10-Q 1 form10-q.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

 

For the quarterly period ended March 31, 2024

 

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: 001-36268

 

MyMD Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware   22-2983783

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification Number)

     

855 N. Wolfe Street, Suite 623
Baltimore, MD

  21205
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code: (856) 848-8698

 

Former name, former address and former fiscal year, if changed since last report: N/A

 

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

 

Title of Each Class:   Trading Symbol(s)   Name of Each Exchange on Which Registered:

Shares of Common Stock par value $0.001 per share

  MYMD   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 

 

As of May 12, 2024, the registrant had 2,307,632 shares of its Common Stock, par value $0.001 per share, outstanding.

 

 

 

 
 

 

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION  
     
Item 1. Financial Statements 3
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 35
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 46
     
Item 4. Controls and Procedures 46
     
PART II – OTHER INFORMATION  
     
Item 1. Legal Proceedings 47
     
Item 1A. Risk Factors 47
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 47
     
Item 3. Defaults Upon Senior Securities 47
     
Item 4. Mine Safety Disclosures 47
     
Item 5. Other Information 48
     
Item 6. Exhibits 48
     
Signatures 50

 

2
 

 

PART I - Financial Information

 

Item 1. Financial Statements.

 

MYMD PHARMACEUTICALS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

March 31, 2024 and December 31, 2023

(unaudited)

 

   March 31, 2024   December 31, 2023 
   As of 
   March 31, 2024   December 31, 2023 
   (unaudited)   (audited) 
ASSETS          
Current Assets          
Cash  $225,655   $2,681,010 
Marketable Securities   1,509,358    2,242,106 
Prepaid expenses   725,159    893,226 
           
Total Current Assets   2,460,172    5,816,342 
           
Non-Current Assets          
Lease Right-of-Use   34,904    47,389 
Goodwill   10,498,539    10,498,539 
Investment in Oravax Medical   1,500,000    

1,500,000

 
           
Total Non-Current Assets   12,033,443    12,045,928 
           
Total Assets  $14,493,615   $17,862,270 
           
LIABILITIES          
Current Liabilities          
Trade and Other Payables  $3,861,232   $3,716,218 
Due to MyMD FL Shareholders   29,982    29,982 
Lease Liability   35,981    48,870 
Dividends Payable   45,828    265,019 
Derivative Liability   -    61,000 
Warrant Liability   -    867,000 
           
Total Current Liabilities   3,973,023    4,988,089 
           
Non-Current Liabilities          
Deferred Compensation Payable, net of current   

279,615

    

100,538

 
           
Total Non-Current Liabilities   279,615    100,538 
           
Total Liabilities   4,252,638    5,088,627 
           
Commitments and Contingencies   -    - 
           

Mezzanine Equity

          
Series F Convertible Preferred Stock, 15,000 shares designated, par value $0,001 and a stated value of $1,000 per share, 4,988 and 6,633 shares issued and outstanding as of March 31, 2024 and December 31, 2023. Liquidation preference of $4,988,000 plus dividends at 10% per annum of $45,828 as of March 31, 2024   4,880,528    6,500,278 
Series F Convertible Preferred Stock - Discount   (3,530,365)   (4,702,023)
Series F Convertible Preferred Stock - Derivative   (1,046,778)   (1,394,184)
           
Total Mezzanine Equity   303,385    404,071 
           
SHAREHOLDERS’ EQUITY          
Preferred Stock, par value $0.001, 50,000,000 total preferred shares authorized          
Series D Convertible Preferred Stock, 211,353 shares designated, $0.001 par value and a stated value of $0.01 per share, 72,992 shares issued and outstanding as of March 31, 2024 and December 31, 2023   144,524    144,524 
Common Stock, par value $0.001, 16,666,666 shares authorized, 2,157,632 and 2,018,857 shares issued and outstanding as of March 31, 2024 and December 31, 2023   2,158    2,019 
Additional Paid in Capital   122,769,885    114,200,096 
Accumulated Deficit   (112,978,975)   (101,977,067)
           
Total Shareholders’ Equity   9,937,592    12,369,572 
           
Total Liabilities and Shareholders’ Equity  $14,493,615   $17,862,270 

 

See accompanying notes to these unaudited condensed consolidated financial statements.

 

3
 

 

MYMD PHARMACEUTICALS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Loss

(unaudited)

 

   2024   2023 
   For the Three Months Ended 
   March 31, 
   2024   2023 
Product Revenue  $-   $- 
Product Cost of Sales   -    - 
Gross Income   -    - 
           
Administrative Expenses   1,068,320    987,987 
Research and Development Expenses   1,198,938    770,430 
Stock Based Compensation   517,365    69,068 
Warrant Issuance Expenses   -    762,834 
           
Loss from Operations   (2,784,623)   (2,590,319)
           
Other (Income) Expenses          
Interest and Dividend Income   (18,306)   (25,824)
Gain/Loss on Sale of Investments   (175)   (175)
FMV Change - Equity Investments   899    1,712 
FMV Change - Derivatives   (61,000)   120,700 
FMV Change - Warrants   7,094,000    

(1,175,000

)
           
Total Other (Income) Expenses   7,015,418    (1,078,587)
           
Loss Before Income Tax   (9,800,041)   (1,511,732)
           
Income Tax Benefit   -    - 
           
Net Loss   (9,800,041)   (1,511,732)
           
Preferred Stock Dividends   1,201,867    158,333 
           
Net Loss Attributable to Common Stockholders  $(11,001,908)  $(1,670,065)
           
Basic and Dilutive net loss per common share  $(5.14)  $(1.20)
           
Weighted average basic and diluted common shares outstanding   2,141,131    1,392,210 

 

See accompanying notes to these unaudited condensed consolidated financial statements.

 

4
 

 

MYMD PHARMACEUTICALS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the Three Months Ended March 31, 2024 and 2023

(unaudited)

 

   Shares   Series F   Shares   Series D   Shares   $0.001   In Capital   Deficit   Equity 
           Common Stock             
   Series F
Convertible
Preferred Stock
   Series D
Convertible
Preferred Stock
       Common Stock
Par Value
   Additional Paid   Accumulated   Total 
   Shares   Series F   Shares   Series D   Shares   $0.001   In Capital   Deficit   Equity 
Balance at December 31, 2023   6,633   $404,071    72,992   $144,524    2,018,857   $2,019   $114,200,096   $(101,977,067)  $12,369,572 
Net loss   -    -    -    -    -    -    -    (9,800,041)   (9,800,041)
Issuance of common stock for vested restricted stock units   -    -    -    -    908    1    (1)   -    - 
Redemption of 383 shares of Series F Convertible Preferred Stock, January 1, 2024 installment of $1,429,871 paid with cash and common stock   (383)   (23,699)   -    -    -    -    -    -    - 
Accelerated Conversion of 438 shares of Series F Convertible Preferred Stock   (438)   (26,300)   -    -    131,200    131    88,357    -    88,488 
Redemption of 812 shares of Series F Convertible Preferred Stock, February 1, 2024 installment of $1,429,871 paid with cash and common stock   (812)   (49,773)   -    -    -    -    -    -    - 
Accelerated Conversion of 12 shares of Series F Convertible Preferred Stock   (12)   (914)   -    -    6,667    7    3,068    -    3,075 
Series F Convertible Preferred Stock Dividend   -    -    -    -    -    -    -    (1,201,867)   (1,201,867)
Reclassification of warrant liability upon warrant modification   -    -    -    -    -    -    

7,961,000

    -    

7,961,000

 
Stock based compensation - stock options   -    -    -    -    -    -    517,365    -    517,365 
Balance at March 31, 2024   4,988   $303,385    72,992   $144,524    2,157,632   $2,158   $122,769,885   $(112,978,975)  $9,937,592 

 

           Common Stock             
   Series F
Convertible
Preferred Stock
   Series D
Convertible
Preferred Stock
       Common Stock
Par Value
   Additional Paid   Accumulated   Total 
   Shares   Series F   Shares   Series D   Shares   $0.001   In Capital   Deficit   Equity 
Balance at December 31, 2022   -   $-    72,992   $144,524    1,315,674   $1,316   $108,308,120   $(93,758,904)  $14,695,056 
Net loss   -    -    -    -    -    -    -    (1,511,732)   (1,511,732)
Round-up shares from the 1-for-30 reverse split effective February 14, 2024   -    -    -    -    65,960    66    (66)   -    - 
Issuance of 15,000 shares of Series F Convertible Preferred Stock, net of discount and offering costs of $14,087,111   15,000    912,889    -    -    -    -    -    -    - 
Series F Convertible Preferred Stock Dividend   -    -    -    -    -    -    -    (158,333)   (158,333)
Stock Based Compensation - Stock Options   -    -    -    -    -    -    69,068    -    69,068 
Balance at March 31, 2023   15,000   $912,889    72,992   $144,524    1,381,634   $1,382   $108,377,122   $(95,428,969)  $13,094,059 

 

See accompanying notes to these unaudited condensed consolidated financial statements.

 

5
 

 

MYMD PHARMACEUTICALS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

   2024   2023 
   For the Three Months Ended 
   March 31, 
   2024   2023 
Cash flows from operating activities:          
Net loss from ongoing operations  $(9,800,041)  $(1,511,732)
Adjustments to reconcile net loss to net cash used in operating activities:          
(Gain)/loss on sale of securities   (175)   (175)
Loss on fair market value of equity investments   899    1,712 
(Gain)/loss on fair market value of derivatives   (61,000)   120,700 
(Gain)/loss on fair market value of warrants   7,094,000    (1,175,000)
Share based compensation:          
To directors - options   189,350    - 
To key employees - options   298,755    19,908 
To non-employees - options   29,260    49,160 
Change in assets and liabilities          
Prepaid expenses   168,066    (172,351)
Trade and other payables   145,014    (1,304,021)
Right-of-use liabilities   (404)   157 
Deferred Compensation Payable   179,077    - 
Dividends Payable   

(154,842

)   - 
Net cash used by operating activities   (1,912,041)   (3,971,642)
           
Cash flows from investing activities:          
Purchases of marketable securities   (18,306)   (13,024,559)
Proceeds from sale of marketable securities   750,330    1,749,970 
Net cash (used in)/provided by investing activities   732,024    (11,274,589)
           
Cash flows from financing activities          
Redemption of Series F Convertible Preferred Stock   (73,472)   - 
Dividends on Series F Convertible Preferred Stock   (1,133,762)   - 
Premium on Series F Convertible Preferred Stock   (68,104)   - 
Net proceeds from issuance of preferred stock   -    14,685,689 
Net cash (consumed)/provided by financing activities   (1,275,338)   14,685,689 
           
Net decrease in cash and restricted cash   (2,455,355)   (560,542)
Cash and restricted cash at beginning of period   2,681,010    749,090 
Cash and restricted cash at end of period  $225,655   $188,548 
           
Supplemental cash flow information          
Cash paid for:          
Interest  $-   $- 
Income Taxes  $-   $- 
           
Supplemental Schedule of Non-Cash Financing and Investing Activities          
Accrual of Series F Convertible Preferred Stock Dividend  $-   $158,333 
Initial fair value of warrant liabilities pursuant to the issuance of Series F Convertible Preferred Stock and Warrants  $-   $10,623,000 
Initial fair value of derivative liabilities pursuant to the issuance of Series F Convertible Preferred Stock and Warrants  $-   $3,149,800 
Reclass of warrant liability upon warrant modification  $

7,961,000

   $- 

 

See accompanying notes to these unaudited condensed consolidated financial statements.

 

6
 

 

MYMD PHARMACEUTICALS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

 

Note 1 – Organization and Description of Business

 

MyMD Pharmaceuticals, Inc. is a Delaware corporation (“MyMD”) that was incorporated in New Jersey prior to the Reincorporation (as defined below). These condensed consolidated financial statements include two wholly owned subsidiaries as of March 31, 2024, Akers Acquisition Sub, Inc. and Bout Time Marketing Corporation, (together, the “Company”). All material intercompany transactions have been eliminated in consolidation.

