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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended September 30, 2023

 

OR

 

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

 

For the transition period from _________to ___________

 

Commission File Number: 001-41159

 

IMMIX BIOPHARMA, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Delaware   45-4869378

(State or other jurisdiction

of incorporation or organization)

 

(I.R.S. Employer

Identification No.)

   
11400 West Olympic Blvd., Suite 200, Los Angeles, CA   90064
(Address of principal executive offices)   (Zip Code)

 

(310) 651-8041

(Registrant’s telephone number, including area code)

 

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

 

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

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common stock, $0.0001 par value   IMMX   The Nasdaq Stock Market LLC

 

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, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   Accelerated filer
       
Non-accelerated filer   Smaller reporting company
       
      Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

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

 

Number of shares of common stock outstanding as of November 9, 2023 was 19,867,224.

 

 

 

 

 

 

       

Page

No.

PART I. FINANCIAL INFORMATION    
         
Item 1.   Financial Statements   5
         
    Condensed Consolidated Balance Sheets as of September 30, 2023 (Unaudited) and December 31, 2022   5
         
    Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months ended September 30, 2023 and 2022 (Unaudited)   6
         
    Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months ended September 30, 2023 and 2022 (Unaudited)   7
         
    Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2023 and 2022 (Unaudited)   8
         
    Notes to the Condensed Consolidated Financial Statements (Unaudited)   9
         
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations   23
         
Item 3.   Quantitative and Qualitative Disclosures About Market Risk   29
         
Item 4.   Controls and Procedures   29
         
PART II. OTHER INFORMATION    
         
Item 1.   Legal Proceedings   30
         
Item 1A.   Risk Factors   30
         
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds   31
         
Item 3.   Defaults Upon Senior Securities   31
         
Item 4.   Mine Safety Disclosures   31
         
Item 5.   Other Information   31
         
Item 6.   Exhibits   32
         
Signatures   33

 

2

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

 

This Quarterly Report on Form 10-Q contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements may be identified by such forward-looking terminology as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. Our forward-looking statements are based on a series of expectations, assumptions, estimates and projections about our company, are not guarantees of future results or performance and involve substantial risks and uncertainty. We may not actually achieve the plans, intentions or expectations disclosed in these forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in these forward-looking statements. Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including the risks and uncertainties inherent in our statements regarding:

 

  our projected financial position and estimated cash burn rate;
     
  our estimates regarding expenses, future revenues and capital requirements;
     
  our ability to continue as a going concern;
     
  our need to raise substantial additional capital to fund our operations, the availability and terms of such funding, and dilution caused thereby;
     
  the success, cost and timing of our clinical trials;
     
  our dependence on third parties in the conduct of our clinical trials;
     
  our ability to obtain the necessary regulatory approvals to market and commercialize our product candidates;
     
  the ultimate impact of a health epidemic, on our business, our clinical trials, our research programs, healthcare systems or the global economy as a whole;
     
  the potential that results of pre-clinical and clinical trials indicate our current product candidates or any future product candidates we may seek to develop are unsafe or ineffective;
     
  the results of market research conducted by us or others;
     
  our ability to obtain and maintain intellectual property protection for our current and future product candidates;
     
  our ability to protect our intellectual property rights and the potential for us to incur substantial costs from lawsuits to enforce or protect our intellectual property rights;
     
  the possibility that a third party may claim we or our third-party licensors have infringed, misappropriated or otherwise violated their intellectual property rights and that we may incur substantial costs and be required to devote substantial time defending against claims against us;
     
  our reliance on third-party suppliers and manufacturers;

 

3

 

 

  the success of competing therapies and products that are or become available;
     
  our ability to expand our organization to accommodate potential growth and our ability to retain and attract key personnel;
     
  the potential for us to incur substantial costs resulting from product liability lawsuits against us and the potential for these product liability lawsuits to cause us to limit our commercialization of our product candidates;
     
  market acceptance of our product candidates, the size and growth of the potential markets for our current product candidates and any future product candidates we may seek to develop, and our ability to serve those markets; and
     
  the successful development of our commercialization capabilities, including sales and marketing capabilities.

 

All of our forward-looking statements are as of the date of this Quarterly Report on Form 10-Q only. In each case, actual results may differ materially from such forward-looking information. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of, or any material adverse change in, one or more of the risk factors or risks and uncertainties referred to in this Quarterly Report on Form 10-Q or included in our other public disclosures or our other periodic reports or other documents or filings filed with or furnished to the U.S. Securities and Exchange Commission (the “SEC”) could materially and adversely affect our business, prospects, financial condition and results of operations. Except as required by law, we do not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections or other circumstances affecting such forward-looking statements occurring after the date of this Quarterly Report on Form 10-Q, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. Any public statements or disclosures by us following this Quarterly Report on Form 10-Q that modify or impact any of the forward-looking statements contained in this Quarterly Report on Form 10-Q will be deemed to modify or supersede such statements in this Quarterly Report on Form 10-Q.

