiannual or annual basis. Our failure to become and remain profitable would decrease the value of the Company and could impair our ability to raise capital, expand our business or continue our operations.

 

We expect that we will need substantial additional funding before we can expect to become profitable from out-licensing our RNA delivery platforms and product candidates, and there is substantial doubt about our ability to continue as a going concern. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our research and development programs.

 

We expect our research and development expenses to remain significant as we continue to develop our RNA delivery platforms and advance or initiate the pre-clinical and clinical development of AM-401, AM-411 or any other product candidate. We expect our total additional cash need in 2024 to be in the range of CHF 6.5 to 7.5 million. As of December 31, 2023, our cash and cash equivalents were CHF 0.6 million. Our assumptions may prove to be wrong, and we may have to use our capital resources sooner than we currently expect. To the extent that we will be unable to generate sufficient cash proceeds from the planned divestiture or partnering of our AM-125 development program and from our 49% stake in our associated company Altamira Medica AG or other partnering activities, we will need substantial additional financing to meet these funding requirements. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements included in this report have been prepared on a going concern basis, which contemplates the continuity of normal activities and realization of assets and settlement of liabilities in the normal course of business. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The lack of a going concern assessment may negatively affect the valuation of the Company’s investments in its subsidiaries and result in a revaluation of these holdings. The board of directors will need to consider the interests of our creditors and take appropriate action to restructure the business if it appears that we are insolvent or likely to become insolvent. Our future funding requirements will depend on many factors, including but not limited to:

 

the scope, rate of progress, results and cost of our nonclinical testing and other related activities;

 

the cost of sourcing key ingredients for our RNA delivery programs and of manufacturing our product candidates and any products that we may develop;

 

the scope of the further development of our RNA delivery platforms and the number and characteristics of product candidates that we pursue;

 

the terms and timing of any collaborative, licensing, and other arrangements that we may establish, including any required milestone and royalty payments thereunder.

 

We expect that we will require additional funding to continue the research and development program for our RNA delivery platforms and our product candidates AM-401 and AM-411. We also expect to continue to incur additional costs associated with operating as a public company. Additional funds may not be available on a timely basis, on favorable terms, or at all, and such funds, if raised, may not be sufficient to enable us to continue to implement our long-term business strategy. If we are not able to raise capital when needed, we could be forced to delay, reduce or eliminate our research and development programs, which could materially harm our business, prospects, financial condition and operating results. This could then result in bankruptcy, or the liquidation of the Company.

 

Raising additional capital may cause dilution to our shareholders, restrict our operations or require us to relinquish rights to our intellectual property or future revenue streams.

 

Until such time, if ever, as we can generate substantial out-licensing revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings, grants, the divestiture or partnering of AM-125, revenues from our 49% stake in Altamira Medica, and license and development agreements in connection with any collaborations. We do not have any committed external source of funds. In the event we need to seek additional funds, we may raise additional capital through the sale of equity or convertible debt securities. In such an event, our shareholders’ ownership interests will be diluted, and the terms of these new securities may include liquidation or other preferences that adversely affect our shareholders’ rights as holders of our common shares. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

 

If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our intellectual property or future revenue streams. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

 

4

 

 

We are working to reposition our company around RNA delivery technology and intend to divest or partner our AM-125 development program. We cannot give any assurance that this repositioning will be successful and that we will be able to divest or partner our AM-125 program at attractive conditions and within a reasonable period of time.

 

In June 2021 we acquired Trasir Therapeutics Inc. (“Trasir”) whose main asset is the proprietary peptide polyplex platform OligoPhore™ / SemaPhore™ that can engage any type of RNA in rapid self-assembly and is designed to allow for RNA delivery to extrahepatic tissues using systemic or local administration. We announced on that occasion our intention to strategically reposition the Company to focus on the development of RNA delivery technology while in the medium term evaluating opportunities to partner or divest our legacy assets. These included primarily our Bentrio® nasal spray for the protection against airborne allergens and viruses and AM-125 for the treatment of vertigo. On November 21, 2023 we completed the partial spin-off of our Bentrio® business through the sale of a 51% stake in the Company’s subsidiary Altamira Medica AG.

 

Any sale or partnering process is time consuming and requires substantial management time and attention, which may have an effect on our business and results of operations.

 

Valuation of assets in one or several partial divestiture or partnering transactions depends on a variety of factors such as the valuation of comparable assets, interest for the type of assets and conditions on capital markets. We can provide no assurances that we will successfully sell or partner our AM-125 development program, or that we will do so in accordance with our expected timeline. Additionally, any decisions made regarding our deployment or use of any sales or out-licensing proceeds we receive in any sale or partnering transaction involves risks and uncertainties. As a result, our decisions with respect to such proceeds may not lead to increased long-term shareholder value. If a sale or the out-licensing of the AM-125 development program at what we consider to be a reasonable price is not available, we may decide to cease efforts to divest or partner the AM-125 development program.

 

Cyber-attacks or other failures in telecommunications or information technology systems could result in information theft, data corruption and significant disruption of our business operations.

 

We and certain of our collaborators depend on information technology and telecommunications systems for significant aspects of operations. These information technology and telecommunications systems support a variety of functions, including project management, preclinical and clinical study management, accounting and finance as well as other general and administrative activities. Information technology and telecommunications systems are vulnerable to damage from a variety of sources, including telecommunications or network failures, malicious human acts and natural disasters. If we are subjected to one or more cyber-attacks or security breaches, we would suffer financial loss. Furthermore, as use of digital technologies has increased, cyber incidents, including deliberate attacks and attempts to gain unauthorized access to computer systems and networks, have increased in frequency and sophistication and make us even more at risk. These threats pose a risk to the security of our systems and networks, the confidentiality and the availability and integrity of our data. Any disruption or loss of information technology or telecommunications systems on which critical aspects of our operations depend could have an adverse effect on business.

 

Risks Related to the Development and Clinical Testing of Our Product Candidates

 

The OligoPhore™ and SemaPhore™ platforms and the AM-401 and AM-411 programs are still in preclinical development. If our development programs are unsuccessful, or we are unable to out-license the platforms or programs, or we experience significant delays in doing so, our business, financial condition and results of operations will be materially adversely affected.

 

We have invested a significant portion of our efforts and financial resources in the acquisition and development of OligoPhore™, SemaPhore™ and AM-401 and AM-411, which are still in preclinical development. Our ability to generate product revenues from the out-licensing of these RNA delivery platforms and drug product candidates, will depend heavily on successful development, obtaining regulatory approval or clearance and eventual commercialization of these product candidates. The success of AM-401 or AM-411 and our other product candidates will depend on several factors, including the following:

 

completing nonclinical studies that demonstrate the efficacy and safety of our product candidates;

 

receiving IND or equivalent regulatory clearance from competent regulatory authorities for clinical testing;

 

acceptance of our RNA delivery platforms and drug product candidates by potential collaboration partners or licensees;

 

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competing effectively with other platform technologies or therapeutics; and

 

qualifying for, maintaining, enforcing and defending our intellectual property rights and claims.

 

If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully out-license OligoPhore™ / SemaPhore™, AM-401 or AM-411, which would materially adversely affect our business, financial condition and results of operations.

 

Drug development involves a lengthy and expensive process with uncertain timelines and uncertain outcomes, and results of earlier in vitro and in vivo studies may not be predictive of future results in humans. In addition, clinical trials with our product candidates may be prolonged or delayed, and therefore we may be unable to out-license our RNA delivery platforms or product candidates on a timely basis or at all.

 

To obtain the requisite regulatory approvals or clearance to test any of our product candidates in humans, we must demonstrate through extensive pre-clinical studies that our products are likely to be safe and effective in humans. The results of pre-clinical studies of our product candidates may not be predictive of the results of future clinical trials in humans. For example, positive results generated to date in pre-clinical studies for our product candidates do not ensure that clinical trials will demonstrate similar results. A number of companies in the biopharmaceutical industry have suffered significant setbacks in early-stage clinical trials due to adverse safety profiles, notwithstanding promising results in pre-clinical studies.

 

We may decide to seek out-licensing partners for our RNA delivery platforms or product candidates after obtaining regulatory approvals or clearance for testing them in humans or only after conducting one or several early stage clinical trials. If we decide to conduct clinical trials, we will need to ensure that they are conducted in accordance with FDA, EMA and comparable foreign regulatory authorities’ legal requirements, regulations or guidelines, and are subject to oversight by these governmental agencies and Institutional Review Boards, or IRBs, at the medical institutions where the clinical trials are conducted. In addition, clinical trials must be conducted with supplies of our RNA delivery platforms or product candidates produced under applicable current good manufacturing practices (cGMP) and other requirements. We depend on medical institutions and clinical research organizations, or CROs, to conduct our clinical trials in compliance with current good clinical practice, or cGCP, standards. To the extent the CROs fail to enroll participants for our clinical trials, fail to conduct the trials to cGCP standards or are delayed for a significant time in the execution of trials, including achieving full enrollment, we may be affected by increased costs, program delays or both, which may harm our business.

 

The completion of clinical trials may be delayed, suspended or terminated as a result of many factors, including but not limited to:

 

the delay or refusal of regulators or IRBs to authorize us to commence a clinical trial at a prospective trial site and changes in regulatory requirements, policies and guidelines;

 

delays or failure to reach agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

 

delays in patient enrollment and variability in the number and types of patients available for clinical trials;

 

the inability to enroll a sufficient number of patients in trials to ensure adequate statistical power to detect statistically significant treatment effects;

 

negative or inconclusive results, which may require us to conduct additional pre-clinical or clinical trials or to abandon projects that we expect to be promising;

 

safety or tolerability concerns could cause us to suspend or terminate a trial if we find that the participants are being exposed to unacceptable health risks;

 

regulators or IRBs requiring that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or safety concerns, among others;

 

lower than anticipated retention rates of patients and volunteers in clinical trials;

 

our CROs or clinical trial sites failing to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all, deviating from the protocol or dropping out of a trial;

 

delays relating to adding new clinical trial sites;

 

difficulty in maintaining contact with patients after treatment, resulting in incomplete data;

 

errors in survey design, data collection and translation;

 

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delays in establishing the appropriate dosage levels;

 

the quality or stability of the product candidate falling below acceptable standards;

 

the inability to produce or obtain sufficient quantities of the RNA delivery platform component or product candidate to complete clinical trials; and

 

exceeding budgeted costs due to difficulty in accurately predicting costs associated with clinical trials.

 

Our product development costs will increase if we experience delays in pre-clinical testing and clinical trials or if we are required to conduct additional studies or trials or other testing beyond the studies, trials and testing that we currently contemplate or conduct and we may be required to obtain additional funds to complete such additional studies and trials. We cannot assure you that our pre-clinical studies or clinical trials will begin as planned or be completed on schedule, if at all, or that we will not need to restructure our studies or trials after they have begun. Significant study or trial delays also could shorten any periods during which we or potential licensees of ours may have the exclusive right to commercialize our product candidates or to use our RNA delivery platforms for their own product candidates or allow competitors to bring products to market before our potential licensees do or shorten any periods during which our potential licensees have the exclusive right to commercialize our product candidates or use our RNA delivery platforms for their own product candidates, which may harm our business and results of operations.

 

If serious adverse, undesirable or unacceptable side effects are identified during the development of our RNA delivery platforms or product candidates or following approval, if any, we may need to abandon our development of such product candidates, the commercial profile of any approved label may be limited, or we may be subject to other significant negative consequences following marketing approval, if any.

 

If our RNA delivery platforms or product candidates are associated with serious adverse, undesirable or unacceptable side effects, we or our potential licensees may need to abandon their development or limit development to certain uses or sub-populations in which such side effects are less prevalent, less severe or more acceptable from a risk-benefit perspective. Many compounds that initially showed promise in pre-clinical or early-stage testing have later been found to cause side effects that restricted their use and prevented further development of the compound for larger indications.

 

Additionally, if one or more of our product candidates or potential licensee’s product candidates incorporating one of our RNA delivery platforms receives marketing approval, and we or others later identify undesirable side effects caused by such products, a number of potentially significant negative consequences could result, including:

 

regulatory authorities may withdraw approvals of such product;

 

regulatory authorities may require additional warnings on the label;

 

we may be required to create a medication guide outlining the risks of such side effects for distribution to patients;

 

we or our potential licensees could be sued and held liable for harm caused to patients; and

 

our reputation and interest from the biopharmaceutical industry in our RNA delivery platforms or product candidates may suffer.

 

Any of these events could prevent us or our potential licensees from achieving or maintaining market acceptance of the particular product candidate, if approved, or of our RNA delivery technology and could significantly harm our business, results of operations and prospects.

 

Due to our limited resources and access to capital, we must and have in the past decided to prioritize development of certain product candidates; these decisions may prove to have been wrong and may adversely affect our revenues.

 

Because we have limited resources and access to capital to fund our operations, we must decide which product candidates to pursue and the amount of resources to allocate to each. Our decisions concerning the allocation of research, collaboration, management and financial resources toward particular compounds, product candidates or therapeutic areas may not lead to the development of viable assets for out-licensing and may divert resources away from better opportunities. Similarly, our potential decisions to delay, terminate or collaborate with third parties in respect of certain product development programs may also prove not to be optimal and could cause us to miss valuable opportunities. If we make incorrect determinations regarding the market potential of our product candidates or misread trends in the biopharmaceutical industry our business, financial condition and results of operations could be materially adversely affected.

 

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Risks Related to Commercialization of Our Products and Product Candidates

 

We operate in highly competitive and rapidly changing industries, which may result in others discovering, developing or commercializing competing products before or more successfully than we do.

 

The biopharmaceutical industry is highly competitive and subject to significant and rapid technological change. Our success is highly dependent on our ability to discover product candidates, develop and to out-license them successfully. In doing so, we face and will continue to face intense competition from a variety of businesses, including large, fully integrated pharmaceutical companies, specialty pharmaceutical companies and biopharmaceutical companies, academic institutions, government agencies and other private and public research institutions in Europe, the United States and other jurisdictions. These organizations may have significantly greater resources than we do and conduct similar research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and marketing of products that compete with our product candidates.

 

Risks Related to Our Reliance on Third Parties

 

If we fail to maintain our current strategic relationship with Washington University, our business, commercialization prospects and financial condition may be materially adversely affected.

 

We have an exclusive license agreement with Washington University located in St. Louis, Missouri (“WU”). Under this agreement with WU, we are given an exclusive, worldwide, royalty-bearing license (with the right to sublicense) under certain patent rights owned or controlled by WU to research, develop, make, have made, sell, offer for sale, use and import pharmaceutical products covered under such patent rights for all fields of use. Such licensed products may include drug products formulated as nanoparticles, comprising a peptide for delivery as well as a therapeutic nucleotide, for intracellular delivery. These intellectual property rights have been the basis of our research and development of AM-401 and AM-411.

 

A good relationship with WU is important for our business prospects. If our relationship with WU was to deteriorate substantially or WU challenges our use of their intellectual property or our calculations of the payments we owe under our agreements, our business, financial condition, commercialization prospects and results of operations could be materially adversely affected.

 

We may seek to form additional strategic alliances in the future with respect to our RNA delivery platforms and drug product candidates, and if we do not realize the benefits of such alliance, our business, financial condition, commercialization prospects and results of operations may be materially adversely affected.

 

The development programs for our RNA delivery platforms and product candidates will require substantial additional cash to fund expenses and may require expertise, such as strategic business development expertise, which we do not currently possess. For example, we currently do not intend to continue the development of our AM-401 and AM-411 product candidates beyond the clearance by regulatory agencies for testing in humans or phase 1 clinical trials. Therefore, in addition to our relationship with WU, we may decide to enter into strategic alliances, or create joint ventures or collaborations with pharmaceutical or biopharmaceutical companies for the further development of those product candidates or out-license rights to third parties to use our RNA delivery platform for the development of their own drug products.

 

We face significant competition in seeking appropriate collaborators. Collaborations are complex and time-consuming to negotiate and document. Any delays in entering into new strategic partnership agreements related to our RNA delivery platforms or product candidates could delay their further development and reduce their competitiveness. We may also be restricted under existing and future collaboration agreements from entering into strategic partnerships or collaboration agreements on certain terms with other potential collaborators. We may not be able to negotiate collaborations on acceptable terms, or at all, for any of our existing or future RNA delivery platforms and product candidates because the potential partner may consider that our research and development pipeline is insufficiently developed to justify a collaborative effort, or that our product candidates and programs do not have the requisite potential to demonstrate safety and efficacy in the target population. If we are unsuccessful in establishing and maintaining a collaboration with respect to a particular RNA delivery platform or product candidate, we may have to curtail the development of that RNA delivery platform or product candidate, reduce the scope of or delay its development program or one or more of our other development programs, delay its potential commercialization, or increase our expenditures and undertake development or commercialization activities at our own expense for which we have not budgeted. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we will not be able to out-license our RNA delivery programs or product candidates to market and generate licensing revenue. Even if we are successful in establishing a new strategic partnership or entering into a collaboration agreement, we cannot be certain that, following such a strategic transaction or license, we will be able to progress the development of the applicable RNA delivery platforms or product candidates as envisaged, or that we will achieve the revenues that would justify such transaction.

 

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We rely on third parties to conduct our nonclinical and clinical trials and perform other tasks for us. If these third parties do not successfully carry out their contractual duties, meet expected deadlines, or comply with regulatory requirements, we may not be able to obtain regulatory approval for or commercialize our product candidates and our business could be substantially harmed.

 

We have relied upon and plan to continue to rely upon third-party contract research organizations, or CROs, to monitor and manage data for our ongoing nonclinical and clinical program. We rely on these parties for execution of our nonclinical and clinical studies and control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of our trials is conducted in accordance with the applicable protocol, legal, regulatory, and scientific standards and our reliance on the CROs does not relieve us of our regulatory responsibilities. We and our CROs and other vendors are required to comply with cGMP, cGCP, and Good Laboratory Practice, or GLP, which are regulations and guidelines enforced by the FDA, the Competent Authorities of the Member States of the EU and comparable foreign regulatory authorities for all of our product candidates in nonclinical and clinical development. Regulatory authorities enforce these regulations through periodic inspections of study sponsors, principal investigators, trial sites and other contractors. If we or any of our CROs or vendors fail to comply with applicable regulations, the data generated in our nonclinical and clinical trials may be deemed unreliable and the EMA, FDA, other regulatory authorities may require us to perform additional nonclinical and clinical trials before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that all of our clinical trials comply with cGCP regulations. In addition, our clinical trials must be conducted with product produced under cGMP regulations. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process.

 

If any of our relationships with these third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs or do so on commercially reasonable terms. In addition, our CROs are not our employees, and except for remedies available to us under our agreements with such CROs, we cannot control whether or not they devote sufficient time and resources to our on-going nonclinical and clinical programs. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our protocols, regulatory requirements, or for other reasons, our clinical trials may be extended, delayed, or terminated and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. CROs may also generate higher costs than anticipated. As a result, our results of operations and the commercial prospects for our product candidates would be harmed, our costs could increase, and our ability to generate revenue could be delayed.

 

Switching or adding additional CROs involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays occur, which can materially impact our ability to meet our desired clinical development timelines. Though we carefully manage our relationships with our CROs, there can be no assurance that we will not encounter similar challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition, and prospects.

 

We currently rely on single-source third-party suppliers and other third parties for the sourcing of certain ingredients and the manufacturing of key components for our RNA delivery platforms and of our drug product candidates and our dependence on these third parties may impair the advancement of our research and development programs.

 

We currently rely on and expect to continue to rely on third parties, for the manufacturing and supply of chemical compounds for preclinical studies and future clinical trials of our RNA delivery platforms and product candidates. For the foreseeable future, we expect to continue to rely on such third parties for the manufacture of our RNA delivery platforms and any of our drug product candidates Although we have auditing rights with all our manufacturing counterparties, we do not have control over a supplier’s or manufacturer’s compliance with applicable laws, regulations and cGMP standards and other laws and regulations, such as those related to environmental health and safety matters.

 

We currently procure the peptide, the siRNA and certain other ingredients for our RNA delivery platform and AM-401 and AM-411 as well as formulated intermediate products and final products from single-source suppliers. Although we believe that there are alternate sources of supply that could satisfy our requirements, and we have performed some preliminary investigations to assess this availability, we cannot assure you that identifying alternate sources and establishing relationships with such sources would not result in significant delay in the development or out-licensing of our RNA delivery programs or drug product candidates. Additionally, we may not be able to enter into supply arrangements with alternative suppliers on commercially reasonable terms, or at all. A delay in the development of our RNA delivery platforms or drug product candidates, or having to enter into a new agreement with a different third party on less favorable terms than we have with our current suppliers could have a material adverse impact upon on our business.

 

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Risks Related to Intellectual Property

 

If we or our licensors are unable to obtain and maintain effective patent rights for our RNA delivery platforms, drug product candidates or any future product candidates, or if the scope of the patent rights obtained is not sufficiently broad, we may not be able to compete effectively in our markets.

 

We rely upon a combination of patents, trade secret protection, and confidentiality agreements to protect the intellectual property related to our technologies, commercial products and drug product candidates. Our success depends in large part on our and our licensors’ ability to obtain and maintain patent and other intellectual property protection in the United States and in other countries with respect to our proprietary technology and products.

 

We have sought to protect our proprietary position by filing patent applications in the United States and abroad related to our novel technologies and products that are important to our business. This process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost, in a timely manner or in all jurisdictions. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. Moreover, in some circumstances, we do not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents, covering technology that we license from third parties. Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business.

 

The patent position of biotechnology and pharmaceutical companies generally is highly uncertain and involves complex legal and factual questions for which legal principles remain unsolved. The patent applications that we own or in-license may fail to result in issued patents with claims that cover our product candidates in the United States or in other foreign countries. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions remain confidential for a period of time after filing, and some remain so until issued. We cannot be certain that we were the first to file any patent application related to our RNA delivery platforms or product candidates, or whether we were the first to make the inventions claimed in our owned patents or pending patent applications, nor can we know whether those from whom we license patents were the first to make the inventions claimed or were the first to file. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. There is no assurance that all potentially relevant prior art relating to our patents and patent applications has been found, which can invalidate a patent or prevent a patent from issuing from a pending patent application. Even if patents do successfully issue, and even if such patents cover our RNA delivery platforms or product candidates, third parties may challenge their validity, enforceability, or scope, which may result in such patents being narrowed, found unenforceable or invalidated, which could allow third parties to commercialize our technology or products and compete directly with us, without payment to us, or result in our inability to manufacture or out-licensing intellectual property rights without infringing third party patent rights. Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual property, provide exclusivity for commercial products or drug product candidates, prevent others from designing around our claims or provide us with a competitive advantage. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business.

 

We have filed or intend to file several patent applications covering various aspects of our RNA delivery platform and product candidates. We cannot offer any assurances about whether the patent will issue, the breadth of any such patent or whether any issued patents will be found invalid and unenforceable or will be challenged by third parties. Any successful opposition to these patents or any other patents owned by or licensed to us after patent issuance could deprive us of rights necessary for the successful commercialization of our RNA delivery platforms or any drug product candidates that we may develop through out-licensing.

 

We may not have sufficient patent terms to effectively protect our products and business.

 

Patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after it is filed. Although various extensions may be available, the life of a patent, and the protection it affords, is limited. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours or otherwise provide us with a competitive advantage. Even if patents covering our product candidates are obtained, once the patent life has expired for a product, we may be open to competition from generic medications.

 

While patent term extensions under the Hatch-Waxman Act in the United States and under supplementary protection certificates in Europe may be available to extend the patent exclusivity term for our RNA delivery platforms and product candidates, we cannot provide any assurances that any such patent term extension will be obtained and, if so, for how long. In addition, upon issuance in the United States any patent term can be adjusted based on certain delays caused by the applicant(s) or the U.S. Patent and Trademark Office, or USPTO. For example, a patent term can be reduced based on certain delays caused by the patent applicant during patent prosecution.

 

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While in the United States there is a possibility of obtaining market protection independent from any patent protection for up to three and five years from approval, and in the European Union one may obtain data exclusivity of eight years from approval with an additional two years of market exclusivity (which can potentially be extended by one year), there is no assurance that we can obtain such data exclusivity and market protection with respect to our RNA delivery platforms, AM-401, AM-411, or any of our other drug product candidates. Our issued patents and pending patent applications are expected to expire for our RNA delivery platforms in 2034, for AM-401 in 2034 and 2043, and for AM-411 in 2034, prior to any patent term extensions to which we may be entitled under applicable laws.

 

If we are unable to maintain effective proprietary rights for our RNA delivery platforms, drug product candidates or any future drug product candidates, we may not be able to compete effectively in our markets.

 

In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable or that we elect not to patent, processes for which patents are difficult to enforce and any other elements of our RNA delivery platform and product candidate discovery and development processes that involve proprietary know-how, information or technology that is not covered by patents. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with our employees, consultants, scientific advisors, and contractors. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems. While we have confidence in these individuals, organizations and systems, agreements or security measures may be breached, and we may not have adequate remedies for any breach. Moreover, if any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent such competitor from using that technology or information to compete with us, which could harm our competitive position.

 

Although we expect all of our employees and consultants to assign their inventions to us, and all of our employees, consultants, advisors, and any third parties who have access to our proprietary know-how, information or technology to enter into confidentiality agreements, we cannot provide any assurances that all such agreements have been duly executed or that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. Misappropriation or unauthorized disclosure of our trade secrets could impair our competitive position and may have a material adverse effect on our business. Additionally, if the steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties for misappropriating such trade secrets. In addition, others may independently discover our trade secrets and proprietary information. For example, the FDA, as part of its Transparency Initiative, is currently considering whether to make additional information publicly available on a routine basis, including information that we may consider to be trade secrets or other proprietary information, and it is not clear at the present time how the FDA’s disclosure policies may change in the future, if at all.

 

Further, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the U.S. As a result, we may encounter significant problems in protecting and defending our intellectual property both in the U.S. and abroad. If we are unable to prevent material disclosure of the intellectual property related to our technologies to third parties, we will not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, financial condition and results of operations.

 

Third-party claims of intellectual property infringement may expose us to substantial liability or prevent or delay our development and commercialization efforts.

 

Our commercial success depends in part on our ability to develop, manufacture, and out-license our RNA delivery platforms or drug product candidates and use our proprietary technology without alleged or actual infringement, misappropriation, or other violation of the patents and proprietary rights of third parties. There have been many lawsuits and other proceedings involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, interferences, oppositions, and reexamination proceedings before the USPTO and corresponding foreign patent offices. Numerous U.S.- and foreign-issued patents and pending patent applications, which are owned by third parties, exist in the fields for which we are developing our RNA delivery platforms and product candidates. Some claimants may have substantially greater resources than we do and may be able to sustain the costs of complex intellectual property litigation to a greater degree and for longer periods of time than we could. In addition, patent holding companies that focus solely on extracting royalties and settlements by enforcing patent rights may target us. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our RNA delivery programs and drug product candidates may be subject to claims of infringement of the patent rights of third parties.

 

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Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture, or methods of treatment related to the use or manufacture of our RNA delivery platforms or product candidates. Although we generally conduct certain freedom to operate search and review with respect to our RNA delivery platforms and product candidates, we cannot guarantee that any of our search and review is complete and thorough, nor can we be sure that we have identified each and every patent and pending application in the United States and abroad that is relevant or necessary to the development and out-licensing of our RNA delivery platforms or product candidates. Because patent applications can take many years to issue, there may be currently pending patent applications that may later result in issued patents that our RNA delivery platforms or product candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents. If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of any of our RNA delivery platforms or product candidates, any molecules formed during the manufacturing process or any final product itself, the holders of any such patents may be able to block our ability to out-license such RNA delivery platform or product candidate unless we obtained a license under the applicable patents, or until such patents expire or are finally determined to be invalid or unenforceable. Similarly, if any third-party patents were held by a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture, or methods of use, the holders of any such patents may be able to block our ability to develop and out-license the applicable RNA delivery platform or product candidate unless we obtained a license or until such patent expires or is finally determined to be invalid or unenforceable. In either case, such a license may not be available on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us.

 

Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and out-license one or more of our RNA delivery platforms or product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.

 

If we fail to comply with the obligations in our Exclusive License Agreement with WU, we could lose intellectual property rights that are important to our AM-401 and AM-411 drug product candidates and further potential drug product candidates.

 

Our Exclusive License Agreement with WU imposes various development, milestone payment, royalty, and other obligations on us. If we fail to comply with our obligations under the agreement and fail to cure such breach, or we are subject to a bankruptcy, WU has the right to terminate the agreement, in which event we would not be able to develop or market our RNA delivery platforms, AM-401 or AM-411 or any future drug product candidates covered by the license.

 

In particular, we are required to use commercially reasonable efforts to meet the following development milestones: a) to file an IND application (or regulatory equivalent in foreign jurisdiction) by June 30, 2024, b) to complete a Phase 1 clinical trial 3.5 years after achieving the first milestone, and c) to complete a Phase 2 clinical trial four years after achieving the second milestone. We may elect to extend each of these milestones once by a period of twelve months, and second time by a period of an additional twelve months, by paying WU a nonrefundable fee in the amount of $50,000 for the first extension and $100,000 for the second extension.

 

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We may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time-consuming, and unsuccessful.

 

Competitors may infringe our patents or the patents of our licensors. To counter such infringement, we may be required to file claims against those competitors, which can be expensive and time-consuming. If we or one of our licensing partners were to initiate legal proceedings against a third party to enforce a patent covering one of our commercial products or drug product candidates, the defendant could counterclaim that the patent covering our commercial product or drug product candidate is invalid, overbroad and/or unenforceable, or that we infringe the defendant’s patents. In patent litigation in the United States, defendant counterclaims alleging invalidity, overbreadth and/or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution. The outcome following legal assertions of invalidity and unenforceability is unpredictable. A court may decide that a patent of ours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop a third party from using the technology in question on the grounds that our patents do not cover that technology. An adverse result in any litigation proceeding could put one or more of our patents at risk of being invalidated or interpreted narrowly, which could adversely affect us.

 

Interference proceedings provoked by third parties or brought by us or declared by the USPTO may be necessary to determine the priority of inventions with respect to our patents or patent applications or those of our licensors. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms or at all. Our defense of litigation or interference proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees. In addition, the uncertainties associated with litigation could have a material adverse effect on our ability to continue our research programs, license necessary technology from third parties, or enter into out-licensing agreement. We may not be able to prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States.

 

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions, or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our common shares.

 

We may be subject to claims that our employees, consultants, or independent contractors have wrongfully used or disclosed confidential information of third parties or that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

 

We employ and utilize the services of individuals who were previously employed or provided services to universities or other biotechnology or pharmaceutical companies. Although we try to ensure that our employees, consultants, and independent contractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants, or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of any of our employee’s, consultant’s or independent contractor’s former employer or other third parties. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel, which could adversely impact our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

 

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Our reliance on our advisors, employees and third parties requires us to share our intellectual property and trade secrets, which increases the possibility that a competitor will discover them or that our intellectual property will be misappropriated or disclosed.

 

Because we rely on our advisors, employees and third-party contractors and consultants to research and develop and to manufacture our commercial products and drug product candidates, we must, at times, share our intellectual property with them. We seek to protect our intellectual property and other proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, consulting agreements or other similar agreements with our advisors, employees, third-party contractors and consultants prior to beginning research or disclosing proprietary information. These agreements typically limit the rights of these advisors, employees and third parties to use or disclose our confidential information, including our intellectual property and trade secrets. Despite the contractual provisions employed when working with these advisors, employees and third parties, the need to share intellectual property and other confidential information increases the risk that such confidential information becomes known by our competitors, are inadvertently incorporated into the product development of others or are disclosed or used in violation of these agreements. Given that our proprietary position is based, in part, on our know-how, intellectual property and trade secrets, a competitor’s discovery of our intellectual property or trade secrets or other unauthorized use or disclosure would impair our competitive position and may have a material adverse effect on our business.

 

In addition, these agreements typically restrict the ability of our advisors, employees, third-party contractors and consultants to publish data potentially relating to our intellectual property, although our agreements may contain certain limited publication rights. For example, any academic institution that we may collaborate with in the future may expect to be granted rights to publish data arising out of such collaboration, provided that we are notified in advance and given the opportunity to delay publication for a limited time period in order for us to secure patent protection of intellectual property rights arising from the collaboration, in addition to the opportunity to remove confidential or trade secret information from any such publication. In the future, we may also conduct joint research and development programs that may require us to share intellectual property under the terms of our research and development or similar agreements. Despite our efforts to protect our intellectual property, our competitors may discover our trade secrets or know how, either through breach of our agreements with third parties, independent development or publication of information by any of our third-party collaborators. A competitor’s discovery of our intellectual property would impair our competitive position and have an adverse impact on our business.

 

We may be subject to claims challenging the inventorship of our patents and other intellectual property.

 

We may be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other intellectual property as an inventor or co-inventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developing our drug product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship or our ownership of our patents or other intellectual property. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

 

We may not be able to protect our intellectual property rights throughout the world.

