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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File No. 001-27072
AIM IMMUNOTECH INC.
(Exact name of registrant as specified in its charter)
| Delaware | 52-0845822 | |
| (State or other jurisdiction of | (I.R.S. Employer Identification | |
| incorporation or organization) | Number) |
| 2117 SW Highway 484, Ocala FL | 34473 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (352) 448-7797
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||
| Common Stock, par value $0.001 per share | AIM | NYSE American |
Securities registered pursuant to Section 12(g) of the Act:
(Title of Each Class)
NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See 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 pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by checkmark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates at June 30, 2023, the last business day of the registrant’s most recently completed second fiscal quarter was $31,829,482.
The number of shares of the registrant’s Common Stock outstanding as of March 27, 2024 was 49,901,177.
DOCUMENTS INCORPORATED BY REFERENCE: None.
TABLE OF CONTENTS
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PART I
| ITEM 1. | Business |
GENERAL
AIM ImmunoTech Inc. and its subsidiaries (collectively, “AIM”, “Company”, “we” or “us”) are an immuno-pharma company headquartered in Ocala, Florida, and focused on the research and development of therapeutics to treat multiple types of cancers, viral diseases and immune-deficiency disorders. We have established a strong foundation of laboratory, pre-clinical and clinical data with respect to the development of nucleic acids and natural interferon to enhance the natural antiviral defense system of the human body, and to aid the development of therapeutic products for the treatment of certain cancers and chronic diseases.
Our flagship products are Ampligen (rintatolimod), a first-in-class drug of large macromolecular RNA (ribonucleic acid) molecules, and Alferon N Injection (Interferon alfa). Ampligen has not been approved by the FDA or marketed in the United States. Ampligen is approved for commercial sale in the Argentine Republic for the treatment of severe Chronic Fatigue Syndrome (“CFS”). Our primary business focus involves Ampligen. Ampligen is a double-stranded RNA (“dsRNA”) molecule being developed for globally important cancers, viral diseases and disorders of the immune system. We are currently proceeding primarily in four areas:
| ● | Conducting a randomized, controlled study to evaluate efficacy and safety of Ampligen compared to a control group to treat locally advanced pancreatic cancer patients. | |
| ● | Evaluating Ampligen in other cancers, as a potential therapy that modifies the tumor microenvironment with the goal of increasing anti-tumor responses to checkpoint inhibitors. | |
| ● | Exploring Ampligen’s antiviral activities and potential use as a prophylactic or treatment for existing viruses, new viruses and mutated viruses thereof. | |
| ● | Evaluating Ampligen as a treatment for myalgic encephalomyelitis/chronic fatigue syndrome (“ME/CFS”) and fatigue and/or Post-COVID conditions of fatigue. |
We are prioritizing activities in an order related to the stage of development, with those clinical activities such as pancreatic cancer, ME/CFS and Post-COVID conditions having priority over antiviral experimentation. We intend that priority clinical work be conducted in trials authorized by the U.S. Food and Drug Administration (“FDA”) or European Medicines Agency (“EMA”), which trials support a potential future NDA. However, our antiviral experimentation is designed to accumulate additional preliminary data supporting our hypothesis that Ampligen is a powerful, broad-spectrum prophylaxis and early-onset therapeutic that may confer enhanced immunity and cross-protection. Accordingly, we will conduct antiviral programs in those venues most readily available and able to generate valid proof-of-concept data, including foreign venues. Please see “Immuno-Oncology” below.
Immuno-Oncology
We are focused on pancreatic cancer because testing results, to date, primarily conducted in the Netherlands, have been very promising. The Netherlands study generated statistically significant data indicating that Ampligen extended survival well beyond the Standard of Care (“SOC”), when compared to well-matched historical controls. These data support the proposition that Ampligen, when administered to either patients with locally advanced or metastatic pancreatic cancer after systemic chemotherapy showed a statistically significant increase in survival rate. In October 2021, we and our Contract Research Organization, Amarex, submitted an Investigational New Drug (“IND”) application to the FDA for a planned Phase 2 study of Ampligen as a therapy for locally advanced or metastatic late-stage pancreatic cancer.
Because of the differences in the scale of necessary trials, our initial primary focus when it comes to pancreatic cancer will be cases that are locally advanced, rather than metastatic. The number of different approaches to treating metastatic pancreatic cancer — approaches which would be determined by treating physicians — would require a much larger, far more expensive trial than would a trial for locally advanced pancreatic cancer. Therefore, we are focusing on patients who have completed FOLFIRINOX and have stable disease. In August 2022, we received Institutional Review Board (“IRB”) approval of the trial protocol in locally advanced pancreatic cancer and so announced the trial’s commencement. The study is recruiting patients. Assuming this trial and subsequent planned clinical trials confirm the existing data, our goal is to then submit an NDA for use of Ampligen in pancreatic cancer patients.
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Ampligen has also demonstrated in the clinic the potential for standalone efficacy in a number of other solid tumors. We have also seen success in increasing survival rates and efficacy in the treatment of animal tumors when Ampligen is used in combination with checkpoint blockade therapies. In fact, in March 2022 we announced interim data from an investigator-initiated, Phase 2, single-arm, efficacy/safety trial to evaluate the effectiveness of combining intensive locoregional intraperitoneal (IP) chemoimmunotherapy of cisplatin with IP Ampligen (TLR-3 agonist) and IV infusion of the checkpoint inhibitor pembrolizumab for patients with recurrent platinum-sensitive ovarian cancer. We believe that data from the study, which is being conducted by the University of Pittsburgh Medical Center and funded by a Merck grant, demonstrated that when combining three drugs – Ampligen and pembrolizumab, which are both immune therapies, with cisplatin, a chemotherapy – evidence of increased biomarkers associated with T cell chemotaxis and cytolytic function has been seen. Importantly, increases of these biomarkers in the tumor microenvironment have been correlated with favorable tumor responses. These successes in the field of immuno-oncology have guided our efforts toward the potential use of Ampligen as a combinational therapy for the treatment of a variety of solid tumor types. The first of our patent applications in this space was granted by the Netherlands on March 15, 2021.
Ampligen as a Potential Antiviral
We have a research and pre-clinical history that indicates broad-spectrum antiviral capability of Ampligen in animals. We hope to demonstrate that it has the same effect in humans. To do this, among other things, we need a population infected with a virus. That is why we have spent significant resources on COVID-19 (the disease caused by SARS-CoV-2) which is active and still infecting many subjects. While much would need to be done to get Ampligen to market as a broad-spectrum antiviral, we believe that it is important to focus our efforts first and foremost on thoroughly proving the concept, especially while there is still a large COVID-19-infected population. Previously, animal studies were conducted that yielded positive results utilizing Ampligen to treat numerous viruses, such as Western Equine Encephalitis Virus, Ebola, Vaccinia Virus (which is used in the manufacture of smallpox vaccine) and SARS-CoV-1. We have conducted experiments in SARS-CoV-2 showing Ampligen has a powerful impact on viral replication. The prior studies of Ampligen in SARS-CoV-1 animal experimentation may predict similar protective effects against SARS-CoV-2.
The FDA has requested that we provide additional data to assist the agency in evaluating the potential risks and benefits of administering Ampligen to asymptomatic and mild COVID-19 individuals. However, as discussed in more detail below, where the threat to the patient from COVID-19 is high, the FDA has already authorized Ampligen in a clinical trial of patients with COVID-19 who have a pre-existing cancer. We have also elected to explore studies (initially with healthy volunteers) outside the United States and have already conducted a study in the Netherlands to determine the safety profile of the intranasal delivery of Ampligen.
In this regard, CHDR, a foundation located in Leiden in the Netherlands, managed a Phase 1 randomized, double-blind study for us to evaluate the safety, tolerability, and biological activity of repeated administration of Ampligen intranasally. A total of 40 healthy subjects received either Ampligen or a placebo in the trial, with the Ampligen given at four escalating dosages across four cohorts, to a maximum level of 1,250 micrograms. The study was completed, and the Final Safety Report reported no Serious or Severe Adverse Events at any dosage level.
While there are approved therapies for COVID-19, we believe that, if Ampligen has the broad-spectrum antiviral properties that we believe that it has, it could be a very valuable tool in treating variants of existing viral diseases, including COVID-19, or novel ones that arise in the future. Unlike most developing therapeutics which attack the virus, Ampligen works differently. We believe that it activates antiviral immune system pathways that fight not just a particular virus or viral variant, but other similar viruses as well.
Please see “Ampligen as a Potential Antiviral” below.
Ampligen as a Treatment for Post-COVID Conditions
In July 2023, we enrolled and dosed the first patient in our Phase 2 study evaluating Ampligen® as a potential therapeutic for people with post-COVID conditions (“AMP-518”). We announced in August 2023 that the study had met the planned enrollment of 80 subjects ages 18 to 60 years who have been randomized 1:1 to receive twice-weekly intravenous infusions of Ampligen or placebo for 12 weeks, with a follow-up phase of two weeks. All patients have completed the study and topline data was reported in February 2024.
Please see “Ampligen as a Treatment for Post-COVID Conditions” below.
Ampligen as a treatment for ME/CFS
We have long been focused on seeking the FDA’s approval for the use of Ampligen to treat myalgic encephalomyelitis/chronic fatigue syndrome (“ME/CFS”). In fact, in February 2013, we received a Complete Response letter (“CRL”) from the FDA for our Ampligen NDA for ME/CFS, stating that we should conduct at least one additional clinical trial, complete various nonclinical studies and perform a number of data analyses.
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While developing a comprehensive response to the FDA and a plan for a confirmatory trial for the FDA NDA, we proceeded independently in Argentina and, in August 2016, we received approval of an NDA from ANMAT for commercial sale of Ampligen in the Argentine Republic for the treatment of severe CFS. In September 2019, we received clearance from the FDA to ship Ampligen to Argentina for the commercial launch and subsequent sales. On June 10, 2020, we received import clearance from ANMAT to import the first shipment of commercial grade vials of Ampligen into Argentina. The next steps in the commercial launch of Ampligen include ANMAT conducting a final inspection of the product and release tests before granting final approval to begin commercial sales. This testing and approval process is ongoing due to ANMAT’s internal processes. Once final approval by ANMAT is obtained, GP Pharm will be responsible for distributing Ampligen in Argentina.
The FDA authorized an open-label treatment protocol (“AMP-511”) allowing patient access to Ampligen for treatment in a study under which severely debilitated CFS patients have the opportunity to be on Ampligen to treat this very serious and chronic condition. The data collected from the AMP-511 protocol through a consortium group of clinical sites provide safety information regarding the use of Ampligen in patients with CFS. The AMP-511 protocol is ongoing. In October 2020, we received IRB approval for the expansion of the AMP-511 protocol to include patients previously diagnosed with SARS-CoV-2 following clearance of the virus, but who still demonstrate chronic fatigue-like symptoms that we refer to as Post-COVID conditions. As of September 30, 2023, there were 11 patients enrolled in this open-label expanded access treatment protocol (including four patients with Post-COVID Conditions). To date, there have been seven such Post-COVID patients treated in the study. AIM previously reported positive preliminary results based on data from the first four Post-COVID Condition patients enrolled in the study. The data show that, by week 12, compared to baseline, there was what the investigators considered a clinically significant decrease in fatigue-related measures.
We plan on a comprehensive follow through with the FDA regarding the use of Ampligen as a treatment for ME/CFS. We have learned a great deal since the FDA’s CRL and plan to adjust our approach to concentrate on specific ME/CFS symptoms. Responses to the CRL and a proposed confirmatory trial are being worked on now by our R&D team and consultants.
Please see “Myalgic Encephalomyelitis/Chronic Fatigue Syndrome (ME/CFS)” below.
Atlas Equity Line of Credit
On March 28, 2024, we entered into a purchase agreement (the “Purchase Agreement”) and a registration rights agreement (the “Registration Rights Agreement”) with Atlas Sciences, LLC, a Utah limited liability company (“Atlas”), pursuant to which Atlas has committed to purchase up to $15 million of our Common Stock.
Under the terms and subject to the conditions of the Purchase Agreement, we have the right, but not the obligation, to sell to Atlas, and Atlas is obligated to purchase up to $15 million of our Common Stock (the “Commitment Amount”). Such sales by us, if any, will be subject to certain limitations, and may occur from time to time, at our sole discretion, over the 24-month period commencing on the date that a registration statement covering the resale of shares that have been and may be issued under the Purchase Agreement. We agreed to file the registration statement with the SEC pursuant to the Registration Rights Agreement. Sales cannot commence until the registration statement is declared effective by the SEC and a final prospectus in connection therewith is filed and the other conditions set forth in the Purchase Agreement are satisfied.
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Atlas has no right to require us to sell any shares to Atlas, but Atlas is obligated to make purchases as we direct, subject to certain conditions. There are no upper limits on the price per share that Atlas must pay for shares of Common Stock. Actual sales of shares to Atlas will depend on a variety of factors to be determined by us from time to time, including, among others, market conditions, the trading price of the Common Stock and determinations by us as to the appropriate sources of funding for us and our operations.
The net proceeds under the Purchase Agreement will depend on the frequency and prices at which we sell shares to Atlas. We expect that any proceeds received by us will be used for working capital and general corporate purposes.
We cannot sell shares below the Minimum Price (as defined by the NYSE American) under the Purchase Agreement that would represent, in the aggregate, more than 19.99% of the outstanding shares on the date that the Purchase Agreement was executed or more than one percent of such shares to Substantial Security Holders (as defined by the NYSE American). Before we could do that, we would need to obtain stockholder approval.
We have agreed with Atlas that we will not enter into any “variable rate” transactions with any third party for a period defined in the Purchase Agreement. Atlas has covenanted not to cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of the Company’s shares.
As consideration for Atlas’s irrevocable commitment to purchase shares upon the terms of and subject to satisfaction of the conditions set forth in the Purchase Agreement, upon execution of the Purchase Agreement, the Company agreed to pay Atlas an initial commitment fee in shares equal to 1.0% of the Commitment Amount. The initial commitment fee was paid upon execution of the Purchase Agreement through the issuance of 338,600 shares of Common Stock.
The Purchase Agreement and the Registration Rights Agreement contain customary representations, warranties, conditions and indemnification obligations of the parties. The Company has the right to terminate the Purchase Agreement at any time, at no cost or penalty.
During any period where bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted or anticipated by or against the Company or any subsidiary of the Company, and in the case of such a proceeding being involuntary or commenced against the Company, which is not dismissed within 60 days, the Company may not initiate any purchase of shares by Atlas.
The foregoing descriptions of the Purchase Agreement and the Registration Rights Agreement are qualified in their entirety by reference to the full text of such agreements, copies of which are attached hereto as Exhibits 10.104 and 10.105, respectively, and each of which is incorporated herein in its entirety by reference. The representations, warranties and covenants contained in such agreements were made only for purposes of such agreements and as of specific dates, were solely for the benefit of the parties to such agreements and may be subject to limitations agreed upon by the contracting parties.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND SUMMARY RISK FACTORS
Certain statements in this Report contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act. All statements, other than statements of historical fact, included or incorporated herein regarding our strategy, future operations, financial position, future revenues, projected costs, plans, prospects and objectives are forward-looking statements. Words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” “think,” “may,” “could,” “will,” “would,” “should,” “continue,” “potential,” “likely,” “opportunity” and similar expressions or variations of such words are intended to identify forward-looking statements but are not the exclusive means of identifying forward-looking statements and their absence does not mean that a statement is not forward-looking. Our forward-looking statements are not guarantees of performance, and actual results could vary materially from those contained in or expressed by such statements due to risks and uncertainties. These statements are based on our management’s current beliefs, expectations and assumptions about future events, conditions and results and on information currently available to us. Discussions containing these forward-looking statements may be found, among other places, in this Report in Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations”; Part II, Item 1. “Legal Proceedings”; and Part II, Item 1A. “Risk Factors”, as well as the following sections of our Annual Report on Form 10-K for the year ended December 31, 2022: Item 1. “Business”, Part I; Item 1A. “Risk Factors”, Part I; Item 3. “Legal Proceedings”, Part I and Part II; Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. Among other things, for those statements, we claim the protection of safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Any forward-looking statements set forth in this presentation speak only as of the date of this presentation. We do not undertake to update any of these forward-looking statements to reflect events or circumstances that occur after the date hereof. We are in various stages of seeking to determine whether Ampligen® will be effective in the treatment of multiple types of viral diseases, cancers, and immune-deficiency disorders and the presentation sets forth our current and anticipated future activities. These activities are subject to change for a number of reasons. Significant additional testing and trials will be required to determine whether Ampligen® will be effective in the treatment of these conditions. Results obtained in animal models do not necessarily predict results in humans. Human clinical trials will be necessary to prove whether or not Ampligen® will be efficacious in humans. No assurance can be given as to whether current or planned clinical trials will be successful or yield favorable data and the trials are subject to many factors including lack of regulatory approval(s), lack of study drug, or a change in priorities at the institutions sponsoring other trials. Even if these clinical trials are initiated, we cannot assure that the clinical studies will be successful or yield any useful data or require additional funding. Among the studies are clinical trials that provide only preliminary data with a small number of subjects, and no assurance can be given that the findings in these studies will prove true or that the study or studies will yield favorable results. Some of the world’s largest pharmaceutical companies and medical institutions are working on a treatment for COVID-19. Even if Ampligen® proves effective in combating the virus, no assurance can be given that our actions toward proving this will be given first priority or that another treatment that eventually proves capable will not make our efforts ultimately unproductive, as multiple vaccines, and some treatments, are now available and major pharma companies are working to develop their own disease treatments. No assurance can be given that future studies will not result in findings that are different from those reported in the studies referenced in this Report. Operating in foreign countries carries with it a number of risks, including potential difficulties in enforcing intellectual property rights. In addition, many countries, including Argentina, are still dealing with COVID-19 outbreaks and have made that their primary focus. We believe that this may be delaying our commercialization of Ampligen® in Argentina until COVID-19 is more under control. We cannot assure that our potential foreign operations will not be adversely affected by these risks.
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Our filings are available at www.aimimmuno.com. The information found on our website is not incorporated by reference into this Report and is included for reference purposes only.
SUMMARY RISK FACTORS
General Risk Related to our Business
| ● | We may require additional financing which may not be available. | |
| ● | We may continue to incur substantial losses and our future profitability is uncertain. | |
| ● | Our drug and related technologies are investigational and subject to regulatory approval. If we are unable to obtain regulatory approval in a timely manner, or at all, our operations will be materially harmed and our stock adversely affected. | |
| ● | The COVID-19 coronavirus or other global pandemics could adversely impact our business, including our clinical trials. We cannot predict the ultimate effects of the COVID-19 virus on our business. | |
| ● | We may be subject to product liability claims from the use of Ampligen, Alferon N Injection, or other of our products which could negatively affect our future operations. We have limited product liability and clinical trial insurance. | |
| ● | Uncertainty of health care reimbursement for our products. | |
| ● | There are risks of liabilities associated with handling and disposing of hazardous materials. | |
| ● | We rely upon information technology and any failure, inadequacy, interruption, or security lapse of that technology, including any cybersecurity incidents, could harm our ability to operate our business effectively. | |
| ● | The loss of services of key personnel could hurt our chances for success. | |
| ● | GAAP requires estimates, judgements and assumptions which inherently contain uncertainties. | |
| ● | We currently, and may in the future, have assets held at financial institutions that may exceed the insurance coverage offered by the Federal Deposit Insurance Corporation, and the loss of such assets would have a severe negative affect on our operations and liquidity. |
Risks Associated with Our Products
| ● | The development of Ampligen is subject to significant risks. | |
| ● | The development of Alferon N Injection is subject to significant risks. | |
| ● | Possible side effects from the use of Ampligen or Alferon N Injection could adversely affect potential revenues and physician/patient acceptability of our product. |
Risks Related to our activities associated with Ampligen’s potential effectiveness as a treatment for COVID-19 or Post-Covid Conditions
| ● | It is not possible to predict the future of COVID-19, and related Post-COVID Conditions, as a global public health threat or the development of related therapies. No assurance can be given that Ampligen will aid in or be applied to the treatment of this virus. | |
| ● | Operating in foreign countries carries with it many risks. |
Risks Associated with Our Intellectual Property
| ● | We may not be profitable unless we can protect our patents and/or receive approval for additional pending patents. | |
| ● | The patent position of biotechnology and pharmaceutical firms is highly uncertain and involves complex legal and factual questions. | |
| ● | There can be no assurance that we will be able to obtain necessary licenses if we cannot enforce patent rights we may hold. In addition, the failure of third parties from whom we currently license certain proprietary information or from whom we may be required to obtain such licenses in the future, to adequately enforce their rights to such proprietary information, could adversely affect the value of such licenses to us. | |
| ● | There is no guarantee that our trade secrets will not be disclosed or known by our competitors. |
Risks Associated with Our R&D
| ● | We cannot predict what additional studies and/or additional testing or information may be required by the FDA. Accordingly, we are unable to estimate the nature, timing, costs and necessary efforts to complete these projects nor the anticipated completion dates. In addition, we have no basis for estimating when material net cash inflows may commence. We have yet to generate significant revenues from the sale of these developmental products. |
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Risks Associated with Our Manufacturing
| ● | Our Alferon N Injection Commercial Sales were halted due to lack of finished goods inventory. If we are unable to gain the necessary FDA approvals related to Alferon N Injection, or if we are unable to identify a CMO or CMOs that meet our requirements, then our operations would most likely be materially and/or adversely affected. | |
| ● | There are no long-term agreements with suppliers of required materials and services for Ampligen and there are a limited number of raw material suppliers. If we are unable to obtain the required raw materials and/or services, we may not be able to manufacture Ampligen. | |
| ● | There are limited number of organizations in the United States available to provide the final manufacturing steps of formulation, fill, finish and packing sets for Alferon N Injection and Ampligen. | |
| ● | There is no assurance that, upon success, manufacture of a drug on a limited-scale basis for investigational use would lead to a successful transition to commercial, large-scale production. | |
| ● | We have limited manufacturing experience for Ampligen and Alferon N Injection. We may not be profitable unless we can produce Ampligen, Alferon N Injection or other products in commercial quantities at costs acceptable to us. |
Risks Associated with Our Licensing/Collaborations/Joint Ventures
| ● | If we are unable to achieve licensing, collaboration and/or joint ventures, our marketing strategy for Ampligen will be part of the differing health care systems around the world along with the different marketing and distribution systems that are used to supply pharmaceutical products to those systems. |
Risks Associated with Our Marketing and Distribution
| ● | We have limited marketing and sales capability. If we are unable to obtain additional distributors and our current and future distributors do not market our products successfully, we may not generate significant revenues or become profitable. |
Risks Associated with Our Competition
| ● | Rapid technological change may render our products obsolete or non-competitive. | |
| ● | Our products may be subject to substantial competition. |
Risks Associated with an Investment in Our Common Stock
| ● | The market price of our stock may be adversely affected by market volatility | |
| ● | Sales of a significant number of shares of our common stock in the public markets, or the perception that such sales could occur, could depress the market price of our common stock. | |
| ● | Provisions of our Certificate of Incorporation and Delaware law could defer a change of our Management, which could discourage or delay offers to acquire us. | |
| ● | Our business, financial condition and operating results could be negatively affected as a result of actions by activist investors. |
AVAILABLE INFORMATION
We file electronically with the United States Securities and Exchange Commission, or SEC, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended. We make available on our website at www.ao-inc.com free of charge, copies of these reports as soon as reasonably practicable after filing these reports with, or furnishing them to, the SEC. We are subject to the information and periodic reporting requirements of the Exchange Act and, in accordance therewith, we file periodic reports, proxy statements and other information with the SEC. Such periodic reports, proxy statements and other information are available for inspection and copying at the website of the SEC www.sec.gov. You also may obtain a free copy of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and amendments to those reports on the day of filing with the SEC on our website at http://www.aimimmuno.com under the Investor Relations tab for SEC Filings or by contacting the Investor Relations Department by calling (833) 475-8247 or (352) 448-7797 or sending an e-mail message to AIM@jtcir.com. Our Internet website and the information contained on that website, or accessible from our website, is not intended to be incorporated into this Annual Report on Form 10-K or any other filings we make with the SEC.
OUR PRODUCTS
Our primary pharmaceutical product platform consists of Ampligen (rintatolimod), a first-in-class drug of large macromolecular double-stranded (ds) RNA (ribonucleic acid) molecules, and our FDA-approved natural alpha-interferon product, Alferon N Injection.
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Ampligen®
Ampligen is approved for sale in Argentina (to 2026) for severe CFS and is an experimental drug in the United States currently undergoing clinical development for the treatment of certain cancers and ME/CFS. Over its developmental history, Ampligen has received various designations, including Orphan Drug Product Designation (FDA and EMA), Treatment protocol (e.g., “Expanded Access” or “Compassionate” use authorization) with Cost Recovery Authorization (FDA) and “promising” clinical outcome recognition based on the evaluation of certain summary clinical reports (“AHRQ” or Agency for Healthcare Research and Quality). Based on the results of published, peer-reviewed pre-clinical studies and clinical trials, we believe that Ampligen may have broad-spectrum antiviral and anti-cancer properties.
We believe that nucleic acid compounds represent a potential new class of pharmaceutical products designed to act at the molecular level for treatment of many human diseases. Ampligen represents the first drug in the class of large (macromolecular) dsRNA molecules to apply for NDA review. There are two forms of nucleic acids: deoxyribonucleic acid (“DNA”) and ribonucleic acid (“RNA”). DNA is a group of naturally occurring molecules found in chromosomes, the cell’s genetic machinery. RNA is a group of naturally occurring informational molecules which orchestrate a cell’s behavior which, in turn, regulates the action of groups of cells, including the cells which comprise the body’s immune system. RNA directs the production of proteins and regulates certain cell activities including the activation of an otherwise dormant cellular defense against viruses and tumors. Our drug technology utilizes specifically configured RNA and is a selective Toll-like Receptor 3 (“TLR3”) agonist that can be administered intravenously, intranasally and intraperitoneally. Ampligen has been assigned the generic name rintatolimod by the United States Adopted Names Council (“USANC”) and has the chemical designation poly(I):poly(C12U).
Expanded Access Program/Early Access Programs/clinical trials of Ampligen that have been conducted or that are ongoing include studies of the potential treatment of patients with pancreatic cancer, renal cell carcinoma, malignant melanoma, non-small cell lung cancer, ovarian cancer, breast cancer, colorectal cancer, prostate cancer, ME/CFS, Hepatitis B, HIV, COVID-19 and Post-COVID conditions.
We have received approval of our NDA from ANMAT for the commercial sale of Ampligen in the Argentine Republic for the treatment of severe CFS. The product will be marketed by GP Pharm, our commercial partner in Latin America. Shipment of the drug product to Argentina was initiated in 2018 to complete the release testing by ANMAT needed for commercial distribution. In September 2019, we received clearance from the FDA to ship Ampligen to Argentina for the commercial launch and subsequent sales. In June 2020, we received import clearance from ANMAT to import the first shipment of commercial grade vials of Ampligen into Argentina. We are currently working with GP Pharm on the commercial launch of Ampligen in Argentina. Commercialization in Argentina will require, among other things, GP Pharm to establish disease awareness, medical education, creation of an appropriate reimbursement level, design of marketing strategies and completion of manufacturing preparations for launch and ANMAT conducting a final inspection of the product and release tests before granting final approval to begin commercial sales. AIM has supplied GP Pharm with the Ampligen required for testing and ANMAT release. This testing and approval process is ongoing due to ANMAT’s internal processes. Once final approval by ANMAT is obtained, GP Pharm will begin distributing Ampligen in Argentina. We continue to pursue our Ampligen NDA, for the treatment of CFS with the FDA.
The FDA has authorized an open-label expanded access treatment protocol (AMP-511) allowing patient access to Ampligen in a study under which severely debilitated CFS patients have the opportunity to be on Ampligen to treat this serious and chronic condition. The AMP-511 protocol started in the 1990s and is ongoing. The data collected from the AMP-511 protocol through clinical sites provide safety information regarding the use of Ampligen in patients with CFS. We are establishing an enlarged database of clinical safety information which we believe will provide further documentation regarding the absence of autoimmune disease associated with Ampligen treatment. We believe that continued efforts to understand existing data, and to advance the development of new data and information, will ultimately support our future filings for Ampligen and/or the design of future clinical studies that the FDA requested in a CRL. The FDA approved an increased reimbursement level from $200 to $345 per 200 mg vial of Ampligen, due to increased production costs; which was re-authorized in 2021 and again in 2022. At this time, we do not plan on passing this adjustment along to the patients in this program. In October 2020, we received IRB approval for the expansion of the AMP-511 Expanded Access Program clinical trial for ME/CFS to include patients previously diagnosed with SARS-CoV-2 following clearance of the virus, but who still demonstrate chronic fatigue-like symptoms that we refer to as Post-COVID conditions. As of December 31, 2023, there are 10 patients enrolled in this open-label expanded access treatment protocol. In July 2022, AIM reported positive preliminary results based on data from the first four Post-COVID Condition patients enrolled in the study. The data show that, by week 12, compared to baseline, the investigators observed what they considered a clinically significant decrease in fatigue-related measures. To date, there have been eight such Post-COVID patients treated in this study.
In May 2016, we entered into a five-year agreement with myTomorrows, a Netherlands based company, for the commencement and management of an Early Access Program (“EAP”) in Europe and Turkey related to ME/CFS. Pursuant to the agreement, as amended, myTomorrows also is managing all Early Access Programs and Special Access Programs in Europe, Canada, and Turkey to treat pancreatic cancer and ME/CFS patients. The agreement was automatically extended for a period of 12 months on May 20, 2021; has been automatically extended for 12 months on each subsequent May 20; and will continue to be automatically extended for periods of 12 months every May 20 until terminated or the terms of the agreement are met.
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In June 2018, Ampligen was cited as outperforming two other TLR3 agonists — poly IC and natural double stranded RNA — in creating an enhanced tumor microenvironment for checkpoint blockade therapy in the journal of Cancer Research (http://cancerres.aacrjournals.org/content/early/2018/05/31/0008-5472.CAN-17-3985). In a head-to-head study in explant culture models, Ampligen activated the TLR3 pathway and promoted an accumulation of killer T cells but, unlike the other two TLR3 agonists, it did so without causing regulatory T cell (Treg) attraction. These findings were considered important because they indicate that Ampligen selectively reprograms the tumor microenvironment by inducing the beneficial aspects of tumor inflammation (attracting killer T cells), without amplifying immune-suppressive elements such as regulatory T cells. The study was conducted at the University of Pittsburgh and Roswell Park as a part of the NIH-funded P01 CA132714 and Ovarian Cancer Specialized Program of Research Excellence (“SPORE”).
In 2018, we completed production of two commercial-size batches of more than 16,000 vials of Ampligen, following its “Fill & Finish” at Jubilant HollisterStier, the Contract Manufacturing Organization. These lots passed all required testing for regulatory release for human use and are being used for multiple programs, including: the treatment of ME/CFS; the pancreatic cancer EAP in the Netherlands; and will continue to be used for ongoing and future clinical studies in oncology. Additionally, two lots of Ampligen were manufactured in December 2019 and January 2020 at Jubilant HollisterStier and we recently issued a purchase order for a total of $1,432,257 to manufacture additional lots of Ampligen at Jubilant. The current manufactured lots of Ampligen have been fully tested and released for commercial product launch in Argentina and for clinical trials. Additionally, in December 2020, we added Pii as a “Fill & Finish” provider to enhance our capacity to produce Ampligen. This addition amplifies our manufacturing capability by providing redundancy and cost savings. The contracts augment our active and in-process fill and finish capacity.
Alferon N Injection®
Alferon N Injection is the registered trademark for our injectable formulation of natural alpha interferon. Alferon N Injection is the only natural-source, multi-species alpha interferon currently approved for sale in the United States and Argentina for the intralesional (within lesions) treatment of refractory (resistant to other treatment) or recurring external genital warts in patients 18 years of age or older. Alferon N Injection is also approved in Argentina for the treatment of refractory patients that failed or were intolerant to treatment with recombinant interferons. Certain types of human papilloma viruses (“HPV”) cause genital warts, a sexually transmitted disease (“STD”). According to the CDC, HPV is the most common sexually transmitted infection, with approximately 79 million Americans — most in their late teens and early 20s — infected with HPV. In fact, the CDC states that “HPV is so common that nearly all sexually active men and women get the virus at some point in their lives.” Although they do not usually result in death, genital warts commonly recur, causing significant morbidity and entail substantial health care costs.
Interferons are a group of proteins produced and secreted by cells to combat diseases. Researchers have identified four major classes of human interferon: alpha, beta, gamma and omega. Alferon N Injection contains a multi-species form of alpha interferon. The worldwide market for injectable alpha interferon-based products has experienced rapid growth and various alpha interferon injectable products are approved for many major medical uses worldwide. Alpha interferons are manufactured commercially in three ways: by genetic engineering, by cell culture, and from human white blood cells. All three of these types of alpha interferon are or were approved for commercial sale in the United States. Our natural alpha interferon is produced from human white blood cells. The potential advantages of natural alpha interferon over recombinant (i.e., synthetic) interferon produced and marketed by other pharmaceutical firms may be based upon their respective molecular compositions. Natural alpha interferon is composed of a family of proteins containing many molecular species of interferon. In contrast, commercial recombinant alpha interferon products each contain only a single species. Researchers have reported that the various species of interferons may have differing antiviral activity depending upon the type of virus. Natural alpha interferon presents a broad complement of species, which we believe may account for its higher activity in laboratory studies. Natural alpha interferon is also glycosylated (i.e., partially covered with sugar molecules). Such glycosylation is not present on the currently U.S.-marketed recombinant alpha interferons. We believe that the absence of glycosylation may be in part responsible for the production of interferon-neutralizing antibodies seen in patients treated with recombinant alpha interferon. Although cell culture-derived interferon is also composed of multiple glycosylated alpha interferon species, the types and relative quantity of these species are different from our natural alpha interferon.
Alferon N Injection [Interferon alfa-n3 (human leukocyte derived)] is a highly purified, natural-source, glycosylated, multi-species alpha interferon product. There are essentially no neutralizing antibodies observed against Alferon N Injection to date and the product has a relatively low side-effect profile. The recombinant DNA derived alpha interferon formulations have been reported to have decreased effectiveness after one year of treatment, probably due to neutralizing antibody formation (See “Manufacturing” and “Marketing/Distribution” sections below for more details on the manufacture and marketing/distribution of Alferon N Injection). The production of new Alferon N Injection Active Pharmaceutical Ingredient, or API, is currently on hold. We do not know when, if ever, our products will be generally available for commercial sale for any indication. Additionally, on May 9, 2023, we were granted a U.S. Patent for a method for preventing or reducing antigenic drift or viral reassortment in a host animal comprising determining if a host animal has been exposed to or infected by an avian influenza virus and administering to the exposed host animal alpha-interferon.
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PATENTS AND NON-PATENT EXCLUSIVITY RIGHTS
We consider patent exclusivity as a crucial component of our business. As of December 31, 2023, we had 54 patents worldwide with 66 additional pending patent applications comprising our intellectual property.
We continually review our patents to determine if they have continuing value. Please see “Note 4: Patents, and Trademark Rights, Net” under Notes to the Consolidated Financial Statements for more information on these patents.
There are no current patent litigation proceedings involving us.
Orphan drug designation
U.S. Orphan drug designation qualifies sponsors for incentives including:
| ● | Tax credits for qualified clinical trials | |
| ● | Exemption from user fees | |
| ● | Potential seven years of market exclusivity after FDA approval |
We have received Orphan Drug Designation (ODD) from the FDA for Ampligen used in the treatment of Chronic Fatigue Syndrome, HIV, Metastatic Melanoma, Renal Cell Carcinoma, Pancreatic Adenocarcinoma and Ebola Virus Disease.
In the European Union, ODD carries ten years of market exclusivity after receiving marketing authorization. We have received ODD from the EU for Ampligen used in the treatment of Ebola Virus Disease and Pancreatic Adenocarcinoma and for Alferon used in the treatment of Middle East Respiratory Syndrome.
RESEARCH AND DEVELOPMENT (“R&D”)
Our general focus during the past several fiscal years has been on expanding the market potential of Ampligen through investigation of efficacy (in vitro and in vivo) in different immune-based disorders including cancer and CFS. We also have focused on research and development of potential prophylactic and therapeutic applications for the treatment of COVID-19, including the long-term effects of COVID-19.
Immuno-Oncology
The potential of Ampligen as an immuno-oncology therapeutic has been a major focus of AIM since our current leadership took over in 2016. We have been working with the University of Pittsburgh’s chemokine modulation research initiative, which includes the use of Ampligen as a potential adjuvant to modify the tumor microenvironment (“TME”) with the goal of increasing anti-tumor responses to check point inhibitors (“CPI”). As part of this collaboration, we have supplied Ampligen to the University. The study, under the leadership of Robert P. Edwards, MD, chair of gynecologic services at Magee-Women’s Hospital of the University of Pittsburgh School of Medicine, and Professor of Surgery Pawel Kalinski, M.D., Ph.D., at Roswell Park, Buffalo, N.Y., involved the chemokine modulatory regimen developed by Dr. Kalinski’s group and successfully completed the Phase 1 dose escalation in patients with resectable colorectal cancer.
Multiple Ampligen clinical trials are underway or recently completed at major university cancer centers testing whether tumor microenvironments can be reprogrammed to increase the effectiveness of cancer immunotherapy, including checkpoint inhibitors. The underway trials include:
| ● | Pancreatic Cancer Trial - The Phase 2 AMP-270 clinical trial is a randomized, open-label, controlled, parallel-arm study with the primary objective of comparing the efficacy of Ampligen versus a no treatment control group following FOLFIRINOX for subjects with locally advanced pancreatic adenocarcinoma. Secondary objectives include comparing safety and tolerability. The AMP-270 is expected to enroll approximately 90 subjects in up to 30 centers across the U.S. and Europe. In March 2022, the FDA granted clearance to proceed with the study. In April 2022, we executed a work order with Amarex to manage the clinical trial. In August 2022, we received IRB approval of the trial protocol and so announced the trial’s commencement. The authorization to proceed with the Phase 2 pancreatic cancer clinical trial has been received with potential sites in the Netherlands at Erasmus MC under Prof. C.H.J. van Eijck, and also at major cancer research centers in the United States such as The Buffett Cancer Center at the University of Nebraska Medical Center (UNMC). The study is recruiting patients. (https://clinicaltrials.gov/ct2/show/NCT05494697). |
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| ● | Advanced Recurrent Ovarian Cancer |
| ○ | Results of the Phase 1 portion of a Phase 1/2 study of intraperitoneal chemo-immunotherapy in advanced recurrent ovarian cancer were published in the American Association for Cancer Research publication, Clinical Cancer Research (Clin Cancer Res January 19, 2022 DOI: 10.1158/1078-0432.CCR-21-3659). The study results represent an important extension of prior studies using human tumor explants that showed Ampligen’s potentially important role as a TLR3 agonist acting synergistically with high-dose IFNα and celecoxib to selectively enhance Teff cell-attractants while suppressing Treg-attractants in the tumor microenvironment with a concomitant increase in the Teff/Treg ratio. The importance of boosting the Teff/Treg ratio in the tumor microenvironment is that it is associated with the conversion of ‘cold’ tumors into ‘hot’ tumors, which have an increased sensitivity to chemo-immunotherapy and an improved chance of showing tumor regression. The Phase 1 portion was designed to establish intraperitoneal safety. The Phase 2 portion of the study is planned to be conducted in the future. https://clinicaltrials.gov/ct2/show/NCT02432378 | |
| ○ | A Phase 2 study of advanced recurrent ovarian cancer using cisplatin, pembrolizumab, plus Ampligen; up to 45 patients to be enrolled; enrollment has commenced, and numerous patients have commenced treatment. We announced interim data from the study demonstrating that evidence of increased biomarkers associated with T cell chemotaxis and cytolytic function was seen when combining Ampligen, pembrolizumab and cisplatin. Increases of these biomarkers in the tumor microenvironment have been correlated with favorable tumor responses. Interim results announced March 2022 detailed an observed clinical response rate of 61% includes two complete and three partial tumor responses, plus three patients with stable disease among the 13 evaluable patients. An important priority will be to confirm these findings through continuing to enroll patients onto this study. https://clinicaltrials.gov/ct2/show/NCT03734692 |
In March 2021, we were granted a patent by the Netherlands Patent Office with granted patent claims that include, but are not limited to, the use of Ampligen as a combination cancer therapy with checkpoint blockade inhibitors (e.g. pembrolizumab, nivolumab). Interim data from an investigator-initiated, Phase 2, single-arm, efficacy/safety trial demonstrated that evidence of increased biomarkers associated with T cell chemotaxis and cytolytic function was seen when combining Ampligen, pembrolizumab and cisplatin. It is critical to note that increases of these biomarkers in the tumor microenvironment have been correlated with favorable tumor responses. All told, the study has seen an Objective Response Rate (ORR) of 38.5%; a study of pembrolizumab alone in the treatment of advanced recurrent ovarian cancer found ORR of 8.1% and 9.9% across two cohorts. We believe that the positive data makes this patent have heightened potential. Similar patents are pending in other countries.
| ● | Stage 4 Metastatic Triple Negative Breast Cancer - Phase 1 study of metastatic triple-negative breast cancer using chemokine modulation therapy, including Ampligen and pembrolizumab. Eight patients were enrolled and 6 patients were evaluable. https://www.clinicaltrials.gov/ct2/show/NCT03599453. The key findings announced in April 2022 included: |
| ○ | The pre-determined primary endpoint of efficacy was met (increase in CD8 in TME). | |
| ○ | Uniform increase of immune markers upon treatment was observed: CD8 mRNA (6.1-fold; p-0.034), GZMB mRNA (3.5-fold; p=0.058), ratios of CD8 /FOXP3 and GZMB/FOXP3 (5.7-fold; p=0.036, and 7.6-fold; p=0.024 respectively), thus successfully meeting the pre-determined primary endpoint in the study (increase in CD8 in TME). | |
| ○ | In addition, an increase in CTL attractants CXCL10 (2.6-fold; p=0.104) and CCL5 (3.3-fold; p=0.019) was observed. In contrast, Treg marker FOXP3 or Treg attractants CCL22 or CXCL12 were not enhanced. | |
| ○ | Three patients had stable disease lasting 2.4, 2.5 and 3.8 months, as of data cut off September 1, 2021. | |
| ○ | An additional patient (non-evaluable) had a partial response (breast tumor autoamputation) with massive tumor necrosis in the post-CKM biopsy. |
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| ● | Stage 4 Colorectal Cancer Metastatic to the Liver - Phase 2a study of Ampligen as a component of chemokine modulatory regimen on colorectal cancer metastatic to liver; recruitment has been completed; 19 patients were enrolled and 12 patients were evaluable for the primary endpoint https://clinicaltrials.gov/ct2/show/NCT03403634. The key findings announced in April 2022 included: |
| ○ | The study’s primary endpoint was met, evidenced by increased CD8a expression post-treatment (p=0.046). | |
| ○ | Saw increase in the CD8a/CD4 (p=0.03), CD8a/FOXP3 (p<0.01) and GZMB/FOXP3 (p<0.01) ratios. | |
| ○ | The expression of CTL-attracting chemokines CCL5 (p=0.08), CXCL9 (p=0.05), and CXCL10 (p=0.06) were increased, while expression of the Treg/MDSC attractant CXCL12 (p=0.07) was decreased post-treatment. | |
| ○ | Median OS was 10.5 (90% CI 2.2-15.2) months, and the median PFS was 1.5 (90% CI 1.4, 1.8) months. | |
| ○ | No tumor responses were seen. The treatment was well tolerated. Of all enrolled patients (N=19), adverse events were noted in 74% of patients, with the most common being fatigue (58%). Grade 3 or higher adverse events were rare (5%). |
| ● | Early-Stage Prostate Cancer - Phase 2 study investigating the effectiveness and safety of aspirin and Ampligen with or without interferon-alpha 2b (Intron A) compared to no drug treatments in a randomized three-arm study of patients with prostate cancer before undergoing radical prostatectomy. Patient enrollment has been initiated in this study designed for up to 45 patients. The study is temporarily suspended due to the Merck discontinuation of Intron-A production. Roswell Park has had a Type-C meeting with the FDA and is currently performing the necessary experiments to replace Intron-A with a generic alpha-interferon. We expect this trial to resume in the near future. https://clinicaltrials.gov/ct2/show/NCT03899987 | |
| ● | Early-Stage Triple Negative Breast Cancer - The objective of this Phase 1 study is to evaluate the safety and tolerability of a combination of Ampligen, celecoxib with or without Intron A, when given along with chemotherapy in patients with early-stage triple negative breast cancer. The now completed (as of September 2022) topline results from the study confirm the positive findings that were previously presented at the 2022 Society for Immunotherapy of Cancer (SITC) 37th Annual Meeting in a poster presentation titled Safety and efficacy of de-escalated neoadjuvant chemoimmunotherapy of triple negative breast cancer (TNBC) using chemokine-modulating regimen (rintatolimod, IFN-α2b, celecoxib). The primary endpoint of the study was safety and tolerability. The results demonstrated that treatment was well-tolerated with mostly grade 1 or 2 treatment-related adverse events (TRAEs) without dose-limiting toxicities (DLTs) or delayed or immune-related toxicities. DLT was defined as grade 3 or higher toxicities within the first 3 weeks. Secondary endpoints included pCR rate where 5/9 (56%) of patients attained pCR and 1 more patient attained ypTmic. Tumor and blood biomarkers were also analyzed in exploratory studies.https://clinicaltrials.gov/ct2/show/NCT04081389 | |
| ● | Refractory Melanoma — Roswell Park Comprehensive Cancer Center (“Roswell Park”), in a clinical trial fully funded by the National Cancer Institute (NCI), has commenced patient enrollment in its Phase 2 study in subjects with primary PD-1/PD-L1 resistant melanoma. The Phase 2 study will evaluate type-1 polarized dendritic cell (αDC1) vaccine in combination with tumor-selective chemokine modulation (“CKM”) comprised of Interferon alpha 2b, Ampligen (rintatolimod) and Celecoxib. Up to 24 patients are to be enrolled. The study was temporarily suspended due to the Merck discontinuation of Intron-A production but has since resumed recruitment (See: https://www.clinicaltrials.gov/show/NCT04093323). | |
| ● | Metastatic or Unresectable Triple Negative Breast Cancer – This phase ½a trial tests the safety, side effects, and best dose of chemokine modulation therapy (CKM) (rintatolimod, celecoxib, and interferon alpha 2b) in combination with pembrolizumab for the treatment of patients with triple negative breast cancer that has spread from where it first started (primary site) to other places in the body (metastatic) or that cannot be removed by surgery (unresectable). The study is recruiting subjects. |
https://clinicaltrials.gov/study/NCT05756166
Additional Progress and Analysis Related to Pancreatic Cancer
In January 2017, the EAP established under our agreement with myTomorrows to enable access of Ampligen to ME/CFS patients was extended to pancreatic cancer patients beginning in the Netherlands. myTomorrows is our exclusive service provider in Europe and Turkey and will manage all EAP activities relating to the pancreatic cancer extension of the program. In February 2018, the agreement with myTomorrows was extended to cover Canada to treat pancreatic cancer patients, pending government approval. There have been no physician requests to date that would cause the program to move forward with the approval process.