 

MYMD-1 is an oral, next-generation TNF-α inhibitor with the potential to transform the way TNF-α based diseases are treated due to its selectivity and ability to cross the blood brain barrier. Its ease of oral dosing is a significant differentiator compared to currently available TNF-α inhibitors, all of which require delivery by injection or infusion. MYMD-1 has also been shown to selectively block TNF-α action where it is overactivated without preventing it from doing its normal job of responding to routine infection. MYMD-1 is doubly effective at inhibiting inflammation by blocking both TNF-a and IL-6 activity, whereas currently approved anti-TNF and anti-IL-6 treatments for RA can only target one or the other. In addition, in early clinical studies it has not been associated with serious side effects known to occur with traditional immunosuppressive therapies that treat inflammation.

 

At the Company’s annual meeting of stockholders held on July 31, 2023, the stockholders approved a plan to merge the Company with and into a newly formed wholly owned subsidiary, MyMD Pharmaceuticals, Inc., a Delaware corporation (“MyMD Delaware”), with MyMD Delaware being the surviving corporation, for the purpose of changing the Company’s state of incorporation from New Jersey to Delaware (the “Reincorporation”). The Reincorporation was effected as of March 4, 2024. In connection with the Reincorporation to Delaware, the par value of the common and preferred stock was changed to $0.001 per share.

 

On February 14, 2024, the Company effected a 1-for-30 reverse stock split (the “Reverse Stock Split”). Simultaneously with the Reverse Stock Split, number of shares of the Company’s common stock authorized for issuance was reduced from 500,000,000 shares to 16,666,666 shares, and our authorized capital stock was reduced from 550,000,000 shares to 66,666,666 shares. The Reverse Stock Split reduced the total number of issued and outstanding shares of Common Stock, including shares held by the Company as treasury shares. All share amounts have been retroactively adjusted for the Reverse Stock Split.

 

On March 4, 2024 (the “Effective Date”), MyMD Pharmaceuticals, Inc., a New Jersey corporation (“MyMD New Jersey”) merged with and into its wholly-owned subsidiary, MyMD Pharmaceuticals, Inc., a Delaware corporation (“MyMD Delaware”), with MyMD Delaware being the surviving corporation, pursuant to that certain Agreement and Plan of Merger, dated as of March 4, 2024, by and between MyMD New Jersey and MyMD Delaware (the “Plan of Merger”), for the purpose of changing the Company’s state of incorporation from New Jersey to Delaware (the “Reincorporation”).

 

MyMD Delaware is deemed to be the successor issuer of MyMD New Jersey under Rule 12g-3 of the Securities Exchange Act of 1934, as amended.

 

The Reincorporation did not result in any change in the Company’s name, business, management, fiscal year, accounting, location of the principal executive offices, assets or liabilities. In addition, the Company’s common stock retained the same CUSIP number and continued to trade on the Nasdaq Capital Market under the symbol “MYMD.” Holders of shares of the Company’s common stock did not have to exchange their existing MyMD New Jersey stock certificates for MyMD Delaware stock certificates.

 

As of the Effective Date of the Reincorporation, the rights of the Company’s stockholders are governed by the Delaware General Corporation Law, the MyMD Delaware Certificate of Incorporation and the Bylaws of MyMD Delaware.

 

Recent Events

 

The February 2023 Offering

 

On February 21, 2023, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain accredited investors (the “Investors”), pursuant to which it agreed to sell to the Investors (i) an aggregate of 15,000 shares of the Company’s newly-designated Series F convertible preferred stock with a stated value of $1,000 per share, initially convertible into up to 6,651,885 shares (pre-split) of the Company’s common stock (the “Common Stock”) at an initial conversion price of $2.255 per share (pre-split), subject to adjustment (the “Preferred Shares”), and (ii) warrants to acquire up to an aggregate of 6,651,885 shares (pre-split) of Common Stock, subject to adjustment (the “Warrants”) (collectively, the “February 2023 Offering”). Following the Reverse Stock Split, (i) the conversion price of the Preferred Shares was adjusted to $3.18 per share pursuant to the terms of the Certificate of Designations, and (ii) the exercise price of the Warrants was adjusted to $3.18 per share and the number of shares of Common Stock issuable upon exercise of the Warrants was adjusted proportionately to 4,716,904 shares pursuant to the terms of the Warrants.

 

7
 

 

Series F Convertible Preferred Stock

 

The Preferred Shares became convertible upon issuance into Common Stock (the “Conversion Shares”) at the election of the holder at any time at an initial conversion price of $2.255 (pre-split) (as adjusted, the “Conversion Price”). The Conversion Price is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like, and subject to price-based adjustment in the event of any issuances of Common Stock, or securities convertible, exercisable or exchangeable for Common Stock, at a price below the then-applicable Conversion Price (subject to certain exceptions). Following the Reverse Stock Split, the Conversion Price for the Preferred Shares was adjusted to $3.18 per share pursuant to the terms of the Certificate of Designations of Series F Convertible Preferred Stock, which was subsequently amended and restated by the filing of the Amended and Restated Certificate of Designations of Series F Convertible Preferred Stock, effective April 8, 2024 (as amended and restated, the “Certificate of Designations”). The Company is required to redeem the Preferred Shares in 12 equal monthly installments, commencing on July 1, 2023. The amortization payments due upon such redemption are payable, at the company’s election, in cash, or subject to certain limitations, in shares of Common Stock valued at the lower of (i) the Conversion Price then in effect and (ii) the greater of (A) 80% of the average of the three lowest closing prices of the Company’s Common Stock during the thirty trading day period immediately prior to the date the amortization payment is due or (B) a “Floor Price” of $6.60 (subject to adjustment for stock splits, stock dividends, stock combinations, recapitalizations or other similar events) or, in any case, such lower amount as permitted, from time to time, by the Nasdaq Stock Market. On April 5, 2024, the Company entered into an Omnibus Waiver and Amendment (the “Omnibus Agreement”) with the Required Holders (as defined in the Certificate of Designations). Pursuant to the Omnibus Agreement, the Required Holders agreed (i) to defer payment of the installment amounts due on March 1, 2024, and April 1, 2024 (the “Installments”), under Section 9(a) of the Certificate of Designations, until May 1, 2024, and (ii) to waive any breach or violation of the Purchase Agreement, the Certificate of Designations, or the Warrants resulting from missing the Installments. The Company may require holders to convert their Preferred Shares into Conversion Shares if the closing price of the Common Stock exceeds $202.95 per share (subject to adjustment for stock splits, stock dividends, stock combinations, recapitalizations or other similar events) for 20 consecutive trading days and the daily dollar trading volume of the Common Stock exceeds $3,000,000 per day during the same period and certain equity conditions described in the Certificate of Designations are satisfied.

 

The holders of the Preferred Shares are entitled to dividends of 10% per annum, compounded monthly, which is payable in cash or shares of Common Stock at the Company’s option, in accordance with the terms of the Certificate of Designations. Upon the occurrence and during the continuance of a Triggering Event (as defined in the Certificate of Designations), the Preferred Shares accrue dividends at the rate of 15% per annum. Upon conversion or redemption, the holders of the Preferred Shares are also entitled to receive a dividend make-whole payment. Except as required by applicable law, the holders of the Preferred Shares are entitled to vote with holders of the Common Stock on as as-converted basis, with the number of votes to which each holder of Preferred Shares is entitled to be calculated assuming a conversion price of $60.21 per share, which was the Minimum Price (as defined in Rule 5635 of the Rule of the Nasdaq Stock Market) applicable immediately before the execution and delivery of the Purchase Agreement, subject to certain beneficial ownership limitations as set forth in the Certificate of Designations. The Certificate of Designations further provides that the holders of record of the Preferred Shares, exclusively and as a separate class, shall be entitled to elect one director of the Company one time on or before June 30, 2024. During the three months ended March 31, 2024 and 2023, the Company recorded dividends totaling $1,201,867 and $158,333, respectively, which are reported as Preferred Stock Dividends on the Condensed Consolidated Statements of Comprehensive Loss.

 

Notwithstanding the foregoing, the Company’s ability to settle conversions and make amortization and dividend make-whole payments using shares of Common Stock is subject to certain limitations set forth in the Certificate of Designations. Further, the Certificate of Designations contains a certain beneficial ownership limitation after giving effect to the issuance of shares of Common Stock issuable upon conversion of, or as part of any amortization payment or dividend make-whole payment under, the Certificate of Designations or Warrants.

 

The Certificate of Designations includes certain Triggering Events (as defined in the Certificate of Designations), including, among other things, the Company’s failure to pay any amounts due to the holders of the Preferred Shares when due. In connection with a Triggering Event, each holder of Preferred Shares will be able to require the Company to redeem in cash any or all the holder’s Preferred Shares at a premium set forth in the Certificate of Designations.

 

The Preferred Shares were determined to be more akin to a debt-like host than an equity-like host. The Company identified the following embedded features that are not clearly and closely related to the debt host instrument: 1) make-whole interest upon a contingent redemption event, 2) make-whole interest upon a conversion event, 3) an installment redemption upon an Equity Conditions Failure (as defined in the Certificate of Designations), and 4) variable share-settled installment conversion. These features were bundled together, assigned probabilities of being affected and measured at fair value. Subsequent changes in fair value of these features are recognized in the Condensed Consolidated Statements of Comprehensive Loss. The Company estimated at issuance the $3,149,800 fair value of the bifurcated embedded derivative at issuance using a Monte Carlo simulation model, with the following inputs; the fair value of our common stock of $1.90 on the issuance date, estimated equity volatility of 120.0%, estimated traded volume volatility of 190.0%, the time to maturity of 1.35 years, a discounted market interest rate of 6.8%, dividend rate of 10.0%, a penalty dividend rate of 15.0%, and probability of default of 0.5%. The fair value of the bifurcated derivative liabilities was estimated utilizing the with and without method which uses the probability weighted difference between the scenarios with the derivative and the plain vanilla maturity scenario without a derivative.

 

The discount to the fair value is included as a reduction to the carrying value of the Preferred Shares. During the three months ended March 31, 2023, the Company recorded a total discount of $14,087,111 upon issuance of the Preferred Shares, which was comprised of the issuance date fair value of the associated embedded derivative of $3,149,800, stock issuance costs of $314,311 and the fair value of the Warrants of $10,623,000.

 

8
 

 

During the three months ended March 31, 2024 and 2023, the Company recorded a gain of $61,000 and a loss of $120,700, respectively, related to the change in fair value of the derivative liabilities which is recorded in other income (expense) on the Condensed Consolidated Statements of Comprehensive Loss. The Company estimated the $0 fair value of the bifurcated embedded derivative at March 31, 2024 using a Monte Carlo simulation model, with the following inputs; the fair value of our common stock of $2.39 on the valuation date, estimated equity volatility of 95.0%, estimated traded volume volatility of 175.0%, the time to maturity of 0.25 years, a discounted market interest rate of 6.2%, dividend rate of 10.0%, a penalty dividend rate of 15.0%, and probability of default of 1.5%.

 

Common Stock Warrants

 

Pursuant to the February 2023 Offering, the Company issued to investors Warrants to purchase 4,716,904 shares of Common Stock, with an exercise price of $3.18 per share (subject to adjustment), for a period of five years from the date of issuance. The Exercise Price and the number of shares issuable upon exercise of the Warrants are subject to customary adjustments for stock dividends, stock splits, reclassifications and the like, and subject to price-based adjustment, on a “full ratchet” basis, in the event of any issuances of Common Stock, or securities convertible, exercisable or exchangeable for Common Stock, at a price below the then-applicable Exercise Price (subject to certain exceptions). Upon any such price-based adjustment to the Exercise Price, the number of shares issuable upon exercise of the Warrants will be increased proportionately.

 

The Warrants were determined to be within the scope of ASC 480-10 as they are puttable to the Company at Holders’ election upon the occurrence of a Fundamental Transaction (as defined in the agreements). As such, the Company recorded the Warrants as a liability at fair value with subsequent changes in fair value recognized in earnings. The Company utilized the Black Scholes Model to calculate the value of these warrants issued during the three months ended March 31, 2023. The fair value of the Warrants of $10,623,000 was estimated at the date of issuance using the following weighted average assumptions: dividend yield 0%; term of 5.0 years; equity volatility of 125.0%; and a risk-free interest rate of 4.09%.