 

Filing, prosecuting, and defending patents in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. As part of ordinary course prosecution and maintenance activities, we determine whether to seek patent protection outside the U.S. and in which countries. This also applies to patents we have acquired or in-licensed from third parties. In some cases this means that we, or our predecessors in interest or licensors of patents within our portfolio, have sought patent protection in a limited number of countries for patents covering our product candidates. Competitors may use our technologies in jurisdictions where we have not obtained or are unable to adequately enforce patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our products and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

 

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Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets, and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our patents, the reproduction of our manufacturing or other know-how or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

 

Risks Related to Employee Matters and Managing Growth

 

Our future growth and ability to compete depends on retaining our key personnel and recruiting additional qualified personnel.

 

Our success depends upon the continued contributions of our key management, scientific and technical personnel, many of whom have substantial experience with or been instrumental for us and our projects. Key management includes our executive officers Thomas Meyer, our founder, Chairman and Chief Executive Officer, Covadonga Pañeda, Chief Operating Officer for our RNA delivery activities, and Marcel Gremaud, our Chief Financial Officer, who constitute the Executive Management Committee. Since January 2023, we have received the contributions of Samuel Wickline, Trasir’s founder and our Chief Scientific Adviser for RNA delivery technology on a part-time consulting basis (from June 2021 to December 2022 he served as Chief Scientific Officer).

 

The loss of key managers, senior scientists or advisors could delay our research and development activities. Laws and regulations on executive compensation, including legislation in Switzerland, may restrict our ability to attract, motivate and retain the required level of qualified personnel. In addition, the competition for qualified personnel in the biopharmaceutical field is intense, and our future success depends upon our ability to attract, retain and motivate highly skilled scientific, technical and managerial employees. We face competition for personnel from other companies, universities, public and private research institutions and other organizations. If our recruitment and retention efforts are unsuccessful in the future, it may be difficult for us to implement our business strategy, which could have a material adverse effect on our business.

 

Risks Related to Our Common Shares

 

The price of our common shares may continue to be volatile and may fluctuate due to factors beyond our control.

 

The share price of publicly traded emerging biopharmaceutical and drug discovery and development companies has been highly volatile and is likely to remain highly volatile in the future. For example, during the last year, our common shares have traded as high as $119.40 in January 2023 and as low as $1.88 in November 2023. The market price of our common shares may fluctuate significantly in the future due to a variety of factors, including:

 

commencement and enrollment of and delays in clinical trials and positive or negative results of testing and clinical trials by us, strategic partners, or competitors;

 

delays in executing on our plans to reposition the Company around RNA delivery technology and to divest or partner our AM-125 development program;

 

technological innovations or commercial product introductions by us or competitors;

 

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changes in government regulations;

 

adverse developments concerning our suppliers or manufacturers;

 

developments concerning proprietary rights, including patents and litigation matters;

 

public concern relating to the commercial value or safety of any of our product candidates;

 

financing or other corporate transactions;

 

  general market conditions in the biopharmaceutical industry or in the economy as a whole;

 

our ability to maintain the listing of our common shares on Nasdaq; or

 

other events and factors beyond our control.

 

Additionally, these factors may affect the liquidity of our common shares, which may hurt your ability to sell our common shares in the future. In addition, the stock market in general has recently experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of individual companies. Broad market and industry factors may materially affect the market price of companies’ stock, including ours, regardless of actual operating performance.

 

Our common shares may be involuntarily delisted from trading on The Nasdaq Capital Market if we fail to comply with the continued listing requirements. A delisting of our common shares is likely to reduce the liquidity of our common shares and may inhibit or preclude our ability to raise additional financing.

 

We are required to comply with certain Nasdaq continued listing requirements, including a series of financial tests relating to shareholder equity, market value of listed securities and number of market makers and shareholders. If we fail to maintain compliance with any of those requirements, our common shares could be delisted from The Nasdaq Capital Market.

 

On multiple occasions in recent years, we failed to maintain compliance with the minimum bid price requirement. To address that non-compliance, on March 13, 2018, we effected the Merger, pursuant to which we effected a “reverse share split” at a ratio of 10-for-1, and on each of May 1, 2019, October 25, 2022, and December 13, 2023 we effected a “reverse share split” at a ratio of 20-for-1. In 2020, we regained compliance as our share price increased. Additionally, on January 11, 2018, we received a letter from Nasdaq indicating that we were not in compliance with Nasdaq’s market value of listed securities requirement. As a result of the July 2018 Registered Offering, we resolved the non-compliance with the market value of listed securities requirement by complying with Nasdaq’s minimum equity standard. On May 25, 2023 we received a letter from Nasdaq indicating that we were no longer in compliance with Nasdaq’s minimum shareholders’ equity requirement. On November 21, 2023 we regained compliance, which will need to be confirmed with the filing of the 2023 Annual Report. However, there can be no assurance that we will be able to successfully maintain compliance with the several Nasdaq continued listing requirements.

 

If, for any reason, Nasdaq should delist our common shares from trading on its exchange and we are unable to obtain listing on another national securities exchange or take action to restore our compliance with the Nasdaq continued listing requirements, a reduction in some or all of the following may occur, each of which could have a material adverse effect on our shareholders:

 

the liquidity of our common shares;

 

the market price of our common shares;

 

our ability to obtain financing for the continuation of our operations;

 

the number of institutional and general investors that will consider investing in our common shares;

 

the number of investors in general that will consider investing in our common shares;

 

the number of market makers in our common shares;

 

the availability of information concerning the trading prices and volume of our common shares; and

 

the number of broker-dealers willing to execute trades in shares of our common shares.

 

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Moreover, delisting may make unavailable a tax election that could affect the U.S. federal income tax treatment of holding, and disposing of, our common shares. See “Taxation—Material U.S. Federal Income Tax Considerations for U.S. Holders” below.

 

In the event that our common shares are delisted from Nasdaq, U.S. broker-dealers may be discouraged from effecting transactions in our common shares because they may be considered penny stocks and thus be subject to the penny stock rules.

 

The SEC has adopted a number of rules to regulate “penny stock” that restrict transactions involving stock which is deemed to be penny stock. Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities Exchange Act of 1934 (the “Exchange Act”). These rules may have the effect of reducing the liquidity of penny stocks. “Penny stocks” generally are equity securities with a price of less than $5.00 per share (other than securities registered on certain national securities exchanges or quoted on the Nasdaq Stock Market if current price and volume information with respect to transactions in such securities is provided by the exchange or system). Our common shares have in the past constituted, and may again in the future constitute, “penny stock” within the meaning of the rules. The additional sales practice and disclosure requirements imposed upon U.S. broker-dealers may discourage such broker-dealers from effecting transactions in our common shares, which could severely limit the market liquidity of such common shares and impede their sale in the secondary market.

 

A U.S. broker-dealer selling penny stock to anyone other than an established customer or “accredited investor” (generally, an individual with net worth in excess of $1,000,000 or an annual income exceeding $200,000, or $300,000 together with his or her spouse) must make a special suitability determination for the purchaser and must receive the purchaser’s written consent to the transaction prior to sale, unless the broker-dealer or the transaction is otherwise exempt. In addition, the “penny stock” regulations require the U.S. broker-dealer to deliver, prior to any transaction involving a “penny stock”, a disclosure schedule prepared in accordance with SEC standards relating to the “penny stock” market, unless the broker-dealer or the transaction is otherwise exempt. A U.S. broker-dealer is also required to disclose commissions payable to the U.S. broker-dealer and the registered representative and current quotations for the securities. Finally, a U.S. broker-dealer is required to submit monthly statements disclosing recent price information with respect to the “penny stock” held in a customer’s account and information with respect to the limited market in “penny stocks.”

 

Shareholders should be aware that, according to the SEC, the market for “penny stocks” has suffered in recent years from patterns of fraud and abuse. Such patterns include (i) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (iii) “boiler room” practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (iv) excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and (v) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, resulting in investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities.

 

Future sales, or the possibility of future sales, of a substantial number of our common shares could adversely affect the price of our common shares.

 

Future sales of a substantial number of our common shares, or the perception that such sales will occur, could cause a decline in the market price of our common shares. Additionally, as of the date of this Annual Report we have warrants outstanding, which are exercisable for an aggregate of 759,167 common shares at a weighted average exercise price of $15.59 per share, options which are exercisable for an aggregate of 145,324 common shares at a weighted average exercise price of $22.17 per share, an equity commitment to sell up to $10.0 million of additional common shares to Lincoln Park Capital Fund, LLC (“LPC”) pursuant to the commitment purchase agreement we entered into on December 5, 2022 with LPC (the “2022 LPC Purchase Agreement”), less an aggregate of $1,185,800 of common shares that have been sold through March 29, 2024 under such agreement. Under an at-the-market offering program pursuant to the sales agreement we entered into with H.C. Wainwright & Co. (“HCW”) on January, 2024 (the “HCW Sales Agreement”) we sold an aggregate of $1.66 million of common shares through March 29, 2024, and we may seek to register additional common shares for sale under such agreement, subject to the volume limitations under Instruction I.B.5 of Form F-3. We have also filed registration statements to register the resale of the common shares underlying the warrants that we have offered and sold in unregistered transactions, the common shares that are sold to LPC and the common shares and other equity securities that we have issued under our prior equity incentive plans or may issue under our omnibus equity compensation plan. These common shares may be freely sold in the public market upon issuance, subject to certain limitations applicable to affiliates. In addition, we have filed a registration statement covering the issuance and sale by us of up to $79 million of common shares, debt securities, warrants, purchase contracts, units and common shares, including shares sold and which may be sold under the HCW Sales Agreement. We may issue such securities, including our common shares and warrants to purchase common shares, at any time and from time to time subject to the limitations set forth in General Instruction I.B.5 of Form F-3. If a large number of our common shares and/or warrants to purchase common shares are sold in the public market, the sales could reduce the trading price of our common shares and impede our ability to raise future capital.

 

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We do not expect to pay dividends in the foreseeable future.

 

We have not paid any dividends since our incorporation. Even if future operations lead to significant levels of distributable profits, we currently intend that any earnings will be reinvested in our business and that dividends will not be paid until we have an established revenue stream to support continuing dividends. The proposal to pay future dividends to shareholders will in addition effectively be at the discretion of our board of directors after taking into account various factors including our business prospects, cash requirements, financial performance and new product development. In addition, payment of future dividends is subject to certain limitations pursuant to Bermuda law or by our Bye-laws. We are subject to Bermuda law restrictions on the payment of dividends including that no dividends may be declared by our board of directors or paid by the Company if there are reasonable grounds for believing that: (i) we are, or would after the payment be, unable to pay our liabilities as they become due; or (ii) that the realizable value of our assets would thereby be less than our liabilities. Accordingly, investors cannot rely on dividend income from our common shares and any returns on an investment in our common shares will likely depend entirely upon any future appreciation in the price of our common shares.

 

If we are or become classified as a passive foreign investment company (“PFIC”), our U.S. shareholders may suffer adverse tax consequences as a result.

 

A non-U.S. corporation, such as our Company, will be considered a PFIC for any taxable year if either (i) at least 75% of its gross income is passive income or (ii) at least 50% of the value of its assets (based on an average of the quarterly values of the assets during a taxable year) is attributable to assets that produce or are held for the production of passive income.

 

Based upon our current and projected income and assets, and projections as to the value of our assets, we do not anticipate that we will be a PFIC for the 2023 taxable year or the foreseeable future. However, no assurance can be given in this regard because the determination of whether we will be or become a PFIC is a factual determination made annually that will depend, in part, upon the composition of our income and assets, and we have not and will not obtain an opinion of counsel regarding our classification as a PFIC. Fluctuations in the market price of our common shares may cause us to be classified as a PFIC in any taxable year because the value of our assets for purposes of the asset test, including the value of our goodwill and unbooked intangibles, may be determined by reference to the market price of our common shares from time to time (which may be volatile). If our market capitalization subsequently declines, we may be or become classified as a PFIC for the 2023 taxable year or future taxable years. Furthermore, the composition of our income and assets may also be affected by how, and how quickly, we use our liquid assets and any future fundraising activity. Under circumstances where our revenues from activities that produce passive income significantly increases relative to our revenues from activities that produce non-passive income, or where we determine not to deploy significant amounts of cash for active purposes, our risk of becoming classified as a PFIC may substantially increase. It is also possible that the Internal Revenue Service (the “IRS”) may challenge the classification or valuation of our Company’s assets, including its goodwill and other unbooked intangibles, or the classification of certain amounts received by our Company, which may result in our Company being, or becoming classified as, a PFIC for the 2023 taxable year or future taxable years. Accordingly, there can be no assurance that we will not be a PFIC in the current or for any future taxable year and U.S. investors should invest in our common shares only if they are willing to bear the U.S. federal income tax consequences associated with investments in PFICs.

 

If we were a PFIC for any taxable year during which a U.S. investor held our common shares, certain adverse U.S. federal income tax consequences could apply to the U.S. Holder. See “Taxation—Material U.S. Federal Income Tax Considerations for U.S. Holders.”

 

We are a holding company with no material direct operations.

 

We are a holding company with no material direct operations. As a result, we would be dependent on dividends, other payments or loans from our subsidiaries in order to pay a dividend. Our subsidiaries are subject to legal requirements of their respective jurisdictions of organization that may restrict their paying dividends or other payments, or making loans, to us, such as the potential for double taxation across jurisdictions.

 

We are a foreign private issuer and, as a result, we are not subject to U.S. proxy rules and are subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than those of a U.S. domestic public company.

 

We report under the Exchange Act, as a non-U.S. company with foreign private issuer status. Because we qualify as a foreign private issuer under the Exchange Act and although we are subject to Bermuda laws and regulations with regard to such matters and furnish semiannual financial information to the SEC, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including (i) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; (ii) the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and (iii) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant events. In addition, foreign private issuers are not required to file their annual report on Form 20-F until four months after the end of each financial year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year. Foreign private issuers are also exempt from the Regulation Fair Disclosure, aimed at preventing issuers from making selective disclosures of material information. As a result of the above, you may not have the same protections afforded to shareholders of companies that are not foreign private issuers.

 

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As a foreign private issuer and as permitted by the listing requirements of Nasdaq, we follow certain home country governance practices rather than the corporate governance requirements of Nasdaq.

 

We are a foreign private issuer. As a result, in accordance with Nasdaq Listing Rule 5615(a)(3), we comply with home country governance requirements and certain exemptions thereunder rather than complying with certain of the corporate governance requirements of Nasdaq.

 

Bermuda law does not require that a majority of our board of directors consists of independent directors. Our board of directors therefore may include fewer independent directors than would be required if we were subject to Nasdaq Listing Rule 5605(b)(1). In addition, we are not subject to Nasdaq Listing Rule 5605(b)(2), which requires that independent directors regularly have scheduled meetings at which only independent directors are present.

 

Bermuda law does not require that we disclose information regarding third-party compensation of our directors or director nominee. As a result, our practice varies from the third-party compensation disclosure requirements of Nasdaq Listing Rule 5250(b)(3). We follow the requirements of Bermuda law with respect to our compensation committee, disclosure of compensation of our directors and executive officers and information regarding third-party compensation of our directors or director nominee, each of which differ from the requirements of the Nasdaq Listing Rules.

 

In addition, as permitted by Bermuda law, we have opted not to implement a standalone nominating committee. To this extent, our practice varies from the independent director oversight of director nominations requirements of Nasdaq Listing Rule 5605(e).

 

The quorum for a general meeting of shareholders is as set out in our Bye-laws, which provides for a quorum of two or more persons present at the start of the meeting and representing in person or by proxy issued and outstanding voting shares in the company. Our practice thus varies from the requirement of Nasdaq Listing Rule 5620(c), which requires an issuer to provide in its bylaws for a generally applicable quorum, and that such quorum may not be less than one-third of the outstanding voting stock. We must provide shareholders with an agenda and other relevant documents for the general meeting of shareholders. However, Bermuda law has no regulatory regime for the solicitation of proxies, thus our practice varies from the requirement of Nasdaq Listing Rule 5620(b), which sets forth certain requirements regarding the solicitation of proxies. In addition, we have opted out of shareholder approval requirements for the issuance of securities in connection with certain events such as the acquisition of stock or assets of another company, the establishment of or amendments to equity-based compensation plans for employees, a change of control of us and certain private placements. To this extent, our practice varies from the requirements of Nasdaq Listing Rule 5635, which generally requires an issuer to obtain shareholder approval for the issuance of securities in connection with such events.

 

As a result of the above, you may not have the same protections afforded to shareholders of companies that are not foreign private issuers.

 

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, shareholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our common shares.

 

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act of 2002, or any subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Inferior internal controls could also subject us to regulatory scrutiny and sanctions, impair our ability to raise revenue and cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common shares.

 

Management concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2022 and 2023, due to material weaknesses identified in Item 15, “Controls and Procedures,” of this Annual Report. The Company did not maintain controls to execute the criteria established in the COSO Framework for the control environment, risk assessment, control activities, information and communication, and monitoring components, which resulted in control deficiencies that constitute material weaknesses, either individually or in the aggregate, within each component of the COSO Framework. This was due to the lack of sufficient resources to execute control activities which contributed to the potential for there to have been material errors in our financial statements in addition to the material misstatement that occurred in our interim reporting for the period ended June 30, 2022.

 

Management is continuing to evaluate the material weaknesses and is in the process of implementing plans to remediate these material weaknesses. We expect our remediation plan to include the following, amongst others:

 

Implementing an effective risk assessment process to identify and analyze risks caused by changes in our business that could impact our system of internal control, including re-designing existing controls as necessary;

 

Reporting on a regular basis to the Company’s Audit Committee on the effectiveness of internal controls;

 

Enhancing the design of control activities to operate at a level of precision to identify all potentially material errors, and training control owners to improve required retention of documentation evidencing their execution of control activities;

 

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Designing and implementing controls over the generation and communication of relevant quality information to be utilized in the execution of control activities; and

 

Investing in training of personnel and hiring additional resources with appropriate expertise to plan and perform more timely and thorough monitoring activities over our internal control over financial reporting.

 

We cannot assure you that the measures we have taken to date, and are continuing to implement, will be sufficient to remediate the material weaknesses we have identified or avoid potential future material weaknesses. The material weaknesses cannot be considered remediated until applicable controls have operated for a sufficient period and management has concluded, through testing, that these controls are operating effectively. Accordingly, we will continue to monitor and evaluate the effectiveness of our internal control over financial reporting. See Item 15. “Controls and Procedures” for more information.

 

We are required to disclose changes made in our internal controls and procedures, and our management is required to assess the effectiveness of these controls annually. However, for as long as we are a “non-accelerated filer” under Securities and Exchange Commission rules, our independent registered public accounting firm is not required to attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404. An independent assessment of the effectiveness of our internal controls could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal controls could lead to further financial statement restatements and require us to incur the expense of remediation.

 

If our remedial measures are insufficient to address the material weaknesses we have identified, these will continue to be disclosed as a material weaknesses. Additionally, if there is a change in conditions, or the degree of compliance with policies or procedure deteriorates, internal review of our internal control over financial reporting or the subsequent testing by our independent registered public accounting firm may reveal other deficiencies in our internal controls over financial reporting that are deemed material weaknesses. If this occurs, our consolidated financial statements or disclosures may contain material misstatements and we could be required to restate our financial results. In addition, if we are unable to successfully remediate any of these material weaknesses, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting or our independent registered public accounting firm may not in future issue an unqualified opinion, each of which could lead to investors losing confidence in our reported financial information, which could have a material adverse effect on the trading price of our common shares, and we may be unable to maintain compliance with applicable stock exchange listing requirements.

 

As a Bermuda company, it may be difficult for you to enforce judgments against us or our directors and executive officers.

 

We are a Bermuda exempted company. As a result, the rights of holders of our common shares are governed by Bermuda law and our memorandum of continuance (the “Memorandum of Continuance”) and Bye-laws. The rights of shareholders under Bermuda law may differ from the rights of shareholders of companies incorporated in other jurisdictions. All of our executive officers and all of our directors referred to in this Annual Report are not residents of the United States, and a substantial portion of our assets are located outside the United States. As a result, it may be difficult for investors to effect service of process on those persons in the United States or to enforce in the United States judgments obtained in U.S. courts against us or those persons based on the civil liability provisions of the U.S. securities laws. It is doubtful whether courts in Bermuda will enforce judgments obtained in other jurisdictions, including the United States, against us or our directors or officers under the securities laws of those jurisdictions or entertain actions in Bermuda against us or our directors or officers under the securities laws of other jurisdictions.

 

Bermuda law differs from the laws in effect in the United States and may afford less protection to holders of our common shares.

 

We are subject to the laws of Bermuda. As a result, our corporate affairs are governed by the Companies Act 1981 of Bermuda (the “Companies Act”), which differs in some material respects from laws typically applicable to U.S. corporations and shareholders, including the provisions relating to interested directors, amalgamations, mergers and acquisitions, takeovers, shareholder lawsuits and indemnification of directors. Generally, the duties of directors and officers of a Bermuda company are owed to the company only. Shareholders of Bermuda companies typically do not have rights to take action against directors or officers of the company and may only do so in limited circumstances. Class actions are not available under Bermuda law. The circumstances in which derivative actions may be available under Bermuda law are substantially more proscribed and less clear than they would be to shareholders of U.S. corporations. The Bermuda courts, however, would ordinarily be expected to permit a shareholder to commence an action in the name of a company to remedy a wrong to the company where the act complained of is alleged to be beyond the corporate power of the company or illegal, or would result in the violation of the company’s memorandum of association (or memorandum of continuance) or bye-laws. Furthermore, consideration would be given by a Bermuda court to acts that are alleged to constitute a fraud against the minority shareholders or, for instance, where an act requires the approval of a greater percentage of the company’s shareholders than that which actually approved it.

 

When the affairs of a company are being conducted in a manner that is oppressive or prejudicial to the interests of some shareholders, one or more shareholders may apply to the Supreme Court of Bermuda, which may make such order as it sees fit, including an order regulating the conduct of the company’s affairs in the future or ordering the purchase of the shares of any shareholders by other shareholders or by the company. Additionally, under our Bye-laws and as permitted by Bermuda law, each shareholder has waived any claim or right of action against our directors or officers for any action taken by directors or officers in the performance of their duties, except for actions involving fraud or dishonesty. In addition, the rights of holders of our common shares and the fiduciary responsibilities of our directors under Bermuda law are not as clearly established as under statutes or judicial precedent in existence in jurisdictions in the United States, particularly the State of Delaware. Therefore, holders of our common shares may have more difficulty protecting their interests than would shareholders of a corporation incorporated in a jurisdiction within the United States.

 

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Our Bye-laws restrict shareholders from bringing legal action against our officers and directors.

 

Our Bye-laws contain a broad waiver by our shareholders of any claim or right of action, both individually and on our behalf, against any of our officers or directors. The waiver applies to any action taken by an officer or director, or the failure of an officer or director to take any action, in the performance of his or her duties, except with respect to any matter involving any fraud or dishonesty on the part of the officer or director. This waiver limits the right of shareholders to assert claims against our officers and directors unless the act or failure to act involves fraud or dishonesty.

 

We have anti-takeover provisions in our Bye-laws that may discourage a change of control.

 

Our Bye-laws contain provisions that could make it more difficult for a third party to acquire us without the consent of our board of directors. These provisions provide for:

 

directors only to be removed for cause;

 

restrictions on the time period in which directors may be nominated;

 

our board of directors to determine the powers, preferences and rights of our preference shares and to issue the preference shares without shareholder approval; and

 

an affirmative vote of 66 2/3% of our voting shares for certain “business combination” transactions which have not been approved by our board of directors.

 

These provisions could make it more difficult for a third party to acquire us, even if the third party’s offer may be considered beneficial by many shareholders. As a result, shareholders may be limited in their ability to obtain a premium for their shares.

 

Legislation enacted in Bermuda as to economic substance may affect our operations.

 

Pursuant to the Economic Substance Act 2018 (as amended) of Bermuda (the “ES Act”) that came into force on January 1, 2019, a registered entity other than an entity which is resident for tax purposes in certain jurisdictions outside Bermuda (“non-resident entity”) that carries on as a business any one or more of the “relevant activities” referred to in the ES Act must comply with economic substance requirements. The ES Act may require in-scope Bermuda entities which are engaged in such “relevant activities” to be directed and managed in Bermuda, have an adequate level of qualified employees in Bermuda, incur an adequate level of annual expenditure in Bermuda, maintain physical offices and premises in Bermuda or perform core income-generating activities in Bermuda. The list of “relevant activities” includes carrying on any one or more of the following activities: banking, insurance, fund management, financing, leasing, headquarters, shipping, distribution and service center, intellectual property and holding entities. We are carrying on relevant activities for the purposes of the ES Act and are required to comply with such economic substance requirements. Our compliance with the ES Act could affect the manner in which the Company operates its business or result in additional costs, which could adversely affect its business, financial condition and results of operations.

 

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ITEM 4. INFORMATION ON THE COMPANY

 

A. History and development of the Company Overview

 

We are a preclinical-stage biopharmaceutical company developing and supplying peptide-based nanoparticle technologies for efficient RNA delivery to extrahepatic tissues (OligoPhore™ / SemaPhore™ platforms). We currently have two flagship siRNA programs using our proprietary delivery technology: AM-401 for KRAS driven cancer and AM-411 for rheumatoid arthritis, both in preclinical development beyond in vivo proof of concept. The versatile delivery platform is also suited for mRNA and other RNA modalities and made available to pharma or biotech companies through out-licensing. In 2023 we took a first step to reposition our company around the RNA delivery business by spinning off a 51% stake in Altamira Medica AG, which manufactures and markets Bentrio®, an OTC nasal spray for allergic rhinitis. We thus continue to hold a 49% stake in the Bentrio® business (with additional economic rights). Further, we have announced our intention to partner / divest also our AM-125 program, a nasal spray for vertigo (post Phase 2), as well as our early- to late-stage clinical development programs in tinnitus and hearing loss.

 

OligoPhore™ / SemaPhore™ platforms

 

In June 2021 we acquired Trasir Therapeutics, Inc., a Delaware corporation (“Trasir”), through which we entered the field of RNA delivery technology. Trasir’s core technology is the proprietary peptide polyplex platform OligoPhore™ and its equivalent SemaPhore™ that can engage any type of short interfering RNA (siRNA) or messenger RNA (mRNA), respectively, in rapid self-assembly. The technology is designed to allow for systemic or local delivery of RNA payloads with efficient cellular uptake and extensive endosomal release. Importantly, it enables delivery to target tissues outside the liver, creating the potential for developing RNA-based therapies for a range of indications with substantial unmet need. In various murine models of disease, OligoPhore™ and SemaPhore™ have been shown to protect the RNA payload (siRNA and/or mRNA) from degradation in the circulation, while enabling pH-dependent nucleotide endosomal escape and cytoplasmic delivery.

 

AM-401

 

In July 2021 we announced the selection of KRAS driven cancer as the first therapeutic indication for our OligoPhore™ oligonucleotide delivery platform. The therapeutic objective for AM-401 is to slow down KRAS driven tumor cell proliferation or to stop it altogether by delivering siRNA specifically inside tumor cells for gene knock down. The siRNA is targeting different KRAS mutations (polyKRASmut). In January 2024 we announced that in vitro data confirmed the ability of polyKRASmut siRNA to knock down a broad range of KRAS mutations in cancer cell lines. These mutations include G12C, G12V, G12D, G12R, G12A, and A146T, which account for 90.9% of KRAS mutations reported in pancreatic ductal adenocarcinoma (PDAC), 65.3% in colorectal cancer (CRC) and 80.0% in non-small cell lung cancer (NSCLC). We aim to advance the AM-401 program through preclinical studies with the objective of filing for an IND in 2025. In this context, we initiated various development work relating to the peptide and siRNA components of AM-401.

 

AM-411

 

In July 2022 we announced the initiation of AM-411, our second development project for an RNA therapeutic based on the OligoPhore™ delivery platform. AM-411 seeks to treat rheumatoid arthritis (RA) by targeting siRNA at p65, one of the main transcriptional regulators of the NF-kB pathway and a key checkpoint in RA inflammation. We aim to advance the AM-411 program through preclinical studies with the objective of filing for an IND in 2025.

 

AM-125

 

We have been developing AM-125 as a reformulation of betahistine for intranasal treatment of vertigo (acute vestibular syndrome; AVS). We started the program in February 2017 through the purchase of various assets related to betahistine dihydrochloride in a spray formulation from Otifex Therapeutics. In 2019 we initiated the “TRAVERS” Phase 2 trial to evaluate the safety and efficacy of AM-125 in 124 patients suffering from AVS following surgery. In June 2022 we reported top-line results from the trial showing good tolerability and a dose- and time-dependent improvement in balance and signs and symptoms of vestibular dysfunction. In parallel to the clinical development, we have been conducting various preclinical studies with AM-125 and working on the analytical and process development for the manufacturing of the drug product. The FDA cleared our IND application in June 2023 which will allow for the conduct of clinical trials in the U.S. In the context of our strategic transition to become a company focused on RNA delivery technology, we intend to out-license or sell the AM-125 program.

 

Bentrio® (AM-301)

 

In September 2020 we initiated the development of AM-301, a drug-free nasal spray for protection against airborne viruses and allergens, through our new subsidiary Altamira Medica AG. Following formulation development, we tested AM-301 first in vitro in a series of experiments using reconstituted human nasal epithelia. Our clinical development in allergic rhinitis comprised four trials: one study each with controlled exposure to grass pollen for 4 hours and to house dust mites for 3 hours (both with 36 patients), one study on the distribution and residence time of AM-301 within the nasal cavity (8 healthy volunteers), and one study with environmental exposure to seasonal allergens for two weeks (NASAR trial; 100 patients). The two challenge studies were completed in 2021 and 2022 and showed good tolerability and protective effects of AM-301 for 3-4 hours; the extended nasal residence time of the formulation within the nasal cavity was confirmed in the trial with human volunteers. The NASAR trial demonstrated a statistically significant and clinically relevant improvement in nasal symptoms and health related quality of life in seasonal allergic rhinitis (SAR) and was also superior in efficacy outcomes to saline nasal spray, the current standard of care in drug free treatments for SAR. In viral infection, we conducted a trial in patients suffering from acute COVID-19 in 2022; top-line results were presented as inconclusive in early 2023.

 

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In the context of our decision to reposition our company around the RNA delivery business, we sold in November 2023 51% of the share capital of Altamira Medica to a Swiss private equity investor. We retained 49% of the company’s share capital and will be entitled to receive 25% of Altamira Medica’s future gross licensing income.

 

Since Bentrio® does not contain any active substance, it is regulated and marketed as an “over-the-counter” (OTC) medical device. In June 2022 the U.S. Food and Drug Administration (FDA) cleared Bentrio® under a 510(k) as a Class II device for the intended use of promoting alleviation of mild allergic symptoms triggered by the inhalation of various airborne allergens. Bentrio® is marketed primarily through distributors; Altamira Medica is planning to partner the product for the US and other key markets with one or several well-established providers of OTC consumer health products.

 

Other inner ear legacy drug development programs

 

We have been developing Keyzilen®, Esketamine gel for injection, for the treatment of acute inner ear tinnitus. Esketamine is a potent, small molecule non-competitive NMDA receptor antagonist. Keyzilen® is formulated in a biocompatible gel and delivered via intratympanic injection. It demonstrated a favorable safety profile and positive effect on PROs associated with tinnitus in two Phase 2 clinical trials. In two Phase 3 clinical trials (TACTT2 and TACTT3), we were unable to confirm the efficacy of Keyzilen® as both of them did not meet their primary efficacy endpoints. Based on the analysis of these outcomes, we have designed a pivotal Phase 2/3 trial for Keyzilen® in two stages to reaffirm the compound’s efficacy in the treatment of acute tinnitus and provide confirmatory efficacy data to support a filing for marketing authorization. In September 2019, we announced that we have obtained advice on the development plan and regulatory pathway from the U.S. Food and Drug Administration (“FDA”) in the context of a Type C meeting and from the European Medicines Agency (“EMA”) in the context of a Scientific Advice procedure for Keyzilen®. As part of our strategic repositioning, we aim to divest or partner the Keyzilen® program as well as some early preclinical stage tinnitus development programs.

 

We also have been developing Sonsuvi® for acute inner ear hearing loss. In a Phase 2 clinical trial, AM-111 showed a favorable safety profile. Furthermore, in patients with severe to profound ASNHL, we observed a clinically relevant improvement in hearing threshold, speech discrimination and a higher rate of complete tinnitus remission compared with placebo. In November 2017, we announced that the HEALOS Phase 3 clinical trial that investigated Sonsuvi® in the treatment of acute inner ear hearing loss did not meet the primary efficacy endpoint. However, a post-hoc analysis of the subpopulation with profound acute hearing loss (PTA ≥ 90 dB at baseline in accordance with a commonly used classification of hearing loss severity) revealed a clinically meaningful and nominally significant improvement in the Sonsuvi® 0.4 mg/mL treatment.

 

Based on the HEALOS results, we have designed a new pivotal trial with AM-111 0.4 mg/mL in patients suffering from acute profound hearing loss and discussed with the FDA and its European counterpart EMA. Through a Protocol Assistance procedure the EMA endorsed the proposed trial design, choice of efficacy and safety endpoints, as well as the statistical methodology. In a Type C meeting with written responses, the proposed choice of primary and secondary efficacy endpoints, the safety endpoints, as well as the planned sample size and statistical methodology were also endorsed by the FDA. In the context of our strategic repositioning, we aim to divest or partner the Keyzilen® and Sonsuvi® program.