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A total of 42 pancreatic cancer patients initially received treatment with Ampligen immuno-oncology therapy under the EAP program at Erasmus MC in the Netherlands; that initial program has since continued to expand and proceed with additional patients to be treated with Ampligen supervised by Prof. C.H.J. van Eijck, MD. In March 2024, the team at Erasmus MC published a thorough data analysis in an article titled “Rintatolimod in Advanced Pancreatic Cancer enhances Anti-Tumor Immunity through Dendritic Cell-Mediated T Cell Responses” in the journal Clinical Cancer Research. The positive clinical findings relate to changes in the tumor microenvironment after Ampligen use. We are working with our Contract Research Organization, Amarex Clinical Research LLC, to seek FDA “fast-track.” We have applied for fast-track status; have received denials to date; and are currently working through the FDA process to provide all the materials and information required to achieve fast-track status.
In January 2023, we entered into an external sponsored collaborative clinical research agreement with Erasmus MC and AstraZeneca. Under the agreement, Erasmus MC is planning to perform an investigator-initiated clinical study, entitled “Combining anti-PD-L1 immune checkpoint inhibitor durvalumab with TLR-3 agonist rintatolimod in patients with metastatic pancreatic ductal adenocarcinoma for therapy effect. DURIPANC Study,” in which it will use study drugs provided by both AstraZeneca and us. In June 2023 we received the required approvals from the Central Committee on Research Involving Human Subjects, which is the Competent Authority for the review of clinical trials in the Netherlands, and the Medical Ethics Review Committee Erasmus MC, which is the governing ethics board. The study is open and has dosed its first subject.
Additionally:
| ● | In December 2020, the FDA granted Ampligen Orphan Drug Designation status for the treatment of pancreatic cancer. The Orphan Drug Designation program provides orphan status to drugs and biologics which are defined as those intended for the treatment, prevention or diagnosis of a rare disease or condition, which is one that affects less than 200,000 persons in the United States or meets cost recovery provisions of the act. The status helps incentivize the treatment of therapies to treat unmet medical needs by providing a company with seven years of exclusivity rights once a drug reaches market. | |
| ● | In February 2021, our subsidiary, NV Hemispherx Biopharma Europe, received formal notification from the European Commission (“EC”) granting Orphan Medicinal Product Designation for Ampligen as a treatment for pancreatic cancer. Orphan products, once commercially approved in the European Union (“EU”), receive benefits including up to ten years of protection from market competition from similar medicines with similar active component and indication for use that are not shown to be clinically superior. |
In June 2021, Ampligen was featured in a publication containing state-of-the-art methodologies in the peer-reviewed medical journal Cancers as a potential treatment option for cancer patients who are infected with SARS-CoV-2. The study’s authors stated that Ampligen has the potential to reduce the severity of the deadly respiratory disease COVID-19. According to laboratory data presented in the publication, “Rintatolimod [Ampligen] activated the innate and the adaptive immune systems by activating a cascade of actions in human pancreatic cancer cells”, including:
| ● | Stimulation of interferon regulatory factors and activation of the interferon signaling pathway, | |
| ● | Production of immunomodulatory activity and | |
| ● | Induction of the expression of MHC class I and II histocompatibility |
The full journal article is titled: “Rintatolimod Induces Antiviral Activities in Human Pancreatic Cancer Cells: Opening for an Anti-COVID-19 Opportunity in Cancer Patients?” Cancers is a peer-reviewed, open access journal of oncology published semimonthly online by MDPI. The study’s authors include Prof. C.H.J. van Eijck, MD, PhD, the lead investigator at Erasmus Medical Center in the Netherlands.
In October 2021, we and Amarex submitted an IND application with the FDA for a planned Phase 2 study of Ampligen as a therapy for locally advanced or metastatic late-stage pancreatic cancer. In December 2021, the FDA responded with a Clinical Hold on the proposed study. We submitted our response to the FDA in February 2022. In March 2022, we received notification from the FDA that the Clinical Hold was released and cleared, meaning that we are now able to proceed with the study specifically to treat locally advanced pancreatic cancer patients. In August 2022, we received IRB approval of the trial protocol and so announced the trial’s commencement. The study is recruiting patients.
Positive data was published in March 2022 in a manuscript titled, “Rintatolimod (Ampligen®) enhances numbers of peripheral B cells and is associated with longer survival in patients with locally advanced and metastasized pancreatic cancer pre-treated with FOLFIRINOX: a single-center named patient program,” in Cancers Special Issue: Combination and Innovative Therapies for Pancreatic Cancer. In the single-center, named-patient program, patients with locally advanced pancreatic cancer (LAPC) or metastatic disease were treated with Ampligen for 6 weeks, at 2 doses per week with 400 mg per infusion. The study found that Ampligen improved the median survival of these patients. The study’s primary endpoints were the Systemic Immune-Inflammation Index (SIII), the Neutrophils to Lymphocyte Ratio (NLR), and absolute counts of 18 different populations of circulating immune cells as measured by flow cytometry. Secondary endpoints were progression-free survival (PFS) and overall survival (OS). The median overall survival in the Ampligen group was 19 months, compared to a historical control group and subgroup (7.5 and 12.5, respectively) that did not receive Ampligen.
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Also in March 2022, we announced that study data evaluating the direct effects of Ampligen on human pancreatic ductal adenocarcinoma (PDAC) cells was accepted for presentation at the 15th Annual International Hepato-Pancreato-Biliary Association World Congress in New York, NY. For the study, three PDAC cell lines (CFPAC-1, MIAPaCa-2, and PANC-1) were treated with various concentrations of Ampligen and their corresponding vehicle control. The proliferation and migration effects were examined using in-vitro assays and the molecular effect was examined by targeted gene expression profiling. Additionally human PDAC samples were used to validate the expression of toll-like receptor 3 (TLR3) by immunohistochemistry. Results from the study demonstrated Ampligen decreased the proliferation and migration ability of CFPAC-1 cells. In addition, it decreased the proliferation of MIAPaCa-2 cells and the migration of PANC-1 cells. However, it did not have a dual effect in MIAPaCa-2 and PANC-1 cells. Interestingly, TLR3 was highly expressed in CFPAC-1 cells, low expressed in MIAPaCa-2 and not expressed in PANC-1. Gene expression analysis revealed the upregulation of interferon-related genes, chemokines, interleukins and cell cycle regulatory genes. The heterogeneity of TLR3 expression was confirmed in human PDAC samples. Based on these results, treating pancreatic cancer with Ampligen may have a direct anti-tumor effect in pancreatic cancer cells expressing TLR-3.
Ampligen as a Potential Antiviral
Following the SARS-CoV-1 outbreak in 2002-03, Ampligen exhibited excellent antiviral properties and protective survival effect in NIH-contracted studies of SARS-CoV-1-infected mice, which is very similar to SARS-CoV-2, the novel virus that causes COVID-19.
| ● | The Barnard 2006 study (https://journals.sagepub.com/doi/abs/10.1177/095632020601700505) found that Ampligen reduced virus lung levels to below detectable limits. | |
| ● | The Day 2009 study (https://www.sciencedirect.com/science/article/pii/S0042682209005832) found that, instead of 100% mortality, there was 100% protective survival using Ampligen. |
We compared key transcription regulatory sequences of SARS-CoV-1 to SARS-CoV-2 and found significant similarities, suggesting highly probable extension of the antiviral effects of Ampligen in the earlier NIH-contracted SARS experiments to COVID-19. The SARS-CoV-2 virus – which causes COVID-19 – shares important genomic and pathogenic similarities with SARS-CoV-1 (hence its name). Since Ampligen has shown antiviral activity against more distantly related coronaviruses, there was a reasonable probability that the antiviral effects of Ampligen against SARS-CoV-1 will likely extend to SARS-CoV-2, and as discussed below, recently, Ampligen has demonstrated ex vivo antiviral activity against SARS-CoV-2. We believe that this creates a compelling case for clinical trials to evaluate Ampligen as a potential tool in the fight against COVID-19.
Since the late 2019 outbreak of SARS-CoV-2, we have been actively engaged in determining whether Ampligen could be an effective treatment for this virus or could be part of a vaccine. We believe that Ampligen has the potential to be both an early-onset treatment for and prophylaxis against SARS-CoV-2. We believe that prior studies of Ampligen in SARS-CoV-1 animal experimentation may predict similar protective effects against the new virus.
In February 2020, we filed three provisional patent applications related to Ampligen in our efforts toward joining the global health community in the fight against the deadly coronavirus (See: https://aimimmuno.com/press-release/aim-immunotech-files-provisional-patent-application-for-the-use-of-ampligenr-as-a-potential-therapy-for-covid-19-induced-chronic-fatigue/). Our three provisional patent applications include: 1) Ampligen as a therapy for the coronavirus; 2) Ampligen as part of a proposed intranasal universal coronavirus vaccine that combines Ampligen with inactivated coronavirus, conveying immunity and cross-protection and; 3) a high-volume manufacturing process for Ampligen. Under the Patent Cooperation Treaty of 1970, which provides international protections for patents, these three provisional patent applications were converted into two international patent applications based on the date of their filings.
In August 2020, we contracted Amarex to act as our Clinical Research Organization and provide regulatory support with regard to a possible clinical trial testing Ampligen’s potential as a COVID-19 prophylaxis via intranasal delivery.
Beginning in April 2020, we entered into confidentiality and non-disclosure agreements with numerous companies for the potential outsourcing of the production of polymer, enzyme, placebo as well as Ampligen, and one Contract Research Organization, Amarex, which will provide regulatory and monitoring support related to a clinical trial testing Ampligen’s intranasal safety and potential as a COVID-19 prophylaxis via intranasal delivery.
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In May 2020, the FDA authorized an IND for Roswell Park to conduct a Phase 1/2a study of a regimen of Ampligen and interferon alpha in cancer patients with COVID-19 infections. This clinical trial, sponsored by Roswell Park in collaboration with us, will test the safety of this combination regimen in patients with cancer and COVID-19, and the extent to which this therapy will promote clearance of the SARS-CoV-2 virus from the upper airway. Several subjects have been treated. It is planned that the phase 1/2a study will enroll up to 44 patients in two stages. Phase 1 will see 12-24 patients receiving both Ampligen and interferon alpha-2b at escalating doses. Once that initial phase is complete, further study participants will be randomized to two arms: one receiving the two-drug combination and a control group who will not receive Ampligen or interferon alpha but will receive best available care. We are a financial sponsor of the study and will provide Ampligen at no charge for this study. In November 2020, the first patient in the study had been enrolled and treated. This study was amended to add 20 patients, with 10 randomized to receive a single dose of Ampligen and 10 patients to receive current best therapies. (See clinicaltrials.gov/NCT04379518). Due to a shortage of qualifying subjects with COVID-19 and cancer as a result of the positive impact of vaccinations and treatments for COVID-19, Roswell is seeking approval to expand the qualifying subject criteria to include other diseases lethal to immuno-compromised cancer patients, such as influenza. Accordingly, the study is temporarily suspended while seeking said approvals.
We also entered into a specialized services agreement with Utah State University and have supplied Ampligen to support the University’s Institute for Viral Research in its research into SARS-CoV-2. The Utah State results show that Ampligen was able to decrease SARS-CoV-2 infectious viral yields by 90% at clinically achievable intranasal Ampligen dosage levels.
In October 2020, we received IRB approval for the expansion of the AMP-511 Expanded Access Program clinical trial for ME/CFS to include patients previously diagnosed with SARS-CoV-2, but who still demonstrate chronic fatigue-like symptoms. Patients in the trial are treated with our flagship pipeline drug Ampligen. In January 2021, we commenced with the treatment of the first previously diagnosed COVID-19 patient with long-COVID symptoms (i.e., Long Hauler) also known as Post-COVID Conditions in the AMP-511 study. Enrollment of post-COVID patients continues in the study.
In January 2021, we entered into a Sponsor Agreement with CHDR to manage a Phase 1 randomized, double-blind study to evaluate the safety and activity of repeated intranasal administration of Ampligen. AIM funded and sponsored the study. This study was designed to assess the safety, tolerability and biological activity of repeated administration of Ampligen intranasally. A total of 40 healthy subjects received either Ampligen or a placebo in the trial, with the Ampligen given at four escalating dosages across four cohorts, to a maximum level of 1,250 micrograms. The study was completed, and the Final Safety Report reported no Serious or Severe Adverse Events at any dosage level. We believe that the trial is a critical step in our ongoing efforts to develop Ampligen as a potential prophylaxis or treatment for COVID-19 and other respiratory viral diseases. Amarex provided us with monitoring support during the trial.
Additionally, we filed two COVID-19-related provisional patent applications in the third quarter of 2021. In August, we filed an application for Ampligen as both an intranasal and an intravenous therapy for what we describe as Post-COVID conditions. The people suffering from Post-COVID conditions, including some young adults, can be afflicted with severe difficulties in concentrating; serious memory problems; and the inability to live an active lifestyle, to work and even to perform everyday tasks. Early data has demonstrated that patients with symptoms of Post-COVID conditions being treated with Ampligen in the ongoing AMP-511 Expanded Access Program have reported improvements in fatigue symptoms. Similarly, in ME/CFS, data supports the claim that Ampligen improves fatigue symptoms. Then in September 2022, we filed a patent application for Ampligen as a potential early-onset intranasal therapy designed to enhance and expand infection-induced immunity, epitope spreading, cross-reactivity and cross-protection in patients exposed to a wide range of RNA respiratory viruses, such as influenza, Rhinoviruses and SARS-CoV-2.
In addition to securing these two provisional patent applications, we also moved forward with proposed studies in these areas and with Pre-Investigational New Drug Applications in September 2021. One pre-IND was for a Phase 2, two-arm, randomized, double-blind, placebo-controlled, multicenter study to evaluate the efficacy and safety of Ampligen in patients experiencing Post-COVID conditions (originally referred to as Post-COVID Cognitive Dysfunction (PCCD) and has been revised to Post-COVID conditions).
Ampligen as a Treatment for Post-COVID Conditions
In July 2023, we enrolled and dosed the first patient in our Phase 2 study evaluating Ampligen® as a potential therapeutic for people with post-COVID conditions (“AMP-518”). We announced in August 2023 that the study had met the planned enrollment of 80 subjects ages 18 to 60 years who have been randomized 1:1 to receive twice-weekly intravenous infusions of Ampligen or placebo for 12 weeks, with a follow-up phase of two weeks. All patients have completed the study and topline data was reported in February 2024.
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On May 9, 2023, we were granted a U.S. Patent for a method for preventing or reducing antigenic drift or viral reassortment in a host animal comprising determining if a host animal has been exposed to or infected by an avian influenza virus and administering to the exposed host animal alpha-interferon.
Myalgic Encephalomyelitis/Chronic Fatigue Syndrome (ME/CFS)
Myalgic Encephalomyelitis/Chronic Fatigue Syndrome (ME/CFS), also known as Chronic Fatigue Immune Dysfunction Syndrome (“CFIDS”) and Chronic Fatigue Syndrome (CFS), is a serious and debilitating chronic illness and a major public health problem. ME/CFS is recognized by both the government and private sector as a significant unmet medical need, including the U.S. National Institutes of Health (“NIH”), FDA and the CDC. The CDC states on its website at https://www.cdc.gov/me-cfs/ that “Myalgic encephalomyelitis/chronic fatigue syndrome (ME/CFS) is a serious, long-term illness that affects many body systems. People with ME/CFS are often not able to do their usual activities. At times, ME/CFS may confine them to bed. People with ME/CFS have severe fatigue and sleep problems. ME/CFS may get worse after people with the illness try to do as much as they want or need to do. This symptom is called post-exertional malaise (PEM). Other symptoms can include problems with thinking and concentrating, pain, and dizziness.”
Many severe ME/CFS patients become completely disabled or totally bedridden and are afflicted with severe pain and mental confusion even at rest. ME/CFS is characterized by incapacitating fatigue with profound exhaustion and extremely poor stamina, sleep difficulties and problems with concentration and short-term memory. It is also accompanied by flu-like symptoms, pain in the joints and muscles, tender lymph nodes, sore throat and new headaches. A distinctive characteristic of the illness is a worsening of symptoms following physical or mental exertion, which do not subside with rest.
The high number of younger people being hospitalized for COVID-19 suggests considerable numbers of people in the prime of their lives may have a COVID-induced ME/CFS-like illness in their future. According to a 2016 journal article, the estimated annual cost of lost productivity related to ME/CFS was $9-37 billion in the United States, and for direct medical costs it was $9-14 billion.
In June of 2020, we filed a provisional patent application for, among other discoveries, the use of Ampligen as a potential early-onset therapy for the treatment of COVID-19 induced chronic fatigue.
Many survivors of the first SARS-CoV-1 epidemic in 2003 continued to report chronic fatigue, difficulty sleeping and shortness of breath months after recovering from the acute illness. “After one year, 17% of patients had not returned to work and 9% more had not returned to their pre-SARS work levels,” according to Simmaron Research. Now there is increasing evidence that patients with COVID-19 can develop a similar, ME/CFS-like illness. These patients are commonly referred to as “Long Haulers.”
In October 2020, we received IRB approval for the expansion of the AMP-511 Expanded Access Program clinical trial for ME/CFS to include patients previously diagnosed with SARS-CoV-2 following clearance of the virus, but who still demonstrate chronic fatigue-like symptoms. For more information on our AMP-511 Expanded Access Program, please see “OUR PRODUCTS: Ampligen” above.
In November 2020, we announced the publication of statistically significant data detailing how Ampligen could have a considerable positive impact on people living with ME/CFS when administered in the early stages of the disease. The data were published in PLOS ONE, a peer-reviewed open access scientific journal published by the Public Library of Science. AIM researchers found that the TLR3 agonist Ampligen substantially improved physical performance in a subset of ME/CFS patients.
As noted above in Overview; General; Ampligen as a treatment for ME/CFS, we have long been focused on seeking the FDA’s approval for the use of Ampligen to treat ME/CFS. In fact, in February 2013, we received a CRL from the FDA for our Ampligen NDA for ME/CFS, stating that we should conduct at least one additional clinical trial, complete various nonclinical studies and perform a number of data analyses.
While developing a comprehensive response to the FDA and a plan for a confirmatory trial for the FDA NDA, we proceeded independently in Argentina and, in August 2016, we received approval of an NDA from ANMAT for commercial sale of Ampligen in the Argentine Republic for the treatment of severe CFS. In September 2019, we received clearance from the FDA to ship Ampligen to Argentina for the commercial launch and subsequent sales. On June 10, 2020, we received import clearance from ANMAT to import the first shipment of commercial grade vials of Ampligen into Argentina. The next steps in the commercial launch of Ampligen include ANMAT conducting a final inspection of the product and release tests before granting final approval to begin commercial sales. This testing and approval process is currently delayed due to ANMAT’s internal processes. Once final approval by ANMAT is obtained, GP Pharm will begin distributing Ampligen in Argentina.
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We plan on a comprehensive follow through with the FDA regarding the use of Ampligen as a treatment for ME/CFS. We have learned a great deal since the FDA’s CRL and plan to adjust our approach to concentrate on specific ME/CFS symptoms. Responses to the CRL and a proposed confirmatory trial are being worked on now by our R&D team and consultants.
Other Diseases
In Europe, the EMA has approved the Orphan Medicinal Products Designation for Ampligen as a potential treatment of Ebola virus disease and for Alferon N Injection as a potential treatment of MERS.
We concluded our series of collaborations designed to determine the potential effectiveness of Ampligen and Alferon N Injection as potential preventive and/or therapeutic treatments for Ebola-related disorders. Although we believe that the threat of both MERS and Ebola globally may reemerge in the future, it appears that the spread of these disorders has diminished.
In April 2021, we entered into an MTA with the University of Cagliari Dipartimento di Scienze della Vita e dell’Ambiente (“UNICA”), an educational institution, under the laws of Italy, located in Monserrato (Cagliari), Italy. The MTA relates to the research and development of the effects of Ampligen and its ability to induce interferon production in several cell lines, and also on the ability of the Ebola virus protein VP35 to bind to viral dsRNA and impede interferon’s upregulation and activity, and on Ampligen’s ability to reverse VP35 inhibition of interferon production in biological systems. The data analysis was published in the peer-reviewed journal Antiviral Research, in a manuscript titled “Ebola virus disease: In vivo protection provided by the PAMP restricted TLR3 agonist rintatolimod and its mechanism of action.” We believe that the analysis supports a dual mechanism of action when Ampligen is used as a prophylactic therapy against Ebola Virus Disease.
In May 2021, we filed a U.S. Provisional Patent Application for Ampligen as a potential therapeutic to possibly slow, halt, or reverse the progression of Alzheimer’s disease.
In November 2022, we received notice that the FDA had granted Orphan Drug Designation to Ampligen for the treatment of Ebola virus disease.
MANUFACTURING
ANMAT in Argentina approved Ampligen for commercial distribution for the treatment of CFS in 2016. Shipment of the drug product to Argentina was initiated in 2018 to complete the release testing by ANMAT needed for commercial distribution. In September 2019, we received clearance from the FDA to ship Ampligen to Argentina for the commercial launch and subsequent sales. In June 2020, we received import clearance from ANMAT to import the first shipment of commercial grade vials of Ampligen into Argentina. We are currently working with GP Pharm on the commercial launch of Ampligen in Argentina (See “Our Products; Ampligen” above).
Following our approval in Argentina, in 2017 we engaged Jubilant HollisterStier (“Jubilant”) to be our authorized CMO for Ampligen. Two lots of Ampligen consisting of more than 16,000 units were manufactured and released in 2018; these lots have been designated for human use in the United States in the cost recovery CFS program and for expanded oncology clinical trials. The production of additional polymer (Ampligen intermediates) took place in 2019 at our New Brunswick facility. Additionally, Jubilant manufactured two more lots of Ampligen in December 2019 and January 2020. The current manufactured lots of Ampligen have been fully tested and released for commercial product launch in Argentina and for clinical trials. In addition, we have supplied GP Pharm with the Ampligen required for testing and ANMAT release. Once final approval by ANMAT is obtained, we anticipate that GP Pharm will begin distributing Ampligen in Argentina.
In December 2020, we added Pii as a “Fill & Finish” provider to enhance our capacity to produce Ampligen. This addition amplifies our manufacturing capability by providing redundancy and cost savings. The contracts augment our existing fill and finish capacity. We are prepared to initiate the production of additional Ampligen when and if needed.
In June 2022 we entered into a lease agreement with the New Jersey Economic Development Authority for a 5,210 square-foot, state-of-the-art R&D facility at the New Jersey Bioscience Center (NJBC), primarily consisting of two separate laboratory suites. The lease commenced on July 1, 2022, and runs through August 31, 2027, but can be extended for an additional five-year period. The facility is AIM’s operations, research and development center.
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Our business plan calls for the utilization of one or more CMOs to produce Ampligen API. While we believe we have sufficient Ampligen API to meet our current needs, we are also continually exploring new efficiencies so as to maximize our ability to fulfill future obligations. In this regard, on December 5, 2022, we entered into a Master Service Agreement and a Quality Agreement with Sterling Pharma Solutions (“Sterling”) for the manufacture of our Poly I and Poly C12U polynucleotides and transfer of associated test methods at Sterling’s Dudley, UK location to produce the polymer precursors to manufacture the drug Ampligen. We are utilizing Sterling’s expertise to refine our approach to polymer production. While we believe we have sufficient Ampligen API to meet current needs, we are also continually exploring new efficiencies in order to maximize its ability to fulfill future obligations. In March 2023, we submitted a work order for a total of $1,432,257 to manufacture additional lots of Ampligen at Jubilant.
Our second product, Alferon N Injection, is approved by the FDA for commercial sales in the United States for the treatment of genital warts. It is also approved by ANMAT in Argentina for commercial sales for the treatment of genital warts and in patients who are refractory to treatment with recombinant interferons. Commercial sales of Alferon N Injection in the United States will not resume until new batches of commercial filled and finished product are produced and released by the FDA. We will need the FDA’s approval to release commercial product once we have identified our new manufacturing approach and submitted satisfactory stability and quality release data. Currently, we are not manufacturing Alferon N Injection and there is no definitive timetable to resume production.
LICENSING/COLLABORATIONS/JOINT VENTURES
To enable potential availability of Ampligen to patients on a worldwide basis, we have embarked on a strategy to license the product and/or to collaborate and/or create a joint venture with companies that have the demonstrated capabilities and commitment to successfully gain approval and commercialize Ampligen in their respective global territories of the world. Ideal partners would have the following characteristics: well-established global and regional experience and coverage; robust commercial infrastructure; a strong track record of successful development and registration of in-licensed products; and a therapeutic area fit (e.g., ME/CFS, immuno-oncology).
MARKETING/DISTRIBUTION
In May 2016, we entered into a five-year exclusive Renewed Sales, Marketing, Distribution and Supply Agreement (the “Agreement”) with GP Pharm. Under this Agreement, GP Pharm was responsible for gaining regulatory approval in Argentina for Ampligen to treat severe CFS in Argentina and for commercializing Ampligen for this indication in Argentina. We granted GP Pharm the right to expand rights to sell this experimental therapeutic into other Latin America countries based upon GP Pharm achieving certain performance milestones. We also granted GP Pharm an option to market Alferon N Injection in Argentina and other Latin America countries (See “Our Products; Ampligen” above). The GP Pharm contract was extended in May 2021, and will now end on May 24, 2024. In August 2021, ANMAT granted a five-year extension to a previous approval to sell and distribute Ampligen to treat severe CFS in Argentina. This extends the approval until 2026.
In May 2016, we entered into a five-year agreement (the “Impatients Agreement”) with Impatients, N.V. (“myTomorrows”), a Netherlands-based company, for the commencement and management of an EAP in Europe and Turkey (the “Territory”) related to ME/CFS. Pursuant to the agreement, myTomorrows, as our exclusive service provider and distributor in the Territory, is performing EAP activities. These activities will be directed to (a) the education of physicians and patients regarding the possibility of early access to innovative medical treatments not yet the subject of a Marketing Authorization (regulatory approval) through named-patient use, compassionate use, expanded access and hospital exemption, (b) patient and physician outreach related to a patient-physician platform, (c) the securing of Early Access Approvals (exemptions and/or waivers required by regulatory authorities for medical treatments prior to Marketing Authorization) for the use of such treatments, (d) the distribution and sale of such treatments pursuant to such Early Access Approvals, (e) pharmacovigilance (drug safety) activities and/or (f) the collection of data such as patient-reported outcomes, doctor-reported experiences and registry data. We are supporting these efforts and supplying Ampligen to myTomorrows at a predetermined transfer price. In the event that we receive Marketing Authorization in any country in the Territory, we will pay myTomorrows a royalty on products sold. Pursuant to the Impatients Agreement, the royalty would be a percentage of Net Sales (as defined in the Impatients Agreement) of Ampligen sold in the Territory where Marketing Authorization was obtained. The formula to determine the percentage of Net Sales will be based on the number of patients that are entered into the EAP. We believe that disclosure of the exact maximum royalty rate and royalty termination date could cause competitive harm. However, to assist the public in gauging these terms, the actual maximum royalty rate is somewhere between 2% and 10% and the royalty termination date is somewhere between five and fifteen years from the First Commercial Sale of a product within a specific country. The parties established a Joint Steering Committee comprised of representatives of both parties to oversee the EAP. No assurance can be given that activities under the EAP will result in Marketing Authorization or the sale of substantial amounts of Ampligen in the Territory. The agreement was automatically extended for a period of 12 months on May 20, 2021; has been automatically extended for 12 months on each subsequent May 20; and will continue to be automatically extended for periods of 12 months every May 20 until terminated or the terms of the agreement are met.
In January 2017, ANMAT granted a five-year extension to a previous approval to sell and distribute Alferon N Injection (under the brand name “Naturaferon”) in Argentina. This extended the approval until 2022. A request to extend the approval beyond 2022 has been filed and is still under review. In February 2013, we received ANMAT approval for the treatment of refractory patients that failed or were intolerant to treatment with recombinant interferon, with Naturaferon in Argentina.
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In January 2017, the EAP through our agreement with myTomorrows designed to enable access of Ampligen to ME/CFS patients was extended to pancreatic cancer patients beginning in the Netherlands. myTomorrows is our exclusive service provider in the Territory and will manage all EAP activities relating to the pancreatic cancer extension of the program.
In August 2017, we extended our agreement with Asembia LLC, formerly Armada Healthcare, LLC, to undertake the marketing, education and sales of Alferon N Injection throughout the United States. This agreement has expired. We were in discussions with Asembia about the possibility of continuing the relationship, while also exploring the possibility of working with other, similar companies. However, we still do not foresee an immediate need for this service and continue to push this search further out in our expected timeline.
In February 2018, we signed an amendment to the EAP with myTomorrows. This amendment extended the Territory to cover Canada to treat pancreatic cancer patients, pending government approval. In March 2018, we signed an amendment to the EAP with myTomorrows, pursuant to which myTomorrows will be our exclusive service provider for special access activities in Canada for the supply of Ampligen for the treatment of ME/CFS.
In December 2020, we entered into a signed Letter of Agreement with myTomorrows for the delivery of Ampligen for the treatment of up to 16 pancreatic cancer patients. In November 2021, we entered into a signed Letter of Agreement with myTomorrows for the delivery of Ampligen for the treatment of up to an additional 5 pancreatic cancer patients. In March 2022, we entered into a signed Letter of Agreement with myTomorrows for the delivery of Ampligen for the treatment of up to an additional 10 pancreatic cancer patients. In November 2022, we entered into a signed Letter of Agreement with myTomorrows for the delivery of Ampligen for the treatment of up to an additional 10 pancreatic cancer patients.
COMPETITION
The major pharmaceutical competitors for Ampligen include Pfizer, GlaxoSmithKline, Merck & Co., Novartis and AstraZeneca. Biotech competitors include Baxter International, Fletcher/CSI, AVANT Immunotherapeutics, AVI BioPharma and Genta.
GOVERNMENT REGULATION
Regulation by governmental authorities in the U.S. and foreign countries is and will be a significant factor in the manufacture and marketing of our products and our ongoing research and product development activities. Ampligen and other products developed from the ongoing research and product development activities will require regulatory clearances prior to commercialization. In particular, new drug products for humans are subject to rigorous pre-clinical and clinical testing as a condition for clearance by the FDA and by similar authorities in foreign countries. The process of seeking these approvals, and the ongoing process of compliance with applicable statutes and regulations, has and will continue to require the expenditure of substantial resources. Any failure by us or our collaborators or licensees to obtain, or any delay in obtaining, regulatory approvals could materially adversely affect the marketing of any products developed by us and our ability to receive product or royalty revenue. We have received Orphan Drug designation for certain therapeutic indications, which we believe might under certain conditions help to accelerate the process of drug development and commercialization. Alferon N Injection is only approved for use in intralesional treatment of refractory or recurring external genital warts in patients 18 years of age or older. Use of Alferon N Injection for other applications requires regulatory approval.
We are subject to various federal, state and local laws, regulations and recommendations relating to such matters as safe working conditions, laboratory and manufacturing practices, the experimental use of animals and the use of and disposal of hazardous or potentially hazardous substances, including infectious disease agents, used in connection with our research work.
For more information about the current status of Alferon N Injection and Ampligen, please see “Our Products” above. See also, “Our drug and related technologies are investigational and subject to regulatory approval. If we are unable to obtain regulatory approval in a timely manner, or at all, our operations will be materially harmed and our stock adversely affected” in Part II; Item 1A “Risk Factors”.
HUMAN CAPITAL
As of December 31, 2023, we had personnel consisting of 26 full-time employees and two part-time employees. Six of the combined personnel are engaged in our research, development, clinical and manufacturing efforts, with 22 performing regulatory, general administration, data processing, including bio-statistics, financial and investor relations functions. We have no union employees.
Employee Engagement
Our business results depend in part on our ability to successfully manage our human capital resources, including attracting, identifying, and retaining key talent. Factors that may affect our ability to attract and retain qualified employees include employee morale, our reputation, competition from other employers, and availability of qualified individuals. We believe our commitment to our human capital resources is an important component of our mission. We provide all employees with the opportunity to share their opinions in open dialogues with our human resources department and senior management.
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Compensation, Benefits and Wellness
We offer fair, competitive compensation and benefits that support our employees’ overall wellness. Further, the health and wellness of our employees are critical to our success. While we have been successful in attracting skilled and experienced scientific personnel, there can be no assurance that we will be able to attract or retain the necessary qualified employees and/or consultants in the future.
| ITEM 1A: | Risk Factors |
The following cautionary statements identify important factors that could cause our actual results to differ materially from those projected in the forward-looking statements made in this Form 10-K. Please see “Special Note Regarding Forward Looking Statements and Summary Risk Factors” above.
Risks Associated with Our Business
We may require additional financing which may not be available.
The development of our products requires the commitment of substantial resources to conduct the time-consuming research, preclinical development, and clinical trials that are necessary to bring pharmaceutical products to market. As of December 31, 2023, we had approximately $13,070,000 in cash and cash equivalents. At present we do not generate any material revenue from our operations, and we do not anticipate doing so in the near future. We may need to obtain additional funding in the future for new studies and/or if current studies do not yield positive results, require unanticipated changes and/or additional studies. In February 2022, the SEC declared our universal shelf registration statement on Form S-3 effective. Pursuant to that registration statement, we can sell up to $100 million of our securities and raise additional capital as needed in the future. Subsequent to the end of 2023, we raised $2,500,000 in net proceeds from the sale of an unsecured Note and we have entered into an equity line agreement (see, Part II; Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Part I; Item 1. Business; Atlas Equity Line of Credit). No assurance can be given as to the amount of funds that could be raised pursuant to this registration statement or the potential dilution to current stockholders.
We will need to allocate capital to eventually commercialize and sell Ampligen and/or recommence sales of Alferon N Injection.
We believe, based on our current financial condition, that we have adequate funds to meet our anticipated operational cash needs and fund current clinical trials over approximately the next twenty-four months. If our funds are not adequate, and we are subsequently unable to obtain additional funding, through joint venturing, sales of securities and/or otherwise, our ability to develop our products, commercially produce inventory or continue our operations may be materially adversely affected.
We may continue to incur substantial losses and our future profitability is uncertain.
As of December 31, 2023, our accumulated deficit was approximately $409,508,000. As with many biotechnology companies, we have not yet generated significant revenues from our products and may incur substantial and increased losses in the future. We cannot assure that we will ever achieve significant revenues from product sales or become profitable. We require, and will continue to require, the commitment of substantial resources to develop our products. We cannot assure that our product development efforts will be successfully completed or that required regulatory approvals will be obtained or that any products will be manufactured and marketed successfully or be profitable.
Our drug and related technologies are investigational and subject to regulatory approval. If we are unable to obtain regulatory approval in a timely manner, or at all, our operations will be materially harmed and our stock adversely affected.
While we have received regulatory approval for the commercialization of Ampligen in Argentina (pending additional release testing and subsequent steps), all of our drugs and associated technologies, other than Alferon N Injection, are investigational in the U.S. and must receive prior regulatory approval by appropriate regulatory authorities for commercial distribution and sale and are currently legally available only through clinical trials in the U.S. with specified disorders. At present, Alferon N Injection is approved for the intralesional treatment of refractory or recurring external genital warts in patients 18 years of age or older. However, it is not at present available for purchase on the market. Use of Alferon N Injection for other indications will require regulatory approval in the United States and abroad.
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Our products, including Ampligen, are subject to extensive regulation by numerous governmental authorities in the U.S. and other countries, including, but not limited to, the U.S. FDA, the Health Protection Branch (“HPB”) of Canada, the Agency for the European Medicines Agency (“EMA”) in Europe; and the Administracion Nacional de Medicamentos, Alimentos y Tecnologia Medica (“ANMAT”) in Argentina. Obtaining regulatory approvals is a rigorous and lengthy process and requires the expenditure of substantial resources. In order to obtain final regulatory approval of a new drug, we must demonstrate to the satisfaction of the regulatory agency that the product is safe and effective for its intended uses and that we are capable of manufacturing the product to the applicable regulatory standards. We require regulatory approval in order to market Ampligen or any other proposed product and receive product revenues or royalties. We cannot assure you that Ampligen will ultimately be demonstrated to be safe and efficacious. While Ampligen is authorized for use in clinical trials in the U.S., we cannot assure you that additional clinical trial approvals will be authorized in the United States or in other countries, in a timely fashion or at all, or that we will complete these clinical trials. In addition, although Ampligen has been authorized by the FDA for treatment use under certain conditions, including provision for cost recovery, there can be no assurance that such authorization will continue in effect.
While we received approval of our Argentinian NDA from ANMAT for commercial sale of rintatolimod (U.S. tradename: Ampligen) in the Argentine Republic for the treatment of severe ME/CFS, ANMAT approval is only an initial, but important, step in the overall successful commercialization of our product. In September 2019, we received clearance from the FDA to ship Ampligen to Argentina for the commercial launch and subsequent sales. However, there are a number of additional actions that must occur before we would be able to commence commercial sales in Argentina. For example, Ampligen is still in the process of release testing the product that has already been sent.
The FDA’s regulatory review and approval process is extensive, lengthy, expensive and inherently uncertain. To receive approval for a product candidate, we must, among other things, demonstrate to the FDA’s satisfaction with substantial evidence from well-controlled pre-clinical and clinical trials that the product candidate is both safe and effective for each indication for which approval is sought. Before we can sell Ampligen for any use or promote Alferon N Injection for any use other than as Alferon N Injection for treatment of refractory or recurring genital warts, we will need to file the appropriate NDA with the FDA in the U.S. and the appropriate regulatory agency outside of the U.S. where we intend to market and sell such products. At present the only NDA we have filed with the FDA is the NDA for the use of Ampligen to treat CFS. The FDA issued a Complete Response Letter (“CRL”) in February 2013 for this NDA and provided recommendations to address certain outstanding issues before they could approve Ampligen for Commercial Sales. The Agency stated that the submitted data do not provide substantial evidence of efficacy of Ampligen for the treatment of CFS and that the data do not provide sufficient information to determine whether the product is safe for use in CFS due to the limited size of the safety database and multiple discrepancies within the submitted data. The FDA indicated that we needed to conduct additional work. Therefore, ultimate FDA approval, if any, may be delayed indefinitely and may require us to expend more resources than we have available. It is also possible that additional studies, if performed and completed, may not be successful or considered sufficient by the FDA for approval or even to make our applications approvable. If any of these outcomes occur, we may be forced to abandon one or more of our future applications for approval, which might significantly harm our business and prospects. As a result, we cannot predict if or when we might receive regulatory approval for the use of Ampligen to treat CFS or for the use of any other products. Even if regulatory approval from the FDA is received for the use of Ampligen to treat CFS or eventually, for the use of any other product, any approvals that we obtain could contain significant limitations in the form of narrow indications, patient populations, warnings, precautions or contra-indications or other conditions of use, or the requirement that we implement a risk evaluation and mitigation strategy. In such an event, our ability to generate revenues from such products could be greatly reduced and our business could be harmed.
If we are unable to gain necessary FDA approvals related to Ampligen and Alferon N Injection on a timely basis, or we are unable to generate the additional data, successfully complete inspections or obtain approvals as required by the FDA on a timely manner, or at all, or determine that any of our clinical studies are not cost/justified to undertake or if, for that or any other reason, Ampligen, Alferon N Injection or one of our other products or production processes do not receive necessary regulatory approval in the U.S. or elsewhere, our operations most likely will be materially and/or adversely affected.
Generally, obtaining approval of an NDA by the FDA, or a comparable foreign regulatory authority, is inherently uncertain. Even after completing clinical trials and other studies, a product candidate could fail to receive regulatory approval for many reasons, including the following:
| ● | not be able to demonstrate to the satisfaction of the FDA that our product candidate is safe and effective for any indication; | |
| ● | the FDA may disagree with the design or implementation of our clinical trials or other studies; | |
| ● | the results of the clinical trials or other studies may not demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks; | |
| ● | the FDA may disagree with our interpretation of data from clinical trials or other studies; | |
| ● | the data collected from clinical trials and other studies of a product candidate may not be sufficient to support the submission of an NDA; |
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| ● | the approval policies or regulations of the FDA may significantly change in a manner rendering our clinical and other study data insufficient for approval; and | |
| ● | the FDA may not approve the proposed manufacturing processes and facilities for a product candidate. |
The COVID-19 coronavirus or other global pandemics could adversely impact our business, including our clinical trials. We cannot predict the ultimate effects of the COVID-19 virus on our business.
The COVID-19 pandemic had and to a certain extent continues to have a major disruptive effect in the US and worldwide, including in countries in which there are planned or active clinical trial sites studying Ampligen. The COVID-19 pandemic or a future major pandemic could severely impact our business and clinical trials, including:
| ● | delays or difficulties in enrolling patients in our clinical trials; | |
| ● | delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff; | |
| ● | diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials; | |
| ● | interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others; | |
| ● | limitations in employee resources that would otherwise be focused on the conduct of our clinical trials, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people; | |
| ● | delays in issuing reports, results and publishing papers; | |
| ● | delays in receiving approval from local regulatory authorities to initiate our planned clinical trials; | |
| ● | delays in clinical sites receiving the supplies and materials needed to conduct our clinical trials; | |
| ● | interruption in global shipping that may affect the transport of clinical trial materials, such as investigational drug product used in our clinical trials; | |
| ● | changes in local regulations as part of a response to the COVID-19 coronavirus outbreak which may require us to change the ways in which our clinical trials are conducted, which may result in unexpected costs, or to discontinue the clinical trials altogether; | |
| ● | delays in necessary interactions with local regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or forced furlough of government employees; and | |
| ● | refusal of the FDA to accept data from clinical trials in affected geographies outside the United States. |
As noted elsewhere in this Report, progress of our commercial launch in Argentina has been delayed due to pandemic factors. The ongoing impact of COVID-19 in Argentina is taxing the nation’s health care system and is, understandably, a main priority of its regulators.
While we are not able to estimate the effects of the COVID-19 outbreak or future pandemics, they may have a material adverse effect on our results of future operations, financial position, and liquidity.
We may be subject to product liability claims from the use of Ampligen, Alferon N Injection, or other of our products which could negatively affect our future operations. We have limited product liability and clinical trial insurance.
We maintain a limited amount of Products Liability and Clinical Trial insurance coverage worldwide for Ampligen and Alferon N Injection due to the minimal amount of historical loss claims regarding these products in the marketplace. Any claims against our products, Ampligen and Alferon N Injection, could have a materially adverse effect on our business and financial condition.
We face an inherent business risk of exposure to product liability claims in the event that the use of Ampligen, Alferon N Injection or other of our products results in adverse effects. This liability might result from claims made directly by patients, hospitals, clinics or other consumers, or by pharmaceutical companies or others manufacturing these products on our behalf. Our future operations may be negatively affected from the litigation costs, settlement expenses and lost product sales inherent to these claims. While we will continue to attempt to take appropriate precautions, we cannot assure that we will avoid significant product liability exposure.
Uncertainty of health care reimbursement for our products.
Our ability to successfully commercialize our products will depend, in part, on the extent to which reimbursement for the cost of such products and related treatment will be available from government health administration authorities, private health coverage insurers and other organizations. Significant uncertainty exists as to the reimbursement status of newly approved health care products, and from time to time legislation is proposed, which, if adopted, could further restrict the prices charged by and/or amounts reimbursable to manufacturers of pharmaceutical products. We cannot predict what, if any, legislation will ultimately be adopted or the impact of such legislation on us. There can be no assurance that third party insurance companies will allow us to charge and receive payments for products sufficient to realize an appropriate return on our investment in product development.
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There are risks of liabilities associated with handling and disposing of hazardous materials.
Our business involves the controlled use of hazardous materials, carcinogenic chemicals, and flammable solvents. Although we believe that our safety procedures for handling and disposing of such materials comply in all material respects with the standards prescribed by applicable regulations, the risk of accidental contamination or injury from these materials cannot be completely eliminated. In the event of such an accident or the failure to comply with applicable regulations, we could be held liable for any damages that result. However, we have obtained insurance coverage to mitigate any potential significant loss in this area.
We rely upon information technology and any failure, inadequacy, interruption or security lapse of that technology, including any cybersecurity incidents, could harm our ability to operate our business effectively.
Our operations could be disrupted if our information systems fail, if we are unsuccessful in implementing necessary upgrades or if we are subject to cyber-attacks. Our business depends on the efficient and uninterrupted operation of our computer and communications systems and networks, hardware and software systems and our other information technology. We collect and maintain information, which includes confidential and proprietary information, as well as personal information regarding our customers and employees, in digital form. Data maintained in digital form is subject to risk of cyber-attacks, which are increasing in frequency and sophistication. Cyber-attacks could include the deployment of harmful malware, viruses, worms, and other means to affect service reliability and threaten data confidentiality, integrity and availability. Despite our efforts to monitor and safeguard our systems to prevent data compromise, the possibility of a future data compromise cannot be eliminated entirely, and risks associated with intrusion, tampering, and theft remain. In addition, we do not have insurance coverage with respect to system failures or cyber- attacks. A failure of our systems, or an inability to successfully expand the capacity of these systems, or an inability to successfully integrate new technologies into our existing systems could have a material adverse effect on our business, results of operations, financial condition, and cash flows.