 

Transaction costs incurred attributable to the issuance of the Warrants of $762,834 were immediately expensed in accordance with ASC 480.

 

During the three months ended March 31, 2024, the Company recorded a loss of $7,094,000 related to the change in fair value of the warrant liabilities which is recorded in other income (expense) on the Condensed Consolidated Statements of Comprehensive Loss. The fair value of the Warrants of $7,961,000 was estimated at March 31, 2024 utilizing the Black Scholes Model using the following weighted average assumptions: dividend yield 0%; remaining term of 3.90 years; equity volatility of 110.0%; and a risk-free interest rate of 4.31%.

 

During the three months ended March 31, 2023, the Company recorded a gain of $1,750,000 related to the change in fair value of the warrant liabilities which is recorded in other income (expense) on the Condensed Consolidated Statements of Comprehensive Loss. The fair value of the Warrants of $867,000 was estimated at March 31, 2023 utilizing the Black Scholes Model using the following weighted average assumptions: dividend yield 0%; remaining term of 4.15 years; equity volatility of 120.0%; and a risk-free interest rate of 3.91%.

 

On May 14, 2024, the Company entered into an Amendment (the “Amendment”) with the Investors in the February 2023 Offering, effective as of March 31, 2024. The Amendment modified certain terms of the Warrants relating to the rights of the holders of the Warrants to provide that, in the event of a Fundamental Transaction (as defined in the Warrants) that is not within the Company’s control, including the Fundamental Transaction not being approved by the Company’s Board of Directors, the holder of the Warrant shall only be entitled to receive from the Company or any successor entity the same type or form of consideration (and in the same proportion), at the Black Scholes Value of the unexercised portion of such Warrant, that is being offered and paid to the holders of the Company’s common stock in connection with the Fundamental Transaction. The modification resulted in the reclassification of the Warrants to be considered equity classified as they were no longer in the scope of ASC 815. In accordance with ASC 815-40, the Company remeasured the Warrants at fair value as of March 31, 2024, the effective date of the modification, and recognized the change in fair value as a non-cash loss and reclassified the Warrants to additional paid-in capital at March 31, 2024.

 

Reduction in Workforce

 

During October and November 2023, the Company implemented a reduction in workforce, eliminating three of the Company’s ten employees. Separated employees were granted a severance package equal to one-quarter of their annual salary.

 

9
 

 

Executive Officer Contract Amendments and Separations

 

Effective November 13, 2023, the Company entered into an amendment to the employment agreement of Dr. Chris Chapman, its President and Chief Medical Officer, providing for Dr. Chapman’s annual base salary to be adjusted from five hundred thousand dollars ($500,000) (the “Full Base Salary”) to two hundred fifty thousand dollars ($250,000) in cash per annum, until payment of his Full Base Salary would no longer jeopardize the Company’s ability to continue as a going concern, as determined by the Company in its sole discretion. The amendment further provides that the remaining $250,000 of base salary per annum (the “Deferral Amount”) shall be deferred until payment of the Deferral Amount would no longer jeopardize the Company’s ability to continue as a going concern, as determined by the Company in its sole discretion, at which time the Deferral Amount may be paid, at Dr. Chapman’s election, in shares of Common Stock or in cash. As of March 31, 2024 and December 31, 2023, the Company had recognized a salary deferral of $86,538 and $28,846, respectively, which is included in Deferred Compensation Payable on the Condensed Consolidated Balance Sheets.

 

In connection with an overall reduction in compensation paid to the Company’s directors implemented in November 2023, effective November 13, 2023, the Company entered into an amendment to the employment agreement of Christopher C. Schreiber, a Director and the Company’s former Executive Chairman, providing for Mr. Schreiber’s annual fee to be adjusted from three hundred thousand dollars ($300,000) (the “Full Fee”) to sixty thousand dollars ($60,000) in cash per annum, until payment of his Full Fee would no longer jeopardize the Company’s ability to continue as a going concern, as determined by the Company in its sole discretion. The amendment further provides that the remaining $240,000 of the fees per annum (the “Fee Deferral Amount”) shall be deferred until payment of the Fee Deferral Amount would no longer jeopardize the Company’s ability to continue as a going concern, as determined by the Company in its sole discretion, at which time the Fee Deferral Amount may be paid, at Mr. Schreiber’s election, in shares of Common Stock or in cash. The amendment also clarified that Mr. Schreiber’s title is “Director.” As of March 31, 2024 and December 31, 2023, the Company had recognized a salary deferral of $83,077 and $27,692, respectively, which is included in Deferred Compensation Payable on the Condensed Consolidated Balance Sheets.

 

Effective November 13, 2023, the Company entered into an amendment to the employment agreement of Dr. Adam Kaplin, its Chief Scientific Officer, providing that Dr. Kaplin’s employment and had an initial term of four months, which the parties had the option to mutually agree to extend for additional consecutive terms of one month each. The amendment further provided that, in the event of termination without cause by the Company prior to the end of the initial term, Dr. Kaplin shall receive his monthly base salary through the end of the initial term. The amendment further provided that all outstanding and unvested shares granted pursuant to the Nonqualified Stock Option Agreement, dated June 7, 2023, between the Company and Dr. Kaplin shall accelerate upon the termination of Dr. Kaplin’s employment. Dr. Kaplin’s amendment further provided that, in the event of a termination for any reason prior to the end of the first renewal term following the end of the initial term, the Company will continue to cover the costs of Dr. Kaplin’s health insurance coverage through the end of the first renewal term, subject to the execution and timely return of a release. Dr. Kaplin’s employment was terminated effective April 15, 2024.

 

Effective November 13, 2023, the Company entered into a mutual employment separation agreement with Paul M. Rivard, its Chief Legal Officer. The separation agreement provides for a lump-sum severance payment equal to three months of his normal base salary in exchange for a waiver and release. The separation agreement further provides that Mr. Rivard will be deemed a contractor providing services to the Company for purposes of any awards previously granted to him under the 2021 Plan if at the relevant time(s) he is providing services to the Company while under the employ of a law firm representing the Company.

 

Director’s Deferral of Board Service Fees

 

On November 13, 2023, the Board approved certain adjustments to the director fees. Mr. Silverman’s fees were decreased from $216,000 to $60,000 annually, with payment of the excess amount of $156,000 deferred until the date that payment of such amount would no longer jeopardize the Company’s ability to continue as a going concern, as determined by the Company in its sole discretion, at which time such amount may be paid, at Mr. Silverman’s election, in shares of Common Stock or in cash. Messrs. Eagle’s, Uzonwanne’s, and White’s fees were decreased from $96,000 to $60,000 annually, with payment of the excess amounts of $36,000 per director deferred until the date that payment of such amounts would no longer jeopardize the Company’s ability to continue as a going concern, as determined by the Company in its sole discretion, at which time such amounts may be paid, at each director’s election, in shares of Common Stock or in cash. As of March 31, 2024 and December 31, 2023, the Company had recognized a board fee deferral of $110,000 and $44,000, respectively, which is included in Deferred Compensation Payable on the Condensed Consolidated Balance Sheets.

 

10
 

 

Note 2 – Significant Accounting Policies

 

(a) Basis of Presentation

 

The condensed consolidated financial statements of the Company are prepared in U.S. Dollars and in accordance with accounting principles generally accepted in the United States of America (US GAAP).

 

The accompanying unaudited condensed financial statements have been prepared by the Company. These statements include all adjustments (consisting only of normal recurring adjustments) which management believes necessary for a fair presentation of the statements and have been prepared on a consistent basis using the accounting policies described in Note 2 Significant Accounting Policies included in the Notes to Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the Securities and Exchange Commission on April 1, 2024 (the “2023 Annual Report”). Certain financial information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the accompanying disclosures are adequate to make the information presented not misleading. The Notes to Financial Statements included in the 2023 Annual Report should be read in conjunction with the accompanying interim financial statements. The interim operating results for the three months ended March 31, 2024 may not be necessarily indicative of the operating results expected for the full year or any future period.

 

(b) Use of Estimates and Judgments

 

The preparation of financial statements in conformity with US GAAP requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements is included in the following notes for recording the fair value of financial instruments, derivative financial instruments valuations, research and development expenses, impairment of intangible assets and the valuation of share-based payments.

 

(c) Functional and Presentation Currency

 

These condensed consolidated financial statements are presented in U.S. Dollars, which is the Company’s functional currency. All financial information has been rounded to the nearest dollar. Foreign Currency Transaction Gains or Losses, resulting from cash balances denominated in Foreign Currencies, are recorded in the Condensed Consolidated Statements of Comprehensive Loss.

 

11
 

 

(d) Comprehensive Income (Loss)

 

The Company follows Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) 220 in reporting comprehensive income. Comprehensive income (loss) is a more inclusive financial reporting methodology that includes disclosure of certain financial information that historically has not been recognized in the calculation of net income (loss). Since the Company has no items of other comprehensive income (loss), comprehensive loss is equal to net loss.

 

(e) Cash and Cash Equivalents

 

The Company considers all highly liquid investments, which include short-term bank deposits (up to three months from date of deposit) that are not restricted as to withdrawal date or use, to be cash equivalents.

 

(f) Fair Value of Financial Instruments

 

Fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management as of and during the three months ended March 31, 2024. The carrying amounts of cash equivalents, accounts receivable, other current assets, other assets, accounts payable, and accrued expenses approximated their fair values as of March 31, 2024 due to their short-term nature. The fair value of the bifurcated embedded derivative related to the convertible preferred stock was estimated using a Monte Carlo simulation model, which uses as inputs the fair value of the Company’s common stock and estimates for the equity volatility and traded volume volatility of the Company’s common stock, the time to maturity of the convertible preferred stock, the risk-free interest rate for a period that approximates the time to maturity, dividend rate, a penalty dividend rate, and the probability of default. The fair value of the warrant liabilities was estimated using the Black Scholes Model which uses as inputs the following weighted average assumptions: dividend yield, expected term in years; equity volatility; and risk-free interest rate.

 

Fair Value Measurement

 

The framework for measuring fair value provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under FASB ASC 820 are described as follows:

 

  Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company can access.
     
  Level 2 Inputs to the valuation methodology include:
     
    quoted prices for similar assets or liabilities in active markets;
    quoted prices for identical or similar assets or liabilities in inactive markets;
    inputs other than quoted prices that are observable for the asset or liability;
    inputs that are derived principally from or corroborated by observable market data by correlation or other means
       
    If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.
     
  Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

 

The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Valuation techniques maximize the use of relevant observable inputs and minimize the use of unobservable inputs.

 

12
 

 

(f) Fair Value of Financial Instruments, continued

 

The following is a description of the valuation methodologies used for assets measured at fair value as of March 31, 2024 and December 31, 2023.

 

Marketable Securities: Valued using quoted prices in active markets for identical assets.

 

   Quoted Prices
in Active
Markets for
Identical Assets
or Liabilities
(Level 1)
   Quoted Prices
for Similar
Assets or
Liabilities in
Active Markets
(Level 2)
   Significant
Unobservable
Inputs
(Level 3)
 
Marketable securities at March 31, 2024  $1,509,358   $        -   $        - 
                
Marketable securities at December 31, 2023  $2,242,106   $-   $- 

 

Marketable securities are classified as available for sale and are valued at fair market value. Maturities of the securities are less than one year.

 

As of March 31, 2024 and December 31, 2023, the Company held certain mutual funds, which, under FASB ASC 321-10, were considered equity investments. As such, the change in fair value in the three months ended March 31, 2024 and 2023 was a loss of $899 and $1,712, respectively.

 

Gains resulting from the sales of marketable securities were $175 and $175 for the three months ended March 31, 2024 and 2023, respectively.