 

Capital expenditure

 

Our actual capital expenditures for the years ended December 31, 2023, 2022 and 2021 amounted to CHF 0.0 million, CHF 2.1 million and CHF 6.7 million, respectively. Our capital expenditures were primarily related to intangible assets (capitalized expenditures in 2022 and 2021) created as part of the AM-125 development program (mainly in Switzerland and Australia) and to the upfront and milestone payments for the acquisition of Trasir (2021).

 

Corporate information

 

We are an exempted company organized under the laws of Bermuda. We began our current operations in 2003. On April 22, 2014, we changed our name from Auris Medical AG to Auris Medical Holding AG and transferred our operational business to our newly incorporated subsidiary Auris Medical AG, which is now our main operating subsidiary. On March 13, 2018, we effected a corporate reorganization through the Merger into a newly formed holding company for the purpose of effecting the equivalent of a 10-1 “reverse share split.” Following shareholder approval at an extraordinary general meeting of shareholders held on March 8, 2019 and upon the issuance of a certificate of continuance by the Registrar of Companies in Bermuda on March 18, 2019, the Company discontinued as a Swiss company and, pursuant to Article 163 of the Swiss Federal Act on Private International Law and pursuant to Section 132C of the Companies Act 1981 of Bermuda (the “Companies Act”), continued existence under the Companies Act as a Bermuda company with the name “Auris Medical Holding Ltd.” (the “Redomestication”). By resolution of a Special General Meeting of Shareholders held on July 21, 2021 we adopted the new company name Altamira Therapeutics Ltd. Our registered office is located at Clarendon House, 2 Church Street, Hamilton HM11, Bermuda, telephone number +1 (441) 295 5950. We maintain a website at www.altamiratherapeutics.com where general information about us is available. Investors can obtain copies of our filings with the SEC from this site free of charge, as well as from the SEC website at www.sec.gov. We are not incorporating the contents of our website into this Annual Report.

 

B. Business overview Strategy

 

Our goal is to become a leading biomedical company focused on developing and commercializing RNA delivery technology. We believe that the use of RNA therapeutics – be it siRNA, mRNA or other types – to control the expression of disease-relevant genes holds great promise. By engaging targets that are otherwise ‘undruggable’ by small molecules and proteins, whole new avenues are expected to open up with RNA therapeutics for treating intractable diseases. However, delivering RNA therapeutics into the right cell of the right tissue has been one of the key challenges preventing their more widespread adoption so far.

 

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So far, most RNA therapeutics have been directed at the liver using delivery platforms based on lipid nanoparticles or GalNAc, an amino sugar derivative of galactose. In contrast, delivery to non-liver (that is extrahepatic) tissues has been largely elusive so far. Our proprietary peptide polyplex platform OligoPhore™ and its equivalent SemaPhore™ can engage any type of short interfering RNA (siRNA) or messenger RNA (mRNA), respectively, in rapid self-assembly. The technology is designed to allow for systemic or local delivery of RNA payloads with efficient cellular uptake and extensive endosomal release. Importantly, it enables delivery to target tissues outside the liver, creating the potential for developing RNA-based therapies for a range of indications with substantial unmet need.

 

The key elements of our strategy are:

 

Demonstrate preclinical and clinical proof of concept with OligoPhore™ in two lead indications. Based on positive results obtained with Oligophore™ delivering various siRNA payloads in more than ten different murine disease models, we have selected two therapeutic targets as the first indications in which we will seek to demonstrate early clinical proof of concept. With project AM-401 we are targeting KRAS driven cancer such as colorectal cancer or pancreatic cancer, and with project AM-411 we are targeting rheumatoid arthritis. There is a high unmet medical need for both of these indications.

 

Leverage OligoPhore™ / SemaPhore™ platform through partnering. Considering the suitability of our peptide polyplex platform for multiple therapeutic indications especially in oncology and inflammatory / autoimmune diseases but also elsewhere, and for various types of nucleotides, we aim to leverage the platform through collaborations with other biopharmaceutical companies and the out-licensing of technology for specific indications (including projects AM-401 and AM-411). In this way, we intend to become a delivery platform company.

 

Focus activities on RNA delivery technology by divesting or partnering our non-RNA businesses. As we aim to expand our activities in RNA delivery technology, we intend to dedicate our full resources and management focus on them. In a first step, we have divested a 51% stake in our Bentrio® business in 2023. We intend to divest or partner the remaining legacy assets in 2024. Any proceeds from divestiture or partnering shall be applied to growing the activities in RNA delivery technology.

 

Delivering RNA therapeutics to extrahepatic tissues

 

OligoPhore™ and SemaPhore™ are versatile platforms for delivery of oligonucleotides such as siRNA (small interfering ribonucleic acid) or mRNA (messenger RNA) into target cells. Using the same technology, OligoPhore™ designates the platform for oligonucleotides, whereas SemaPhore™ designates the platform for mRNA. It is based on a proprietary 21 amino acid peptide that can engage any type of RNA in rapid self-assembly into a polyplex. The polyplex has a size, charge, and other physical features that allows escaping hepatic sequestration while increasing circulation time clearance, thus allowing the polyplex to reach other target tissues than the liver. OligoPhore™ / SemaPhore™ protect the RNA payload from degradation in the circulation and allow for rapid cellular uptake, while enabling pH-dependent nucleotide maximal endosomal escape and cytoplasmic delivery.

 

Effective delivery and positive treatment outcomes have been demonstrated with OligoPhore™ in more than 10 diverse murine models of disease for cancer, cardiovascular, metabolic and rheumatological targets in the NF-κB family, various members of the ETS transcription factor family, and targets in the JNK and TAM pathways. With SemaPhore™, positive results have been demonstrated so far in five different murine disease models in osteoarthritis (WNT16 and DNMT3B as targets), atherosclerosis (p27Kip1), aortic aneurysm (SOD2) and tumor microenvironment (ZBTB46). All of these results have been published in peer-reviewed journals or presented at scientific conferences.

 

The polyplex formulations are formed as the peptide carrier condenses nucleic acids by mixing at a pre-defined ratio. The interaction between RNA sequence and peptide is initially electrostatic, but importantly an exothermic process of strong hydrogen bonding takes place between the histidines and nucleic acids to markedly stabilize the polyplex. A coating of albumin or hyaluronic acid is used to further stabilize the system. Once the polyplex is formed it can be injected intravenously or intraperitoneally, or by any other route that reaches the circulation, or it may be applied locally. The polyplex readily escapes leaky vasculature, a feature of various pathologies, and is taken up avidly by cells that are capable of macropinocytosis such as cancer cells or macrophages. However, we also have transfected endothelium, smooth muscle, and other cell types. Once in the endosome, the natural process of acidification disassembles the polyplex. The released peptide interacts with the endosomal membrane to permeabilize it and promotes the release of the RNA payload into the cytoplasm. The peptide is then diluted quickly and broken down, causing no unintended damage to the cell membrane itself.

 

In July 2021 we announced the selection of KRAS driven cancer as the first and in July 2022 the selection of rheumatoid arthritis as the second therapeutic indication for our OligoPhore™ oligonucleotide delivery platform (AM-401 and AM-411). We aim to advance the AM-401 and AM-411 programs through preclinical studies with the objective of filing for an IND in 2025. In parallel, we will seek to leverage the OligoPhore™ and SemaPhore™ platforms through collaborations with other biopharmaceutical companies and the out-licensing of technology for specific indications.

 

Market for RNA therapeutics

 

RNA therapeutics is a rapidly emerging field of human medicine that has the potential to change the standard of care for many diseases and target previously undruggable pathways. Traditional small molecule drugs target active sites of proteins so as to inhibit or alter their function; however, only 1.5% of the human genome encodes proteins (Damase et al., 2021), and only 10–14% of proteins have active binding sites that are “druggable” targets for small molecules (Hopkins and Groom, 2002). Thus the “druggable” targets for small molecule therapies are limited. This limitation was addressed in part by recombinant protein technology which has become a significant share of the pharmaceutical market (Damase et al., 2021). However, recombinant proteins have limitations as drugs, particularly due to size and stability issues. By contrast, nucleic-acid based strategies avoid many of these limitations as they make use of the translational machinery of the human cell.

 

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RNA therapeutics comprise four broad categories: aptamers, antisense oligonucleotides (ASOs), RNA interference (RNAi) and messenger RNA (mRNA). Aptamers are oligonucleotides that bind to specific target molecules to inhibit signal transduction. ASOs are oligonucleotides that target mRNA to alter gene expression, whereas RNAi (short interfering RNA or siRNA and micro RNA or miRNA) promote the degradation of specific mRNA molecules. MRNA, on the other hand, promotes protein expression either to compensate for a defective gene / protein or to produce a protein to induce a therapeutic response. Regardless of the type of RNA therapeutic, delivery into target cells and tissues has proved to be a major challenge as RNA is inherently unstable and tends to show poor cellular uptake. Various delivery technologies have been developed to address these challenges, including the use of nanocarriers or bioconjugates for targeted delivery. While there has been substantial progress with delivery of RNA therapeutics to the liver, other target tissues and organs have remained difficult to reach.

 

In 1998, the FDA approved the first ASO based therapeutic and in 2018 the first siRNA therapeutic. Further approvals have followed, and there is a growing number of RNA therapeutics in clinical development. With the rapid development of vaccines against COVID-19, which use mRNA to instruct muscle cells to produce the non-infectious SARS-CoV-2 spike protein to induce specific neutralizing antibodies, some key advantages of RNA-based therapeutics such as rapid design and scale-up in manufacturing have been highlighted. According to a recent report published by Allied Market Research the global market for RNA therapeutics (RNAi and ASOs) reached $4.9 billion in 2021 and is expected to grow to $25.1 billion in 2030. In another recent report by Research and Markets, it is estimated that the global market for mRNA therapeutics should grow from $46.7 billion in 2021 to $101.3 billion by 2026.

 

Our Product Candidates

 

OligoPhore and SemaPhore RNA delivery platforms

 

RNA-based therapies are currently one of the most promising fields in medical research. We believe that the use of RNA therapeutics – be it siRNA, mRNA or other types – to control the expression of disease-relevant genes holds great promise. By engaging targets that are otherwise ‘undruggable’ by small molecules and proteins, whole new avenues are expected to open with RNA therapeutics for treating intractable diseases. There exist various carriers for delivering nucleic acids into cells, such as viral-based vectors, lipid nanoparticles (LNPs), and ligand conjugates. Although each of these systems exhibits promising features, robust nucleic acid delivery remains the key rate-limiting step for unlocking the full potential of RNA therapeutics. So far, most RNA therapeutics have been directed at the liver using delivery platforms based on lipid nanoparticles (LNPs) or GalNAc-conjugates. In contrast, delivery to non-liver (that is extrahepatic) tissues has been largely elusive so far.

 

Our solutions – OligoPhore and SemaPhore

 

Our OligoPhore™ / SemaPhore™ technology is a highly versatile platform that allows for delivery of nucleic acids into cells, notably into non-liver tissues, using systemic or local administration. We are developing OligoPhore™ / SemaPhore™ as versatile platforms for delivery of nucleic acid payloads such as siRNA (small interfering ribonucleic acid) or mRNA (messenger ribonucleic acid) into target cells, using systemic or local administration.

 

OligoPhore™ / SemaPhore™ are based on a proprietary 21 amino acid peptide that rapidly condenses nucleic acids into a polyplex. The polyplex has a size, charge, and other physical features that allow it to escape hepatic sequestration and systemic clearance and thus to reach other target tissues than the liver. It readily escapes the leaky vasculature, a feature of various pathologies, and is taken up avidly by cells that are capable of macropinocytosis (“cell drinking”), such as cancer cells or macrophages. However, OligoPhore™ / SemaPhore™ polyplexes have also been shown to transfect endothelial cells, smooth muscle cells, and other cell types.

 

Once in the endosome, the natural process of acidification disassembles the polyplex. The released peptide interacts with the endosomal membrane to permeabilize it and release the RNA into the cytoplasm.

 

The technology has the following main features:

 

  Stability: siRNA is complexed and protected from degradation in a nanoparticle polyplex, and it is only released inside of cells after endosomal uptake and not in the circulation

 

  Extrahepatic delivery: the nanoparticle is not sequestered in liver, but will readily permeate inflamed pathological tissues, delivering the payload to the target tissue

 

  Endosomal escape: we have co-opted the natural cellular process of endosomal acidification to disassemble the polyplex, which is followed by maximal release of siRNA into the cytoplasm

 

  Selectivity: the polyplex silences molecular targets in diseased tissues only

 

  Safety: no cellular or adaptive immune response to nanoparticle components or siRNA after multiple serial doses, and no organ toxicities observed in mice after serial dosing

 

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The OligoPhore™ / SemaPhore™ technology has been extensively and successfully tested with various siRNA and mRNA sequences in over 15 disease models in mice and there have been over 30 peer reviewed scientific publications describing the technology and its applications. We are aiming to license the technology to companies in the biopharmaceutical industry for use with their own RNA molecules, providing support for the formulation and process development steps.

 

AM-401 in KRAS driven cancers

 

KRAS driven cancers

 

The KRAS gene encodes the Kras protein which controls cell growth, cell maturation, and cell death. Through mutations, the Ras proteins can be rendered persistently active, causing cancer cells to proliferate and spread in the body. Mutations of KRAS are associated with poor prognosis in several cancers, and there is a substantial body of evidence supporting the role of KRAS in the initiation and maintenance of cancer. As described by Herdeis and colleagues in a 2021 publication in the journal Current Opinion in Structural Biology, mutated forms of KRAS are found in one-fifth of all human cancers, including 32% of non-small-cell lung cancers (NSCLCs), 40% of colorectal cancers (CRCs) and 85–90% of pancreatic cancers. According to the American Cancer Society, overall, almost 150,000 new cases of KRAS mutated tumors are diagnosed in the United States alone across these three tumor types each year. It has been estimated that mutations in KRAS alone account for approximately one million deaths per year worldwide (Simanshu et al., 2017).

 

Since the original discovery of KRAS as an oncogene in 1982, there have been intense efforts to develop a targeted therapeutic for KRAS mutant cancers. Although the role of KRAS mutations in cancer has been known for decades, they have remained a challenging target for therapeutic interventions. KRAS was long considered undruggable, in part because its surface lacked obvious binding sites. In 2021 the FDA approved sotorasib as the first ever treatment for KRAS driven cancer, followed by adagrasib in 2022. Both drugs are small molecules and received accelerated approval as second-line treatments for KRAS G12C-mutated NSCLC.

 

Our solution – AM-401

 

We are applying our OligoPhore™ technology to KRAS driven cancers for first clinical proof of concept. The therapeutic objective for AM-401 is to slow down KRAS driven tumor cell growth and proliferation or to stop it altogether by delivering KRAS siRNA specifically inside tumor cells for gene knock down. As described by Strand and colleagues in a 2019 issue of the scientific journal Oncotarget, in vitro and in vivo experiments demonstrated efficient uptake of OligoPhore™ (then known as p5RHH nanoparticles) with KRAS-targeted siRNA in colorectal and pancreatic cancer cells, strong inhibition of KRAS expression, reduced viability of tumor cells and significant reduction in tumor growth and volume. Importantly, a murine model demonstrated the capacity of the OligoPhore™ platform to drive targeted delivery of the nanoparticles specifically to tumor cells.

 

Based on these outcomes, we started in silico and in vitro work to screen and select the most effective siRNA sequences and to optimize their properties. Our polyKRASmut siRNA approach allows to target different KRAS mutations and is thus polyvalent. In vitro data confirmed the ability of polyKRASmut siRNA to knock down a broad range of KRAS mutations in cancer cell lines. These mutations include G12C, G12V, G12D, G12R, G12A, and A146T, which according to an evaluation by Huang and colleagues in a 2021 issue of Signal Transduction and Targeted Therapy account for 90.9% of KRAS mutations reported in pancreatic ductal adenocarcinoma (PDAC), 65.3% in colorectal cancer (CRC) and 80.0% in non-small cell lung cancer (NSCLC). In comparison, the currently approved small molecule inhibitors sotorasib and adagrasib target just one KRAS mutation (G12C), which represents 1.7%, 7.1% and 41.0% of total KRAS mutations in PDAC, CRC and NSCLC, respectively. Since polyKRASmut was tested against only a limited number of mutations, it may potentially knock down other, yet untested mutations.

 

The process of sequence selection and optimization will be followed by further in vivo testing. Meanwhile, we have been working on the scale up in the synthesis of the peptide base of OligoPhore™ and process development for the manufacture of the nanoparticles. We intend to review and discuss our plans for IND-enabling preclinical studies with the FDA in the context of a Pre-IND meeting. Subject to the opening of an IND (or equivalent clearance by another regulatory agency), we expect to conduct a Phase 1 clinical trial in patients with KRAS driven cancer either on our own or through a partner from the biopharmaceutical industry.

 

AM-411 in rheumatoid arthritis

 

Rheumatoid arthritis

 

Rheumatoid arthritis (RA) is a chronic inflammatory condition causing joint swelling and pain which may also affect other areas, including the skin, eyes, brain, and cardiovascular system. In the US in 2014, approximately 1.3 million adults suffered from RA, as described by Hunter and colleagues in a 2017 issue of Rheumatology International. According to the World Health Organization (WHO), in 2019 the autoimmune disease affected globally 18 million people. A study by Crowson and colleagues which was published in 2012 in the journal Arthritis and Rheumatism showed that RA affects 1 in 28 women and 1 in 59 men during their lifetime. There is no cure for RA; current treatments seek to manage RA with biologic and non-biologic immunosuppressants, corticosteroids and non-steroidal anti-inflammatory drugs (NSAIDs). While useful, drug resistance occurs in up to 50% of patients and systemic adverse reactions are frequent, including rash, hair loss, altered liver function, low blood cell counts, nausea, increased infections and neuropathy. New biologics targeting JAK/ interleukins have been issued black box warnings by the FDA. According to a market research study by Allied Market Research, the global anti-rheumatics market is expected to grow from $57.9 billion in 2019 to $62.9 billion in 2027, representing the second largest therapeutic area after oncology. Adalimumab, a biologic blocking TNF which is marketed as Humira®, was #1 among RA therapeutics in 2021 and also the world’s largest selling drug outside of Pfizer’s COVID-19 vaccine.

 

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Our solution - AM-411

 

AM-411 is a polyplex nanoparticle delivering siRNA to inflamed tissues to target the NF-κB signaling pathway, a critical regulator of immune and inflammatory responses. Like AM-401, the drug product is based on our OligoPhore™ technology which allows for delivery of RNA payloads specifically to inflamed tissues with extensive endosomal release once inside cells, generating a new class of precision medicines with potentially increased local efficacy and reduced systemic side effects. AM-411 comprises an optimized siRNA targeting p65, one of the components of NF-kB and a key checkpoint in RA inflammation that has generated high interest as a target. However, given NF-kB’s ubiquitous functions, the key challenge is to induce contextual, tissue specific effects, which is not possible with classic small molecule or biologic approaches. AM-411 reduces local inflammation without affecting the NF-κB pathway elsewhere and is less likely to generate resistance because it reduces synthesis of p65 rather than blocking the protein.

 

AM-411’s therapeutic potential in RA has already been demonstrated in a study using a collagen antibody–induced arthritis model in mice. As described by Zhou and colleagues in a 2014 issue of the Journal of Clinical Investigation OligoPhore™ nanoparticles with siRNA targeting NF-κB (p65) potently suppressed early inflammatory arthritis. The treatment effectively reduced inflammatory cytokines and cellular influx into the joints, protected against bone erosions and preserved cartilage integrity. Importantly, the treatment did not affect p65 expression in off-target organs or elicit a humoral response after serial injections.

 

Based on these outcomes, we started in silico and in vitro work to screen and select the most effective siRNA sequences and to optimize their properties. This will be followed by further in vivo testing. The AM-411 program will benefit from extensive synergies with the AM-401 program and vice versa.

 

Competition

 

We face or may face competition from different sources with respect to our OligoPhore™ and SemaPhore™ RNA delivery platforms and our product candidates AM-401 and AM-411 and any other product candidates that we may seek to develop in the future. Our RNA delivery platforms and any product candidates that we successfully develop will compete with existing RNA delivery platforms and therapies, even if they use different technologies or if they are not licensed specifically for use in our target therapeutic indications or if they lack clear proof of efficacy.

 

Possible competitors may be other biopharmaceutical companies as well as academic institutions, government agencies and private and public research institutions, which may in the future develop RNA delivery platforms for extrahepatic delivery or products to treat KRAS driven cancer or rheumatoid arthritis. We believe that the key competitive factors affecting the success of our RNA delivery platforms and product candidates in out-licensing are likely to be features such as biodistribution, pharmacokinetics, efficacy, safety and tolerability.

 

RNA delivery technologies

 

There are several companies offering commercial- or developmental-stage technologies for delivering RNA payloads to extrahepatic cells. These include Acuitas Therapeutics Inc., Andros Pharmaceuticals Co., Ltd., Aro Biotherapeutics, Avidity Biosciences, Inc., Bio-Path Holdings, Inc., Chimeron Bio Inc., Dicerna Pharmaceuticals, Inc., Duet BioTherapeutics Inc., Dyne Therapeutics Inc., Entrada Therapeutics Inc., Ethris GmbH, Factor Bioscience Inc., Feldan Bio Inc., Genevant Sciences Corp., Medesis Pharma SA, Mercurna B.V., Neurogene Inc., Neoregen Biotech Co., Ltd., NeuBase Therapeutics, Inc., Orna Therapeutics, Inc., Pantherna Therapeutics GmbH, RNATICS GmbH, Sirnaomics Ltd., TransCode Therapeutics, Inc., Ovensa Inc., PepGen Inc., pHion Therapeutics Ltd., Vectiopep LLC, Vector Bioscience Cambridge Ltd., or 20Med Therapeutics B.V. Although we consider that our OligoPhore™ / SemaPhore™ platform offers unique advantages over current delivery approaches such as lipid nanoparticles, GalNAc conjugates or viral vectors through the ability to use of systemic administration, delivery to extrahepatic tissues, efficient cellular uptake and high levels of endosomal release, it may take time to raise awareness and interest among potential customers within the biopharmaceutical industry, resulting in its successful adoption.

 

KRAS driven cancers

 

There are several companies marketing or developing treatments for KRAS driven cancers. Amgen and Mirati Therapeutics obtained an accelerated approval by the FDA for the KRAS G12C small molecule inhibitors sotorasib and adagrasib as second-line treatment in NSCLC with G12C mutated KRAS (that is a glycine-to-cysteine substitution at codon 12 of KRAS). G12C mutations are also the targets for small molecule inhibitors under development by Novartis (IDQ443), Genentech (GDC-6036), Eli Lilly (LY3537982), and Boehringer Ingelheim (BI 1823911) with target indications in NSCLC, colorectal cancer (CRC), pancreatic cancer and other solid tumors carrying the KRAS G12C mutation. Moderna is in early stage clinical development with a patient-specific mRNA-based vaccine encoding KRAS neoantigens (mRNA-5671). Revolution Medicines has several small molecule inhibitors under development, which target G12C (RMC-6291), G12D (RMC-9805), G13C (RMC-8839) or all RAS cancer mutations (RASMulti(On)). Recently KRAS degraders, small molecules that seek to break down KRAS (in some instances targeting more than one single mutation), have emerged as another potential treatment approach. There are also programs using RNAi such as NBF-006 by Nitto Denko, which seeks to inhibit the expression of glutathione-S-transferase P and uses lipid nanoparticles for delivery, or siG12D LODER by Silenseed Ltd., which releases siRNA targeting the KRAS G12D mutation from in implanted biodegradable biopolymeric matrix.

 

The aforementioned developments have the potential to compete with AM-401. In addition, there exist various treatment paradigms for key targets such as NSCLC, CRC and pancreatic cancers, including resection, chemotherapy, treatment with biologics and combinations thereof, and various lines of therapy. The relative positioning within current or future lines of therapy and thus the most relevant competition to AM-401 are uncertain at this point of development.

 

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Rheumatoid arthritis

 

The market for RA therapeutics is highly competitive and currently dominated by several large pharma companies. They are marketing primarily biologics targeting TNF-α, e.g. adalimumab (Abbvie), infliximab (Johnson & Johnson), or etanercept (Amgen), or other targets such as B cells (rituximab, Roche), T cells, (abatacept, BMS), or IL-6 (tocilizumab, Genentech). As the patent and other market access protection has lapsed for several of these biologics, biosimilars have been developed and introduced to the market by competitors. A biosimilar is a biologic that is highly similar to and has no clinically meaningful differences from an existing approved biologic. Further, large companies are marketing various small molecule JAK inhibitors such as upadacitinib (AbbVie), tofacitinib (Pfizer) or baricitinib (Lilly). In addition, there are various older drugs on the market, such as glucocorticoids, non-steroidal anti-inflammatory drugs (NSAIDs) or disease modifying antirheumatic drugs (DMARDs), including methotrexate, hydroxychloroquine and sulfasalazine.

 

Intellectual Property

 

Patents

 

We develop product candidates in disease areas with high unmet medical need, great market potential and where we have a proprietary position through patents covering various aspects of our products, e.g., composition, dosage, formulation, and use, etc. Our success depends on an intellectual property portfolio that supports our out-licensing efforts and future revenue streams as well as erects barriers to our competitors. For example, we have broad disclosures in our patent applications and can pursue patent claims directed to our own leading product candidates as well as claims directed to certain potentially competing products. In addition, our earlier filed patent applications are prior art to others including certain of our competitors who filed their patent applications later than ours. We are maintaining and building our patent portfolio through: filing new patent applications; prosecuting existing applications and licensing and acquiring new patents and patent applications.

 

Despite these measures, any of our intellectual property and proprietary rights could be challenged, invalidated, circumvented, infringed or misappropriated, or such intellectual property and proprietary rights may not be sufficient to permit us to take advantage of current market trends or otherwise to provide competitive advantages.

 

RNA delivery platforms

 

We are the exclusive licensee under our agreement with Washington University of a portfolio of patents and patent applications that relate to peptide based polyplexes for RNA delivery. The portfolio includes two issued US patents along with their foreign counterparts in various jurisdictions that cover the composition of matter or method of use of the peptide based polyplexes. These licensed patents and patent applications are expected to expire between 2034 and 2037, prior to any patent term extensions to which we may be entitled under applicable laws.

 

AM-401

 

In February 2023 and February 2024 we filed two provisional patent applications related to our AM-401 program with the USPTO describing novel nanoparticle compositions based on OligoPhore™ or derivatives thereof in combination with siRNA sequences designed to silence different types rather than one specific type of mutated KRAS (polyKRASmut). If granted, the new patent would be expected to expire in 2043.

 

Legacy assets

 

We own a U.S. patent on the composition and use of intranasal betahistine (AM-125); related patents have issued or been allowed in more than 40 other countries to date. These patents are expected to expire in 2038. Further, we own various patents and patent application related to our other legacy assets in tinnitus and hearing loss.

 

Proprietary Rights

 

In addition to patent protection, we intend to use other means to protect our proprietary rights. We may pursue marketing exclusivity periods that are available under regulatory provisions in certain countries, including the US, Europe and Japan.

 

Furthermore, orphan drug exclusivity has been or may be sought where available. Such exclusivity has a term of 7 years in the United States and 10 years in Europe. We have obtained orphan drug designation for Sonsuvi® for the treatment of ASNHL in the United States and Europe. Orphan drug protection has been or may be sought where available if such protection also grants 7 years of market exclusivity. In addition, we have acquired a U.S. orphan drug designation for betahistine for the treatment of obesity associated with Prader-Willi syndrome.

 

We have obtained U.S. trademark registrations for Altamira and several U.S. trademark registrations for betahistine.

 

In addition, we rely upon unpatented trade secrets, know-how, and continuing technological innovation to develop and maintain our competitive position. We seek to protect our ownership of know-how and trade secrets through an active program of legal mechanisms including assignments, confidentiality agreements, material transfer agreements, research collaborations and licenses.

 

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Collaboration and License Agreements

 

Washington University

 

On December 11, 2020, we entered into an Exclusive License Agreement with Washington University (WU), which Exclusive License Agreement was subsequently amended and restated in June 2021 (as so amended and restated, the “Agreement”), with effect as of December 11, 2020. Pursuant to the Agreement, WU granted us an exclusive, worldwide, royalty-bearing license (with the right to sublicense) during the term of the Agreement under certain patent rights owned or controlled by WU to research, develop, make, have made, sell, offer for sale, use and import pharmaceutical products covered under such patent rights for all fields of use. Such licensed products may include “silencing RNA” (siRNAs) pharmaceutical preparations formulated in combination with our proprietary delivery technologies. In consideration for such worldwide, exclusive license, we will be obligated to pay WU: annual license maintenance fees in the low five figures through first commercial sale; pre-clinical and clinical regulatory milestones; sales milestones; and a low single digit royalty based on annual net sales of licensed products worldwide for at least the applicable patent term or period of marketing exclusivity, whichever is longer, but in no case less than a minimum royalty term of 12 years; and a percentage share (in the double digits) of sublicensing revenues received by the Company in connection with licensed products. Such regulatory and sales milestones may total up to an aggregate of $4,375,000. In the event the Company fails to meet certain regulatory diligence milestones, WU will have the right to terminate the license.

 

In particular, we are required to use commercially reasonable efforts to meet the following development milestones: a) to file an IND (or regulatory equivalent in foreign jurisdiction) June 30, 2024, b) to complete a Phase 1 clinical trial 3.5 years after achieving the first milestone, and c) to complete a Phase 2 clinical trial four years after achieving the second milestone. We may elect to extend each of these milestones once by a period of 12 months, and second time by a period of an additional 12 months, by paying WU a nonrefundable fee in the amount of $50,000 for the first extension and $100,000 for the second extension.

 

Manufacturing

 

We currently rely on and expect to continue to rely on third parties for the supply of raw materials and the manufacture of key components for our RNA delivery platforms such as relevant peptides and for our drug product candidates, including AM-401, AM-411 and any other drug product candidate. For the foreseeable future, we expect to continue to rely on such third parties. Reliance on third-party providers may expose us to more risk than if we were to manufacture key components for our RNA delivery platforms or product candidates ourselves. We intend to out-license rights to use and manufacture our RNA delivery platforms and product candidates to other biopharmaceutical companies; however, we may choose to retain control of critical manufacturing processes for strategic purposes, in which case we would remain responsible for compliance of the manufacturing with applicable laws, regulations and applicable cGMP standards.

 

Commercialization Strategy

 

For our RNA activities, we are not seeking to commercialize any drug products on our own but rather licensing out the technology to partners in the biopharmaceutical industry.

 

Government Regulation

 

The preclinical and clinical testing, manufacturing, labeling, storage, distribution, record keeping, advertising, promotion, import, export and marketing, among other things, of our RNA delivery platforms and product candidates are subject to extensive regulation by governmental authorities in the United States and other countries. The FDA, under the Federal Food, Drug, and Cosmetic Act, regulates pharmaceutical products in the United States.

 

We expect that OligoPhore™ / SemaPhore™ will be classified by regulatory agencies as nanomaterial carrier which is added to therapeutics with the intention of improving the delivery of the active pharmaceutical ingredient (which is the RNA “payload”). Regulatory agencies seek to verify that such nanomaterial carrier is safe in the amount it will be used, performs its intended function in the drug product, does not adversely affect the performance of the active drug, and is manufactured according to good manufacturing practices.

 

We expect that AM-401 and AM-411 will be classified by regulatory agencies as drug products which comprise OligoPhore™ as excipient and the polyKRASmut siRNA and p65 siRNA, respectively, as active substances.

 

The steps required before a drug product may be approved for marketing in the United States generally include:

 

the completion of pre-clinical laboratory tests and animal tests conducted under GLP regulations;

 

the submission to the FDA of an IND application for human clinical testing, which must become effective before human clinical trials commence;

 

the performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the product candidate for each proposed indication and conducted in accordance with cGCP;

 

the submission to the FDA of an NDA;

 

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the FDA’s acceptance of the NDA;

 

satisfactory completion of an FDA inspection of the manufacturing facilities at which the product is made to assess compliance with cGMPs; and

 

the FDA’s review and approval of an NDA prior to any commercial marketing or sale of the drug in the United States.

 

The testing and approval process requires substantial time, effort and financial resources, and the receipt and timing of any approval is uncertain.

 

Pre-clinical studies include laboratory evaluations of the product candidate, as well as animal studies to assess the potential safety and efficacy of the product candidate. The results of the pre-clinical studies, together with manufacturing information and analytical data, are submitted to the FDA as part of the IND, which must become effective before clinical trials may be commenced. The IND will become effective automatically 30 days after receipt by the FDA, unless the FDA raises concerns or questions about the conduct of the trials as outlined in the IND prior to that time. In this case, the IND sponsor and the FDA must resolve any outstanding concerns before clinical trials can proceed.