We and our vendors’ sophisticated information technology operations are spread across multiple, sometimes inconsistent, platforms, which pose difficulties in maintaining data integrity across systems. The ever-increasing use and evolution of technology, including cloud-based computing, creates opportunities for the unintentional or improper dissemination or destruction of confidential information stored in our systems.
Any breach of our security measures or the accidental loss, inadvertent disclosure, unapproved dissemination, misappropriation or misuse of trade secrets, proprietary information or other confidential information, whether as a result of theft, hacking, fraud, trickery or other forms of deception, or for any other cause, could enable others to produce competing products, use our proprietary technology or information and/or adversely affect our business position. Further, any such interruption, security breach, loss or disclosure of confidential information could result in financial, legal, business and reputational harm to our company and could have a material adverse effect on our business, financial condition, results of operations, cash flows and stock price. Please see Part I; Item 1C “Cybersecurity”
The loss of services of key personnel could hurt our chances for success.
Our success is dependent on the continued efforts of our staff, especially certain doctors and researchers. The loss of the services of personnel key to our operations could have a material adverse effect on our operations and chances for success. The loss of key personnel or the failure to recruit additional personnel as needed could have a materially adverse effect on our ability to achieve our objectives.
GAAP requires estimates, judgements and assumptions which inherently contain uncertainties.
There are inherent uncertainties involved in estimates, judgments and assumptions used in the preparation of financial statements in accordance with GAAP. Any future changes in estimates, judgments and assumptions used or necessary revisions to prior estimates, judgments or assumptions could lead to a restatement of our results.
The financial statements included in this Annual Report on Form 10-K are prepared in accordance with GAAP. This involves making estimates, judgments and assumptions that affect reported amounts of assets (including intangible assets), liabilities, mezzanine equity, stockholders’ equity, operating revenues, costs of sales, operating expenses, other income, and other expenses. Estimates, judgments, and assumptions are inherently subject to change in the future and any necessary revisions to prior estimates, judgments or assumptions could lead to a restatement. Any such changes could result in corresponding changes to the amounts of assets (including goodwill and other intangible assets), liabilities, mezzanine equity, stockholders’ equity, operating revenues, costs of sales, operating expenses, other income and other expenses.
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We currently, and may in the future, have assets held at financial institutions that may exceed the insurance coverage offered by the Federal Deposit Insurance Corporation (“FDIC”), and the loss of such assets would have a severe negative affect on our operations and liquidity.
On March 10, 2023, Silicon Valley Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation, which appointed the FDIC as receiver. Similarly, on March 12, 2023, Signature Bank and Silvergate Capital Corp. were each swept into receivership. A statement by the Department of the Treasury, the Federal Reserve and the FDIC stated that all depositors of SVB would have access to all of their money after only one business day of closure, including funds held in uninsured deposit accounts. Although we do not have any funds deposited with SVB and Signature Bank, we currently have deposits with Bank of America and Truist Bank, each exceeding $250,000. In the future, we may maintain our cash assets at these and other financial institutions in the United States in amounts that may be in excess of the FDIC insurance limit of $250,000. In the event of a failure of any of these financial institutions where we maintain our deposits or other assets, we may incur a loss to the extent such loss exceeds the FDIC insurance limitation, which could have a material adverse effect upon our liquidity, financial condition and our results of operations.
Risks Associated with Our Products
The development of Ampligen is subject to significant risks.
Ampligen may be found to be ineffective or to have adverse side effects, fail to receive necessary regulatory clearances, be difficult to manufacture on a commercial scale, be uneconomical to market or be precluded from commercialization by proprietary right of third parties. Our investigational products are in various stages of clinical and pre-clinical development and require further clinical studies and appropriate regulatory approval processes before any such products can be marketed. We do not know when, if ever, Ampligen or our other products will be generally available for commercial sale for any indication. Generally, only a small percentage of potential therapeutic products are eventually approved by the FDA for commercial sale.
To the extent that we are required by the FDA, pursuant to the Ampligen NDA, to conduct additional studies and take additional actions, approval of any applications that we submit may be delayed by several years or may require us to expend more resources than we have available. It is also possible that additional studies, if performed and completed, may not be successful or considered sufficient by the FDA for approval or even to make our applications approvable. If any of these outcomes occur, we may be forced to abandon one or more of our future applications for approval, which might significantly harm our business and prospects. As a result, we cannot predict when or whether regulatory approval will be obtained for any product candidate we develop.
If approved, one or more of the potential side effects of the drug might deter usage of Ampligen in certain clinical situations and, therefore, could adversely affect potential revenues and physician/patient acceptability of our product.
The development of Alferon N Injection is subject to significant risks.
Although Alferon N Injection is approved for marketing in the United States for intralesional treatment of refractory or recurring external genital warts in patients 18 years of age or older, to date it has not been approved for other indications.
Possible side effects from the use of Ampligen or Alferon N Injection could adversely affect potential revenues and physician/patient acceptability of our product.
We believe that Ampligen has been generally well tolerated with a low incidence of clinical toxicity, particularly given the severely debilitating or life-threatening diseases that have been treated. A mild flushing reaction has been observed in approximately 15-20% of patients treated in our various studies. This reaction is occasionally accompanied by a rapid heartbeat, a tightness of the chest, urticaria (swelling of the skin), anxiety, shortness of breath, subjective reports of “feeling hot”, sweating and nausea. The reaction is usually infusion-rate related and can generally be controlled by reducing the rate of infusion. Other adverse side effects include liver enzyme level elevations, diarrhea, itching, asthma, low blood pressure, photophobia, rash, visual disturbances, slow or irregular heart rate, decreases in platelets and white blood cell counts, anemia, dizziness, confusion, elevation of kidney function tests, occasional temporary hair loss and various flu-like symptoms, including fever, chills, fatigue, muscular aches, joint pains, headaches, nausea and vomiting. These flu-like side effects typically subside within several months.
The FDA in its February 1, 2013, CRL, provided recommendations to address certain outstanding issues before they could approve Ampligen for Commercial Sales. The Agency stated that the submitted data do not provide sufficient information to determine whether the product is safe for use in CFS due to the limited size of the safety database and multiple discrepancies within the submitted data.
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If approved, one or more of the potential side effects of the drug might deter usage of Ampligen in certain clinical situations and therefore, could adversely affect potential revenues and physician/patient acceptability of our product.
At present, Alferon N Injection is approved for the intralesional (within the lesion) treatment of refractory or recurring external genital warts in adults. In clinical trials conducted for the treatment of genital warts with Alferon N Injection, patients did not experience serious side effects; however, there can be no assurance that unexpected or unacceptable side effects will not be found in the future for this use or other potential uses of Alferon N Injection which could threaten or limit such product’s usefulness.
Risks Related to our activities associated with Ampligen’s potential effectiveness as a treatment for COVID-19 of Post-COVID Conditions
It is not possible to predict the future of COVID-19, and related Post-COVID Conditions, as a global public health threat or the development of related therapies. No assurance can be given that Ampligen will aid in or be applied to the treatment of this virus.
Significant additional testing and trials will be required to determine whether Ampligen will be effective in the treatment of COVID-19 or Post-COVID conditions, and no assurance can be given that it will be the case. We base our belief that Ampligen may be effective in the treatment of COVID-19 or Post-COVID conditions on the result of studies that we reviewed and referenced. No assurance can be given that future studies will not result in findings that are different from those in the studies that we have relied upon. We are one of many companies working to develop a treatment for this virus, most of whom have far greater resources than us. This includes research into a range of COVID-19-related circumstances, from prophylactic and early-onset treatments to therapies for Post-COVID conditions. If one of these companies develops an effective treatment along the same lines as a therapy being developed by AIM, the development of Ampligen for this virus most likely will be adversely affected. Moreover, there already are available treatments.
Operating in foreign countries carries with it many risks.
Some of our studies are being conducted in the Netherlands and we may conduct other studies and or we may enter into agreements such as supply agreements. Operating in foreign countries carries with it a number of risks, including potential difficulties in enforcing intellectual property rights. We cannot assure that our potential foreign operations will not be adversely affected by these risks.
Risks Associated with Our Intellectual Property
We may not be profitable unless we can protect our patents and/or receive approval for additional pending patents.
We need to preserve and acquire enforceable patents covering the use of Ampligen for a particular disease in order to obtain exclusive rights for the commercial sale of Ampligen for such disease. We obtained all rights to Alferon N Injection, and we plan to preserve and acquire enforceable patents covering its use for existing and potentially new diseases once we have had a successful FDA Pre Approval Inspection. Our success depends, in large part, on our ability to preserve and obtain patent protection for our products and to obtain and preserve our trade secrets and expertise. Certain of our know-how and technology is not patentable, particularly the procedures for the manufacture of our experimental drug, Ampligen. We also have been issued a patent which affords protection on the use of Ampligen in patients with Chronic Fatigue Syndrome. We have not yet been issued any patents in the United States for the use of Ampligen as a sole treatment for any of the cancers which we have sought to target. For more information on Patents, please see PART I, Item 1 “Business; Patents”.
We cannot assure that our competitors will not seek and obtain patents regarding the use of similar products in combination with various other agents, for a particular target indication prior to our doing so. If we cannot protect our patents covering the use of our products for a particular disease, or obtain additional patents, we may not be able to successfully market our products.
The patent position of biotechnology and pharmaceutical firms is highly uncertain and involves complex legal and factual questions.
To date, no consistent policy has emerged regarding the breadth of protection afforded by pharmaceutical and biotechnology patents. There can be no assurance that new patent applications relating to our products, process or technology will result in patents being issued or that, if issued, such patents will afford meaningful protection against competitors with similar technology. It is generally anticipated that there may be significant litigation in the industry regarding patent and intellectual property rights. Such litigation could require substantial resources from us, and we may not have the financial resources necessary to enforce the patent rights that we hold. No assurance can be made that our patents will provide competitive advantages for our products, process and technology or will not be successfully challenged by competitors. No assurance can be given that patents do not exist or could not be filed which would have a materially adverse effect on our ability to develop or market our products or to obtain or maintain any competitive position that we may achieve with respect to our products. Our patents also may not prevent others from developing competitive products or processes using related technology.
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There can be no assurance that we will be able to obtain necessary licenses if we cannot enforce patent rights we may hold. In addition, the failure of third parties from whom we currently license certain proprietary information or from whom we may be required to obtain such licenses in the future, to adequately enforce their rights to such proprietary information, could adversely affect the value of such licenses to us.
If we cannot enforce the patent rights we currently hold we may be required to obtain licenses from others to develop, manufacture or market our products. There can be no assurance that we would be able to obtain any such licenses on commercially reasonable terms, if at all. We currently license certain proprietary information from third parties, some of which may have been developed with government grants under circumstances where the government maintained certain rights with respect to the proprietary information developed. No assurances can be given that such third parties will adequately enforce any rights they may have or that the rights, if any, retained by the government will not adversely affect the value of our license.
There is no guarantee that our trade secrets will not be disclosed or known by our competitors.
To protect our rights, we require all employees and certain consultants to enter into confidentiality agreements with us. There can be no assurance that these agreements will not be breached, that we would have adequate and enforceable remedies for any breach, or that any trade secrets of ours will not otherwise become known or be independently developed by competitors.
Risks Associated with Our R&D
We cannot predict what additional studies and/or additional testing or information may be required by the FDA. Accordingly, we are unable to estimate the nature, timing, costs and necessary efforts to complete these projects nor the anticipated completion dates. In addition, we have no basis for estimating when material net cash inflows may commence. We have yet to generate significant revenues from the sale of these developmental products.
Due to the inherent uncertainty involved in the design and conduct of clinical trials and the applicable regulatory requirements, including the factors discussed above in “Our Products”, we cannot predict what additional studies and/or additional testing or information may be required by the FDA. In addition, most of our studies to date have involved only a small group of participants and positive results in such a small group does not mean that such results will prove true in studies with a much larger group of participants. Accordingly, we are unable to estimate the nature, timing, costs and necessary efforts to complete these projects nor the anticipated completion dates. In addition, we have no basis for estimating when material net cash inflows may commence. We have yet to generate significant revenues from the sale of these developmental products. As of December 31, 2023, we had approximately $13,070,000 in Cash, Cash Equivalents. Please see “We may require additional financing which may not be available” above.
Risks Associated with Our Manufacturing
Our Alferon N Injection Commercial Sales were halted due to lack of finished goods inventory. If we are unable to gain the necessary FDA approvals related to Alferon N Injection, or if we are unable to identify a CMO or CMOs that meet our requirements, then our operations would most likely be materially and/or adversely affected.
We are exploring engaging a Contract Manufacturing Organization (“CMO”) to produce Alferon API. At present, we do not have a supply of Alferon N Injection or the requisite API. Additionally, although our old New Brunswick facility was FDA approval under the BLA for Alferon N Injection, this status will need to be reapproved when a CMO or a new facility is identified for the production of the drug. We cannot provide any guarantee that a CMO or other future facility will pass an FDA pre-approval inspection for Ampligen or Alferon N Injection manufacture.
If we are unable to gain the necessary FDA approvals related to the manufacturing process and/or final product of new Alferon N Injection inventory or contract with a CMO, our operations most likely will be materially adversely affected. For more information on Alferon N Injection regarding potential commercial sales, please see PART I, Item 1 - “Business; Manufacturing”.
There are no long-term agreements with suppliers of required materials and services for Ampligen and there are a limited number of raw material suppliers. If we are unable to obtain the required raw materials and/or services, we may not be able to manufacture Ampligen.
A number of essential raw materials are used in the production of Ampligen as well as packaging materials utilized in the fill and finish process. We do not have, but continue to work toward having, long-term agreements for the supply of such materials, when possible. There can be no assurance we can enter into long-term supply agreements covering essential materials on commercially reasonable terms, if at all.
There are a limited number of suppliers in the United States and abroad available to provide the raw and packaging materials/reagents for use in manufacturing Ampligen and Alferon N Injection. At present, we do not have any agreements with third parties for the supply of any of these materials or we are relying on a limited source of reagent suppliers necessary for the manufacture of Alferon N Injection. Jubilant HollisterStier LLC has manufactured batches of Ampligen for us pursuant to purchase orders. We anticipate, but cannot assure, that additional orders will be placed upon approved quotes and purchase orders provided by us to Jubilant. On December 22, 2020, we added Pharmaceutics International Inc. (“Pii”) as a “Fill & Finish” provider to enhance our capacity to produce the drug Ampligen. This addition amplifies our manufacturing capability by providing redundancy and cost savings. The contracts augment our existing fill and finish capacity. If we are unable to place adequate acceptable purchase orders with Jubilant or Pii in the future at acceptable prices upon acceptable terms, we will need to find another manufacturer. If we need to find another contract manufacturer to produce Ampligen, it would create a significant delay and expense to get the manufacturer up and running. The costs and availability of products and materials we would need for the production of Ampligen are subject to fluctuation depending on a variety of factors beyond our control, including competitive factors, changes in technology, ownership of intellectual property, FDA and other governmental regulations. There can be no assurance that we will be able to obtain such products and materials on terms acceptable to us or at all.
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While we produced limited quantities of active pharmaceutical ingredients (“API”) for our products in our old New Brunswick, NJ facility, the sale of this facility necessitated our exploring the engagement of a CMO to produce API for both Ampligen and Alferon. While we believe we have sufficient API to meet our current Ampligen needs, we are also continually exploring new efficiencies so as to maximize our ability to fulfill future obligations. Currently, the Alferon N Injection manufacturing process is on hold and there is no definitive timetable for its restart. Please see “Our Alferon N. Injection commercial sales were halted due to lack of finished goods inventory. If we are unable to gain the necessary FDA approvals related to Alferon N Injection, our operations most likely will be materially and/or adversely affected” above.
If we are unable to obtain or manufacture the required materials/reagents, and/or procure services needed in the final steps in the manufacturing process, we may be unable to manufacture Ampligen. The costs and availability of products and materials we need for the production of Ampligen are subject to fluctuation depending on a variety of factors beyond our control, including competitive factors, changes in technology, ownership of intellectual property, FDA and other governmental regulations. There can be no assurance that we will be able to obtain such products and materials on terms acceptable to us or at all. For more information on Ampligen manufacturing, please see PART I, Item 1 - “Business; Our Products; Manufacturing” above.
There are limited number of organizations in the United States available to provide the final manufacturing steps of formulation, fill, finish and packing sets for Alferon N Injection and Ampligen.
There are a limited number of organizations in the United States available to provide the final steps in the manufacturing for Alferon N Injection and Ampligen. To formulate, fill, finish and package our products (“fill and finish”), we require an FDA approved third party CMO.
In January 2017, we approved a quote and provided a purchase order with Jubilant HollisterStier LLC pursuant to which Jubilant manufactured batches of Ampligen for us. We anticipate, but cannot assure, that additional orders will be placed upon approved quotes and purchase orders provided by us to Jubilant. If we are unable to place adequate acceptable purchase orders with Jubilant in the future at acceptable prices upon acceptable terms our business would be materially and adversely affected. Please see the prior risk factor.
In December 2020, we added Pii as a “Fill & Finish” provider to enhance our capacity to produce the drug Ampligen. This addition amplifies our manufacturing capability by providing redundancy and cost savings. The contracts augment our existing fill and finish capacity.
Should there be an unanticipated delay in receiving new product or should we experience an unexpected demand for Ampligen, our ability to supply Ampligen most likely will be adversely affected. If we are unable to procure services needed in the final steps in the manufacturing process, we may be unable to manufacture Alferon N Injection and/or Ampligen. The costs and availability of products and materials we need for the production of Ampligen and the commercial production of Alferon N Injection and other products which we may commercially produce are subject to fluctuation depending on a variety of factors beyond our control, including competitive factors, changes in technology, and FDA and other governmental regulations and there can be no assurance that we will be able to obtain such products and materials on terms acceptable to us or at all. For more information on Ampligen and Alferon N Injection manufacturing, please see PART I, Item 1 - “Business; Our Products; Manufacturing” above.
There is no assurance that, upon success, manufacture of a drug on a limited-scale basis for investigational use would lead to a successful transition to commercial, large-scale production.
Changes in methods of manufacturing, including commercial scale-up, may affect the chemical structure of Ampligen and other RNA drugs, as well as their safety and efficacy. The transition from limited production of pre-clinical and clinical research quantities to production of commercial quantities of our products will involve distinct management and technical challenges, and may require additional management, technical personnel and capital. While we intend to identify a CMO (or CMOs) with a state-of-the-art facility capable of meeting potential increased demand for Ampligen, there can be no assurance that our manufacturing will be successful or that any given product will be determined to be safe and effective, or capable of being manufactured under applicable quality standards, economically, and in commercial quantities, or successfully marketed.
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We have limited manufacturing experience for Ampligen and Alferon N Injection. We may not be profitable unless we can produce Ampligen, Alferon N Injection or other products in commercial quantities at costs acceptable to us.
Ampligen has been produced to date in limited quantities for use in our clinical trials, Early Access Program and Expanded Access Program. In addition, in Argentina, Ampligen is still in the process of release testing the product that has already been sent. To be successful, our products must be manufactured in commercial quantities in compliance with regulatory requirements and at acceptable costs. We believe, but cannot assure, that it will not be necessary to increase our current product plans to meet our production obligations. We intend to utilize third-party facilities if and when the need arises. We will need to comply with regulatory requirements for such facilities, including those of the FDA pertaining to cGMP requirements or maintaining our BLA status. There can be no assurance that such facilities can be used, built, or acquired on commercially acceptable terms, or that such facilities, if used, built, or acquired, will be adequate for the production of our proposed products for large-scale commercialization or our long-term needs.
We have never produced Ampligen, Alferon N Injection or any other products in large commercial quantities. We must manufacture our products in compliance with regulatory requirements in large commercial quantities and at acceptable costs in order for us to be profitable. We intend to utilize third-party manufacturers and/or facilities if and when the need arises or, if we are unable to do so, to build or acquire commercial-scale manufacturing facilities. If we cannot manufacture commercial quantities of Ampligen and/or Alferon N Injection or continue to maintain third party agreements for its manufacture at costs acceptable to us, our operations will be significantly affected. If and when the Ampligen NDA is approved, we may need to find an additional vendor to manufacture the product for commercial sales. Also, each production lot of Alferon N Injection is subject to FDA review and approval prior to releasing the lots to be sold. This review and approval process could take considerable time, which would delay our having product in inventory to sell, nor can we provide any assurance as to the receipt of FDA approval of our finished inventory product. There can be no assurances that the Ampligen and/or Alferon N Injection can be commercially produced at costs acceptable to us.
Risks Associated with Our Licensing/Collaborations/Joint Ventures
If we are unable to achieve licensing, collaboration and/or joint ventures, our marketing strategy for Ampligen will be part of the differing health care systems around the world along with the different marketing and distribution systems that are used to supply pharmaceutical products to those systems.
We have received approval of our NDA from ANMAT for commercial sale of rintatolimod (U.S. tradename: Ampligen) in the Argentine Republic for the treatment of severe CFS. The product will be marketed by GP Pharm, our commercial partner in Latin America. In September 2019, we received clearance from the FDA to ship Ampligen to Argentina for the commercial launch and subsequent sales. We are currently working with GP Pharma on the commercial launch of Ampligen in Argentina. Commercialization in Argentina will require, among other things, GP Pharm to establish disease awareness, medical education, creation of an appropriate reimbursement level, design of marketing strategies and completion of manufacturing preparations for launch.
The next steps in the commercial launch of Ampligen include ANMAT conducting a final inspection of the product and release tests before granting final approval to begin commercial sales. This testing and approval process is currently delayed due ANMAT’s internal processes. Once final approval by ANMAT is obtained, GP Pharm will begin distributing Ampligen in Argentina. We continue to pursue our Ampligen NDA, for the treatment of CFS with the FDA.
Risks Associated with Our Marketing and Distribution
We have limited marketing and sales capability. If we are unable to obtain additional distributors and our current and future distributors do not market our products successfully, we may not generate significant revenues or become profitable.
We have limited marketing and sales capability. We are dependent upon existing, and possibly future, marketing agreements and third-party distribution agreements for our products in order to generate significant revenues and become profitable. As a result, any revenues received by us will be dependent in large part on the efforts of third parties, and there is no assurance that these efforts will be successful.
Our commercialization strategy for Ampligen, if and when it is approved for marketing and sale by the FDA, may include licensing/co-marketing agreements utilizing the resources and capacities of a strategic partner(s). We continue to seek a world-wide marketing partner with the goal of having a relationship in place before approval is obtained. In parallel to partnering discussions, appropriate pre-marketing activities will be undertaken. It is our current intention to control manufacturing of Ampligen on a world-wide basis.
Our commercialization strategy for Alferon N Injection may include the utilization of internal functions and/or licensing/co-marketing agreements that would utilize the resources and capacities of one or more strategic partners.
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We cannot assure that our U.S. or foreign marketing strategy will be successful or that we will be able to establish future marketing or third-party distribution agreements on terms acceptable to us, or that the cost of establishing these arrangements will not exceed any product revenues. Our inability to establish viable marketing and sales capabilities would most likely have a materially adverse effect on us. There can be no assurances that the approved Alferon N Injection product will be returned to prior sales levels.
Risks Associated with Our Competition
Rapid technological change may render our products obsolete or non-competitive.
The pharmaceutical and biotechnology industries are subject to rapid and substantial technological change. Technological competition from pharmaceutical and biotechnology companies, universities, governmental entities and others diversifying into the field is intense and is expected to increase. Most of these entities have significantly greater research and development capabilities than us, as well as substantial marketing, financial and managerial resources, and represent significant competition for us. There can be no assurance that developments by others will not render our products or technologies obsolete or noncompetitive, or that we will be able to keep pace with technological developments.
Our products may be subject to substantial competition.
Ampligen. Our flagship product, Ampligen is being evaluated as a potential treatment for COVID-19, myalgic encephalomyelitis/chronic fatigue syndrome (ME/CFS) and COVID-induced CFS symptoms (“Long Haulers”); as well as multiple types of cancers. With regard to COVID-19, multiple global companies are actively working to develop therapies for COVID-19, including several companies which have successfully developed vaccines and treatments. It is possible that these or other companies may be developing therapies that are similar to that which we are attempting to develop, and could therefore develop them first. Some of these potential products may have an entirely different approach or means of accomplishing similar therapeutic effects to products being developed by us. These competing products may be more effective and less costly than our products. In addition, conventional drug therapy, surgery and other more familiar treatments may offer competition to our products. Furthermore, many of our competitors have significantly greater experience than we do in preclinical testing and human clinical trials of pharmaceutical products and in obtaining FDA, The Health Protection Branch of the Canada Department of National Health and Welfare (HPB) and other regulatory approvals of products. Accordingly, our competitors may succeed in obtaining FDA, HPB or other regulatory product approvals more rapidly than us. There are no drugs approved for U.S. commercial sale for the treatment of CFS; standard of care is to focus on symptom relief, such as addressing pain or depression. The dominant competitors with drugs to treat disease indications which we plan to address include Pfizer, GlaxoSmithKline, Merck & Co., Novartis and AstraZeneca. Biotech competitors include Baxter International, Fletcher/CSI, AVANT Immunotherapeutics, AVI BioPharma and Genta. These potential competitors are among the largest pharmaceutical companies in the world, are well known to the public and the medical community, and have substantially greater financial resources, product development, and manufacturing and marketing capabilities than we have. Although we believe our principal advantage is the unique mechanism of action of Ampligen on the immune system, we cannot assure that we will be able to compete.
Alferon N Injection. Our competitors are among the largest pharmaceutical companies in the world, are well known to the public and the medical community, and have substantially greater financial resources, product development, and manufacturing and marketing capabilities than we have. Alferon N Injection currently competes with Merck’s injectable recombinant alpha interferon product (Intron® A) for the treatment of genital warts. In addition, other pharmaceutical firms offer self-administered topical cream, for the treatment of external genital and perianal warts such as Graceway Pharmaceuticals (Aldara®), Perrigo Company (Imiquimod Cream - Generic Equivalent to Aldara®), Watson Pharma (Condylox®) and MediGene (Veregen®). Alferon N Injection also competes with surgical, chemical, and other methods of treating genital warts. We cannot assess the impact products developed by our competitors, or advances in other methods of the treatment of genital warts, will have on the commercial viability of Alferon N Injection. If and when we obtain additional approvals of uses of this product, we expect to compete primarily on the basis of product performance. Our competitors have developed or may develop products (containing either alpha or beta interferon or other therapeutic compounds) or other treatment modalities for those uses. There can be no assurance that, if we are able to obtain regulatory approval of Alferon N Injection for the treatment of new indications, we will be able to achieve any significant penetration into those markets. In addition, because certain competitive products are not dependent on a source of human blood cells, such products may be able to be produced in greater volume and at a lower cost than Alferon N Injection. Currently, our wholesale price on a per unit basis of Alferon N Injection is higher than that of the competitive recombinant alpha and beta interferon products. Please see risk factor “We may not be profitable unless we can protect our patents and/or receive approval for additional pending patents” above for additional information.
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Other companies may succeed in developing products earlier than we do, obtaining approvals for such products from the FDA more rapidly than we do, or developing products that are more effective than those we may develop. While we will attempt to expand our technological capabilities in order to remain competitive, there can be no assurance that research and development by others or other medical advances will not render our technology or products obsolete or non-competitive or result in treatments or cures superior to any therapy we develop.
Risks Associated with an Investment in Our Common Stock:
The market price of our stock may be adversely affected by market volatility.
The market price of our common stock has been and is likely to be volatile. This is especially true given the current significant instability in the financial markets, and the adverse effects and disruptions caused by the war in the Ukraine, Israel and Gaza. Should our progress slow or results of testing or activities by others negatively impact our efforts, it is just as likely that our stock price will be significantly adversely affected, and in such case, investors could sustain substantial losses. In addition to the foregoing and, general economic, political and market conditions, the price and trading volume of our stock could fluctuate widely in response to many factors, including:
| ● | announcements of the results of clinical trials by us or our competitors; | |
| ● | announcements of availability or projections of our products for commercial sale; | |
| ● | announcements of legal actions against us and/or settlements or verdicts adverse to us; | |
| ● | adverse reactions to products; | |
| ● | governmental approvals, delays in expected governmental approvals or withdrawals of any prior governmental approvals or public or regulatory agency comments regarding the safety or effectiveness of our products, or the adequacy of the procedures, facilities or controls employed in the manufacture of our products; | |
| ● | changes in U.S. or foreign regulatory policy during the period of product development; | |
| ● | developments in patent or other proprietary rights, including any third-party challenges of our intellectual property rights; | |
| ● | announcements of technological innovations by us or our competitors; | |
| ● | announcements of new products or new contracts by us or our competitors; | |
| ● | actual or anticipated variations in our operating results due to the level of development expenses and other factors; | |
| ● | changes in financial estimates by securities analysts and whether our earnings meet or exceed the estimates; | |
| ● | conditions and trends in the pharmaceutical and other industries; | |
| ● | new accounting standards; | |
| ● | overall investment market fluctuation; | |
| ● | restatement of prior financial results; | |
| ● | notice of NYSE American non-compliance with requirements; and | |
| ● | occurrence of any of the risks described in these risk factors and the risk factors incorporated by reference herein. |
Our common stock is listed for quotation on the NYSE American. For the year ended December 31, 2023, the trading price of our common stock has ranged from $0.32 to $0.77 per share. We expect the price of our common stock to remain volatile. The average daily trading volume of our common stock varies significantly.
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Sales of a significant number of shares of our common stock in the public markets, or the perception that such sales could occur, could depress the market price of our common stock.
We may issue shares to be used to meet our capital requirements or use shares to compensate employees, consultants and/or Directors. We have registered securities for public sale pursuant to a universal shelf registration statement which will allow us to raise additional capital as needed in the future from the sale of our securities.
We are unable to estimate the amount, timing or nature of future sales of outstanding common stock or instruments convertible into or exercisable for our common stock. Sales of a significant number of shares of our common stock in the public markets, or the perception that such sales could occur as a result of our utilization of our shelf registration statement or otherwise could depress the market price of our common stock and impair our ability to raise capital through the sale of additional equity securities. We cannot predict the effect that future sales of our common stock or the market perception that we are permitted to sell a significant number of our securities would have on the market price of our common stock. Please see Item 7- “Management’s Discussion and Analysis of Financial Condition and Result of Operations; Liquidity and Capital Resources” in PART II.
Provisions of our Certificate of Incorporation and Delaware law could defer a change of our Management, which could discourage or delay offers to acquire us.
Provisions of our Certificate of Incorporation and Delaware law may make it more difficult for someone to acquire control of us or for our stockholders to remove existing management and might discourage a third party from offering to acquire us, even if a change in control or in Management would be beneficial to our stockholders. For example, our Certificate of Incorporation allows us to issue shares of preferred stock without any vote or further action by our stockholders. Our Board of Directors has the authority to fix and determine the relative rights and preferences of preferred stock. Our Board of Directors also has the authority to issue preferred stock without further stockholder approval. As a result, our Board of Directors could authorize the issuance of a series of preferred stock that would grant to holders the preferred right to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of common stock and the right to the redemption of the shares, together with a premium, prior to the redemption of our common stock. On November 14, 2017, at the direction of the Board, we amended and restated the Rights Agreement between us and, American Stock Transfer & Trust Company, LLC, its current Rights Agent. Pursuant to the original Rights Agreement, our Board of Directors declared a dividend distribution of one Right for each outstanding share of common stock to stockholders of record at the close of business on November 29, 2002. Each Right entitles the registered holder to purchase from us a unit consisting of one one-hundredth of a share (a “Unit”) of Series A Junior Participating Preferred Stock, par value $0.01 per share at a Purchase Price of $21.00 per Unit, subject to adjustment. While our Rights Agreement was scheduled to expire in late 2022, we extended it on May 14, 2023 and will now expire on May 14, 2028.
Our business, financial condition and operating results could be negatively affected as a result of actions by activist investors.
An activist group (the “Activist Group”) submitted a notice (the “Notice”) to our Board, seeking to put forth three individuals for election as directors to our four-person Board at our 2023 Annual Meeting. The Activist Group includes many of the persons who made a similar but failed attempt at our 2022 Annual Meeting. The Board once again found that the Activist Group’s Notice was invalid and rejected it. After a full trial, the Delaware Chancery Court upheld our rejection.
A proxy contest and related litigation, along the lines discussed above, could have a material adverse effect on us for the following reasons:
| ● | Activist investors may attempt to effect changes in our governance and strategic direction or to acquire control over the Board or AIM. In particular, if the Activist is successful in its litigation and subsequent proxy contest, it may gain control of the Board. |
| ● | While we welcome the opinions of all stockholders, responding to proxy contests and related litigation by activist investors is likely to be costly and time-consuming, disrupt our operations, and potentially divert the attention of our Board, management team and other employees away from their regular duties and the pursuit of business opportunities to enhance stockholder value. |
| ● | Perceived uncertainties as to our future direction as a result of potential changes to the composition of the Board may lead to the perception of a change in the strategic direction of the business, instability or lack of continuity, which may cause concern to our existing or potential strategic partners, customers, employees and stockholders; may be exploited by our competitors; may result in the loss of potential business opportunities or limit our ability to timely initiate or advance clinical trials; and may make it more difficult to attract and retain qualified personnel and business partners. |
| ● | Proxy contests and related litigation by activist investors could cause significant fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business. |
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| ITEM 1B. | Unresolved Staff Comments. |
None.
| ITEM 1C. | Cybersecurity. |
We maintain a cyber risk management program designed to identify, assess, manage, mitigate, and respond to cybersecurity threats.
We have established policies and processes for assessing, identifying, and managing material risk from cybersecurity threats, and have integrated these processes into our overall risk management systems and processes. We routinely assess material risks from cybersecurity threats, including any potential unauthorized occurrence on or conducted through our information systems that may result in adverse effects on the confidentiality, integrity, or availability of our information systems or any information residing therein.
We conduct periodic risk assessments to identify cybersecurity threats, as well as assessments in the event of a material change in our business practices that may affect information systems that are vulnerable to such cybersecurity threats. These risk assessments include identification of reasonably foreseeable internal and external risks, the likelihood and potential damage that could result from such risks, and the sufficiency of existing policies, procedures, systems, and safeguards in place to manage such risks. Following these risk assessments, we re-design, implement, and maintain reasonable safeguards to minimize identified risks; reasonably address any identified gaps in existing safeguards; and regularly monitor the effectiveness of our safeguards.
We engage consultants or other third parties in connection with our risk assessment processes. These service providers assist us to design and implement our cybersecurity policies and procedures, as well as to monitor and test our safeguards. We have not encountered cybersecurity challenges that have materially impaired our operations or financial standing.
Our management team, in conjunction with third-party IT and cybersecurity service providers is responsible for oversight and administration of our cyber risk management program, and for informing senior management and other relevant stakeholders regarding the prevention, detection, mitigation, and remediation of cybersecurity incidents. Our management team have prior experience selecting, deploying, and overseeing cybersecurity technologies, initiatives, and processes directly or via selection of strategic third-party partners, and relies on threat intelligence as well as other information obtained from governmental, public, or private sources, including external consultants engaged by us for strategic cyber risk management, advisory and decision making. Our Audit Committee assists management in oversight and administration of our cyber risk management program.
We have an annual assessment performed by a third-party specialist of our cyber risk management program. The annual risk assessment identifies, quantifies, and categorizes material cyber risks. In addition, in conjunction with the third-party cyber risk management specialists we develop a risk mitigation plan to address such risks, and where necessary, remediate potential vulnerabilities identified through the annual assessment process.
We face risks from cybersecurity threats that could have a material adverse effect on its business, financial condition, results of operations, cash flows or reputation. We acknowledge that the risk of cyber incidents is prevalent in the current threat landscape and that a future cyber incident may occur in the normal course of its business. However, prior cybersecurity incidents have not had a material adverse effect on our business, financial condition, results of operations, or cash flows. We proactively seek to detect and investigate unauthorized attempts and attacks against IT assets, data, and services, and to prevent their occurrence and recurrence where practicable through changes or updates to internal processes and tools and changes or updates to our service delivery; however, potential vulnerabilities to known or unknown threats will still remain. Further, there is increasing regulation regarding responses to cybersecurity incidents, including reporting to regulators, investors, and additional stakeholders, which could subject us to additional liability and reputational harm. In response to such risks, we have implemented initiatives such as implementation of the cybersecurity risk assessment process and development of an incident response plan. See Item 1A. “Risk Factors” for more information on our cybersecurity risks.
| ITEM 2. | Properties. |
Our principal executive office and finance is located at 2117 SW Highway 484, Ocala FL 34473, human resource office is located at 604 Main Street, Riverton, NJ 08077 and manufacturing is located at 671A US-1 South, North Brunswick, NJ 08902. We currently lease our principal executive office and finance for $2,780 per month, our human resource office for $2,850 per month and our manufacturing office for $16,100 per month.
| ITEM 3. | Legal Proceedings. |
We are, and from time to time may become, subject to litigation and various legal proceedings that involve claims for substantial amounts of money or for other relief or that might necessitate changes to our business or operations. Please see Note 16 “Contingencies” to the consolidated financial statements included in Part II, “Item 8. Financial Statements and Supplementary Data” of this Annual Report.
Because litigation is inherently unpredictable, assessing contingencies related to litigation is a complex process involving highly subjective judgment about potential outcomes of future events. When evaluating litigation contingencies, we may be unable to provide a meaningful estimate due to a number of factors, including the procedural status of the matter in question, the availability of appellate remedies, insurance coverage related to the claim or claims in question, the presence of complex or novel legal theories, and the ongoing discovery and development of information important to the matter. In addition, damage amounts claimed in litigation against us may be unsupported, exaggerated, or unrelated to possible outcomes, and as such are not meaningful indicators of our potential liability or financial exposure. Accordingly, we review the adequacy of accruals and disclosures each quarter in consultation with legal counsel, and we assess the probability and range of possible losses associated with contingencies for potential accrual in the consolidated financial statements. However, the ultimate resolution of litigated claims may differ from our current estimates.
In the normal course of business, there are various claims in process, matters in litigation, and other contingencies, certain of which are covered by insurance policies. While it is not possible to predict the outcome of these suits, legal proceedings, and claims with certainty, management is of the opinion that adequate provision for potential losses associated with these matters has been made in the financial statements and that the ultimate resolution of any one of these matters will not have a material adverse effect on our financial position and results of operations. A significant increase in the number of these claims, or one or more successful claims resulting in greater liabilities than the we currently anticipate, could materially and adversely affect our business, financial condition, results of operations, and cash flows.
Hemispherx Biopharma, Inc (n/ka) AIM Immunotech vs BioLife Plasma Services,
LP No 1711391858 ( Phila CCP)
We commenced an action in the Philadelphia Court of Common Pleas in 2017 against Biolife Plasma Services, LP related to the defendants’ breach of a contract requiring the defendant to supply certain blood related products used by and necessary to us in the manufacture of our products, including the loss profits associated with the defendants’ breaches. The Defendant asserted defenses, including a counterclaim asserting our failure to have paid invoices billed for the product in the amount of $96,676 following the Defendant’s notification that it would not be fulfilling the terms of the contract.
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The trial court issued a ruling in March 2023 on cross Motions for Summary Judgment in which it denied all of our motions and granted defendant’s Motion to exclude evidence of future loss of profit damages. The ruling specified that we had properly pled, and the Court was specifically allowing our damages theory to proceed on reliance damages. We sought reconsideration of the ruling based on its internal inconsistency with the contemporaneously issued Order which allowed only the counterclaims to proceed. In July 2023, we sought appellate review of the inconsistent lower Court pretrial rulings. In September 2023, the Court issued an Order in response to our Motion for Reconsideration granting the Motion, vacating its prior Order on summary judgment, and issued a new Order and Opinion.
The new Order and Opinion again denied our motion for summary judgment, and granted defendants’ motion for summary judgment. The effect of the Order was to again allow only the defendant’s counterclaim to proceed. The Order mooted the pending appellate review. On December 6, 2023, we petitioned the Superior (appellate) Court to allow immediate appeal. The Superior Court has not ruled on the Petition. The parties have twice mediated the matter with no resolution achieved. No estimate can be made of when the trial court and appellate court will address the pending matters. No estimate of the outcome can be made at this time pending determination of the Petition and the underlying issues presented in the appeal.
AIM ImmunoTech, Inc. v. Tudor., Case No. 2021-CA-393 (Marion County, FL)
On August 13, 2021, the Marion County Circuit Court entered an Agreed Order Granting Joint Motion for Entry of Stipulated Injunction (“Injunction”), which precluded Tudor from contacting any of our business relations. We are currently pursuing enforcement of the Injunction against Tudor, who recently violated the Injunction. We are not seeking damages against Tudor. We intend on filing a motion to enforce the Injunction and will seek to recover its attorney’s fees and costs, along with any other sanction necessary to preclude Tudor from violating the injunction again.
Jorgl v. AIM Immunotech, Inc. et al., C.A. No. 2022-0669-LWW (Del. Ch.)
On July 29, 2022, Jonathan Jorgl (“Jorgl”) filed a complaint against us and the then-members of our Board of Directors in the Delaware Court of Chancery (the “Jorgl Action”). The complaint challenged the decision of our Board of Directors to reject Jorgl’s notice of intent to nominate two candidates for election to the our Board of Directors on the basis that the notice failed to comply with our bylaws. The Complaint sought a declaration that Jorgl’s nomination was valid and effective and complied with our bylaws and that the we must list Jorgl’s candidates in our proxy materials, as well as a temporary restraining order, preliminary injunction, and permanent injunction enjoining defendants from taking any action to prevent Jorgl from exercising his alleged nomination rights and from making any statements that disparage Jorgl’s candidates prior to or during our annual meeting of stockholders.
On August 15, 2022, the Court denied Jorgl’s motion for temporary restraining order, granted the motion to expedite, and scheduled a hearing on Jorgl’s preliminary injunction motion. After expedited discovery and briefing, the Court issued an opinion on October 28, 2022, denying Jorgl’s motion for preliminary injunction. On November 1, 2022, Jorgl and the other participants in his nomination efforts and attempted proxy contest announced in a press release that they did not plan to proceed to trial or seek an appeal of the Court’s ruling denying the motion for preliminary injunction and that the proxies they solicited would not be voted at our annual meeting of stockholders. We held our annual meeting of stockholders on November 3, 2022, and the stockholders re-elected Thomas Equels, William Mitchell, and Stewart Appelrouth as directors.
On April 20, 2023, Jorgl filed a motion to dismiss the Jorgl Action. On June 20, 2023, the Court entered an order dismissing the Jorgl Action and retaining jurisdiction to adjudicate any related fee disputes.
On July 20, 2023, defendants filed a motion to shift all litigation fees they incurred in connection with the Jorgl Action to Jorgl on the basis that he brought the litigation in bad faith (the “AIM Fee Motion”). Also on July 20, 2023, Jorgl filed a motion to shift certain legal fees to defendants that he incurred in connection with contesting a subpoena defendants served on the legal counsel that advised Jorgl in his nomination efforts, Baker & Hostetler LLP (the “Jorgl Fee Motion”). The Delaware Court of Chancery ruled on certain discovery motions in October 2023 pertaining to the AIM Fee Motion, and on March 25, 2024, ordered the parties to provide a joint status report regarding the AIM Fee Motion and the Jorgl Fee Motion within 30 days. We anticipate that the parties will negotiate a schedule to complete briefing on the motions.
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AIM ImmunoTech, Inc. v. Tudor, et al., Case 5:22-cv-00323 (M.D. Florida 2022)
On July 15, 2022, we filed suit against Franz Tudor, Todd Deutsch, Ted Kellner, Jonathan Jorgl, Walter Lautz, Robert Chioini, and Michael Rice (collectively, the “Tudor Group”) for injunctive relief arising from the Tudor Group’s alleged violations of the Securities Exchange Act for failing to register as a group and provide required disclosures. On July 8, 2022, Jorgl served a notice of intent to nominate two director candidates from the Tudor Group for election at our 2022 annual meeting. We rejected the notice because we believed the notice did not comply with the bylaws, federal law, or Delaware law. We allege the notice is missing critical information required by the bylaws and made material misrepresentations and omissions. We believe the Tudor Group was acting in concert to appoint the nominees and sued these individuals to enjoin them from violating our bylaws and federal law. On July 10, 2023, the court dismissed the complaint. We filed a motion for reconsideration, which the trial court denied. We filed an appeal of the dismissal, which is pending and referenced below. The defendants have filed motions for sanctions seeking to recover their legal costs from the inception of the case, which total hundreds of thousands of dollars, according to the defendants, and additional sums, also not quantified, to act as a deterrent. On December 19, 2023, the court heard oral argument on the motions. The parties submitted post-hearing briefs, and the matter is pending before the Court.
AIM ImmunoTech, Inc. v. Tudor, et al., Case No. 0:2023prici13576 (11th Cir. 2023)
We filed a notice of appeal of the order of dismissal and the order denying its motion for reconsideration that were entered in AIM ImmunoTech, Inc. v. Tudor, et al., Case 5:22-cv-00323 (M.D. Fla. 2022) (above). The appellate deadlines are stayed until the lower court rules on the pending motions.
Kellner v. AIM Immunotech, Inc. et al., C.A. No. 2023-0879-LWW (Del. Ch.)
On August 25, 2023, Ted D. Kellner (“Kellner”) filed a complaint against us and the four current members of our Board of Directors in the Delaware Court of Chancery (the “Kellner Action”). The complaint challenged (1) our adoption of amendments to the advance notice provision of our bylaws; and (2) the decision of our Board of Directors to reject Kellner’s notice of intent to nominate himself and two other candidates’ election to our Board of Directors at our 2023 annual meeting of stockholders on the basis that the nomination notice failed to comply with our amended bylaws. The complaint seeks, among other things, a declaration that (1) the amendments to our Bylaws were unlawful; and/or (2) the Board’s application of the amended bylaws to reject Kellner’s nomination notice was unlawful or inequitable. On September 11, 2023, defendants in the Kellner Action filed an answer responding to Kellner’s complaint and we filed a counterclaim. Our counterclaim seeks a declaration that (1) our bylaw amendments are lawful and valid; and (2) Kellner’s nomination notice did not comply with our bylaws.
Upon completion of expedited discovery and briefing, the Court held trial in the Kellner Action from October 30, 2023, to November 1, 2023.