 

Proceeds from the sales of marketable securities in the three months ended March 31, 2024 and 2023 were $750,330 and $1,749,970, respectively. Purchases of marketable securities in the three months ended March 31, 2024 and 2023 were $18,306 and $13,024,559, respectively.

 

13
 

 

Fair Value on a Recurring Basis

 

The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually. The estimated fair value of the warrant liabilities and bifurcated embedded derivatives represent Level 3 measurements. The following table presents information about the Company’s liabilities that are measured at fair value on a recurring basis as of March 31, 2024, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

 

      March 31, 
Description  Level  2024 
Liabilities:        
Warrant liabilities (Note 3)  3  $7,961,000 
Derivative liabilities (Note 3)  3  $- 

 

      December 31, 
Description  Level  2023 
Liabilities:        
Warrant liabilities (Note 3)  3  $867,000 
Derivative liabilities (Note 3)  3  $61,000 

 

The following table sets forth a summary of the change in the fair value of the warrant liabilities that is measured at fair value on a recurring basis for the three months ended March 31, 2024:

 

 

Balance on December 31, 2023  $867,000 
Issuance of warrants reported at fair value   - 
Change in fair value of warrant liabilities   

7,064,000

 
Reclassification of warrant liability to equity upon warrant modification   (7,091,000)
Balance on March 31, 2024  $- 

 

The following table sets forth a summary of the change in the fair value of the derivative liabilities that is measured at fair value on a recurring basis for the three months ended March 31, 2024:

 

 

Balance on December 31, 2023  $61,000 
Issuance of convertible preferred stock with derivative liabilities   - 
Change in fair value of derivative liabilities   (61,000)
Balance on March 31, 2024  $- 

 

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(g) Derivative Financial Instruments

 

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging.” If liability accounting is required, the Company’s derivative instruments are recorded at fair value at the issuance date and re-valued at each reporting date, with changes in the fair value reported in the statements of operations. Derivative assets and liabilities are classified on the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within twelve (12) months of the balance sheet date.

 

The Company has determined that the Series F Convertible Preferred Stock warrants are derivatives that are required to be accounted for as liabilities. The Company has also determined that the following embedded features in the preferred stock are not clearly and closely related to the debt host instrument: 1) make-whole interest upon a contingent redemption event, 2) make-whole interest upon a conversion event, 3) an installment redemption upon an Equity Conditions Failure (as defined in the Certificate of Designation), and 4) variable share-settled installment conversion and as such are bifurcated from the preferred stock and accounted for as liabilities. The fair value of the warrants and embedded features are estimated using internal valuation models. The Company’s valuation models utilize inputs and other assumptions and may not be reflective of the price at which they can be settled.

 

Warrants

 

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities fromE quity (“ASC 480”) and ASC 815. The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside oft he Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end datewhile the warrants are outstanding.

 

For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be liability classified and recorded at their initial fair value on the date of issuance and remeasured at fair value and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the Statements of Comprehensive Income (Loss).

 

Modification of warrants

 

The Company applies the guidance in ASC 815-40 to account for warrants that are liability classified that are subsequently modified resulting in a reclassification to equity. The warrants are remeasured at fair value on the modification date, the change in fair value is recognized as a non-cash gain or loss on the Statement of Comprehensive Income (Loss), and the warrants are reclassified to additional paid-in capital.

 

(h) Prepaid Expenses

 

Prepaid expenses represent expenses paid prior to the date that the related services are rendered or used are comprised principally of prepaid insurance and research and development expenses.

 

(i) Concentrations

 

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash on deposit with financial institutions and accounts receivable. At times, the Company’s cash in banks exceeds the FDIC insurance limit. The Company has not experienced any loss because of these cash deposits. These cash balances are maintained with two banks as of March 31, 2024.

 

(j) Risk Management of Cash and Investments

 

It is the Company’s policy to minimize the Company’s capital resources to investment risks, prioritizing the preservation of capital over investment returns. Investments are maintained in securities, primarily publicly traded, short-term money market funds based on highly rated federal, state and corporate bonds, that minimize the risk to the Company’s capital resources and provide ready access to funds.

 

The Company’s investment portfolios are regularly monitored for risk and are held with one brokerage firm.

 

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(k) Investments

 

Investments recorded using the cost method will be assessed for any decrease in value that has occurred that is other than temporary and the other than temporary decrease in value shall be recognized. As and when circumstances and facts change, the Company will evaluate the Company’s ability to significantly influence operational and financial policy to establish a basis for converting the investment accounted for using the cost method to the equity method of valuation in accordance with FASB ASC 323.

 

In accordance with FASB ASC 323, the Company recognizes investments in joint ventures based upon the Company’s ability to significantly influence the operational or financial policies of the joint venture. An objective judgment of the level of influence is made at the time of the investment based upon several factors including, but not limited to the following:

 

  a) Representation on the Board of Directors
  b) Participation in policy-making processes
  c) Material intra-entity transactions
  d) Interchange of management personnel
  e) Technological dependencies
  f) Extent of ownership and the ability to influence decision making based upon the makeup of other owners when the shareholder group is small.

 

The Company follows the equity method for valuating investments in joint ventures when the existence of significant influence over operational and financial policy has been established, as determined by management; otherwise, the Company will valuate these investments using the cost method.

 

In accordance with FASB ASC 321-10-35-2, the Company has elected to measure its investment in Oravax Medical, Inc. (“Oravax”) (Note 3) as an equity security without a readily determinable fair value. Under this election, an equity security without a readily available fair value is reflected at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. At each reporting period, the Company is required to make a qualitative assessment considering impairment indicators to evaluate whether the investment is impaired. If deemed impaired, the Company is required to estimate the fair value of the investment and recognize an impairment loss equal to the difference between the fair value of the investment and its carry amount. As of March 31, 2024, the Company performed a qualitative assessment to evaluate whether the investment is impaired and determined that the investment was not impaired and thus no adjustment to fair market value was required as of March 31, 2024.

 

(l) Property, Plant and Equipment

 

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Costs include expenditures that are directly attributable to the acquisition of the asset.

 

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognized within “other (income)/expense” in the Condensed Consolidated Statements of Comprehensive Loss.

 

Depreciation is recognized over the estimated useful lives of the property, plant and equipment. Leased assets are depreciated over the shorter of the lease term or their useful lives.

 

The estimated useful lives for the current and comparative periods are as follows:

 

 

   Useful Life
   (in years)
Plant and equipment  5-12
Furniture and fixtures  5-10
Computer equipment & software  3-5
Leasehold Improvements  Shorter of the remaining lease or estimated useful life

 

Depreciation methods, useful lives and residual values are reviewed at each reporting date.

 

(m) Intangible Assets

 

The Company’s long-lived intangible assets, other than goodwill, are assessed for impairment when events or circumstances indicate there may be an impairment. These assets were initially recorded at their estimated fair value at the time of acquisition and assets not acquired in acquisitions were recorded at historical cost. However, if their estimated fair value is less than the carrying amount, other intangible assets with indefinite lives are reduced to their estimated fair value through an impairment charge in the Condensed Consolidated Statements of Comprehensive Loss.

 

16
 

 

Patents and Trade Secrets

 

Propriety protection for the Company’s products, technology and process is important to its competitive position. As of March 31, 2024, the Company has 17 issued U.S. patents, 64 foreign patents, 2 pending U.S. patent applications and 10 foreign patent applications pending in such jurisdictions as Australia, Canada, China, European Union, Israel, Japan and South Korea, which if issued are expected to expire between 2036 and 2041. Management intends to protect all other intellectual property (e.g. copyrights, trademarks, and trade secrets) using all legal remedies available to the Company.

 

The Company records expenses related to the application for and maintenance of patents as a component of research and development expenses on the Condensed Consolidated Statement of Comprehensive Loss.

 

Patent Costs

 

Patents may be purchased from third parties. The costs of acquiring the patent are capitalized as patent costs if it represents a future economic benefit to the Company. Once a patent is acquired it is amortized over its remaining useful life and assessed for impairment when necessary.

 

Other Intangible Assets

 

Other intangible assets that are acquired by the Company, which have definite useful lives, are measured at cost less accumulated amortization and accumulated impairment losses.

 

Amortization

 

Amortization is recognized on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use. The estimated useful lives for the current and comparative periods are as follows:

   Useful Life
   (in years)
Patents and trademarks  12-17

 

(n) Goodwill

 

Goodwill is evaluated annually for impairment or whenever we identify certain triggering events or circumstances that would more likely than not reduce the fair value below its carrying amount. Events or circumstances that might indicate an interim evaluation is warranted include, among other things, unexpected adverse business conditions, economic factors (for example, the loss of key personnel), supply costs, unanticipated competitive activities, and acts by governments and courts.

 

(o) Recoverability of Long-Lived Assets

 

In accordance with FASB ASC 360-10-35 “Impairment or Disposal of Long-lived Assets”, long-lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable or that the useful lives of those assets are no longer appropriate. The Company evaluates at each balance sheet date whether events and circumstances have occurred that indicate possible impairment.

 

17
 

 

The Company determines the existence of such impairment by measuring the expected future cash flows (undiscounted and without interest charges) and comparing such amount to the carrying amount of the assets. An impairment loss, if one exists, is then measured as the amount by which the carrying amount of the asset exceeds the discounted estimated future cash flows. Assets to be disposed of are reported at the lower of the carrying amount or fair value of such assets less costs to sell. Asset impairment charges are recorded to reduce the carrying amount of the long-lived asset that will be sold or disposed of to their estimated fair values. Charges for the asset impairment reduce the carrying amount of the long-lived assets to their estimated salvage value in connection with the decision to dispose of such assets.

 

(p) Right-of-Use Assets

 

The Company leases a facility in Baltimore, Maryland (“2021 Wolfe St”) under an operating lease (“2021 Baltimore Lease”) with annual rentals of $52,800 to $56,016 plus certain operating expenses. The 2021 Baltimore Lease took effect on November 17, 2021 for a term of 12 months with automatic renewals unless a sixty-day notice is provided. The initial term expired on November 30, 2022. The lease renewed effective December 1, 2022 for a term of 12 months with automatic renewals unless a sixty-day notice is provided.

 

The Company leased a facility in Tampa, Florida (“Platt St”) under an operating lease (“Platt Street Lease”) with annual rentals of $22,030 to $23,259 plus certain operating expenses. The Platt Street Lease took effect on April 1, 2022 for a term of 36 months. The Platt Street Lease was cancelled without penalty effective October 31, 2023.

 

18
 

 

In accordance with FASB ASC, Topic 842, Leases (“ASC 842”), which increases transparency and comparability by recognizing a lessee’s rights and obligations resulting from leases by recording them on the balance sheet as lease assets and lease liabilities. The guidance requires the recognition of the right-of-use (“ROU”) assets and related operating and finance lease liabilities on the balance sheet.

 

The Company utilizes the package of practical expedients permitted within the standard, which allows an entity to forgo reassessing (i) whether a contract contains a lease, (ii) classification of leases, and (iii) whether capitalized costs associated with a lease meet the definition of initial direct costs. Also, the Company elected the expedient allowing an entity to use hindsight to determine the lease term and impairment of ROU assets and the expedient to allow the Company to not have to separate lease and non-lease components. The Company has also elected the short-term lease accounting policy under which the Company would not recognize a lease liability or ROU asset for any lease that at the commencement date has a lease term of twelve months or less and does not include a purchase option that the Company is more than reasonably certain to exercise.

 

For operating leases, the lease liability is initially and subsequently measured at the present value of the unpaid lease payments. The Company generally uses its incremental borrowing rate as the discount rate for leases, unless an interest rate is implicitly stated in the lease. The present value of the lease payments is calculated using the incremental borrowing rate for operating leases, which was determined using a portfolio approach based on the rate of interest that the Company would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. The lease term for all the Company’s leases includes the non-cancellable period of the lease plus any additional periods covered by either a Company option to extend the lease that the Company is reasonably certain to exercise, or an option to extend the lease controlled by the lessor. All ROU assets are reviewed for impairment.

 

Lease expense for operating leases consists of the lease payments plus any initial direct costs and is recognized on a straight-line basis over the lease term.