 

Clinical trials involve the administration of the drug product candidates to healthy volunteers or patients with the disease to be treated under the supervision of a qualified principal investigator. Clinical trials are conducted under protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety, and the efficacy criteria to be evaluated. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. Further, each clinical trial must be reviewed and approved by an independent Institutional Review Board, or IRB, either centrally or individually at each institution at which the clinical trial will be conducted. The IRB will consider, among other things, ethical factors, the safety of human subjects and the possible liability of the institution. There are also requirements governing the reporting of ongoing clinical trials and clinical trial results to public registries. The FDA, the IRB or the clinical trial sponsor may suspend or terminate clinical trials at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk. Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee. This group provides authorization for whether or not a trial may move forward at designated check points based on access to certain data from the study. We may also suspend or terminate a clinical trial based on evolving business objectives and/or competitive climate.

 

Clinical trials are typically conducted in three sequential phases prior to approval, but the phases may overlap. These phases generally include the following:

 

Phase 1. Phase 1 clinical trials represent the initial introduction of a product candidate into human subjects, frequently healthy volunteers. In Phase 1, the product candidate is usually tested for safety, including adverse effects, dosage tolerance, absorption, distribution, metabolism, excretion and pharmacodynamics.

 

Phase 2. Phase 2 clinical trials usually involve studies in a limited patient population to (1) evaluate the efficacy of the product candidate for specific indications, (2) determine dosage tolerance and optimal dosage and (3) identify possible adverse effects and safety risks.

 

Phase 3. If a product candidate is found to be potentially effective and to have an acceptable safety profile in Phase 2 studies, the clinical trial program will be expanded to Phase 3 clinical trials to further demonstrate clinical efficacy, optimal dosage and safety within an expanded patient population at geographically dispersed clinical study sites.

 

Phase 4 clinical trials are conducted after approval to gain additional experience from the treatment of patients in the intended therapeutic indication and to document a clinical benefit in the case of drugs approved under accelerated approval regulations, or when otherwise requested by the FDA in the form of post-market requirements or commitments. Failure to promptly conduct any required Phase 4 clinical trials could result in withdrawal of approval.

 

The results of pre-clinical studies and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information on the manufacture, composition and quality of the product, are submitted to the FDA in the form of an NDA requesting approval to market the product. The NDA must be accompanied by a significant user fee payment. The FDA has substantial discretion in the approval process and may refuse to accept any application or decide that the data is insufficient for approval and require additional pre-clinical, clinical or other studies.

 

In addition, under the Pediatric Research Equity Act, or PREA, an NDA or supplement to an NDA must contain data to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may grant deferrals for submission of data or full or partial waivers. Unless otherwise required by regulation, PREA does not apply to any drug for an indication for which orphan designation has been granted. However, if only one indication for a product has orphan designation, a pediatric assessment may still be required for any applications to market that same product for the non-orphan indication(s).

 

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Once the NDA submission has been submitted, the FDA has 60 days after submission of the NDA to conduct an initial review to determine whether it is sufficient to accept for filing. Under the Prescription Drug User Fee Act, the FDA sets a goal date by which it plans to complete its review. The current goal is 10 months from the date of submission of the NDA application. The review process is often extended by FDA requests for additional information or clarification. Before approving an NDA, the FDA will inspect the facilities at which the product is manufactured and will not approve the product unless the manufacturing facility complies with cGMPs and may also inspect clinical trial sites for integrity of data supporting safety and efficacy. The FDA may also convene an advisory committee of external experts to provide input on certain review issues relating to risk, benefit and interpretation of clinical trial data. The FDA is not bound by the recommendations of an advisory committee, but generally follows such recommendations in making its decisions. The FDA may delay approval of an NDA if applicable regulatory criteria are not satisfied and/or the FDA requires additional testing or information. The FDA may require post-marketing testing and surveillance to monitor safety or efficacy of a product.

 

After the FDA evaluates the NDA and conducts inspections of manufacturing facilities where the drug product and/or its API will be produced, it may issue an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. A Complete Response Letter indicates that the review cycle of the application is complete and the application is not ready for approval. A Complete Response Letter may require additional clinical data and/or an additional pivotal Phase 3 clinical trial(s), and/or other significant, expensive and time-consuming requirements related to clinical trials, pre-clinical studies or manufacturing. Even if such additional information is submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. The FDA could also approve the NDA with a Risk Evaluation and Mitigation Strategy, or REMS, plan to mitigate risks, which could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. The FDA also may condition approval on, among other things, changes to proposed labeling, development of adequate controls and specifications, or a commitment to conduct one or more post-market studies or clinical trials. Such post-market testing may include Phase 4 clinical trials and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization.

 

We intend to out-license our AM-401 and AM-411 product candidates following the IND or after the successful completion of the Phase 1 clinical development stage. Any further regulatory requirements would have to be met by the licensees.

 

Pharmaceutical Coverage, Pricing and Reimbursement

 

In both domestic and foreign markets, our sales of any approved drug products will depend in part on the availability of coverage and adequate reimbursement from third-party payors. Third-party payors include government authorities, managed care providers, private health insurers and other organizations. Patients who are prescribed treatments for their conditions and providers performing the prescribed services generally rely on third-party payors to reimburse all or part of the associated healthcare costs. Patients are unlikely to use our products, if approved, unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our products. Sales of our products will therefore depend substantially, both domestically and abroad, on the extent to which the costs of our products will be paid by third-party payors. These third-party payors are increasingly focused on containing healthcare costs by challenging the price and examining the cost-effectiveness of medical products and services. Expectations for pricing and reimbursement levels in turn may influence the terms and conditions of any out-licensing transaction relating to our product candidates even if concluded before marketing approval and pricing and reimbursement.

 

C. Organizational structure

 

The registrant corporation, Altamira Therapeutics Ltd., had five wholly-owned subsidiaries and one associated company as of December 31, 2023, which are each listed in Exhibit 8.1 filed hereto. We primarily operate our business out of our operating subsidiary Auris Medical AG.

 

D. Property, plants and equipment

 

Our registered office is in Hamilton, Bermuda. We also lease approximately 4,700 square feet of office space in Basel, Switzerland. This property serves as the corporate headquarters of our principal operating subsidiary.

 

ITEM 4A. UNRESOLVED STAFF COMMENTS

 

Not applicable.

 

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

 

You should read the following discussion and analysis of our financial condition and results of operations together with our audited consolidated financial statements, including the notes thereto, included in this Annual Report. The following discussion is based on our financial information prepared in accordance with IFRS as issued by the IASB, which might differ in material respects from generally accepted accounting principles in other jurisdictions. The following discussion includes forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those described under “Item 3. Key Information—D. Risk factors” and elsewhere in this Annual Report.

 

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A. Operating Results Overview

 

We are a preclinical-stage biopharmaceutical company developing and supplying peptide-based nanoparticle technologies for efficient RNA delivery to extrahepatic tissues (OligoPhore™ / SemaPhore™ platforms). We currently have two flagship siRNA programs using our proprietary delivery technology: AM-401 for KRAS driven cancer and AM-411 for rheumatoid arthritis, both in preclinical development beyond in vivo proof of concept. The versatile delivery platform is also suited for mRNA and other RNA modalities and made available to biopharmaceutical companies through out-licensing. In 2023 we took a first step to reposition our company around the RNA delivery business by spinning off a 51% stake in Altamira Medica AG, which manufactures and markets Bentrio®, an OTC nasal spray for allergic rhinitis. We thus continue to hold a 49% stake in the Bentrio® business (with additional economic rights). Further, we have announced our intention to partner / divest also our AM-125 program, a nasal spray for vertigo (post Phase 2), as well as our early- to late-stage clinical development programs in tinnitus and hearing loss.

 

To date, we have financed our operations through public offerings of our common shares, private placements of equity securities, and short- and long-term loans. As of December 31, 2023, we had cash and cash equivalents of CHF 0.6 million and an accumulated deficit of CHF 18.0 million. We expect our research and development expenses to remain significant as we continue to develop our RNA delivery platforms and advance or initiate the pre-clinical and clinical development of AM-401, AM-411 or any other product candidate. We do not expect to generate licensing or royalty or product revenues sufficient to fund our operations unless and until we achieve substantial royalty or product revenues from out-licensing or other partnering transactions related our OligoPhore™ or SemaPhore™ platforms, our AM-401 and AM-411 product candidates, our AM-125 development program and / or from our 49% stake in Altamira Medica AG. This situation raises substantial doubt about the Company’s ability to continue as a going concern.

 

Collaboration and License Agreements

 

Washington University

 

In 2020, we entered into an Exclusive License Agreement with Washington University located in St. Louis, Missouri (“WU”), which Exclusive License Agreement was subsequently amended and restated in June 2021, with effect as of December 11, 2020. Pursuant to the agreement, WU granted us an exclusive, worldwide, royalty-bearing license (with the right to sublicense) during the term of the agreement under certain patent rights owned or controlled by WU to research, develop, make, have made, sell, offer for sale, use and import pharmaceutical products covered under such patent rights for all fields of use. Such licensed products may include drug products formulated as nanoparticles, comprising a peptide for delivery as well as a therapeutic nucleotide, for intracellular delivery. In consideration for such worldwide, exclusive license, we will be obligated to pay WU: annual license maintenance fees in the low five figures through first commercial sale; pre-clinical and clinical regulatory milestones; sales milestones; and a low single digit royalty based on annual net sales of licensed products worldwide for at least the applicable patent term or period of marketing exclusivity, whichever is longer, but in no case less than a minimum royalty term of 12 years; and a percentage share (in the double digits) of sublicensing revenues received by us in connection with licensed products. Such regulatory and sales milestones may total up to an aggregate of $4,375,000. In the event we fail to meet certain regulatory diligence milestones, WU will have the right to terminate the license.

 

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Financial Operations Overview

 

We expect our regular total funding requirements for operations and financial obligations in 2024 to be in the range of CHF 6.5 to 7.5 million.

 

Research and development expense

 

Research and development expense consists principally of:

 

salaries for research and development staff and related expenses, including employee benefits;

 

costs for production of pre-clinical compounds, drug substances and drug products by contract manufacturers;

 

fees and other costs paid to contract research organizations in connection with additional pre-clinical testing and the performance of clinical trials;

 

costs of related facilities, materials and equipment;

 

costs associated with obtaining and maintaining patents;

 

costs related to the preparation of regulatory filings and fees; and

 

depreciation, amortization and impairment of tangible and intangible fixed assets used to develop our product candidates.

 

Our research and development expense mainly relates to the following key programs:

 

  AM-401 for KRAS Driven Cancer. Through the acquisition of Trasir we entered the field of RNA delivery technology. In July 2021 we announced the selection of KRAS driven cancer as the first therapeutic indication for our OligoPhore™ oligonucleotide delivery platform. The therapeutic objective for AM-401 is to slow down KRAS driven tumor cell proliferation or to stop it altogether by delivering siRNA specifically inside tumor cells for gene knock down. We are employing siRNA which is targeting different KRAS mutations (polyKRASmut) and have shown that it knocks down a broad range of KRAS mutations in cancer cell lines. We aim to advance the AM-401 program through preclinical studies with the objective of filing for an IND in 2025.

 

AM-411 for Rheumatoid Arthritis. In July 2022 we announced the initiation of AM-411, our second development project for an RNA therapeutic based on the OligoPhore™ delivery platform. AM-411 seeks to treat rheumatoid arthritis (RA) by targeting siRNA at p65, one of the main transcriptional regulators of the NF-kB pathway and a key checkpoint in RA inflammation. We aim to advance the AM-411 program through preclinical studies with the objective of filing for an IND in 2025.

 

AM-125 for Vertigo. We have been developing AM-125 as a reformulation of betahistine for intranasal delivery. In 2019 we initiated the “TRAVERS” Phase 2 trial to evaluate the safety and efficacy of AM-125 in 124 patients suffering from acute vestibular syndrome following surgery. In June 2022 we reported top-line results from the trial showing good tolerability a dose- and time-dependent improvement in balance and signs and symptoms of vestibular dysfunction. In parallel to the clinical development, we have been conducting various preclinical studies with AM-125 and working on the analytical and process development for the manufacturing of the drug product. The FDA cleared our IND application in June 2023 which will allow for the conduct of clinical trials in the U.S. In the context of our strategic transition to become a company focused on RNA delivery technology, we intend to out-license or sell the AM-125 program. We have impaired previously capitalized research and development expenses for AM-125 as per year end 2022, which is recorded in research and development expenses.

 

Bentrio® for Allergy and Viral Infection: In September 2020 we initiated the development of AM-301, a drug-free nasal spray for protection against airborne viruses and allergens, through our new subsidiary Altamira Medica AG. Following formulation development, we tested AM-301 first in vitro in a series of experiments using reconstituted human nasal epithelia. Our clinical development in allergic rhinitis comprised four trials: one study each with controlled exposure to grass pollen for 4 hours and to house dust mites for 3 hours (both with 36 patients), one study on the distribution and residence time of AM-301 within the nasal cavity (8 healthy volunteers), and one study with environmental exposure to seasonal allergens for two weeks (NASAR trial; 100 patients). The two challenge studies were completed in 2021 and 2022 and showed good tolerability and protective effects of AM-301 for 3-4 hours; the extended nasal residence time of the formulation within the nasal cavity was confirmed in the trial with human volunteers. The NASAR trial demonstrated a statistically significant and clinically relevant improvement in nasal symptoms and health related quality of life in seasonal allergic rhinitis (SAR) and was also superior in efficacy outcomes to saline nasal spray, the current standard of care in drug free treatments for SAR. In viral infection, we conducted a trial in patients suffering from acute COVID-19 in 2022; top-line results were presented as inconclusive in early 2023. In the context of our decision to reposition our company around the RNA delivery business, we sold in November 2023 51% of the share capital of Altamira Medica to a Swiss private equity investor. We retained 49% of the company’s share capital and will be entitled to receive 25% of Altamira Medica’s future gross licensing income.

 

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Other research and development expenses mainly relate to the maintenance of our late-stage projects Sonsuvi® (AM-111) and Keyzilen® (AM-101) and pre-clinical studies of AM-102 (second generation tinnitus treatment).

 

For the years ended December 31, 2023, 2022 and 2021 we spent CHF 2.0 million and CHF 0.6 million and CHF 0.2 million on research and development expenses related to our RNA delivery platforms and AM-401 and AM-411. For the years ended December 31, 2023, 2022 and 2021, we spent CHF 1.0   million, CHF 2.1 million, and CHF 2.8 million, respectively, on research and development expenses related to our intranasal betahistine program (before capitalization of expenses related to AM-125). For the years ended December 31, 2023, 2022 and 2021, we spent CHF 1.4  million, CHF 3.9 million and, CHF 4.2 million on research and development expenses related to Bentrio®.

 

In 2024, the level of research and development expenses related to our RNA delivery platforms and AM-401 and AM-411 programs is expected to increase as we will conduct more in vitro studies, initiate in vivo studies and expand formulation and process development work. At this time, we cannot reasonably estimate the nature, timing and estimated costs of the efforts that will be necessary to advance the development of our programs to the point where they could be out-licensed, or the period, if any, in which material net cash inflows may commence from such transaction(s). This is due to numerous risks and uncertainties associated with developing drugs, including the uncertainty of:

 

the scope, rate of progress, results and cost of nonclinical studies and clinical trials, and other related activities;

 

the cost of manufacturing supplies for nonclinical and clinical studies, and establishing manufacturing processes for potential commercial uses of our RNA delivery platform and product candidates and any other products that we may develop;

 

the number and characteristics of product candidates that we pursue;

 

the cost, timing, and outcomes of regulatory clearance or approvals for clinical testing in humans; and

 

the terms and timing of any collaborative, licensing, and other arrangements that we may establish, including any required milestone and royalty payments thereunder.

 

A change in the outcome of any of these variables could mean a significant change in the costs and timing associated with the development of such product candidate. For example, if the FDA or other regulatory authority were to require us to conduct pre-clinical and clinical studies beyond those which we currently anticipate will be required for the submission of the IND filings or if we experience significant delays in obtaining study slots with contract research organizations or sourcing appropriate animals for such studies, we could be required to expend significant additional financial resources and time on the completion of the IND enabling studies.

 

In the context of our strategic repositioning, we have decided to deprioritize the development of our development programs in hearing loss and tinnitus and to seek their divestiture. We therefore do not expect to incur any or any meaningful research and development expenses for these programs in 2024.

 

Sales and marketing expense

 

Through the partial spin-off of our Bentrio® business in November 2023 we no longer have any commercial stage product in our portfolio. Therefore, we are no longer incurring any sales and marketing expenses.

 

General and administrative expense

 

Our general and administrative expense consists principally of:

 

salaries for general and administrative staff and related expenses, including employee benefits;

 

business development expenses, including travel expenses;

 

administration expenses including professional fees for auditors and other consulting expenses not related to research and development activities, professional fees for lawyers not related to the protection and maintenance of our intellectual property and IT expenses;

 

cost of facilities, communication and office expenses; and

 

depreciation and amortization of tangible and intangible fixed assets not related to research and development activities.

 

Interest income

 

Our policy is to invest funds in low risk investments including interest bearing deposits. Due to the partial divestiture of the Bentrio® business and related reclassification as discontinued operations, we have been recording interest income on loans related to this entity as part of these discontinued operations.

 

34

 

 

Interest expense

 

In 2023 and 2022, our interest expense consisted principally of interest due on the two convertible loans provided by FiveT.

 

Revaluation loss/gain from derivative financial instruments

 

Expenses related to fair value measurement of derivatives embedded in the 2022 FiveT convertible loan of CHF 181,258 were recorded as financial expenses in profit or loss for the twelve months ended December 31, 2023, compared to 2022 where there was a revaluation gain of CHF 449,898. Fair value measurement of the embedded derivative in the 2023 FiveT convertible loan resulted in a revaluation gain of CHF 15,066 in 2023. Further in the year 2023 we realized a gain on modification of financial instruments of CHF 36,778 and a loss on modification of financial instruments of CHF 7,317, both related to modifications of loans with warrants.

 

On January 30, 2018, we issued warrants in connection with a direct offering of 3,125 common shares, each warrant entitling its holder to purchase 0.6 common share at an exercise price of $2,000.00 per common share. As of December 31, 2021, the warrants were exercisable for an aggregate of 1,875 of our common shares (assuming we decide to round up fractional common shares to the next whole common share), at an exercise price of $2,000.00 per common share. Revaluation gain/(loss) show the changes in fair value of the warrant issued in connection with this offering. As of December 31, 2023 and 2022, the fair value of the warrants was zero (December 31, 2021: CHF 1,233). In 2023 there was no revaluation gain or loss on the derivative. The revaluation gain of the derivative for the twelve months ended December 31, 2022 amounted to CHF 1,233, compared to CHF 5,085 in 2021. Since its initial recognition on January 30, 2018, the fair value of the warrants has decreased by CHF 2,482,514 resulting in a gain in the corresponding amount (fair value as of January 30, 2018: CHF 2,483,747).

 

Foreign currency exchange gain/(loss), net

 

Our foreign currency exchange gain/(loss), net, consists primarily of unrealized gains or losses on our USD and EUR denominated cash and cash equivalents. We do not hedge our investments by currency borrowings or other hedging instruments.

 

Transaction costs

 

Transaction costs are shown as costs if they are not directly attributable to the equity transaction. Transaction costs recognized in profit or loss amounted to CHF 0 in the year ended December 31, 2023, compared to CHF 1,137 in the previous year.

 

Other comprehensive loss

 

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized in other comprehensive loss.

 

Assets and liabilities of our subsidiaries with functional currency other than CHF are included in our consolidated financial statements by translating the assets and liabilities into CHF at the exchange rates applicable at the end of the reporting period. Income and expenses for each consolidated statement of profit or loss and other comprehensive income are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transaction).

 

Foreign currency differences arising from translating the financial statements of our subsidiaries from currencies other than CHF are recognized in other comprehensive income and presented in the foreign currency translation reserve under equity in the statement of financial position. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal.

 

Results of Operations

 

The numbers below have been derived from our consolidated financial statements included elsewhere herein. The discussion below should be read along with these consolidated financial statements and it is qualified in its entirety by reference to them.

 

Following the partial divestiture of our Bentrio® business in November 2023, related activities have been reclassified and are shown as discontinued operations. Please see Note 27 to our audited financial statements included elsewhere in this Annual Report.

 

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Comparison of the years ended December 31, 2023 and 2022

 

   Year Ended December 31, 
   2023   2022   Change 
   (in thousands of CHF)   % 
Other operating income   256    9    2,744%
Research and development   (3,036)   (14,621)   (79)%
General and administrative   (3,136)   (3,402)   (8)%
Operating loss   (5,916)   (18,014)   (67)%
Finance income   354    565    (40)%
Finance expense   (1,668)   (1,211)   36%
Share of loss of an associate   (40)   -    n/a%
Loss before tax   (7,270)   (18,660)   (61)%
Income tax gain/(loss)   -    8    (100)%
Net loss attributable to owners of the Company   (7,270)   (18,652)   (61)%
Discontinued operations:               
Profit after tax from discontinued operations   3,401    (7,876)   (143)%
Net loss attributable to owners of the Company   (3,869)   (26,528)   (85)%
Other comprehensive income/(loss):               
Items that will never be reclassified to profit or loss               
Remeasurements of defined benefit liability, net of taxes of CHF 0   31    441    (93)%
Items that are or may be reclassified to profit or loss               
Foreign currency translation differences, net of taxes of CHF 0   209    61    243%
Share of other comprehensive income of an associate   7    -    n/a %
Other comprehensive income/(loss), net of taxes of CHF 0   247    502    (52)%
Total comprehensive loss attributable to owners of the Company   (3,622)   (26,026)   (86)%

 

Other operating income

 

Other operating income amounted to CHF 0.3 million in 2023 compared to CHF nine thousand in 2022 and was primarily related to the receipt of a grant from the National Center for Advancing Translational Sciences of the National Institutes of Health for work on an RNA project.

 

Research and development expense

 

   Year Ended December 31, 
   2023   2022   Change 
   (in thousands of CHF)   % 
Research and development expense            
Clinical projects   (129)   (67)   92%
Pre-clinical projects   (505)   (390)   (30)%
Product and process development   (364)   (199)   83%
Employee benefits   (1,430)   (1,426)   0.3%
Impairment intangible assets   -    (12,339)   (100)%
Other research and development expenses   (608)   (200)   203%
Total   (3,035)   (14,622)   (79)%

  

Research and development expenses decreased by 79% from CHF 14.6 million in 2022 to CHF 3.0 million in 2023 primarily as there was no more non-cash write-off (impairment) of previously capitalized internal development costs related to the AM-125 project. Excluding the impairment charges in 2022, research and development expenses rose in 2023 mainly due to higher activity levels related to our RNA projects.

 

General and administrative expense

 

   Year Ended December 31, 
   2023   2022   Change 
   (in thousands of CHF)   % 
General and administrative expense               
Employee benefits   (656)   (645)   2%
Business development   (15)   (16)   (2)%
Travel expenses   (43)   (96)   (55)%
Administration expenses   (2,274)   (2,517)   (10)%
Lease expenses   (16)   (6)   162%
Depreciation   (119)   (119)   0%
Capital tax expenses   (13)   (3)   310%
Total   (3,136)   (3,402)   (8)%

 

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General and administrative expenses decreased by 8% from CHF 3.4 million in 2022 to CHF 3.1 million in the year ended December 31, 2023. The decrease was primarily related to lower general administrative expenses, which include fees for legal, accounting and auditing services, the listing of the Company’s common shares and fees for the Board of Directors, among others. Depreciation expenses of CHF 0.1 million relate to the leasing of office space in Basel, Switzerland.

 

Finance income

 

Finance income decreased from CHF 0.6 million in 2022 to CHF 0.3 million in 2023 primarily due to lower revaluation gains from financial instruments, which was only partially compensated by higher interest income on loans to entities reported as discontinued operations.

 

Finance expense

 

Finance expense in the year ended December 31, 2023 increased 37% from CHF 1.2 million to CHF 1.7 million compared to 2022 primarily due to an increase in interest payments related to convertible loans, higher financial revaluation losses from financial instruments and higher foreign currency exchange losses.

 

Share of loss of an associate

 

Following the sale of 51% of our Bentrio® business in November 2023, we recorded a loss of CHF 40 thousand for our remaining 49% share for the remainder of 2023 under the equity method.

 

Income tax gain/(loss)

 

Income tax gain/(loss) reflects the assessment of deferred tax assets and liabilities.

 

Discontinued operations

 

The Bentrio® business was reclassified as discontinued operations due to the sale of a 51% stake in Altamira Medica AG in November 2023. In 2022, the Company incurred a loss from discontinued operations of CHF 7.9 million; in 2023, a gain of CHF 3.4 million was incurred, including an accounting gain from the sale of the 51% in the amount of CHF 5.2 million. Please see Note 27 to our audited financial statements included elsewhere in this Annual Report.

 

Remeasurements of defined benefits liability

 

Remeasurements of the net defined benefits liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), decreased 93% from CHF 0.4 million in 2022 to CHF 31 thousand in 2023.

 

Foreign currency translation differences

 

Foreign currency translation differences increased to CHF 0.2 million in 2023 from CHF 61 thousand in 2022.

 

Comparison of the years ended December 31, 2022 and 2021

 

    Year Ended December 31,  
    2022     2021     Change  
    (in thousands of CHF)     %  
                   
Other operating income     9       -         n/a %
Research and development     (14,621 )     (3,202 )     357 %
General and administrative     (3,402 )     (3,669 )     (7 )%
Operating loss     (18,014 )     (6,871 )     162 %
Finance income     565       79       615 %
Finance expense     (1,211 )     (14 )     8,550 %
Share of loss of an associate     -               n/a %
Loss before tax     (18,660 )     (6,806 )     174 %
Income tax gain/(loss)     8       118       (93 )%
Net loss attributable to owners of the Company     (18,652 )     (6,688 )     179 %
Discontinued operations:                        
Profit after tax from discontinued operations     (7,876 )     (10,370 )     (24 )%
Net loss attributable to owners of the Company     (26,528 )     (17,058 )     56 %
Other comprehensive income/(loss):                        
Items that will never be reclassified to profit or loss                        
Remeasurements of defined benefit liability, net of taxes of CHF 0     441       265       66 %
Items that are or may be reclassified to profit or loss                        
Foreign currency translation differences, net of taxes of CHF 0     61       1       6,000 %
Share of other comprehensive income of an associate     -       -       n/a     %
Other comprehensive income/(loss), net of taxes of CHF 0     502       266       89 %
Total comprehensive loss attributable to owners of the Company     (26,026 )     (16,792 )     55 %

 

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Research and development expense

 

   Year Ended December 31, 
   2022   2021   Change 
   (in thousands of CHF)   % 
Research and development expense        
Clinical projects   (67)   (64)   5%
Pre-clinical projects   (390)   (97)   302%
Product and process development   (199)   (165)   21%
Employee benefits   (1,426)   (935)   53%
Impairment intangible assets   (12,339)   (1,530)   706%
Other research and development expenses   (200)   (411)   (51)%
Total   (14,621)   (3,202)   357%

 

Research and development expense increased by 357% from CHF 3.2 million in 2021 to CHF 14.6 million in 2022 mainly due to the non-cash write-off (impairment) of previously capitalized internal development costs related to the AM-125 project. Other major increases were recorded for preclinical projects and employee benefits due to increased activities related to our RNA programs and higher headcount. Other research and development expenses decreased primarily due to lower expenses for patenting.

 

General and administrative expense

 

   Year Ended December 31, 
   2022   2021   Change 
  (in thousands of CHF)   % 
General and administrative expense               
Employee benefits   (645)   (1,371)   (53)%
Business development   (16)   (40)   (61)%
Travel expenses   (96)   (76)   26%
Administration expenses   (2,517)   (2,099)   20%
Lease expenses   (6)   (52)   (88)%
Depreciation tangible assets   (119)   (30)   296%
Capital tax expenses   (3)   (1)   211%
    (3,402)   (3,669)   (7)%

 

General and administrative expenses decreased by 7% from CHF 3.7 million in 2021 to CHF 3.4 million in the year ended December 31, 2022. The decrease was primarily related to lower employee benefits, which was partly offset by higher general administrative expenses and depreciation of tangible assets. The latter in the amount of CHF 0.1 million are related to the leasing of office space in Basel, Switzerland.

 

Finance income

 

Finance income increased from CHF 79 thousand in 2021 to CHF 0.6 million in 2022 primarily due to revaluation gains on the fair value measurement of derivatives embedded in the 2022 FiveT convertible loan and also due to higher interest income on loans to entities reported as discontinued operations.

 

Finance expense

 

Finance expense increased from 14 thousand in 2021 to CHF 1.2 million in 2022 primarily due to the accrued interest on the CHF 5 million convertible loan granted by FiveT in February 2022 and secondarily due to net foreign currency exchange losses.

 

Income tax gain/(loss)

 

Income tax gain/(loss) reflects the assessment of deferred tax assets and liabilities.

 

Discontinued operations

 

In the Bentrio® business, which was classified as discontinued operations, the loss decreased from CHF 10.4 million in 2021 to of CHF 7.9 million in 2022 due to higher product revenues, other income and finance income on one hand and lower cost of goods sold and reduced operating expenses. Please see Note 27 to our audited financial statements included elsewhere in this Annual Report.

 

Remeasurements of defined benefits liability

 

Remeasurements of the net defined benefits liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), increased 66% from CHF 0.3 million in 2021 to CHF 0.4 million in 2022. The gain in 2022 is primarily due to a higher discount rate which was partly compensated by a negative return on plan assets.

 

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Foreign currency translation differences

 

Foreign currency translation differences increased to CHF 0.1 million in 2022 from a negligible amount in 2021.

 

B.Liquidity and capital resources

 

Since inception, we have incurred significant operating losses. We have financed our operations through the public offerings of our common shares, private placements of equity securities and short-term loans.

 

Cash flow

 

Comparison of the years ended December 31, 2023 and 2022

 

The table below summarizes our consolidated statement of cash flows including both continuing and discontinued operations for the years ended December 31, 2023 and 2022:

 

   Year Ended December 31, 
   2023   2022 
   (in thousands of CHF) 
Net cash used in operating activities   (11,511)   (8,683)
Net cash from / used in investing activities   1,445    (2,142)
Net cash from financing activities   10,622    9,832 
Net effect of currency translation on cash   46    24 
Cash and cash equivalents at the beginning of the period   15    984 
Cash and cash equivalents at the end of the period   617    15 

 

Net cash used in operating activities increased from CHF 8.7 million in 2022 to CHF 11.5 million in 2023 primarily due to an increase in net working capital compared to a decrease in net working capital in 2022. The effect of the changes in net working capital were partly compensated by lower spending on research and development costs.

 

In 2023, there was a cash inflow from investing activities of CHF 1.4 million due to the net cash proceeds from the sale of Altamira Medica AG and the subsequent capital contribution to this company, which is treated as an investment in an associate after the sale. In 2022 there was a cash outflow from investing activities of CHF 2.1 million due to investments in intangible assets.

 

The cash inflow from financing activities increased from CHF 9.8 million in 2022 to CHF 10.6 million in 2023 as the Company obtained net proceeds from offerings and warrant exercises of CHF 9.7 million and CHF 2.5 million from the 2023 FiveT convertible loan. On the other hand, loans in the total amount of CHF 1.4 million were repaid.

 

Comparison of the years ended December 31, 2022 and 2021

 

The table below summarizes our consolidated statement of cash flows including both continuing and discontinued operations for the years ended December 31, 2022 and 2021:

 

   Year Ended December 31, 
   2022   2021 
   (in thousands of CHF) 
Net cash used in operating activities   (8,683)   (13,673)
Net cash used in investing activities   (2,142)   (3,505)
Net cash from financing activities   9,832    6,614 
Net effect of currency translation on cash   24    289 
Cash and cash equivalents at the beginning of the period   984    11,259 
Cash and cash equivalents at the end of the period   15    984 

 

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Net cash used in operating activities decreased from CHF 13.7 million in 2021 to CHF 8.7 million in 2022 as spending on research and development and administration decreased and net working capital was lower, which was only partially compensated by higher spending on marketing and sales.

 

Cash used in investing activities decreased from CHF 3.5 million in 2021 to CHF 2.1 million in 2022. The decrease is primarily due to lower investments in intangible assets related to AM-125; in addition, the 2021 amount comprised the payment of the cash component of the Trasir acquisition price.

 

The cash inflow from financing activities increased from CHF 6.6 million in 2021 to CHF 9.8 million in 2022 as the Company obtained in February 2022 a convertible loan from FiveT in the amount of CHF 5.0 million, obtained further loans from several investors in the amount of CHF 1.05 million, and raised capital through the ATM program and equity line in the amount of CHF 3.9 million net of transaction costs.