The Court of Chancery issued an opinion on December 28, 2023, that declared (1) the Board’s rejection of Kellner’s nomination notice was lawful and equitable, (2) certain of our bylaw amendments were valid, and (3) certain of the our bylaw amendments were invalid. Kellner has appealed the court’s ruling concerning the Board’s rejection of his nomination notice, and the bylaw amendments the court ruled were valid. The Defendants have appealed the court’s ruling as to the bylaw amendments the court ruled were invalid. The parties agreed to, and the Delaware Supreme Court ordered, expedited briefing, which is now complete. Oral argument is scheduled for April 10, 2024.
Although Kellner is not presently seeking monetary relief from us in the Kellner Action, he has reserved the right to seek reimbursement of certain legal fees and expenses from us if the Delaware Supreme Court upholds the invalidation of certain bylaws.
| ITEM 4. | Mine Safety Disclosures. |
Not Applicable.
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PART II
| ITEM 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. |
Market Information
Our common stock is listed and traded on the NYSE American under the symbol AIM.
Holders of Common Stock
As of March 25, 2023, there were approximately 150 holders of record of our Common Stock. This number was determined from records maintained by our transfer agent and does not include beneficial owners of our securities whose securities are held in the names of various dealers and/or clearing agencies.
Securities Authorized for Issuance Under Equity Compensation Plans
Information about securities authorized for issuance under our equity compensation plans is incorporated herein by reference to Item 12 of Part III of this Annual Report.
Dividends
We have not paid any cash dividends on our Common Stock in recent years. It is management’s intention not to declare or pay dividends on our Common Stock, but to retain earnings, if any, for the operation and expansion of our business.
Recent Sales of Unregistered Securities
2018 Equity Incentive Plan
During the year ended December 31, 2022, we issued a total of 850,000 options under the 2018 Equity Incentive Plan, effective September 12, 2018, which will continue in effect for a period of 10 years from its effective date.
During the year ended December 31, 2023, we issued a total of 400,000 options under the 2018 Equity Incentive Plan, effective September 12, 2018, which will continue in effect for a period of 10 years from its effective date.
Employees and Directors Purchase Plan
On July 7, 2020, the board of directors approved a plan pursuant to which all directors, officers, and employees could purchase from us up to an aggregate of $500,000 worth of shares at the market price. Pursuant to NYSE American rules, this plan was effective for a sixty-day period commencing upon the date that the NYSE American approved our Supplemental Listing Application. We issued 10,730 shares of our common stock at a price of $2.33 for a total of $25,000 under this plan. When this plan expired, the board of directors approved subsequent similar $500,000 plans for all directors, officers and employees to buy shares from us at the market price. Subsequent plans were approved by the board of directors upon the expiration of prior plans. The last plan approved by the Board of Directors for the fiscal year ended December 31, 2023, was on October 26, 2023.
During the fiscal year ended December 31, 2022, we issued a total of 86,817 shares of our common stock at prices ranging from $0.76 to $1.02 for a total of $80,000 under the plan.
During the fiscal year ended December 31, 2023, we issued a total of 419,285 shares of our common stock at prices ranging from $0.31 to $0.67 for a total of $150,500 under the plan.
In March 2024, we sold 204,547 and 38,462 shares of our common stock at prices of $0.33 and $0.39 per share, respectively, under the plan.
Azenova
On December 6, 2023, the Company issued to Azenova, LLC, an option to purchase up to three hundred and sixty thousand (360,000) shares of our “Common Stock” at a price equal to $0.46 per share. This Option was awarded pursuant to the Consulting Agreement dated October 16, 2023 between the Company and Azenova, LLC. On December 6, 2023, 180,000 options were transferred to Jeffrey Southerton and 180,000 options were transferred to Stacy J. Evans; both transfers with an exercise price of $0.46.
The offers, sales and issuances of securities described above was deemed to be exempt from registration under the Securities Act in reliance on either Section 4(a)(2) in that the issuance of securities to the accredited investors did not involve a public offering, or Rule 701 in that the transactions were under compensatory benefit plans and contracts relating to compensation as provided under Rule 701.
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| ITEM 6. | [Reserved] |
| ITEM 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
The following discussion and analysis is related to our financial condition and results of operations for the two years ended December 31, 2023 This information should be read in conjunction with our consolidated financial statements and related notes thereto beginning on F-1 of this Form 10-K. Please also see “Special Note Regarding Forward Looking Statements and Summary Risk Factors” in ITEM 1. Business.
Fair Value
We have issued warrants (the “Warrants”) in February 2017, June 2017, August 2017, April 2018, and March 2019 that are single compound derivatives containing both an embedded right to obtain stock upon exercise (a “Call”) and a series of embedded rights to settle the Warrants for cash upon the occurrence of certain events (each, a “Put”). Generally, the Put provisions allow the Warrant Holders liquidity protection; the right to receive cash in certain situations where the Holders would not have a means of readily selling the shares issuable upon exercise of the Warrants (e.g., where there would no longer be a significant public market for our common stock). However, because the contractual formula used to determine the cash settlement value of the embedded Put requires use of certain assumptions, the cash settlement value of the embedded Put can differ from the fair value of the unexercised embedded Call option at the time the embedded Put option is exercised.
We recompute the fair value of the Warrants at the end of each quarterly reporting period. Such value computation includes subjective input assumptions that are consistently applied each period. If we were to alter our assumptions or the numbers input based on such assumptions, the resulting fair value could be materially different.
RESULTS OF OPERATIONS
Year ended December 31, 2023 versus year ended December 31, 2022
Our net loss was approximately $28,962,000 and $19,445,000 for the years ended December 31, 2023 and 2022, respectively, representing an increase in net loss of approximately $9,517,000 or (49%) when compared to the same period in 2022. This increase in net loss for the year ended December 31, 2023, was primarily due to the following:
| ● | an increase in general and administrative expenses of $8,063,000; | |
| ● | an increase in research and development expenses of $3,949,000; | |
| ● | an increase in production costs of $42,000; offset by | |
| ● | an increase in revenue of $61,000; | |
| ● | an increase on income from investments of $1,879,000; | |
| ● | an increase in interest/other income of $440,000; | |
| ● | an increase in gain from sale of Income tax operating losses of $177,000; | |
| ● | an increase on the gain from sale of fixed assets of $15,000; | |
| ● | a decrease of the quarterly revaluation of certain redeemable warrants of $35,000. |
Net loss per share was $ (0.60) and $(0.40) for the years ended December 31, 2023 and 2022, respectively. The weighted average number of shares of our common stock outstanding as of December 31, 2023, was 48,585,404 as compared to 48,047,288 as of December 31, 2022.
Revenues
Revenues from our Ampligen® Cost Recovery Program were $202,000 and $141,000 for the years ended December 31, 2023 and 2022, representing an increase of $61,000 which is primarily related to the fluctuation of patient participation.
For the years ended December 31, 2023 and 2022, we had no Alferon N Injection® Finished Good product to commercially sell and all revenue was generated from the EAP and our FDA approved open-label treatment protocol, (“AMP 511”), that allows patient access to Ampligen® for treatment in an open-label safety study.
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Production Costs
Production costs were approximately $42,000 and $0, respectively, for the years ended December 31, 2023 and 2022, representing an increase of $42,000 in production costs in the current period. The increase was due to the cost incurred for production of Ampligen that occurred in the last quarter of 2023.
Research and Development Costs
Overall Research and Development (“R&D”) costs for the year ended December 31, 2023, were approximately $10,939,000 as compared to $6,990,000 a year ago, reflecting an increase of approximately $3,949,000. The primary reason for the increase in research and development costs was due to the increases in Company sponsored clinical trials expenses of approximately $2,162,000 and an increase in outside consultant costs of approximately $1,787,000.
General and Administrative Expenses
General and Administrative (“G&A”) expenses for the years ended December 31, 2023 and 2022, were approximately $21,137,000 and $13,074,000, respectively, reflecting an increase of approximately $8,063,000. The increase in G&A expenses during the current period was largely due to increases in legal fees of approximately $6,500,000 primarily related to responding to an attempt by a group of shareholders to bypass our bylaws and nominating procedures, and financial consultant fees of $2,407,000 offset by a decrease in stock compensation of $711,000. We are in the process of submitting an insurance claim and hopes to recover a portion of the legal expenses related to the shareholder action, but recovery, if any, at this time cannot be determined.
Gain (loss) on Investments
Gain (loss) on investments for the years ended December 31, 2023 and 2022 was approximately $200,000 and ($1,679,000), respectively, reflecting an increased gain on investments of approximately $1,879,000. The gain was due to the change in the fair value of equity investments.
Redeemable Warrants
The revaluation of certain redeemable warrants resulted in a non-cash adjustment to the redeemable warrants liability. There was no change for the twelve months ended December 31, 2023, compared with a gain of $35,000 for the twelve months ended December 31, 2022 (see “Financial Statements: Note 15: Fair Value” for the various factors considered in the valuation of redeemable warrants).
Gain from sale of income tax operating losses
In December 2023, we effectively sold $14,156,000 of our New Jersey state net operating loss carryforward and $38,600 in R&D credits for the year 2022 for approximately $1,313,000. Additionally, we recorded a deferred tax asset in the amount of approximately $1,604,000 for the current year 2023 operating losses to be sold in 2024. (see Note 12 Income Taxes (FASB ASC 740 Income Taxes).
Liquidity and Capital Resources
Cash used in operating activities for the year ended December 31, 2023, was approximately $21,267,000 compared to approximately $16,108,000 for the same period in 2022, an increase of $5,159,000. The primary reasons for this increase in cash used in operations in 2023 was an increased net loss during the year of $9,517,000 and a gain on investments of $1,879,000, a decrease in stock compensation of $711,000 which was partially offset by an increase in accounts payable of $5,887,000 an increase in accrued expenses of $812,000.
Cash used in investing activities for the year ended December 31, 2023, was approximately ($832,000) compared to cash provided by investing activities in 2022 of approximately $10,988,000, representing a change of $11,820,000. The primary reason for the change during the current period is the net purchase and sale of marketable investments activity of ($294,000) compared to the $7,359,000 for the same period in 2022, and by the proceeds from the sale of property and equipment of $47,000 in 2023, compared with $3,900,000 in 2022.
Cash provided by financing activities for the year ended December 31, 2023, was approximately $485,000 compared to approximately $80,000 for the same period in 2022, an increase of $405,000. The primary reason for this increase was the receipt of $485,000 in net proceeds from the sale of shares in 2023 compared to $80,000 from the proceeds from sale of stock, net of issuance costs in 2022. As discussed below, in April 2023 we entered into an Equity Distribution Agreement, which was the primary source of additional equity proceeds in 2023 compared with 2022.
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As of December 31, 2023, we had approximately $13,070,000 in cash, cash equivalents and marketable investments, inclusive of approximately $7,631,000 in marketable investments, representing a decrease of approximately $21,120,000 from December 31, 2022.
We are committed to a focused business plan oriented toward finding senior co-development partners with the capital and expertise needed to commercialize the many potential therapeutic aspects of our experimental drugs and our FDA approved drug Alferon N Injection.
Today, some three years after COVID-19 first appeared, the world has a number of vaccines and some promising therapeutics. Our quest to prove the antiviral activities of Ampligen continues. If Ampligen has the broad-spectrum antiviral properties that we believe that it has, it could be a very valuable tool in treating variants of existing viral diseases, including COVID-19, or novel ones that arise in the future. Unlike most developing therapeutics which attack the virus, Ampligen works differently. We believe that it activates antiviral immune system pathways that fight not just a particular virus or viral variant, but other similar viruses as well.
The development of our products requires the commitment of substantial resources to conduct the time-consuming research, preclinical development, and clinical trials that are necessary to bring pharmaceutical products to market. We believe, based on our current financial condition, that we have adequate funds to meet our anticipated operational cash needs and fund current clinical trials over approximately the next twenty-four months. In this regard, in April, 2023, we entered into an Equity Distribution Agreement (the “EDA”), with Maxim Group LLC (“Maxim”), pursuant to which we may sell from time to time, shares of our common stock having an aggregate offering price of up to $8.5 million through Maxim, as agent. During the year ended December 31, 2023, we sold 598,114 shares under the EDA for total gross proceeds of approximately $344,000, which includes a 3.0% fee to Maxim of $10,326. In February 2022, the SEC declared our universal shelf registration statement on Form S-3 effective. Pursuant to that registration statement, we can sell up to $100 million of our securities and raise additional capital as needed in the future. Subsequent to the end of 2023, we raised $2,500,000 in net proceeds from the sale of an unsecured Note and entered into an equity line of credit (see exhibits 10.104 and 10.105). No assurance can be given as to the amount of funds that could be raised or the potential dilution to current stockholders.
At present we do not generate any material revenues from operations, and we do not anticipate doing so in the near future. We may need to obtain additional funding in the future for new studies and/or if current studies do not yield positive results, require unanticipated changes and/or additional studies. If we are unable to commercialize and sell Ampligen and/or recommence material sales of Alferon N Injection, our operations, financial position and liquidity may be adversely impacted, and additional financing may be required. There can be no assurances that, if needed, we will be able to raise adequate funds or enter into licensing, partnering or other arrangements to advance our business goals. We may seek to access the public equity market whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time. We are unable to estimate the amount, timing or nature of future sales of outstanding common stock or instruments convertible into or exercisable for our common stock. Any additional funding may result in significant dilution and could involve the issuance of securities with rights, which are senior to those of existing stockholders. See Part I, Item 1A - “Risk Factors; We may require additional financing which may not be available”.
Certain Relationships and Related Transactions
Refer to PART III, ITEM 13 - “Certain Relationships and Related Transactions, and Director Independence.
New Accounting Pronouncements
Refer to “Note 2(g) – Recent Accounting Standards and Pronouncements” under Notes to Consolidated Financial Statements.
Critical Accounting Estimates
Our significant accounting estimates are described in the Notes to Consolidated Financial Statements. The significant accounting estimates that we believe are most critical to aid in fully understanding our reported financial results are the following:
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Long-Lived Assets
We assess long-lived assets for impairment when events or changes in circumstances indicate that the carrying value of the assets or the asset grouping may not be recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant decreases in the market price of a long-lived asset or group, a significant adverse change in the extent or manner in which a long-lived asset (asset group) is being used or its physical condition, a significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset (asset group, including an adverse action or assessment by a regulator, an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset (asset group), a current period operating or cash flow loss combined with a history of operating or cash flow losses or projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset (asset group) or a current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated useful life.
When assessing for impairment, we measure the recoverability of assets that it will continue to use in its operations by comparing the carrying value of the asset grouping to our estimate of the related total future undiscounted net cash flows. If an asset grouping’s carrying value is not recoverable through the related undiscounted cash flows, the asset grouping is considered to be impaired.
We measure the impairment by comparing the difference between the asset grouping’s carrying value and its fair value. Long-lived assets are considered a non-financial asset and are recorded at fair value only if an impairment charge is recognized. Impairments are determined for groups of assets related to the lowest level of identifiable independent cash flows. The Company makes subjective judgments in determining the independent cash flows that can be related to specific asset groupings. In addition, as the Company reviews its manufacturing process and other manufacturing planning decisions, if the useful lives of assets are shorter than the Company had originally estimated, it accelerates the rate of depreciation over the assets’ new, shorter useful lives.
Redeemable Warrants
We utilize the guidance contained in ASC 480 Distinguishing Liabilities from Equity in the determination of whether to record warrants and options as Equity and/or Liability. If the guidance of ASC 480 is deemed inconclusive, we continue our analysis utilizing ASC 815 Derivatives and Hedging.
Our method of recording the related value is consistent with the standards as defined by the Financial Accounting Standards Board utilizing the concept of “Fair Value” from ASC 820-10-55-1 that states that any fair value measurement requires that the reporting entity, to determine the valuation technique(s) appropriate for the measurement, consider the availability of data with which to develop inputs that represent the assumptions that market participants would use in pricing the asset or liability and the level in the fair value hierarchy within which the inputs fall.
We recomputed the value of the redeemable warrants at the end of each quarterly period. We use the Monte Carlo Simulation approach which includes subjective input assumptions that are consistently applied each quarter. If we were to alter our assumptions or the numbers input based on such assumptions, the resulting fair value could be materially different. As discussed in greater detail in “Fair Value” at the beginning of this ITEM 7, the significant assumptions using this model are: (i) Risk-Free Interest Rate; (ii) Expected Holding Period; (iii) Expected Volatility; (iv) Expected Dividend Yield; (v) Expected Probability of a Fundamental Transaction; (vi) Expected Timing of Announcement of a Fundamental Transaction; (vii) Expected 100 Day Volatility at Announcement of a Fundamental Transaction; (viii) Expected Risk-Free Interest Rate at Announcement of a Fundamental Transaction; and (ix) Expected Time Between Announcement and Consummation of a Fundamental Transaction. The derivative is values using Level 3 inputs which are highly subjective and require a high degree of judgment.
Concentration of Credit Risk
Our policy is to limit the amount of credit exposure to any one financial institution and place investments with financial institutions evaluated as being credit worthy, or in short-term money markets, which are exposed to minimal interest rate and credit risks. We have bank deposits and overnight repurchase agreements that exceed federally insured limits.
Concentration of credit risk, with respect to receivables, is limited through our credit evaluation process. We do not require collateral on our receivables. Our receivables historically consisted principally of amounts due from wholesale drug companies.
| ITEM 7A. | Quantitative and Qualitative Disclosures About Market Risk. |
Not Applicable.
| ITEM 8. | Financial Statements and Supplementary Data. |
Please see the “Index to Financial Statements and Financial Statement Schedule” on page F-1.
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| ITEM 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosures. |
None.
| ITEM 9A. | Controls and Procedures. |
Effectiveness of Control Procedures
As of December 31, 2023, the end of the period covered by this report, we carried out an evaluation under the supervision and with the participation of our Management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act. Our disclosure controls and procedures are intended to ensure that the information we are required to disclose in the reports that we file or submit under the Securities Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities Exchange Commission’s rules and forms and (ii) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as the principal executive and financial officers, respectively, to allow final decisions regarding required disclosures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the controls and procedures were effective as of December 31, 2023, to ensure that material information was accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Our management has concluded that the financial statements included in this Form 10-K present fairly, in all material respects our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States of America.
Changes in Internal Control over Financial Reporting
We made no changes in our internal control over financial reporting during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).
Management’s Report on Internal Control over Financial Reporting
Our Management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rules 13a-15(f) or 15d-15(f), under the Exchange Act. Internal control over financial reporting is a process designed by, or under the supervision of, our principal executive and principal financial officers and affected by our Board of Directors, Management and other personnel, and to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on its financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2023. In making this assessment, Management used the criteria set forth in the framework in 2013 established by the Committee of Sponsoring Organizations of the Treadway Commission Internal Control—Integrated Framework, (COSO). A material weakness is a deficiency, or combination of deficiencies, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
Management has concluded that we did maintain effective internal control over financial reporting as of December 31, 2023, based on the criteria set forth in “Internal Control—Integrated Framework” issued by the COSO.
| ITEM 9B. | Other Information. |
None.
| ITEM 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. |
None.
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PART III
| ITEM 10. | Directors and Executive Officers and Corporate Governance. |
The following sets forth biographical information about each of our Directors and Executive Officers as of the date of this report:
| Name | Age | Position | ||
| Thomas K. Equels, Esq | 71 | Chief Executive Officer, President, and Director | ||
| Peter W. Rodino III | 72 | Chief Operating Officer, General Counsel & Secretary | ||
| William M. Mitchell, M.D., Ph.D. | 89 | Chairman of the Board and Director | ||
| Stewart L. Appelrouth | 70 | Director | ||
| Nancy Bryan | 66 | Director | ||
| Robert Dickey IV | 68 | Chief Financial Officer |
Each Director has been elected to serve until the next annual meeting of stockholders, or until their earlier resignation, removal from office, death or incapacity. Each Executive Officer serves at the discretion of the Board of Directors, subject to rights, if any, under contracts of employment.
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We believe our Board Members represent a desirable diversity of backgrounds, skills, education and experiences, and they all share the personal attributes of dedication to be effective directors. In recommending Board candidates, Corporate Governance and Nomination Committee considers a candidate’s: (1) general understanding of elements relevant to the success of a publicly traded company in the current business environment; (2) understanding of our business; and (3) diversity in educational and professional background. The Committee also gives consideration to a candidate’s judgment, competence, dedication and anticipated participation in Board activities along with experience, geographic location and special talents or personal attributes. The following are qualifications, experience and skills for Board members which are important to our business and its future:
Leadership Experience: We seek directors who have demonstrated strong leadership qualities. Such leaders bring diverse perspectives and broad business insight to our Company. The relevant leadership experience that we seek includes a past or current leadership role in a large or entrepreneurial company, a senior faculty position at a prominent educational institution or a past elected or appointed senior government position.
Industry or Academic Experience: We seek directors who have relevant industry experience, both with respect to the disease areas where we are developing new therapies as well as with the economic and competitive dynamics of pharmaceutical markets, including those in which our drugs will be prescribed.
Scientific, Legal or Regulatory Experience: Given the highly technical and specialized nature of biotechnology, we desire that certain of our directors have advanced degrees, as well as drug development experience. Since we are subject to substantial regulatory oversight, both here and abroad by the FDA and other agencies, we also desire directors who have legal or regulatory experience.
Finance Experience: We believe that our directors should possess an understanding of finance and related reporting processes, particularly given the complex budgets and long timelines associated with drug development programs.
THOMAS K. EQUELS, is our Chief Executive Officer (since 2016), President (since 2015) and Executive Vice Chairman (since 2008). He has also been one of our Directors since 2008. Mr. Equels was formerly the President and Managing Director of the Equels Law Firm in Miami, Fla. For over a quarter century, he represented national governments, state governments and private companies in banking, insurance, aviation, pharmaceutical and construction matters. He also was on numerous occasions the court-appointed receiver to turn around distressed companies. Mr. Equels received his Juris Doctor degree with high honors from Florida State University. He received his Bachelor of Science, summa cum laude, from Troy University and also obtained his Master of Science Degree from Troy University. Mr. Equels began his professional career as a military pilot. He served in Vietnam and was awarded two Distinguished Flying Crosses, the Bronze Star, the Purple Heart, and fifteen Air Medals. In 2012, he was Knighted by Pope Benedict.
THOMAS K. EQUELS, Esq. - Director Qualifications:
| ● | Leadership Experience – Military, Owner and former President, Managing Director of Equels Law Firm, Court appointed receiver in numerous industries; | |
| ● | Industry Experience – as legal counsel, General Counsel, CFO and CEO; and |
Biotech, Scientific, Legal or Regulatory Experience - Law degree with over 25 years as a practicing attorney specializing in litigation, development of clinical trials, creating intellectual property concepts, and established plan to finance drug development.
WILLIAM M. MITCHELL, M.D., Ph.D., has been a Director since July 1998 and Chairman of the Board since February 2016. Dr. Mitchell is a Professor of Pathology, Microbiology & Immunology at Vanderbilt University School of Medicine and is a board certified physician. Dr. Mitchell earned an M.D. from Vanderbilt University and a Ph.D. from Johns Hopkins University, where he served as a House Officer in Internal Medicine, followed by a Fellowship at its School of Medicine. Dr. Mitchell has published over 200 papers, reviews and abstracts that relate to viral pathogenesis, anti-viral drugs, immune responses to infection, cancer diagnostics, as well as other biomedical topics. Dr. Mitchell has been active in many professional societies that have included the American Society of Investigative Pathology, the International Society for Antiviral Research, the American Society of Clinical Oncology, the American Society of Biochemistry and Molecular Biology, the American Chemical Society, the International Academy of Pathology, the United States and Canadian Academy of Pathology, and the American Society of Microbiology. Dr. Mitchell is a member of the American Medical Association. He has served on numerous government review committees, among them the Centers for Disease Control and Prevention (CDC) and the National Institutes of Health, including the initial AIDS and Related Research Review Group. Dr. Mitchell previously served as one of our Directors from 1987 to 1989.
WILLIAM M. MITCHELL, M.D., Ph.D. - Director Qualifications:
| ● | Leadership Experience – Professor at Vanderbilt University School of Medicine. He was an independent member of the Board of Directors for Chronix Biomedical and was Chairman of its Medical Advisory Board. Additionally, he has served on multiple governmental review committees of the National Institutes of Health, Centers for Disease Control and Prevention and for the European Union, including key roles as Chairman; |
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| ● | Academic and Industry Experience – Physician scientist with extensive investigative experience on viral and immunology, and cancer issues relevant to our scientific business along with being a former independent Director of an entrepreneurial diagnostic company (Chronix Biomedical) that is involved in next generation DNA sequencing for blood based cancer diagnosis (i.e.- the liquid biopsy).; and | |
| ● | Scientific, Legal or Regulatory Experience - M.D., Ph.D. and professor at a top ranked school of medicine, and inventor of record on numerous U.S. and international patents who is experienced in regulatory affairs through filings with the FDA. |
STEWART L. APPELROUTH, CPA was appointed as a director and head of the Audit Committee in August 2016 and is a certified public accountant and partner at Appelrouth Farah & Co., P.A. and, since March 2022, a partner at Citrin Cooperman Advisors, LLP, both Certified Public Accountants. Mr. Appelrouth is also a certified forensic accountant and possesses 40 years of experience in Accounting and Consulting. He is a member of or has affiliations with the AICPA, American College of Forensic Examiners, Association of Certified Fraud Examiners, past member of the Florida Bar Grievance Committee, Florida Institute of Certified Public Accountants and InfraGard Member, a national information sharing program between the Federal Bureau of Investigation and the private sector.
Mr. Appelrouth graduated from Florida State University in 1975 and received his Master’s Degree in Finance from Florida International University in 1980. The Board has determined Mr. Appelrouth to be an Independent Director as required under Section 803(2) of the NYSE: American Company Guide and Rule 10A-3 under the Exchange Act.
STEWART L. APPELROUTH - Director Qualifications:
| ● | Leadership Experience –has served in leadership positions on numerous Boards and other organizations; | |
| ● | Industry Experience – Partner at certified public accounting and advisory firm; Certified Public Accountant and Certified Fraud Examiner; | |
| ● | Regulatory Experience – FINRA Arbitrator. | |
| ● | Financial Expert – over 40 years of accounting and audit experience. |
NANCY K. BRYAN - was appointed as a director in March 2023. Ms. Bryan is an established leader with more than 35 years of experience in the life sciences industry. She has served on executive leadership teams and played key roles in biopharmaceutical companies’ successes, including marketing, sales, business development, financing, and communications. From 2013 to 2023, Ms. Bryan served as President and CEO of BioFlorida Inc., an association supporting the advancement of life sciences in Florida. Prior to joining BioFlorida, Ms. Bryan began her career with major pharmaceutical companies including Merck, GlaxoSmithKline and Bayer Pharmaceuticals. She then went on to serve in a number of executive leadership positions in specialty pharmaceuticals and smaller, start-up biotech companies, including Indevus Pharmaceuticals and NPS Pharmaceuticals. Throughout her career, Ms. Bryan helped develop, launch, and commercialize many products including blockbusters (Zantac, Levitra), major biologics (Tysabri) and orphan drugs for rare diseases (Valstar for bladder cancer, Supprelin LA for central precocious puberty), and helped establish franchises in a wide variety of therapeutic areas, including Oncology, Anti-infectives, GI and Autoimmune (MS, CD). She has established a successful track record with introducing strategic and tactical solutions to develop global markets as well as launch, grow and turn around established and underperforming drugs, resulting in greater revenue, market share, profitability, and stockholder value.
Ms. Bryan holds a BA in Economics from the University of Virginia and an MBA from Columbia University, and her academic honors include Phi Beta Kappa and Beta Gamma Sigma.
NANCY K. BRYAN – Director Qualifications:
| ● | Leadership Experience – President and CEO of BioFlorida; served on executive leadership teams and played a key role in biopharmaceutical companies’ successes including marketing, sales, business development, financing initiatives and investor and PR communications; and | |
| ● | Commercialization Experience – 25 years of experience in Biopharmaceuticals in commercial positions of increasing responsibility involving primary care, biologics and specialty markets; throughout her career, she has developed, launched and commercialized many products, major biologics and orphan drugs for rare diseases and has established franchises in a wide variety of therapeutic areas including: Oncology, Anti-infectives, GI and Autoimmune (MS,CD). |
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Information about our Executive Officers
In addition to Mr. Equels (discussed above), the following are our Executive Officers during fiscal 2023:
PETER W. RODINO III has been a Director since July 2013. On September 30, 2016, Mr. Rodino resigned as a member of our Board to permit him to serve us in a new capacity. Effective October 1, 2016, we retained Mr. Rodino as our Executive Director for Governmental Relations, and as our General Counsel and, as of October 16, 2019, Mr. Rodino assumed the role of Chief Operating Officer. Mr. Rodino has been our Secretary since November 2016. Mr. Rodino has broad legal, financial, and executive experience. In addition to being President of Rodino Consulting LLC and managing partner at several law firms during his many years as a practicing attorney, he served as Chairman and CEO of Crossroads Health Plan, the first major Health Maintenance Organization in New Jersey. He also has had experience as an investment executive in the securities industry and acted as trustee in numerous Chapter 11 complex corporate reorganizations. Previously, as founder and president of Rodino Consulting, Mr. Rodino provided business and government relations consulting services to smaller companies with a focus on helping them develop business plans, implement marketing strategies and acquire investment capital. Mr. Rodino holds a B.S. in Business Administration from Georgetown University and a J.D. degree from Seton Hall University.
ROBERT DICKEY, IV has been our Chief Financial Officer since April 4, 2022. Mr. Dickey has more than 25 years of experience in C-suite financial leadership for life science and medical device companies, both private and public, ranging from preclinical development to commercial operations and across a variety of disease areas and medical technologies. Mr. Dickey has served as Managing Director at Foresite Advisors since March 2020 assuming responsibility for CFO advisory, financial analysis, capital raising, and transactional support/execution for public offerings and M&A services at life science companies and was previously a Managing Director at Danforth Advisors from August 2018 to March 2020. Both Foresite Advisors and Danforth Advisors provide financial support and investment advisory services. Mr. Dickey served as a member on the board of directors at Emmaus Life Sciences, a biopharmaceutical company, from July 2019 to August 2022; served as a member on the board of directors at Sanuthera, Inc., a privately held medical device company, from 2013 to 2017, and was employed as Chief Financial Officer of Motif Bio Plc., a NASDAQ and London AIM exchange-listed antibiotics company, from January 2017 to February 2018. Earlier in his career, Mr. Dickey spent 18 years in investment banking, primarily at Lehman Brothers, with a background split between mergers and acquisitions and capital markets transactions. Mr. Dickey was a senior vice president of the Company from 2008 until 2013. Throughout his career he has demonstrated C-level (CFO, COO and CEO) and Board level experience in public, private, revenue stage and development stage life sciences and medical device companies and has played a leading role in two start-ups. His prior career as an investment banker included 14 years at Lehman Brothers. Mr. Dickey is experienced in all stages of the business lifecycle, including start-up, high-growth and turnarounds, and in building businesses and achieving an exit. He also has international experience, expertise in public and private financings, M&A, partnering/licensing transactions, project management and Chapter 11 reorganizations, as well as interacting with boards, VC’s, shareholders and Wall Street. Dickey has an MBA from The Wharton School and an AB from Princeton University.
Audit Committee and Audit Committee Expert
The Audit Committee of our Board consists of Stewart L. Appelrouth (Chair) and Dr. Mitchell, both determined by the Board to be Independent Directors as required under Section 803(2) of the NYSE: American Company Guide and Rule 10A-3 under the Exchange Act. The Board has determined that Mr. Appelrouth qualifies as an “audit committee financial expert” as that term is defined by Section 803B(2) of the NYSE: American Company Guide and the rules and regulations of the SEC. On March 28, 2023, Ms. Bryan was appointed as an additional member of the Audit Committee.
We believe Dr. Mitchell, Ms. Bryan and Mr. Appelrouth to be independent of management and free of any relationship that would interfere with their exercise of independent judgment as members of this Committee. The principal functions of the Audit Committee are to (1) assist the Board in fulfilling its oversight responsibility relating to the annual independent audit of our consolidated financial statements and management’s assessment of internal control over financial reporting, the engagement of the independent registered public accounting firm and the evaluation of the independent registered public accounting firm’s qualifications, independence and performance; (2) select the independent registered public accounting firm, oversee the work of the independent registered public accounting firm, pre-approve all auditing services of the independent registered public accounting firm and evaluate the independent registered public accounting firm’s qualifications, independence and performance; (3) prepare the reports or statements as may be required by NYSE American or the securities laws; (4) assist the Board in fulfilling its oversight responsibility relating to the integrity of our financial statements and financial reporting process and our system of internal accounting and financial controls; (5) discuss the financial statements and reports with management and the independent registered public accounting firm, including critical accounting policies and practices, our disclosures in our Annual Report and any significant financial reporting that arose in the preparation of the audited financial statements; and (6) oversee the Disclosure Control Committee. The Audit Committee is authorized to engage independent counsel and other advisors as it deems necessary.
This Audit Committee formally met twelve times in 2023 with all committee members in attendance. Our General Counsel and Chief Financial Officer support the Audit Committee in its work. The full text of the Audit Committee’s Charter, as approved by the Board, is available on our website: http://www.aimimmuno.com in the “Investor Relations” tab under “Corporate Governance”.
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Scientific Advisory Board (“SAB”)
The SAB was established to leverage its member’s scientific and pharmaceutical expertise and advice to advance our drug development programs by providing guidance on steering us forward and capitalizing on business opportunities as well as interactions with the FDA. It is responsible for: (i) reviewing all submissions made by us to the FDA and other regulators to ensure that the submissions fully, accurately, and timely describe the status of any clinical trials, tests, or other studies or analyses of drug safety and efficacy undertaken by us, and any agreements, protocols, or guidance provided by relevant regulatory agencies; and (ii) monitoring and supervising our relationship with the FDA. The SAB shall have free and open access to our scientific and executive personnel, including the Chief Scientific Officer and the members of our Board of Directors. The SAB is comprised of William Mitchell, M.D., Chairman, and Ronald Brus, M.D., W. Neal Burnette, M.D., Christopher Nicodemus, M.D., and Philip Ransom Roane, Ph.D. all of whom are members. The SAB met one time in 2023.
Disclosure Controls Committee
The Disclosure Controls Committee (“DCC”) reports to the Audit Committee and is responsible for procedures and guidelines on managing disclosure information. The purpose of the DCC is to make certain that information required to be publicly disclosed is properly accumulated, recorded, summarized and communicated to the Board and management. This process is intended to allow for timely decisions regarding communications and disclosures and to help ensure that we comply with related SEC rules and regulations. The DCC is responsible for (1) implementing, monitoring and evaluating our disclosure controls and procedures; (2) reviewing and evaluating our interactions with the FDA and other similar regulatory bodies; and (3) reviewing with the Audit Committee our earnings and other press releases and periodic reports and proxy statements that are to be filed with the SEC. Robert Dickey, our CFO, is the DCC’s Investor Relations Coordinator and Chair. The other members of the DCC are Peter Rodino, our COO and General Counsel, Dr. William Mitchell, one of our Independent Directors, Dr. David Strayer, Chief Scientific Officer, Diane Young, our Clinical Project Manager, Jodie Pelz, our Director of Finance, and Ann Marie Coverly, Director of HR and Administration serving as the Deputy Investor Relations Coordinator. The full text of the DCC’s Charter, as approved by the Board, is available on our website: www.aimimmuno.com in the “Investor Relations” tab under “Corporate Governance.” The DCC actively met on numerous occasions in 2023.
Executive Committee
In February 2016, our Board formed the Executive Committee. On March 28, 2023, Ms. Bryan was appointed as an additional member of this committee. The Executive Committee reports to the Board, and its purpose is to aid the Board in handling matters which, in the opinion of the Chairman of the Board, should not be postponed until the next scheduled meeting of the Board. Mr. Equels, our Chief Executive Officer is the chair of the Committee and is a member of the Committee along with three of our independent directors, Mr. Appelrouth, Dr. Mitchell and Ms. Bryan. The full text of the Executive Committee Charter, as approved by the Board, is available on our website: www.aimimmuno.com in the “Investor Relations” tab under “Corporate Governance”. The Committee did not meet in 2023.
Corporate Governance and Nomination Committee
The Corporate Governance and Nomination Committee consists of Dr. William M. Mitchell (Chair) and Director, and Mr. Stewart L. Appelrouth, Director. On March 28, 2023, Ms. Nancy Bryan was appointed as an additional member of this committee. In 2023, the Corporate Governance and Nomination Committee met two times. All committee members were in attendance for the meetings.
All of the members of the Committee meet the independence standards contained within the NYSE American Company Guide and AIM’s Corporate Governance Guidelines. The full text of the Corporate Governance and Nomination Committee Charter as well as the Corporate Governance Guidelines, are available on our website: https://aimimmuno.com/corporate-governance/.
The Corporate Governance and Nomination Committee is responsible for (1) assisting the Board in identifying, recommending, assessing, recruiting and selecting candidates to serve as members of the Board, including in connection with filling vacancies; (2) assisting the Board in developing criteria for identifying and selecting individuals for nomination to the Board; (3) advising the Board with respect to the Board’s composition, procedures and committees; (4) reviewing, assessing and recommending appropriate Corporate Governance Guidelines; (5) reviewing the charter of each committee of the Board and recommending to the Board the number, identity and responsibilities of each committee; (6) reviewing our business practices as they relate to preserving our good reputation; (7) developing and recommending to the Board procedures for succession planning for our executives and continuity of the Board; and (8) assessing the effectiveness of the Board in meeting the long-terms interest of the stockholders. The Committee is authorized to retain search firms and other consultants to assist it in identifying candidates and fulfilling its other duties.
Stockholders who wish to suggest qualified candidates should write to the Corporate Secretary, AIM ImmunoTech Inc., 2117 SW Highway 484, Ocala, Florida 34473, stating in detail the qualifications of such persons for consideration by the Committee. Director candidates should demonstrate the qualifications, experience and skills for Board members which are important to AIM’s business and its future, as outlined in Proposal 1 below.
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We aspire to the highest standards of ethical conduct; reporting results with accuracy and transparency; and maintaining full compliance with the laws, rules and regulations that govern our business. AIM’s Corporate Governance Guidelines embody many of our policies and procedures which are at the foundation of our commitment to best practices. The guidelines are reviewed annually and revised if deemed necessary, to continue to reflect best practices.
Code of Ethics
Our Board of Directors adopted a revision to the 2003 Code of Ethics and business conduct for officers, directors, employees, agents and consultants. The principal amendments included broadening the Code’s application to our agents and consultants, adoption of a regulatory compliance policy and adoption of a policy for protection and use of Company computer technology for business purposes only. On an annual basis, this Code is reviewed and signed by each Officer, Director, employee and strategic consultant with none of the amendments constituting a waiver of provision of the Code of Ethics on behalf of our Chief Executive Officer, Chief Financial Officer, or persons performing similar functions.
You may obtain a copy of this Code by visiting our website at www.aimimmuno.com (Investor Relations / Corporate Governance) or by written request to our office at 2117 SW Highway 484, Ocala, FL 34473.
Section 16(a) Beneficial Ownership Reporting Compliance
Under federal securities laws, our directors and officers, and any beneficial owner of more than 10% of a class of our equity securities, are required to report their ownership of the Company’s equity securities and any changes in such ownership in a timely manner. We are required to disclose in this Report any delinquent filing of such reports and any failure to file such reports during the fiscal year ended December 31, 2023. Based solely upon information provided by officers and directors and greater than 10% owners, we are not aware of any filings not made on a timely basis, except for two Forms 4 filed on March 27, 2024, to report awards of options to Thomas Equels and Peter Rodino on November 30, 2023.
| ITEM 11. | Executive Compensation. |
COMPENSATION DISCUSSION AND ANALYSIS
This discussion and analysis describes our executive compensation philosophy, process, plans and practices as they relate to our “Named Executive Officers” (“NEO”) listed below and gives the context for understanding and evaluating the more specific compensation information contained in the narratives, tables and related disclosures that follow. For the purposes of discussion and analysis, the following NEOs are included in the narratives, tables and related disclosures that follow:
| ● | Thomas K. Equels, Chief Executive Officer (“CEO”) and President; | |
| ● | Robert Dickey IV, Chief Financial Officer (“CFO”); and | |
| ● | Peter Rodino, Chief Operating Officer (“COO”), General Counsel and Company Secretary (“CS”). |
In November 2020, we entered into an employment agreement with Thomas Equels, the agreement runs for five years with a base salary of $850,000. Mr. Equels will be awarded a year-end target bonus of $350,000. In March 2021, subsequent to the fiscal year ended December 31, 2020, we entered into employment agreements with Peter Rodino. The agreement runs for three years, respectively. Compensation is divided into both short- and long-term compensation. Short-term (cash) compensation will consist of a base salary of $425,000. Mr. Rodino will be awarded a year-end target bonus based on performance and goals established by the Compensation Committee. Long term compensation will be provided by 100,000 non-qualified yearly stock options with one-year vesting commencing on November 30, 2021. In addition, Mr. Equels and Mr. Rodino will be entitled to awards (“Event Awards”) equal to 3% for Mr. Equels and 1% for Mr. Rodino of the “Gross Proceeds” from specific events such as acquisitions, licensing agreements or “therapeutic indication” (each, an “Event”). Gross Proceeds means those cash amounts paid to us by the other parties for licensing agreements, therapeutic acquisitions or any other one-time cash generating event. Therapeutic indications are for example target organ specific pathologically defined cancer indications, vaccine enhancers, broad spectrum antiviral indications, or medical entities associated with persistent severe fatigue. Mr. Equels and Mr. Rodino also will each be entitled to an award (an “Acquisition Award”) equal to 3% for Mr. Equels and 1% for Mr. Rodino of the Gross Proceeds, upon the sale of our Company or substantially all of its assets (an “Acquisition”). An Event Award or Acquisition Award shall be paid in cash within 90 days of our receipt of the Gross Proceeds. On March 2022, the Company entered into a consulting agreement with Foresite Advisors, LLC, a company wholly owned by Robert Dickey IV, for $375 an hour pursuant to which Mr. Dickey serves as our Chief Financial Officer, effective April 4, 2022.
Governance of Compensation Committee
The Compensation Committee consists of the following three directors, each of whom is “independent” under applicable NYSE American rules, a “Non-Employee Director” as defined in Rule 16b-3 under the Exchange Act, and an “Outside Director” as defined under the U.S. Treasury regulations promulgated under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”): William Mitchell, M.D., Ph.D. (Chair) and Stewart L. Appelrouth. On March 28, 2023, Ms. Bryan was appointed as an additional member of this committee.
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The Compensation Committee oversees implementation and administration of our compensation and employee benefits programs with the goal of attracting, retaining and motivating executives and officers, as well as other employees, to improve their performance and our financial performance. In that regard, the Compensation Committee (1) reviews and approves corporate goals and objectives relevant to compensation; (2) evaluates the performance and compensation of our officers and executives and reviews the compensation of all other non-officer executives that are considered highly paid; (3) reviews and approves employment agreements, severance agreements, change of control agreements, deferred compensation agreements, perquisites and similar compensation arrangements of our executive officers; (4) makes recommendations to the Board on the compensation of non-employee members of the Board; (5) administers our incentive and equity-based compensation plans, including, approving the grant of equity awards under such plans, reviewing such plans and making recommendations to the Board regarding the adoption, amendment or termination of such plans; (6) selects and determines the fees and scope of work of its compensation consultants; and (7) reviews our compensation strategy to assure that it continues to advance our objectives and promote stockholder value. The full text of the Compensation Committee’s Charter, as approved by the Board, is available on our website: www.aimimmuno.com in the “Investor Relations” tab under “Corporate Governance”.
This Committee formally met four times in 2023 and all committee members were in attendance for the meetings. Our General Counsel, Chief Financial Officer and Director of Human Resources support the Compensation Committee in its work.
Results of Stockholder Advisory Vote on Executive Compensation
At the November 2022 Annual Meeting of Stockholders, the Stockholders did not approve the annual, non-binding advisory vote on Executive Compensation.
Objectives and Philosophy of Executive Compensation
The primary objectives of the Compensation Committee of our Board of Directors with respect to Executive compensation are to attract and retain the most talented and dedicated Executives possible, to tie annual and long-term cash and stock incentives to achievement of measurable performance objectives, and to align Executives’ incentives with stockholder value creation. To achieve these objectives, the Compensation Committee expects to implement and maintain compensation plans that tie a substantial portion of Executives’ overall compensation to key strategic financial and operational goals such as the establishment and maintenance of key strategic relationships, the development of our products, the identification and advancement of additional products and the performance of our common stock price. The Compensation Committee evaluates individual Executive performance with the goal of setting compensation at levels the Committee believes are comparable with Executives in other companies of similar size and stage of development operating in the biotechnology industry while taking into account our relative performance, our own strategic goals, governmental regulations and the results of Stockholder Advisory Votes regarding executive compensation.
EXECUTIVE COMPENSATION
The following table provides information on the compensation during the fiscal years ended December 31, 2023 and 2022 of Thomas Equels, our Chief Executive Officer, Peter Rodino our Chief Operating Officer, General Counsel and Secretary, Robert Dickey IV our Chief Financial Officer.