 

The Company’s operating leases are comprised of the 2021 Baltimore Lease and the Platt Street Lease on the Condensed Consolidated Balance Sheets. The information related to these leases are presented below:

Balance Sheet Location  Lease   Lease   Total   Lease   Lease   Total 
   As of March 31, 2024   As of December 31, 2023 
   Platt Street   2021 Baltimore       Platt Street   2021 Baltimore     
Balance Sheet Location  Lease   Lease   Total   Lease   Lease   Total 
Operating Lease                              
Lease Right of Use  $-   $34,904   $34,904   $-   $47,389   $47,389 
Lease Payable, current   -    35,981    35,981    -    48,870    48,870 
Lease Payable - net of current   -    -    -    -    -    - 

 

The following provides details of the Company’s lease expense:

Lease Expenses  Lease   Lease   Total   Lease   Lease   Total 
  

For the Three Months Ended
March 31, 2024

  

For the Three Months Ended
March 31, 2023

 
   Platt Street   2021 Baltimore       Platt Street   2021 Baltimore     
Lease Expenses  Lease   Lease   Total   Lease   Lease   Total 
Operating Leases                              
Lease Costs  $-   $13,600   $13,600   $5,660   $13,600   $19,260 

 

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Other information as of March 31, 2024 related to leases is presented below:

   Platt Street   2021 Baltimore     
Other Information  Lease   Lease   Total 
Operating Leases               
Operating cash used  $-   $9,336   $9,336 
Average remaining lease term   -    8    8 
Average discount rate   10.0%   10.0%   10.0%

 

As of March 31, 2024, the annual minimum lease payments of the Company’s operating lease liabilities were as follows:

   Platt Street   2021 Baltimore     
   Lease   Lease   Total 
For Years Ending December 31,               
2024          -    36,267    36,267 
Total future minimum lease payments, undiscounted  $-   $36,267   $36,267 
Less: Imputed interest   -    286    286 
Present value of future minimum lease payments  $-   $35,981   $35,981 

 

(q) Revenue Recognition

 

The Company will recognize revenue under ASC 606, Revenue from Contracts with Customers. The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods and services transferred to the customer. The following five steps are applied to achieve that core principle:

 

  1) Identify the contract with the customer
  2) Identify the performance obligations in the contract
  3) Determine the transaction price
  4) Allocate the transaction price to the performance obligations in the contract
  5) Recognize revenue when the company satisfies a performance obligation

 

(r) Income Taxes

 

The Company utilizes an asset and liability approach for financial accounting and reporting for income taxes. The provision for income taxes is based upon income or loss after adjustment for those permanent items that are not considered in the determination of taxable income. Deferred income taxes represent the tax effects of differences between the financial reporting and tax basis of the Company’s assets and liabilities at the enacted tax rates in effect for the years in which the differences are expected to reverse.

 

The Company evaluates the recoverability of deferred tax assets and establishes a valuation allowance when it is more likely than not that some portion or all the deferred tax assets will not be realized. Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In management’s opinion, adequate provisions for income taxes have been made. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.

 

Tax benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon settlement. A liability for “unrecognized tax benefits” is recorded for any tax benefits claimed in the Company’s tax returns that do not meet these recognition and measurement standards. As of March 31, 2024 and December 31, 2023, no liability for unrecognized tax benefits was required to be reported.

 

20
 

 

There was no income tax benefit recorded for the losses for the three months ended March 31, 2024 and 2023 since management determined that the realization of the net deferred tax assets is not more likely than not to be realized and has recorded a full valuation allowance on the net deferred tax assets.

 

The Company’s policy for recording interest and penalties associated with tax audits is to record such items as a component of general and administrative expense. There were no amounts accrued for penalties and interest for the three months ended March 31, 2024 and 2023. The Company does not expect its uncertain tax position to change during the next twelve months. Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its position.

 

Tax years from 2020 through 2023 remain subject to examination by federal and state jurisdictions.

 

(s) Basic and Diluted Earnings per Share of Common Stock

 

Basic earnings per common share is based on the weighted average number of shares outstanding during the periods presented. Diluted earnings per share is computed using the weighted average number of common shares plus dilutive common share equivalents outstanding during the period. Potential common shares that would have the effect of increasing diluted earnings per share are considered anti-dilutive.

 

Diluted net loss per share is computed using the weighted average number of shares of Common Stock and dilutive potential Common Stock outstanding during the period.

 

As the Company reported a net loss for the three months ended March 31, 2024 and 2023, Common Stock equivalents were anti-dilutive.

 

As of March 31, 2024 and 2023, the following securities are excluded from the calculation of weighted average dilutive common shares because their inclusion would have been anti-dilutive:

   2024   2023 
   For the Three Months Ended
March 31,
 
   2024   2023 
Stock Options   47,286    145,907 
Unvested Restricted Stock Units   88,668    93169 
Warrants to purchase Common Stock   4,933,622    4,934,106 
Pre-funded Warrants to purchase Common Stock   -    4,505 
Series C Convertible Preferred Warrants   918    918 
Series D Convertible Preferred Stock   1,217    1,217 
Series F Convertible Preferred Stock   1,568,553    4,716,981 
Total potentially dilutive shares   6,640,264    9,896,803 

 

(t) Stock-based Payments

 

The Company accounts for stock-based compensation under the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 718, “Compensation - Stock Compensation”, which requires the measurement and recognition of compensation expense for all stock-based awards made to employees and directors based on estimated fair values on the grant date. The Company estimates the fair value of stock-based awards on the date of grant using the Black-Scholes model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods using the straight-line method. In June 2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting (the “2018 Update”). The amendments in the 2018 Update expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees. Prior to the 2018 Update, Topic 718 applied only to share-based transactions to employees. Consistent with the accounting requirement for employee share-based payment awards, nonemployee share-based payment awards within the scope of Topic 718 are measured at grant-date fair value of the equity instruments that an entity is obligated to issue when the good has been delivered or the service has been rendered and any other conditions necessary to earn the right to benefit from the instruments have been satisfied.

 

The Company has elected to account for forfeiture of stock-based awards as they occur.

 

21
 

 

(u) Research and Development Costs

 

In accordance with FASB ASC 730, research and development costs are expensed as incurred and consist of fees paid to third parties that conduct certain research and development activities on the Company’s behalf.

 

(v) Recently Issued Accounting Pronouncements

 

As of March 31, 2024 and for the three months then ended, there were no recently issued accounting pronouncements that had a material effect on the Company’s consolidated financial statements.

 

Note 3 – Going Concern

 

The Company has evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.

 

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has sustained a net loss attributable to common stockholders of $11,001,908 and $1,670,065, respectively, and negative cash flows from operations of $1,912,041 and $3,971,642, respectively, for the three months ended March 31, 2024 and 2023. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern for the next 12 months from the date of this Quarterly Report is dependent upon its ability to obtain additional capital financing. Through the date of this Quarterly Report, the Company has been primarily financed through the proceeds from the sale of preferred and common stock. In the event the Company does not complete an offering, the Company expects to seek additional funding through private equity or debt financings. The Company may not be able to obtain financing on acceptable terms, or at all. The issuance of additional equity would result in dilution to existing stockholders. If the Company is unable to obtain additional funds when they are needed or if such funds cannot be obtained on terms acceptable to the Company, the Company would be unable to execute upon the business plan or pay costs and expenses as they are incurred, which would have a material, adverse effect on the business, financial condition and results of operations. No assurance can be given that the Company will be successful in these efforts. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

22
 

 

Note 4 – Trade and Other Payables

 

Trade and other payables consist of the following:

   March 31, 2024   December 31, 2023 
         
Accounts Payable – Trade  $3,350,185   $3,079,080 
Accrued Expenses   511,047    637,138 
Trade and other payables, Total  $3,861,232   $3,716,218 

 

Note 5 – Stock-based Payments

 

Equity incentive Plans

 

2013 Stock Incentive Plan

 

On January 23, 2014, the Company adopted the 2013 Stock Incentive Plan (“2013 Plan”). The 2013 Plan was amended by the Board on January 9, 2015 and September 30, 2016, and such amendments were ratified by shareholders on December 7, 2018. The 2013 Plan provides for the issuance of up to 73 shares of the Company’s Common Stock. As of March 31, 2024, grants of restricted stock and options to purchase 54 shares of Common Stock have been issued pursuant to the 2013 Plan, and 19 shares of Common Stock remain available for issuance.

 

2016 Stock Incentive Plan

 

In 2016, pre-Merger MyMD Florida adopted the MyMD Pharmaceuticals, Inc. Amended and Restated 2016 Equity Incentive Plan (the “2016 Plan”). The 2016 Plan provided for the issuance of up to 50,000,000 shares of the Company’s Common Stock. As of March 31, 2024, no options were outstanding and no shares of Common Stock remain available for issuance under the 2016 Plan. Pursuant to the Merger Agreement, effective as of the effective time of the Merger, the Company assumed pre-Merger MyMD Florida’s Second Amendment to Amended and Restated 2016 Stock Incentive Plan (collectively with the 2016 Plan, the “MyMD Florida Incentive Plan”), assuming all of pre-Merger MyMD Florida’s rights and obligations with respect to the options issued thereunder (except that the term of each options was amended to expire on the second-year anniversary of the effective time of closing). All such options expired on April 16, 2023.

 

2017 Stock Incentive Plan

 

On August 7, 2017, the shareholders approved, and the Company adopted the 2017 Stock Incentive Plan (“2017 Plan”). The 2017 Plan provides for the issuance of up to 118 shares of the Company’s Common Stock. As of March 31, 2024, grants of restricted stock and options to purchase 93 shares of Common Stock have been issued pursuant to the 2017 Plan, and 25 shares of Common Stock remain available for issuance.

 

2018 Stock Incentive Plan

 

On December 7, 2018, the shareholders approved, and the Company adopted the 2018 Stock Incentive Plan (“2018 Plan”). On August 27, 2020, the 2018 Plan was modified to increase the total authorized shares. The 2018 Plan, as amended, provides for the issuance of up to 18,670 shares of the Company’s Common Stock. As of March 31, 2024, grants of RSUs and restricted stock to purchase 8,769 shares of Common Stock have been issued pursuant to the 2018 Plan, and 9,901 shares of Common Stock remain available for issuance.

 

23
 

 

2021 Stock Incentive Plan

 

On April 15, 2021, the shareholders approved, and the Company adopted the 2021 Stock Incentive Plan (“2021 Plan”). The 2021 Plan provides for the issuance of up to 240,940 shares of the Company’s Common Stock. As of March 31, 2024, grants of RSUs and stock options to purchase 230,318 shares of Common Stock have been issued pursuant to the 2021 Plan, and 10,622 shares of Common Stock remain available for issuance.

 

Stock Options

 

The following table summarizes the activities for MyMD stock options for the three months ended March 31, 2024:

               Weighted     
               Average     
       Weighted   Weighted   Remaining     
       Average   Average   Contractual   Aggregate 
   Number of   Exercise   Grant Date   Term   Intrinsic 
   Shares   Price   Fair Value   (years)   Value 
Balance at December 31, 2023   139,840   $46.09   $42.34    8.17   $- 
Granted   -    -    -    -    - 
Exercised   -    -    -    -    - 
Forfeited   -    -    -    -    - 
Canceled/Expired   -    -    -    -    - 
Balance at March 31, 2024   139,840   $46.09   $42.34    7.92   $- 
Exercisable as of March 31, 2024   47,286   $56.44   $51.49    7.23   $- 

 

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the closing stock price of $2.39 for the Company’s common shares on March 31, 2024 and the closing stock price of $7.77 for the Company’s common shares on December 31, 2023.

 

On January 28, 2022, the Company’s Compensation Committee approved the issuance of 6,668 stock options under the 2021 Plan. These shares had a grant date fair value of $107.70 per share or a cumulative fair market value of $717,660 as calculated using Black-Scholes (exercise price $118.80 per share, stock price $118.80 per share, volatility of 124.43%, discount rate of 1.74% and seven-year term). The grant was segmented into four vesting tranches triggered by performance achievements and expire on January 28, 2029. The Company will amortize the expenses over the vesting cycles of the individual tranches when the performance achievement is probable. As of March 31, 2024, none of the vesting events have occurred.