 

Cash and funding sources

 

The table below summarizes our sources of financing for the years ended December 31, 2023, 2022 and 2021:

 

   Equity         
   Capital and         
   Preference         
   Shares   Loans   Total 
   (in thousands of CHF) 
2023   9,721    2,500    12,221 
2022   3,927    6,039    9,966 
2021   6,686    -    6,686 
Total   20,334    8,539    28,873 

 

On May 1, 2023, we entered into a convertible loan agreement with FiveT Investment Management Ltd. (“FiveT IM”), pursuant to which FiveT IM has agreed to loan to the Company CHF 2,500,000, which bears interest at the rate of 10% per annum and matures 22 months from May 4, 2023 (the “2023 FiveT Loan”). FiveT IM will have the right to convert all or part of the convertible loan, including accrued and unpaid interest, at its option, into common shares, subject to the limitation that FiveT IM own no more than 4.99% of the common shares at any time. The conversion price was fixed at CHF 28.40 per common share (subject to adjustment for share splits or other similar events).

 

Commencing 60 days after May 4, 2023 we must repay at least 1/20th of the outstanding loan plus accrued interest pro rata in monthly tranches which, at our discretion, may be paid at any time during the month either in: (i) cash plus 3% or (ii) common shares, or a combination of both. Such shares will be priced at the lower of (i) the mean daily trading volume weighted average price (“VWAP”) for the common shares on the 20 trading days preceding the repayment date or (ii) 90% of the daily trading volume weighted average price for common shares on the repayment date. We made the last amortization of the 2023 FiveT Loan on December 8, 2023. In total, we made aggregate cash payments of CHF 387,045 and issued an aggregate 443,294 common shares at an average price of CHF 5.07 to FiveT IM under the 2023 FiveT Loan.

 

Further, FiveT IM received warrants to purchase an aggregate of 81,274 common shares at an exercise price of CHF 30.76 per common share, which may be exercised up to five years. On December 7, 2023, we entered into a letter agreement (the “Warrant Inducement Agreement”) under which FiveT IM was granted the option to exercise the warrants by or before December 14, 2023 at a reduced exercise price which was defined as 90% of the daily trading volume weighted average price for our common shares on the NASDAQ stock exchange on the trading day following the date of each such exercise and receive additional warrants upon any such exercise. FiveT IM exercised all existing warrants at the reduced exercise price of CHF 6.656 per common share, yielding proceeds of CHF 540,960 to the Company. On December 15, 2023, we issued to FiveT IM new warrants to purchase 81,274 common shares at CHF 6.656 each for six months from their date of issuance and to purchase 81,274 common shares at CHF 6.656 each for two years from their date of issuance.

 

On July 6, 2023 we announced the pricing of a public offering of 555,556 common shares (or pre-funded warrants in lieu thereof) accompanied by common warrants to purchase up to 555,556 common shares, at a combined public offering price of $9.00 per share (or pre-funded warrant in lieu thereof) and accompanying common warrant. The common warrants have an exercise price of CHF 8.00 per share, are immediately exercisable upon issuance and will expire five years from the date of issuance. In addition, we issued 36,113 common warrants with an exercise price of CHF 10.00 each to the placement agent. The offering closed on July 10, 2023. The gross proceeds to the Company from this offering were $5.0 million, before deducting the placement agent’s fees and other offering expenses payable by the Company. Net proceeds were CHF 3.7 million.

 

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On December 28, 2022, we entered into two separate loan agreements with two private investors (“Private Lenders”), as amended, pursuant to which Private Lenders have agreed to loan to the Company an aggregate of CHF 350,000, which loans bear interest at the rate of 5% per annum and were to mature as of May 30, 2023. The Company agreed to grant to the Private Lenders warrants to purchase an aggregate 2,359 common shares. The warrants are exercisable at an exercise price of CHF 89.02 per share for up to five years from the date of issuance. On May 12, 2023, the Company and the Private Lenders entered into an amendment to the loan agreement, which extended the maturity date of the loan from May 31, 2023 to July 31, 2023 and lowered the strike price for the Warrants attached to the loan to CHF 17.62 per common share, which is the Swiss Franc equivalent of the trading volume weighted average price for common shares on the NASDAQ stock exchange on the trading day preceding the date of the amendment. The loans were paid back on July 14, 2023.

 

On December 5, 2022, we entered into a purchase agreement with Lincoln Park Capital Fund, LLC (the “2022 Commitment Purchase Agreement”). Pursuant to the purchase agreement, LPC agreed to subscribe for up to $10.0 million of our common shares over the 24-month term of the purchase agreement. As consideration for LPC’s irrevocable commitment to purchase common shares upon the terms of and subject to satisfaction of the conditions set forth in the 2022 Commitment Purchase Agreement, the Company agreed to issue 2,500 common shares immediately to LPC as commitment shares. The 2022 Commitment Purchase Agreement effectively replaced the 2020 Commitment Purchase Agreement. Under the 2020 Commitment Purchase Agreement LPC agreed to purchase common shares for up to $10,000,000 over the 30-month term of the Purchase Agreement. Prior to its termination we had issued 16,250 common shares for aggregate proceeds of $4.0 million to LPC under the 2020 Commitment Purchase Agreement. The 2020 Commitment Purchase Agreement effectively replaced the 2018 Commitment Purchase Agreement. Under the 2018 Commitment Purchase Agreement LPC agreed to purchase common shares for up to $10,000,000 over the 30-month term of the Purchase Agreement. Prior to its termination we had issued 1,469 common shares for aggregate proceeds of $1.8 million to LPC under the 2018 Commitment Purchase Agreement.

 

Under the 2022 Commitment Purchase Agreement, we have the right, from time to time at our sole discretion over the 24-month period from December 27, 2022 to require LPC to subscribe for up to 750 of our common shares on the applicable purchase date (a “Regular Purchase”), which maximum number of shares may be increased to certain higher amounts up to a maximum of 1500 common shares, if the market price of our common shares at the time of the Regular Purchase equals or exceeds $200.00 (such share and dollar amounts subject to proportionate adjustments for share splits, reverse share splits, recapitalizations and other similar transactions as set forth in the Purchase Agreement), provided that LPC’s purchase obligation under any single Regular Purchase shall not exceed $1,500,000. In the event that the purchase price per common share and number of common shares must be adjusted, and if after giving effect to the full proportionate adjustment, for any reorganization, recapitalization, non-cash dividend, share split, reverse share split or other similar transaction as provided in the Purchase Agreement, the combination of the as-adjusted purchase price per common share and the as-adjusted number of common shares does not result in a LPC purchase commitment equal to or greater than $150,000, then the maximum number of shares that we may issue under a Regular Purchase may be adjusted such that LPC’s purchase commitment will be equal to, or as closely approximating without exceeding $150,000 (such dollar amount not be subject to proportionate adjustments for share splits, reverse share splits, recapitalizations and other similar transactions as set forth in the Purchase Agreement). The purchase price of common shares we may elect to sell to LPC under the 2022 Commitment Purchase Agreement in a Regular Purchase, if any, will be based on prevailing market prices of our common shares immediately preceding the time of sale as set forth in the 2022 Commitment Purchase Agreement. In addition to Regular Purchases, the Company may also direct Lincoln Park to purchase other amounts of our common shares in “accelerated purchases” and in “additional accelerated purchases” under the terms set forth in the 2022 Commitment Purchase Agreement.

 

LPC has no right to require us to sell any common shares to LPC, but LPC is obligated to make purchases as the Company directs, subject to certain conditions. There is no maximum on the price per share that LPC must pay for our common shares that we may elect to sell to LPC pursuant to the 2022 Commitment Purchase Agreement. In all instances, the Company may not sell common shares to LPC under the 2022 Commitment Purchase Agreement to the extent that the sale of shares would result in LPC beneficially owning more than 4.99% of our common shares. As of the date of this report, we have issued a total of 117,500 of our common shares to LPC for an aggregate amount of $1,136,975 under the 2022 Commitment Purchase Agreement.

 

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On September 9, 2022 the Company entered into a loan agreement with FiveT IM, Dominik Lysek and Thomas Meyer (the “Lenders”), as amended, pursuant to which the Lenders have agreed to loan to the Company an aggregate of CHF 600,000.00, which loan bears interest at the rate of 5% per annum and was to mature as of March 31, 2023. The Company agreed to grant to the Lenders warrants (the “Warrants”) to purchase an aggregate 2,085 common shares. The Warrants are exercisable at an exercise price of CHF 144.00 per share for up to five years from October 1, 2022.

 

On May 12, 2023, the Company and the Lenders entered into an amendment to the loan agreement, which extended the maturity date of the loan from May 31, 2023 to July 31, 2023, introduced a right for Lenders to convert the loan into common shares of the Company at CHF 22.40 per common share, which is the Swiss Franc equivalent of 120% of the mean daily trading volume weighted average price for common shares on the NASDAQ stock exchange on the 20 trading days preceding the date of the amendment, and a right for the Company to repay the loan in common shares of the Company priced at the lower of (i) the mean daily trading volume weighted average price for the common shares on the 20 trading days preceding the repayment date or (ii) 90% of the daily trading volume weighted average price for common shares on the repayment date, and lowered the strike price for the Warrants attached to the loan to CHF 17.62 per common share, which is the Swiss Franc equivalent of the trading volume weighted average price for common shares on the NASDAQ stock exchange on trading day preceding the date of the amendment. The loan was repaid on July 14, 2023.

 

On February 4, 2022, the Company entered into a convertible loan agreement with FiveT IM. The convertible loan of CHF 5.0 million, as amended (the “2022 FiveT Loan”) carried interest at the rate of 10% per annum and was to mature on May 31, 2023. FiveT IM had the right to convert all or part of the 2022 FiveT Loan, including accrued and unpaid interest, at its option, into common shares, subject to the limitation that FiveT IM own no more than 4.9% of the common shares at any time. On April 13, 2023, the Company and FiveT IM entered into an amendment to the 2022 FiveT Loan (the “2022 FiveT Loan Amendment”), which amended the conversion price of the 2022 FiveT Loan to a fixed price equal to the lower of (a) the mean daily VWAP of the Company’s common shares on the Nasdaq Stock Market on the 20 trading days preceding the effective date of the 2022 FiveT Loan Amendment or (b) 90% of the VWAP on the effective date of the 2022 FiveT Loan Amendment. From April 13, 2023 to April 17, 2023, FiveT IM converted the entire 2022 FiveT Loan into an aggregate 217,051 common shares at a conversion price of $28.95 per share. As a result, the 2022 FiveT Loan is no longer outstanding and has been terminated.

 

On September 8, 2020, FiveT provided a convertible loan to our subsidiary Altamira Medica. The loan had a principal amount of CHF 1.5 million, a duration of 18 months, and carried an interest rate of 8% p.a. Under the terms of the agreement, FiveT had the right to convert the loan or parts thereof including accrued interest into common shares of either Altamira or the Company, subject to additional provisions and certain restrictions. On December 2, 2020, FiveT converted principal of CHF 895,455 into 1843 shares of the Company at the pre-defined maximum conversion price of $540.00 per share. On March 4, 2021, FiveT converted the remaining outstanding amount under the loan, thus retiring the loan.

 

Due to the COVID-19 pandemic, in 2020 Swiss banks granted special loans under certain conditions with a guarantee by the Swiss Government. Our Company was eligible for a loan of CHF 50,000, which was granted on March 26, 2020. The loan is interest-free and may be repaid at any time with a maximum term of five years. The company repaid the loan on June 18, 2021.

 

On November 30, 2018, we entered into the A.G.P. Sales Agreement with A.G.P. Pursuant to the terms of the A.G.P. Sales Agreement, as amended on April 5, 2019, we may offer and sell our common shares, from time to time through A.G.P. by any method deemed to be an “at-the-market” offering as defined in Rule 415(a)(4) promulgated under the Securities Act. Pursuant to the A.G.P. Sales Agreement, we may sell common shares up to a maximum aggregate offering price of $25.0 million. In 2023, we sold 104,147 shares under the ATM for aggregate proceeds of $5.1 million. We terminated the A.G.P. Sales Agreement effective January 1, 2024. Prior to its termination, we sold an aggregate 123,512 of our common shares for an aggregate offering price of $13.1 million pursuant to the A.G.P. Sales Agreement.

 

We have no other ongoing material financial commitments, such as lines of credit or guarantees that are expected to affect our liquidity over the next five years, other than leases.

 

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Funding requirements; Going Concern

 

We expect that we will need additional funding. We expect our total additional cash need in 2024 to be in the range of CHF 6.5 to 7.5 million. As of December 31, 2023, our cash and cash equivalents were CHF 0.6 million. Our assumptions may prove to be wrong, and we may have to use our capital resources sooner than we currently expect. To the extent that we will be unable to generate sufficient cash proceeds from the planned divestiture or partnering of our AM-125 development program and from our 49% stake in our associated company Altamira Medica AG or other partnering activities, we will need substantial additional financing to meet these funding requirements.

 

As of the date of this Annual Report we have warrants outstanding, which are exercisable for an aggregate of 759,167 common shares at a weighted average exercise price of $15.59 per share, options which are exercisable for an aggregate of 145,324 common shares at a weighted average exercise price of $22.17 per share, an equity commitment to sell up to $10.0 million of additional common shares to Lincoln Park Capital Fund, LLC (“LPC”) pursuant to the commitment purchase agreement we entered into on December 5, 2022 with LPC (the “2022 LPC Purchase Agreement”), less an aggregate of $1,185,800 of common shares that have been sold through March 29, 2024 under such agreement, and under an at-the-market offering program pursuant to the sales agreement we entered into with H.C. Wainwright & Co. (“HCW”) on January 19, 2024 (the “HCW Sales Agreement”) we sold an aggregate of $1.66 million of common shares through March 29, 2024, and we may seek to register additional common shares for sale under such agreement, subject to the volume limitations under Instruction I.B.5 of Form F-3.

 

We have based our estimate of funding requirements on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect. Our future funding requirements will depend on many factors, including but not limited to:

 

the scope, rate of progress, results and cost of our nonclinical testing and other related activities;

 

the cost of sourcing key ingredients for our RNA delivery programs and of manufacturing our product candidates and any products that we may develop;

 

the scope of the further development of our RNA delivery platforms and the number and characteristics of product candidates that we pursue;

 

the terms and timing of any collaborative, licensing, and other arrangements that we may establish, including any required milestone and royalty payments thereunder.

 

We expect that we will require additional funding to continue the research and development program for our RNA delivery platforms and our product candidates AM-401 and AM-411. We also expect to continue to incur additional costs associated with operating as a public company. Additional funds may not be available on a timely basis, on favorable terms, or at all, and such funds, if raised, may not be sufficient to enable us to continue to implement our long-term business strategy. If we are not able to raise capital when needed, we could be forced to delay, reduce or eliminate our research and development programs, which could materially harm our business, prospects, financial condition and operating results. This could then result in bankruptcy, or the liquidation of the Company.

 

These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements included in this report have been prepared on a going concern basis, which contemplates the continuity of normal activities and realization of assets and settlement of liabilities in the normal course of business. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The lack of a going concern assessment may negatively affect the valuation of the Company’s investments in its subsidiaries and result in a revaluation of these holdings. The board of directors will need to consider the interests of our creditors and take appropriate action to restructure the business if it appears that we are insolvent or likely to become insolvent.

 

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We may raise additional capital through the sale of equity or convertible debt securities. In such an event, your ownership interest will be diluted, and the terms of these new securities may include liquidation or other preferences that adversely affect your rights as a holder of our common shares.

 

For more information as to the risks associated with our future funding needs, see “Item 3. Key Information—D. Risk factors.”

 

Significant accounting policies and use of estimates and judgment

 

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with IFRS. The preparation of these financial statements requires us to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

 

While our significant accounting policies are more fully described in the notes to our audited consolidated financial statements appearing elsewhere in this Annual Report, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our financial condition and results of operations.

 

Intangible assets

 

Research and development

 

The project stage forms the basis for the decision as to whether costs incurred for the Company’s development projects can be capitalized. For the AM-125 program, given the stage of the development project, the nature of the development approach and the fact that there is an existing market for oral betahistine, direct development expenditures have been capitalized until the end of 2022, including certain expenses related to the patenting of intellectual property. As of December 31, 2022, the capitalized costs related to the AM-125 program were fully impaired based on the impairment analysis performed under IFRS.

 

Intellectual property-related costs for patents are part of the expenditure for the research and development projects. Therefore, registration costs for patents are expensed when incurred as long as the research and development project concerned does not meet the criteria for capitalization.

 

Licenses, Intellectual Property and Data rights

 

Intellectual property rights that are acquired by the Company are capitalized as intangible assets if they are controlled by the Company, are separately identifiable and are expected to generate future economic benefits, even if uncertainty exists as to whether the research and development will ultimately result in a marketable product. Consequently, upfront and milestone payments to third parties for the exclusive use of pharmaceutical compounds in specified areas of treatment are recognized as intangible assets.

 

Measurement

 

Intangible assets acquired that have finite useful lives are measured at cost less accumulated amortization and any accumulated impairment losses.

 

Subsequent expenditure

 

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.

 

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Amortization

 

All licenses of the Company have finite lives. Amortization will start once the Company’s intangible assets are available for use. Amortization of licenses is calculated on a straight-line basis over the period of the expected benefit or until the license expires. The estimated useful life of the Company’s licenses is 10 years from the date first available for use or the remaining term of patent protection. The Company assesses at each balance sheet date whether intangible assets which are not yet ready for use are impaired.

 

Income tax

 

Income tax expense comprises current and deferred tax. It is recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income/loss, or OCI.

 

Current tax

 

Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to tax payable or receivable in respect of previous years. It is measured using tax rates enacted or substantively enacted at the reporting date. Taxable profit differs from “loss before tax” as reported in the consolidated statement of profit or loss and other comprehensive loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible.

 

Deferred tax

 

Deferred income tax is recognized, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax is not recognized for:

 

temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;

 

temporary differences related to investments in subsidiaries to the extent that the Company is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and

 

taxable temporary differences arising on the initial recognition of goodwill.

 

Deferred income tax is determined using tax rates and laws that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

 

Deferred income tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

 

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off tax assets against tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its tax assets and liabilities on a net basis.

 

Employee benefits

 

The Company maintains a pension plan for all employees employed in Switzerland through payments to an independent collective foundation. Under IFRS, the pension plan qualifies as a defined benefit plan. There are no pension plans for the subsidiaries in Ireland, Australia and the United States.

 

The Company’s net obligation in respect of defined benefit plans is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.

 

The recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. In order to calculate the present value of economic benefits, consideration is given to any minimum funding requirements.

 

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in OCI. The Company determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognized in profit or loss.

 

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Share-based compensation

 

Stock Options

 

The Company maintains a share-based payment plan in the form of a stock option plan for its employees, members of the Board of Directors as well as key service providers. Stock options are granted at the Board’s discretion without any contractual or recurring obligations.

 

The share-based compensation plan qualifies as an equity settled plan. The grant-date fair value of share-based payment awards granted to employees is recognized as an expense, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the awards. Under the Company’s equity incentive plan (the “Equity Incentive Plan” or “EIP”) adopted in August 2014 and amended in April 2017 and June 2019, 50% of granted share options granted to employees vest after a period of service of two years from the grant date and the remaining 50% vest after a period of service of three years from the grant date. Share options granted to members of the Board of Directors from 2016 onwards vest after a period of one year after the grant date.

 

The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognized as an expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. Share-based payments that are not subject to any further conditions are expensed immediately at grant date. In the year the options are exercised the proceeds received net of any directly attributable transaction costs are credited to share capital (par value) and share premium.

 

Valuation of stock options

 

The fair value of our stock options is determined by our Management and our Board of Directors and takes into account numerous factors to determine a best estimate of the fair value of our share options as of each grant date.

 

Option pricing and values are determined based on the Black Scholes option pricing model, and assumptions are made for inputs such as volatility of our stock and the risk-free rate.

 

Recent accounting pronouncements

 

See Note 4 to our audited financial statements included elsewhere in this Annual Report for a full description of recent accounting pronouncements, including the expected dates of adoption and effects on the Company’s financial condition, results of operations and cash flows.

 

C.Research and development, patents and licenses, etc.

 

See “Item 4. Information on the Company—A. History and Development of the Company,” “Item 4. Information on the Company—B. Business Overview” and Item 5. Operating and Financial Review and Prospects—A. Operating Results – Results of Operations.”

 

D.Trend information

 

See “Item 5. Operating and Financial Review and Prospects.”

 

E.Critical Accounting Estimates

 

Not applicable.

 

F.Safe harbor

 

See “Forward-Looking Statements.”

 

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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

 

A.Directors and senior management

 

Our directors have been elected for a one-year term and, accordingly, the term will expire at the time of our 2024 annual general meeting.

 

The following table presents information about our executive officers and directors.

 

            Initial
            Year of
Name   Position   Age   Appointment
Executive Officers            
Thomas Meyer   Chairman, Director and Chief Executive Officer   56   2003
Covadonga Pañeda   Chief Operating Officer   50   2022
Marcel Gremaud   Chief Financial Officer   66   2021
             
Non-Executive Directors            
Mats Blom   Director   59   2017
Alain Munoz   Director   74   2018
Margrit Schwarz   Director   60   2021

 

Unless otherwise indicated, the current business addresses for our executive officers and directors is Altamira Therapeutics Ltd., Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda.

 

Executive Officers

 

Thomas Meyer, Founder, Chairman of the Board of Directors and Chief Executive Officer: Mr. Meyer founded Auris Medical in April 2003 and has served as Chairman and CEO since that time. Prior to founding us, he was the Chief Executive Officer of Disetronic Group, a leading Swiss supplier of precision infusion and injection systems. He worked for Disetronic in various functions starting in 1988, becoming member of the Board of Directors in 1996, Deputy Chief Executive Officer in 1999 and Chief Executive Officer in early 2000. Prior to joining Disetronic, he advised several Swiss companies in strategy, marketing and corporate finance. He has been the Chairman of the Board of Directors of PharmaTrail Ltd. since 2020. He holds a Ph.D. (Dr.rer.pol.) in business administration from the University of Fribourg, Switzerland.

 

Covadonga Pañeda, Chief Operating Officer (RNA) (from April 2022): Ms. Pañeda, Ph.D., has over 15 years of experience in drug development. From 2011 to 2018, she served as R&D Manager at Sylentis S.A., a clinical stage RNAi biopharma company, served as R&D Senior Project Leader from 2018 to 2019 at Exeltis (Insudpharma), a company focused on the development of branded pharmaceuticals, served as Director of Development from 2019 to 2020 at Canaan Research and Investment, a venture capital fund focused on biotechnology companies, and most recently, from 2020 to 2022, she served as Director of Development at Limm Therapeutics, a neuroimmune biopharma company. Dr. Pañeda obtained a Ph.D. in Biochemistry and Molecular Biology at the Faculty of Medicine at Universidad Autónoma, Madrid, Spain, and spent several years as a Post-doc at the Scripps Research Institute, La Jolla, CA. In April 2022 Ms. Pañeda joined us as Chief Development Officer and was promoted to Chief Operating Officer effective January 1, 2023.

 

Marcel Gremaud, Chief Financial Officer: Mr. Gremaud, CPA, has been Altamira Therapeutics’ Chief Financial Officer since November 2021. In 2001 he founded Gremaud GmbH, an audit and accounting company, and as its owner and CEO has been supporting various companies in financial consolidation and accounting in accordance with IFRS or Swiss GAAP FER. Mr. Gremaud has more than 30 years’ experience in controlling and accounting in international pharma companies and start-ups.

 

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Non-Executive Directors

 

Mats Blom, Director: Mr. Blom has been a member of our Board of Directors since April 2017. Mr. Blom is Chief Financial Officer (CFO) of NorthSea Therapeutics B.V., a biotechnology company focused on oral, structurally engineered lipid therapeutics. Prior to joining NorthSea, he served as CFO of Modus Therapeutics A/B, a biotechnology company developing therapeutics to restore healthy blood flow for patients with debilitating diseases, Zealand Pharma A/B, a biotechnology company focused on the discovery, design and development of innovative peptide-based medicines, and Swedish Orphan International, an orphan drug company acquired by BioVitrum in 2009. In addition, Mr. Blom has extensive managerial experience and has held CFO positions at Active Biotech AB and Anoto Group AB. Previously, he served as a management consultant at Gemini Consulting and Ernst & Young. He is currently a member of the Board of Directors of Hansa Biopharma AB (HNSA), Egetis Therapeutics AB (EGTX) and Pephexia Therapeutics ApS. Mats Blom holds a BA in Business Administration and Economics from the University of Lund and an MBA from IESE University of Navarra, Barcelona.

 

Alain Munoz, Director: Mr. Munoz, MD, has been a member of our Board of Directors since March 2018 and previously served on our Board of Directors between 2007 and 2015. Mr. Munoz is an entrepreneur and independent management consultant in the pharmaceutical and biotechnology industry. From 1990 to 2000, Mr. Munoz worked with the Fournier Group, as Research and Development Director and then Senior Vice President of the Pharmaceutical Division. He joined Fournier from Sanofi Research, where he started as Director in the cardiovascular and anti-thrombotic products department and then as Vice President international development. Mr. Munoz is qualified in cardiology and anesthesiology from the University Hospital of Montpellier, France where he was head of the clinical cardiology department. He has been a member of the Scientific Committee of the French Drug Agency. He serves as an independent Board Member of Zealand Pharma A/S (ZEAL.CO) and is Chairman of the Board of Directors of Acticor Biotech SAS.

 

Margrit Schwarz, Director: Ms. Schwarz, PhD, has been a member of our Board of Directors since July 2021. Prior executive positions include Chief Operating Officer of Draupnir Bio, Chief Business Officer at HepaRegeniX, and Chief Scientific Officer and Head of R&D at Genevant Sciences, where she was responsible for developing a portfolio of RNAi and mRNA drug candidates in the liver and rare disease space. Ms. Schwarz has also served as VP & Global Head External Innovation at Roche, VP & Therapeutic Area Head Cardiorenal at Boehringer Ingelheim, and Director Research at Amgen. She has led preclinical R&D and IND-enabling phases for multiple development candidates, including the anti-PCSK9 therapeutic antibody Repatha, launched in 2015. She is a member of the Advisory Boards of Immunethep and EvlaBio, and a contractual Expert with Innosuisse and the European Innovation Council. She holds a PhD in biochemistry from the University of Cologne, Germany, and an MBA from Columbia University, NY.

 

Board Diversity Matrix (As of March 29, 2024)

 

To be completed by Foreign Issuers (with principal executive offices outside of the U.S.) and Foreign Private Issuers
 
Country of Principal Executive Offices:  Bermuda
Foreign Private Issuer  Yes
Disclosure Prohibited Under Home Country Law  No
Total Number of Directors  4

 

   Female  Male  Non-Binary  Did Not Disclose
Gender
Part I: Gender Identity            
Directors  1  3  0  0
Part II: Demographic Background            
Underrepresented Individual in Home Country Jurisdiction            
         0   
LGBTQ+        0   
Did Not Disclose Demographic Background        0   

 

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B.Compensation

 

For the year ended December 31, 2023, the aggregate compensation accrued or paid to the members of our board of directors and our executive officers for services in all capacities was CHF 1,256,493 (2022: CHF 1,172,818).

 

For the year ended December 31, 2023, the amount set aside or accrued by us to provide pension, retirement or similar benefits to members of our board of directors or executive officers amounted to a total of CHF 44,469 (2022: CHF 49,050).

 

Compensation awarded to the Board of Directors in 2023

 

The total compensation of the members of the board of directors in 2023 is outlined below:

 

   Cash   Social   Stock     
In CHF  Compensation   Contributions   Options (2)   Total 
Thomas Meyer, PhD, Chairman (1)   -       -    -    - 
Armando Anido (2)   18,934         12,043    30,977 
Margarit Schwarz   37,868         12,043    49,911 
Mats Blom   37,868         12,043    49,911 
Alain Munoz   37,868         12,043    49,911 
Total   132,538    -    48,172    180,708 

 

(1)Disclosed under “Compensation Awarded to Our Executive Officers” below. The Chief Executive Officer does not receive any additional compensation for the exercise of the office of the Chairman.

 

(2)Serving up to the 2023 Annual General Meeting on June 27, 2023.

 

In 2023, 2261 options were granted to each eligible member of the Board of Directors, with an exercise price of $14.40 per common share and an expiration date of June 27, 2031. The fair value calculation of the options was based on the Black-Scholes option pricing model. Assumptions were made regarding inputs such as volatility and the risk-free rate in order to determine the fair value of the options.

 

Compensation Awarded to our Executive Officers in 2023

 

The total compensation and the highest individual compensation to our executive officers in 2023 are outlined below:

 

           Social         
           contributions         
   Fixed Cash   Variable   and fringe   Stock     
in CHF  Compensation   Compensation (1)   benefits   Options (2)   Total 
Thomas Meyer, PhD, Chief Executive Officer (3)   366,000    65,880    84,357    138,637    654,874 
Executive Officers Total (4)   630,000    95,850    181,783    199,157    1,106,790 

 

(1)The variable compensation is paid in cash.

 

(2) 2023 option grants, exercise prices of $19.20 and $2.92 expiration date April 30, 2031 and October 31, 2031, respectively. The fair value calculation of the options was based on the Black-Scholes option pricing model. Assumptions were made regarding inputs such as volatility and the risk-free rate in order to determine the fair value of the options.

 

(3)Highest paid executive.

 

(4)On December 31, 2023, we had three executive officers, of which one was remunerated on a consulting basis (not included in this table).

 

Employment Agreements

 

We have entered into employment and/or consulting agreements with our executive officers Thomas Meyer, Covadonga Pañeda and Marcel Gremaud. The employment and/or consulting agreements provide for the compensation that the executive officers are entitled to receive, including certain equity grants, and the employment agreement of Mr. Meyer contains a termination notice period of six months. The Company will have title to the intellectual property rights developed in connection with the executive officer’s employment, if any.

 

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None of our directors has entered into service agreements with the Company. However, we may in the future enter into employment or services agreements with such individuals, the terms of which may provide for, among other things, cash or equity-based compensation and benefits.

 

Adoption of Clawback Policy

 

On November 15, 2023, in accordance with Rule 10D-1 promulgated under the Exchange Act and Nasdaq Listing Rule 5608, we adopted an incentive compensation recoupment policy which is filed herewith as Exhibit 91.1.

 

Equity Incentive Plans

 

Equity Incentive Plan

 

In August 2014, as amended and restated in June 2019, we established the EIP with the purpose of motivating and rewarding those employees and other individuals who are expected to contribute significantly to our success, and advancing the interests of our shareholders by enhancing our ability to attract, retain and motivate individuals. The option exercise price for options under the EIP is determined by the compensation committee at the time of grant but shall not be less than the par value of a common share on the grant date. As of December 31, 2023, 3,313 common shares were available for award under the EIP.

 

Plan administration. The EIP is administered by our compensation committee. Approval of the committee is required for all grants of awards under the EIP. The committee may delegate to one or more officers the authority to grant options and stock appreciation rights, and the committee may delegate to another committee (which may consist of solely one director) the authority to grant all types of awards.

 

Eligibility. Any director, employee, consultant or any other individual who provides services to us or any of our affiliates is eligible to be selected to receive an award under the EIP.

 

Awards. Awards include options, stock appreciation rights, restricted stock, restricted stock units, performance awards and other stock-based awards.

 

Vesting period. The committee determines the time or times at which an option becomes vested and exercisable, provided that the minimum vesting period is 12 months. The committee may specify in an award agreement that an “in-the-money” option be automatically exercised on its expiration date. For restricted stock and restricted stock units, the award agreement will specify the vesting schedule and, with respect to restricted stock units, the delivery schedule.

 

Accelerated vesting. Subject to any additional vesting conditions that may be specified in an individual award agreement, the EIP provides that upon a change of control of the Company (as defined in the EIP) the committee may cause options and stock appreciation rights to be cancelled in consideration of full acceleration of the award or a substitute award with equal intrinsic value (as defined in the EIP). It also provides that the committee may decide, or include in any award agreement, the circumstances in which, and the extent to which, an award may be exercised, settled, vested, paid or forfeited in the event of a participant’s termination of service prior to exercise or settlement of an award.

 

Amendment. Our board of directors has the authority to amend the EIP subject, in certain circumstances, to required shareholder approval or the consent of an affected participant.

 

Indemnification

 

Section 98 of the Companies Act provides generally that a Bermuda company may indemnify its directors, officers and auditors against any liability which by virtue of any rule of law would otherwise be imposed on them in respect of any negligence, default, breach of duty or breach of trust, except in cases where such liability arises from fraud or dishonesty of which such director, officer or auditor may be guilty in relation to the company. Section 98 further provides that a Bermuda company may indemnify its directors, officers and auditors against any liability incurred by them in defending any proceedings, whether civil or criminal, in which judgment is awarded in their favor or in which they are acquitted or granted relief by the Supreme Court of Bermuda pursuant to section 281 of the Companies Act.

 

Our Bye-laws provide that we shall indemnify our officers and directors in respect of their actions and omissions, except in respect of their fraud or dishonesty. Our Bye-laws provide that the shareholders waive all claims or rights of action that they might have, individually or in right of the company, against any of the company’s directors or officers for any act or failure to act in the performance of such director’s or officer’s duties, except in respect of any fraud or dishonesty of such director or officer. Section 98A of the Companies Act permits us to purchase and maintain insurance for the benefit of any officer or director in respect of any loss or liability attaching to him in respect of any negligence, default, breach of duty or breach of trust, whether or not we may otherwise indemnify such officer or director. We have purchased and maintain a directors’ and officers’ liability policy for such a purpose.