 

This Quarterly Report on Form 10-Q may include market data and certain industry data and forecasts, which we may obtain from internal company surveys, market research, consultant surveys, publicly available information, reports of governmental agencies and industry publications, articles and surveys. Industry surveys, publications, consultant surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but the accuracy and completeness of such information is not guaranteed. While we believe that such studies and publications are reliable, we have not independently verified market and industry data from third-party sources, and we have not commissioned any such information.

 

4

 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS.

 

Immix Biopharma, Inc.

Condensed Consolidated Balance Sheets

 

   September 30, 2023   December 31, 2022 
   (Unaudited)     
ASSETS          
Current assets:          
Cash and cash equivalents  $19,582,425   $13,436,714 
Tax receivable   652,482    255,705 
Prepaid expenses and other current assets   2,096,600    1,205,398 
           
Total current assets   22,331,507    14,897,817 
           
Other assets   103,191    6,724 
Equipment, net   40,080    3,560 
           
Total assets  $22,474,778   $14,908,101 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities:          
Accounts payable and accrued expenses  $2,825,504   $1,273,296 
           
Total current liabilities   2,825,504    1,273,296 
           
Funds held for subsidiary private offering   -    475,000 
           
Total liabilities   2,825,504    1,748,296 
           
Commitments and contingencies   -     -  
           
Stockholders’ equity:          
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding   -    - 
Common stock, $0.0001 par value; 200,000,000 shares authorized; 19,681,091 shares issued and 19,608,728 shares outstanding at September 30, 2023 and 13,964,485 shares issued and 13,892,122 shares outstanding at December 31, 2022   1,968    1,397 
Additional paid-in capital   68,146,992    51,156,597 
Accumulated other comprehensive income   46,735    87,021 
Accumulated deficit   (48,321,791)   (37,985,247)
Treasury stock at cost, 72,363 shares as of September 30, 2023 and December 31, 2022   (99,963)   (99,963)
Total Immix Biopharma, Inc. stockholders’ equity   19,773,941    13,159,805 
Non-controlling interests   (124,667)   - 
Total stockholders’ equity   19,649,274    13,159,805 
           
Total liabilities and stockholders’ equity  $22,474,778   $14,908,101 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

5

 

 

Immix Biopharma, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

 

   2023   2022   2023   2022 
   For the Three Months Ended   For the Nine Months Ended 
   September 30,   September 30, 
   2023   2022   2023   2022 
Operating expenses:                    
General and administrative expenses  $2,417,776   $837,441   $5,130,977   $2,491,151 
Research and development   2,106,020    695,937    5,634,284    1,933,219 
                     
Total operating expenses   4,523,796    1,533,378    10,765,261    4,424,370 
                     
Loss from operations   (4,523,796)   (1,533,378)   (10,765,261)   (4,424,370)
                     
Other income (expense):                    
Interest income   186,691    -    343,431    - 
Interest expense   -    -    -    (497)
Total other income (expense), net   186,691    -    343,431    (497)
                     
Loss before provision for income taxes   (4,337,105)   (1,533,378)   (10,421,830)   (4,424,867)
                     
Provision for income taxes   6,807    1,672    18,326    5,009 
                     
Net loss   (4,343,912)   (1,535,050)   (10,440,156)   (4,429,876)
Net loss attributable to non-controlling interests   63,248    -    103,612    - 
Net loss attributable to Immix Biopharma, Inc. common stockholders  (4,280,664)  (1,535,050)  (10,336,544)  (4,429,876)
                     
Other comprehensive income (loss):                    
Foreign currency translation   (34,147)   (40,389)   (40,286)   (63,353)
Total other comprehensive loss   (34,147)   (40,389)   (40,286)   (63,353)
                     
Comprehensive loss  (4,314,811)  (1,575,439)  (10,376,830)  (4,493,229)
Less: comprehensive loss attributable to non-controlling interests   

-

    

-

    

-

    

-

 
Comprehensive loss attributable to Immix Biopharma, Inc. common stockholders  $(4,314,811)  $(1,575,439)  $(10,376,830)  $(4,493,229)
                     
Loss per common share - basic and diluted  $(0.23)  $(0.11)  $(0.65)  $(0.32)
                     
Weighted average shares outstanding - basic and diluted   18,578,414    13,924,832    15,861,100    13,879,261 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

6

 

 

Immix Biopharma, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

For the Three and Nine Months Ended September 30, 2023 and 2022

(Unaudited)

 

       Common   Additional   Accumulated Other           Treasury   Non-   Total 
   Common   Stock   Paid-in   Comprehensive   Accumulated   Treasury   Stock   Controlling   Stockholders’ 
   Shares   Amount   Capital   Income   Deficit   Shares   Amount   Interests   Equity 
Balance December 31, 2022   13,964,485   $1,397   $51,156,597   $87,021   $(37,985,247)   (72,363)  $(99,963)  $-   $13,159,805 
                                              
Shares issued under ATM facility for cash proceeds, net of offering costs   50,000    5    101,318    -    -    -    -    -    101,323 
                                              