Summary Compensation Table
| Name & Principal Position | Year | Salary / Fees $ (2) |
Bonus |
Stock Awards $ |
Option |
Non-Equity Incentive Plan Compensation $ |
Change in Pension Valued and NQDC Earnings $ |
All Other Compensation $ (3) |
Total |
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| Thomas K Equels | 2023 | 850,000 | — | — | 128,112 | — | — | 103,189 | 1,081,301 | |||||||||||||||||||||||||||
| CEO & President (2)3 | 2022 | 850,000 | 300,000 | — | 111,556 | — | — | 90,472 | 1,352,028 | |||||||||||||||||||||||||||
| Robert Dickey IV | 2023 | 54,484 | $ | 10,000 | — | — | — | — | — | 64,484 | ||||||||||||||||||||||||||
| CFO (2)4 | 2022 | 37,815 | $ | 10,000 | — | — | — | — | — | 47,815 | ||||||||||||||||||||||||||
| Peter Rodino | ||||||||||||||||||||||||||||||||||||
| COO, General Counsel | 2023 | 425,000 | — | — | 42,704 | — | — | 59,940 | 527,644 | |||||||||||||||||||||||||||
| & Secretary (2)5 | 2022 | 425,000 | 150,000 | — | 69,295 | — | — | 55,003 | 699,298 | |||||||||||||||||||||||||||
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Notes:
| (1) | All option awards were valued using the Black-Scholes method. |
| (2) | For Named Executive Officers, who are also Directors that receive compensation for their services as a Director, the Salary/Fees and Option Awards columns include compensation that was received by them for their role as a member of the Board of Directors. As is required by Regulation S-K, Item 402(c), compensation for services as a Director have been reported within the “Summary Compensation Table” (above) for fiscal years of 2023 and 2022 as well as reported separately in the “Compensation of Directors” section (see below) for calendar year 2023. |
| Pursuant to his current employment agreement, Mr. Equels is entitled to 3% of the “Gross Proceeds” (as defined in the employment agreement) for “significant events” (as described in the employment agreement) There were no payments during 2023 and 2022. |
| (3) | Mr. Equels’ All Other Compensations consists of: |
| 2023 | 2022 | |||||||
| Life & Disability Insurance | $ | 41,073 | $ | 31,375 | ||||
| Healthcare Insurance | 24,316 | 26,764 | ||||||
| Car Expenses/Allowance | 18,000 | 18,000 | ||||||
| 401(k) Matching Funds | 19,800 | 14,333 | ||||||
| Total | $ | 103,189 | $ | 90,472 | ||||
| (4) | Mr. Dickey’s All Other Compensations consists of: |
| 2023 | 2022 | |||||||
| Life & Disability Insurance | $ | — | $ | — | ||||
| Healthcare Insurance | — | — | ||||||
| Car Expenses/Allowance | — | — | ||||||
| 401(k) Matching Funds | — | — | ||||||
| Total | $ | — | $ | — |
| (5) | Mr. Rodino’s All Other Compensations consists of: |
| 2023 | 2022 | |||||||
| Life & Disability Insurance | $ | 2,524 | $ | 2,450 | ||||
| Healthcare Insurance | 23,216 | 23,820 | ||||||
| Car Expenses/Allowance | 14,400 | 14,400 | ||||||
| 401(k) Matching Funds | 19,800 | 14,333 | ||||||
| Total | $ | 59,940 | $ | 55,003 | ||||
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| (6) | All bonus compensation for 2023 was deferred to 2024. |
| Outstanding Equity Awards at Fiscal Year End | Option Awards | Stock Awards | ||||||||||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable |
Number of Securities Underlying Unexercised Options (#) Unexercisable |
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) |
Options Exercise Price ($) |
Option Expiration Date |
Number of Shares or Units of Stock that Have Not Vested (#) |
Market Value of Shares or Units of Stock that Have Not Vested ($) |
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested (#) |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested ($) |
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| Thomas K Equels | 568 | — | — | 190.08 | 6/6/2024 | — | — | — | — | |||||||||||||||||||||||||
| President and Chief | 568 | — | — | 132.00 | 6/8/2025 | — | — | — | — | |||||||||||||||||||||||||
| Executive Officer | 568 | — | — | 73.92 | 6/8/2026 | — | — | — | — | |||||||||||||||||||||||||
| 6,818 | — | — | 24.64 | 6/8/2027 | — | — | — | — | ||||||||||||||||||||||||||
| 323 | — | — | 21.56 | 6/15/2027 | — | — | — | — | ||||||||||||||||||||||||||
| 323 | — | — | 21.56 | 6/30/2027 | — | — | — | — | ||||||||||||||||||||||||||
| 412 | — | — | 21.12 | 7/15/2027 | — | — | — | — | ||||||||||||||||||||||||||
| 472 | — | — | 18.48 | 7/31/2027 | — | — | — | — | ||||||||||||||||||||||||||
| 485 | — | — | 18.04 | 8/15/2027 | — | — | — | — | ||||||||||||||||||||||||||
| 556 | — | — | 15.84 | 8/31/2027 | — | — | — | — | ||||||||||||||||||||||||||
| 8,446 | — | — | 16.28 | 2/13/2028 | — | — | — | — | ||||||||||||||||||||||||||
| 2,841 | — | — | 16.72 | 4/12/2028 | — | — | — | — | ||||||||||||||||||||||||||
| 6,818 | — | — | 13.20 | 5/16/2028 | — | — | — | — | ||||||||||||||||||||||||||
| 5,682 | — | — | 13.20 | 5/16/2028 | — | — | — | — | ||||||||||||||||||||||||||
| 3,666 | — | — | 13.64 | 7/18/2028 | — | — | — | — | ||||||||||||||||||||||||||
| 6,457 | — | — | 9.68 | 10/17/2028 | — | — | — | — | ||||||||||||||||||||||||||
| 23 | — | — | 9.68 | 11/14/2028 | — | — | — | — | ||||||||||||||||||||||||||
| 9,685 | — | — | 9.68 | 1/28/2029 | — | — | — | — | ||||||||||||||||||||||||||
| 300,000 | — | — | 3.05 | 8/12/2030 | — | — | — | — | ||||||||||||||||||||||||||
| 300,000 | — | — | 1.96 | 11/11/2030 | — | — | — | — | ||||||||||||||||||||||||||
| 300,000 | — | — | 1.71 | 11/11/2031 | — | — | — | — | ||||||||||||||||||||||||||
| 300,000 | — | — | 0.41 | 11/30/2032 | — | — | — | — | ||||||||||||||||||||||||||
| — | 300,000 | — | 0.47 | 11/30/2033 | — | — | — | — | ||||||||||||||||||||||||||
| Total | 1,254,711 | 300,000 | — | — | — | — | — | |||||||||||||||||||||||||||
| Robert Dickey IV Chief financial Officer | 50,000 | — | — | 0.70 | 03/03/2032 | — | — | — | — | |||||||||||||||||||||||||
| Total | 50,000 | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Peter Rodino | 284 | — | — | 68.64 | 6/21/2026 | — | — | — | — | |||||||||||||||||||||||||
| COO, General Counsel and Secretary | 151 | — | — | 21.56 | 6/15/2027 | — | — | — | — | |||||||||||||||||||||||||
| 151 | — | — | 21.56 | 6/30/2027 | — | — | — | — | ||||||||||||||||||||||||||
| 192 | — | — | 21.12 | 7/15/2027 | — | — | — | — | ||||||||||||||||||||||||||
| 220 | — | — | 18.48 | 7/31/2027 | — | — | — | — | ||||||||||||||||||||||||||
| 226 | — | — | 18.04 | 8/15/2027 | — | — | — | — | ||||||||||||||||||||||||||
| 259 | — | — | 15.84 | 8/31/2027 | — | — | — | — | ||||||||||||||||||||||||||
| 3,941 | — | — | 16.28 | 2/13/2028 | — | — | — | — | ||||||||||||||||||||||||||
| 2,273 | — | — | 16.72 | 4/12/2028 | — | — | — | — | ||||||||||||||||||||||||||
| 2,652 | — | — | 13.20 | 5/16/2028 | — | — | — | — | ||||||||||||||||||||||||||
| 1,711 | — | — | 13.64 | 7/18/2028 | — | — | — | — | ||||||||||||||||||||||||||
| 3,013 | — | — | 9.68 | 10/17/2028 | — | — | — | — | ||||||||||||||||||||||||||
| 23 | — | — | 9.68 | 11/14/2028 | — | — | — | — | ||||||||||||||||||||||||||
| 4,520 | — | — | 9.68 | 1/28/2029 | — | — | — | — | ||||||||||||||||||||||||||
| 75,000 | — | — | 1.85 | 12/9/2030 | — | — | — | — | ||||||||||||||||||||||||||
| 100,000 | — | — | 1.44 | 11/30/2031 | — | — | — | — | ||||||||||||||||||||||||||
| 50,000 | — | — | 0.70 | 03/03/2032 | — | — | — | — | ||||||||||||||||||||||||||
| 100,000 | — | — | 0.41 | 11/30/2032 | — | — | — | — | ||||||||||||||||||||||||||
| — | 100,000 | 0.47 | 11/30/2033 | — | — | — | — | |||||||||||||||||||||||||||
| Total | 344,616 | 100,000 | — | — | — | — | — | |||||||||||||||||||||||||||
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Payments on Disability
As of December 31, 2020, we had an employment agreement with Mr. Equels which entitled him to his base salary, applicable benefits otherwise due and payable through the last day of the month in which disability occurs and immediate vesting of stock options. In the event of permanent disability, the Company will provide an additional two years of base salary. On March 24, 2021, we entered into employment agreements with Mr. Rodino which entitled him to his base salary, applicable benefits otherwise due and payable through the last day of the month in which disability occurs and immediate vesting of stock options. In the event of permanent disability, the Company will provide an additional two years of base salary. In addition, each NEO has the same short and long-term disability coverage which is available to all eligible employees. The coverage for short-term disability provides up to six months of full salary continuation up to 60% of weekly pay, less other income, with a $1,500 weekly maximum limit. The coverage for group long-term disability provides coverage at the exhaustion of short-term disability benefits of full salary continuation up to 60% of monthly pay, less other income, with a $10,000 monthly maximum limit. The maximum benefit period for the group long-term disability coverage is 60 months for those age 60 and younger at the time of the claim with the coverage period proportionately reduced with the advanced age of the eligible employee to a minimum coverage period of 12 months for those of 69 years old and older as of the date of the claim. For the period June 2010 through December 2023, Mr. Equels was entitled to receive total disability coverage of $400,000 pursuant to his employment agreement and payable by us.
Payments on Death
Pursuant to their employment agreements, the NEOS are entitled to their base salary and applicable benefits otherwise due and payable through the last day of the month in which death occurs and immediate vesting of stock options. Each NEO has coverage of group life insurance, along with accidental death and dismemberment benefits, consistent to the dollar value available to all eligible employees. The benefit is equal to two times current salary or wage with a maximum limit of $300,000, plus any supplemental life insurance elected and paid for by the NEO. For the period June 2010 and through December 2023, Mr. Equels is entitled to receive total death benefit coverage of $3,000,000 pursuant to his employment agreement and payable by us.
Estimated Payments Following Severance — Named Executive Officers (NEO)
Pursuant to his employment agreement, Mr. Equels is entitled to severance benefits on certain types of employment terminations not related to a change in control or termination not for cause. Mr. Rodino and Mr. Dickey are not covered by an employment severance agreement and therefore would only receive severance as determined by the Compensation Committee in its discretion.
The dollar amounts below assume that the termination occurred on January 2, 2024. The actual dollar amounts to be paid can only be determined at the time of the NEO’s separation from us based on their prevailing compensation and employment agreements along with any determination by the Compensation Committee in its discretion.
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| Name | Event | Cash Severance ($) |
Value of Stock Awards That Will Become Vested (1) ($) |
Continuation of Benefits ($) |
Additional Life Insurance ($) |
Total ($) | ||||||||||||||||
| Thomas K. Equels, | Involuntary (no cause) | $ | 2,436,000 | $ | 128,112 | — | — | $ | 2,564,112 | |||||||||||||
| CEO & President | Termination (for cause) | — | — | — | — | — | ||||||||||||||||
| Death or disability | $ | 1,700,000 | $ | 128,112 | — | — | $ | 1,828,112 | ||||||||||||||
| Termination by employee or retirement | — | $ | 128,112 | — | — | $ | 128,112 | |||||||||||||||
| Robert Dickey IV | Involuntary (no cause) | — | — | — | — | — | ||||||||||||||||
| CFO | Termination (for cause) | — | — | — | — | — | ||||||||||||||||
| Death or disability | — | — | — | — | — | |||||||||||||||||
| Termination by employee or retirement | — | — | — | — | — | |||||||||||||||||
| Peter Rodino | Involuntary (no cause) | $ | 107,880 | $ | 42,704 | — | — | $ | 150,584 | |||||||||||||
| COO, General Counsel and | Termination (for cause) | — | — | — | — | — | ||||||||||||||||
| Secretary | Death or disability | $ | 850,000 | $ | 42,704 | — | — | $ | 892,704 | |||||||||||||
| Termination by employee or retirement | — | $ | 42,704 | — | — | $ | 42,704 | |||||||||||||||
Notes:
| (1) | Consists of stock options contractually required per the employee’s respective employment agreement or arrangement to be granted during each calendar year of the term under our 2018 Equity Incentive Plan. The stock options have a ten-year term and an exercise price equal to the closing market price of our common stock on the date of grant. The value was obtained using the Black-Scholes-Merton pricing model for stock-based compensation in accordance with FASB ASC 718. |
Payments on Termination in Connection with a Change in Control of Named Executive Officers
Pursuant to their employment agreements, each NEO is entitled to severance benefits on certain types of employment terminations related to a change in control. In such an event, the term of their employment agreements would automatically be extended for three additional years, except where such change in control occurs as a result of certain “significant events” (as described in his employment agreement).
The dollar amounts in the chart below assume that change in control termination occurred on January 2, 2024, based on the employment agreements that existed at that time. The actual dollar amounts to be paid can only be determined at the time of the NEO’s separation from us based on their prevailing compensation and employment agreements along with any determination by the Compensation Committee in its discretion.
Estimated Benefits on Termination Following a Change in Control — December 31, 2023
The following table shows potential payments to the NEO if employment terminates following a change in control under contracts, agreements, plans or arrangements at December 31, 2023. The amounts assume a January 2, 2024, termination date regarding base pay and use of the opening price of $0.44 on the NYSE American for our common stock at that date.
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| Name | Aggregate Severance Pay ($) |
PVSU Acceleration (2) ($) |
Early Vesting of Restricted Stock (4) (5) ($) |
Early Vesting of Stock Options and SARs (3) ($) |
Acceleration and Vesting of Supplemental Award (5) ($) |
Welfare Benefits Continuation ($) |
Outplacement Assistance ($) |
Parachute Tax Gross-up Payment ($) |
Total ($) |
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| Thomas K. Equels | $4,340,000 ( | 1) | — | — | — | $651,000 ( | 4) | — | — | — | $ | 4,991,000 | ||||||||||||||||||||||||
| Robert Dickey IV | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Peter Rodino | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Notes:
| (1) | This amount represents the Base Salary and benefits for the remaining current term of the NEO’s employment agreement plus a three-year extension in the term upon the occurrence of a termination from a change in control. The employment agreement with Mr. Equels has a term through December 31, 2025. This amount excludes the following payments as they cannot be calculated unless and until certain events occur: Mr. Equels is entitled to 3% of the “Gross Proceeds” (as defined in the employment agreement) for “significant events” (as described in his employment agreement) and 3% of the Gross Proceeds from any sale of our Company or substantially all of our assets. |
| (2) | This amount represents the payout of all outstanding performance-vesting share units (“PVSU”) awarded on a change in control at the target payout level with each award then pro-rated based on the time elapsed for the applicable three-year performance period. |
| (3) | This amount is the intrinsic value [fair market value] on January 2, 2024 ($0.48 per share) minus the weighted average per share exercise price of $0.43 of all unvested stock options for each NEO, including Stock Appreciation Rights (“SAR”). Any option with an exercise price of greater than fair market value was assumed to be cancelled for no consideration and, therefore, had no intrinsic value. |
| (4) | This amount represents the options to be issued annually for the remaining term of the NEO’s employment agreement plus a three-year extension in the occurrence of termination from a change in control. For the purpose of this schedule, a NYSE American closing price at January 2, 2024 of $0.48 was used with an estimated exercise price of $0.48 for Mr. Equels. The value was obtained using the Black-Scholes-Merton pricing model for stock-based compensation in accordance with FASB ASC 718. |
| (5) | Any purchase rights represented by the Option not then vested shall, upon a change in control, shall become vested. |
Post-Employment Compensation
The following is a description of post-employment compensation payable to the respective NEO. If a NEO does not have a specific benefit, they will not be mentioned in the subsection. In such an event, the NEO does not have any such benefits upon termination unless otherwise required by law.
Termination for Cause
All of our NEOs can be terminated for cause. For each NEO “Cause” means willful engaging by any NEO in illegal conduct, gross misconduct or gross violation of our Code of Ethics and Business Conduct for Officers, which is demonstrably and materially injurious to our Company. Mr. Equels’ agreement provides that he shall not be deemed to have been terminated for Cause unless and until we initiate a process by delivery to him a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the directors of the Board specifying the grounds for termination. After reasonable notice to Mr. Equels and an opportunity for him to be heard, the issues shall be adjudicated by a retired Florida judge or a Florida certified mediator mutually acceptable to the Board of Directors and Mr. Equels. Termination requires a finding that Mr. Equels was guilty of intentional and material misconduct according to the standards set forth above, and specifying the particulars thereof in detail supported by legally admissible evidence and utilizing the legal standard of beyond reasonable doubt. In the event that an NEO’s employment is terminated for Cause, we shall pay such NEO, at the time of such termination, only the compensation and benefits otherwise due and payable to him through the last day of his actual employment by us.
Termination without Cause
In the event that an NEO is terminated at any time without “Cause”, we shall pay to him, at the time of such termination, the compensation and benefits otherwise due and payable through the last day of the then current term of his Agreement. However, benefit distributions that are made due to a “separation from service” occurring while he is a Named Executive Officer shall not be made during the first six months following separation from service. Rather, any distribution which would otherwise be paid to him during such period shall be accumulated and paid to him in a lump sum on the first day of the seventh month following the “separation from service”. All subsequent distributions shall be paid in the manner specified.
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Death or Disability
A NEO can be terminated for death or disability. “Disability” means the NEO’s inability effectively to carry out substantially all of his duties by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. In the event his employment is terminated due to his death or disability, we will pay him (or his estate as the case may be), at the time of such termination, his base salary, applicable benefits, and immediate vesting of unvested stock options. In the event of permanent disability, we will provide an additional two years of base salary.
Compensation of Directors
Our Compensation, Audit and Corporate Governance and Nomination Committees, consist of Dr. William M. Mitchell, Compensation and Corporate Governance and Nomination Committee Chair, Stewart L. Appelrouth, Audit Committee Chair, and Nancy K. Byrn all of whom are independent Board of Director members.
We reimburse Directors for travel expenses incurred in connection with attending board, committee, stockholder and special meetings along with other Company business-related expenses. We do not provide retirement benefits or other perquisites to non-employee Directors under any current program.
There was no cost of living increase granted in 2022 or 2023.
All Directors have been granted options to purchase common stock under our Stock Option Plans and/or Warrants to purchase common stock. We believe such compensation and payments are necessary in order for us to attract and retain qualified outside directors. Options shares for stock compensation were issued under the 2018 Equity Incentive Plans.
Director Compensation – 2023 & 2022
| Name and Title of Director | Year |
Fees Earned or Paid in Cash $ |
Stock Award $ | Option Award $ | Non-Equity Incentive Plan Compensation $ | Change in Pension Value & Nonqualified Deferred Compensation Earnings $ | All Other Compensation As Director $ | Total $ | ||||||||||||||||||||||||
| T. Equels | 2023 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
| Executive | 2022 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
| Vice Chairman | ||||||||||||||||||||||||||||||||
| W. Mitchell | 2023 | 139,365 | — | — | — | — | — | 139,365 | ||||||||||||||||||||||||
| Chairman of | 2022 | 182,462 | — | 50,703 | — | — | — | 233,165 | ||||||||||||||||||||||||
| the Board | ||||||||||||||||||||||||||||||||
| S. Appelrouth | 2023 | 139,365 | — | — | — | — | — | 139,365 | ||||||||||||||||||||||||
| Director | 2022 | 182,462 | — | 50,703 | — | — | — | 233,165 | ||||||||||||||||||||||||
| N. Bryan | 2023 | 93,750 | — | — | — | — | — | 93,750 | ||||||||||||||||||||||||
| Director | 2022 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
In March 2023, the Board reduced annual cash compensation from $182,462 to $125,000 to allow for additional Board members.
| ITEM 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. |
The following table sets forth as of March 24, 2024, the number and percentage of outstanding shares of Common Stock beneficially owned by:
| ● | Each person, individually or as a group, known to us to be deemed the beneficial owners of five percent or more of our issued and outstanding Common Stock; | |
| ● | Each of our Directors and the Named Executives Officers; and |
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| ● | All of our officers and directors as a group. | |
| ● | Total number of shares of Common Stock at March 27, 2024 was 49,901,177. |
| Name and Address of Beneficial Owner |
Shares Beneficially Owned |
% Of Shares Beneficially Owned |
||||||
| Thomas K. Equels, Executive Vice Chairman, Chief Executive Officer, President | 1,971,166 | (1) | *0.04 | % | ||||
| Peter W. Rodino III, Chief Operating Officer, General Counsel, Secretary | 526,335 | (2) | * | % | ||||
| William M. Mitchell, M.D., Chairman of the Board of Directors | 306,001 | (3) | * | % | ||||
| Stewart L. Appelrouth, Director | 379,364 | (4) | * | % | ||||
| Robert Dickey IV, Chief Financial Officer | 50,000 | (5) | * | % | ||||
| Nancy K. Bryan, Director | 38,462 |
* | % | |||||
| All directors and executive officers as a group (6 persons) | 3,271,328 | 0. 065 | % |
* Less than 1%
(1) For Mr. Equels, shares beneficially owned include 1,254,711 shares issuable upon exercise of options and excludes 300,000 shares issuable upon exercise of options not vested or not exercisable within the next 60 days.
(2) For Mr. Rodino, shares beneficially owned include 344,617 shares issuable upon exercise of options and excludes 100,000 shares issuable upon exercise of options not vested or not exercisable within the next 60 days.
(3)For Dr. Mitchell, shares beneficially owned include 229,589 shares issuable upon exercise of options and excludes no shares issuable upon exercise of options not vested or not exercisable within the next 60 days. Also includes 190 shares of common stock owned by his spouse and 190 shares owned by family trusts.
(4)For Mr. Appelrouth, shares beneficially owned include 139,599 shares issuable upon exercise of options and excludes no shares issuable upon exercise of options not vested or not exercisable within the next 60 days.
(5)For Mr. Dickey IV, shares beneficially owned include 50,000 shares issuable upon exercise of options.
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The following table gives information about our Common Stock that may be issued upon the exercise of options, warrants and rights under all of our equity compensation plans as of December 31, 2023:
| Plan Category | Number of Securities to be issued upon exercise of outstanding options, warrants and rights |
Weighted Average Exercise Price Per Share |
Number of securities Remaining available for future issuance under equity compensation plans (excluding securities reflected in column) (a) |
|||||||||
| (a) | (c) | |||||||||||
| Equity compensation plans approved by security holders: | 3,293,493 | $ | 4.03 | 1,210,286 | ||||||||
| Equity compensation plans not approved by security holders: | 152,160 | $ | 8.03 | — | ||||||||
| Total | 3,445,653 | $ | 4.21 | 1,210,286 | ||||||||
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| ITEM 13. | Certain Relationships and Related Transactions, and Director Independence. |
Review, Approval or Ratification of Transactions with Related Persons
Our policy is to require that any transaction with a related party required to be reported under applicable SEC rules, other than compensation related matters and waivers of our code of business conduct and ethics, be reviewed and approved or ratified by a majority of independent, disinterested Directors. We have adopted procedures in which the Audit Committee shall conduct an appropriate review of all related party transactions for potential conflict of interest situations on an annual and case-by-case basis with the approval of this Committee required for all such transactions.
We have employment agreements with certain of our executive officers and have granted such Officers and Directors options and warrants to purchase our Common Stock, as discussed under the headings, Item 11. “Executive Compensation”, and Item 12. “Security Ownership of Certain Beneficial Owners and Management”, as noted above.
| ITEM 14. | Principal Accountant Fees and Services. |
All audit and professional services are approved in advance by the Audit Committee to assure such services do not impair the auditor’s independence from us. The total fees by BDO USA, P.C. (“BDO”) for 2023 were $594,474 and total fees for 2022 were $545,000.
| Amount ($) | ||||||||
| 2023 | 2022 | |||||||
| Description of Fees: | ||||||||
| Audit Fees | $ | 560,984 | $ | 522,000 | ||||
| Tax Fees | 33,490 | 23,000 | ||||||
| Total | $ | 594,474 | $ | 545,000 | ||||
Audit Fees
Audit fees include the audit of our annual financial statements and the review of our financial statements included in our quarterly reports and services in connection with statutory and regulatory filings.
It also includes fees for assurance and related services that were reasonably related to the performance of the audit or review of our financial statements. Audit-related fees include professional services related to the Company’s filing of SEC Form S-3 and S-8 (i.e., stock shelf offering procedures).
Tax Fees
Tax fees include fees billed by BDO for professional services rendered for tax return preparation, compliance, advice and planning services.
The Audit Committee has determined that BDO’s rendering of these audit-related services and all other fees were compatible with maintaining auditor’s independence. The Board of Directors considered BDO to be well qualified to serve as our independent public accountants. The Committee also pre-approved the charges for services performed in 2023 and 2022.
The Audit Committee pre-approves all auditing and accounting services and the terms thereof (which may include providing comfort letters in connection with securities underwriting) and non-audit services (other than non-audit services prohibited under Section 10A(g) of the Exchange Act or the applicable rules of the SEC or the Public Company Accounting Oversight Board) to be provided to us by the independent auditor; provided, however, the pre-approval requirement is waived with respect to the provisions of non-audit services for us if the “de minimus” provisions of Section 10A (i)(1)(B) of the Exchange Act are satisfied. This authority to pre-approve non-audit services may be delegated to one or more members of the Audit Committee, who shall present all decisions to pre-approve an activity to the full Audit Committee at its first meeting following such decision.
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PART IV
| ITEM 15. | Exhibits and Financial Statement Schedules. |
Financial Statements and Schedules - See index to financial statements on page F-1 of this Annual Report. All other schedules called for under regulation S-X are not submitted because they are not applicable or not required, or because the required information is included in the financial statements or notes thereto.
(i) Exhibits - See exhibit index below.
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| * | Filed herewith. |
(b) Financial Statement Schedules
All schedules have been omitted because either they are not required, are not applicable or the information is otherwise set forth in the financial statements and related notes thereto.
| Item 16. | Form 10-K Summary |
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| AIM IMMUNOTECH INC. | ||
| By: | /s/ Thomas K. Equels | |
| Thomas K. Equels | ||
| Chief Executive Officer | ||
March 29, 2024
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange of 1934, as amended, this report has been signed below by the following persons on behalf of this Registrant and in the capacities and on the dates indicated.
| /s/ Thomas K Equels | Chief Executive Officer & President, | March 29, 2024 | ||
| Thomas K. Equels | Director of the Board | |||
| /s/ William Mitchell | Chairman of the Board | March 29, 2024 | ||
| William Mitchell, M.D., Ph.D. | and Director | |||
| /s/ Stewart L Appelrouth | Director | March 29, 2024 | ||
| Stewart L. Appelrouth | ||||
| /s/ Robert Dickey IV E | Chief Financial Officer | March 29, 2024 | ||
| Robert Dickey IV | ||||
| /s/ Nancy Bryan E | Director | March 29, 2024 | ||
| Nancy Bryan |
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AIM IMMUNOTECH INC. AND SUBSIDIARIES
Index to Consolidated Financial Statements
| F- |
Report of Independent Registered Public Accounting Firm
Stockholders and Board of Directors
AIM ImmunoTech Inc.
Ocala, Florida
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of AIM ImmunoTech Inc. (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2023 and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
| F- |
Research and Development Costs
As described in Note 8 to the consolidated financial statements, the Company entered into research, consulting and supply agreements with third party service providers to perform research and development activities on therapeutics, including clinical trials. The Company recorded research and development costs of approximately $10.9 million for the year ended December 31, 2023, and accrued clinical trial expenses of approximately $0.8 million at December 31, 2023. The identification of research and development costs involves reviewing open contracts and purchase orders, communicating with applicable company and third-party personnel to identify services that have been performed, and corroborating the level of service performed and the associated cost incurred for the service when the Company has not yet been invoiced or otherwise notified of actual expenses.
We identified the recognition of research and development costs as a critical audit matter. The principal consideration for our determination was that performing procedures and evaluating audit evidence relating to research and development costs involved a high degree of auditor effort required to address this matter.
The primary procedures we performed to address this critical audit matter included:
| ● | Testing research and development costs on a sample basis, which included tracing relevant information to certain underlying agreements, purchase orders, and invoices received. | |
| ● | Confirming certain research and development costs incurred for the fiscal year with third party service providers. |
/s/ BDO USA, P.C.
We have served as the Company’s auditor since 2021.
Miami, Florida
March 29, 2024
| F- |
AIM IMMUNOTECH INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 2023 and 2022
(in thousands, except for share and per share amounts)
| 2023 | 2022 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 5,439 | $ | 27,053 | ||||
| Marketable investments | 7,631 | 7,137 | ||||||
| Funds receivable from New Jersey net operating loss | 1,184 | 1,676 | ||||||
| Prepaid expenses and other current assets | 302 | 455 | ||||||
| Total current assets | 14,556 | 36,321 | ||||||
| Property and equipment, net | 127 | 195 | ||||||
| Right of use asset, net | 697 | 829 | ||||||
| Patent and trademark rights, net | 2,313 | 1,941 | ||||||
| Other assets |
1,688 |
1,202 | ||||||
| Total assets | $ | 19,381 | $ | 40,488 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 6,443 | $ | 377 | ||||
| Accrued expenses | 1,986 | 806 | ||||||
| Current portion of operating lease liability | 223 | 178 | ||||||
| Total current liabilities | 8,652 | 1,361 | ||||||
| Long-term liability: | ||||||||
| Operating lease liability | 495 | 659 | ||||||
| Total liabilities | 9,147 | 2,020 | ||||||
| Commitments and contingencies (Notes 8, 10, 11, 16) | - | - | ||||||
| Stockholders’ equity: | ||||||||
| Series A Junior Participating Preferred Stock, $0.001 par value, 4,000,000 and 250,000 shares authorized as of December 31, 2023 and 2022, respectively; issued and outstanding – none | — | — | ||||||
| Series B Convertible Preferred Stock, stated value $1,000 per share, 10,000 shares authorized; 689 and 696 issued and outstanding as of December 31, 2023 and 2022, respectively | 689 | 696 | ||||||
| Common Stock, $0.001 par value, authorized shares - 350,000,000; issued and outstanding shares 49,102,484 and 48,084,287 (including 701,667 and 694,324 of unvested stock awards) as of December 31, 2023 and 2022, respectively | 49 | 48 | ||||||
| Additional paid-in capital | 419,004 | 418,270 | ||||||
| Accumulated deficit | (409,508 | ) | (380,546 | ) | ||||
| Total stockholders’ equity | 10,234 | 38,468 | ||||||
| Total liabilities and stockholders’ equity | $ | 19,381 | $ | 40,488 | ||||
See accompanying notes to consolidated financial statements.
| F- |
AIM IMMUNOTECH INC. AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share data)
| Years ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Revenues: | ||||||||
| Clinical treatment programs – US | $ | 202 | $ | 141 | ||||
| Total Revenues | 202 | 141 | ||||||
| Costs and Expenses: | ||||||||
| Production costs | 42 | — | ||||||
| Research and development | 10,939 | 6,990 | ||||||
| General and administrative | 21,137 | 13,074 | ||||||
| Total Costs and Expenses | 32,118 | 20,064 | ||||||
| Operating loss | (31,916 | ) | (19,923 | ) | ||||
| Gain (loss) on investments | 200 | (1,679 | ) | |||||
| Interest and other income | 1,069 | 629 | ||||||
| Gain on sale of fixed assets | 18 | 3 | ||||||
| Redeemable warrants valuation adjustment | — | 35 | ||||||
| Gain from sale of income tax operating losses | 1,667 | 1,490 | ||||||
| Net Loss | $ | (28,962 | ) | $ | (19,445 | ) | ||
| Basic and diluted loss per share | $ | (0.60 | ) | $ | (0.40 | ) | ||
| Weighted average shares outstanding basic and diluted | 48,585,404 | 48,047,288 | ||||||
See accompanying notes to consolidated financial statements.
| F- |
AIM IMMUNOTECH INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders’ Equity
(in thousands except share data)
For the Year Ended December 31, 2023
| Series B | Common Stock | Common Stock .001 | Additional Paid-in | Accumulated other Comprehensive | Accumulated | Total Stockholders’ | ||||||||||||||||||||||
| Preferred | Shares | Par Value | Capital | Income (Loss) | Deficit | Equity | ||||||||||||||||||||||
| Balance December 31, 2022 | $ | 696 | 48,084,287 | $ | 48 | $ | 418,270 | $ | — | $ | (380,546 | ) | $ | 38,468 | ||||||||||||||
| Common stock issuance, net of costs | — | 1,017,399 | 1 | 484 | — | — | 485 | |||||||||||||||||||||
| Equity-based compensation | — | — | — | 243 | — | — | 243 | |||||||||||||||||||||
| Series B preferred shares converted to common shares | (7 | ) | 798 | — | 7 | — | — | — | ||||||||||||||||||||
| Net comprehensive loss | — | — | — | — | — | (28,962 | ) | (28,962 | ) | |||||||||||||||||||
| Balance December 31, 2023 | $ | 689 | 49,102,484 | $ | 49 | $ | 419,004 | $ | — | $ | (409,508 | ) | $ | 10,234 | ||||||||||||||
For the Year Ended December 31, 2022
| Series B | Common Stock |
Common Stock .001 | Additional Paid-in | Accumulated other Comprehensive | Accumulated | Total Stockholders’ | ||||||||||||||||||||||
| Preferred | Shares | Par Value | Capital | Income (Loss) | Deficit | Equity | ||||||||||||||||||||||
| Balance December 31, 2021 | $ | 715 | 47,994,672 | $ | 48 | $ | 417,217 | $ | — | $ | (361,101 | ) | $ | 56,879 | ||||||||||||||
| Common stock issuance, net of costs | — | 88,749 | — | 80 | — | — | 80 | |||||||||||||||||||||
| Equity-based compensation | — | — | — | 954 | — | — | 954 | |||||||||||||||||||||
| Cashless warrant conversion | — | 638 | — | — | — | — | — | |||||||||||||||||||||
| Series B preferred shares converted to common shares | (19 | ) | 228 | — | 19 | — | — | — | ||||||||||||||||||||
| Net comprehensive loss | — | — | — | — | — | (19,445 | ) | (19,445 | ) | |||||||||||||||||||
| Balance December 31, 2022 | $ | 696 | 48,084,287 | $ | 48 | $ | 418,270 | $ | — | $ | (380,546 | ) | $ | 38,468 | ||||||||||||||
See accompanying notes to consolidated financial statements.
| F- |
AIM IMMUNOTECH INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
Years ended December 31,
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (28,962 | ) | $ | (19,445 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation of property and equipment | 39 | 38 | ||||||
| Redeemable warrants valuation adjustment | — | (35 | ) | |||||
| Gain on sale of fixed assets | (18 | ) | — | |||||
| Abandonment and expiration of patents and trademark rights | 14 | — | ||||||
| Amortization of patent and trademark rights | 199 | 218 | ||||||
| Non-cash lease expense | 287 | (680 | ) | |||||
| Loss from sale of income tax operating losses | — | 197 | ||||||
| Equity-based compensation | 243 | 954 | ||||||
| Loss (gain) on sale of marketable investments | (200 | ) | 1,679 | |||||
| Change in assets and liabilities: | ||||||||
| Funds receivable from New Jersey operating loss sales | 492 | (35 | ) | |||||
| Prepaid expenses and other current assets | 153 | (151 | ) | |||||
| Lease liability | (274 | ) | 688 | |||||
| Other assets | (486 | ) | (83 | ) | ||||
| Accounts payable | 6,066 | 179 | ||||||
| Accrued expenses | 1,180 | 368 | ||||||
| Net cash used in operating activities | (21,267 | ) | (16,108 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Proceeds from sale of marketable investments | 1,299 | 10,083 | ||||||
| Purchase of marketable investments | (1,593 | ) | (2,724 | ) | ||||
| Purchase of property and equipment | — | (86 | ) | |||||
| Proceeds from sale of property and equipment | 47 | 3,900 | ||||||
| Purchase of patent and trademark rights | (585 | ) | (185 | ) | ||||
| Net cash (used in) provided by investing activities | (832 | ) | 10,988 | |||||
| Cash flows from financing activities: | ||||||||
| Proceeds from sale of stock, net of issuance costs | 485 | 80 | ||||||
| Net cash provided by financing activities | 485 | 80 | ||||||
| Net decrease in cash and cash equivalents | (21,614 | ) | (5,040 | ) | ||||
| Cash and cash equivalents at beginning of year | 27,053 | 32,093 | ||||||
| Cash and cash equivalents at end of year | $ | 5,439 | $ | 27,053 | ||||
| Supplemental disclosures of non-cash investing and financing cash flow information: | ||||||||
| Unrealized gain (loss) on marketable investments | $ | 376 | $ | (928 | ) | |||
| Conversion of Series B preferred | $ | 7 | 19 | |||||
| Operating lease liability arising from obtaining right of use asset | $ | 73 | $ | 736 | ||||
See accompanying notes to consolidated financial statements.
| F- |
AIM IMMUNOTECH INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Description of Business and Basis of Presentation
Business
AIM ImmunoTech Inc. and its subsidiaries (collectively, “AIM”, “Company”, “we” or “us”) are an immuno-pharma company headquartered in Ocala, Florida, and focused on the research and development of therapeutics to treat multiple types of cancers, viral diseases and immune-deficiency disorders. We have established a strong foundation of laboratory, pre-clinical and clinical data with respect to the development of nucleic acids and natural interferon to enhance the natural antiviral defense system of the human body, and to aid the development of therapeutic products for the treatment of certain cancers and chronic diseases.
AIM’s flagship products are Ampligen (rintatolimod), a first-in-class drug of large macromolecular RNA (ribonucleic acid) molecules, and Alferon N Injection (Interferon Alfa-N3). Ampligen has not been approved by the FDA or marketed in the United States. Ampligen is approved for commercial sale in the Argentine Republic for the treatment of severe Chronic Fatigue Syndrome (“CFS”).
The Company’s primary business focus involves Ampligen. Ampligen is a double-stranded RNA (“dsRNA”) molecule being developed for globally important cancers, viral diseases and disorders of the immune system.
AIM currently is proceeding primarily in four areas:
| ● | Conducting a randomized, controlled study to evaluate efficacy and safety of Ampligen compared to a control group to treat locally advanced pancreatic cancer patients. | |
| ● | Evaluating Ampligen in other cancers, as a potential therapy that modifies the tumor microenvironment with the goal of increasing anti-tumor responses to check point inhibitors. |
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| ● | Exploring Ampligen’s antiviral activities and potential use as a prophylactic or treatment for existing viruses, new viruses and mutated viruses thereof. | |
| ● | Evaluating Ampligen as a treatment for myalgic encephalomyelitis/chronic fatigue syndrome (“ME/CFS”) and fatigue and/or Post-COVID conditions of fatigue. |
AIM is prioritizing activities in an order related to the stage of development, with those clinical activities such as pancreatic cancer, ME/CFS and Post-COVID conditions having priority over antiviral experimentation. AIM intends that priority clinical work be conducted in trials authorized by the U.S. Food and Drug Administration (“FDA”) or European Medicines Agency (“EMA”), which trials support a potential future NDA. However, the Company’s antiviral experimentation is designed to accumulate additional preliminary data supporting its hypothesis that Ampligen is a powerful, broad-spectrum prophylaxis and early-onset therapeutic that may confer enhanced immunity and cross-protection. Accordingly, the Company will conduct antiviral programs in those venues most readily available and able to generate valid proof-of-concept data, including foreign venues.
Basis of Preparation and Consolidation
The accompanying consolidated financial statements include the accounts of AIM ImmunoTech and all entities in which a controlling interest is held by the Company. All significant intercompany balances and transactions have been eliminated in consolidation. The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”).
(2) Summary of Significant Accounting Policies
(a) Cash and Cash Equivalents
Cash includes bank deposits maintained at several financial institutions. The Company considers highly liquid instruments with an original maturity of three months or less to be cash equivalents. At various times throughout the year ended December 31, 2023, some accounts held at financial institutions were in excess of the federally insured limit of $250 thousand. The Company has not experienced any losses on these accounts and believes credit risk to be minimal.
(b) Marketable Investment
The Company’s marketable investments consist solely of mutual funds. We determine realized gains and losses for marketable investments using the specific identification method and measure the fair value of our marketable investments using a market approach where identical or comparable prices are available. If quoted market prices are not available, fair values of investments are determined using prices from a pricing service, pricing models, quoted prices of investments with similar characteristics or discounted cash flow models.
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(c) Property and Equipment, net
Schedule of Property and Equipment
| (in thousands) December 31, | ||||||||
| 2023 | 2022 | |||||||
| Furniture, fixture and equipment | $ | 1,448 | $ | 2,233 | ||||
| Less: accumulated depreciation | (1,321 | ) | (2,038 | ) | ||||
| Property and equipment, net | $ | 127 | $ | 195 | ||||
Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets, ranging from three to ten years. Depreciation expense for the years ended December 31, 2023 and 2022 was $39,000 and $38,000, respectively.
The Company made a strategic shift on in-house manufacturing and recorded an impairment of the facility in the amount of $1,800,000 during the year ended December 31, 2021. The Company sold the manufacturing facility on November 1, 2022.
(d) Patent and Trademark Rights, net
Patents and trademarks are stated at cost (primarily legal fees) and are amortized using the straight-line method over the established useful life of 17 years. The Company reviews its patents and trademark rights periodically to determine whether they have continuing value, or their value has become impaired. Such review includes an analysis of the patent and trademark’s ultimate revenue and profitability potential. Management’s review addresses whether each patent continues to fit into the Company’s strategic business plans.
(e) Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure (“GAAP”) of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the reporting period. Actual results could differ from those estimates, and those differences may be material. Accounts requiring the use of significant estimates include determination of other-than-temporary impairment on securities, valuation of deferred taxes, patent and trademark valuations, stock-based compensation calculations, fair value of warrants, and contingency accruals.
(f) Revenue
The Company accounts for revenue in accordance with Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (“Topic 606”). Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that it will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
Revenue from the sale of Ampligen under cost recovery clinical treatment protocols approved by the FDA is recognized when the product is shipped. The Company has no other obligation associated with its products once shipment has been accepted by the customer.
Revenue from the sale Ampligen under the EAP is recognized as the product is distributed and administered to patients involved in the cost recovery program.
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(g) Accounting for Income Taxes
Deferred income tax assets and liabilities are determined based on differences between the financial statement reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws in effect when the differences are expected to reverse. The measurement of deferred income tax assets is reduced, if necessary, by a valuation allowance for any tax benefits which are not expected to be realized. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in the period that such tax rate changes are enacted.
The Company applies the provisions of FASB ASC 740-10 Uncertainty in Income Taxes. As a result of the implementation, there has been no material change to the Company’s tax positions as they have not paid any corporate income taxes due to operating losses. With the exception of net operating losses generated in New Jersey, all tax benefits will likely not be recognized due to the substantial net operating loss carryforwards which will most likely not be realized prior to expiration. With no tax due for the foreseeable future, the Company has determined that a policy to determine the accounting for interest or penalties related to the payment of tax is not necessary at this time.
(h) Recent Accounting Standards and Pronouncements
In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements. The standard requires additional or amended disclosure requirements for a variety of transactions. The provisions most applicable to the Company include the method used in diluted earnings per share computation for each dilutive security including interim periods, preferences in involuntary liquidation for preferred stock. This ASU becomes effective dependent upon the SEC’s removal of related disclosures from Regulation S-X or S-K. Early adoption is permitted. The Company has evaluated the impact of adoption of this ASU on its financial condition, results of operations and cash flows, and, as such, has determined that the adoption of the new standard will not have a material effect on its financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) Improvements to Income Tax Disclosures. The amendments in this Update require that public business entities on an annual basis (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income [or loss] by the applicable statutory income tax rate). Specifically, public business entities are required to disclose a tabular reconciliation, using both percentages and reporting currency amounts. The amendments in this Update require that all entities disclose on an annual basis the following information about income taxes paid: 1. The amount of income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign taxes 2. The amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5 percent of total income taxes paid (net of refunds received). The amendments in this Update require that all entities disclose the following information: 1. Income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign 2. Income tax expense (or benefit) from continuing operations disaggregated by federal (national), state, and foreign.
The amendments in this Update eliminate the requirement for all entities to (1) disclose the nature and estimate of the range of the reasonably possible change in the unrecognized tax benefits balance in the next 12 months or (2) make a statement that an estimate of the range cannot be made. The amendments in this Update remove the requirement to disclose the cumulative amount of each type of temporary difference when a deferred tax liability is not recognized because of the exceptions to comprehensive recognition of deferred taxes related to subsidiaries and corporate joint ventures. The Company has evaluated the impact of adoption of this ASU on its financial condition, results of operations and cash flows, and, as such, has determined that the adoption of the new standard will not have a material effect on its financial statements.
Other recent accounting pronouncements issued by the FASB did not or are not believed by management to have a material impact on the Company’s present or future financial statements.
The Company accounts for its stock-based compensation awards in accordance with FASB ASC Topic 718, “Compensation – Stock Compensation”, which requires recognition of compensation expense related to stock-based compensation awards over the period during which an employee is required to provide service for the award. Compensation expense is equal to the fair value of the award at the date of grant, net of estimated forfeitures.
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Basic and diluted net loss per share is computed using the weighted average number of shares of Common Stock outstanding during the period. Equivalent Common shares, consisting of 3,523,949 and 2,966,538 of stock options and warrants, are excluded from the calculation of diluted net loss per share for the years ended December 31, 2023 and 2022, respectively, since their effect is antidilutive due to the net loss of the Company.
(k) Long-Lived Assets
The Company assesses long-lived assets for impairment when events or changes in circumstances indicate that the carrying value of the assets or the asset grouping may not be recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant decreases in the market price of a long-lived asset or group, a significant adverse change in the extent or manner in which a long-lived asset (asset group) is being used or its physical condition, a significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset (asset group), including an adverse action or assessment by a regulator, an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset (asset group), a current period operating or cash flow loss combined with a history of operating or cash flow losses or projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset (asset group) or a current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated useful life.
When assessing for impairment, the Company measures the recoverability of assets that it will continue to use in its operations by comparing the carrying value of the asset grouping to our estimate of the related total future undiscounted net cash flows. If an asset grouping’s carrying value is not recoverable through the related undiscounted cash flows, the asset grouping is considered to be impaired.