 

Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of the Company, the Company has been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable.

 

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C.Board practices

 

Board Composition and Election of Directors

 

Our board of directors is currently composed of four members, see “Item 6. Directors, Senior Management and Employees—A. Directors and senior management.” Each director is elected for a one-year term.

 

Our Bye-laws provide that directors may be elected at either the annual general meeting or a special general meeting. Unless shareholders determine otherwise, under our Bye-laws directors hold office until the next annual general meeting or until their successors are elected or appointed or their office is otherwise vacated.

 

We are a foreign private issuer. As a result, in accordance with the Nasdaq stock exchange listing requirements, we comply with home country governance requirements and certain exemptions thereunder rather than the Nasdaq stock exchange corporate governance requirements. For an overview of our corporate governance principles, see “Item 16G. Corporate governance.”

 

Committees of the Board of Directors

 

Audit Committee

 

The audit committee, which consists of Mats Blom, Alain Munoz and Margrit Schwarz, assists our board of directors in overseeing our accounting and financial reporting processes and the audits of our financial statements. In addition, the audit committee is directly responsible for the appointment, compensation, retention and oversight of the work of our independent registered public accounting firm. Mr. Blom serves as chairman of the committee. The audit committee consists exclusively of members of our board of directors who are financially literate, and Mr. Blom is considered an “audit committee financial expert” as defined by the SEC. Our board of directors has determined that Mr. Blom, Mr. Munoz and Ms. Schwarz satisfy the “independence” requirements set forth in Rule 10A-3 under the Exchange Act.

 

The audit committee is governed by a charter that complies with Nasdaq rules. The audit committee is responsible for, among other things:

 

the appointment, compensation, retention and oversight of any auditor or accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services;

 

pre-approving the audit services and non-audit services to be provided by our independent auditor before the auditor is engaged to render such services;

 

reviewing and discussing with the independent auditor its responsibilities under generally accepted auditing standards, the planned scope and timing of the independent auditor’s annual audit plan(s) and significant findings from the audit;

 

obtaining and reviewing a report from the independent auditor describing all relationships between the independent auditor and the Company consistent with the applicable PCAOB requirements regarding the independent auditor’s communications with the audit committee concerning independence;

 

confirming and evaluating the rotation of the audit partners on the audit engagement team as required by law;

 

reviewing with management and the independent auditor, in separate meetings whenever the Audit Committee deems appropriate, any analyses or other written communications prepared by the Management and/or the independent auditor setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative IFRS methods on the financial statements; and other critical accounting policies and practices of the Company;

 

reviewing, in conjunction with the Chief Executive Officer and Chief Financial Officer of the Company, the Company’s disclosure controls and procedures and internal control over financial reporting;

 

establishing procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters;

 

approving or ratifying any related person transaction (as defined in our related person transaction policy) in accordance with our related person transaction policy.

 

The audit committee meets at least four times per year.

 

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Compensation Committee

 

The compensation committee, which consists of Alain Munoz and Margrit Schwarz, assists our board of directors in overseeing our cash compensation and equity award recommendations for our executive officers along with the rationale for such recommendations, as well as summary information regarding the aggregate compensation provided to our directors and executive officers. While Bermuda law does not require that we adopt a compensation committee, we have established a compensation committee in accordance with our bye-laws. As a result, our practice varies from the requirements of Nasdaq Listing Rule 5605(d), which sets forth certain requirements as to the responsibilities, composition and independence of compensation committees.

 

D.Employees

 

As of December 31, 2023, we had 12 employees (10.4 full time equivalents, FTEs). The breakdown by cost centers is as follows: Research & Development: 7.4 FTEs, General & Administration: 3.0 FTEs. All employees were located in Switzerland. None of our employees is subject to a collective bargaining agreement or represented by a trade or labor union. We consider our relations with our employees to be good.

 

E.Share ownership

 

See “Item 7. Major Shareholders and Related Party Transactions—A. Major shareholders.”

 

F.Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation

 

Not applicable.

 

 

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

 

A.Major shareholders

 

The following table presents information relating to the beneficial ownership of our common shares as of March 29, 2024 by:

 

each person, or group of affiliated persons, known by us to own beneficially 5% or more of our outstanding common shares;

 

each of our executive officers and directors; and

 

all executive officers and directors as a group.

 

The number of common shares beneficially owned by each entity, person, executive officer or director is determined in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any common shares over which the individual has sole or shared voting power or investment power as well as any common shares that the individual has the right to acquire within 60 days of March 29, 2024 through the exercise of any option, warrant or other right. Except as otherwise indicated, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all common shares held by that person.

 

Common shares that a person has the right to acquire within 60 days of March 29, 2024 are deemed outstanding for purposes of computing the percentage ownership of the person holding such rights, but are not deemed outstanding for purposes of computing the percentage ownership of any other person, except with respect to the percentage ownership of all executive officers and directors as a group. Unless otherwise indicated below, the address for each beneficial owner is Altamira Therapeutics Ltd., Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda.

 

The percentage of common shares beneficially owned is based on 2,240,245 common shares issued and outstanding as of March 29, 2024. Each common share confers the right on the holder to cast one vote at a general meeting of shareholders and no shareholder has different voting rights.

 

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   Shares Beneficially 
   Owned 
Shareholder  Number   Percent 
5% Shareholders        
-        
Executive Officers and Directors          
Thomas Meyer, Ph.D. (1)   22,297    1.00%
Mats Blom, MBA (2)   279    * 
Alain Munoz, MD (3)   278    * 
Margrit Schwarz, Ph.D. (4)   103    * 
Covadonga Pañeda, Ph.D.       

 
Marcel Gremaud, CPA (5)   32    * 
All current directors and executive officers as a group (6 persons)   22,989    1.03%

 

*Indicates beneficial ownership of less than 1% of the total outstanding common shares.

 

(1)Consists of 20,000 common shares, warrants to purchase 920 common shares and options to purchase 1,377 common shares under the EIP.

 

(2)Consists of options to purchase common shares under the Company’s EIP.

 

(3)Consists of options to purchase common shares under the Company’s EIP.

 

(4)Consists of options to purchase common shares under the Company’s EIP.

 

(5)Consists of options to purchase common shares under the Company’s EIP.

 

Holders

 

As of March 29, 2024, we had four shareholders of record of our common shares.

 

Significant Changes in Ownership by Major Shareholders

 

None

 

B.Related party transactions Related Person Transaction Policy

 

Prior to our initial public offering, we entered into a new related person transaction policy under which any such transaction must be approved or ratified by the audit committee or the board of directors.

 

Indemnification Agreements

 

We have entered into indemnification agreements with our directors and executive officers. The indemnification agreements and our Bye-laws require us to indemnify our directors and executive officers to the fullest extent permitted by law.

 

Employment Agreements

 

Certain of our executive officers have entered into employment agreements with the Company, certain of which provide for notice of termination periods and include restrictive covenants. None of our directors have entered into service agreements with the Company. See “Item 6. Directors, Senior Management and Employees—B. Compensation—Employment Agreements.”

 

Mandate Agreements

 

Gremaud GmbH has provided the Chief Financial Officer for the Company since November 18, 2021. The Chief Financial Officer is an employee of Gremaud GmbH and is not paid directly by the Company. Fees paid to Gremaud GmbH for CFO services were CHF 251,110 for 2023 compared to CHF 195,988 in 2022.

 

Loan Agreements

 

On September 9, 2022, the Company entered into a loan agreement with FiveT Investment Management Ltd., Dominik Lysek and Thomas Meyer, the Company’s CEO (the “Lenders”), pursuant to which the Lenders have agreed to loan to the Company an aggregate of CHF 600,000.00 (the “September 2022 Loan Agreement”), which Loan bears interest at the rate of 5% per annum and was paid back as of July 14, 2023. The Company issued to the Lenders warrants (the “Warrants”) to purchase an aggregate 2,085 common shares. The Warrants became exercisable immediately at an exercise price of CHF 89.02 per share (which was subsequently lowered to CHF 17.62), may be exercised up to five years from the date of issuance and may be exercised on a cashless basis in certain circumstances specified therein. Mr. Meyer lent CHF 200,000 of the total principal amount. 

 

From December 8, 2022 to March 8, 2023, Mr. Meyer’s spouse provided one of the Company’s subsidiaries with a short-term loan of CHF 100,000.00, bearing interest at the rate of 5% per annum.

 

C.Interests of experts and counsel

 

Not applicable.

 

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ITEM 8. FINANCIAL INFORMATION

 

A.Consolidated statements and other financial information Financial Statements

 

See “Item 18. Financial Statements,” which contains our financial statements prepared in accordance with IFRS.

 

Legal Proceedings

 

From time to time we may become involved in legal proceedings that arise in the ordinary course of business. During the period covered by the financial statements contained herein, we have not been a party to or paid any damages in connection with litigation that has had a material adverse effect on our financial position.

 

No assurance can be given that future litigation will not have a material adverse effect on our financial position. See “Item 3. Key Information—D. Risk factors.”

 

Dividends and Dividend Policy

 

We have never paid or declared any cash dividends on our shares, and we do not anticipate paying any cash dividends on our common shares in the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of our board of directors and any payment of dividends will, amongst other requirements, be subject to legal restrictions.

 

B.Significant changes

 

A discussion of the significant changes in our business can be found under “Item 4. Information on the Company—A. History and development of the Company” and “Item 4. Information on the Company—B. Business Overview.”

 

ITEM 9. THE OFFER AND LISTING

 

A.Offering and listing details

 

Not applicable.

 

B.Plan of distribution

 

Not applicable.

 

C.Markets

 

Our common shares began trading on the Nasdaq Global Market on August 11, 2014 under the symbol “EARS”. On September 28, 2017, we transferred our common shares from the Nasdaq Global Market to the Nasdaq Capital Market under the same symbol (“EARS”). On March 14, 2018, our post-Merger common shares began trading on the Nasdaq Capital Market. Following approval of our shareholders at a Special General Meeting of Shareholders held on July 21, 2021 we changed our name from Auris Medical Holding Ltd. to Altamira Therapeutics Ltd., and our shares started trading under the new name and the new ticker symbol “CYTO” on the Nasdaq Capital Market on July 26, 2021.

 

There can be no assurance that our common shares will remain listed on the Nasdaq Capital Market. See “Item 3. Key Information—D. Risk Factors— Risks Related to Our Common Shares—Our common shares may be involuntarily delisted from trading on The Nasdaq Capital Market if we fail to comply with the continued listing requirements. A delisting of our common shares is likely to reduce the liquidity of our common shares and may inhibit or preclude our ability to raise additional financing.”

 

D.Selling shareholders

 

Not applicable.

 

E.Dilution

 

Not applicable.

 

F.Expenses of the issue

 

Not applicable.

 

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ITEM 10. ADDITIONAL INFORMATION

 

A.Share capital

 

Not applicable.

 

B.Memorandum of Continuance and Bye-laws

 

We are an exempted company incorporated under the laws of Bermuda. On January 24, 2019, our board of directors determined that it would be in our best interest to change our legal seat and jurisdiction of incorporation, respectively, from Switzerland to Bermuda pursuant to the Redomestication. Our shareholders approved the Redomestication and adopted the Memorandum of Continuance and the Bye-laws at an extraordinary meeting of shareholders held on March 8, 2019. Upon the issuance of a certificate of continuance by the Registrar of Companies in Bermuda on March 18, 2019, the Company discontinued as a Swiss company and, pursuant to Article 163 of the Swiss Federal Act on Private International Law and pursuant to Section 132C of the Companies Act continued existence under the Companies Act as a Bermuda company with the name “Auris Medical Holding Ltd.”

 

At a Special General Meeting of Shareholders held on July 21, 2021, the Company adopted the new name “Altamira Therapeutics Ltd.” which was registered with the Bermuda Registrar of Companies and a Certificate of Change of Name was issued by the Bermuda Registrar of Companies.

 

Set forth below is a description of our share capital, Memorandum of Continuance and Bye-laws. Additionally, set forth below is a comparison of select provisions of the corporate laws of Delaware and Bermuda showing the default positions in each jurisdiction that govern shareholder rights.

 

Bermuda Description of Share Capital

 

The following description of our share capital summarizes certain provisions of our Memorandum of Continuance (which is equivalent for these purposes to a memorandum of association under Bermuda law) and our Bye-laws. Such summaries do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all of the provisions of our Memorandum of Continuance and Bye-laws in effect from the continuance of the Company. We urge you to read the forms of our Memorandum of Continuance and Bye-laws, included as exhibits to this Annual Report.

 

General

 

We are an exempted company incorporated under the laws of Bermuda. We began our current operations in 2003 as a corporation organized in accordance with Swiss law and domiciled in Switzerland under the name Auris Medical AG, and our name was changed to Auris Medical Holding AG on April 22, 2014. Following the Merger on March 13, 2018, the surviving entity was named Auris Medical Holding AG. Upon the issuance of a certificate of continuance by the Registrar of Companies in Bermuda on March 18, 2019, the Redomestication was effected and we continued in Bermuda pursuant to Section 132C of the Companies Act as a Bermuda company, subject to the Companies Act and other laws of Bermuda, with the name “Auris Medical Holding Ltd”. At a Special General Meeting of Shareholders held on July 21, 2021, the Company adopted the new name “Altamira Therapeutics Ltd.”. Our registered office is located at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda.

 

The Memorandum of Continuance provides that the objects of our business are unrestricted, and we have the capacity, rights, powers and privileges of a natural person.

 

Since the Redomestication, other than the 2019, 2022 and 2023 Reverse Share Splits and the increase of authorized share capital of the Company on June 30, 2020, reduction of issued share capital on July 29, 2020, reduction of authorized share capital on September 29, 2020, increase of authorized share capital on September 29, 2022, increase of authorized share capital on February 17, 2023, and the increase of authorized share capital on June 27, 2023, the change in the currency denomination of the share capital from CHF to USD and reduction of the issued and authorized share capital on November 2, 2023, and as otherwise described herein, including the change of the company name to Altamira Therapeutics Ltd. on 21 July 2021, there have been no material changes to our share capital, mergers, amalgamations or consolidations of us or any of our subsidiaries, no material changes in the mode of conducting our business, no material changes in the types of products produced or services rendered and no name changes. There have been no bankruptcy, receivership or similar proceedings with respect to us or our subsidiaries.

 

There have been no public takeover offers by third parties for our shares nor any public takeover offers by us for the shares of another company which have occurred during the last or current financial years.

 

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Share Capital

 

As of December 31, 2023, our authorized share capital consisted of 5,000,000 common shares, par value USD 0.002 per share, and 20,000,000 preference shares, par value USD 0.0001 per share, and there were 1,477,785 common shares issued and outstanding, excluding 145,324 common shares issuable upon exercise of options and 759,167 common shares issuable upon exercise of warrants, and no preference shares issued and outstanding. All the Company’s issued and outstanding shares are fully paid in.

 

Pursuant to our Bye-laws, subject to any resolution of the shareholders to the contrary, our board of directors is authorized to issue any of our authorized but unissued shares. There are no limitations on the right of non-Bermudians or non-residents of Bermuda to hold or vote our shares.

 

Common Shares

 

Holders of common shares have no pre-emptive, redemption, conversion or sinking fund rights. Holders of common shares are entitled to one vote per share on all matters submitted to a vote of holders of common shares. Unless a different majority is required by law or by our Bye-laws, resolutions to be approved by holders of common shares require approval by a simple majority of votes cast at a general meeting at which a quorum is present.

 

In the event of our liquidation, dissolution or winding up, the holders of common shares are entitled to share equally and ratably in our assets, if any, remaining after the payment of all of our debts and liabilities, subject to any liquidation preference on any issued and outstanding preference shares.

 

Preferred Shares

 

Pursuant to Bermuda law and our Bye-laws, our board of directors by resolution may establish one or more series of preference shares having such number of shares, designations, dividend rates, relative voting rights, conversion or exchange rights, redemption rights, liquidation rights and other relative participation, optional or other special rights, qualifications, limitations or restrictions as may be fixed by the board without any further shareholder approval. Such rights, preferences, powers and limitations as may be established could have the effect of discouraging an attempt to obtain control of us.

 

Dividend Rights

 

Under Bermuda law a company may not declare or pay dividends if there are reasonable grounds for believing that: (i) the company is, or would after the payment be, unable to pay its liabilities as they become due; or (ii) the realizable value of its assets would thereby be less than its liabilities. Under our Bye-laws, each common share is entitled to dividends if, as and when dividends are declared by our board of directors, subject to any preferred dividend right of the holders of any preference shares.

 

Variation of Rights

 

If at any time we have more than one class of shares, the rights attaching to any class, unless otherwise provided for by the terms of issue of the relevant class, may be varied either: (i) with the consent in writing of the holders of 75% of the issued shares of that class; or (ii) with the sanction of a resolution passed by a majority of the votes cast at a general meeting of the relevant class of shareholders at which a quorum consisting of at least two or more persons holding or representing issued and outstanding shares of the relevant class is present. Our Bye-laws specify that the creation or issue of shares ranking equally with existing shares will not, unless expressly provided by the terms of issue of existing shares, vary the rights attached to existing shares. In addition, the creation or issue of preference shares ranking prior to common shares will not be deemed to vary the rights attached to common shares or, subject to the terms of any other series of preference shares, to vary the rights attached to any other series of preference shares.

 

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Transfer of Shares

 

Our board of directors may in its absolute discretion and without assigning any reason refuse to register the transfer of a share that it is not fully paid. Our board of directors may also refuse to recognize an instrument of transfer of a share unless it is accompanied by the relevant share certificate and such other evidence of the transferor’s right to make the transfer as our board of directors shall reasonably require. Subject to these restrictions, a holder of common shares may transfer the title to all or any of his common shares by completing a form of transfer in the form set out in our Bye-laws (or as near thereto as circumstances admit) or in such other common form as the board may accept. The instrument of transfer must be signed by the transferor and transferee, although in the case of a fully paid share our board of directors may accept the instrument signed only by the transferor.

 

Share Split and Reverse Share Split effected by consolidating our common shares

 

Our board of directors may in its absolute discretion and without further approval of shareholders divide, consolidate or sub-divide our share capital in any manner permitted by the Companies Act, including approving a reverse share split by consolidating our common shares (together with a corresponding increase in the par value thereof) in a ratio determined by the board of directors. Our Bye-laws also provide that upon an alteration or reduction of share capital where fractions of shares or some other difficulty would arise, our board of directors may deal with or resolve the same in any manner as it thinks fit.

 

Meeting of Shareholders

 

Under Bermuda law, a company is required to convene at least one general meeting of shareholders each calendar year (the “annual general meeting”). However, the members may by resolution waive this requirement, either for a specific year or period of time, or indefinitely. When the requirement has been so waived, any member may, on notice to the company, terminate the waiver, in which case an annual general meeting must be called.

 

Bermuda law provides that a special general meeting of shareholders may be called by the board of directors of a company and must be called upon the request of shareholders holding not less than 10% of the paid-up capital of the company carrying the right to vote at general meetings. Bermuda law also requires that shareholders be given at least five days’ advance notice of a general meeting, but the accidental omission to give notice to any person does not invalidate the proceedings at a meeting. Our Bye-laws provide that the board of directors may convene an annual general meeting or a special general meeting. Under our Bye-laws, at least 14 days’ notice of an annual general meeting or a special general meeting must be given to each shareholder entitled to vote at such meeting. This notice requirement is subject to the ability to hold such meetings on shorter notice if such notice is agreed: (i) in the case of an annual general meeting by all of the shareholders entitled to attend and vote at such meeting; or (ii) in the case of a special general meeting by a majority in number of the shareholders entitled to attend and vote at the meeting holding not less than 95% in nominal value of the shares entitled to vote at such meeting. The quorum required for a general meeting of shareholders is two or more persons present in person at the start of the meeting and representing in person or by proxy issued and outstanding common shares.

 

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Access to Books and Records and Dissemination of Information

 

Members of the general public have a right to inspect the public documents of a company available at the office of the Registrar of Companies in Bermuda. These documents include the company’s memorandum of association (or memorandum of continuance), including its objects and powers, and certain alterations to the memorandum of association (or memorandum of continuance). The shareholders have the additional right to inspect the bye-laws of the company, minutes of general meetings and the company’s audited financial statements, which must be presented to the annual general meeting. The register of members of a company is also open to inspection by shareholders and by members of the general public without charge. The register of members is required to be open for inspection for not less than two hours in any business day (subject to the ability of a company to close the register of members for not more than thirty days in a year). A company is required to maintain its share register in Bermuda but may, subject to the provisions of the Companies Act, establish a branch register outside of Bermuda. A company is required to keep at its registered office a register of directors and officers that is open for inspection for not less than two hours in any business day by members of the public without charge. A company is also required to file with the Registrar of Companies in Bermuda a list of its directors to be maintained on a register, which register will be available for public inspection subject to such conditions as the Registrar may impose and on payment of such fee as may be prescribed. Bermuda law does not, however, provide a general right for shareholders to inspect or obtain copies of any other corporate records.

 

Election and Removal of Directors

 

Our Bye-laws provide that our board shall consist of three directors or such greater number as the board may determine. Our board of directors currently consists of five directors. Each director shall hold office for such term as the shareholders may determine or, in their absence of such determination, until the next annual general meeting or until their successors are elected or appointed or their office is otherwise vacated.

 

Any shareholder or shareholders holding or representing not less than 5% of the total voting rights wishing to propose for election as a director someone who is not an existing director or is not proposed by our board must give notice of the intention to propose the person for election. Where a director is to be elected at an annual general meeting, that notice must be given not less than 90 days nor more than 120 days before the anniversary of the last annual general meeting prior to the giving of the notice or, in the event the annual general meeting is called for a date that is not 30 days before or after such anniversary the notice must be given not later than 10 days following the earlier of the date on which notice of the annual general meeting was posted to members or the date on which public disclosure of the date of the annual general meeting was made. Where a director is to be elected at a special general meeting, that notice must be given not later than 10 days following the earlier of the date on which notice of the special general meeting was posted to members or the date on which public disclosure of the date of the special general meeting was made.

 

A director may be removed, with cause, by the shareholders, provided notice of the shareholders meeting convened to remove the director is given to the director. The notice must contain a statement of the intention to remove the director and must be served on the director not less than fourteen days before the meeting. The director is entitled to attend the meeting and be heard on the motion for his removal.

 

Proceedings of Board of Directors

 

Our Bye-laws provide that our business is to be managed and conducted by our board of directors. Bermuda law permits individual and corporate directors and there is no requirement in our Bye-laws or Bermuda law that directors hold any of our shares. There is also no requirement in our Bye-laws or Bermuda law that our directors must retire at a certain age.

 

The remuneration of our directors is determined by our board of directors, and there is no requirement that a specified number or percentage of “independent” directors must approve any such determination. Our directors may also be paid all travel, hotel and other expenses properly incurred by them in connection with our business or their duties as directors.

 

Provided a director discloses a direct or indirect interest in any contract or arrangement with us as required by Bermuda law, such director is entitled to vote in respect of any such contract or arrangement in which he or she is interested unless he or she is disqualified from voting by the chairman of the relevant board meeting.

 

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Indemnification of Directors and Officers

 

Section 98 of the Companies Act provides generally that a Bermuda company may indemnify its directors, officers and auditors against any liability which by virtue of any rule of law would otherwise be imposed on them in respect of any negligence, default, breach of duty or breach of trust, except in cases where such liability arises from fraud or dishonesty of which such director, officer or auditor may be guilty in relation to the company. Section 98 further provides that a Bermuda company may indemnify its directors, officers and auditors against any liability incurred by them in defending any proceedings, whether civil or criminal, in which judgment is awarded in their favor or in which they are acquitted or granted relief by the Supreme Court of Bermuda pursuant to section 281 of the Companies Act.

 

Our Bye-laws provide that we shall indemnify our officers and directors in respect of their actions and omissions, except in respect of their fraud or dishonesty. Our Bye-laws provide that the shareholders waive all claims or rights of action that they might have, individually or in right of the company, against any of the company’s directors or officers for any act or failure to act in the performance of such director’s or officer’s duties, except in respect of any fraud or dishonesty of such director or officer. Section 98A of the Companies Act permits us to purchase and maintain insurance for the benefit of any officer or director in respect of any loss or liability attaching to him in respect of any negligence, default, breach of duty or breach of trust, whether or not we may otherwise indemnify such officer or director. We have purchased and maintain a directors’ and officers’ liability policy for such a purpose. See “Comparison of Corporate Law—Indemnification of directors and executive management and limitation of liability.”

 

Amendment of Memorandum of Continuance and Bye-laws

 

Bermuda law provides that the memorandum of association (or memorandum of continuance) of a company may be amended by a resolution passed at a general meeting of shareholders. Our Bye-laws provide that no bye-law shall be rescinded, altered or amended, and no new bye-law shall be made, unless it shall have been approved by a resolution of our board of directors and by a resolution of our shareholders. In the case of certain bye-laws, such as the Bye-laws relating to election and removal of directors, approval of business combinations and amendment of bye-law provisions, the required resolutions must include the affirmative vote of at least 66 2⁄3% of our directors then in office and of at least 66 2⁄3% percent of the votes attaching to all shares in issue.

 

Under Bermuda law, the holders of an aggregate of not less than 20% in par value of a company’s issued share capital or any class thereof have the right to apply to the Supreme Court of Bermuda for an annulment of any amendment of the memorandum of association (or memorandum of continuance) adopted by shareholders at any general meeting, other than an amendment which alters or reduces a company’s share capital as provided in the Companies Act. Where such an application is made, the amendment becomes effective only to the extent that it is confirmed by the Bermuda court. An application for an annulment of an amendment of the memorandum of association (or memorandum of continuance) must be made within twenty-one days after the date on which the resolution altering the company’s memorandum of association (or memorandum of continuance) is passed and may be made on behalf of persons entitled to make the application by one or more of their number as they may appoint in writing for the purpose. No application may be made by shareholders voting in favor of the amendment.

 

Amalgamations, Mergers and Business Combinations

 

The amalgamation or merger of a Bermuda company with another company or corporation (other than certain affiliated companies) requires an amalgamation or merger agreement that is approved by the company’s board of directors and by its shareholders. Unless the company’s bye-laws provide otherwise, the approval of 75% of the shareholders voting at such meeting is required to approve the amalgamation or merger agreement, and the quorum for such meeting must be two persons holding or representing more than one-third of the issued shares of the company. Our Bye-laws provide that an amalgamation or a merger (other than with a wholly owned subsidiary or as described below) that has been approved by the board must only be approved by a majority of the votes cast at a general meeting of the shareholders at which the quorum shall be two or more persons present in person and representing in person or by proxy issued and outstanding common voting shares. Any amalgamation or merger or other business combination (as defined in the Bye-laws) not approved by our board of directors must be approved by the holders of not less than 66 2⁄3% of all votes attaching to all shares then in issue entitling the holder to attend and vote on the resolution.

 

Under Bermuda law, in the event of an amalgamation or merger of a Bermuda company with another company or corporation, a shareholder of the Bermuda company who did not vote in favor of the amalgamation or merger and who is not satisfied that fair value has been offered for such shareholder’s shares may, within one month of notice of the shareholders meeting, apply to the Supreme Court of Bermuda to appraise the fair value of those shares.

 

Our Bye-laws contain provisions regarding “business combinations” with “interested shareholders”. Pursuant to the Bye-laws, in addition to any other approval that may be required by applicable law, any business combination with an interested shareholder within a period of three years after the date of the transaction in which the person became an interested shareholder must be approved by our board and authorized at an annual or special general meeting by the affirmative vote of at least 66 2⁄3% of our issued and outstanding voting shares that are not owned by the interested shareholder, unless: (i) prior to the time that the shareholder becoming an interested shareholder, our board of directors approved either the business combination or the transaction that resulted in the shareholder becoming an interested shareholder; or (ii) upon consummation of the transaction that resulted in the shareholder becoming an interested shareholder, the interested shareholder owned at least 85% of our issued and outstanding voting shares at the time the transaction commenced. For purposes of these provisions, “business combinations” include mergers, amalgamations, consolidations and certain sales, leases, exchanges, mortgages, pledges, transfers and other dispositions of assets, issuances and transfers of shares and other transactions resulting in a financial benefit to an interested shareholder. An “interested shareholder” is a person that beneficially owns 15% or more of our issued and outstanding voting shares and any person affiliated or associated with us that owned 15% or more of our issued and outstanding voting shares at any time three years prior to the relevant time.

 

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Compulsory Acquisition of Shares Held by Minority Holders

 

An acquiring party is generally able to acquire compulsorily the common shares of minority holders in the following ways:

 

(1) By a procedure under the Companies Act known as a “scheme of arrangement.” A scheme of arrangement could be effected by obtaining the agreement of the company and of holders of its shares (or any class of shares), representing in the aggregate a majority in number and at least 75% in value of the shares or class of shares present and voting at a court ordered meeting held to consider the scheme or arrangement. The scheme of arrangement must then be sanctioned by the Bermuda Supreme Court. If a scheme of arrangement receives all necessary agreements and sanctions, upon the filing of the court order with the Registrar of Companies in Bermuda, all holders of common shares could be compelled to sell their shares under the terms of the scheme or arrangement.

 

(2) If the acquiring party is a company it may compulsorily acquire all the shares of the target company, by acquiring pursuant to a tender offer 90% of the shares or class of shares not already owned by, or by a nominee for, the acquiring party (the offeror), or any of its subsidiaries. If an offeror has, within four months after the making of an offer for all the shares or class of shares not owned by, or by a nominee for, the offeror, or any of its subsidiaries, obtained the approval of the holders of 90% or more of all the shares to which the offer relates, the offeror may, at any time within two months beginning with the date on which the approval was obtained, require by notice any nontendering shareholder to transfer its shares on the same terms as the original offer. In those circumstances, nontendering shareholders will be compelled to sell their shares unless the Supreme Court of Bermuda (on application made within a one-month period from the date of the offeror’s notice of its intention to acquire such shares) orders otherwise.

 

(3) Where one or more parties holds not less than 95% of the shares or a class of shares of a company, such holder(s) may, pursuant to a notice given to the remaining shareholders or class of shareholders, acquire the shares of such remaining shareholders or class of shareholders. When this notice is given, the acquiring party is entitled and bound to acquire the shares of the remaining shareholders on the terms set out in the notice, unless a remaining shareholder, within one month of receiving such notice, applies to the Supreme Court of Bermuda for an appraisal of the value of its shares. This provision only applies where the acquiring party offers the same terms to all holders of shares whose shares are being acquired.

 

Anti-Takeover Provisions

 

Two-thirds supermajority shareholder voting requirement: Our Bye-laws provide that, except to the extent that a proposal has received the prior approval of the board, the approval of an amalgamation, merger or consolidation with or into any other person shall require the affirmative vote of not less than 66 2⁄3% of all votes attaching to all shares then in issue entitling the holder to attend and vote on the resolution (except for certain “business combinations” with “interested shareholders” as set forth in Amalgamations, Mergers and Business Combinations above).

 

Amendments to the Bye-laws: Our Bye-laws provide that no bye-law may be rescinded, altered or amended and no new bye-law may be made until the same has been approved by a resolution of the board and by a resolution of the shareholders. In the case of certain bye-laws, such as the Bye-laws relating to election and removal of directors, approval of business combinations and amendment of bye-law provisions, the required resolutions must include the affirmative vote of at least 66 2⁄3% of our directors then in office and of at least 66 2⁄3% percent of the votes attaching to all issued and outstanding shares.

 

Limitations on the election of directors: Our Bye-laws provide that a person may be proposed for election or appointment as a director at a general meeting either by the board or by one or more shareholders holding our shares which in the aggregate carry not less than 5% of the voting rights in respect of the election of directors. In addition, unless a person is proposed for election or appointment as a director by the board, when a person is proposed for appointment or election as a director, written notice of the proposal must be given to us as follows. Where a director is to be appointed or elected: (1) at an annual general meeting, such notice must be given not less than 90 days nor more than 120 days before the anniversary of the last annual general meeting prior to the giving of the notice or, in the event the annual general meeting is called for a date that is not 30 days before or after such anniversary the notice must be given not later than 10 days following the earlier of the date on which notice of the annual general meeting was posted to shareholders or the date on which public disclosure of the date of the annual general meeting was made; and (2) at a special general meeting, such notice must be given not later than 10 days following the earlier of the date on which notice of the special general meeting was posted to shareholders or the date on which public disclosure of the date of the special general meeting was made.

 

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Shareholder Suits

 

Class actions and derivative actions are generally not available to shareholders under Bermuda law. The Bermuda courts, however, would ordinarily be expected to permit a shareholder to commence an action in the name of a company to remedy a wrong to the company where the act complained of is alleged to be beyond the corporate power of the company or illegal, or would result in the violation of the company’s memorandum of association (or memorandum of continuance) or bye-laws. Furthermore, consideration would be given by a Bermuda court to acts that are alleged to constitute a fraud against the minority shareholders or, for instance, where an act requires the approval of a greater percentage of the company’s shareholders than that which actually approved it.

 

When the affairs of a company are being conducted in a manner which is oppressive or prejudicial to the interests of some part of the shareholders, one or more shareholders may apply to the Supreme Court of Bermuda, which may make such order as it sees fit, including an order regulating the conduct of the company’s affairs in the future or ordering the purchase of the shares of any shareholders by other shareholders or by the company.