Nexcella shares issued for cash proceeds   -    -    650,000    -    -    -    -    -    650,000 
                                              
Stock-based compensation   6,700    1    329,918    -    -    -    -    -    329,919 
                                              
Non-controlling interests in subsidiary   -    -    13,990    -    -    -    -    (13,990)   - 
                                              
Net loss   -    -    -    -    (2,479,664)   -    -    (18,368)   (2,498,032)
                                              
Foreign currency translation adjustment   -    -    -    (4,474)   -    -    -    -    (4,474)
                                              
Balance March 31, 2023   14,021,185    1,403    52,251,823    82,547    (40,464,911)   (72,363)   (99,963)   (32,358)   11,738,541 
                                              
Shares issued under ATM facility for cash proceeds, net of offering costs   2,213,868    221    4,584,032    -    -    -    -    -    4,584,253 
                                              
Stock-based compensation   99,128    10    447,646    -    -    -    -    -    447,656 
                                              
Non-controlling interests in subsidiary   -    -    2,416    -    -    -    -    (2,416)   - 
                                              
Net loss   -    -    -    -    (3,576,216)   -    -    (21,996)   (3,598,212)
                                              
Foreign currency translation adjustment   -    -    -    (1,665)   -    -    -    -    (1,665)
                                              
Balance June 30, 2023   16,334,181    1,634   $57,285,917    80,882    (44,041,127)   (72,363)   (99,963)   (56,770)   13,170,573 
                                              
Shares issued under ATM facility for cash proceeds, net of offering costs   105,834    10    185,272    -    -    -    -    -    185,282 
                                              
Shares and warrants issued under private placement for cash proceeds, net of offering costs   3,241,076    324    9,933,829    -    -    -    -    -    9,934,153 
                                              
Stock-based compensation   -    -    737,325    -    -    -    -    -    737,325 
                                              
Non-controlling interests in subsidiary   -    -    4,649    -    -    -    -    (4,649)   - 
                                              
Net loss   -    -    -    -    (4,280,664)   -    -    (63,248)   (4,343,912)
                                              
Foreign currency translation adjustment   -    -    -    (34,147)   -    -    -    -    (34,147)
                                              
Balance September 30, 2023   19,681,091   $1,968   $68,146,992   $46,735   $(48,321,791)   (72,363)  $(99,963)  $(124,667)  $19,649,274 
                                              
Balance December 31, 2021   13,228,689   $1,323   $47,618,852   $125,408   $(29,755,534)   -   $-   $-   $17,990,049 
                                              
Shares issued for cash proceeds, net of offering costs   630,000    63    2,913,687    -    -    -    -    -    2,913,750 
                                              
Stock-based compensation   -    -    65,074    -    -    -    -    -    65,074 
                                              
Net loss   -    -    -    -    (1,332,048)   -    -    -    (1,332,048)
                                              
Foreign currency translation adjustment   -    -    -    15,587    -    -    -    -    15,587 
                                              
Balance March 31, 2022   13,858,689    1,386    50,597,613    140,995    (31,087,582)   -    -    -    19,652,412 
                                              
Shares issued for cashless exercise of option   62,532    6    (6)   -    -    -    -    -    - 
                                              
Stock-based compensation   -    -    65,709    -    -    -    -    -    65,709 
                                              
Shares issued for services   26,315    3    49,997    -    -    -    -    -    50,000 
                                              
Repurchase of common shares   -    -    -    -    -    (37,418)   (55,963)   -    (55,963)
                                              
Net loss   -    -    -    -    (1,562,778)   -    -    -    (1,562,778)
                                              
Foreign currency translation adjustment   -    -    -    (38,551)   -    -    -    -    (38,551)
                                              
Balance June 30, 2022   13,947,536   $1,395   $50,713,313   $102,444   $(32,650,360)   (37,418)  $(55,963)  $-   $18,110,829 
                                              
Shares issued for services   16,949    2    49,998    -    -    -    -    -    50,000 
                                              
Stock-based compensation   -    -    163,192    -    -    -    -    -    163,192 
                                              
Net loss   -    -    -    -    (1,535,050)   -    -    -    (1,535,050)
                                              
Foreign currency translation adjustment   -    -    -    (40,389)   -    -    -    -    (40,389)
                                              
Balance September 30, 2022   13,964,485   $1,397   $50,926,503   $62,055   $(34,185,410)   (37,418)  $(55,963)  $-   $16,748,582 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

7

 

 

Immix Biopharma, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

   2023   2022 
   For the Nine Months Ended 
   September 30, 
   2023   2022 
Operating Activities:          
Net loss  $(10,440,156)  $(4,429,876)
Adjustments to reconcile net loss to net cash used in operating activities:          
Stock-based compensation   1,514,900    393,975 
Depreciation   2,392    1,569 
Changes in operating assets and liabilities:          
Tax receivable   (427,476)   (175,435)
Prepaid expenses and other current assets   (923,909)   207,544 
Accounts payable and accrued expenses   1,580,248    506,945 
Accrued interest   -    (9,099)
           