 

On June 21, 2022, the Company granted 3,334 stock options under the 2021 Plan to a third-party consultant in consideration of services rendered. These shares had a grant date fair value of $59.70 per share or a cumulative fair market value of $199,360 as calculated using Black-Scholes (exercise price $69.00 per share, stock price $69.00 per share, volatility of 130.51%, discount rate of 3.24% and five-year term). The grant vested immediately and expire on June 21, 2027. The Company is amortizing the expense over twelve months, the term of the consulting agreement.

 

24
 

 

On June 7, 2023, the Company issued 66,503 options to the directors and key employees. These shares had a grant date fair value of $47.10 per share or a cumulative fair market value of $3,128,759 as calculated using Black-Scholes (exercise price $49.00 per share, stock price $49.00 per share, volatility of 115.94%, discount rate of 3.79% and a ten-year term). One-third of the options vested on the grant date, one-third vest on the first anniversary of the grant and one-third vest on the second anniversary of the grant. One-third of the fair-market value of the options was expensed on the grant date and the remaining two-thirds is amortized over 24-month vesting.

 

On September 6, 2023, the Company issued 33,334 options to a key employee. These shares had a grant date fair value of $23.10 per share or a cumulative fair market value of $769,700 as calculated using Black-Scholes (exercise price $24.30 per share, stock price $24.30 per share, volatility of 117.90%, discount rate of 4.44% and a ten-year term). The options will vest upon the achievement of specific performance goals. The fair-market value of the options will be recognized in the period the vesting event is achieved. As of March 31, 2024, none of the vesting events have occurred.

 

On September 6, 2023, the Company issued 3,334 options to a key employee. These shares had a grant date fair value of $23.10 per share or a cumulative fair market value of $76,970 as calculated using Black-Scholes (exercise price $24.30 per share, stock price $24.30 per share, volatility of 117.90%, discount rate of 4.44% and a ten-year term). One-half of the options vested on the grant date, one-half vest on the first anniversary of the grant. The fair-market value of the vested options was amortized upon the issuance of the grant and the remaining options will be amortized over the 12-month vesting cycle.

 

During the three months ended March 31, 2024 and 2023, the Company recognized stock option expenses totaling $517,365 and $69,068, respectively.

 

The unamortized stock option expenses as of March 31, 2024 totaled $1,968,146.

 

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Restricted Stock Units

 

On October 14, 2021, the Compensation Committee of the Board of Directors approved grants totaling 93,169 Restricted Stock Units to the Company’s six directors and seven key employees. Each RSU had a grant date fair value of $242.70 which will be amortized upon vesting into administrative expenses within the Consolidated Statement of Comprehensive Loss. Such RSUs were granted under the 2021 Plan. Vesting of each RSU is:

 

  One-third (33%) of each RSU will vest when the Company’s market capitalization is equal to or greater than $500,000,000 for at least ten trading days during any twenty (20) consecutive trading day period ending on or after December 15, 2021 and the fair market value of the Common Stock equals or exceeds $150.00 during such trading day period.
     
  One-third (33%) of each RSU will vest when the Company’s market capitalization is equal to or greater than $750,000,000 for at least ten trading days during any twenty (20) consecutive trading day period ending on or after December 15, 2021 and the fair market value of the Common Stock equals or exceeds $150.00 during such trading day period.
     
  The remaining awarded units will vest when the Company’s market capitalization is equal to or greater than $1,000,000,000 for at least ten trading days during any twenty (20) consecutive trading day period ending on or after December 15, 2021 and the fair market value of the Common Stock equals or exceeds $150.00 during such trading day period.
     
  In the event that (i) a change in control occurs or (ii) the participant incurs a termination of service by the Company without cause or due to the participant’s death or total and permanent disability, then all unvested units shall become vested units immediately upon the occurrence of such event.

 

As of March 31, 2024, none of the vesting milestones have been met.

 

During the three months ended March 31, 2024, the Company converted 908 vested RSUs issued in September 2020 to a member of the Board of Directors into 908 common shares of the Company. Expenses related to these RSUs had been recognized by pre-merger Akers Biosciences, Inc in 2021 and prior years.

 

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The following is the status of outstanding unvested restricted stock units outstanding as of March 31, 2024 and the changes for the three months ended March 31, 2024:

Summary of Restricted Stock Units Activity

       Weighted 
       Average 
   Number of   Grant Date 
   RSUs   Fair Value 
Balance at December 31, 2023   88,668   $242.70 
Granted   -    - 
Vested   -    - 
Forfeited   -    - 
Canceled/Expired   -    - 
Balance at March 31, 2024   88,668   $242.70 

 

As of March 31, 2024, the unamortized value of the RSUs was $21,519,721.

 

Note 6 – Equity

 

Authorized Capital Stock

 

As of March 31, 2024, the Company’s authorized capital stock consisted of 66,666,666 shares, of which 16,666,666 are shares of Common Stock, $0.001 par value per share (the “Common Stock”), and 50,000,000 are shares of preferred stock, $0.001 par value per share, 1,990,000 of which have been designated as Series C Convertible Preferred Stock (the “Series C Preferred Stock”), 211,353 of which have been designated as Series D Convertible Preferred Stock (the “Series D Preferred Stock”), 100,000 of which have been designated as Series E Junior Participating Preferred Stock and 15,000 of which have been designated as Series F Convertible Preferred Stock (the “Series F Preferred Stock”). As of March 31, 2024 and December 31, 2023, there were 2,157,632 and 2,018,857 shares of Common Stock issued and outstanding, respectively. There were 72,992 shares of Series D Preferred Stock issued and outstanding and warrants to purchase Series C Preferred Stock convertible into 918 shares of Common Stock issued and outstanding as of March 31, 2024 and December 31, 2023. There were 4,988 and 6,633 shares of Series F Preferred Stock issued and outstanding as of March 31, 2024 and December 31, 2023, respectively. There were no shares of Series C Convertible Preferred Stock or Series E Junior Participating Preferred Stock issued and outstanding as of March 31, 2024 and December 31, 2023.

 

Preferred Stock

 

The holders of preferred shares or preferred warrants are entitled to vote per share, as limited by the certificate of designation for each class of preferred shares or warrants, at meetings of the Company.

 

27
 

 

Series D Convertible Preferred Stock

 

The following are the principal terms of the Series D Preferred Stock:

 

Rank

 

The Series D Preferred Stock ranks (1) on parity with Common Stock on an “as converted” basis, (2) senior to any series of our capital stock hereafter created specifically ranking by its terms junior to the Series D Preferred Stock, (3) on parity with any series of our capital stock hereafter created specifically ranking by its terms on parity with the Series D Preferred Stock, and (4) junior to any series of our capital stock hereafter created specifically ranking by its terms senior to the Series D Preferred Stock in each case, as to dividends or distributions of assets upon our liquidation, dissolution or winding up whether voluntary or involuntary.

 

Conversion Rights

 

A holder of Series D Preferred Stock is entitled at any time to convert any whole or partial number of shares of Series D Preferred Stock into shares of our Common Stock, determined by dividing the stated value equal to $0.01 by the conversion price of $0.01 per share. A holder of Series D Preferred Stock is prohibited from converting Series D Preferred Stock into shares of Common Stock if, as a result of such conversion, the holder, together with its affiliates, would own more than 4.99% of the total number of shares of our Common Stock then issued and outstanding (with such ownership restriction referred to as the “Series D Beneficial Ownership Limitation”) immediately after giving effect to the issuance of the shares of Common Stock issuable upon conversion of the Series D Preferred Stock. However, any holder may increase or decrease such percentage to any other percentage not in excess of 9.99%, provided that any increase in such percentage shall not be effective until 61 days after such notice to us. The conversion rate of the Series D Preferred Stock is subject to proportionate adjustments for stock splits, reverse stock splits and similar events, but is not subject to adjustment based on price anti-dilution provisions.

 

Dividend Rights

 

In addition to stock dividends or distributions for which proportionate adjustments will be made, holders of Series D Preferred Stock are entitled to receive dividends on shares of Series D Preferred Stock equal, on an as-if-converted-to-common-stock basis, to and in the same form as dividends actually paid on shares of the Common Stock when, as and if such dividends are paid on shares of the Common Stock. No other dividends are payable on shares of Series D Preferred Stock.

 

Voting Rights

 

Subject to the Series D Beneficial Ownership Limitation, on any matter presented to our stockholders for their action or consideration at any meeting of our stockholders (or by written consent of stockholders in lieu of a meeting), each holder, in its capacity as such, shall be entitled to cast the number of votes equal to the number of whole shares of our Common Stock into which the Series D Preferred Stock beneficially owned by such holder are convertible as of the record date for determining stockholders entitled to vote on or consent to such matter (taking into account all Series D Preferred Stock beneficially owned by such holder). Except as otherwise required by law or by the other provisions of the Certificate of Designation of Series D Convertible Preferred Stock (the “Series D Certificate of Designation”), the holders of Series D Preferred Stock, in their capacity as such, shall vote together with the holders of our Common Stock and any other class or series of stock entitled to vote thereon as a single class.

 

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Liquidation Rights

 

Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of Series D Preferred Stock are entitled to receive, pari passu with the holders of Common Stock, out of the assets available for distribution to stockholders an amount equal to such amount per share as would have been payable had all shares of Series D Preferred Stock been converted into Common Stock immediately before such liquidation, dissolution or winding up, without giving effect to any limitation on conversion as a result of the Series D Beneficial Ownership Limitation, as described above.

 

Exchange Listing

 

Series D Preferred Stock is not listed on the Nasdaq, any national securities exchange or other nationally recognized trading system. Our Common Stock issuable upon conversion of the Series D Preferred Stock is listed on the Nasdaq under the symbol “MYMD”.

 

Failure to Deliver Conversion Shares

 

If we fail to timely deliver shares of Common Stock upon conversion of the Series D Preferred Stock (the “Series D Conversion Shares”) within the time period specified in the Series D Certificate of Designation (within two trading days after delivery of the notice of conversion, or any shorter standard settlement period in effect with respect to trading market on the date notice is delivered), then we are obligated to pay to the holder, as liquidated damages, an amount equal to $25 per trading day (increasing to $50 per trading day on the third trading day and $100 per trading day on the sixth trading day) for each $5,000 of stated value of Series D Preferred Stock being converted which are not timely delivered. If we make such liquidated damages payments, we are also not obligated to make Series D Buy-In (as defined below) payments with respect to the same Series D Conversion Shares.

 

Compensation for Series D Buy-In on Failure to Timely Deliver Shares

 

If we fail to timely deliver the Series D Conversion Shares to the holder, and if after the required delivery date the holder is required by its broker to purchase (in an open market transaction or otherwise) or the holder or its brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the holder of the Series D Conversion Shares which the holder anticipated receiving upon such conversion or exercise (a “Series D Buy-In”), then we are obligated to (A) pay in cash to such holder (in addition to any other remedies available to or elected by such holder) the amount, if any, by which (x) such holder’s total purchase price (including any brokerage commissions) for the shares of Common Stock so purchased exceeds (y) the product of (1) the aggregate number of Series D Conversion Shares that such holder was entitled to receive from the conversion at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions) and (B) at the option of such holder, either reissue (if surrendered) the shares of Series D Preferred Stock equal to the number of shares of Series D Preferred Stock submitted for conversion (in which case, such conversion shall be deemed rescinded) or deliver to such holder the number of Series D Conversion Shares that would have been issued if we had timely complied with its delivery requirements.

 

29
 

 

As of March 31, 2024, the Company had 72,992 shares of Series D Convertible Preferred Stock outstanding which represent 1,217 underlying shares of the Company’s Common Stock.