The Company measures the impairment by comparing the difference between the asset grouping’s carrying value and its fair value. Long-lived assets are considered a non-financial asset and are recorded at fair value only if an impairment charge is recognized. Impairments are determined for groups of assets related to the lowest level of identifiable independent cash flows. The Company makes subjective judgments in determining the independent cash flows that can be related to specific asset groupings. In addition, as the Company reviews its manufacturing process and other manufacturing planning decisions, if the useful lives of assets are shorter than the Company had originally estimated, it accelerates the rate of depreciation over the assets’ new, shorter useful lives.
(l) Lease accounting
The Company is a party to leases for office space, lab facilities and other equipment. The Company determines if a contract contains a lease arrangement at the inception of the contract. For leases in which the Company is the lessee, leases are classified as either finance or operating, with classification affecting the pattern of expense recognition. The Company records right of use assets and operating lease liabilities for its operating leases, which are initially recognized at the present value of future lease payments over the lease term. For leases that do not provide an implicit rate, the Company utilizes an estimated incremental borrowing rate based on market observations existing at lease inception to calculate the present value of future payments. The Company amortizes its right of use assets on a straight-line basis over the associated lease term.
The lease term is defined as the non-cancelable period of the lease, plus any options to extend or terminate the lease when it is reasonably certain that the Company will exercise the option. The Company has elected to include both lease and non-lease components in the determination of lease payments. Payments made to a lessor for items such as taxes, insurance, common area maintenance, or other costs commonly referred to as executory costs, are also included in lease payments if they are fixed. The fixed portion of these payments are included in the calculation of the lease liability, while any variable portion is recognized as variable lease expenses as incurred.
The Company has elected not to recognize right of use assets and lease obligations for its short term leases, which are defined as leases with an initial term of 12 months or less. Lease payments for short term leases are recognized on a straight-line basis over the lease term.
(m) Reclassifications
Certain prior year amounts have been reclassified to conform with current year presentation. These changes did not have any effect on net income, stockholders’ equity, or cash flows.
(3) Marketable Investments
Marketable investments consist of mutual funds. At December 31, 2023 and 2022, it was determined that none of the marketable investments had an other-than-temporary impairment. At December 31, 2023 and 2022, all securities were measured as Level 1 instruments of the fair value measurements standard (See Note 15: Fair Value). As of December 31, 2023 and 2022, the Company held $7,631,000 and $7,137,000, respectively, in mutual funds.
Mutual Funds classified as available for sale consisted of:
(in thousands)
December 31, 2023
Schedule of Available of Sale
| Securities |
Fair Value |
Short-Term Investments | ||||||
| Mutual Funds | $ | 7,631 | $ | 7,631 | ||||
| Totals | $ | 7,631 | $ | 7,631 | ||||
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(in thousands)
December 31, 2023
Schedule of Equity Securities
| Securities | ||||
| Net gain recognized during the year on equity securities | $ | 200 | ||
| Less: Net gains and losses recognized during the year on equity securities sold during the year | (176 | ) | ||
| Unrealized gains and losses recognized during the year on equity securities still held at the end of the year | $ | 376 | ||
Mutual Funds classified as available for sale consisted of:
(in thousands)
December 31, 2022
| Securities | Fair Value | Short-Term Investments | ||||||
| Mutual Funds | $ | 7,137 | $ | 7,137 | ||||
| Totals | $ | 7,137 | $ | 7,137 | ||||
(in thousands)
December 31, 2022
| Securities | ||||
| Net losses recognized during the period on equity securities | $ | (1,679 | ) | |
| Less: Net gains and losses recognized during the period on equity securities sold during the year | (751 | ) | ||
| Unrealized gains and losses recognized during the reporting period on equity securities still held at the end of the year | $ | (928 | ) | |
(4) Patents and Trademark Rights, Net
Patent and trademark rights consist of the following (in thousands):
Schedule of Patent and Trademark Rights
| December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||
| Gross Carrying Value | Accumulated Amortization | Net Carrying Value | Gross Carrying Value | Accumulated Amortization | Net Carrying Value | |||||||||||||||||||
| Patents | $ | 2,947 | $ | (750 | ) | $ | 2,197 | $ | 2,389 | $ | (595 | ) | $ | 1,794 | ||||||||||
| Trademarks | 229 | (113 | ) | 116 | 216 | (69 | ) | 147 | ||||||||||||||||
| Net amortizable patents and trademarks rights | $ | 3,176 | $ | (863 | ) | $ | 2,313 | $ | 2,605 | $ | (664 | ) | $ | 1,941 | ||||||||||
The following table presents the changes in the patents and trademark rights:
Schedule of Changes in Patents, Trademark Rights
(in thousands) |
||||
| December 31, 2022 | $ | 1,941 | ||
| Acquisitions | 585 | |||
| Abandonments | (14 | ) | ||
| Amortization | (199 | ) | ||
| December 31, 2023 | $ | 2,313 | ||
Patents and trademarks are stated at cost (primarily legal fees) and are amortized using the straight-line method of the estimated useful life of 17 years and 10 years, respectively.
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Amortization of patents and trademarks for each of the next five years is as follows (in thousands):
Schedule of Amortization of Patents and Trademarks
| Year Ending December 31, | ||||
| 2024 | $ | 241 | ||
| 2025 | 232 | |||
| 2026 | 230 | |||
| 2027 | 208 | |||
| 2028 | 189 | |||
| Thereafter | 1,213 | |||
| Total | $ | 2,313 | ||
(5) Accrued Expenses
Accrued expenses at December 31, 2023 and 2022 consist of the following:
Schedule of Accrued Expenses
| (in thousands) December 31, | ||||||||
| 2023 | 2022 | |||||||
| Compensation | $ | 414 | $ | 1 | ||||
| Professional fees | 1,352 | 492 | ||||||
| Clinical trial expenses | 184 | 110 | ||||||
| Other expenses | 36 | 203 | ||||||
| Total | $ | 1,986 | $ | 806 | ||||
(6) Stockholders’ Equity
(a) Preferred Stock
The Company is authorized to issue 5,000,000 shares of $0.01 par value preferred stock with such designations, rights and preferences as may be determined by the Board. Of our authorized preferred stock, 4,000,000 shares have been designated as Series A Junior Participating Preferred Stock and 10,000 shares have been designated as Series B Convertible Preferred Stock.
Series A Junior Participating Preferred Stock
On May 10, 2023, the Company filed a Certificate of Increase in Delaware, increasing the number of preferred stock designated as Series A Junior Participating Preferred Stock to 4,000,000 from 250,000 shares.
Series B Convertible Preferred Stock
The Company has designated 10,000 shares of its preferred stock as Series B Convertible Preferred Stock (the “Preferred Stock”). Each share of Preferred Stock has a par value of $0.01 per share and a stated value equal to $1,000 (the “Stated Value”). The shares of Preferred Stock shall initially be issued and maintained in the form of securities held in book-entry form and the Depository Trust Company or its nominee (“DTC”) shall initially be the sole registered holder of the shares of Preferred Stock.
Each share of Preferred Stock shall be convertible, at any time and from time to time from and after the Original Issue Date at the option of the Holder thereof or at any time and from time to time on or after the second anniversary of the Original Issue Date at the option of the Corporation, into that number of shares of Common Stock (subject in each case to the limitations determined by dividing the Stated Value of such share of Preferred Stock by the Conversion Price). The conversion price for the Preferred Stock shall be equal to $0.20, subject to adjustment herein (the “Conversion Price”).
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Pursuant to a registration statement relating to a rights offering declared effective by the SEC on February 14, 2019, AIM distributed to its holders of common stock and to holders of certain options and redeemable warrants as of February 14, 2019, at no charge, one non-transferable subscription right for each share of common stock held or deemed held on the record date. Each right entitled the holder to purchase one unit, at a subscription price of $1,000 per unit, consisting of one share of Series B Convertible Preferred Stock with a face value of $1,000 (and immediately convertible into common stock at an assumed conversion price of $8.80) and 114 warrants with an assumed exercise price of $8.80. The redeemable warrants are exercisable for five years after the date of issuance. The net proceeds realized from the rights offering were approximately $4,700,000. During the year ended December 31, 2023, 7 shares of Series B Convertible Preferred Stock were converted into common stock.
As of December 31, 2023 and 2022, the Company had 689 and 696 shares of Series B Convertible Preferred Stock outstanding, respectively. Holders shall be entitled to receive, and the Company shall pay, dividends on shares of Series B Preferred Stock equal (on an as-if-converted-to-Common-Stock basis) to and in the same form as dividend actually paid on shares of Common Stock when as and if such dividends are paid on shares of the Common Stock. Each such Preferred Share is convertible into 114 shares of common stock. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the Holders shall be entitled to receive out of the assets, whether capital or surplus of the Company the same amount that a holder of Common Stock would receive if the Preferred Stock was fully converted. The Series B Convertible Preferred Stock does not carry voting Rights.
(b) Common Stock and Equity Finances
The Company has authorized shares of 350,000,000 with specific limitations and restrictions on the usage of 8,000,000 of the 350,000,000 authorized shares. As of December 31, 2023 and 2022, there were 49,102,484 and 48,084,287 shares of Common Stock issued and outstanding, respectively.
Employee Stock Purchase Plan (Not equity compensation)
On July 7, 2020, the Board approved a plan pursuant to which all directors, officers, and employees could purchase from the Company up to an aggregate of $500,000 worth of shares at the market price (including subsequent plans, the “Employee Stock Purchase Plan”). Pursuant to NYSE American rules, this plan was effective for a sixty-day period commencing upon the date that the NYSE American approved the Company’s Supplemental Listing Application. The Company created successive new plans following the expiration of the July 7, 2020 plan. The latest plan was approved by the Board in January 2024 and expires in March 2024.
During the year ended December 31, 2023, the Company issued a total of 419,285 shares of its Common Stock at a price ranging from $0.31 to $0.67 for total proceeds of approximately $150,500 as part of the employee stock purchase plan.
During the year ended December 31, 2022, the Company issued a total of 86,817 shares of its Common Stock at prices ranging from $0.76 to $1.02 for total proceeds of $80,000 as part of the employee stock purchase plan.
Warrants (Rights offering)
On September 27, 2019, the Company closed a public offering underwritten by A.G.P./Alliance Global Partners, LLC (the “Offering”) of (i) 1,740,550 shares of Common Stock; (ii) pre-funded warrants exercisable for 7,148,310 shares of Common Stock (the “Pre-funded Warrants”), and (iii) warrants to purchase up to an aggregate of 8,888,860 shares of Common Stock (the “Warrants”). In conjunction with the Offering, we issued a Representative’s Warrant to purchase up to an aggregate of 266,665 shares of common stock (the “Representative’s Warrant”). The shares of Common Stock and Warrants were sold at a combined Offering price of $0.90, less underwriting discounts and commissions. Each Warrant sold with the shares of Common Stock represents the right to purchase one share of Common Stock at an exercise price of $0.99 per share. The Pre-Funded Warrants and Warrants were sold at a combined Offering price of $0.899, less underwriting discounts and commissions. The Pre-Funded Warrants were sold to purchasers whose purchase of shares of Common Stock in the Offering would otherwise result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% of the Company’s outstanding Common Stock immediately following the consummation of the Offering, in lieu of shares of Common Stock. Each Pre-Funded Warrant represents the right to purchase one share of Common Stock at an exercise price of $0.001 per share. The Pre-Funded Warrants are exercisable immediately and may be exercised at any time until the Pre-Funded Warrants are exercised in full. A registration statement on Form S-1, relating to the Offering was filed with the SEC and was declared effective on September 25, 2019, the net proceeds were approximately $7,200,000. During the year ended December 31, 2020, 1,870,000 of the Pre-funded Warrants were exercised and 8,873,960 Warrants were exercised. In addition, on March 25, 2020, the Representative’s Warrant was amended to permit exercise of such warrant to commence on March 30, 2020. These warrants were exercised on March 31, 2020 and an aggregate of 266,665 shares were issued upon exercise of this warrant for gross proceeds of approximately $264,000 and a $46,000 expense for the warrant modification. No Warrants were exercised during the year ended December 31, 2023 and 2022. As of December 31, 2023 and 2022 there are 15,000 Warrants outstanding.
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Equity Distribution Agreement
On April 19, 2023, the Company entered into an Equity Distribution Agreement (the “EDA”) with Maxim Group LLC (“Maxim”), pursuant to which the Company may sell, from time to time, shares of its common stock having an aggregate offering price of up to $8,500,000 through Maxim, as agent (the “Offering”). Sales under the EDA were registered under the S-3 Shelf Registration Statement. Under the terms of the EDA, Maxim will be entitled to a transaction fee at a fixed rate of 3.0% of the gross sales price of shares sold under the EDA. During the year ended December 31, 2023, the Company sold 598,114 shares under the EDA for total gross proceeds of approximately $344,000, which includes a 3.0% fee to Maxim of $10,326. Subsequent to the year ended December 31, 2023, the Company sold 699,568 shares under the EDA for total gross proceeds of $316,392, which includes a 3.0% fee to Maxim of $9,492.
Rights Plan
On May 12, 2023, the Company amended and restated its November 14, 2017 Rights Plan with American Stock Transfer & Trust Company as Rights Agent (the “Rights Plan”).
(c) Common Stock Options and Warrants
(i) Stock Options
The 2018 Equity Incentive Plan, effective September 12, 2018, authorizes the grant of (i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) Stock Appreciation Rights, (iv) Restricted Stock Awards, (v) Restricted Stock Unit Awards, (vi) Performance Stock Awards, (vii) Performance Cash Awards, and (viii) Other Stock Awards. Initially, a maximum of 7,000,000 shares of common stock is reserved for potential issuance pursuant to awards under the 2018 Equity Incentive Plan. Unless sooner terminated, the 2018 Equity Incentive Plan will continue in effect for a period of 10 years from its effective date.
The Equity Incentive Plans of 2018 are administered by the Board of Directors. The Plans provide for awards to be made to such Officers, other key employees, non-employee Directors, consultants and advisors of the Company and its subsidiaries as the Board may select.
Stock options awarded under the Plans may be exercisable at such times (not later than 10 years after the date of grant) and at such exercise prices (not less than fair market value at the date of grant) as the Board may determine. The Board may provide for options to become immediately exercisable upon a “change in control”, which is defined in the Plans to occur upon any of the following events: (a) the acquisition by any person or group, as beneficial owner, of 20% or more of the outstanding shares or the voting power of the outstanding securities of the Company; (b) either a majority of the Directors of the Company at the annual stockholders meeting has been nominated other than by or at the direction of the incumbent Directors of the Board, or the incumbent Directors cease to constitute a majority of the Company’s Board; (c) the Company’s stockholders approve a merger or other business combination pursuant to which the outstanding common stock of the Company no longer represents more than 50% of the combined entity after the transaction; (d) the Company’s stockholders approve a plan of complete liquidation or an agreement for the sale or disposition of all or substantially all of the Company’s assets; or (e) any other event or circumstance determined by the Company’s Board to affect control of the Company and designated by resolution of the Board as a change in control.
The fair value of each option award is estimated on the date of grant using a Black-Scholes-Merton pricing option valuation model. Expected volatility is based on the historical volatility of the price of the Company’s stock. The risk-free interest rate is based on U.S. Treasury issues with a term equal to the expected life of the option and equity warrant. The Company uses historical data to estimate expected dividend yield, life and forfeiture rates. The expected life of the options and equity warrants was estimated based on historical option and equity warrant holders’ behavior and represents the period of time that options and equity warrants are expected to be outstanding. The fair values of the options granted were estimated based on the following weighted average assumptions:
| Year Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Risk-free interest rate | 4.37 | % | 1.74% - 3.88% | |||||
| Expected dividend yield | — | — | ||||||
| Expected life | 10 years | 10 years | ||||||
| Expected volatility | 99.91 | % | 98.43% - 107.18% | |||||
| Weighted average grant date fair value for options issued | $0.43 per option for 400,000 options | $0.51 per option for 850,000 options | ||||||
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The exercise price of all stock options and equity warrants granted was equal to or greater than the fair market value of the underlying common stock on the date of the grant.
Schedule of Stock Option Activity
| 2023 | 2022 | |||||||||||||||||||||||
| Option | Weighted Average Exercise |
Option | Weighted Average Exercise |
|||||||||||||||||||||
| Shares | Price | Price | Shares | Price | Price | |||||||||||||||||||
| Outstanding, beginning of year | 124,399 | 13.20 – 1,003.20 | 22.23 | 128,504 | 13.20 – 2,127.84 | 25.58 | ||||||||||||||||||
| Granted | — | — | — | — | — | — | ||||||||||||||||||
| Forfeited | (5,047 | ) | 9.68-327.36 | 57.79 | (4,105 | ) | 16.76-2,127.84 | 129.88 | ||||||||||||||||
| Exercised | — | — | — | — | — | — | ||||||||||||||||||
| Outstanding, end of year | 119,352 | 13.20-2,127.84 | 20.72 | 124,399 | 13.20-1,003.20 | 22.23 | ||||||||||||||||||
| Exercisable, end of year | 119,352 | 13.20-2,127.84 | 124,399 | 13.20-1,003.20 | ||||||||||||||||||||
| Weighted average remaining contractual life (years) | 4.06 years | 5.98 years | ||||||||||||||||||||||
Schedule of Stock Option Activity
| 2023 | 2022 | |||||||||||||||||||||||
| Option | Weighted Average Exercise |
Option | Weighted Average Exercise |
|||||||||||||||||||||
| Shares | Price | Price | Shares | Price | Price | |||||||||||||||||||
| Outstanding, beginning of year | 2,474,971 | 0.31-9.68 | 1.72 | 1,650,017 | 1.11 – 9.68 | 2.35 | ||||||||||||||||||
| Granted | 400,000 | 0.47-0.47 | 0.47 | 850,000 | 0.31 – 1.71 | 0.51 | ||||||||||||||||||
| Forfeited | (60,829 | ) | 0.31-9.68 | 1.98 | (25,046 | ) | 1.85 – 9.68 | 1.86 | ||||||||||||||||
| Exercised | — | — | — | — | — | — | ||||||||||||||||||
| Outstanding, end of year | 2,814,142 | 0.31-9.68 | 1.54 | 2,474,971 | 0.31 – 9.68 | 1.72 | ||||||||||||||||||
| Exercisable, end of year | 2,397,474 | 0.31-327.36 | 4.71 | 1,916,637 | 0.41 – 9.68 | 2.22 | ||||||||||||||||||
| Weighted average remaining contractual life (years) | 7.96 years | 9.65 years | ||||||||||||||||||||||
| Available for future grants | 1,210,286 | 466,120 | ||||||||||||||||||||||
| F- |
Stock option activity during the years ended December 31, 2023 and 2022 is as follows:
Schedule of Vest Stock Option Activity
| Number of | Weighted Average Exercise | Weighted Average Remaining Contracted Term |
Aggregate Intrinsic | |||||||||||||
| Options | Price | (Years) | Value | |||||||||||||
| Outstanding December 31, 2021 | 1,498,798 | $ | 4.22 | 9.11 | — | |||||||||||
| Granted | 550,000 | 0.49 | 9.71 | — | ||||||||||||
| Forfeited | (28,584 | ) | 17.71 | — | — | |||||||||||
| Expired | — | — | — | — | ||||||||||||
| Outstanding December 31, 2022 | 2,020,214 | $ | 3.01 | 8.86 | — | |||||||||||
| Granted | 400,000 | 0.47 | 10.17 | — | ||||||||||||
| Forfeited | (7,601 | ) | 9.68 | — | ||||||||||||
| Expired | (4,175 | ) | 41.61 | — | — | |||||||||||
| Outstanding December 31, 2023 | 2,408,438 | $ | 2.50 | 8.70 | — | |||||||||||
| Vested and expected to vest at December 31, 2023 | 2,041,772 | $ | 1.90 | 6.73 | — | |||||||||||
| Exercisable at December 31, 2023 | 2,041,772 | $ | 1.90 | 6.73 | — | |||||||||||
The weighted-average grant-date fair value of employee options vested during the year ended December 31, 2023 was $184,000 for 424,999 options at $0.43 per option and during year ended December 31, 2022 was $768,666 for 575,000 options at $1.34 per option.
Schedule of Unvested Stock Option Activity
| Number of | Weighted Average Exercise | Average Remaining Contracted Term | Aggregate Intrinsic | |||||||||||||
| Options | Price | (Years) | Value | |||||||||||||
| Unvested December 31, 2021 | 412,500 | $ | 4.15 | 5.85 | — | |||||||||||
| Granted | 550,000 | 0.49 | 9.71 | — | ||||||||||||
| Vested | (541,590 | ) | 1.31 | 9.73 | — | |||||||||||
| Forfeited | (28,584 | ) | 17.71 | — | — | |||||||||||
| Unvested December 31, 2022 | 392,326 | $ | 0.80 | 8.86 | — | |||||||||||
| Granted | 400,000 | 0.47 | 10.17 | — | ||||||||||||
| Vested | (413,884 | ) | 1.90 | 6.73 | — | |||||||||||
| Forfeited | (7,601 | ) | 9.68 | — | — | |||||||||||
| Expired | (4,175 | ) | 41.61 | — | — | |||||||||||
| Unvested December 31, 2023 | 366,666 | $ | 2.13 | 12.44 | — | |||||||||||
| F- |
Schedule of Vest Stock Option Activity
| Number of | Weighted Average Exercise | Weighted Average Remaining Contracted Term | Aggregate Intrinsic | |||||||||||||
| Options | Price | (Years) | Value | |||||||||||||
| Outstanding December 31, 2021 | 279,723 | $ | 6.12 | 7.93 | — | |||||||||||
| Granted | 300,000 | 0.54 | 9.68 | — | ||||||||||||
| Exercised | — | — | — | — | ||||||||||||
| Forfeited | (568 | ) | 153.12 | — | — | |||||||||||
| Outstanding December 31, 2022 | 579,155 | $ | 3.09 | 8.36 | — | |||||||||||
| Granted | 360,000 | 0.46 | 10.04 | — | ||||||||||||
| Exercised | — | — | — | — | ||||||||||||
| Expired | (653 | ) | 145.24 | — | — | |||||||||||
| Forfeited | (53,447 | ) | 1.31 | — | — | |||||||||||
| Outstanding December 31, 2023 | 885,055 | $ | 2.02 | 9.23 | — | |||||||||||
| Vested and expected to vest at December 31, 2023 | 550,055 | $ | 2.56 | 10.02 | — | |||||||||||
| Exercisable at December 31, 2023 | 550,055 | $ | 2.56 | 10.02 | — | |||||||||||
The weighted-average grant-date fair value of non-employee options vested during year 2023 was $90,000 for 191,666 options at $0.47 per option and during the year 2022 was $247,166 for 229,053 options at $1.08 per option.
Schedule of Unvested Stock Option Activity
| Number of | Weighted Average Exercise | Weighted Average Remaining Contracted Term |
Aggregate Intrinsic | |||||||||||||
| Options | Price | (Years) | Value | |||||||||||||
| Unvested December 31, 2021 | 97,831 | $ | 3.89 | 7.82 | — | |||||||||||
| Granted | 300,000 | 0.54 | 9.68 | — | ||||||||||||
| Vested | (229,053 | ) | 0.82 | — | — | |||||||||||
| Forfeited | (1,989 | ) | — | — | — | |||||||||||
| Unvested December 31, 2022 | 166,789 | $ | 4.05 | 9.49 | — | |||||||||||
| Granted | 360,000 | 0.46 | 10.18 | — | ||||||||||||
| Vested | (137,565 | ) | 0.47 | 9.47 | — | |||||||||||
| Expired | (776 | ) | 145.24 | — | — | |||||||||||
| Forfeited | (53,447 | ) | 1.31 | — | — | |||||||||||
| Unvested December 31, 2023 | 335,001 | $ | 1.83 | 10.70 | — | |||||||||||
Stock-based compensation expense was approximately $243,000 and $954,000 for the years ended December 31, 2023 and 2022.
As of December 31, 2023 and 2022, there was $294,000 and $217,000, respectively, of unrecognized stock-based compensation cost related to options granted under the Equity Incentive Plans. Stock-based compensation related to options granted under the Equity Incentive Plans will be recorded over the vesting period which is typically one year or upon reaching agreed upon Company and/or individual performance milestones being met which is indefinite.
| F- |
(ii) Stock Warrants
Stock warrants are issued as needed by the Board of Directors and have no formal plan.
The fair value of each warrant award is estimated on the date of grant using a Black-Scholes-Merton pricing option valuation model. Expected volatility is based on the historical volatility of the price of the Company’s stock. The risk-free interest rate is based on U.S. Treasury issues with a term equal to the expected life of the warrant. The Company uses historical data to estimate expected dividend yield, life and forfeiture rates. The expected life of the warrants was estimated based on historical option holder’s behavior and represents the period of time that options are expected to be outstanding. No warrants were granted in 2023 or 2022.
Schedule of Warrants Outstanding and Exercisable
| 2023 | 2022 | |||||||||||||||||||||||
| Warrant | Weighted Average Exercise |
Warrant | Weighted Average Exercise |
|||||||||||||||||||||
| Shares | Price | Price | Shares | Price | Price | |||||||||||||||||||
| Outstanding, beginning of year |
226,610 | $ 0.99-132.00 | $ | 9.10 | 294,939 | $0.99 – 469.92 | $ | 15.19 | ||||||||||||||||
| Granted | — | — | — | — | — | — | ||||||||||||||||||
| Expired | (74,450 | ) | 17.05 | 17.05 | (68,215 | ) | 469.92 | 469.92 | ||||||||||||||||
| Exercised | — | — | — | (114 | ) | 8.80 | 8.80 | |||||||||||||||||
| Outstanding, end of year | 152,160 | $ 0.99-8.80 | $ | 8.03 | 226,610 | $ 0.99-132.00 | $ | 9.10 | ||||||||||||||||
| Exercisable | 152,160 | $ 0.99-8.80 | $ | 8.03 | 226,610 | $ 0.99-132.00 | $ | 9.10 | ||||||||||||||||
| Weighted average remaining contractual life | .75 years | .94 years | ||||||||||||||||||||||
| Years exercisable | 2024 | 2023-2024 | ||||||||||||||||||||||
Stock warrants are issued at the discretion of the Board. During the year ended December 31, 2023, there were no warrants issued or exercised. During the year ended December 31, 2022, there were no warrants issued and 114 were exercised.
(7) Segment and Related Information
The Company operates in one segment, which performs research and development activities related to Ampligen and other drugs under development. The Company’s revenues for the two-year period ended December 31, 2023, were earned in the United States. All assets are maintained in the United States of America.
(8) Research, Consulting and Supply Agreements
The Company has entered into research, consulting and supply agreements with third party service providers to perform research and development activities on therapeutics, including clinical trials. The identification of research and development costs involves reviewing open contracts and purchase orders, communicating with applicable company and third-party personnel to identify services that have been performed, and corroborating the level of service performed and the associated cost incurred for the service when the Company has not yet been invoiced or otherwise notified of actual expenses. The Company expenses these research and development costs when incurred.
During the year ended December 31, 2023, research and development expenses were comprised of: clinical studies ($6,014,000), manufacturing and engineering ($3,220,000), quality control ($1,271,000) and regulatory ($434,000).
During the year ended December 31, 2022, research and development expenses were comprised of: clinical studies ($4,070,000), manufacturing and engineering ($1,241,000), quality control ($1,236,000) and regulatory ($443,000).
The following summarizes the most substantial of our contracts relating to research, consulting, and supply costs for AIM as they related to research and development costs during the year ended December 31, 2023.
| F- |
Amarex Clinical Research LLC
Amarex is the principal administrator of several of AIM’s largest clinical studies. AIM has multiple contracts with Amarex Clinical Research LLC (“Amarex”). During the year ended December 31, 2023 and 2022, the Company incurred approximately $4,290,000 and $2,272,000, respectively, related to these ongoing agreements:
| ● | Pancreatic Cancer - In April 2022, AIM executed a work order with Amarex pursuant to which Amarex is managing a Phase 2 clinical trial in locally advanced pancreatic cancer patients designated AMP-270. Per the work order, AIM anticipates that Amarex’s management of the study will cost approximately $8,400,000. This estimate includes pass-through costs of approximately $1,000,000 and excludes certain third-party and investigator costs and escalations necessary for study completion. AIM anticipates that the study will take approximately 4.6 years to complete. |
| ○ | During the year ended December 31, 2023, the Company incurred approximately $600,000 related to this agreement. | |
| ○ | During the year ended December 31, 2022, the Company incurred approximately $1,691,000 related to this agreement. |
| ● | Post-COVID Conditions - In September 2022, AIM executed a work order with Amarex, pursuant to which Amarex is managing a Phase 2 trial in patients with Post-COVID Conditions. AIM is sponsoring the study. AIM anticipates that the study will cost approximately $6,400,000, which includes pass through costs of approximately $125,000, investigator costs estimated at about $4,400,000, and excludes certain other third-party costs and escalations. During 2023, the original work order increased to approximately $6,600,000 for the addition of patient reported outcome (PRO) electronic questionnaires (devices/tablets for patients to complete); services associated with the ePRO system and additional safety monitoring services as well as changes to study documentation (such as protocol amendments) which resulted in additional IND submissions to FDA. This study was effectively concluded in 2023. |
| ○ | During the year ended December 31, 2023, the Company incurred approximately $3,690,000 related to this agreement. | |
| ○ | During the year ended December 31, 2022, the Company incurred approximately $581,000 related to this agreement. |
Jubilant HollisterStier
Jubilant HollisterStier (“Jubilant”) is AIM’s authorized CMO for Ampligen for the approval in Argentina. In 2017, the Company entered into an agreement with Jubilant pursuant to which Jubilant will manufacture batches of Ampligen® for the Company. Since the 2017 engagement of Jubilant, two lots of Ampligen consisting of more than 16,000 units were manufactured and released in the year 2018. The first lot was designated for human use in the United States in the cost recovery CFS program and for expanded oncology clinical trials. The second lot has been designated for these programs in addition to commercial distribution in Argentina for the treatment of CFS. Jubilant manufactured additional two lots of Ampligen in December 2019 and January 2020. In March 2023, the Company ordered an additional 27,900 vials from Jubilant at a cost of approximately $1,432,000.
| ○ | During the year ended December 31, 2023, the Company incurred approximately $1,432,000 related to this agreement. | |
| ○ | During the year ended December 31, 2022, the Company incurred approximately $79,000 related to this agreement. |
Sterling Pharma Solutions
In 2022, the Company entered into a Master Service Agreement and a Quality Agreement with Sterling Pharma Solutions (“Sterling”) for the manufacture of the Company’s Poly I and Poly C12U polynucleotides and transfer of associated test methods at Sterling’s Dudley, UK location to produce the polymer precursors to manufacture the drug Ampligen.
| ○ | During the year ended December 31, 2023, the Company incurred approximately $363,000 related to this agreement. | |
| ○ | During the year ended December 31, 2022, the Company did not incur any expense related to this agreement. |
Erasmus
In December 2022, the Company entered into a joint clinical study agreement with Erasmus University Medical Center Rotterdam to conduct a Phase II study: Combining anti-PD-L1 immune checkpoint inhibitor durvalumab with TLR-3 agonist rintatolimod in patients with metastatic pancreatic ductal adenocarcinoma for therapy efficacy. This is a study in collaboration with AstraZeneca. AIM’s limited responsibilities are limited to providing Ampligen. Additionally, AIM agreed to provide a grant of $200,000 for the study.
| ○ | During the year ended December 31, 2023, the Company incurred approximately $100,000 pursuant to the Grant Agreement. | |
| ○ | During the year ended December 31, 2022, the Company did not incur any expense related to this agreement. |
| F- |
Azenova Sales International
In October 2023, the Company entered into a consulting agreement with Azenova, LLC whereas Azenova will provide business development services for AIM’s Ampligen product for solid tumors for a 12 month term that is extendable upon the agreement of the parties. In exchange for its services, Azenova will receive a fixed monthly retainer of $30,000 per month in addition to 360,000 stock options that vest monthly.
| ○ | During the year ended December 31, 2023, the Company incurred approximately $75,000 related to this agreement. | |
| ○ | During the year ended December 31, 2022, the Company did not incur any expense related to this agreement. |
Alcami
In September 2023, the Company entered into an agreement with Alcami Corporation to perform an extractables study for a primary packaging component. The agreement called for fixed costs of approximately $30,000 upon completion of the study and issue of the final report, along with solvent costs, and pass through items to be billed on a per activity basis. The final bill for the initial study was received in December 2023.
| ○ | During the year ended December 31, 2023, the Company incurred approximately $65,000 of lab services from Alcami. | |
| ○ | During the year ended December 31, 2022, the Company incurred approximately $18,000 of lab services from Alcami. |
(9) 401(k) Plan
AIM has a defined contribution plan, entitled the AIM ImmunoTech Employees 401(k) Plan and Trust Agreement (the “401(k) Plan”). AIM’s full-time employees are eligible to participate in the 401(k) Plan following 61 days of employment. Subject to certain limitations imposed by federal tax laws, participants are eligible to contribute up to 15% of their salary (including bonuses and/or commissions) per annum. Participants’ contributions to the 401(k) Plan may be matched by us at a rate determined annually by the Board.
Each participant immediately vests in his or her deferred salary contributions as well as the Company’s safe harbor contributions. A 6% safe harbor matching contribution by us was reinstated effective January 1, 2021. For the year ended December 31, 2023 and 2022, the Company’s matching contributions were approximately $162,000 and $122,000, respectively
(10) Employment Agreements
The Company had contractual agreements with Named Executive Officers (“NEO”) in 2023, and 2022. The aggregate annual base compensation for these NEO under their respective contractual agreements for 2023 and 2022 was $1,275,000 and $1,275,000, respectively. In addition, certain of these Officers were entitled to receive performance bonuses of up to 25% or 20% of their respective annual base salary, at the sole discretion of the Compensation Committee of the Board of Directors. For the years ended December 31, 2023 and 2022, Officers’ bonuses were $450,000, to be deferred and paid in 2024 and $450,000, respectively.
In 2023, equity was granted as a form of compensation to these Officers.
| a. | The Company granted 300,000 ten-year options to purchase common stock with an exercise price of $0.47 per share to vest in one year to Thomas K. Equels, Chief Executive Officer. |
| b. | The Company granted 100,000 ten-year options to purchase common stock with an exercise price of $0.47 per share which vest in one year to Peter Rodino, Chief Operating Officer and General Counsel. |
The Company recorded stock compensation expense of approximately $14,000 during the year ended December 31, 2023 with regard to these issuances to Officers Equels and Rodino.
In 2022, equity was granted as a form of compensation to these Officers.
| F- |
| c. | The Company granted 300,000 ten-year options to purchase common stock with an exercise price of $0.41 per share to vest in one year to Thomas K. Equels, Chief Executive Officer. |
| d. | The Company granted 150,000 ten-year options to purchase common stock with exercise price of $0.41 to $0.70 per share which vest in one year to Peter Rodino, Chief Operating Officer and General Counsel. |
| e. | The Company granted 50,000 ten-year options to purchase common stock with an exercise price of $0.70 per share which vest in one year to Ellen Lintal, former Chief Financial Officer. |
The Company recorded stock compensation expense of approximately $107,000 during the year ended December 31, 2023 with regard to these issuances to Officers Equels, Rodino, and former Officer Lintal.
(11) Leases
The Company leases office and lab facilities and other equipment under non-cancellable operating leases with initial terms typically ranging from 1 to 5 years, expiring at various dates during 2024 through 2027, and requiring monthly payments ranging from less than $1,000 to $17,000. Certain leases include additional renewal options ranging from 1 to 5 years.
AIM has classified all of its leases as operating leases.
As of December 31, 2023 and 2022, the balance of the right of use assets was $697,000 and $829,000, respectively, and the corresponding operating lease liability balance was $718,000 and $837,000, respectively. Right of use assets are recorded net of accumulated amortization of $363,000 and $158,000 as of December 31, 2023 and 2022, respectively.
AIM recognized rent expense associated with these leases are follows:
Schedule of AIM Recognized Rent Expense Associated with Operating Lease
| Year ended December 31, | ||||||||
| (in thousands) | ||||||||
| 2023 | 2022 | |||||||
| Lease costs: | ||||||||
| Operating lease costs | $ | 288 | $ | 128 | ||||
| Short-term and variable lease costs | 335 | 211 | ||||||
| Total lease costs | $ | 623 | $ | 339 | ||||
| Classification of lease costs | ||||||||
| Research & development | $ | 498 | $ | 220 | ||||
| General and administrative | 125 | 119 | ||||||
| Total lease costs | $ | 623 | $ | 339 | ||||
The Company’s leases have remaining lease terms between 3 and 44 months. As of December 31, 2023 and 2022, the weighted-average remaining term was 41 and 43 months, respectively.
The Company’s weighted average incremental borrowing rate for its leases was 10% as of December 31, 2023 and 2022, respectively.
Future minimum payments as of December 31, 2023, are as follows:
Schedule of Operating Lease Future Payments
| Year Ending December 31, (in thousands) | ||||
| 2024 | $ | 279 | ||
| 2025 | 229 | |||
| 2026 | 200 | |||
| 2027 | 133 | |||
| Thereafter | — | |||
| Less imputed interest | (123 | ) | ||
| Total | $ | 718 | ||
| F- |
(12) Income Taxes (FASB ASC 740 Income Taxes)
The Company applies the provisions of FASB ASC 740-10 Uncertainty in Income Taxes. As a result of the implementation, there has been no material change to the Company’s tax positions as they have not paid any corporate income taxes due to operating losses. With the exception of net operating losses and research and development credits generated in New Jersey, all tax benefits will likely not be recognized due to the substantial net operating loss carryforwards which will most likely not be realized prior to expiration.
As of December 31, 2023, the Company has approximately $166,300,000 of Federal net operating loss carryforwards (expiring in the years 2023 through 2038), and $103,300,000 of Federal net operating loss carryforwards with no expiration date, both of which have been limited by Internal Revenue Code Section 382, available to offset future federal taxable income. The Company has approximately $28,800,000 of New Jersey state net operating loss carryforwards (expiring in 2044). The Company has approximately $82,500,000 of Florida state net operating loss carryforwards with no expiration date to offset future Florida taxable income. The Company has approximately $3,600,000 of Belgium net operating loss carryforwards with no expiration date to offset future taxable income In December 2023, the Company effectively sold $14,156,000 of its New Jersey state net operating loss carryforward and $38,600 in R&D credits for the year 2022 for approximately $1,313,000. The utilization of certain state net operating loss carryforwards may be subject to annual limitations. With no tax due for the foreseeable future, the Company has determined that a policy to determine the accounting for interest or penalties related to the payment of tax is not necessary at this time.
Under the Tax Reform Act of 1986, the utilization of a corporation’s net operating loss carryforward is limited following a greater than 50% change in ownership. As noted above, due to the Company’s prior and current equity transactions, some of the Company’s net operating loss carryforwards are subject to an annual limitation generally determined by multiplying the value of the Company on the date of the ownership change by the federal long-term tax-exempt rate. Any unused annual limitation may be carried forward to future years for the balance of the net operating loss carryforward period.
Deferred income taxes reflect the net tax effects of temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and the carrying amounts used for income tax purposes. In assessing the realizability of deferred tax assets, Management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. With the exception of net operating losses generated in New Jersey which can be surrendered for 80% of their value, due to the uncertainty of the Company’s ability to realize the benefit of the deferred tax asset, the remainder of our deferred tax assets are fully offset by a valuation allowance at December 31, 2023 and 2022.
The components of the net deferred tax assets and liabilities as of December 31, 2023 and 2022, which include the correction of an immaterial deferred tax error of approximately $1.4 million in the stock compensation component and the corresponding valuation allowance for the same amount as of December 31, 2022, consist of the following:
Schedule of Components of Net Deferred Tax Assets and Liabilities
| (in thousands) | ||||||||
| Deferred tax assets: | December 31, | |||||||
| 2023 | 2022 | |||||||
| Net operating losses | $ | 25,114 | $ | 19,674 | ||||
| Research and Development costs | 3,517 | 7,647 | ||||||
| Amortization & depreciation | 6,791 | 2,342 | ||||||
| R&D credits | 1,376 | 744 | ||||||
| Other | 137 | 77 | ||||||
Right of use asset |
6 | 2 | ||||||
| Stock compensation | 1,479 | 1,472 | ||||||
| Total deferred tax assets | 38,420 | 31,958 | ||||||
| Less: Valuation allowance | (36,816 | ) | (30,840 | ) | ||||
| Deferred tax assets, net | $ | 1,604 | $ | 1,118 | ||||
Deferred tax assets are included within other assets in the accompanying Consolidated Balance Sheets. The benefits of deferred tax assets are included within the gain from sale of income tax operating losses in the accompanying Consolidated Statements of Operations and Comprehensive Loss. The Company’s deferred tax asset estimates the projected sale of 2023 and 2022 New Jersey state operating losses to be sold in the subsequent year, respectively.
| F- |
Rate Reconciliation
Reconciliation between the effective tax rate on income from continuing operations and the statutory tax rate is as follows (in thousands):
Schedule of Effective Tax Rate and Statutory Tax Rate
| Pre Tax Book Loss | $ | (28,962 | ) | |||||
| Federal Rate | (6,082 | ) | 21.0 | % | ||||
| State Taxes | (2,244 | ) | 7.75 | % | ||||
| Other Perms | (83 | ) | 0.29 | % | ||||
| RTP | (8 | ) | 0.03 | % | ||||
| Income Tax Income | (479 | ) | 1.65 | % | ||||
| State Rate Change | 618 | -2.13 | % | |||||
| R&D | (272 | ) | 0.94 | % | ||||
| State NOL | — | 0.00 | % | |||||
| NJ NOL True Up | 1,123 | -3.88 | % | |||||
| Stock Compensation True Up | (1,347 | ) | 4.65 | % | ||||
| Fixed Assets True Up | 925 | -3.19 | % | |||||
| Other | (22 | ) | 0.08 | % | ||||
| NOL Refund VA True Up | 486 | -1.68 | % | |||||
| Valuation Allowance | 7,385 | -25.50 | % | |||||
| Total | $ | — | 0.0 | % |
(13) Certain Relationships and Related Transactions
The Company has an employment agreement with its NEOs and has granted its NEOs and directors options to purchase its common stock. Please see details of these Employment Agreements in Note 10 - Employment Agreements.
(14) Concentrations of Risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash, cash equivalents, investments and accounts receivable. The Company places its cash with high-quality financial institutions and, at times, such amounts in non-interest-bearing accounts may be in excess of Federal Deposit Insurance Corporation insurance limits. There were no credit-based sales for 2023 and 2022.
There are a limited number of suppliers in the United States and abroad available to provide the raw and packaging materials/reagents for use in manufacturing Ampligen and Alferon N Injection. At present, the Company does not have any agreements with third parties for the supply of any of these materials or it is relying on a limited source of reagent suppliers necessary for the manufacture of Alferon N Injection. Jubilant HollisterStier LLC has manufactured batches of Ampligen for us pursuant to purchase orders. The Company anticipates that additional orders will be placed upon approved quotes and purchase orders provided by us to Jubilant. On December 22, 2020, it added Pharmaceutics International Inc. (“Pii”) as a “Fill & Finish” provider to enhance our capacity to produce the drug Ampligen. This addition amplifies our manufacturing capability by providing redundancy and cost savings. The contracts augment the Company’s existing fill and finish capacity. If the Company is unable to place adequate acceptable purchase orders with Jubilant or Pii in the future at acceptable prices upon acceptable terms, it will need to find another manufacturer. The costs and availability of products and materials the Company would need for the production of Ampligen are subject to fluctuation depending on a variety of factors beyond our control, including competitive factors, changes in technology, ownership of intellectual property, FDA and other governmental regulations. There can be no assurance that the Company will be able to obtain such products and materials on terms acceptable to it or at all.
Currently, the Alferon N Injection manufacturing process is on hold and there is no definitive timetable to restart production. If the Company is unable to acquire FDA approvals related to the manufacturing process and/or final product of new Alferon N Injection inventory or contract with a CMO, its operations most likely will be materially and/or adversely affected. In light of these contingencies, there can be no assurances that the approved Alferon N Injection product will be returned to production on a timely basis, if at all, or that if and when it is again made commercially available, it will return to prior sales levels.
(15) Fair Value
The Company complies with the provisions of FASB ASC 820 “Fair Value Measurements” for its financial and non-financial assets and liabilities. ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis.
| F- |
The Company accounts for certain assets and liabilities at fair value. The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market. AIM categorizes each of its fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety. These levels are:
| 1. | Level 1 – Quoted prices are available in active markets for identical assets or liabilities at the reporting date. Generally, this includes debt and equity securities that are traded in an active market. | |
| 2. | Level 2 – Observable inputs other than Level 1 prices such as quote prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Generally, this includes debt and equity securities that are not traded in an active market. | |
| 3. | Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or other valuation techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. As of September 30, 2023, the Company has classified the warrants with cash settlement features as Level 3. Management evaluates a variety of inputs and then estimates fair value based on those inputs. As discussed above, the Company utilized the Monte Carlo Simulation Model in valuing the warrants. |
The table below presents the balances of assets and liabilities measured at fair value on a recurring basis by level within the hierarchy as (in thousands):
Schedule of Assets and Liabilities Measured at Fair Value on a Recurring Basis
| As of December 31, 2023 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| Assets: | ||||||||||||||||
| Cash equivalents | $ | 4,805 | $ | 4,805 | $ | — | $ | — | ||||||||
| Marketable investments | $ | 7,631 | $ | 7,631 | $ | — | $ | — | ||||||||
| As of December 31, 2022 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| Assets: | ||||||||||||||||
| Cash equivalents | $ | 25,180 | $ | 25,180 | $ | — | $ | — | ||||||||
| Marketable investments | $ | 7,137 | $ | 7,137 | $ | — | $ | — | ||||||||
The Company’s cash balances are representative of their fair values as these balances are comprised of deposits available on demand. For certain instruments, including funds receivable from New Jersey net operating loss, accounts payable and accrued expenses, it was estimated that the carrying values approximated the fair value due to the short-term maturities of these instruments (Level 1).