Net cash used in operating activities   (8,694,001)   (3,504,377)
           
Investing Activities:          
Purchase of equipment   (38,912)   - 
           
Net cash used in investing activities   (38,912)   - 
           
Financing Activities:          
Payments of deferred offering costs   (234,617)   - 
Proceeds from sale of common stock, net of offering costs   14,936,437    2,913,750 
Proceeds from sale of Nexcella common stock   175,000    - 
Payments on note payable   -    (50,000)
Repurchase of common stock   -    (55,963)
           
Net cash provided by financing activities   14,876,820    2,807,787 
           
Effect of foreign currency on cash   1,804    (31,367)
           
Net change in cash and cash equivalents   6,145,711    (727,957)
Cash and cash equivalents – beginning of period   13,436,714    17,644,478 
Cash and cash equivalents – end of period  $19,582,425   $16,916,521 
           
Supplemental Disclosures of Cash Flow Information:          
Interest paid  $-   $9,596 
Income taxes paid  $18,326   $- 
           
Supplemental Disclosures of Noncash Financing Information:          
Nexcella shares issued for funds previously received  $475,000   $- 
Deferred offering costs charged against proceeds from sale of common stock  $131,426   $- 
Common stock issued for cashless exercise of stock options  $-   $6 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

8

 

 

Immix Biopharma, Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

Note 1 – Nature of Business

 

Immix Biopharma, Inc. (the “Company”) is a clinical-stage biopharmaceutical pharmaceutical company organized as a Delaware corporation on January 7, 2014 which is focused on developing a novel class of Tissue-Specific Therapeutics in oncology and immune-dysregulated diseases. In August 2016, the Company established a wholly-owned Australian subsidiary, Immix Biopharma Australia Pty Ltd. (“IBAPL”), in order to conduct various preclinical and clinical activities for its development candidates. In November 2022, the Company established a majority-owned subsidiary, Nexcella, Inc. (“Nexcella”), which is a clinical-stage biopharmaceutical company engaged in the discovery and development of novel cell therapies for hematologic malignancies (blood cancers), oncology and other indications.

 

Note 2 – Summary of Significant Accounting Policies

 

Basis of Presentation - The accompanying condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). The Company’s fiscal year end is December 31.

 

The condensed consolidated financial statements and related disclosures as of September 30, 2023 and for the three and nine months ended September 30, 2023 and 2022 are unaudited, pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. In the Company’s opinion, these unaudited condensed consolidated financial statements include all adjustments (consisting only of normal recurring adjustments) necessary for the fair statement of the results for the interim periods. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements of the Company for the years ended December 31, 2022 and 2021 which are included in the Company’s Annual Report on Form 10-K filed with the SEC on March 27, 2023. The results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the full year ending December 31, 2023.

 

Risk and Uncertainties - The Company operates in a dynamic and highly competitive industry and is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, protection of proprietary technology, dependence on key personnel, contract manufacturers and contract research organizations, compliance with government regulations and the need to obtain additional financing to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical studies and clinical trials and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance and reporting. The Company believes that changes in any of the following areas could have a material adverse effect on the Company’s future financial position, results of operations, or cash flows; ability to obtain future financing; advances and trends in new technologies and industry standards; results of clinical trials; regulatory approval and market acceptance of the Company’s products; development of sales channels; certain strategic relationships; litigation or claims against the Company based on intellectual property, patent, product, regulatory, or other factors; and the Company’s ability to attract and retain employees necessary to support its growth.

 

Products developed by the Company require approvals from the U.S. Food and Drug Administration (“FDA”) or other international regulatory agencies prior to commercial sales. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained or maintained, that the products will receive the necessary approvals, or that any approved products will be commercially viable. If the Company is denied approval, approval is delayed, or the Company is unable to maintain approval, it could have a material adverse impact on the Company. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from other pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees, consultants and other third parties.

 

9

 

 

The Company has expended and plans to continue to expend substantial funds to complete the research, development and clinical testing of product candidates. The Company also will be required to expend additional funds to establish commercial-scale manufacturing arrangements and to provide for the marketing and distribution of products that receive regulatory approval. The Company may require additional funds to commercialize its products. The Company is unable to entirely fund these efforts with its current financial resources and will need to raise additional funding in the future. If adequate funds are unavailable on a timely basis from operations or additional sources of financing, the Company may have to delay, reduce the scope of or eliminate one or more of its research or development programs which may materially and adversely affect its business, financial condition and operations.

 

Use of Estimates The preparation of these condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The Company uses significant judgments when making estimates related to the valuation of deferred tax assets and related valuation allowances, accrual and prepayment of research and development expenses, and the valuation of stock-based compensation. Actual results could differ from those estimates.

 

Principles of ConsolidationThe accompanying condensed consolidated financial statements include the accounts of Immix Biopharma, Inc., the accounts of its 100% owned subsidiary, IBAPL, and the accounts of its majority-owned subsidiary, Nexcella. All intercompany transactions and balances have been eliminated in consolidation. For consolidated entities where the Company owns less than 100% of the subsidiary, the Company records net loss attributable to non-controlling interests in its condensed consolidated statements of operations and comprehensive loss equal to the percentage of the economic or ownership interest retained in such entities by the respective non-controlling parties.