 

Series F Convertible Preferred Stock

 

The following are the principal terms of the Series F Preferred Stock:

 

Dividends

 

The holders of the Series F Preferred Stock are entitled to dividends of 10.0% per annum, compounded monthly, which are payable in cash or shares of Common Stock at the Company’s option, in accordance with the terms of the certificate of designation of the Series F Preferred Stock, which was subsequently amended and restated by the filing of the Amended and Restated Certificate of Designations of Series F Convertible Preferred Stock, effective April 8, 2024 (as amended and restated, (the “Series F Certificate of Designation”). Upon the occurrence and during the continuance of a Triggering Event (as defined in the Series F Certificate of Designation), shares of Series F Preferred Stock will accrue dividends at the rate of 15.0% per annum. Upon conversion or redemption, the holders of shares of Series F Preferred Stock are also entitled to receive a dividend make-whole payment.

 

Voting Rights

 

Except as required by law (including without limitation, the Delaware General Corporation Law (the “DGCL”)), the holders of the Series F Preferred Stock are entitled to vote with holders of the Common Stock on as as-converted basis, with the number of votes to which each holder of Series F Preferred Stock is entitled to be calculated assuming a conversion price of $60.21 per share, which was the Minimum Price (as defined in Rule 5635 of the Rule of the Nasdaq Stock Market) applicable immediately before the execution and delivery of the Purchase Agreement, subject to certain beneficial ownership limitations as set forth in the Series F Certificate of Designation. The Series F Certificate of Designation further provides that the holders of record of the Series F Preferred Stock, exclusively and as a separate class, shall be entitled to elect one director of the Company one time on or before June 30, 2024. . To the extent that under the DGCL the vote of the holders of shares of Series F Preferred Stock, voting separately as a class or series, as applicable, is required to authorize a given action of the Company, the affirmative vote or consent of a majority of the outstanding shares of Series F Preferred Stock, voting together in the aggregate and not in separate series unless required under the DGCL, represented at a duly held meeting at which a quorum is presented or by written consent of such majority (except as otherwise may be required under the DGCL) shall constitute the approval of such action by both the class or the series, as applicable.

 

Liquidation

 

Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, each holder of shares of the Series F Preferred Stock shall be entitled to receive out of the assets, whether capital or surplus, of the Company an amount per share of Series F Preferred Stock equal to the greater of (A) 125% of the stated value of such share of Series F Preferred Stock (plus any applicable make-whole amount, unpaid late charge or other applicable amount) on the date of such payment and (B) the amount per share such holder would receive if such holder converted such share of Series F Preferred Stock into Common Stock immediately prior to the date of such payment. All shares of capital stock of the Company shall be junior in rank to all shares of Series F Preferred Stock with respect to the preferences as to payments upon the liquidation.

 

Conversion

 

The Series F Preferred Stock is convertible into shares of Common Stock (the “Conversion Shares”). The initial conversion price, subject to adjustment as set forth in the Series F Certificate of Designation, was $2.255 (pre-split) (the “Conversion Price”). The Conversion Price can be adjusted as set forth in the Series F Certificate of Designation for stock dividends and stock splits or the occurrence of a fundamental transaction (generally including any reorganization, recapitalization or reclassification of the Common Stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation or merger with or into another person, the acquisition of more than 50% of the outstanding Common Stock, or any person or group becoming the beneficial owner of 50% of the voting power represented by the outstanding Common Stock). The Conversion Price is also subject to “full ratchet” price-based adjustment in the event of any issuances of Common Stock, or securities convertible, exercisable or exchangeable for Common Stock, at a price below the then-applicable Conversion Price (subject to certain exceptions). Following the Reverse Stock Split, the Conversion Price for the Preferred Shares was adjusted to $3.18 per share pursuant to the terms of the Series F Certificate of Designation. If any shares of Series F Preferred Stock are converted or reacquired by us, such shares shall resume the status of authorized but unissued shares of Series F Preferred Stock of the Company and shall no longer be designated as Series F Preferred Stock.

 

The Company is required to redeem the shares of Series F Preferred Stock in 12 equal monthly installments, commencing on July 1, 2023. The amortization payments due upon such redemption are payable, at the Company’s election, in cash, or subject to certain limitations, in shares of Common Stock valued at the lower of (i) the Conversion Price then in effect and (ii) the greater of (A) 80% of the average of the three lowest closing prices of the Company’s Common Stock during the thirty trading day period immediately prior to the date the amortization payment is due or (B) a “Floor Price” of $6.60 (subject to adjustment for stock splits, stock dividends, stock combinations, recapitalizations or other similar events) or, in any case, such lower amount as permitted, from time to time, by the Nasdaq Stock Market; provided that if the Floor Price is the lowest effective price, the Company will be required to make the amortization payment in cash. On April 5, 2024, the Company entered into the Omnibus Agreement with the Required Holders (as defined in the Series F Certificate of Designation). Pursuant to the Omnibus Agreement, the Required Holders agreed (i) to defer payment of the Installments, under Section 9(a) of the Series F Certificate of Designation, until May 1, 2024, and (ii) to waive any breach or violation of the Purchase Agreement, the Series F Certificate of Designations, or the Warrants resulting from missing the Installments.

 

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Exchange Cap

 

The Company was initially restricted from issuing shares of Common Stock upon conversion of the Series F Preferred Stock or exercise of the associated warrants in excess of 19.99% of the shares of Common Stock outstanding as of the date immediately prior to the issuance of the shares of Series F Preferred Stock and the associated warrants (the “Issuable Maximum”) until the Company obtained stockholder approval for the issuance of shares of Common Stock in excess of the Issuable Maximum (“Stockholder Approval”). The Company received the Stockholder Approval on July 31, 2023.

 

Optional Conversion

 

The Series F Preferred Stock can be converted at the option of the holder at any time and from time to time after the original issuance date. Holders shall effect conversions by providing us with the form of conversion notice (the “Notice of Conversion”) specifying the number of shares of Series F Preferred Stock to be converted, the number of shares of Series F Preferred Stock owned subsequent to the conversion at issue and the date on which such conversion is to be effected, which date may not be prior to the date the applicable holder delivers by email such Notice of Conversion to us.

 

Mandatory Conversion

 

If on any day after the issuance of the shares of Series F Preferred Stock the closing price of the Common Stock has exceeded $202.95 (subject to adjustment for stock splits, stock dividends, stock combinations, recapitalizations or other similar events) for 20 consecutive trading days and the daily dollar trading volume of the Common Stock has exceeded $3,000,000 per trading day during the same period and certain equity conditions described in the Series F Certificate of Designation are satisfied (the “Mandatory Conversion Date”), we shall deliver written notice of the Mandatory Conversion (as defined below) to all holders on the Mandatory Conversion Date and, on such Mandatory Conversion Date, we shall convert all of each holder’s shares of Series F Preferred Stock into Conversion Shares at the then effective Conversion Price (the “Mandatory Conversion”). If any of the Equity Conditions shall cease to be satisfied at any time on or after the Mandatory Conversion Date through and including the actual delivery of all of the Conversion Shares to the holders, the Mandatory Conversion shall be deemed withdrawn and void ab initio.

 

Beneficial Ownership Limitation

 

The Series F Preferred Stock cannot be converted to Common Stock if the holder and its affiliates would beneficially own more than 4.99% or 9.99% at the election of the holder of the outstanding Common Stock. However, any holder may increase or decrease such percentage to any other percentage not in excess of 9.99% upon notice to us, provided that any increase in this limitation will not be effective until 61 days after such notice from the holder to us and such increase or decrease will apply only to the holder providing such notice.

 

Common Stock

 

The holders of common shares are entitled to one vote per share at meetings of the Company.

 

As of March 31, 2024, the Company had 2,157,632 shares of Common Stock issued and outstanding. During the three months ended March 31, 2024, the Company issued 137,867 shares of common stock as installment conversions and 0 shares of common stock for make-whole adjustments for the Series F Convertible Preferred.

 

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Common Stock Warrants

 

The table below summarizes the warrant activity for the three months ended March 31, 2024:

       Weighted   Average     
       Average   Remaining   Aggregate 
   Number of   Exercise   Contractual   Intrinsic 
   Warrants   Price   Term (years)   Value 
Balance at December 31, 2023   4,933,622   $147.86    4.08   $21,650,589 
Issued   -    -    -    - 
Exercised   -    -    -    - 
Forfeited   -    -    -    - 
Canceled/Expired   -    -    -    - 
Balance at March 31, 2024   4,933,622   $9.02    3.83   $- 
Exercisable as of March 31, 2024   4,933,622   $9.02    3.83   $- 

 

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the closing stock price of $2.39 for the Company’s common shares on March 31, 2024 and the closing stock price of $7.77 for the Company’s common shares on December 31, 2023.

 

Pursuant to the February 2023 Offering, the Company issued to investors Warrants to purchase 4,716,904 shares of Common Stock (as adjusted, and subject to further adjustment), with an exercise price of $3.18 per share (as adjusted, and subject to further adjustment), for a period of five years from the date of issuance. The Exercise Price and the number of shares issuable upon exercise of the Warrants are subject to customary adjustments for stock dividends, stock splits, reclassifications and the like, and subject to price-based adjustment, on a “full ratchet” basis, in the event of any issuances of Common Stock, or securities convertible, exercisable or exchangeable for Common Stock, at a price below the then-applicable Exercise Price (subject to certain exceptions). Upon any such price-based adjustment to the Exercise Price, the number of shares issuable upon exercise of the Warrants will be increased proportionately.

 

Series C Convertible Preferred Stock Warrants

 

The table below summarizes the warrant activity for the three months ended March 31, 2024:

       Weighted   Average     
       Average   Remaining   Aggregate 
   Number of   Exercise   Contractual   Intrinsic 
   Warrants   Price   Term (years)   Value 
Balance at December 31, 2023   918   $240.00    0.94   $           - 
Granted   -    -    -    - 
Exercised   -    -    -    - 
Forfeited   -    -    -    - 
Canceled/Expired   -    -    -    - 
Balance at March 31, 2024   918   $240.00    0.69   $- 
Exercisable as of March 31, 2024   918   $240.00    0.69   $- 

 

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the closing stock price of $2.39 for the Company’s common shares on March 31, 2024 and the closing stock price of $7.77 for the Company’s common shares on December 31, 2023. All Series C Convertible Preferred Stock Warrants were vested on date of grant.

 

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Note 7 – Commitments and Contingencies

 

NASDAQ Capital Market Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard

 

On October 11, 2023, the Company received a letter from the Listing Qualifications Department of the Nasdaq Stock Market (“Nasdaq”) indicating that, based upon the closing bid price of the Company’s common stock for the 30 consecutive business days between August 29, 2023, to October 10, 2023, the Company did not meet the minimum bid price of $1.00 per share required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2). The letter also indicated that the Company will be provided with a compliance period of 180 calendar days, or until April 8, 2024 (the “Compliance Period”), in which to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A).

 

Effective as of 4:05 p.m. Eastern Standard Time on February 14, 2024, the Company effected the Reverse Stock Split of its common stock at a ratio of one-for-thirty. Simultaneously with the Reverse Stock Split, number of shares of the Company’s common stock authorized for issuance was reduced from 500,000,000 shares to 16,666,666 shares, and our authorized capital stock was reduced from 550,000,000 shares to 66,666,666 shares. The Company’s common stock continued to be traded on the Nasdaq Capital Market under the symbol MyMD and began trading on a split-adjusted basis at market open on February 15, 2024. On March 4, 2024, the Company was notified by Nasdaq that the Company had regained compliance with all Nasdaq listing requirements and the matter was closed.

 

Litigation and Settlements

 

Raymond Akers Actions

 

On April 14, 2021, Raymond F. Akers, Jr., Ph.D. filed a lawsuit against MyMD Pharmaceuticals, Inc. (p/k/a Akers Biosciences, Inc.) in the Superior Court of New Jersey, Law Division, Gloucester County (the “First Raymond Akers Action”). Mr. Akers asserts one common law whistleblower retaliation claim against the Company.

 

On September 23, 2021, the Court granted MyMD Pharmaceutical, Inc.’s (“MyMD’s”) Motion to Dismiss Plaintiff’s Amended Complaint and dismissed Plaintiff’s Amended Complaint. The Court indicated that Mr. Akers is “free to file another complaint, however, tort-based ‘Pierce’ allegations, and/or CEPA claims are barred by the statute of limitations.”