The Company also has certain redeemable warrants with a cash settlement feature in the occurrence of a Fundamental Transaction. The fair value of the redeemable warrants (“Redeemable Warrants”) related to the Company’s March 2019 common stock and warrant issuance, are calculated using a Monte Carlo Simulation (Level 3).
The Company recomputes the fair value of the Redeemable Warrants at the issuance date and the end of each quarterly reporting period. Such value computation includes subjective input assumptions that are consistently applied each period. If the Company were to alter its assumptions or the numbers input based on such assumptions, the resulting fair value could be materially different.
| F- |
The Company utilized the following assumptions to estimate the fair value of the March 2019 Warrants:
Schedule of Assumptions to Estimate Fair Value of Warrants
| December 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Underlying price per share | $ | 0.44 | $ | 0.31 | ||||
| Exercise price per share | $ | 8.80 | $ | 8.80 | ||||
| Risk-free interest rate | 5.47 | % | 4.67 | % | ||||
| Expected holding period | .19 | 1.19 | ||||||
| Expected volatility | 80 | % | 70 | % | ||||
| Expected dividend yield | — | — | ||||||
The significant assumptions using the Monte Carlo Simulation approach for valuation of the Warrants are:
| (i) | Risk-Free Interest Rate. The risk-free interest rates for the Warrants are based on U.S. Treasury constant maturities for periods commensurate with the remaining expected holding periods of the warrants. | |
| (ii) | Expected Holding Period. The expected holding period represents the period of time that the Warrants are expected to be outstanding until they are exercised. The Company utilizes the remaining contractual term of the Warrants at each valuation date as the expected holding period. | |
| (iii) | Expected Volatility. Expected stock volatility is based on daily observations of the Company’s historical stock values for a period commensurate with the remaining expected holding period on the last day of the period for which the computation is made. | |
| (iv) | Expected Dividend Yield. Expected dividend yield is based on the Company’s anticipated dividend payments over the remaining expected holding period. As the Company has never issued dividends, the expected dividend yield is 0% and this assumption will be continued in future calculations unless the Company changes its dividend policy. | |
| (v) | Expected Probability of a Fundamental Transaction. The possibility of the occurrence of a Fundamental Transaction triggering a Put right is extremely remote. As discussed above, a Put right would only arise if a Fundamental Transaction 1) is an all cash transaction; (2) results in the Company going private; or (3) is a transaction involving a person or entity not traded on a national securities exchange. The Company believes such an occurrence is highly unlikely because: |
| 1. | The Company only has one product that is FDA approved but is currently not available for commercial sales. |
| 2. | The Company will have to perform additional clinical trials for FDA approval of its flagship product. |
| 3. | Industry and market conditions continue to include uncertainty, adding risk to any transaction. |
| 4. | Available capital for a potential buyer in a cash transaction continues to be limited. |
| 5. | The nature of a life sciences company is heavily dependent on future funding and high fixed costs, including Research & Development. |
| 6. | The Company has minimal revenues streams which are insufficient to meet the funding needs for the cost of operations or construction at their manufacturing facility; and |
| 7. | The Company’s Rights Agreement and Executive Agreements make it less attractive to a potential buyer. |
With the above factors utilized in analysis of the likelihood of the Put’s potential Liability, the Company estimated the range of probabilities related to a Put right being triggered as:
Schedule of Range of Probabilities
| Range of Probability | Probability | |||
| Low | 0.5 | % | ||
| Medium | 1.0 | % | ||
| High | 5.0 | % | ||
The Monte Carlo Simulation has incorporated a 5.0% probability of a Fundamental Transaction to date for the life of the securities.
| (vi) | Expected Timing of Announcement of a Fundamental Transaction. As the Company has no specific expectation of a Fundamental Transaction, for reasons elucidated above, the Company utilized a discrete uniform probability distribution over the Expected Holding Period to model in the potential announcement of a Fundamental Transaction occurring during the Expected Holding Period. |
| F- |
| (vii) | Expected 100 Day Volatility at Announcement of a Fundamental Transaction. An estimate of future volatility is necessary as there is no mechanism for directly measuring future stock price movements. Daily observations of the Company’s historical stock values for the 100 days immediately prior to the Warrants’ grant dates, with a floor of 100%, were utilized as a proxy for the future volatility. | |
| (viii) | Expected Risk-Free Interest Rate at Announcement of a Fundamental Transaction. The Company utilized a risk-free interest rate corresponding to the forward U.S. Treasury rate for the period equal to the time between the date forecast for the public announcement of a Fundamental Transaction and the Warrant expiration date for each simulation. | |
| (ix) | Expected Time Between Announcement and Consummation of a Fundamental Transaction. The expected time between the announcement and the consummation of a Fundamental Transaction is based on the Company’s experience with the due diligence process performed by acquirers and is estimated to be six months. The Monte Carlo Simulation approach incorporates this additional period to reflect the delay Warrant Holders would experience in receiving the proceeds of the Put. |
While the assumptions remain consistent from period to period (e.g., utilizing historical stock prices), the numbers input change from period to period (e.g., the actual historical prices input for the relevant period). The carrying amount and estimated fair value of the above Warrants was approximately $0 at December 31, 2023 and 2022.
(16) Contingencies
Because litigation is inherently unpredictable, assessing contingencies related to litigation is a complex process involving highly subjective judgment about potential outcomes of future events. When evaluating litigation contingencies, the Company may be unable to provide a meaningful estimate due to a number of factors, including the procedural status of the matter in question, the availability of appellate remedies, insurance coverage related to the claim or claims in question, the presence of complex or novel legal theories, and the ongoing discovery and development of information important to the matter. In addition, damage amounts claimed in litigation against the Company may be unsupported, exaggerated, or unrelated to possible outcomes, and as such are not meaningful indicators of the Company’s potential liability or financial exposure. Accordingly, the Company reviews the adequacy of accruals and disclosures each quarter in consultation with legal counsel, and it assesses the probability and range of possible losses associated with contingencies for potential accrual in the condensed consolidated financial statements. However, the ultimate resolution of litigated claims may differ from the Company current estimates.
In the normal course of business, there are various claims in process, matters in litigation, and other contingencies, certain of which are covered by insurance policies. When a loss is probable, we record an accrual based on the reasonably estimable loss or range of loss. We do not record liabilities for reasonably possible loss contingencies but do disclose a range of reasonably possible losses if they are material and we are able to estimate such a range. If we cannot provide a range of reasonably possible losses, we explain the factors that prevent us from determining such a range. Historically, adjustments to our estimates have not been material. While it is not possible to predict the outcome of these suits, legal proceedings, and claims with certainty, management is of the opinion that adequate provision for potential losses associated with these matters has been made in the financial statements and that the ultimate resolution of any one of these matters will not have a material adverse effect on the Company’s financial position and results of operations. A significant increase in the number of these claims, or one or more successful claims resulting in greater liabilities than the Company currently anticipates, could materially and adversely affect the Company’s business, financial condition, results of operations, and cash flows.
(17) Subsequent Events
On February 16, 2024, the Company entered into a Note Purchase Agreement with an unrelated party raising $2,500,000 in net proceeds from the sale of an unsecured promissory Note.
On March 28, 2024, the Company entered into a purchase agreement and a registration rights agreement with an unrelated party, pursuant to which this party committed to purchase up to $15,000,000 of common stock of the Company for a period of 24 months from the date of the agreement.
In March 2024, the Company sold 204,547 and 38,462 shares of its common stock at prices of $0.33 and $0.39 per share, respectively, under the Employees and Directors Purchase Plan.
| F- |
Exhibit 4.25
Description of Common Stock
The following summary description of the common stock of AIM ImmunoTech Inc. (“we”, “our” or “us”) is based on the provisions of our amended and restated certificate of incorporation as amended (“Certificate of Incorporation”), as well as our amended and restated bylaws (“Bylaws”), and the applicable provisions of the Delaware General Corporation Law. This information is qualified entirely by reference to the applicable provisions of our Certificate of Incorporation, Bylaws, and the Delaware General Corporation Law. Our Certificate of Incorporation and Bylaws have previously been filed as exhibits with the Securities and Exchange Commission (the “SEC”).
Voting Rights
Holders of our common stock are entitled to one vote per share in the election of directors and on all other matters on which stockholders are entitled or permitted to vote. Holders of our common stock are not entitled to cumulative voting rights.
Dividend Rights
Subject to the terms of any then outstanding series of preferred stock, the holders of our common stock are entitled to dividends in the amounts and at times as may be declared by our board of directors out of funds legally available therefor.
Liquidation Rights
Upon liquidation or dissolution, holders of our common stock are entitled to share ratably in all net assets available, if any, for distribution to stockholders after we have paid, or provided for payment of, all of our debts and liabilities, and after payment of any liquidation preferences to holders of any then outstanding shares of preferred stock.
Other Matters
Holders of our common stock have no redemption, conversion or preemptive rights. There are no sinking fund provisions applicable to our common stock. The rights, preferences and privileges of the holders of our common stock are subject to the rights of the holders of shares of any series of preferred stock that we may issue in the future.
All of our outstanding shares of common stock are fully paid and nonassessable.
Anti-Takeover Effects of Provisions of Delaware Law, Our Certificate of Incorporation,
Our Bylaws and Our Stockholders’ Rights Plan
Delaware Anti-Takeover Law
Section 203 of the Delaware General Corporation Law
We are subject to Section 203 of the Delaware General Corporation Law, which prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years after the date that such stockholder became an interested stockholder, with the following exceptions:
| ● | before such date, our board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; | |
| ● | upon completion of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction began, excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) those shares owned (i) by persons who are directors and also officers and (ii) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or | |
| ● | on or after such date, the business combination is approved by our board of directors and authorized at an annual or special meeting of the stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock that is not owned by the interested stockholder. |
In general, Section 203 defines business combination to include the following:
| ● | any merger or consolidation involving the corporation and the interested stockholder; | |
| ● | any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder; | |
| ● | subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder; | |
| ● | any transaction involving the corporation that has the effect of increasing the proportionate share of the stock or any class or series of the corporation beneficially owned by the interested stockholder; or | |
| ● | the receipt by the interested stockholder of the benefit of any loss, advances, guarantees, pledges or other financial benefits by or through the corporation. |
In general, Section 203 defines an “interested stockholder” as an entity or person who, together with the person’s affiliates and associates, beneficially owns, or within three years before the time of determination of interested stockholder status did own, 15% or more of the outstanding voting stock of the corporation.
Certificate of Incorporation and Bylaws
Our Certificate of Incorporation and/or Bylaws provide that:
| ● | our Bylaws may be amended or repealed by our board of directors or our stockholders; | |
| ● | our board of directors will be authorized to issue, without stockholder approval, preferred stock, the rights of which will be determined at the discretion of our board of directors and that, if issued, could operate as a “poison pill” to dilute the stock ownership of a potential hostile acquirer to prevent an acquisition that our board of directors does not approve; | |
| ● | our stockholders do not have cumulative voting rights, and therefore our stockholders holding a majority of the shares of common stock outstanding will be able to elect all of our directors; and | |
| ● | our stockholders must comply with advance notice provisions to bring business before or nominate directors for election at a stockholder meeting. |
Stockholder Rights Plan
On November 19, 2002, our board of directors declared a dividend distribution of one Right for each outstanding share of Common Stock to stockholders of record at the close of business on November 29, 2002 pursuant to our rights agreement (as subsequently amended and restated, the “Rights Agreement”) between us and our Rights Agent. Each Right entitles the registered holder of one share of our Common Stock to purchase from the Company a unit consisting of one one-hundredth of a share (a “Unit”) of Series A Junior Participating Preferred Stock, par value $0.01 per share at a Purchase Price of $4.00 per Unit, subject to adjustment. All terms not specifically defined herein have the definition set forth in the Rights Agreement. The description and terms of the Rights are set forth in the Rights Agreement.
The current Amended and Restated Rights Agreement is included as an exhibit to the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2023 (File No. 001-27072) filed with the SEC on May, 15, 2023. Such Plan and the Rights are described In Part II, ITEM 5: Other Information in the foregoing Report on Form 10-Q. All of the foregoing are incorporated by reference herein.
Potential Effects of Authorized but Unissued Stock
We have shares of common stock and preferred stock available for future issuance without stockholder approval. We may utilize these additional shares for a variety of corporate purposes, including future public offerings to raise additional capital, to facilitate corporate acquisitions or payment as a dividend on the capital stock.
The existence of unissued and unreserved common stock and preferred stock may enable our board of directors to issue shares to persons friendly to current management or to issue preferred stock with terms that could render more difficult or discourage a third-party attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise, thereby protecting the continuity of our management. In addition, our board of directors has the discretion to determine designations, rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences of each series of preferred stock, all to the fullest extent permissible under the Delaware General Corporation Law and subject to any limitations set forth in our Certificate of Incorporation. The purpose of authorizing our board of directors to issue preferred stock and to determine the rights and preferences applicable to such preferred stock is to eliminate delays associated with a stockholder vote on specific issuances. The issuance of preferred stock, while providing desirable flexibility in connection with possible financings, acquisitions and other corporate purposes, could have the effect of making it more difficult for a third-party to acquire, or could discourage a third-party from acquiring, a majority of our outstanding voting stock.
Exhibit 10.104
EQUITY PURCHASE AGREEMENT
This Equity Purchase Agreement is entered into as of March 28, 2024 (this “Agreement”), by and between AIM ImmunoTech, Inc., a Delaware corporation (the “Company”), and Atlas Sciences, LLC, a Utah limited liability company (the “Investor”, and collectively with the Company, the “Parties”).
WHEREAS, the Parties desire that, upon the terms and subject to the conditions contained herein, the Company shall issue and sell to the Investor, from time to time as provided herein, and the Investor shall purchase up to Fifteen Million Dollars ($15,000,000.00) of the Company’s Common Stock (as defined below);
NOW, THEREFORE, the Parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 DEFINED TERMS. As used in this Agreement, the following terms shall have the following meanings specified or indicated (such meanings to be equally applicable to both the singular and plural forms of the terms defined):
“Agreement” shall have the meaning specified in the preamble hereof.
“Applicable Laws” shall mean all applicable laws, statutes, rules, regulations, orders, executive orders, directives, policies, guidelines and codes having the force of law, whether local, national, or international, as amended from time to time, including without limitation (i) all applicable laws that relate to money laundering, terrorist financing, financial record keeping and reporting, (ii) all applicable laws that relate to anti-bribery, anti-corruption, books and records and internal controls, including the United States Foreign Corrupt Practices Act of 1977, and (iii) any Sanctions laws.
“Bankruptcy Law” means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors.
“Clearing Costs” shall mean all the Investor’s brokerage firm, clearing firm, legal and Transfer Agent fees with respect to the Put Shares.
“Clearing Date” shall be the date on which the Investor receives the Put Shares in its brokerage account and such Put Shares are cleared and approved for trading by Investor’s brokerage firm.
“Closing” shall mean one of the closings of a purchase and sale of shares of Common Stock pursuant to Section 2.3.
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“Closing Certificate” shall mean the closing certificate of the Company in the form of Exhibit B hereto.
“Closing Date” shall mean the date of any Closing hereunder.
“Commitment Period” shall mean the period commencing on the Execution Date, and ending on the earlier of (i) the date on which the Investor shall have purchased Put Shares pursuant to this Agreement equal to the Maximum Commitment Amount, (ii) twenty-four (24) months after the date of this Agreement, (iii) written notice of termination by the Company to the Investor (which shall not occur during any Valuation Period), or (iv) the date that, pursuant to or within the meaning of any Bankruptcy Law, the Company commences a voluntary case or any Person commences a proceeding against the Company, a Custodian is appointed for the Company or for all or substantially all of its property or the Company makes a general assignment for the benefit of its creditors; provided, however, that the provisions of Articles III, IV, V, VI, IX and the agreements and covenants of the Company and the Investor set forth in Article X shall survive the termination of this Agreement.
“Commitment Shares” shall mean 338,600 shares of the Company’s Common Stock.
“Common Stock” shall mean the Company’s common stock, $0.001 par value per share, and any shares of any other class of common stock whether now or hereafter authorized, having the right to participate in the distribution of dividends (as and when declared) and assets (upon liquidation of the Company).
“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
“Custodian” means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law.
“Damages” shall mean any loss, claim, damage, liability, cost and expense (including, without limitation, reasonable attorneys’ fees and disbursements and costs and expenses of expert witnesses and investigation).
“DTC” shall mean The Depository Trust Company, or any successor performing substantially the same function for the Company.
“DTC/FAST Program” shall mean the DTC’s Fast Automated Securities Transfer Program.
“DWAC” shall mean Deposit Withdrawal at Custodian as defined by the DTC.
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“DWAC Eligible” shall mean that (a) the Common Stock is eligible at DTC for full services pursuant to DTC’s Operational Arrangements, including, without limitation, transfer through DTC’s DWAC system, (b) the Company has been approved (without revocation) by the DTC’s underwriting department, (c) the Transfer Agent is approved as an agent in the DTC/FAST Program, (d) the Commitment Shares or Put Shares, as applicable, are otherwise eligible for delivery via DWAC, and (e) the Transfer Agent does not have a policy prohibiting or limiting delivery of the Commitment Shares or Put Shares, as applicable, via DWAC.
“DWAC Shares” means shares of Common Stock that are (i) issued in electronic form, (ii) freely tradable and transferable and without restriction on resale and (iii) timely credited by the Company to the Investor’s or its designee’s specified DWAC account with DTC under the DTC/FAST Program, or any similar program hereafter adopted by DTC performing substantially the same function.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Execution Date” shall mean the date of this Agreement.
“FINRA” shall mean the Financial Industry Regulatory Authority, Inc.
“Investment Amount” shall mean the dollar value equal to the number of Put Shares referenced in the applicable Put Notice multiplied by the applicable Purchase Price, minus the Clearing Costs.
“Lien” means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.
“Market Price” shall mean the lowest daily volume weighted average price of the Company’s Common Stock on the Principal Market during the Valuation Period, in each case as reported by Bloomberg, L.P. or other reputable source designated by the Investor.
“Material Adverse Effect” shall mean any effect on the business, operations, properties, or financial condition of the Company and the Subsidiaries that is material and adverse to the Company and the Subsidiaries and/or any condition, circumstance, or situation that would prohibit or otherwise materially interfere with the ability of the Company to enter into and perform its obligations under any Transaction Document.
“Maximum Commitment Amount” shall mean Fifteen Million Dollars ($15,000,000.00).
“Median Daily Trading Volume” shall mean the median daily trading volume of the Company’s Common Stock on the Principal Market during the five (5) Trading Days immediately preceding the respective Put Date.
“Person” shall mean an individual, a corporation, a partnership, an association, a trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.
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“Principal Market” shall mean trading from 9:30 AM to 4:00 PM ET on any of the national exchanges (i.e. NYSE, NYSE American, and Nasdaq), or principal quotation systems (i.e. OTCQX, OTCQB, and OTC Pink), or other principal exchange or recognized quotation system which is at the time the principal trading platform or market for the Common Stock.
“Purchase Price” shall mean 95% of the Market Price on such date on which the Purchase Price is calculated in accordance with the terms and conditions of this Agreement.
“Put” shall mean the right of the Company to require the Investor to purchase shares of Common Stock, subject to the terms and conditions of this Agreement.
“Put Date” shall mean any Trading Day during the Commitment Period that a Put Notice is deemed delivered pursuant to Section 2.2(b).
“Put Notice” shall mean a written notice, substantially in the form of Exhibit A hereto, to Investor setting forth the Put Shares which the Company intends to require Investor to purchase pursuant to the terms of this Agreement.
“Put Shares” shall mean all shares of Common Stock issued, or that the Company shall be entitled to issue, per any applicable Put Notice in accordance with the terms and conditions of this Agreement.
“Regulation D” shall mean Regulation D promulgated under the Securities Act.
“Required Minimum Share Reserve” shall mean, as of any date, the maximum aggregate number of shares of Common Stock potentially issuable at such time pursuant to the Transaction Documents, which shall be calculated on each such date as follows: the then remaining Maximum Commitment Amount divided by the Purchase Price on each such date, ignoring any beneficial ownership limitations set forth herein, except that such amount shall not exceed the number of Put Shares actually registered for resale under the Registration Statement. Notwithstanding the foregoing, until such time as the Company obtains the Approval (as defined below), the Required Minimum Share Reserve shall mean 9,975,000 shares of Common Stock. Following Approval, the Required Minimum Share Reserve will be calculated in accordance with the formula set forth above.
“Rule 144” shall mean Rule 144 under the Securities Act or any similar provision then in force under the Securities Act.
“SEC” shall mean the United States Securities and Exchange Commission.
“Securities” means, collectively, the Put Shares and Commitment Shares.
“Securities Act” shall mean the Securities Act of 1933, as amended.
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“Short Sales” shall mean all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act.
“Subsidiary” means any Person the Company wholly-owns or controls, or in which the Company, directly or indirectly, owns a majority of the voting stock or similar voting interest, in each case that would be disclosable pursuant to Item 601(b)(21) of Regulation S-K promulgated under the Securities Act.
“Trading Day” shall mean a day on which the Principal Market shall be open for business.
“Transaction Documents” shall mean this Agreement, the registration rights agreement of even date, and all exhibits hereto and thereto.
“Transfer Agent” shall mean the Company’s transfer agent as of the date of this Agreement and any successor transfer agent of the Company.
“Valuation Period” shall mean the period beginning on the date three (3) Trading Days immediately preceding the applicable Put Date and ending on the date that is two (2) Trading Days after the Clearing Date.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section 2.1 PUTS. Upon the terms and conditions set forth in this Agreement (including, without limitation, the provisions of Article VII), the Company shall have the right, but not the obligation, to direct the Investor, by its delivery to the Investor of a Put Notice from time to time during the Commitment Period, to purchase Put Shares (i) in a minimum amount not less than $25,000.00 and (ii) in a maximum amount up to the lesser of (a) $500,000.00, or (b) the Median Daily Trading Volume, or such other greater amount mutually agreed upon by the parties; provided, however, in no event will the number of Put Shares exceed the Beneficial Ownership Limitation (as defined below). The minimum and maximum values described above will be determined by multiplying the number of Put Shares set forth in the applicable Put Notice by the closing trade price of the Common Stock on the Principal Market as reported by Bloomberg, L.P. on the Trading Day immediately preceding the date the Put Notice is delivered.
Section 2.2 MECHANICS.
(a) PUT NOTICE. At any time and from time to time during the Commitment Period, except as provided in this Agreement, the Company may deliver a Put Notice to Investor, subject to satisfaction of the conditions set forth in Section 7.2 and otherwise provided herein. The Company shall deliver, or cause to be delivered, the Put Shares as DWAC Shares to the Investor within one (1) Trading Day following the Put Date.
(b) DATE OF DELIVERY OF PUT NOTICE. A Put Notice shall be deemed delivered on (i) the Trading Day it is received by email by the Investor if such notice is received on or prior to 9:00 a.m. EST or (ii) the immediately succeeding Trading Day if it is received by email after 9:00 a.m. EST on a Trading Day or at any time on a day which is not a Trading Day. The Company shall not deliver a Put Notice to Investor during any Valuation Period, unless waived by the Investor in writing.
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Section 2.3 CLOSINGS. At the end of the Valuation Period, the Investment Amount for the respective Put Shares shall be established as provided in this Agreement. If the value of the Put Shares delivered to the Investor causes the Company to exceed the Maximum Commitment Amount, then immediately after the Valuation Period the Investor shall return to the Company the surplus amount of Put Shares associated with such Put and the Investment Amount with respect to such Put shall be reduced by any Clearing Costs related to the return of such Put Shares. The Closing of a Put shall occur within one (1) Trading Day following the end of the respective Valuation Period, whereby the Investor shall deliver the Investment Amount by wire transfer of immediately available funds to an account designated by the Company. The Investment Amount for the first Put Notice submitted by the Company will be reduced by $15,000.00 to cover Investor’s legal and due diligence fees incurred in connection with this Agreement.
Section 2.4 PRINCIPAL MARKET REGULATION. The Company shall not affect any sales of the Put Shares under this Agreement and the Investor shall not have the obligation to purchase any Put Shares under this Agreement to the extent (but only to the extent) that after giving effect to such purchase and sale the aggregate number of Put Shares and Commitment Shares issued under this Agreement would exceed 19.99% of the outstanding Common Stock as of the date of this Agreement which number of shares shall be reduced, on a share-for-share basis, by the number of shares of Common Stock issued or issuable pursuant to any transaction or series of transactions that may be aggregated with the transactions contemplated by this Agreement under applicable rules of the Principal Market (the “Exchange Cap”), subject to appropriate adjustment for any stock dividend, stock split, stock combination, rights offerings, reclassification or similar transaction that proportionately decreases or increases the Common Stock until the Company has obtained shareholder approval to issue shares of Common Stock hereunder exceeding the Exchange Cap (the “Approval”).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
The Investor represents and warrants to the Company that:
Section 3.1 INTENT. The Investor is entering into this Agreement for its own account and the Investor has no present arrangement (whether or not legally binding) at any time to sell the Securities to or through any Person in violation of the Securities Act or any applicable state securities laws; provided, however, that the Investor reserves the right to dispose of the Securities at any time in accordance with federal and state securities laws applicable to such disposition.
Section 3.2 NO LEGAL ADVICE FROM THE COMPANY. The Investor acknowledges that it has had the opportunity to review this Agreement and the transactions contemplated by this Agreement with its own legal counsel and investment and tax advisors. The Investor is relying solely on such counsel and advisors and not on any statements or representations of the Company or any of its representatives or agents for legal, tax or investment advice with respect to this investment, the transactions contemplated by this Agreement or the securities laws of any jurisdiction.
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Section 3.3 ACCREDITED INVESTOR. The Investor is an accredited investor as defined in Rule 501(a)(3) of Regulation D, and the Investor has such experience in business and financial matters that it is capable of evaluating the merits and risks of an investment in the Securities. The Investor acknowledges that an investment in the Securities is speculative and involves a high degree of risk.
Section 3.4 AUTHORITY. The Investor has the requisite power and authority to enter into and perform its obligations under this Agreement and the other Transaction Documents and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the other Transaction Documents and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action and no further consent or authorization of the Investor is required. Each Transaction Document to which it is a party has been duly executed by the Investor, and when delivered by the Investor in accordance with the terms hereof, will constitute the valid and binding obligation of the Investor enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application.
Section 3.5 NOT AN AFFILIATE. The Investor is not an officer, director or “affiliate” (as that term is defined in Rule 405 of the Securities Act) of the Company.
Section 3.6 ORGANIZATION AND STANDING. The Investor is an entity duly incorporated or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability company or similar power and authority to enter into and to consummate the transactions contemplated by this Agreement and the other Transaction Documents.
Section 3.7 ABSENCE OF CONFLICTS. The execution and delivery of this Agreement and the other Transaction Documents, and the consummation of the transactions contemplated hereby and thereby and compliance with the requirements hereof and thereof, will not (a) violate any order, writ, judgment, injunction, decree or award binding on the Investor, (b) violate any provision of any indenture, instrument or agreement to which the Investor is a party or is subject, or by which the Investor or any of its assets is bound, or conflict with or constitute a material default thereunder, (c) result in the creation or imposition of any lien pursuant to the terms of any such indenture, instrument or agreement, or constitute a breach of any fiduciary duty owed by the Investor to any third party, (d) require the approval of any third-party (that has not been obtained) pursuant to any material contract, instrument, agreement, relationship or legal obligation to which the Investor is subject or to which any of its assets, operations or management may be subject or (e) result in a violation of Investor’s certificate or articles of incorporation, by-laws or other organizational or charter documents.
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Section 3.8 DISCLOSURE; ACCESS TO INFORMATION. The Investor had an opportunity to review copies of the SEC Documents (as defined below) filed on behalf of the Company and has had access to all publicly available information with respect to the Company.
Section 3.9 MANNER OF SALE. At no time was the Investor presented with or solicited by or through any leaflet, public promotional meeting, television advertisement or any other form of general solicitation or advertising. The Investor is not purchasing or acquiring the Securities as a result of any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Securities.
Section 3.10 RELIANCE ON EXEMPTIONS. The Investor understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of U.S. federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and the Investor’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Investor set forth herein in order to determine the availability of such exemptions and the eligibility of the Investor to acquire the Securities. The Investor understands that (i) the Securities may not be offered for sale, sold, assigned or transferred unless (A) registered pursuant to the Securities Act or (B) an exemption exists permitting such Securities to be sold, assigned or transferred without such registration; and (ii) any sale of the Securities made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of the Securities under circumstances in which the seller (or the Person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the Securities Act) may require compliance with some other exemption under the Securities Act or the rules and regulations of the SEC thereunder.
Section 3.11 STATUTORY UNDERWRITER STATUS. The Investor acknowledges that it will be disclosed as an “underwriter” and a “selling stockholder” in each Registration Statement and in any Prospectus contained therein to the extent required by applicable law and to the extent the Prospectus is related to the resale of the Securities.
Section 3.12 RESALES OF SECURITIES. The Investor represents, warrants and covenants that it will resell such Securities only (i) pursuant to the Registration Statement in which the resale of such Securities is registered under the Securities Act, in a manner described under the caption “Plan of Distribution” in such Registration Statement, and in a manner in compliance with all applicable U.S. federal and state securities laws, rules and regulations, including, without limitation, any applicable prospectus delivery requirements of the Securities Act, or (ii) in compliance with some other exemption under the Securities Act.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investor that:
Section 4.1 ORGANIZATION OF THE COMPANY. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in a Material Adverse Effect and no proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.
Section 4.2 AUTHORITY. The Company has the requisite corporate power and authority to enter into and perform its obligations under this Agreement and the other Transaction Documents. The execution and delivery of this Agreement and the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action and no further consent or authorization of the Company or its Board of Directors or stockholders is required. Each of this Agreement and the other Transaction Documents has been duly executed and delivered by the Company and constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application.
Section 4.3 CAPITALIZATION. As of the date hereof, the authorized capital stock of the Company consists of 350,000,000 shares of Common Stock, $0.001 par value per share, of which 49,901,177 shares of Common Stock are issued and outstanding as of the date hereof. Except as set forth in the SEC Documents, the Company has not issued any capital stock since its most recently filed periodic report under the Exchange Act, other than pursuant to Exempt Transactions (as defined in this Agreement), the exercise of employee stock options under the Company’s stock option plans, the issuance of shares of Common Stock to employees pursuant to the Company’s employee stock purchase plans and pursuant to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date of the most recently filed periodic report under the Exchange Act. No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents. Except as set forth in the SEC Documents and except as a result of Exempt Transactions or the purchase and sale of the Securities, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents. The issuance and sale of the Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Investor) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such securities. There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.
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Section 4.4 LISTING AND MAINTENANCE REQUIREMENTS. The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the SEC is contemplating terminating such registration. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements.
Section 4.5 SEC DOCUMENTS; DISCLOSURE. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the one (1) year preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Documents”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Documents prior to the expiration of any such extension. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and other federal laws, rules and regulations applicable to such SEC Documents, and none of the SEC Documents when filed contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Documents comply as to form and substance in all material respects with applicable accounting requirements and the published rules and regulations of the SEC or other applicable rules and regulations with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except (a) as may be otherwise indicated in such financial statements or the notes thereto or (b) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments). Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company confirms that neither it nor any other Person acting on its behalf has provided the Investor or its agents or counsel with any information that it believes constitutes or might constitute material, non-public information. The Company understands and confirms that the Investor will rely on the foregoing representation in effecting transactions in securities of the Company.
Section 4.6 VALID ISSUANCES. The Securities are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid, and non-assessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents.
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Section 4.7 NO CONFLICTS. The execution, delivery and performance of this Agreement and the other Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby, including, without limitation, the issuance of the Put Shares and Commitment Shares, do not and will not: (a) result in a violation of the Company’s or any Subsidiary’s certificate or articles of incorporation, by-laws or other organizational or charter documents, (b) conflict with, or constitute a material default (or an event that with notice or lapse of time or both would become a material default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, instrument or any “lock-up” or similar provision of any underwriting or similar agreement to which the Company or any Subsidiary is a party, or (c) result in a violation of any federal, state or local law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Company or any Subsidiary or by which any property or asset of the Company or any Subsidiary is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect) nor is the Company otherwise in violation of, conflict with or in default under any of the foregoing. The business of the Company is not being conducted in violation of any law, ordinance or regulation of any governmental entity, except for possible violations that either singly or in the aggregate do not and will not have a Material Adverse Effect. The Company is not required under federal, state or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement or the other Transaction Documents (other than any SEC, FINRA or state securities filings that may be required to be made by the Company subsequent to any Closing or any registration statement that may be filed pursuant hereto); provided that, for purposes of the representation made in this sentence, the Company is assuming and relying upon the accuracy of the relevant representations and agreements of Investor herein.
Section 4.8 NO MATERIAL ADVERSE CHANGE. No event has occurred that would have a Material Adverse Effect on the Company that has not been disclosed in subsequent SEC Documents.
Section 4.9 LITIGATION AND OTHER PROCEEDINGS. Except as disclosed in the SEC Documents, there are no actions, suits, investigations, inquiries or proceedings pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties, nor has the Company received any written or oral notice of any such action, suit, proceeding, inquiry or investigation, which would have a Material Adverse Effect. No judgment, order, writ, injunction or decree or award has been issued by or, to the knowledge of the Company, requested of any court, arbitrator or governmental agency which would have a Material Adverse Effect. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the SEC involving the Company, any Subsidiary or any current or former director or officer of the Company or any Subsidiary.
Section 4.10 REGISTRATION RIGHTS. Except as set forth in the SEC Documents and the Exempt Transactions, no Person (other than the Investor) has any right to cause the Company to effect the registration under the Securities Act of any securities of the Company or any Subsidiary.
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Section 4.11 NO SOLICITATION; NO BROKERS. Except with respect to Ascendiant Capital Markets, LLC, a registered broker-dealer (CRD#: 152912) (the “Placement Agent”), the Company has taken no action which would give rise to any claim by any person for brokerage commissions, transaction fees or similar payments relating to this Agreement or the transactions contemplated hereby.
ARTICLE V
COVENANTS OF INVESTOR
Section 5.1 COMPLIANCE WITH LAW; TRADING IN SECURITIES. The Investor’s trading activities with respect to shares of Common Stock will be in compliance with all applicable state and federal securities laws and regulations and the rules and regulations of FINRA and the Principal Market.
Section 5.2 SHORT SALES AND CONFIDENTIALITY. Neither the Investor, nor any affiliate of the Investor acting on its behalf or pursuant to any understanding with it, will execute any Short Sales during the period from the date hereof to the end of the Commitment Period. For the purposes hereof, and in accordance with Regulation SHO, the sale after delivery of a Put Notice of such number of shares of Common Stock reasonably expected to be purchased under a Put Notice shall not be deemed a Short Sale. The Investor shall, until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company in accordance with the terms of this Agreement, maintain the confidentiality of the existence and terms of this transaction and the information included in the Transaction Documents.
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1 LISTING OR QUOTATION OF COMMON STOCK. During the Commitment Period and until this Agreement is terminated, the Company shall promptly secure the listing or quotation of all of the Put Shares to be issued to the Investor hereunder and the Commitment Shares on the Principal Market (subject to official notice of issuance) and shall maintain the listing or quotation of all such Put Shares from time to time issuable hereunder and the Commitment Shares. The Company shall maintain the (i) listing or quotation and (ii) trading of the Common Stock on the Principal Market (including, without limitation, maintaining sufficient net tangible assets) and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of FINRA and the Principal Market.
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Section 6.2 OTHER EQUITY LINES AND TRANSACTIONS. So long as this Agreement remains in effect, the Company covenants and agrees that it will not, without the prior written consent of the Investor, enter into any other Variable Rate Transaction (as defined below) or equity line of credit with any other party. “Variable Rate Transaction” means a transaction in which the Company (i) issues or sells any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive, additional shares of Common Stock either (A) at a conversion price, exercise price or exchange rate or other price that is based upon, and/or varies with, the trading prices of or quotations for the shares of Common Stock at any time after the initial issuance of such debt or equity securities or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock or (ii) issues securities at a future determined price. Notwithstanding anything herein to the contrary, a Variable Rate Transaction shall not include any issuance pursuant to an Exempt Transaction (as defined in this Agreement). “Exempt Transaction” shall mean the issuance of (a) shares of Common Stock or other securities to officers, directors, employees, service providers, or vendors of the Company, including but not limited to under any equity compensation or incentive plan of the Company; (b) any “at-the-market offering” through a registered broker-dealer, whereby such registered broker-dealer is acting as principal or agent in the purchase of Common Stock from the Company, (c) a public offering of securities of the Company, including but not limited to an underwritten primary offering; and (d) securities pursuant to a merger, consolidation, acquisition, or similar business combination or strategic transactions, provided that such securities are issued as “restricted securities” (as defined in Rule 144) and carry no registration rights that require or permit the filing of any registration statement in connection therewith, and provided that any such issuance shall only be to an entity (or to the equityholders of an entity) which is, itself or through its subsidiaries, an operating company or an owner of an asset in a business synergistic with the business of the Company and shall provide to the Company additional benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.
Section 6.3 FILING OF CURRENT REPORT AND REGISTRATION STATEMENT. The Company agrees that it shall file a Current Report on Form 8-K, including the Transaction Documents as exhibits thereto, with the SEC within the time required by the Exchange Act, relating to the transactions contemplated by, and describing the material terms and conditions of, the Transaction Documents (the “Current Report”). Pursuant to the terms of the Registration Rights Agreement, the Company shall also file with the SEC, within forty-five (45) Business Days from the date hereof, a new registration statement (the “Registration Statement”) covering only the resale of the Put Shares and the Commitment Shares or at the Company election in the alternative, take all required action to file the sale of the Put Shares and the Commitment Shares under a current shelf registration statement.
Section 6.4 NO BROKER-DEALER ACKNOWLEDGEMENT. Absent a final adjudication from a court of competent jurisdiction stating otherwise, the Company shall not to any person, institution, governmental or other entity, state, claim, allege, or in any way assert, that Investor is currently, or ever has been, a broker-dealer under the Securities Exchange Act of 1934.
Section 6.5 RESERVATION OF COMMON STOCK. The Company shall maintain a reserve from its duly authorized shares of Common Stock equal to 100% of the Required Minimum Share Reserve in accordance with the terms of this Agreement.
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Section 6.6 ISSUANCE OF COMMITMENT SHARES. In consideration for the Investor’s execution and delivery of, and performance under this Agreement, the Company shall cause the Transfer Agent to issue the Commitment Shares to the Investor on the Execution Date. For the avoidance of doubt, all of the Commitment Shares shall be fully earned as of the Execution Date, and the issuance of the Commitment Shares is not contingent upon any other event or condition, including, without limitation, the effectiveness of the Registration Statement or the Company’s submission of a Put Notice to the Investor and irrespective of any termination of this Agreement. The Company shall include in the Registration Statement all the Commitment Shares.
ARTICLE VII
CONDITIONS TO DELIVERY OF
PUT NOTICES AND CONDITIONS TO CLOSING
Section 7.1 CONDITIONS PRECEDENT TO THE RIGHT OF THE COMPANY TO ISSUE AND SELL PUT SHARES. In addition to the other provisions of this Agreement, the right of the Company to issue and sell the Put Shares to the Investor is subject to the satisfaction of each of the conditions set forth below:
(a) ACCURACY OF INVESTOR’S REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Investor shall be true and correct in all material respects as of the date of this Agreement and as of the date of each Closing as though made at each such time.
(b) PERFORMANCE BY INVESTOR. Investor shall have performed, satisfied and complied in all respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Investor at or prior to such Closing.
Section 7.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF INVESTOR TO PURCHASE PUT SHARES. The obligation of the Investor hereunder to purchase Put Shares is subject to the satisfaction of each of the following conditions:
(a) EFFECTIVE REGISTRATION STATEMENT. The Registration Statement covering the resale of the Put Shares and the Commitment Shares, and any amendment or supplement thereto, shall remain effective for the resale by the Investor of the Put Shares and Commitment Shares in accordance with the terms of this Agreement and (i) neither the Company nor the Investor shall have received notice that the SEC has issued or intends to issue a stop order with respect to such Registration Statement or that the SEC otherwise has suspended or withdrawn the effectiveness of such Registration Statement, either temporarily or permanently, or intends or has threatened to do so and (ii) no other suspension of the use of, or withdrawal of the effectiveness of, such Registration Statement or related prospectus shall exist.
(b) ACCURACY OF THE COMPANY’S REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Company (such representations and warranties whenever mentioned in this Agreement means as updated in SEC Reports) shall be true and correct in all material respects as of the date of this Agreement and as of the date of each Closing (except for representations and warranties specifically made as of a particular date).
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(c) PERFORMANCE BY THE COMPANY. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company, including but not limited to the delivery of the Put Shares as provided in Section 2.2(a) of this Agreement.
(d) NO INJUNCTION. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or adopted by any court or governmental authority of competent jurisdiction that prohibits or directly and materially adversely affects any of the transactions contemplated by the Transaction Documents, and no proceeding shall have been commenced that may have the effect of prohibiting or materially adversely affecting any of the transactions contemplated by the Transaction Documents.
(e) ADVERSE CHANGES. Since the date of filing of the Company’s most recent SEC Document, no event that had or is reasonably likely to have a Material Adverse Effect has occurred.
(f) NO SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK. The trading of the Common Stock shall not have been suspended by the SEC, the Principal Market or FINRA, or otherwise halted for any reason, and the Common Stock shall have been approved for listing or quotation on and shall not have been delisted from its Principal Market (determined as of the execution date of this Agreement). In the event of a suspension, delisting, or halting for any reason, of the trading of the Common Stock, as contemplated by this Section 7.2(f), the Investor shall have the right to return to the Company any remaining amount of Put Shares associated with such Put, and the Purchase Price with respect to such Put shall be reduced accordingly.
(g) BENEFICIAL OWNERSHIP LIMITATION. The number of Put Shares then to be purchased by the Investor shall not exceed the number of such shares that, when aggregated with all other shares of Common Stock then owned by the Investor beneficially or deemed beneficially owned by the Investor together with its affiliates, would result in the Investor owning more than the Beneficial Ownership Limitation (as defined below), as determined in accordance with Section 16 of the Exchange Act and the regulations promulgated thereunder. For purposes of this Section 7.2(g), in the event that the amount of Common Stock outstanding, as determined in accordance with Section 16 of the Exchange Act and the regulations promulgated thereunder, is greater on a Closing Date than on the date upon which the Put Notice associated with such Closing Date is given, the amount of Common Stock outstanding on such Closing Date shall govern for purposes of determining whether the Investor, when aggregating all purchases of Common Stock made pursuant to this Agreement, would own more than the Beneficial Ownership Limitation following such Closing Date. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable pursuant to a Put Notice.
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(h) NO KNOWLEDGE. The Company shall have no knowledge of any event more likely than not to have the effect of causing the Registration Statement to be suspended or otherwise ineffective (which event is more likely than not to occur within the fifteen (15) Trading Days following the Trading Day on which such Put Notice is deemed delivered). The Company shall have no knowledge of any untrue statement (or alleged untrue statement) of a material fact or omission (or alleged omission) of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, in the Registration Statement, any effective registration statement filed pursuant to the Registration Rights Agreement or any post-effective amendment or prospectus which is a part of the foregoing, unless the Company has filed an amendment with the SEC.
(i) OFFICER’S CERTIFICATE. On the date of delivery of each Put Notice, the Investor shall have received the Closing Certificate executed by an executive officer of the Company and to the effect that all the conditions to such Closing shall have been satisfied as of the date of each such certificate.
(j) DWAC ELIGIBLE. The Common Stock must be DWAC Eligible and not subject to a “DTC chill.”
(k) SEC DOCUMENTS. All reports, schedules, registrations, forms, statements, information and other documents required to have been filed by the Company with the SEC pursuant to the reporting requirements of the Exchange Act shall have been filed with the SEC within the applicable time periods prescribed for such filings under the Exchange Act.
(l) BANKRUPTCY. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall not be instituted by or against the Company or any subsidiary of the Company, and in the case of such a proceeding being involuntary or commenced against the Company, which is not dismissed within sixty (60) days (the “Bankruptcy Proceedings”), and the Company shall have no knowledge of any event more likely than not to have the effect of causing Bankruptcy Proceedings to arise. In the event of Bankruptcy Proceedings as contemplated by this Section 7.2(l), the Investor shall have the right to return to the Company any remaining amount of Put Shares associated with such Put, and the Purchase Price with respect to such Put shall be reduced accordingly.
(m) SUFFICIENT AUTHORIZED SHARES. In respect of each Put, the Company has at the time of making the Put sufficient authorized Common Stock to be able to deliver the Put Shares.
(n) NO VIOLATION OF EXCHANGE CAP. The issuance of the Put Shares shall not violate the Exchange Cap or Approval requirements of the Principal Market.
(o) RESERVE. The Company shall have reserved the Required Minimum Share Reserve for the Investor’s benefit under this Agreement, the Company satisfied the reserve requirements with respect to all other contracts between the Company and Investor, and the Transfer Agent Instruction Letter shall have been executed by the Company and the Transfer Agent as well as acknowledged and agreed to in writing by the Transfer Agent.
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(p) NO VIOLATION. No statute, regulation, order, guidance, decree, writ, ruling or injunction shall have been enacted, entered, promulgated, threatened or endorsed by any federal, state, local or foreign court or governmental authority of competent jurisdiction, including, without limitation, the SEC, which prohibits the consummation of or which would materially modify or delay any of the transactions contemplated by the Transaction Documents.
(q) LEGAL OPINION. The Company shall cause to be delivered to the Investor a written opinion of counsel satisfactory to the Investor, in form and substance satisfactory to the Investor and its counsel, relating to the availability and effectiveness of the Registration Statement, as supplemented by any prospectus supplement or amendment thereto, and regarding the Company’s compliance with the federal securities laws of the United States in the issuance, sale and registration of the Put Shares and the Commitment Shares.
ARTICLE VIII
LEGENDS
Section 8.1 NO RESTRICTIVE STOCK LEGEND. No restrictive stock legend shall be placed on the share certificates representing the Put Shares.
Section 8.2 INVESTOR’S COMPLIANCE. Nothing in this Article VIII shall affect in any way the Investor’s obligations hereunder to comply with all applicable securities laws upon the sale of the Common Stock.