 

Liquidity and Going Concern These condensed consolidated financial statements have been prepared on a going concern basis, which assumes the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The continuation of the Company as a going concern is dependent upon the ability of the Company to obtain financing to continue operations. In December 2021, the Company received $18,648,934 in net proceeds from the initial public offering (“IPO”) of its common stock. In January 2022, the Company raised additional net proceeds of $2,913,750 from the exercise of the underwriter’s over-allotment option in connection with the Company’s IPO. On March 22, 2023, the Company entered into an ATM Sales Agreement (the “March Sales Agreement”) with ThinkEquity LLC (the “Sales Agent”), pursuant to which the Company, issued and sold through the Sales Agent, approximately $5 million of shares of the Company’s common stock in sales deemed to be “at-the-market offerings” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended (the “March ATM Facility”) (see Note 6). As of June 15, 2023, the Company completed the equity raise pursuant to the March Sales Agreement and received net proceeds of $4,685,576 under the March ATM Facility. On July 14, 2023, the Company entered into an additional ATM Sales Agreement (the “July Sales Agreement”) with the Sales Agent, pursuant to which the Company, may, from time to time, issue and sell through the Sales Agent shares of the Company’s common stock in sales deemed to be “at-the-market offerings” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended (the “July ATM Facility”) (see Note 6). Initially, the Company is eligible to sell up to $4,200,000 worth of shares of its common stock as the aggregate market value of the Company’s shares of common stock eligible for sale under the July Sales Agreement is subject to the limitations of General Instruction I.B.6 of Form S-3 until such time that the Company’s public float equals or exceeds $75.0 million. In the event the aggregate market value of the Company’s outstanding common stock held by non-affiliates equals or exceeds $75.0 million, then the one-third limitation on sales set forth in General Instruction I.B.6 of Form S-3 shall not apply to additional sales made pursuant to the July Sales Agreement.

 

In August 2023, the Company sold (i) 3,241,076 shares of the Company’s common stock, par value $0.0001, and (ii) Pre-Funded warrants to purchase 1,913,661 shares of common stock (the “Pre-Funded Warrants”). The Company received gross proceeds of $10 million from the private placement and net proceeds of approximately $9.93 million, after deducting fees and expenses paid by the Company (the “August 2023 Private Placement”) (see Note 6).

 

As of November 9, 2023, the Company has sold 210,834 common shares pursuant to the July ATM Facility for net proceeds of $586,193.

 

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The Company has a history of, and expects to continue to report, negative cash flows from operations and a net loss. While the Company’s estimates of its operating expenses and working capital requirements could be incorrect and the Company may use its cash resources faster than it anticipates, management believes that its cash and cash equivalents on hand at September 30, 2023, and funds that may be raised from the July ATM Facility, will be sufficient to meet the Company’s working capital requirements through at least November 9, 2024.

 

Concentration of Credit Risk Periodically, the Company may carry cash and cash equivalents balances at financial institutions in excess of the federally insured limit of $250,000, or the Australian insured limit of AUD 250,000. At times, deposits held with financial institutions may exceed the amount of insurance provided. The Company has not experienced losses on these accounts and management believes that the credit risk with regard to these deposits is not significant.

 

Cash and Cash Equivalents – The Company’s cash equivalents include short-term highly liquid investments with an original maturity of 90 days or less when purchased and are carried at fair value.

 

Fair Value of Financial InstrumentsThe carrying value of short-term instruments, including cash and cash equivalents, tax receivable, accounts payable and accrued expenses, approximate fair value due to the relatively short period to maturity for these instruments.

 

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company utilizes a three-level valuation hierarchy for disclosures of fair value measurements, defined as follows:

 

Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

 

Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.

 

Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value.

 

The following fair value hierarchy table presents information about the Company’s asset measured at fair value on a recurring basis:

 

   Level 1   Level 2   Level 3 
   Fair Value Measurements at September 30, 2023 
   Level 1   Level 2   Level 3 
Assets:               
Cash equivalents (money market funds)  $18,834,431   $    -   $     - 

 

As of September 30, 2023, the Company had no liabilities required to be measured at fair value on a recurring basis.

 

As of December 31, 2022, the Company had no assets or liabilities required to be measured at fair value on a recurring basis.

 

Australian Tax Incentive IBAPL is eligible to receive a cash refund from the Australian Taxation Office for eligible research and development (“R&D”) expenditures under the Australian R&D Tax Incentive Program (the “Australian Tax Incentive”). The Australian Tax Incentive is recognized as a reduction to R&D expense when there is reasonable assurance that the relevant expenditure has been incurred, the amount can be reliably measured and that the Australian Tax Incentive will be received. The Company recognized reductions to R&D expense of $378,390 and $30,001 for the three months ended September 30, 2023 and 2022, respectively. The Company recognized reductions to R&D expense of $599,926 and $176,178 for the nine months ended September 30, 2023 and 2022, respectively.