 

Our Bye-laws contain a provision by virtue of which our shareholders waive any claim or right of action that they have, both individually and on our behalf, against any director or officer in relation to any action or failure to take action by such director or officer, except in respect of any fraud or dishonesty of such director or officer. The SEC has advised that the operation of this provision as a waiver of the right to sue for violations of federal securities laws would likely be unenforceable in U.S. courts.

 

Capitalization of Profits and Reserves

 

Pursuant to our Bye-laws, our board of directors may (i) capitalize any part of the amount of our share premium or other reserve accounts or any amount credited to our profit and loss account or otherwise available for distribution by applying such sum in paying up unissued shares to be allotted as fully paid bonus shares pro-rata (except in connection with the conversion of shares) to the shareholders; or (ii) capitalize any sum standing to the credit of a reserve account or sums otherwise available for dividend or distribution by paying up in full, partly paid or nil paid shares of those shareholders who would have been entitled to such sums if they were distributed by way of dividend or distribution.

 

Exchange controls

 

We have received consent under the Exchange Control Act 1972 from the Bermuda Monetary Authority for the issue and transfer of the common shares to and between non-residents of Bermuda for exchange control purposes provided our shares remain listed on an appointed stock exchange, which includes the Nasdaq Capital Market. In granting such consent the Bermuda Monetary Authority accepts no responsibility for our financial soundness or the correctness of any of the statements made or opinions expressed in this Annual Report.

 

Registrar or Transfer Agent

 

A register of holders of the common shares is maintained by Conyers Corporate Services (Bermuda) Limited in Bermuda, and a branch register is maintained in the United States by American Stock Transfer & Trust Company, LLC, who serves as branch registrar and transfer agent.

 

Untraced Shareholders

 

Our Bye-laws provide that our board of directors may forfeit any dividend or other monies payable in respect of any shares which remain unclaimed for six years from the date when such monies became due for payment. In addition, we are entitled to cease sending dividend warrants and checks by post or otherwise to a shareholder if such instruments have been returned undelivered to, or left uncashed by, such shareholder on at least two consecutive occasions or, following one such occasion, reasonable enquires have failed to establish the shareholder’s new address. This entitlement ceases if the shareholder claims a dividend or cashes a dividend check or a warrant.

 

Certain Provisions of Bermuda Law

 

We have been designated by the Bermuda Monetary Authority as a non-resident for Bermuda exchange control purposes. This designation allows us to engage in transactions in currencies other than the Bermuda dollar, and there are no restrictions on our ability to transfer funds (other than funds denominated in Bermuda dollars) in and out of Bermuda or to pay dividends to United States residents who are holders of our common shares.

 

We have received consent from the Bermuda Monetary Authority for the issue and free transferability of all of our common shares to and between non-residents of Bermuda for exchange control purposes, provided our shares remain listed on an appointed stock exchange, which includes the Nasdaq Capital Market. Approvals or permissions given by the Bermuda Monetary Authority do not constitute a guarantee by the Bermuda Monetary Authority as to our performance or creditworthiness. Accordingly, in giving such consent or permissions, the Bermuda Monetary Authority shall not be liable for the financial soundness, performance or default of our business or for the correctness of any opinions or statements expressed in this Annual Report. Certain issues and transfers of common shares involving persons deemed resident in Bermuda for exchange control purposes require the specific consent of the Bermuda Monetary Authority.

 

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In accordance with Bermuda law, share certificates are only issued in the names of companies, partnerships or individuals. In the case of a shareholder acting in a special capacity (for example as a trustee), certificates may, at the request of the shareholder, record the capacity in which the shareholder is acting. Notwithstanding such recording of any special capacity, we will not be bound to investigate or see to the execution of any such trust. We will take no notice of any trust applicable to any of our shares, whether or not we have been notified of such trust.

 

Comparison of Corporate Law

 

Set forth below is a comparison of select provisions of the corporate laws of Delaware and Bermuda showing the default positions in each jurisdiction that govern shareholder rights.

 

DELAWARE CORPORATE LAW   BERMUDA CORPORATE LAW
 
Mergers and similar arrangements
     
Under the Delaware General Corporation Law, with certain exceptions, a merger, consolidation, sale, lease or transfer of all or substantially all of the assets of a corporation must be approved by the board of directors and a majority of the outstanding shares entitled to vote thereon. A shareholder of a Delaware corporation participating in certain major corporate transactions may, under certain circumstances, be entitled to appraisal rights pursuant to which such shareholder may receive cash in the amount of the fair value of the shares held by such shareholder (as determined by a court) in lieu of the consideration such shareholder would otherwise receive in the transaction. The Delaware General Corporation Law also provides that a parent corporation, by resolution of its board of directors, may merge with any subsidiary, of which it owns at least 90.0% of each class of capital stock without a vote by the shareholders of such subsidiary. Upon any such merger, dissenting shareholders of the subsidiary would have appraisal rights.   The amalgamation or merger of a Bermuda company with another company or corporation (other than certain affiliated companies) requires the amalgamation or merger agreement to be approved by the company’s board of directors and by its shareholders. Unless the company’s bye-laws provide otherwise, the approval of 75% of the shareholders voting at a general meeting is required to approve the amalgamation or merger agreement, and the quorum for such meeting must be two persons holding or representing more than one-third of the issued shares of the company. The Bye-laws provide that a merger or an amalgamation (other than with a wholly owned subsidiary or as described below) that has been approved by the board must only be approved by a majority of the votes cast at a general meeting of the shareholders at which the quorum shall be two or more persons present in person and representing in person or by proxy issued and outstanding voting shares.
     
   

The Bye-laws contain provisions regarding “business combinations” with “interested shareholders”. Pursuant to our Bye-laws, in addition to any other approval that may be required by applicable law, any business combination with an interested shareholder within a period of three years after the date of the transaction in which the person became an interested shareholder must be approved by our board and authorized at an annual or special general meeting by the affirmative vote of at least 66 and 2/3rds% of our issued and outstanding voting shares that are not owned by the interested shareholder, unless: (i) prior to the time that the shareholder becoming an interested shareholder, our board of directors approved either the business combination or the transaction that resulted in the shareholder becoming an interested shareholder; or (ii) upon consummation of the transaction that resulted in the shareholder becoming an interested shareholder, the interested shareholder owned at least 85% of our issued and outstanding voting shares at the time the transaction commenced. For purposes of these provisions, “business combinations” include mergers, amalgamations, consolidations and certain sales, leases, exchanges, mortgages, pledges, transfers and other dispositions of assets, issuances and transfers of shares and other transactions resulting in a financial benefit to an interested shareholder.

     
    An “interested shareholder” is a person that beneficially owns 15% or more of our issued and outstanding voting shares and any person affiliated or associated with us that owned 15% or more of our issued and outstanding voting shares at any time three years prior to the relevant time.
     
    Under Bermuda law, in the event of an amalgamation or merger of a Bermuda company with another company or corporation, a shareholder of the Bermuda company who did not vote in favor of the amalgamation or merger and who is not satisfied that fair value has been offered for such shareholder’s shares may, within one month of notice of the shareholders meeting, apply to the Supreme Court of Bermuda to appraise the fair value of those shares. Note that each share of an amalgamating or merging company carries the right to vote in respect of an amalgamation or merger whether or not is otherwise carries the right to vote.

 

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DELAWARE CORPORATE LAW   BERMUDA CORPORATE LAW
 
Shareholders’ suits
     

Class actions and derivative actions generally are available to shareholders of a Delaware corporation for, among other things, breach of fiduciary duty, corporate waste and actions not taken in accordance with applicable law. In such actions, the court has discretion to permit the winning party to recover attorneys’ fees incurred in connection with such action.

 

Class actions and derivative actions are generally not available to shareholders under Bermuda law. The Bermuda courts, however, would ordinarily be expected to permit a shareholder to commence an action in the name of a company to remedy a wrong to the company where the act complained of is alleged to be beyond the corporate power of the company or illegal, or would result in the violation of the company’s memorandum of association or bye-laws. Furthermore, consideration would be given by a Bermuda court to acts that are alleged to constitute a fraud against the minority shareholders or, for instance, where an act requires the approval of a greater percentage of the company’s shareholders than that which actually approved it.

     
   

When the affairs of a company are being conducted in a manner which is oppressive or prejudicial to the interests of some part of the shareholders, one or more shareholders may apply to the Supreme Court of Bermuda, which may make such order as it sees fit, including an order regulating the conduct of the company’s affairs in the future or ordering the purchase of the shares of any shareholders by other shareholders or by the company.

 

   

The Bye-laws contain a provision by virtue of which our shareholders waive any claim or right of action that they have, both individually and on our behalf, against any director or officer in relation to any action or failure to take action by such director or officer, except in respect of any fraud or dishonesty of such director or officer.

     
Shareholder vote on board and management compensation
     

Under the Delaware General Corporation Law, the board of directors has the authority to fix the compensation of directors, unless otherwise restricted by the certificate of incorporation or bylaws.

 

The Bye-laws contain a provision that the board of directors has the power to determine the remuneration, if any, of the directors.

     
Annual vote on board renewal
 

Unless directors are elected by written consent in lieu of an annual meeting, directors are elected in an annual meeting of stockholders on a date and at a time designated by or in the manner provided in the bylaws. Re-election is possible.

   

The Bye-laws provide that the directors shall hold office for such term as the shareholders may determine or, in their absence of such determination, until the next annual general meeting, or until their successors are elected or appointed or their office is otherwise vacated. Re-election is possible.

     
Classified boards are permitted.   Provision for staggered boards of directors may be included in a company’s bye-laws.

 

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DELAWARE CORPORATE LAW   BERMUDA CORPORATE LAW
 
Indemnification of directors and executive management and limitation of liability
 

The Delaware General Corporation Law provides that a certificate of incorporation may contain a provision eliminating or limiting the personal liability of directors (but not other controlling persons) of the corporation for monetary damages for breach of a fiduciary duty as a director, except no provision in the certificate of incorporation may eliminate or limit the liability of a director for:

 

any breach of a director’s duty of loyalty to the corporation or its shareholders; 

acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; 

statutory liability for unlawful payment of dividends or unlawful stock purchase or redemption; or 

any transaction from which the director derived an improper personal benefit.

 
  Section 98 of the Companies Act provides generally that a Bermuda company may indemnify its directors, officers and auditors against any liability which by virtue of any rule of law would otherwise be imposed on them in respect of any negligence, default, breach of duty or breach of trust, except in cases where such liability arises from fraud or dishonesty of which such director, officer or auditor may be guilty in relation to the company. Section 98 further provides that a Bermuda company may indemnify its directors, officers and auditors against any liability incurred by them in defending any proceedings, whether civil or criminal, in which judgment is awarded in their favor or in which they are acquitted or granted relief by the Supreme Court of Bermuda pursuant to section 281 of the Companies Act.
     
A Delaware corporation may indemnify any person who was or is a party or is threatened to be made a party to any proceeding, other than an action by or on behalf of the corporation, because the person is or was a director or officer, against liability incurred in connection with the proceeding if the director or officer acted in good faith and in a manner reasonably believed to be in, or not opposed to, the best interests of the corporation; and the director or officer, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful.    The Bye-laws contain provisions that provide that we shall indemnify our officers and directors in respect of their actions and omissions, except in respect of their fraud or dishonesty. Our bye-laws provide that the shareholders waive all claims or rights of action that they might have, individually or in right of the company, against any of the company’s directors or officers for any act or failure to act in the performance of such director’s or officer’s duties, except in respect of any fraud or dishonesty of such director or officer. Section 98A of the Companies Act permits us to purchase and maintain insurance for the benefit of any officer or director in respect of any loss or liability attaching to him in respect of any negligence, default, breach of duty or breach of trust, whether or not we may otherwise indemnify such officer or director. We have purchased and maintain a directors’ and officers’ liability policy for such a purpose. 
     

Unless ordered by a court, any foregoing indemnification is subject to a determination that the director or officer has met the applicable standard of conduct:

 

by a majority vote of the directors who are not parties to the proceeding, even though less than a quorum; 

by a committee of directors designated by a majority vote of the eligible directors, even though less than a quorum; 

by independent legal counsel in a written opinion if there are no eligible directors, or if the eligible directors so direct; or by the shareholders. 

   
     
Moreover, a Delaware corporation may not indemnify a director or officer in connection with any proceeding in which the director or officer has been adjudged to be liable to the corporation unless and only to the extent that the court determines that, despite the adjudication of liability but in view of all the circumstances of the case, the director or officer is fairly and reasonably entitled to indemnity for those expenses which the court deems proper.     

 

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DELAWARE CORPORATE LAW   BERMUDA CORPORATE LAW
 
Directors’ fiduciary duties
     

A director of a Delaware corporation has a fiduciary duty to the corporation and its shareholders. This duty has two components:

 

the duty of care; and

the duty of loyalty.

  At common law, members of a board of directors owe a fiduciary duty to the company to act in good faith in their dealings with or on behalf of the company and exercise their powers and fulfill the duties of their office honestly. This duty includes the following elements: (i) a duty to act in good faith in the best interests of the company; (ii) a duty not to make a personal profit from opportunities that arise from the office of director; (iii) a duty to avoid conflicts of interest; and (iv) a duty to exercise powers for the purpose for which such powers were intended.
     
The duty of care requires that a director act in good faith, with the care that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform himself of, and disclose to shareholders, all material information reasonably available regarding a significant transaction. The duty of loyalty requires that a director act in a manner he reasonably believes to be in the best interests of the corporation. He must not use his corporate position for personal gain or advantage. This duty prohibits self-dealing by a director and mandates that the best interest of the corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally. In general, actions of a director are presumed to have been made on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the corporation. However, this presumption may be rebutted by evidence a breach of one of the fiduciary duties.  

The Companies Act also imposes a duty on directors and officers of a Bermuda company to: (i) act honestly and in good faith with a view to the best interests of the company; and (ii) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

 

In addition, the Companies Act imposes various duties on directors and officers of a company with respect to certain matters of management and administration of the company.

     
Should such evidence be presented concerning a transaction by a director, a director must prove the procedural fairness of the transaction, and that the transaction was of fair value to the corporation.    
     
Shareholder action by written consent
     
A Delaware corporation may, in its certificate of incorporation, eliminate the right of shareholders to act by written consent.   The Companies Act provides that shareholders may take action by written consent, except in respect of the removal of an auditor from office before the expiry of his term or in respect of a resolution passed for the purpose of removing a director before the expiration of his term of office. A resolution in writing is passed when it is signed by the members of the company who at the date of the notice of the resolution represent such majority of votes as would be required if the resolution had been voted on at a meeting or when it is signed by all the members of the company or such other majority of members as may be provided by the bye-laws of the company.

 

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DELAWARE CORPORATE LAW   BERMUDA CORPORATE LAW
 
Shareholder proposals
     

A shareholder of a Delaware corporation has the right to put any proposal before the annual meeting of shareholders, provided it complies with the notice provisions in the governing documents. A special meeting may be called by the board of directors or any other person authorized to do so in the governing documents, but shareholders may be precluded from calling special meetings.

 
  Shareholder(s) may, as set forth below and at their own expense (unless the company otherwise resolves), require the company to: (i) give notice to all shareholders entitled to receive notice of the annual general meeting of any resolution that the shareholder(s) may properly move at the next annual general meeting; and/or (ii) circulate to all shareholders entitled to receive notice of any general meeting a statement in respect of any matter referred to in the proposed resolution or any business to be conducted at such general meeting. The number of shareholders necessary for such a requisition is either: (i) any number of shareholders representing not less than 5% of the total voting rights of all shareholders entitled to vote at the meeting to which the requisition relates; or (ii) not less than 100 shareholders.
     
    Pursuant to the Bye-laws, any shareholder or shareholders holding or representing not less than 5% of the total voting rights wishing to propose for election as a director someone who is not an existing director or is not proposed by our board must give notice of the intention to propose the person for election in accordance with the Bye-laws.
     
Cumulative voting
     
Under the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless the corporation’s certificate of incorporation provides for it.   Under Bermuda law, the voting rights of shareholders are regulated by the company’s bye-laws and, in certain circumstances, by the Companies Act. The Bye-laws provide for a plurality of voting for elections of directors, and cumulative voting for elections of directors is not permitted.
     
Removal of directors
     
A Delaware corporation with a classified board may be removed only for cause with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise.   Under the Bye-laws, a director may be removed, with cause, by the shareholders, provided notice of the shareholders meeting convened to remove the director is given to the director. The notice must contain a statement of the intention to remove the director and must be served on the director not less than fourteen days before the meeting. The director is entitled to attend the meeting and be heard on the motion for his removal.
     

Transactions with interested shareholders

     
The Delaware General Corporation Law generally prohibits a Delaware corporation from engaging in certain business combinations with an “interested shareholder” for three years following the date that such person becomes an interested shareholder. An interested shareholder generally is a person or group who or which owns or owned 15.0% or more of the corporation’s outstanding voting stock within the past three years.  

There is no similar law in Bermuda.

 

The Bye-laws contain provisions regarding “business combinations” with “interested shareholders” which are described above under “mergers and similar arrangements.”

     
Dissolution; Winding up
     
Unless the board of directors of a Delaware corporation approves the proposal to dissolve, dissolution must be approved by shareholders holding 100.0% of the total voting power of the corporation. Only if the dissolution is initiated by the board of directors may it be approved by a simple majority of the corporation’s outstanding shares. Delaware law allows a Delaware corporation to include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions initiated by the board.  

A Bermuda company may be wound up by the Bermuda court on application presented by the company itself, its creditors (including contingent or prospective creditors) or its contributories. The Bermuda court has authority to order winding up in a number of specified circumstances including where it is, in the opinion of the Bermuda court, just and equitable to do so.

 

A Bermuda company limited by shares may be wound up voluntarily when the shareholders so resolve in general meeting. In the case of a voluntary winding up, the company shall, from the commencement of the winding up, cease to carry on its business, except so far as may be required for the beneficial winding up thereof.

 

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DELAWARE CORPORATE LAW   BERMUDA CORPORATE LAW
 
Variation of rights of shares
 
A Delaware corporation may vary the rights of a class of shares with the approval of a majority of the outstanding shares of such class, unless the certificate of incorporation provides otherwise.   Under the Bye-laws, if at any time we have more than one class of shares, the rights attaching to any class, unless otherwise provided for by the terms of issue of the relevant class, may be varied either: (i) with the consent in writing of the holders of 75% of the issued shares of that class; or (ii) with the sanction of a resolution passed by a majority of the votes cast at a general meeting of the relevant class of shareholders at which a quorum consisting of at least two persons holding or representing issued shares of the relevant class is present. The Bye-laws specify that the creation or issue of shares ranking equally with existing shares will not, unless expressly provided by the terms of issue of existing shares, vary the rights attached to existing shares. In addition, the creation or issue of preference shares ranking prior to common shares will not be deemed to vary the rights attached to common shares or, subject to the terms of any other series of preference shares, to vary the rights attached to any other series of preference shares.
     
Amendment of governing documents
     
A Delaware corporation’s governing documents may be amended with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise.   A Bermuda company’s memorandum of association and bye-laws may be amended by resolutions of the board of directors and the shareholders, subject to the company’s bye-laws.
     
Inspection of Books and Records
     
Shareholders of a Delaware corporation, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose, and to obtain copies of list(s) of shareholders and other books and records of the corporation and its subsidiaries, if any, to the extent the books and records of such subsidiaries are available to the corporation.   Members of the general public have a right to inspect the public documents of a company available at the office of the Registrar of Companies in Bermuda. These documents include the company’s memorandum of association/continuance, including its objects and powers, and certain alterations to the memorandum of association/continuance. The shareholders have the additional right to inspect the bye-laws of the company, minutes of general meetings and the company’s audited financial statements, which must be presented to the annual general meeting. The register of members of a company is also open to inspection by shareholders without charge, and by members of the general public on payment of a fee. The register of members is required to be open for inspection for not less than two hours in any business day (subject to the ability of a company to close the register of members for not more than thirty days in a year). A company is required to maintain its share register in Bermuda but may, subject to the provisions of the Companies Act, establish a branch register outside of Bermuda. A company is required to keep at its registered office a register of directors and officers that is open for inspection for not less than two hours in any business day by members of the public without charge. Bermuda law does not, however, provide a general right for shareholders to inspect or obtain copies of any other corporate records.

 

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DELAWARE CORPORATE LAW   BERMUDA CORPORATE LAW
 
Payment of dividends
     

The board of directors may approve a dividend without shareholder approval. Subject to any restrictions contained in its certificate of incorporation, the board may declare and pay dividends upon the shares of its capital stock either:

 

out of its surplus, or

in case there is no such surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year.

  Under Bermuda law, the board of directors may declare a dividend without shareholder approval, but a company may not declare or pay dividends if there are reasonable grounds for believing that: (i) the company is, or would after the payment be, unable to pay its liabilities as they become due; or (ii) that the realizable value of its assets would thereby be less than its liabilities. Under the Bye-laws, each common share is entitled to dividends if, as and when dividends are declared by our board of directors, subject to any preferred dividend right of the holders of any preference shares.
     
Stockholder approval is required to authorize capital stock in excess of that provided in the charter. Directors may issue authorized shares without stockholder approval.    
     
Creation and issuance of new shares
     
All creation of shares requires the board of directors to adopt a resolution or resolutions, pursuant to authority expressly vested in the board of directors by the provisions of the company’s certificate of incorporation.   The authorized share capital of a Bermuda company is determined by the company’s shareholders.

 

C.Material contracts

 

Except as otherwise disclosed in this Annual Report (including the Exhibits), we are not currently, and have not been in the last two years, party to any material contract, other than contracts entered into in the ordinary course of business.

 

D.Exchange controls

 

We have been designated by the Bermuda Monetary Authority as a non-resident for Bermuda exchange control purposes. This designation allows us to engage in transactions in currencies other than the Bermuda dollar, and there are no restrictions on our ability to transfer funds (other than funds denominated in Bermuda dollars) in and out of Bermuda or to pay dividends to United States residents who are holders of our common shares.

 

We have received consent from the Bermuda Monetary Authority for the issue and free transferability of all of our common shares to and between non-residents of Bermuda for exchange control purposes, provided our shares remain listed on an appointed stock exchange, which includes the Nasdaq Capital Market. Approvals or permissions given by the Bermuda Monetary Authority do not constitute a guarantee by the Bermuda Monetary Authority as to our performance or creditworthiness. Accordingly, in giving such consent or permissions, the Bermuda Monetary Authority shall not be liable for the financial soundness, performance or default of our business or for the correctness of any opinions or statements expressed in this Annual Report. Certain issues and transfers of common shares involving persons deemed resident in Bermuda for exchange control purposes require the specific consent of the Bermuda Monetary Authority.

 

E.Taxation

 

The following summary contains a description of the material Bermuda and U.S. federal income tax consequences of the acquisition, ownership and disposition of common shares, but it does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase common shares. The summary is based upon the tax laws of Bermuda and regulations thereunder, of Switzerland and regulations thereunder and on the tax laws of the United States and regulations thereunder as of the date hereof, which may be subject to change.

 

Bermuda Tax Considerations

 

At the present time, there is no Bermuda income or profits tax, withholding tax, capital gains tax, capital transfer tax, estate duty or inheritance tax payable by us or by our shareholders in respect of our shares. On December 27, 2023, Bermuda enacted the Corporate Income Tax Act 2023 (the “CIT Act”). The CIT Act provides for the taxation of the Bermuda constituent entities of multi-national groups that have in excess of EUR 750 million revenue for at least two of the last four fiscal years beginning on or after January 1, 2025. Accordingly the Company will not be subject to taxation pursuant to the CIT Act unless the Company and its subsidiaries are a multi-national group that have in excess of EUR 750 million revenue for at least two of the last four fiscal years beginning on or after January 1, 2025.

 

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Material U.S. Federal Income Tax Considerations for U.S. Holders

 

The following is a description of the material U.S. federal income tax consequences to the U.S. Holders (defined below) of owning and disposing of common shares, but it does not purport to be a comprehensive description of all tax considerations that may be relevant to a particular person’s decision to hold the common shares. This discussion applies only to a U.S. Holder that acquires our common shares at their original issuance and holds common shares as capital assets for U.S. federal income tax purposes. In addition, it does not describe all of the tax consequences that may be relevant in light of the U.S. Holder’s particular circumstances, including alternative minimum tax consequences, the potential application of the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), known as the Medicare contribution tax and tax consequences applicable to U.S. Holders subject to special rules, such as:

 

banks, certain financial institutions and insurance companies;

 

brokers, dealers or traders in securities or persons who use a mark-to-market method of tax accounting;

 

persons holding common shares as part of a straddle, wash sale, conversion transaction or persons entering into a constructive sale with respect to the common shares;

 

persons whose functional currency for U.S. federal income tax purposes is not the U.S. dollar;

 

entities classified as partnerships for U.S. federal income tax purposes and other pass through entities, and investors in such pass through entities;

 

tax-exempt entities, including an “individual retirement account” or “Roth IRA”;

 

persons that own or are deemed to own ten percent or more of the stock by vote or value of our shares;

 

persons who acquired our common shares pursuant to the exercise of an employee stock option or otherwise as compensation; or

 

persons holding shares in connection with a trade or business conducted outside of the United States.

 

If an entity that is classified as a partnership for U.S. federal income tax purposes holds common shares, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. Partnerships or other pass through entities holding common shares and partners in such partnerships should consult their tax advisers as to their particular U.S. federal income tax consequences of holding and disposing of the common shares.

 

This discussion is based on the Code, administrative pronouncements, judicial decisions, final, temporary and proposed Treasury regulations, all as of the date hereof, any of which is subject to change, possibly with retroactive effect.

 

A “U.S. Holder” is a holder who, for U.S. federal income tax purposes, is a beneficial owner of common shares and is:

 

an individual who is a citizen or resident of the United States;

 

a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States, any state therein or the District of Columbia;

 

an estate the income of which is subject to U.S. federal income taxation regardless of its source; or

 

a trust with respect to which a U.S. court is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of its substantial decisions, or that has a valid election in effect to be treated as a U.S. person under applicable U.S. Treasury Regulations.

 

U.S. Holders should consult their tax advisers concerning the U.S. federal, state, local and non-U.S. tax consequences of owning and disposing of common shares in their particular circumstances.

 

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Passive Foreign Investment Company Rules

 

Special U.S. tax rules apply to U.S. Holders of stock in a company that are considered to be a PFIC. In general, a non-U.S. corporation will be considered a PFIC for any taxable year in which (i) 75% or more of its gross income consists of passive income or (ii) 50% or more of the average quarterly value of its assets consists of assets that produce, or are held for the production of, passive income. For purposes of the above calculations, a non-U.S. corporation that directly or indirectly owns at least 25% by value of the shares of another corporation is treated as if it held its proportionate share of the assets of the other corporation and received directly its proportionate share of the income of the other corporation. Passive income generally includes dividends, interest, rents, royalties and capital gains. Cash is a passive asset for PFIC purposes. Goodwill (the value of which may be determined by reference to the company’s market capitalization) is generally treated as an active asset to the extent attributable to activities intended to produce active income.

 

Based upon our current and projected income and assets, and projections as to the value of our assets, we do not anticipate that we will be a PFIC for the 2024 taxable year or the foreseeable future. There can be no assurance that the IRS will agree with our conclusion and that the IRS would not successfully challenge our position. Furthermore, there can be no assurance regarding our PFIC status for the current year or any particular year in the future because PFIC status is factual in nature, depends upon factors not wholly within our control, generally cannot be determined until the close of the taxable year in question and is determined annually. Our status as a PFIC will depend on the nature and composition of our income and the nature, composition and value of our assets (which may be determined based on the fair market value of each asset, with the value of goodwill and going concern value being determined in large part by reference to the market value of our common shares, which may be volatile). Our status may also depend, in part, on how quickly we utilize the cash proceeds from our fundraising activities in our business. Accordingly, there can be no assurance that we will not be a PFIC in the current or for any future taxable year. Therefore, U.S. Holders should invest in our common shares only if they are willing to bear the U.S. federal income tax consequences associated with investments in PFICs.

 

If we are a PFIC for any taxable year and any of our non-U.S. subsidiaries or other companies in which we own equity interests were also a PFIC (any such entity, a “Lower-tier PFIC”), under attribution rules, U.S. Holders will be deemed to own their proportionate shares of Lower-tier PFICs and will be subject to U.S. federal income tax according to the rules described in the following paragraphs on (i) certain distributions by a Lower-tier PFIC and (ii) a disposition of shares of a Lower-tier PFIC, in each case as if the U.S. Holder held such shares directly, even if the U.S. Holder has not received the proceeds of those distributions or dispositions.

 

Generally, if we are a PFIC for any taxable year during which a U.S. Holder holds our shares, the U.S. Holder may be subject to certain adverse tax consequences. Unless a U.S. Holder makes a timely “mark to market” election or “qualified electing fund” election, each as discussed below, gain recognized on a disposition (including, under certain circumstances, a pledge) of common shares by the U.S. Holder, or on an indirect disposition of shares of a Lower-tier PFIC, will be allocated ratably over the U.S. Holder’s holding period for the shares. The amounts allocated to the taxable year of disposition and to years before we became a PFIC, if any, will be taxed as ordinary income. The amounts allocated to each other taxable year will be subject to tax at the highest rate in effect for that taxable year for individuals or corporations, as appropriate, and an interest charge will be imposed on the tax attributable to the allocated amounts. Further, to the extent that any distribution received by a U.S. Holder on our common shares (or a distribution by a Lower-tier PFIC to its shareholder that is deemed to be received by a U.S. Holder) exceeds 125% of the average of the annual distributions on the shares received during the preceding three years or the U.S. Holder’s holding period, whichever is shorter, the distribution will be subject to taxation in the same manner as gain, described immediately above.

 

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If we are a PFIC for any year during which a U.S. Holder holds common shares, we generally will continue to be treated as a PFIC with respect to the U.S. Holder for all succeeding years during which the U.S. Holder holds common shares, even if we cease to meet the threshold requirements for PFIC status. U.S. Holders should consult their tax advisers regarding the potential availability of a “deemed sale” election that would allow them to eliminate this continuing PFIC status under certain circumstances.

 

If we are a PFIC and our common shares are “regularly traded” on a “qualified exchange,” a U.S. Holder may make a mark-to-market election with respect to the shares that would result in tax treatment different from the general tax treatment for PFICs described above. Our common shares will be treated as “regularly traded” in any calendar year in which more than a de minimis quantity of the common shares is traded on a qualified exchange on at least 15 days during each calendar quarter. Nasdaq, on which the common shares are currently listed, is a qualified exchange for this purpose. U.S. Holders should consult their tax advisers regarding the availability and advisability of making a mark-to-market election in their particular circumstances and the consequences to them if the common shares are delisted from Nasdaq (see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—Our common shares may be involuntarily delisted from trading on The Nasdaq Capital Market if we fail to comply with the continued listing requirements. A delisting of our common shares is likely to reduce the liquidity of our common shares and may inhibit or preclude our ability to raise additional financing” above). In particular, U.S. Holders should consider carefully the impact of a mark-to-market election with respect to their common shares given that we may have Lower-tier PFICs for which a mark-to-market election may not be available.

 

If we are a PFIC and a U.S. Holder makes the mark-to-market election, the U.S. Holder generally will recognize as ordinary income any excess of the fair market value of the common shares at the end of each taxable year over their adjusted tax basis, and will recognize an ordinary loss in respect of any excess of the adjusted tax basis of the common shares over their fair market value at the end of the taxable year (but only to the extent of the net amount of income previously included as a result of the mark-to-market election). If a U.S. Holder makes the election, the U.S. Holder’s tax basis in the common shares will be adjusted to reflect the income or loss amounts recognized. Any gain recognized on a sale or other disposition of common shares in a year in which we are a PFIC will be treated as ordinary income and any loss will be treated as an ordinary loss (but only to the extent of the net amount of income previously included as a result of the mark to-market election). Losses that exceed this limitation are subject to the rules generally applicable to losses provided in the Code and U.S. Treasury regulations. Amounts treated as ordinary income will not be eligible for the preferential tax rates applicable to “qualified dividend income” or long-term capital gains. Distributions paid on common shares will be treated as discussed below under “Taxation of Distributions.” Once made, the election cannot be revoked without the consent of the IRS unless the common shares cease to be marketable.

 

Alternatively, a U.S. Holder can make an election, if we provide the necessary information, to treat us and each Lower-tier PFIC as a qualified electing fund (a “QEF Election”) in the first taxable year that we (and each Lower-tier PFIC) are treated as a PFIC with respect to the U.S. Holder. A U.S. Holder must make the QEF Election for each PFIC by attaching a separate properly completed IRS Form 8621 (Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund) for each PFIC to its timely filed U.S. federal income tax return. Upon request of a U.S. Holder, we intend to provide the information necessary for a U.S. Holder to make a QEF Election with respect to us for any other taxable year for which we determine that we were a PFIC and will use commercially reasonable efforts to cause each Lower-tier PFIC that we control to provide such information with respect to such Lower-tier PFIC. However, no assurance can be given that such QEF Election information will be available for any Lower-tier PFIC and we cannot guarantee that we will continue to provide such determination or information for future years.