ARTICLE IX
NOTICES; INDEMNIFICATION
Section 9.1 NOTICES. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (a) personally served, (b) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (c) delivered by reputable air courier service with charges prepaid, or (d) transmitted by hand delivery, telegram, or email as a PDF, addressed as set forth below or to such other address as such party shall have specified most recently by written notice given in accordance herewith. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (i) upon hand delivery or delivery by email at the address designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (ii) on the second business day following the date of mailing by express courier service or on the fifth business day after deposited in the mail, in each case, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.
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The addresses for such communications shall be:
If to the Company:
AIM ImmunoTech, Inc.
Attn: Thomas K. Equels
2117 SW Highway 484
Ocala, Florida 34473
If to the Investor:
Atlas Sciences, LLC
303 East Wacker Drive, Suite 1040
Chicago, IL 60601
Email: jfife@chicagoventure.com and coby@chicagoventure.com
With a copy to (which copy shall not constitute notice):
Hansen Black Anderson Ashcraft PLLC
Attn: Jonathan Hansen
3051 West Maple Loop Drive, Suite 325
Lehi, Utah 84043
Either party hereto may from time to time change its address or email for notices under this Section 9.1 by giving at least ten (10) days’ prior written notice of such changed address to the other party hereto.
Section 9.2 INDEMNIFICATION BY THE COMPANY. In consideration of the Investor’s execution and delivery of this Agreement and acquiring the Put Shares hereunder, and in addition to all of the Company’s other obligations under this Agreement, the Company shall defend, protect, indemnify and hold harmless the Investor and its officers, directors, managers, members, partners, employees and agents (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) and each person who controls the Investor within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (collectively, the “Investor Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and reasonable and documented expenses in connection therewith (irrespective of whether any such Investor Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by the Investor Indemnitees or any of them as a result of, or arising out of, or relating to (a) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement for the registration of the Put Shares as originally filed or in any amendment thereof, or in any related prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Investor specifically for inclusion therein; (b) any material misrepresentation or breach of any material representation or material warranty made by the Company in this Agreement or any other certificate, instrument or document contemplated hereby or thereby; or (c) any material breach of any material covenant, material agreement or material obligation of the Company contained in this Agreement or any other certificate, instrument or document contemplated hereby or thereby. To the extent that the foregoing undertaking by the Company may be unenforceable under Applicable Law, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities, which is permissible under Applicable Law.
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Section 9.3 INDEMNIFICATION BY INVESTOR. In consideration of the Company’s execution and delivery of this Agreement, and in addition to all of the Investor’s other obligations under this Agreement, the Investor shall defend, protect, indemnify and hold harmless the Company and all of its officers, directors, shareholders, employees and agents (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) and each person who controls the Investor within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (collectively, the “Company Indemnitees”) from and against any and all Indemnified Liabilities incurred by the Company Indemnitees or any of them as a result of, or arising out of, or relating to (a) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement for the registration of the Put Shares as originally filed or in any amendment thereof, or in any related prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the Investor will only be liable for written information relating to the Investor furnished to the Company by or on behalf of the Investor specifically for inclusion in the documents referred to in the foregoing indemnity, and will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Investor by or on behalf of the Company specifically for inclusion therein; (b) any misrepresentation or breach of any representation or warranty made by the Investor in this Agreement or any instrument or document contemplated hereby or thereby executed by the Investor; or (c) any breach of any covenant, agreement or obligation of the Investor contained in this Agreement or any other certificate, instrument or document contemplated hereby or thereby executed by the Investor. To the extent that the foregoing undertaking by the Investor may be unenforceable under Applicable Laws, the Investor shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities, which is permissible under Applicable Laws
Section 9.4 NOTICE OF CLAIM. Promptly after receipt by an Investor Indemnitee or Company Indemnitee of notice of the commencement of any action or proceeding (including any governmental action or proceeding) involving an Indemnified Liability, such Investor Indemnitee or Company Indemnitee, as applicable, shall, if a claim for an Indemnified Liability in respect thereof is to be made against any indemnifying party under this Article IX, deliver to the indemnifying party a written notice of the commencement thereof; but the failure to so notify the indemnifying party will not relieve it of liability under this Article IX except to the extent the indemnifying party is prejudiced by such failure. The indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually reasonably satisfactory to the indemnifying party and the Investor Indemnitee or Company Indemnitee, as the case may be; provided, however, that an Investor Indemnitee or Company Indemnitee shall have the right to retain its own counsel with the actual and reasonable third party fees and expenses of not more than one counsel for such Investor Indemnitee or Company Indemnitee to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by the indemnifying party, the representation by such counsel of the Investor Indemnitee or Company Indemnitee and the indemnifying party would be inappropriate due to actual or potential differing interests between such Investor Indemnitee or Company Indemnitee and any other party represented by such counsel in such proceeding. The Investor Indemnitee or Company Indemnitee shall cooperate fully with the indemnifying party in connection with any negotiation or defense of any such action or claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Investor Indemnitee or Company Indemnitee which relates to such action or claim. The indemnifying party shall keep the Investor Indemnitee or Company Indemnitee reasonably apprised as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable for any settlement of any action, claim or proceeding effected without its prior written consent, provided, however, that the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the prior written consent of the Investor Indemnitee or Company Indemnitee, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Investor Indemnitee or Company Indemnitee of a release from all liability in respect to such claim or litigation. Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Investor Indemnitee or Company Indemnitee with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made. The indemnification required by this Article IX shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received and payment therefor is due.
Section 9.05 REMEDIES. The remedies provided for in this Article IX are not exclusive and shall not limit any right or remedy which may be available to any indemnified person at law or equity.
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ARTICLE X
MISCELLANEOUS
Section 10.1 GOVERNING LAW; JURISDICTION. This Agreement shall be governed by and construed in accordance with the laws of the State of Utah without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement or any other agreement, certificate, instrument or document contemplated hereby shall be brought only in the State of Utah. The Parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTIONS CONTEMPLATED HEREBY. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other agreement, certificate, instrument or document contemplated hereby or thereby by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
Section 10.2 PAYMENT SET ASIDE. Further, to the extent that the (i) Company makes a payment or payments to the Investor pursuant to this Agreement or any other agreement, certificate, instrument or document contemplated hereby or thereby, or (ii) the Investor enforces or exercises its rights pursuant to this Agreement or any other agreement, certificate, instrument or document contemplated hereby or thereby, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof (including but not limited to the sale of the Securities) are for any reason (i) subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, or disgorged by the Investor, or (ii) are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver, government entity, or any other person or entity under any law (including, without limitation, any bankruptcy law, foreign, state or federal law, common law or equitable cause of action), then (i) to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred and (ii) the Company shall immediately pay to the Investor a dollar amount equal to the amount that was for any reason (i) subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, or disgorged by the Investor, or (ii) required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver, government entity, or any other person or entity under any law (including, without limitation, any bankruptcy law, foreign, state or federal law, common law or equitable cause of action).
Section 10.3 ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of the Company and the Investor and their respective successors. Neither this Agreement nor any rights of the Investor or the Company hereunder may be assigned by either party to any other Person.
Section 10.4 NO THIRD PARTY BENEFICIARIES. This Agreement is intended for the benefit of the Company and the Investor and their respective successors, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as set forth in Section 9.3.
Section 10.5 TERMINATION. The Company may terminate this Agreement at any time by written notice to the Investor, except during any Valuation Period. In addition, this Agreement shall automatically terminate at the end of the Commitment Period. Notwithstanding anything in this Agreement to the contrary, (i) the provisions of Articles III, IV, VI, IX of this Agreement and the agreements and covenants of the Company and the Investor set forth in Article X of this Agreement shall survive the termination of this Agreement and (ii) the Investor shall retain all rights to the Commitment Shares even if this Agreement is terminated.
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Section 10.6 ENTIRE AGREEMENT. The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the Company and the Investor with respect to the matters covered herein and therein and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the Parties acknowledge have been merged into such documents, exhibits and schedules.
Section 10.7 FEES AND EXPENSES. Except as expressly set forth in the Transaction Documents or any other writing to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all Transfer Agent fees (including, without limitation, any fees required for same-day processing of any instruction letter delivered by the Company), stamp taxes and other taxes and duties levied in connection with the delivery of any Securities to the Investor. Upon execution of this Agreement, the Company shall issue the Commitment Shares to Investor for its commitment to enter into this Agreement. The Commitment Shares shall be earned in full upon the execution of this Agreement, and the issuance of the Commitment Shares is not contingent upon any other event or condition, including but not limited to the effectiveness of the Registration Statement or the Company’s submission of a Put Notice to the Investor.
Section 10.8 COUNTERPARTS. This Agreement may be executed in multiple counterparts, each of which may be executed by less than all of the Parties and shall be deemed to be an original instrument which shall be enforceable against the Parties actually executing such counterparts and all of which together shall constitute one and the same instrument. This Agreement may be delivered to the other Parties hereto by email of a copy of this Agreement bearing the signature of the Parties so delivering this Agreement.
Section 10.9 SEVERABILITY. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision; provided that such severability shall be ineffective if it materially changes the economic benefit of this Agreement to any party.
Section 10.10 FURTHER ASSURANCES. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
Section 10.11 NO STRICT CONSTRUCTION. The language used in this Agreement will be deemed to be the language chosen by the Parties to express their mutual intent, and no rules of strict construction will be applied against any party.
Section 10.12 EQUITABLE RELIEF. The Company recognizes that in the event that it fails to perform, observe, or discharge any or all of its obligations under this Agreement, any remedy at law may prove to be inadequate relief to the Investor. The Company therefore agrees that the Investor shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages.
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Section 10.13 TITLE AND SUBTITLES. The titles and subtitles used in this Agreement are used for the convenience of reference and are not to be considered in construing or interpreting this Agreement.
Section 10.14 AMENDMENTS; WAIVERS. No provision of this Agreement may be amended or waived by the Parties from and after the date that is one (1) Trading Day immediately preceding the initial filing of the Registration Statement with the SEC. Subject to the immediately preceding sentence, (i) no provision of this Agreement may be amended other than by a written instrument signed by both Parties hereto and (ii) no provision of this Agreement may be waived other than in a written instrument signed by the party against whom enforcement of such waiver is sought. No failure or delay in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.
Section 10.15 PUBLICITY. The Company and the Investor shall consult with each other in issuing any press releases or otherwise making public statements with respect to the transactions contemplated hereby and no party shall issue any such press release or otherwise make any such public statement, other than as required by law, without the prior written consent of the other Parties, which consent shall not be unreasonably withheld or delayed, except that no prior consent shall be required if such disclosure is required by law, in which such case the disclosing party shall provide the other party with prior notice of such public statement. Notwithstanding the foregoing, the Company shall not publicly disclose the name of the Investor without the prior written consent of the Investor, except to the extent required by law. The Investor acknowledges that this Agreement and all or part of the Transaction Documents may be deemed to be “material contracts,” as that term is defined by Item 601(b)(10) of Regulation S-K, and that the Company may therefore be required to file such documents as exhibits to reports or registration statements filed under the Securities Act or the Exchange Act. The Investor further agrees that the status of such documents and materials as material contracts shall be determined solely by the Company, in consultation with its counsel.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written.
| COMPANY: | ||
| AIM IMMUNOTECH, INC. | ||
| By: | s/Thomas Equels | |
| Thomas Equels, Chief Executive Officer | ||
| INVESTOR: | ||
| ATLAS SCIENCES, LLC | ||
| By: | s/John Fife | |
| John M. Fife, President | ||
[Signature Page to Equity Purchase Agreement]
EXHIBIT A
FORM OF PUT NOTICE
TO: ATLAS SCIENCES, LLC
DATE: ____________________
We refer to the Equity Purchase Agreement, dated March 28, 2024 (the “Agreement”), entered into by and between AIM ImmunoTech, Inc. and you. Capitalized terms defined in the Agreement shall, unless otherwise defined herein, have the same meaning when used herein.
We hereby:
1) Give you notice that we require you to purchase ____________ Put Shares pursuant to the Agreement; and
2) Certify that, as of the date hereof, the conditions set forth in Section 7.2 of the Agreement are satisfied.
| AIM IMMUNOTECH, INC. | ||
| By: | ||
| Thomas Equels, CEO | ||
EXHIBIT B
FORM OF OFFICER’S CERTIFICATE
OF AIM IMMUNOTECH, INC.
Pursuant to Section 7.2(i) of that certain Equity Purchase Agreement, dated March 28, 2024 (the “Agreement”), by and between AIM ImmunoTech, Inc. (the “Company”) and Atlas Sciences, LLC (the “Investor”), the undersigned, in his capacity as Chief Executive Officer of the Company, and not in his individual capacity, hereby certifies, as of the date hereof (such date, the “Condition Satisfaction Date”), the following:
1. The representations and warranties of the Company are true and correct in all material respects as of the Condition Satisfaction Date as though made on the Condition Satisfaction Date (except for representations and warranties specifically made as of a particular date) with respect to all periods, and as to all events and circumstances occurring or existing to and including the Condition Satisfaction Date, except for any conditions which have temporarily caused any representations or warranties of the Company set forth in the Agreement to be incorrect and which have been corrected with no continuing impairment to the Company or the Investor; and
2. All of the conditions precedent to the obligation of the Investor to purchase Put Shares set forth in the Agreement, including but not limited to Section 7.2 of the Agreement, have been satisfied as of the Condition Satisfaction Date.
Capitalized terms used herein shall have the meanings set forth in the Agreement unless otherwise defined herein.
IN WITNESS WHEREOF, the undersigned has hereunto affixed his hand as of the ________, 20__.
| By: | ||
| Thomas Equels, CEO |
Exhibit 10.105
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of March 28, 2024, is entered into by and between AIM IMMUNOTECH, INC., a Delaware corporation (the “Company”), and ATLAS SCIENCES, LLC, a Utah limited liability company (together with it permitted assigns, the “Investor”). Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Equity Purchase Agreement by and between the parties hereto, dated as of the date hereof (as amended, restated, supplemented or otherwise modified from time to time, the “Purchase Agreement”).
WHEREAS:
The Company has agreed, upon the terms and subject to the conditions of the Purchase Agreement, to sell to the Investor up to Fifteen Million Dollars ($15,000,000.00) of Put Shares (as defined in the Purchase Agreement) and to induce the Investor to enter into the Purchase Agreement, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the “Securities Act”), and applicable state securities laws.
NOW, THEREFORE, in consideration of the promises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Investor hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following meanings:
a. “Investor” shall have the meaning set forth above.
b. “Person” means any individual or entity including but not limited to any corporation, a limited liability company, an association, a partnership, an organization, a business, an individual, a governmental or political subdivision thereof or a governmental agency.
c. “Register,” “registered,” and “registration” refer to a registration effected by preparing and filing one or more registration statements of the Company in compliance with the Securities Act and/or pursuant to Rule 415 under the Securities Act or any successor rule providing for offering securities on a continuous basis (“Rule 415”), and the declaration or ordering of effectiveness of such registration statement(s) by the United States Securities and Exchange Commission (the “SEC”).
d. “Registrable Securities” means (i) all of the Put Shares which have been, or which may, from time to time be issued, including without limitation all of the shares of common stock, par value $0.001 per share (“Common Stock”), which have been issued or will be issued to the Investor under the Purchase Agreement (without regard to any beneficial ownership limitation or restriction on purchases therein), and (ii) the Commitment Shares (as defined in the Purchase Agreement), and shares of Common Stock issued to the Investor as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise.
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e. “Registration Statement” means one or more registration statements, as supplemented by any prospectus supplement or amendment thereto, of the Company covering only the sale of the Registrable Securities.
2. REGISTRATION.
a. Registration. The Company shall file with the SEC an initial Registration Statement within forty-five (45) calendar days from the date of this Agreement covering at least 15,000,000 shares of Registrable Securities so as to permit the resale of such Registrable Securities by the Investor, including but not limited to under Rule 415 under the Securities Act at then prevailing market prices (and not fixed prices), subject to the aggregate number of authorized shares of the Company’s Common Stock then available for issuance in its Certificate of Incorporation. The initial Registration Statement shall register only Registrable Securities. The Investor and its counsel shall have a reasonable opportunity to review and comment upon such Registration Statement and any amendment or supplement to such Registration Statement and any related prospectus prior to its filing with the SEC, and the Company shall give due consideration to all reasonable comments. The Investor shall furnish all information reasonably requested by the Company for inclusion therein. The Company shall use its reasonable best efforts to have the Registration Statement declared effective as soon as practicable, and any amendment declared effective by the SEC at the earliest possible date. The Company shall use reasonable best efforts to keep the Registration Statement effective, including but not limited to pursuant to Rule 415 promulgated under the Securities Act and available for the resale by the Investor of all of the Registrable Securities covered thereby at all times until the earlier of (i) the date on which the Investor shall have sold all the Registrable Securities and the Maximum Commitment Amount (as defined in the Purchase Agreement) under the Purchase Agreement has been drawn down by the Company pursuant to a Registration Statement and (ii) the date on which the Purchase Agreement is terminated (the “Registration Period”). The Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading. In the event that (i) the Registration Statement or New Registration Statement (as defined below) becomes stale after the initial effectiveness of such Registration Statement or New Registration Statement and (ii) the Investor still has ownership of any of the Registrable Securities that the Investor cannot then sell without restriction pursuant to Rule 144 promulgated under the Securities Act, the Company shall immediately file one or more post-effective amendments to facilitate the SEC’s declaration of effectiveness with respect to such Registration Statement or New Registration Statement.
b. Rule 424 Prospectus. The Company shall, as required by applicable securities regulations, from time-to-time file with the SEC, pursuant to Rule 424 promulgated under the Securities Act, the prospectus and prospectus supplements, if any, to be used in connection with sales of the Registrable Securities under the Registration Statement. The Company shall file such initial prospectus covering the Investor’s sale of the Registrable Securities within three (3) business days of the date that the Registration Statement is declared effective by the SEC. The Investor and its counsel shall have a reasonable opportunity to review and comment upon such prospectus prior to its filing with the SEC, and the Company shall give due consideration to all such comments. The Investor shall use its reasonable best efforts to comment upon such prospectus within one (1) Business Day from the date the Investor receives the final pre-filing version of such prospectus.
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c. Sufficient Number of Shares Registered. In the event the number of shares available under the Registration Statement is insufficient to cover all of the Registrable Securities, the Company shall amend the Registration Statement or file a new Registration Statement (a “New Registration Statement”), so as to cover all of such Registrable Securities (subject to the limitations set forth in Section 2(a)) as soon as practicable, but in any event not later than ten (10) Business Days after the necessity therefor arises, subject to any limits that may be imposed by the SEC pursuant to Rule 415 under the Securities Act as well as the Exchange Cap (as defined in the Purchase Agreement). The Company shall use it reasonable best efforts to cause such amendment and/or New Registration Statement to become effective as soon as practicable following the filing thereof. In the event that any of the Put Shares are not included in the Registration Statement, or have not been included in any New Registration Statement and the Company files any other registration statement under the Securities Act (other than on Form S-4, Form S-8, or with respect to other employee related plans or rights offerings) (“Other Registration Statement”) then the Company shall include in such Other Registration Statement first all of such Put Shares and second any other securities the Company wishes to include in such Other Registration Statement
d. Offering. If the staff of the SEC (the “Staff”) or the SEC seeks to characterize any offering pursuant to a Registration Statement filed pursuant to this Agreement as constituting an offering of securities that does not permit such Registration Statement to become effective and be used for resales by the Investor under Rule 415 at then-prevailing market prices (and not fixed prices), or if after the filing of the initial Registration Statement with the SEC pursuant to Section 2(a), the Company is otherwise required by the Staff or the SEC to reduce the number of Registrable Securities included in such initial Registration Statement, then the Company shall reduce the number of Registrable Securities to be included in such initial Registration Statement until such time as the Staff and the SEC shall so permit such Registration Statement to become effective and be used as aforesaid. In the event of any reduction in Registrable Securities pursuant to this paragraph, the Company shall file one or more New Registration Statements in accordance with Section 2(c) until such time as all Registrable Securities have been included in Registration Statements that have been declared effective and the prospectus contained therein is available for use by the Investor, provided, however, that this obligation shall cease at the end of the Registration Period. Notwithstanding any provision herein or in the Purchase Agreement to the contrary, the Company’s obligations to register Registrable Securities (and any related conditions to the Investor’s obligations) shall be qualified as necessary to comport with any requirement of the SEC or the Staff as addressed in this Section 2(d).
3. RELATED OBLIGATIONS.
With respect to the Registration Statement and whenever any Registrable Securities are to be registered pursuant to Section 2 including on any New Registration Statement, the Company shall use its reasonable efforts to effect the registration of the Registrable Securities in accordance with the intended method of disposition thereof and, pursuant thereto, the Company shall have the following obligations:
a. The Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to any registration statement and the prospectus used in connection with such registration statement, which prospectus is to be filed pursuant to Rule 424 promulgated under the Securities Act, as may be necessary to keep the Registration Statement or any New Registration Statement effective at all times during the Registration Period, and, during such period, comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities of the Company covered by the Registration Statement or any New Registration Statement until such time as all of such Registrable Securities shall have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in such registration statement.
b. The Company shall permit the Investor to review and comment upon the Registration Statement or any New Registration Statement and all amendments and supplements thereto at least two (2) Business Days prior to their filing with the SEC, and not file any document in a form to which Investor reasonably objects. The Investor shall use its reasonable best efforts to comment upon the Registration Statement or any New Registration Statement and any amendments or supplements thereto within two (2) Business Days from the date the Investor receives the final version thereof. The Company shall furnish to the Investor, without charge any correspondence from the SEC or the staff of the SEC to the Company or its representatives relating to the Registration Statement or any New Registration Statement.
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c. Upon request of the Investor, the Company shall furnish to the Investor, (i) promptly after the same is prepared and filed with the SEC, at least one copy of such registration statement and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits, (ii) upon the effectiveness of any registration statement, a copy of the prospectus included in such registration statement and all amendments and supplements thereto (or such other number of copies as the Investor may reasonably request) and (iii) such other documents, including copies of any preliminary or final prospectus, as the Investor may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities owned by the Investor. For the avoidance of doubt, any filing available to the Investor via the SEC’s live EDGAR system shall be deemed “furnished to the Investor” hereunder.
d. The Company shall use reasonable best efforts to (i) register and qualify the Registrable Securities covered by a registration statement under such other securities or “blue sky” laws of such jurisdictions in the United States as the Investor reasonably requests, (ii) prepare and file in those jurisdictions, such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period, (iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), (y) subject itself to general taxation in any such jurisdiction, or (z) file a general consent to service of process in any such jurisdiction. The Company shall promptly notify the Investor who holds Registrable Securities of the receipt by the Company of any notification with respect to the suspension of the registration or qualification of any of the Registrable Securities for sale under the securities or “blue sky” laws of any jurisdiction in the United States or its receipt of actual notice of the initiation or threatening of any proceeding for such purpose.
e. As promptly as practicable after becoming aware of such event or facts, the Company shall notify the Investor in writing of the happening of any event or existence of such facts as a result of which the prospectus included in any registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and promptly prepare a supplement or amendment to such registration statement and/or take any other necessary steps (which, if in accordance with applicable SEC rules and regulations, may consist of a document to be filed by the Company with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and to be incorporated by reference in the prospectus) to correct such untrue statement or omission, and deliver a copy of such supplement or amendment to the Investor (or such other number of copies as the Investor may reasonably request). The Company shall also promptly notify the Investor in writing (i) when a prospectus or any prospectus supplement or post-effective amendment has been filed, and when a registration statement or any post-effective amendment has become effective (notification of such effectiveness shall be delivered to the Investor by email on the same day of such effectiveness and by overnight mail), (ii) of any request by the SEC for amendments or supplements to any registration statement or related prospectus or related information, and (iii) of the Company’s reasonable determination that a post-effective amendment to a registration statement would be appropriate.
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f. The Company shall use its reasonable best efforts to prevent the issuance of any stop order or other suspension of effectiveness of any registration statement, or the suspension of the qualification of any Registrable Securities for sale in any jurisdiction and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest possible moment and to notify the Investor of the issuance of such order and the resolution thereof or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.
g. The Company shall (i) cause all the Registrable Securities to be listed on each securities exchange on which securities of the same class or series issued by the Company are then listed, if any, if the listing of such Registrable Securities is then permitted under the rules of such exchange, or (ii) secure designation and quotation of all the Registrable Securities on the Principal Market (as defined in the Purchase Agreement). The Company shall pay all fees and expenses in connection with satisfying its obligation under this Section.
h. The Company shall cooperate with the Investor to facilitate the timely preparation and delivery of the Registrable Securities (not bearing any restrictive legend) either by DWAC, DRS, or in certificated form if DWAC or DRS is unavailable, to be offered pursuant to any registration statement and enable such Registrable Securities to be in such denominations or amounts as the Investor may reasonably request and registered in such names as the Investor may request.
i. The Company shall at all times provide a transfer agent and registrar with respect to its Common Stock.
j. If reasonably requested by the Investor, the Company shall (i) immediately incorporate in a prospectus supplement or post-effective amendment such information as the Investor believes should be included therein relating to the sale and distribution of Registrable Securities, including, without limitation, information with respect to the number of Registrable Securities being sold, the purchase price being paid therefor and any other terms of the offering of the Registrable Securities; (ii) make all required filings of such prospectus supplement or post-effective amendment as soon as practicable upon notification of the matters to be incorporated in such prospectus supplement or post-effective amendment; and (iii) supplement or make amendments to any registration statement.
k. The Company shall use its reasonable best efforts to cause the Registrable Securities covered by any registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to consummate the disposition of such Registrable Securities.
l. Within one (1) Business Day after any registration statement which includes the Registrable Securities is ordered effective by the SEC, the Company shall deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with copies to the Investor) confirmation that such registration statement has been declared effective by the SEC in the form attached hereto as Exhibit A. Thereafter, if requested by the Investor at any time, the Company shall require its counsel to deliver to the Investor a written confirmation whether or not the effectiveness of such registration statement has lapsed at any time for any reason (including, without limitation, the issuance of a stop order) and whether or not the registration statement is current and available to the Investor for sale of all of the Registrable Securities.
m. The Company shall take all other reasonable actions necessary to expedite and facilitate disposition by the Investor of Registrable Securities pursuant to any registration statement.
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n. Notwithstanding anything to the contrary in this Agreement, the provisions in this Agreement and the Company’s obligations thereunder are subject to compliance with the Exchange Cap.
4. OBLIGATIONS OF THE INVESTOR.
a. The Company shall notify the Investor in writing of the information the Company reasonably requires from the Investor in connection with any registration statement hereunder. The Investor shall furnish to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it as shall be reasonably required to effect the registration of such Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request.
b. The Investor agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of any registration statement hereunder.
c. The Investor agrees that, upon receipt of any notice from the Company of the happening of any event or existence of facts of the kind described in Section 3(f) or the first sentence of 3(e), the Investor will immediately discontinue disposition of Registrable Securities pursuant to any registration statement(s) covering such Registrable Securities until the Investor’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 3(f) or the first sentence of 3(e). Notwithstanding anything to the contrary, the Company shall cause its transfer agent to promptly deliver shares of Common Stock without any restrictive legend in accordance with the terms of the Purchase Agreement in connection with any sale of Registrable Securities with respect to which the Investor has entered into a contract for sale prior to the Investor’s receipt of a notice from the Company of the happening of any event of the kind described in Section 3(f) or the first sentence of Section 3(e) and for which the Investor has not yet settled.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than sales or brokerage commissions, incurred in connection with registrations, filings or qualifications pursuant to Sections 2 and 3, including, without limitation, all registration, listing and qualifications fees, printers and accounting fees, and fees and disbursements of counsel for the Company, shall be paid by the Company.
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6. INDEMNIFICATION.
a. To the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold harmless and defend the Investor, each Person, if any, who controls the Investor, the members, the directors, officers, partners, employees, agents, representatives of the Investor and each Person, if any, who controls the Investor within the meaning of the Securities Act or the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (each, an “Indemnified Person”), against any losses, claims, damages, liabilities, judgments, fines, penalties, charges, costs, attorneys’ fees, amounts paid in settlement or expenses, joint or several, (collectively, “Claims”) incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental, administrative or other regulatory agency, body or the SEC, whether pending or threatened, whether or not an indemnified party is or may be a party thereto (“Indemnified Damages”), to which any of them may become subject insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of a material fact in the Registration Statement, any New Registration Statement or any post-effective amendment thereto or in any filing made in connection with the qualification of the offering under the securities or other “blue sky” laws of any jurisdiction in which Registrable Securities are offered (“Blue Sky Filing”), or the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in the final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made, not misleading, (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any other law, including, without limitation, any state securities law, or any rule or regulation thereunder relating to the offer or sale of the Registrable Securities pursuant to the Registration Statement or any New Registration Statement or (iv) any material violation by the Company of this Agreement (the matters in the foregoing clauses (i) through (iv) being, collectively, “Violations”). The Company shall reimburse each Indemnified Person promptly as such expenses are incurred and are due and payable, for any reasonable legal fees or other reasonable expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(a): (i) shall not apply to a Claim by an Indemnified Person arising out of or based upon a Violation which occurs in reliance upon and in conformity with information about the Investor furnished in writing to the Company by such Indemnified Person expressly for use in connection with the preparation of the Registration Statement, any New Registration Statement or any such amendment thereof or supplement thereto, if such prospectus was timely made available by the Company pursuant to Section 3(c) or Section 3(e); (ii) with respect to any superseded prospectus, shall not inure to the benefit of any such person from whom the person asserting any such Claim purchased the Registrable Securities that are the subject thereof (or to the benefit of any person controlling such person) if the untrue statement or omission of material fact contained in the superseded prospectus was corrected in the revised prospectus, as then amended or supplemented, if such revised prospectus was timely made available by the Company pursuant to Section 3(c) or Section 3(e), and the Indemnified Person was promptly advised in writing not to use the incorrect prospectus prior to the use giving rise to a violation and such Indemnified Person, notwithstanding such advice, used it; (iii) shall not be available to the extent such Claim is based on a failure of the Investor to deliver or to cause to be delivered the prospectus made available by the Company, if such prospectus was timely made available by the Company pursuant to Section 3(c) or Section 3(e); and (iv) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the transfer of the Registrable Securities by the Investor pursuant to Section 9.
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b. Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 6 of notice of the commencement of any action or proceeding (including any governmental action or proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section 6, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the case may be; provided, however, that an Indemnified Person or Indemnified Party shall have the right to retain its own counsel with the reasonable fees and expenses of one counsel to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by the indemnifying party, the representation by such counsel of the Indemnified Person or Indemnified Party and the indemnifying party would be inappropriate due to actual or potential differing interests between such Indemnified Person or Indemnified Party and any other party represented by such counsel in such proceeding. The Indemnified Party or Indemnified Person shall cooperate fully with the indemnifying party in connection with any negotiation or defense of any such action or claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnified Party or Indemnified Person which relates to such action or claim. The indemnifying party shall keep the Indemnified Party or Indemnified Person fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable for any settlement of any action, claim or proceeding effected without its written consent, provided, however, that the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the consent of the Indemnified Party or Indemnified Person, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or Indemnified Person of a release from all liability in respect to such claim or litigation. Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Indemnified Party or Indemnified Person with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party under this Section 6, except to the extent that the indemnifying party is prejudiced in its ability to defend such action.
c. The indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Indemnified Damages are incurred.
d. The indemnity agreements contained herein shall be in addition to (i) any cause of action or similar right of the Indemnified Party or Indemnified Person against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent permitted by law; provided, however, that: (i) no seller of Registrable Securities guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any seller of Registrable Securities who was not guilty of fraudulent misrepresentation; and (ii) contribution by any seller of Registrable Securities shall be limited in amount to the net amount of proceeds received by such seller from the sale of such Registrable Securities.
8. REPORTS AND DISCLOSURE UNDER THE SECURITIES ACTS.
With a view to making available to the Investor the benefits of Rule 144 promulgated under the Securities Act or any other similar rule or regulation of the SEC that may at any time permit the Investor to sell securities of the Company to the public without registration (“Rule 144”), at all times while the Purchase Agreement is in effect the Company agrees, at the Company’s sole expense, to:
a. make and keep public information available, as those terms are understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act so long as the Company remains subject to such requirements and the filing of such reports and other documents is required for the applicable provisions of Rule 144;
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c. furnish to the Investor so long as the Investor owns Registrable Securities, promptly upon request, (i) a written statement by the Company that it has complied with the reporting and or disclosure provisions of Rule 144, the Securities Act and the Exchange Act, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested to permit the Investor to sell such securities pursuant to Rule 144 without registration; and
d. take such additional action as is reasonably requested by the Investor to enable the Investor to sell the Registrable Securities pursuant to Rule 144, including, without limitation, delivering all such legal opinions, consents, certificates, resolutions and instructions to the Company’s transfer agent as may be requested from time to time by the Investor and otherwise fully cooperate with Investor and Investor’s broker to effect such sale of securities pursuant to Rule 144.
The Company agrees that damages may be an inadequate remedy for any breach of the terms and provisions of this Section 8 and that Investor shall, whether or not it is pursuing any remedies at law, be entitled to equitable relief in the form of a preliminary or permanent injunctions, without having to post any bond or other security, upon any breach or threatened breach of any such terms or provisions.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
Neither party shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other party.
10. AMENDMENT OF REGISTRATION RIGHTS.
No provision of this Agreement may be amended or waived by the parties from and after the date that is one Business Day immediately preceding the initial filing of the Registration Statement with the SEC. Subject to the immediately preceding sentence, no provision of this Agreement may be (i) amended other than by a written instrument signed by both parties hereto or (ii) waived other than in a written instrument signed by the party against whom enforcement of such waiver is sought. Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.
11. MISCELLANEOUS.
a. A Person is deemed to be a holder of Registrable Securities whenever such Person owns or is deemed to own of record such Registrable Securities. If the Company receives conflicting instructions, notices or elections from two or more Persons with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from the registered owner of such Registrable Securities.
b. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and shall be (a) personally served, (b) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (c) delivered by reputable air courier service with charges prepaid, or (d) transmitted by hand delivery, telegram, or email as a PDF, addressed as set forth below or to such other address as such party shall have specified most recently by written notice given in accordance herewith. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (i) upon hand delivery or delivery by email at the address designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (ii) on the second business day following the date of mailing by express courier service or on the fifth business day after deposited in the mail, in each case, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:
If to the Company:
AIM ImmunoTech, Inc.
11120 NE 2nd Street, Suite 200
Attn: Thomas K. Equels
2117 SW Highway 484
Ocala, Florida 34473
If to the Investor:
Atlas Sciences, LLC
303 East Wacker Drive, Suite 1040
Chicago, Illinios 60601
Email: jfife@chicagoventure.com
Either party hereto may from time to time change its address or email for notices under this Section 11.b by giving at least ten (10) days’ prior written notice of such changed address to the other party hereto.
c. The corporate laws of the State of Utah shall govern all issues concerning this Agreement. All other questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of Utah, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Utah or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Utah. Each party hereby irrevocably submits to the exclusive jurisdiction of the State of Utah for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction.
d. This Agreement and the Purchase Agreement constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein. This Agreement and the Purchase Agreement supersede all prior agreements and understandings among the parties hereto with respect to the subject matter hereof and thereof.
e. Subject to the requirements of Section 9, this Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties hereto.
f. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
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g. This Agreement may be executed in identical counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement. This Agreement, once executed by a party, may be delivered to the other party hereto by e-mail in a “.pdf” format data file of a copy of this Agreement bearing the signature of the party so delivering this Agreement.
h. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
i. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent and no rules of strict construction will be applied against any party.
j. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.
* * * * * *
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of day and year first above written.
| COMPANY: | ||
| AIM IMMUNOTECH, INC. | ||
| By: | s/ Thomas Equels | |
| Thomas Equels, Chief Executive Officer | ||
| INVESTOR: | ||
| ATLAS SCIENCES, LLC | ||
| By: | s/John M. Fife | |
| John M. Fife, President | ||
[Signature Page to Registration Rights Agreement]
EXHIBIT A
TO REGISTRATION RIGHTS AGREEMENT
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
______, 2024
[Transfer Agent}
[Address]
Re: Effectiveness of Registration Statement
Ladies and Gentlemen:
We are counsel to AIM IMMUNOTECH, INC., a Delaware corporation (the “Company”), and have represented the Company in connection with that certain Purchase Agreement, dated as of March 28, 2024 (the “Purchase Agreement”), entered into by and between the Company and Atlas Sciences, LLC, a Utah limited liability company (the “Investor”) pursuant to which the Company has agreed to issue to the Investor shares of the Company’s common stock, $0.001 par value (the “Common Stock”), in an amount up to Fifteen Million Dollars ($15,000,000.00) (the “Put Shares”), in accordance with the terms of the Purchase Agreement. In connection with the transactions contemplated by the Purchase Agreement, the Company has registered with the U.S. Securities & Exchange Commission the following shares of Common Stock:
| (1) | __________ Put Shares to be issued to the Investor upon purchase from the Company by the Investor from time to time in accordance with the Purchase Agreement; and | |
| (2) | __________ Commitment Shares (as defined in the Purchase Agreement) (the “Commitment Shares”). |
Pursuant to the Purchase Agreement, the Company also has entered into a registration rights agreement, of even date with the Purchase Agreement with the Investor (the “Registration Rights Agreement”) pursuant to which the Company agreed, among other things, to register the Put Shares and Commitment Shares under the Securities Act of 1933, as amended (the “Securities Act”). In connection with the Company’s obligations under the Purchase Agreement and the Registration Rights Agreement, on [_____], 2024, the Company filed a Registration Statement (File No. 333-[_________]) (the “Registration Statement”) with the Securities and Exchange Commission (the “SEC”) relating to the resale of the Put Shares and Commitment Shares.
In connection with the foregoing, we advise you that a member of the SEC’s staff has advised us by telephone that the SEC has entered an order declaring the Registration Statement effective under the Securities Act at [_____] [A.M./P.M.] on [__________], 2024 and we have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that any stop order suspending its effectiveness has been issued or that any proceedings for that purpose are pending before, or threatened by, the SEC and the Put Shares and Commitment Shares are available for resale under the Securities Act pursuant to the Registration Statement and may be issued without any restrictive legend.
| Very truly yours, | ||
| [Company Counsel] | ||
| By: | ||
cc: Atlas Sciences, LLC
Exhibit 21.1
Subsidiaries
| US Subsidiaries: | Status | |
| BioPro Corp. | Dormant | |
| BioAegean Corp. | Dormant | |
| Foreign Subsidiaries: | ||
| Aim ImmunoTech Europe N.V./S.A. (Belgium) |
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-262280), Form S-1 (No. 333-217671, 333-220756, 333-226057, 333-229051 and 333-233657) and Form S-8 (No. 333-257614, 333-160499, 333-209060, 333-220296, 333-227543 and 333-240315) of AIM ImmunoTech, Inc. (the Company) of our report dated March 29, 2024, relating to the consolidated financial statements which appears in this Annual Report on Form 10-K.
| /s/ BDO USA, P.C. |
Miami, Florida
March 29, 2024
EXHIBIT 31.1
CERTIFICATIONS PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT OF 2002
I, Thomas K. Equels certify that:
| 1. | I have reviewed this annual report on Form 10-K of AIM ImmunoTech Inc. | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; | |
| 4. | The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c. | Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d. | Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and |
| 5. | The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and | |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
| Date: March 29, 2024 | |
| /s/ Thomas K. Equels | |
| Thomas K. Equels, Esq. | |
| Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATIONS PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT OF 2002
I, Robert Dickey IV, certify that:
| 1. | I have reviewed this annual report on Form 10-K of AIM ImmunoTech Inc.; | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; | |
| 4. | The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c. | Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d. | Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and |
| 5. | The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and | |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
| Date: March 29, 2024 | |
| /s/ Robert Dickey IV | |
| Robert Dickey IV | |
| Chief Financial Officer |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of AIM ImmunoTech Inc. (the “Company”) on Form 10-K for the year ended December 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas K. Equels, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
| Date: March 29, 2024 | |
| /s/ Thomas K. Equels | |
| Thomas K. Equels, Esq. | |
| Chief Executive Officer |
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of AIM ImmunoTech Inc. (the “Company”) on Form 10-K for the year ended December 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert Dickey IV, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
| Date: March 29, 2024 | |
| /s/ Robert Dickey IV | |
| Robert Dickey IV | |
| Chief Financial Officer |
Exhibit 97.1
AIM ImmunoTech Inc.
CLAWBACK POLICY
Introduction
The Board of Directors (the “Board”) of AIM ImmunoTech Inc. (the “Company”) believes that it is in the best interests of the Company and its stockholders to create and maintain a culture that emphasizes integrity and accountability and that reinforces the Company’s pay-for-performance compensation philosophy. The Board has therefore adopted this policy which provides for the recoupment of certain executive compensation in the event of an accounting restatement resulting from material noncompliance with financial reporting requirements under the federal securities laws (the “Policy”). This Policy is designed to comply with Section 10D of the Securities Exchange Act of 1934 (the “Exchange Act”).
Administration
This Policy shall be administered by the Board’s Compensation Committee. Any determinations made by the Compensation Committee shall be final and binding on all affected individuals.
Covered Executives
This Policy applies to the Company’s current and former executive officers, as determined by the Compensation Committee in accordance with Section 10D of the Exchange Act and the listing standards of the NYSE American, or such other national securities exchange on which the Company’s securities are listed (“Covered Executives”).
Recoupment; Accounting Restatement
In the event the Company is required to prepare an accounting restatement of its financial statements due to the Company’s material noncompliance with any financial reporting requirement under the securities laws, the Compensation Committee will require reimbursement or forfeiture of any excess Incentive Compensation received by any Covered Executive during the three completed fiscal years immediately preceding the date on which the Company is required to prepare an accounting restatement, without regard to such Covered Executive’s individual knowledge or responsibility related to such restatement.
Incentive Compensation
For purposes of this Policy, Incentive Compensation means any of the following; provided that, such compensation is granted, earned, or vested based wholly or in part on the attainment of a financial reporting measure:
Annual bonuses and other short- and long-term cash incentives.
(Dated November 28, 2023)
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Stock options.
Stock appreciation rights.
Restricted stock.
Restricted stock units.
Performance shares.
Performance units.
Excess Incentive Compensation: Amount Subject to Recovery
The amount to be recovered will be the excess of the Incentive Compensation paid to the Covered Executive based on the erroneous data over the Incentive Compensation that would have been paid to the Covered Executive had it been based on the restated results, as determined by the Compensation Committee.
If the Compensation Committee cannot determine the amount of excess Incentive Compensation received by the Covered Executive directly from the information in the accounting restatement, then it will make its determination based on a reasonable estimate of the effect of the accounting restatement.
Examples of Incentive Compensation include bonuses and equity awards that are based on one or more financial performance goals.
Method of Recoupment
The Compensation Committee will determine, in its sole discretion, the method for recouping Incentive Compensation hereunder.
The Compensation Committee may pursue recovery of the Incentive Compensation in the manner it chooses, including by pursuing reimbursement from the Covered Executives of all or part of the compensation awarded or paid, by electing to withhold unpaid compensation, or by rescinding or canceling unvested stock or option awards.
In the reasonable exercise of its business judgment under this Policy, the Compensation Committee may determine whether and to what extent additional action is appropriate to address the circumstances surrounding a Restatement to minimize the likelihood of any recurrence and to impose such other discipline as it deems appropriate.
No Indemnification
The Company shall not indemnify any Covered Executives against the loss of any incorrectly awarded Incentive Compensation.
Interpretation
The Compensation Committee is authorized to interpret and construe this Policy and to make all determinations necessary, appropriate, or advisable for the administration of this Policy. It is intended that this Policy be interpreted in a manner that is consistent with the requirements of Section 10D of the Exchange Act and any applicable rules or standards adopted by the Securities and Exchange Commission or any national securities exchange on which the Company’s securities are listed.
Other Rights
The requirements of this Policy are in addition to, and not in lieu of, any legal claims the Company may have or any actions that may be imposed by law enforcement agencies, regulators, administrative bodies, or other authorities. Further, the exercise by the Compensation Committee of any rights pursuant to this Policy will not impact any other rights that the Company may have with respect to any Covered Executive subject to this Policy.
(Dated November 28, 2023)
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Effective Date
This Policy implemented on November ~, 2023, shall be effective as of October 2, 2023 (the “Effective Date”) and shall apply to Incentive Compensation that is approved, awarded or granted to Covered Executives on or after that date.
Amendment; Termination
The Compensation Committee may amend this Policy from time to time in its discretion and shall amend this Policy as it deems necessary to reflect final regulations adopted by the Securities and Exchange Commission under Section 10D of the Exchange Act and to comply with any rules or standards adopted by a national securities exchange on which the Company’s securities are listed. The Compensation Committee may terminate this Policy at any time.
Other Recoupment Rights
The Compensation Committee intends that this Policy will be applied to the fullest extent of the law. The Compensation Committee may require that any employment agreement, equity award agreement, or similar agreement entered into on or after the Effective Date shall, as a condition to the grant of any benefit thereunder, require a Covered Executive to agree to abide by the terms of this Policy. Any right of recoupment under this Policy is in addition to, and not in lieu of, any other remedies or rights of recoupment that may be available to the Company pursuant to the terms of any similar policy in any employment agreement, equity award agreement, or similar agreement and any other legal remedies available to the Company.
Impracticability
The Compensation Committee shall recover any excess Incentive Compensation in accordance with this Policy unless such recovery would be impracticable, as determined by the Compensation Committee in accordance with Rule 10D-1 of the Exchange Act and the listing standards of the national securities exchange on which the Company’s securities are listed.
Acknowledgment/Condition of Eligibility
The Company will provide notice and seek acknowledgement of this Policy from each Covered Executive. However, failure to provide such notice will not nullify the terms of this Policy. After the Effective Date, any grant of Incentive Compensation to a Covered Executive will be deemed to have been made subject to the terms of this Policy. All Incentive Compensation subject to this Policy will remain subject to this policy, even if already paid, until the Policy ceases to apply to such Incentive Compensation and any other vesting conditions applicable to the Incentive Compensation are satisfied.
Successors
This Policy shall be binding and enforceable against all Covered Executives and their beneficiaries, heirs, executors, administrators or other legal representatives.
(Dated November 28, 2023)
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