 

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Deferred Offering Costs – The Company has capitalized qualified legal, accounting and other direct costs related to its efforts to raise capital through the sale of its common stock under the July ATM Facility. Deferred offering costs will be deferred and amortized ratably upon sales under the July ATM Facility, and upon completion, they will be reclassified to additional paid-in capital as a reduction of the July ATM proceeds. If the Company terminates the July ATM Facility or there is a significant delay, all of the deferred offering costs will be immediately written off to operating expenses. As of September 30, 2023, $103,191 of deferred offering costs were capitalized related to the July ATM Facility, which are included in other assets in the accompanying condensed consolidated balance sheet.

 

Stock-Based Compensation Stock-based compensation expense represents the estimated grant date fair value of the Company’s equity awards, consisting of stock options issued under the Company’s stock option plan and restricted common stock (see Note 6). The fair value of equity awards is recognized over the requisite service period of such awards (usually the vesting period) on a straight-line basis. The Company estimates the fair value of stock options using the Black-Scholes option pricing model on the date of grant and recognizes forfeitures as they occur. For stock awards for which vesting is subject to performance-based milestones, the expense is recorded over the remaining service period after the point when the achievement of the milestone is probable, or the performance condition has been achieved.

 

Research and Development Costs R&D costs are expensed as incurred. R&D costs consist primarily of clinical research fees paid to consultants and outside service providers, other expenses relating to design, development and testing of the Company’s therapy candidates, and for license and milestone costs related to in-licensed products and technology. Costs incurred in obtaining technology licenses are charged to R&D expense if the technology licensed has not reached commercial feasibility and has no alternative future use. Such licenses purchased by the Company require substantial completion of research and development, regulatory and marketing approval efforts in order to reach commercial feasibility and have no alternative future use.

 

Clinical trial costs are a component of R&D expenses. The Company estimates expenses incurred for clinical trials that are in process based on services performed under contractual agreements with clinical research organizations and actual clinical investigators. Included in the estimates are (1) the fee per patient enrolled as specified in the clinical trial contract with each institution participating in the clinical trial and (2) progressive data on patient enrollments obtained from participating clinical trial sites and the actual services performed. Changes in clinical trial assumptions, such as the length of time estimated to enroll all patients, rate of screening failures, patient drop-out rates, number and nature of adverse event reports, and the total number of patients enrolled can impact the average and expected cost per patient and the overall cost of the clinical trial. The Company monitors the progress of the trials and their related activities and adjusts expense accruals, when applicable. Adjustments to accruals are charged to expense in the period in which the facts give rise to the adjustments become known.

 

Other Comprehensive Income (Loss)Other comprehensive income (loss) includes foreign currency translation gains and losses. The cumulative amount of translation gains and losses are reflected as a separate component of stockholders’ equity in the condensed consolidated balance sheets, as accumulated other comprehensive income.

 

Foreign Currency Translation and Transaction Gains (Losses) The Company, and its majority-owned subsidiary Nexcella, maintain their accounting records in U.S. Dollars. The Company’s operating subsidiary, IBAPL, is located in Australia and maintains its accounting records in Australian Dollars, which is its functional currency. Assets and liabilities of the subsidiary are translated into U.S. dollars at exchange rates at the balance sheet date, equity accounts are translated at historical exchange rate and revenues and expenses are translated by using the average exchange rates for the period. Translation adjustments are reported as a separate component of other comprehensive income (loss) in the consolidated statements of operations and comprehensive loss. Foreign currency denominated transactions are translated at exchange rates approximating those in effect at the transaction dates. Gains (losses) resulting from foreign currency transactions are included in general and administrative expenses in the accompanying condensed consolidated statements of operations and comprehensive loss and were $8,095 and $1,891 for the three months ended September 30, 2023 and 2022, respectively, and $6,372 and $5,982 for the nine months ended September 30, 2023 and 2022, respectively.

 

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Loss Per Common Share - Basic loss per common share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted loss per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. Basic weighted average shares outstanding for the three and nine months ended September 30, 2023 include 1,913,661 shares underlying Pre-Funded warrants to purchase common shares. As the shares underlying these Pre-Funded warrants can be issued for little consideration (an exercise price per share equal to $0.0001 per share), these shares are deemed to be issued for purposes of basic loss per common share As of September 30, 2023 and 2022, the Company’s potentially dilutive shares, which were not included in the calculation of net loss per share, included stock options and warrants exercisable for 2,911,412 and 2,168,742 shares of common stock, respectively.

 

Reclassifications

 

Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation. These reclassifications had no effect on our previously reported results of operations or accumulated deficit.

 

Recent Accounting Pronouncements

 

The Company does not believe that any recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying condensed consolidated financial statements.

 

Note 3 – Agreements with Nexcella Subsidiary

 

Founders Agreement

 

Effective December 8, 2022, the Company entered into a Founders Agreement with Nexcella (the “Nexcella Founders Agreement”).