 

If a U.S. Holder makes a QEF Election with respect to a PFIC, the U.S. Holder will be currently taxable on its pro rata share of the PFIC’s ordinary earnings and net capital gain (at ordinary income and capital gain rates, respectively) for each taxable year that the entity is classified as a PFIC. If a U.S. Holder makes a QEF Election with respect to us, any distributions paid by us out of our earnings and profits that were previously included in the U.S. Holder’s income under the QEF Election will not be taxable to the U.S. Holder. A U.S. Holder will increase its tax basis in its common shares by an amount equal to any income included under the QEF Election and will decrease its tax basis by any amount distributed on the common shares that is not included in its income. In addition, a U.S. Holder will recognize capital gain or loss on the disposition of common shares in an amount equal to the difference between the amount realized and its adjusted tax basis in the common shares. A U.S. Holder will not be taxed on the ordinary income and net capital gain under the QEF rules for any year that we are not a PFIC. U.S. Holders should note that if we are a PFIC and they make QEF Elections with respect to us and Lower-tier PFICs, they may be required to pay U.S. federal income tax with respect to their common shares for any taxable year significantly in excess of any cash distributions received on the shares for such taxable year. U.S. Holders should consult their tax advisers regarding making QEF Elections in their particular circumstances.

 

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Furthermore, if with respect to a particular U.S. Holder, we are treated as a PFIC for the taxable year in which we paid a dividend or the prior taxable year, the preferential dividend rate with respect to dividends paid to certain non-corporate U.S. Holders will not apply.

 

If we are a PFIC for any taxable year during which a U.S. Holder holds common shares, such U.S. Holder will be required to file an annual information report with respect to the Company and any Lower-tier PFIC, generally with such U.S. Holder’s U.S. federal income tax return on IRS Form 8621.

 

U.S. Holders should consult their tax advisers concerning our PFIC status and the tax considerations relevant to an investment in a PFIC.

 

Taxation of Distributions

 

As discussed above under “Item 8. Financial Information—Dividends and Dividend Policy,” we do not currently expect to make distributions on our common shares. In the event that we do make distributions of cash or other property, subject to the PFIC rules described above, distributions paid on common shares, other than certain pro rata distributions of common shares, will be treated as dividends to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Because we may not calculate our earnings and profits under U.S. federal income tax principles, we expect that distributions generally will be reported to U.S. Holders as dividends. The U.S. dollar amount of any dividend will be treated as foreign-source dividend income to U.S. Holders and will not be eligible for the dividends-received deduction generally available to U.S. corporations under the Code. Dividends will be included in a U.S. Holder’s income on the date of the U.S. Holder’s receipt of the dividend.

 

Sale or Other Disposition of Common Shares

 

Subject to the PFIC rules described above, for U.S. federal income tax purposes, gain or loss realized on the sale or other disposition of common shares will be capital gain or loss, and will be long-term capital gain or loss if the U.S. Holder held the common shares for more than one year. The amount of the gain or loss will equal the difference between the U.S. Holder’s tax basis in the common shares disposed of and the amount realized on the disposition, in each case as determined in U.S. dollars. This gain or loss will generally be U.S.-source gain or loss for foreign tax credit purposes. The deductibility of capital losses is subject to limitations. U.S. Holders should consult their tax advisers regarding the proper treatment of gain or loss, the availability of a foreign tax credit, and for U.S. Holders that sell common shares for an amount denominated in a currency other than the U.S. dollar should consult their tax advisers regarding any potential foreign currency gain or loss that may have to be recognized.

 

Information Reporting and Backup Withholding

 

Payments of dividends and sales proceeds that are made within the United States or through certain U.S.-related financial intermediaries generally are subject to information reporting, and may be subject to backup withholding, unless (i) the U.S. Holder is a corporation or other exempt recipient or (ii) in the case of backup withholding, the U.S. Holder provides a correct taxpayer identification number and certifies that it is not subject to backup withholding.

 

Backup withholding is not an additional tax. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against the holder’s U.S. federal income tax liability and may entitle it to a refund, provided that the required information is timely furnished to the IRS.

 

Information Reporting with Respect to Foreign Financial Assets

 

Certain U.S. Holders who are individuals and certain entities may be required to report information relating to an interest in our common shares, subject to certain exceptions (including an exception for common shares held in accounts maintained by certain U.S. financial institutions). U.S. Holders should consult their tax advisers regarding whether or not they are obligated to report information relating to their ownership and disposition of the common shares.

 

The above description is not intended to constitute a complete analysis of all tax consequences relating to the ownership and disposition of our common shares. You should consult your tax advisor concerning the tax consequences of the ownership and disposition of our common shares in your particular situation.

 

F.Dividends and paying agents

 

Not applicable.

 

G.Statement by experts

 

Not applicable.

 

H.Documents on display

 

We are subject to the informational requirements of the Exchange Act. Accordingly, we are required to file reports and other information with the SEC, including annual reports on Form 20-F and reports on Form 6-K. The SEC maintains an Internet website that contains reports and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov.

 

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Under Bermuda law shareholders have the right to inspect the bye-laws of the company, minutes of general meetings and the company’s audited financial statements, which must be presented to the annual general meeting. The register of members of a company is also open to inspection by shareholders and by members of the general public without charge. The register of members is required to be open for inspection for not less than two hours in any business day (subject to the ability of a company to close the register of members for not more than thirty days in a year).

 

As a foreign private issuer, we are exempt under the Exchange Act from, among other things, the rules prescribing the furnishing and content of proxy statements, and our executive officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we will not be required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.

 

I.Subsidiary information

 

Not applicable.

 

J.Annual Report to Security Holders

 

Not applicable.

 

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Credit Risk

 

We manage credit risk on a group basis. Credit risk arises from cash and cash equivalents and deposits with banks, as well as from other receivables. Our policy is to invest funds in low risk investments including interest bearing deposits. Only independent banks and financial institutions are used and banks with which we currently hold term deposits have a minimum S&P rating of “A”. Receivables are not past due and not impaired and include only well-known counterparties.

 

We hold cash and cash equivalents in our principal operating currencies (CHF, USD, EUR and AUD).

 

Market Risk

 

In the ordinary course of our business activities, we are exposed to various market risks that are beyond our control, including fluctuations in foreign exchange rates, and which may have an adverse effect on the value of our financial assets and liabilities, future cash flows and profit. As a result of these market risks, we could suffer a loss due to adverse changes in foreign exchange rates. Our policy with respect to these market risks is to assess the potential of experiencing losses and the consolidated impact thereof, and to mitigate these market risks.

 

Currency Risk

 

We operate internationally and are exposed to foreign exchange risk arising from various exposures, primarily with respect to the US Dollar and Euro. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations. To manage foreign exchange risk we maintain foreign currency cash balances to cover anticipated future purchases of materials and services in foreign currencies. We do not hedge our foreign exchange risk.

 

As of December 31, 2023, a 5% increase or decrease in the USD/CHF exchange rate with all other variables held constant would have resulted in a CHF 57,870 (2022: CHF 10,913) increase or decrease in the net result. Also, a 5% increase or decrease in the EUR/CHF exchange rate with all other variables held constant would have resulted in a CHF 5,532 (2022: CHF 82,850) increase or decrease in the net annual result.

 

We have subsidiaries in the United States, Ireland and Australia, whose net assets are exposed to foreign currency translation risk. Due to the small size of these subsidiaries the translation risk is not significant.

 

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

 

A.Debt securities

 

Not applicable.

 

B.Warrants and rights

 

Not applicable.

 

C.Other securities

 

Not applicable.

 

D.American Depositary Shares

 

Not applicable.

 

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PART II

 

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

 

A.Defaults

 

No matters to report.

 

B.Arrears and delinquencies No matters to report.

 

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

 

E.Use of Proceeds

 

Not applicable.

 

ITEM 15. CONTROLS AND PROCEDURES 

 

A.Disclosure Controls and Procedures

 

Our management, with the participation of our CEO and CFO, has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), as amended, as of December 31, 2022. Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were not effective as of December 31, 2023, because of the material weaknesses in our internal control over financial reporting described below.

 

Notwithstanding the conclusion by our Chief Executive Officer and Chief Financial Officer that our disclosure controls and procedures as of December 31, 2023 were not effective, and notwithstanding the material weaknesses in our internal control over financial reporting described below, management believes that the consolidated financial statements and related financial information included in this Annual Report on Form 20-F fairly present in all material respects our financial condition, results of operations and cash flows as of and for the years ended December 31, 2023 and 2022 in conformity with IFRS.

 

B.Management’s Annual Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with IFRS.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements, including the possibility of human error, the circumvention or overriding of controls, or fraud. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements.

 

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

 

Management conducted an evaluation of the effectiveness of internal control over financial reporting based upon the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO Framework”). Based on that evaluation, management concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2023 and 2022, due to the material weaknesses identified below.

 

Material Weaknesses in Internal Control Over Financial Reporting

 

The Company did not maintain controls to execute the criteria established in the COSO Framework for the control environment, risk assessment, control activities, information and communication, and monitoring components, which resulted in control deficiencies that constitute material weaknesses, either individually or in the aggregate, within each component of the COSO Framework. This was due to the lack of sufficient resources to execute control activities which contributed to the potential for there to have been material errors in our financial statements, and therefore, resulted in the following material weaknesses:

 

Control Environment

 

The Company did not maintain a sufficient complement of personnel with appropriate levels of knowledge, experience, and training in accounting and internal control matters commensurate with the development stage nature and complexity of the Company’s business. The lack of sufficient appropriately skilled and trained personnel contributed to our failure to: (i) design and implement all necessary internal controls; and (ii) consistently operate our internal controls.

 

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The control environment material weakness contributed to other material weaknesses within our system of internal control over financial reporting in the following COSO Framework components:

 

Risk Assessment

 

The deficiencies identified in the risk assessment component of the COSO Framework constitute a material weakness, either individually or in the aggregate, relating primarily to: (i) identifying, assessing, and communicating appropriate objectives, (ii) identifying and analyzing risks to achieve such objectives, and (iii) identifying and assessing changes in the business that could impact the system of internal controls.

 

Control Activities

 

The deficiencies identified in the control activities component of the COSO Framework constitute a material weakness, either individually or in the aggregate, relating to: (i) designing controls to address relevant risks, (ii) providing evidence of control performance, (iii) providing appropriate segregation of duties, or (iv) control operation occurring at a level of precision to identify all potentially material errors.

 

Information and Communication

 

The deficiencies identified in the information and communication component of the COSO Framework constitute a material weakness, either individually or in the aggregate, relating to communicating accurate information internally and externally, including providing information pursuant to objectives, responsibilities, and functions of internal control. The Company did not consistently operate controls for generating and using relevant quality information and did not establish communication protocols to support the functioning of internal controls based on the criteria established in the COSO Framework.

 

Monitoring

 

The deficiencies constituting a material weakness, either individually or in the aggregate, related to the monitoring component of the COSO Framework not ascertaining whether the components of internal control were present and functioning.

 

Remediation Plan and Status

 

Management is continuing to evaluate the material weaknesses discussed above and is in the process of implementing plans to remediate these material weaknesses. Our remediation plan includes the following, amongst others:

 

Hiring of a Head of Finance and Administration to increase our internal capacities;

 

Implementing an effective risk assessment process to identify and analyze risks caused by changes in our business that could impact our system of internal control, including re-designing existing controls as necessary;

 

Reporting on a regular basis to the Company’s Audit Committee on the effectiveness of internal controls;

 

Enhancing the design of control activities to operate at a level of precision to identify all potentially material errors, and training control owners to improve required retention of documentation evidencing their execution of control activities;

 

Designing and implementing controls over the generation and communication of relevant quality information to be utilized in the execution of control activities; and

 

Investing in training of personnel and hiring additional resources with appropriate expertise to plan and perform more timely and thorough monitoring activities over our internal control over financial reporting.

 

We cannot assure you that the measures we have taken to date, and are continuing to implement, will be sufficient to remediate the material weaknesses we have identified or avoid potential future material weaknesses. The material weaknesses cannot be considered remediated until applicable controls have operated for a sufficient period and management has concluded, through testing, that these controls are operating effectively. Accordingly, we will continue to monitor and evaluate the effectiveness of our internal control over financial reporting.

 

C.Attestation Report of the Registered Public Accounting Firm

 

Not applicable.

 

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D.Changes in Internal Control over Financial Reporting

 

Other than described above in this Item 15, there have been no changes in our internal control over financial reporting during the year ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

ITEM 16. [RESERVED]

 

ITEM 16A. Audit committee financial expert

 

Our board of directors has determined that Mats Blom is the audit committee financial expert, as that term is defined by the SEC, and is independent for the purposes of SEC and Nasdaq rules.

 

ITEM 16B. Code of ethics

 

Code of Business Conduct and Ethics

 

We have adopted a Code of Business Conduct and Ethics which covers a broad range of matters including the handling of conflicts of interest, compliance issues and other corporate policies such as insider trading and equal opportunity and non-discrimination standards. Our Code of Business Conduct applies to all of our directors, executive officers and employees. We have published our Code of Business Conduct and Ethics on our website, www.altamiratherapeutics.com. The information contained on our website is not a part of this Annual Report.

 

ITEM 16C. Principal Accountant Fees and Services

 

   2023   2022 
Audit fees   254    349 
Audit-related fees   232    102 
Total fees   486    451 

 

In 2023 we were billed CHF 135,724 by our new auditors BDO AG in connection with audit services for our interim review and preparations for the audit of our 2023 accounts.

 

In 2023 we were billed CHF 157,840 by our former auditors Deloitte AG in connection with audit services for our annual filing as well as interim reviews, group audit, and statutory audits plus CHF 232,460 in connection with audit-related services for work in connection with our equity offerings and registration statements. In 2022 we were billed CHF 348,956 by Deloitte AG in connection with audit services for our annual filing as well as interim reviews, group audit, and statutory audits plus CHF 102,400 in connection with audit-related services for work in connection with our equity offerings and registration statements.

 

Pre-Approval Policies and Procedures

 

To ensure the independence and objectivity of the Company’s external auditors, the provision of all non-audit services by the external auditors are pre-approved by the Audit Committee.

 

ITEM 16D. Exemptions from the listing standards for audit committees

 

Not applicable.

 

ITEM 16E. Purchases of equity securities by the issuer and affiliated purchasers

 

In 2023, no purchases of our equity securities were made by or on behalf of Altamira Therapeutics Ltd. or any affiliated purchaser.

 

ITEM 16F. Change in registrant’s certifying accountant

 

Not applicable.

 

ITEM 16G. Corporate governance

 

Summary of Significant Corporate Governance Differences From Nasdaq Listing Standards

 

Our common shares are listed on the Nasdaq Capital Market, or Nasdaq. We are therefore required to comply with certain of the Nasdaq’s corporate governance listing standards, or the Nasdaq Standards. As a foreign private issuer, we may follow our home country’s corporate governance practices in lieu of certain of the Nasdaq Standards. Our corporate governance practices differ in certain respects from those that U.S. companies must adopt in order to maintain a Nasdaq listing. A brief, general summary of those differences is provided as follows.

 

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Independent Directors

 

Bermuda law does not require that a majority of our board of directors consist of independent directors. Our board of directors therefore may include fewer independent directors than would be required if we were subject to Nasdaq Listing Rule 5605(b)(1). In addition, we are not be subject to Nasdaq Listing Rule 5605(b)(2), which requires that independent directors must regularly have scheduled meetings at which only independent directors are present.

 

Audit Committee

 

We relied on the phase-in rules of the SEC and Nasdaq with respect to the independence of our audit committee. These rules require all members of our audit committee must meet the independence standard for audit committee members within one year of our initial public offering. All current members of our audit committee meet the independence requirements.

 

Compensation Committee

 

While Bermuda law does not require that we have a compensation committee, we have established a compensation committee in accordance with Bermuda law. As a result, our practice varies from the requirements of Nasdaq Listing Rule 5605(d), which sets forth certain requirements as to the responsibilities, composition and independence of compensation committees.

 

Nominating and Corporate Governance Committee

 

As permitted by the listing requirements of Nasdaq, we have also opted out of the requirements of Nasdaq Listing Rule 5605(e), which requires an issuer to have independent director oversight of director nominations.

 

Quorum requirements

 

Under Bermuda law we are required to specify a quorum in our Bye-laws. Our Bye-laws provide for a quorum of two or more persons present at the start of the meeting and representing in person or by proxy issued and outstanding voting shares in the company. Our practice thus varies from the requirement of Nasdaq Listing Rule 5620(c), which requires an issuer to provide in its bylaws for a generally applicable quorum, and that such quorum may not be less than one-third of the outstanding voting stock.

 

Solicitation of proxies

 

Our Bye-laws provide that our shareholders may appoint a proxy holder, and we must provide shareholders with an agenda and other relevant documents for the general meeting of shareholders. However, Bermuda law has no regulatory regime for the solicitation of proxies and thus our practice varies from the requirement of Nasdaq Listing Rule 5620(b), which sets forth certain requirements regarding the solicitation of proxies.

 

Shareholder approval

 

We have opted out of shareholder approval requirements for the issuance of securities in connection with certain events such as the acquisition of stock or assets of another company, the establishment of or amendments to equity-based compensation plans for employees, a change of control of us and certain private placements. To this extent, our practice varies from the requirements of Nasdaq Listing Rule 5635, which generally requires an issuer to obtain shareholder approval for the issuance of securities in connection with such events.

 

Third Party Compensation

 

Bermuda law does not require that we disclose information regarding third party compensation of our directors or director nominees. As a result, our practice varies from the third-party compensation disclosure requirements of Nasdaq Listing Rule 5250(b)(3).

 

Diversity disclosure

 

Bermuda law does not require that we disclose information regarding board diversity. As a result, our practice varies from the requirements of Nasdaq Listing Rule 5606.

 

ITEM 16H. Mine safety disclosure

 

Not applicable.

 

ITEM 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspection

 

Not applicable.

 

ITEM 16J. Disclosure Regarding Insider Trading Policy

 

Pursuant to applicable SEC transition guidance, the disclosure required by Item 16J will be applicable to the Company from the fiscal year ending December 31, 2024.

 

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ITEM 16K. Disclosure Regarding Cybersecurity

 

Risk management and strategy

 

We and certain of our collaborators depend on information systems for significant aspects of operations. These information systems support a variety of functions, including project management, preclinical and clinical study management, accounting and finance as well as other general and administrative activities. Information systems are subject to various cybersecurity risks.

 

We have implemented certain tools and processes to aid us in our efforts to identify, assess, prevent, and manage such cybersecurity risks. We identify and assess risks from cybersecurity threats as part of our overall risk assessment process. We collaborate with subject matter specialists, as necessary, to gather insights for identifying and assessing cybersecurity threat risks, their likelihood and severity, and potential preventative measures and mitigations. For the prevention and management of cybersecurity risks, we rely on:

 

Use of specialized third-party service providers: our Company utilizes third-party providers for information systems which offer comprehensive, state-of-the-art cybersecurity solutions to a large number of customers in Switzerland.

 

Security by design: our third-party service providers deploy systems safeguards that are designed to protect the Company’s information systems from cybersecurity threats, including firewalls, intrusion prevention and detection systems, anti-malware functionality and identity and access management.

 

Proactive surveillance: our third-party service providers continuously monitor our information systems and alert us automatically to any cybersecurity incident.

 

Incident response and recovery plans: our third-party service providers have established and maintain plans that address their and the Company’s response to a cybersecurity incident and the processes for recovery from such incident, including protected backup solutions.

 

Trainings: as part of our overall quality management system, we have established and maintain standard operating procedures (SOPs) for information systems, on which we periodically train our staff. These SOPs include processes related to cybersecurity risks.

 

To date, no risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected our company, including our business strategy, results of operations or financial condition. However, any future actual or perceived breach of our cybersecurity could interfere with our operations and have an adverse effect on our business or financial condition, including intellectual property theft; fraud; extortion; harm to employees; violation of privacy laws and other litigation and legal risk; and reputational risk. For further information, see “Item 3. Key Information – D. Risk Factors – Risks Related to Our Business and Industry – Cyber-attacks or other failures in telecommunications or information technology systems could result in information theft, data corruption and significant disruption of our business operations.”

 

Governance

 

Our Board of Directors recognizes the importance of managing the risk of cybersecurity threats to the Company. The Board is responsible for overseeing our risk management activities in general, including cybersecurity risks. It meets at least four times each year and performs at least once a year a comprehensive risk assessment. Our senior management team, which includes our CEO, CFO, COO, and our Head of Finance and Administration and our Vice President Technology, reports from time to time, or as required, to the Board on cybersecurity risks and trends and other information necessary to perform such risk assessment and oversee the development and performance of our risk mitigation processes.

 

Our Head of Finance and Administration is responsible for overseeing our information systems and cybersecurity risks, assessing and managing cybersecurity risks, as well as communicating cybersecurity incidents, matters and trends to Executive Management and the Board of Directors. He works closely with our third-party service providers responsible for operating and managing our information systems.

 

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PART III

 

ITEM 17. Financial statements

 

We have responded to Item 18 in lieu of this item.

 

ITEM 18. Financial statements

 

Financial Statements are filed as part of this Annual Report, see page F-1.

 

ITEM 19. Exhibits

 

(a) The following documents are filed as part of this registration statement:

 

1.1   Memorandum of Continuance and Corporate Actions of the registrant (incorporated herein by reference to exhibit 3.1 of the Alamira Therapeutics Ltd. registration statement on Form F-1 (Registration No. 333-269823) filed with the Commission on March 7, 2023)
1.2   Bye-laws of the Registrant (incorporated herein by reference to exhibit 3.2 of the Alamira Therapeutics Ltd. registration statement on Form F-1 (Registration No. 333-269823) filed with the Commission on February 16, 2023
2.1   Form of Registration Rights Agreement between Auris Medical Holding AG and the shareholders listed therein (incorporated by reference to exhibit 4.1 of the Auris Medical Holding AG registration statement on Form F-1 (Registration no. 333-197105) filed with the Commission on July 21, 2014)
2.2   Warrant Agreement, dated as of March 13, 2018, between Auris Medical Holding AG and Hercules Capital, Inc. (incorporated by reference to exhibit 2.2 of the Auris Medical Holding AG Annual Report on Form 20-F filed with the Commission on March 22, 2018)
2.3   Registration Rights Agreement, dated as of October 10, 2017 between Auris Medical Holding AG and Lincoln Park Capital Fund, LLC (incorporated by reference to exhibit 10.3 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on October 11, 2017)
2.4   Purchase Agreement, dated as of May 2, 2018 between Auris Medical Holding AG and Lincoln Park Capital Fund, LLC (incorporated by reference to exhibit 10.1 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on May 2, 2018)
2.5   Registration Rights Agreement, dated as of May 2, 2018 between Auris Medical Holding AG and Lincoln Park Capital Fund, LLC (incorporated by reference to exhibit 10.2 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on May 2, 2018)
2.6   Form of Pre-Funded Warrant (incorporated by reference to exhibit 4.6 of the Auris Medical Holding AG registration statement on Form F-1 (Registration no. 333-225676) filed with the Commission on July 12, 2018)
2.7   Form of Series A Warrant (incorporated by reference to exhibit 4.7 of the Auris Medical Holding AG registration statement on Form F-1 (Registration no. 333-225676) filed with the Commission on July 12, 2018)
2.8   Form of Series B Warrant (incorporated by reference to exhibit 4.8 of the Auris Medical Holding AG registration statement on Form F-1 (Registration no. 333-225676) filed with the Commission on July 12, 2018)
2.9   Form of Common Warrant (incorporated by reference to exhibit 4.1 of the Auris Medical Holding Ltd. report on Form 6-K filed with the commission on May 16, 2019)
2.10   Form of Pre-Funded Warrant (incorporated by reference to exhibit 4.2 of the Auris Medical Holding Ltd. report on Form 6-K filed with the commission on May 16, 2019)
2.11   Form of Common Warrant Agent Agreement (incorporated by reference to exhibit 4.3 of the Auris Medical Holding Ltd. report on Form 6-K filed with the commission on May 16, 2019)
2.12   Form of Pre-Funded Warrant Agent Agreement (incorporated by reference to exhibit 4.4 of the Auris Medical Holding Ltd. report on Form 6- K filed with the commission on May 16, 2019)
2.13*   Description of Securities Registered under Section 12 of the Exchange Act
2.14   Purchase Agreement, dated as of April 23, 2020 between Auris Medical Holding Ltd. and Lincoln Park Capital Fund, LLC (incorporated by reference to exhibit 10.1 of the Auris Medical Holding Ltd. report on Form 6-K furnished with the Commission on April 23, 2020)
2.15   Registration Rights Agreement, dated as of April 23, 2020 between Auris Medical Holding Ltd. and Lincoln Park Capital Fund, LLC (incorporated by reference to exhibit 10.2 of the Auris Medical Holding Ltd. report on Form 6-K furnished with the Commission on April 23, 2020)

 

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2.16   Form of Warrant, dated as of September 9, 2022 (incorporated by reference to exhibit 4.1 of the Altamira Therapeutics Ltd. report on Form 6-K filed with the Commission on September 12, 2022)
2.17   Purchase Agreement, dated as of December 5, 2022 between Altamira Therapeutics Ltd. and Lincoln Park Capital Fund, LLC (incorporated by reference to exhibit 10.1 of the Altamira Therapeutics Ltd. report on Form 6-K filed with the Commission on December 5, 2022)
2.18   Registration Rights Agreement, dated as of December 5, 2022 between Altamira Therapeutics Ltd. and Lincoln Park Capital Fund, LLC (incorporated by reference to exhibit 10.2 of the Altamira Therapeutics Ltd. report on Form 6-K filed with the Commission on December 5, 2022)
2.19   Form of Common Warrant (incorporated by reference to exhibit 4.19 of the Altamira Therapeutics Ltd. registration statement on Form F-1/A filed with the Commission on July 5, 2023)
2.20   Form of Pre-funded Warrant (incorporated by reference to exhibit 4.20 of the Altamira Therapeutics Ltd. report on Form F-1/A filed with the Commission on July 5, 2023)
2.21   Form of Placement Agent Warrant (incorporated by reference to exhibit 4.21 of the Altamira Therapeutics Ltd. report on Form F-1/A filed with the Commission on July 5, 2023)
4.1†   Collaboration and License Agreement, dated October 21, 2003, between Auris Medical AG and Xigen SA (incorporated by reference to exhibit 10.1 of the Auris Medical Holding AG registration statement on Form F-1 (Registration no. 333-197105) filed with the Commission on June 27, 2014)
4.2†   Co-Ownership and Exploitation Agreement, dated September 29, 2003, between Auris Medical AG and INSERM (incorporated by reference to exhibit 10.2 of the Auris Medical Holding AG registration statement on Form F-1 (Registration no. 333-197105) filed with the Commission on June 27, 2014)
4.3   Form of Indemnification Agreement (incorporated by reference to exhibit 99.4 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on May 11, 2016)
4.4   Stock Option Plan A (incorporated by reference to exhibit 10.11 of the Auris Medical Holding AG registration statement on Form F-1 (Registration no. 333-197105) filed with the Commission on June 27, 2014)
4.5   Stock Option Plan C (incorporated by reference to exhibit 10.12 of the Auris Medical Holding AG registration statement on Form F-1 (Registration no. 333-197105) filed with the Commission on June 27, 2014)
4.6   Equity Incentive Plan, as amended (incorporated by reference to exhibit 99.1 to the Auris Medical Holding AG registration statement on Form S-8 (Registration no. 333-217306) filed with the Commission on April 14, 2017)
4.7   English language translation of Lease Agreement between Auris Medical AG and PSP Management AG (incorporated by reference to exhibit 4.8 of the Auris Medical Holding AG Annual Report on Form 20-F filed with the Commission on March 14, 2017)
4.8   Controlled Equity OfferingSM Sales Agreement, dated as of June 1, 2016, between Auris Medical Holding AG and Cantor Fitzgerald & Co. (incorporated by reference to exhibit 1.1 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on June 1, 2016)
4.9   Share Lending Agreement, dated as of June 1, 2016, between Thomas Meyer and Cantor Fitzgerald & Co. (incorporated by reference to exhibit 10.1 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on June 1, 2016)
4.10   Loan and Security Agreement, dated as of July 19, 2016, between Auris Medical Holding AG, the several banks and other financial institutions or entities from time to time parties to the agreement and Hercules Capital, Inc. (incorporated by reference to exhibit 10.1 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on July 19, 2016)
4.11   Consent and Waiver, dated as of March 8, 2018, between Auris Medical Holding AG, the several banks and other financial institutions or entities from time to time parties to the agreement and Hercules Capital, Inc. (incorporated by reference to exhibit 4.12 of the Auris Medical Holding AG Annual Report on Form 20-F filed with the Commission on March 22, 2018)
4.12   Joinder Agreement dated as of March 13, 2018 to the Loan and Security Agreement, dated as of July 19, 2016, between Auris Medical Holding AG, the several banks and other financial institutions or entities from time to time parties to the agreement and Hercules Capital, Inc. (incorporated by reference to exhibit 4.13 of the Auris Medical Holding AG Annual Report on Form 20-F filed with the Commission on March 22, 2018)
4.13   Share Pledge Agreement, dated July 19, 2016, between Auris Medical Holding AG and Hercules Capital, Inc. (incorporated by reference to exhibit 10.3 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on July 19, 2016)
4.14   Claims Security Assignment Agreement, dated July 19, 2016, between Auris Medical Holding AG and Hercules Capital, Inc. (incorporated by reference to exhibit 10.4 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on July 19, 2016)
4.15   Bank Account Claims Security Assignment Agreement, dated July 19, 2016, between Auris Medical Holding AG and Hercules Capital, Inc. (incorporated by reference to exhibit 10.5 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on July 19, 2016)
4.16   Purchase Agreement, dated as of October 10, 2017 between Auris Medical Holding AG and Lincoln Park Capital Fund, LLC (incorporated by reference to exhibit 10.1 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on October 11, 2017)

 

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4.17   Purchase Agreement, dated as of October 10, 2017 between Auris Medical Holding AG and Lincoln Park Capital Fund, LLC (incorporated by reference to exhibit 10.2 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on October 11, 2017)
4.18   Placement Agency Agreement, dated as of January 28, 2018, between Auris Medical Holding AG and Ladenburg Thalmann & Co. Inc. (incorporated by reference to exhibit 1.1 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on January 30, 2018)
4.19   Securities Purchase Agreement, dated as of January 26, 2018 by and among Auris Medical Holding AG and the investors named therein (incorporated by reference to exhibit 10.1 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on January 30, 2018)
4.20     Agreement and Plan of Merger, dated as of February 9, 2018 by and among Auris Medical Holding AG and Auris Medical NewCo Holding AG (incorporated by reference to exhibit 99.3 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on February 9, 2018)
4.21     Share Transfer Agreement, dated as of February 9, 2018 by and between Thomas Meyer and Auris Medical Holding AG (incorporated by reference to exhibit 4.22 of the Auris Medical Holding AG Annual Report on Form 20-F filed with the Commission on March 22, 2018)
4.22     Sales Agreement, dated as of November 30, 2018, between Auris Medical Holding AG and A.G.P./Alliance Global Partners (incorporated by reference to exhibit 1.1 of the Auris Medical Holding AG report on Form 6-K filed with the Commission on November 30, 2018)
4.23     Form of Indemnification Agreement (incorporated by reference to exhibit 10.23 of the Auris Medical Holding Ltd. registration statement on Form F-1 (Registration no. 333-229465) filed with the Commission on March 20, 2019)
4.24       Amendment No. 1 to Sales Agreement, dated as of April 5, 2019, between Auris Medical Holding Ltd. and A.G.P./Alliance Global Partners (incorporated by reference to exhibit 1.1 of the Auris Medical Holding Ltd. report on Form 6-K filed with the Commission on April 5, 2019)
4.25       Convertible Loan Agreement, dated as of September 7, 2020, by and among Auris Medical Holding Ltd., Altamira Medica AG and FiveT Capital Holding AG (incorporated by reference to exhibit 99.1 of the Auris Medical Holding Ltd. report on Form 6-K furnished with the Commission on September 8, 2020)
4.26†       Agreement and Plan of Merger, dated June 1, 2021, by and among Auris Medical Holding Ltd., Auris Medical Inc., Trasir Therapeutics, Inc., and each of the stockholders of Trasir Therapeutics, Inc. (incorporated by reference to exhibit 2.1 of the Auris Medical Holding Ltd. report on Form 6-K furnished with the Commission on June 3, 2021)
4.27†       Exclusive License Agreement, dated December 11, 2020, by and between Washington University and Trasir Therapeutics, Inc. (incorporated by reference to exhibit 10.1 of the Auris Medical Holding Ltd. report on Form 6-K furnished with the Commission on June 3, 2021)
4.28       Convertible Loan Agreement, dated as of February 4, 2022, by and among Altamira Therapeutics Ltd. and FiveT Investment Management Ltd. (incorporated by reference to exhibit 99.1 of the Altamira Therapeutics Ltd. report on Form 6-K furnished with the Commission on February 8, 2022)
4.29†