 

On March 1, 2022, Mr. Akers filed a second action against MyMD in the Superior Court of New Jersey, Law Division, Gloucester County (the “Second Raymond Akers Action”) again asserting one common law whistleblower retaliation claim against the Company. The Company believes that the Second Raymond Akers Action is without merit and, moreover, was filed against the Court’s specific admonition that Plaintiff does not attempt to circumvent the statute of limitations.

 

On May 27, 2022, the Court granted-in-part and denied-in-part MyMD’s Motion to Dismiss Plaintiff’s Complaint. The Court reaffirmed the ruling in the First Raymond Akers Action that any tort-based Pierce claims are time-barred. However, the Court denied the Motion as it pertained to Plaintiff’s contract-based Pierce claim and “Repayment of Monies Owed” claim. On July 29, 2022, MyMD filed its Answer, which included affirmative defenses. As of March 31, 2024, the Second Raymond Akers Action is in the discovery phase.

 

All legal fees incurred were expensed as and when incurred.

 

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Note 8 – Related Parties

 

SRQ Patent Holdings and SRQ Patent Holdings II

 

MyMD is a party to two Amended and Restated Confirmatory Patent Assignment and Royalty Agreements, both dated November 11, 2020, with SRQ Patent Holdings and SRQ Patent Holdings II, under which MyMD (or its successor) will be obligated to pay to SRQ Patent Holdings or SRQ Patent Holdings II (or its designees) certain royalties on product sales or other revenue received on products that incorporate or are covered by the intellectual property that was assigned to MyMD. The royalty is equal to 8% of the net sales price on product sales and, without duplication, 8% of milestone revenue or sublicense compensation. SRQ Patent Holdings and SRQ Patent Holdings II are affiliates of Mr. Jonnie Williams, Sr. No revenue has been received subject to these agreements for the three months ended March 31, 2024 and 2023.

 

MIRA Pharmaceuticals Limited License Agreement

 

MyMD is a party to an Amended and Restated Limited License Agreement, dated June 27, 2022 and amended on April 20, 2023, with MIRA Pharmaceuticals, Inc. (Nasdaq: MIRA), under which the parties agreed to share technical information and know-how pertaining to the synthetic manufacture and formulation of the parties’ respective Supera-CBD™ and MIRA1a™ product candidates. MyMD, which holds patent rights to MIRA1a™ in 22 foreign countries, was granted a perpetual, non-exclusive, royalty-free license to use improvements to MIRA1a™ made under the agreement, and MIRA was granted a limited, perpetual, worldwide, non-exclusive, royalty-free license to use Supera-CBD™ as a synthetic intermediate in the manufacture of MIRA1a™. [MyMD’s President and Chief Medical Officer, Chris Chapman, M.D., is Executive Chairman of MIRA]

 

Note 9 – Employee Benefit Plan

 

The Company maintains a defined contribution benefit plan under section 401(k) of the Internal Revenue Code covering substantially all qualified employees of the Company (the “401(k) Plan”). Under the 401(k) Plan, the Company matches 100% up to a 3% contribution, and 50% over a 3% contribution, up to a maximum of 5%.

 

The Company made matching contributions to the 401(k) Plan during the three months ended March 31, 2024 and 2023 of $6,058 and $10,281, respectively.

 

Note 10—Patent Assignment and Royalty Agreement

 

In November 2016, the Company entered into an agreement with the holders of certain intellectual property relating to the Company’s current product candidate. Under the terms of the agreement, the counterparty assigned its rights and interest in certain patents to the Company in exchange for future royalty payments based on a fixed percentage of future revenues, as defined. The agreement is effective until the later of (1) the date of expiration of the assigned patents or (2) the date of expiration of the last strategic partnership or licensing agreement including the assigned patents. No revenue has been received subject to this agreement for the three months ended March 31, 2024 and 2023.

 

Note 11—Subsequent Events

 

On April 5, 2024, the Company entered into the Omnibus Agreement with the Required Holders. Pursuant to the Omnibus Agreement, the Required Holders agreed (i) to defer payment of the Installments, under Section 9(a) of the Certificate of Designations, until May 1, 2024, and (ii) to waive any breach or violation of the Purchase Agreement, the Certificate of Designations, or the Warrants resulting from missing the Installments. The Company and the Required Holders further agreed pursuant to the Omnibus Agreement to amend and restate the Certificate of Designations of the Series F Convertible Preferred Stock by filing the Amended and Restated Certificate of Designations of the Series F Convertible Preferred Stock (the “Amended and Restated Certificate of Designations”).

 

The Amended and Restated Certificate of Designations amended the Certificate of Designations of the Series F Convertible Preferred Stock to provide, among other things, that, except as required by applicable law, the holders of Series F Preferred Shares are entitled to vote with holders of the Common Stock on as as-converted basis, with the number of votes to which each holder of Series F Preferred Shares is entitled to be calculated assuming a conversion price of $60.21 per share, which was the Minimum Price (as defined in Rule 5635 of the Rule of the Nasdaq Stock Market) applicable immediately before the execution and delivery of the Purchase Agreement, subject to certain beneficial ownership limitations as set forth in the Amended and Restated Certificate of Designations. The Amended and Restated Certificate of Designations further provides that the holders of record of the Series F Preferred Shares, exclusively and as a separate class, shall be entitled to elect one director of the Company one time on or before June 30, 2024.

 

The Amended and Restated Certificate of Designations was filed with the Secretary of State of the State of Delaware, effective as of April 8, 2024.

 

In connection with the filing of the Amended and Restated Certificate of Designations, effective as of April 8, 2024, the Company increased the authorized number of directors from six (6) to seven (7) and appointed Mitchell Glass to serve as a member of the Company’s board of directors, with Mr. Glass having been elected to such position by the holders of the Preferred Shares.

 

On April 15, 2024, Adam Kaplin, M.D., Ph.D., who served as Chief Scientific Officer of the Company, tendered his resignation from his role as an officer of the Company, effective immediately. Dr. Kaplin’s resignation was not in connection with any disagreement between Dr. Kaplin and the Company, its management, the Company’s board of directors or any committee thereof on any matter relating to the Company’s operations, policies or practices, or any other matter.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

The information set forth below should be read in conjunction with our condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the Securities and Exchange Commission on April 1, 2024. This discussion and analysis contains forward-looking statements based on our current expectations, assumptions, estimates and projections. These forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those indicated in these forward-looking statements as a result of certain factors, including those discussed in Part II, Item 1A of this Quarterly Report on Form 10-Q, entitled “Risk Factors.” References in this discussion and analysis to “us,” “we,” “our,” or “the Company” refer collectively to MyMD Pharmaceuticals, Inc.

 

Our financial statements are prepared in accordance with GAAP. These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q.

 

This quarterly report on Form 10-Q and other reports filed by the Company from time to time with the Securities and Exchange Commission (the “SEC” and such reports, collectively, the “Filings”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the Filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks relating to the Company’s business, industry, and the Company’s operations and results of operations. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

 

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

 

Important factors that could cause actual results to differ materially from the results and events anticipated or implied by such forward-looking statements include, but are not limited to:

 

  fluctuation and volatility in market price of our Common Stock due to market and industry factors, as well as general economic, political and market conditions;
     
  the impact of dilution on our shareholders;
     
  our ability to realize the intended benefits of the Merger (as defined below) and the Contribution Agreement (as defined below);

 

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  the impact of our ability to realize the anticipated tax impact of the Merger;
     
  the outcome of litigation or other proceedings we may become subject to in the future;
     
  delisting of our Common Stock from the Nasdaq;
     
  our availability and ability to continue to obtain sufficient funding to conduct planned research and development efforts and realize potential profits;
     
  our ability to develop and commercialize our product candidates, including MYMD-1, Supera-CBD and other future product candidates;
     
  the impact of the complexity of the regulatory landscape on our ability to seek and obtain regulatory approval for our product candidates, both within and outside of the U.S.;
     
  the required investment of substantial time, resources and effort for successful clinical development and marketization of our product candidates;
     
  challenges we may face with maintaining regulatory approval, if achieved;
     
  the potential impact of changes in the legal and regulatory landscape, both within and outside of the U.S.;
     
  the impact of pandemics, such as COVID-19, on the administration, funding and policies of regulatory authorities, both within and outside of the U.S.;
     
  our dependence on third parties to conduct pre-clinical and clinical trials and manufacture its product candidates;
     
  the impact of pandemics, like COVID-19, on our results of operations, business plan and the global economy;
     
  challenges we may face with respect to our product candidates achieving market acceptance by providers, patients, patient advocacy groups, third party payors and the general medical community;
     
  the impact of pricing, insurance coverage and reimbursement status of our product candidates;
     
  emerging competition and rapidly advancing technology in our industry;
     
  our ability to obtain, maintain and protect our trade secrets or other proprietary rights, operate without infringing upon the proprietary rights of others and prevent others from infringing on its proprietary rights;
     
  our ability to maintain adequate cyber security and information systems;
     
  our ability to achieve the expected benefits and costs of the transactions related to the acquisition of Supera Pharmaceuticals, Inc. (“Supera”);
     
  our ability to effectively execute and deliver our plans related to commercialization, marketing and manufacturing capabilities and strategy;
     
  our ability to obtain adequate financing in the future on reasonable terms, as and when we need it;
     
  challenges we may face in identifying, acquiring and operating new business opportunities;
     
  our ability to retain and attract senior management and other key employees;
     
  our ability to quickly and effectively respond to new technological developments;
     
  changes in political, economic or regulatory conditions generally and in the markets in which we operate; and
     
  our compliance with all laws, rules, and regulations applicable to our business.

 

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Overview

 

MyMD is focused on developing and commercializing two therapeutic platforms based on well-defined therapeutic targets, MYMD-1 and Supera-CBD:

 

 

MYMD-1 is a clinical stage small molecule that regulates the immunometabolic system to treat autoimmune disease, including (but not limited to) multiple sclerosis, diabetes, rheumatoid arthritis, and inflammatory bowel disease. MYMD-1 is being developed to treat age-related illnesses such as frailty and sarcopenia. MYMD-1 works by regulating the release of numerous pro-inflammatory cytokines, such as TNF-α, interleukin 6 (“IL-6”) and interleukin 17 (“IL-17”). MYMD-1 currently is being evaluated in patients with sarcopenia (age-related muscle loss). The company has significant intellectual property coverage to protect these autoimmune indications, as well as therapy as an anti-aging product;

 

MyMD in collaboration with its CRO is in the final stages of preparing the clinical safety report for the Phase II clinical trtal, “A double-blind, randomized, Phase 2 study to investigate the efficacy, tolerability and pharmacokinetics of MYMD1 in the treatment of participants aged 65 years or older with chronic inflammation associated with sarcopenia/frailty” for submission to the FDA. The submission is planned for the end of the second quarter of 2024. Exploratory analysis indicates the biomarker sTNFR1 is the most sensitive biomarker for Sarcopenia patients aged 65-75 years old. PK analysis indicates that PK/PD strategy is consistent at measurements of biomarkers 2-4 hours post-dose. There were no serious adverse events reported, no subject dropout’s secondary to an adverse event. Additionally, there were no clinically significant cardiovascular, ECG issues, or neurotoxicity issues with any patients during the study.

 

In preparation for future studies, MyMD and partner Charles River Laboratories completed a FDA required 90-day oral gavage electroencephalogram (EEG) safety study in an animal model. No treatment-related adverse events were observed, and MYMD-1 was well tolerated in the animals. EEG and macroscopic results were insignificant. If acceptable by the FDA this study will allow the potential clinical dosing greater than 30 days with MYMD-1.

 

A phase II study for rheumatoid arthritis, “A double-blind, randomized, placebo-controlled multicenter Phase II proof-of-concept study to evaluate the efficacy, safety, biological activity, and pharmacokinetics of MYMD-1™ added to methotrexate in patients with moderate-to-severe active rheumatoid arthri