 

The Nexcella Founders Agreement provides that prior to a Qualified IPO (as defined in Nexcella’s Amended and Restated Certificate of Incorporation, as amended (the “Nexcella COI”)) or Qualified Change in Control (as defined in the Nexcella COI), the Company shall provide funds to Nexcella as requested by Nexcella, in good faith, to be evidenced by a senior unsecured promissory note. In exchange for the time and capital expended in the formation of Nexcella and the identification of specific assets, the acquisition of which benefit Nexcella, on December 21, 2022, the Company loaned Nexcella approximately $2.1 million, evidenced by a senior unsecured promissory note, representing the up-front fee required to acquire Nexcella’s license agreement with Hadasit Medica Research Services & Development, Ltd. (“HADASIT”) and BIRAD Research and Development Company Ltd. (“BIRAD”), and for use as working capital for its research and development activities. The note, which matures on January 31, 2030, accrues interest at a rate of 7.875% per annum and is convertible into shares of common stock of Nexcella at a conversion price of $2.00 per share, subject to adjustment; provided, however, that such note shall automatically convert into shares of Nexcella common stock immediately prior to certain conversion triggers set forth in the note. Nexcella may not prepay the note without the Company’s prior written consent. The Nexcella Founders Agreement has a term of 15 years, which, upon expiration, automatically renews for successive one-year periods unless terminated by the Company upon notice at least six months prior to the end of the term or upon the occurrence of a Change of Control (as defined in the Nexcella Founders Agreement). In connection with the Nexcella Founders Agreement, the Company was issued 250,000 shares of Nexcella’s Class A Preferred Stock, 1,000,000 shares of Nexcella’s Class A Common Stock, and 5,000,000 shares of Nexcella’s common stock. The Class A Preferred Stock is identical to the common stock other than as to conversion rights, the PIK Dividend right (as defined below) and voting rights.

 

Each share of Class A Preferred Stock is convertible, at the Company’s option, into one fully paid and nonassessable share of Nexcella’s common stock, subject to certain adjustments. As a holder of Nexcella’s Class A Preferred Stock, the Company will receive on each March 13 (each a “PIK Dividend Payment Date”) until the date all outstanding Class A Preferred Stock is converted into Nexcella’s common stock or redeemed (and the purchase price is paid in full), pro rata per share dividends paid in additional fully paid and nonassessable shares of Nexcella common stock (“PIK Dividends”) such that the aggregate number of shares of common stock issued pursuant to such PIK Dividend is equal to 2.5% of Nexcella’s fully-diluted outstanding capitalization on the date that is one business day prior to any PIK Dividend Payment Date. In addition, as a holder of Class A Preferred Stock, the Company will be entitled to cast for each share of Class A Preferred Stock held as of the record date for determining stockholders entitled to vote on matters presented to the stockholders of Nexcella, the number of votes that is equal to 1.1 times a fraction, the numerator of which is the sum of (A) the shares of outstanding Nexcella common stock and (B) the whole shares of Nexcella common stock into which the shares of outstanding Nexcella Class A Common Stock and the Class A Preferred Stock are convertible and the denominator of which is the number of shares of outstanding Nexcella Class A Preferred Stock.

 

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Each share of Class A Common Stock is convertible, at the Company’s option, into one fully paid and nonassessable share of Nexcella’s common stock, subject to certain adjustments. In addition, upon a Qualified IPO (as defined in the Nexcella COI) or Qualified Change in Control (as defined in the Nexcella COI), each share of Class A Common Stock will automatically convert into one fully paid and nonassessable share of Nexcella’s common stock; provided however, if at that time, the Class A Common Stock is not then convertible into a number of shares of Nexcella common stock (or such other capital stock or securities at the time issuable upon the conversion of the Class A Common Stock) that have a value of: (a) in the case of a Qualified IPO, at least $5,000,000 based on the initial offering price in such initial public offering, or (b) in the case of a Qualified Change in Control, at least $5,000,000 in cash or at least $5,000,000 of equity based on the implied value of a share of Nexcella common stock resulting from the price paid upon the consummation of such Qualified Change of Control, the Class A Common Stock will automatically convert into such number of shares of Nexcella common stock (or such other capital stock or securities at the time issuable upon the conversion of the Class A Common Stock) that have a value of $5,000,000 based on the initial offering price in such initial public offering or the implied value of a share of Nexcella common stock resulting from the price paid upon the consummation of such Qualified Change of Control (or if such Qualified Change of Control results in the Class A Shares being exchanged solely for cash, then $5,000,000 in cash). The Company is entitled to cast such number of votes equal to the number of whole shares of Nexcella common stock into which the Company’s Class A Common Stock is convertible as of the record date for determining stockholders entitled to vote on matters presented to the stockholders of Nexcella.

 

In addition to the foregoing, the Company is entitled to one vote for each share of Nexcella common stock held by it. Except as provided by law or by the Nexcella COI, holders of Nexcella Class A Common Stock and Class A Preferred Stock shall vote together with the holders of Nexcella common stock, as a single class.

 

As additional consideration under the Nexcella Founders Agreement, Nexcella will also: (i) pay an equity fee in shares of common stock, payable within five business days of the closing of any equity or debt financing for Nexcella or any of its respective subsidiaries that occurs after the effective date of the Nexcella Founders Agreement and ending on the date when the Company no longer has majority voting control in Nexcella’s voting equity, equal to 2.5% of the gross amount of any such equity or debt financing; and (ii) pay a cash fee equal to 4.5% of Nexcella’s annual Net Sales (as defined in the Nexcella Founders Agreement), payable on an annual basis, within 90 days of the end of each calendar year. In the event of a Change of Control, Nexcella will pay a one-time change in control fee equal to five times the product of (A) Net Sales for the 12 months immediately preceding the Change of Control and (B) 4.5%.

 

Management Services Agreement

 

Effective as of December 8, 2022, the Company entered into a Management Services Agreement (the “Nexcella MSA”) with Nexcella. Pursuant to the terms of the Nexcella MSA, the Company will render management, advisory and consulting services to Nexcella. Services provided under the Nexcella MSA may include, without limitation, (i) advice and assistance concerning any and all aspects of Nexcella’s operations, clinical trials, financial planning and strategic transactions and financings and (ii) conducting relations on behalf of Nexcella with accountants, attorneys, financial advisors and other professionals (collectively, the “Services”). At the request of the Company, Nexcella will utilize clinical research services, medical education, communication and marketing services and investor relations/public relation services of companies or individuals designated by the Company, provided those services are offered at market prices. In consideration for the Services, Nexcella will pay the Company an annual base management and consulting fee of $500,000 (the “Annual Consulting Fee”), payable in advance in equal quarterly installments on the first business day of each calendar quarter in each year; provided, however, that such Annual Consulting Fee will be increased to $1.0 million for each calendar year in which Nexcella has Net Assets (as defined in the Nexcella MSA) in excess of $100 million at the beginning of the calendar year. Notwithstanding the foregoing, the first Annual Consulting Fee payment is not due until first business day of the calendar quarter immediately following the completion of the first equity financing for Nexcella that is in excess of $10 million in gross proceeds, which hasn’t yet occurred. The first payment will include all amounts in arrears from the effective date of the Nexcella MSA through such payment as well as the amounts in advance for such first quarterly payment. Actual and direct out-of-pocket expenses reasonably incurred by the Company in performing the Services are required to be reimbursed to the Company by Nexcella. The Nexcella MSA continues for a period of five years from the effective date thereof and shall be automatically extended for additional five year periods unless the Company and Nexcella provide written notice to not extend the term at least 90 days prior to the end of the term, unless the Nexcella MSA is terminated earlier by mutual agreement of the Company and Nexcella.

 

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Note 4 – Prepaid Expenses and Other Current Assets

 

Prepaid expenses and other current assets consist of the following as of September 30, 2023 and December 31, 2022:

Schedule of Prepaid Expenses and Other Current Assets

   September 30, 2023   December 31, 2022 
Prepaid research and development expenses  $1,652,833   $792,130 
Prepaid insurance expense   89,500    323,296 
Prepaid public company compliance expense   25,275    - 
Prepaid investor relations expense   161,993    11,905 
Other current assets   166,999    78,067 
Total prepaid expenses and other current assets  $2,096,600   $1,205,398 

 

Note 5 – Accounts Payable and Accrued Expenses

 

Accounts payable and accrued expenses consist of the following as of September 30, 2023 and December 31, 2022:

 

           
   September 30, 2023   December 31, 2022 
Accounts payable  $1,566,006   $143,074 
Accrued research and development expenses   

748,162

    

57,500

 
Accrued professional services   283,255    81,691 
Accrued compensation and related expenses   128,478    552,835 
Other accrued expenses   99,603    438,196 
Total accounts payable and accrued expenses  $2,825,504   $1,273,296 

 

Note 6 – Stockholders’ Equity

 

The Company has authorized 200,000,000 shares of common stock and 10,000,000 shares of preferred stock each with a par value of $0.0001 per share.

 

March ATM Sales Agreement

 

On March 22, 2023, the Company entered into the March Sales Agreement with the Sales Agent pursuant to which the Company could offer and sell, from time to time, through the Sales Agent, shares (the “March Shares”) of the Company’s common stock, par value $0.0001 per share, having an aggregate offering price of up to $5,000,000, subject to the terms and conditions set forth in the March Sales Agreement. The March Shares were offered and sold pursuant to the Company’s prospectus supplement, dated March 22, 2023, filed by the Company with the SEC on March 22, 2023, including the accompanying base prospectus forming a part of the Company’s Registration Statement on Form S-3 (File No. 333-269100) filed by the Company with the SEC on January 3, 2023 and declared effective by the SEC on January 11, 2023. The aggregate market value of March Shares eligible for sale under the Sales Agreement was subject to the limitations of General Instruction I.B.6 of Form S-3.