UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended:
OR
For the transition period from __________ to __________
Commission
File No.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation) |
(IRS Employer Identification No.) |
(Address of principal executive offices and zip code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of exchange on which registered | ||
| The
|
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 past 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.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| ☒ | Smaller reporting company | |||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
As of November 10, 2022, there were shares outstanding of the registrant’s common stock.
EXPLANATORY NOTE
This report is the Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 of MyMD Pharmaceuticals, Inc., which was formerly known as Akers Biosciences, Inc. prior to the consummation on April 16, 2021 of the merger described below.
On April 16, 2021, pursuant to the previously announced Agreement and Plan of Merger and Reorganization, dated November 11, 2020 (the “Original Merger Agreement”), as amended by Amendment No. 1 thereto, dated March 16, 2021 (the Original Merger Agreement, as amended by Amendment No. 1, the “Merger Agreement”), by and among MyMD Pharmaceuticals, Inc., a New Jersey corporation previously known as Akers Biosciences, Inc. (the “Company”), XYZ Merger Sub Inc., a Florida corporation and a wholly owned subsidiary of the Company (“Merger Sub”), and MyMD Pharmaceuticals (Florida), Inc., a Florida corporation previously known as MyMD Pharmaceuticals, Inc. (“MyMD Florida”), Merger Sub was merged with and into MyMD Florida, with MyMD Florida continuing after the merger as the surviving entity and a wholly owned subsidiary of the Company (the “Merger”). At the effective time of the Merger, without any action on the part of any stockholder, each issued and outstanding share of pre-Merger MyMD Florida’s common stock, par value $0.001 per share (the “MyMD Florida Common Stock”), including shares underlying pre-Merger MyMD Florida’s outstanding equity awards, was converted into the right to receive (x) 0.7718 shares (the “Exchange Ratio”) of the Company’s common stock, no par value per share (the “Company Common Stock”), (y) an amount in cash, on a pro rata basis, equal to the aggregate cash proceeds received by the Company from the exercise of any options to purchase shares of MyMD Florida Common Stock outstanding at the effective time of the Merger assumed by the Company upon closing of the Merger prior to the second-year anniversary of the closing of the Merger (the “Option Exercise Period”), such payment (the “Additional Consideration”), and (z) potential milestone payments in shares of Company Common Stock up to the aggregate number of shares issued by the Company to pre-merger MyMD Florida stockholders at the closing of the Merger payable upon the achievement of certain market capitalization milestone events during the 36-month period immediately following the closing of the Merger. Immediately following the effective time of the Merger, the Company effected a 1-for-2 reverse stock split of the issued and outstanding Company Common Stock (the “Reverse Stock Split”). Upon completion of the Merger and the transactions contemplated in the Merger Agreement, (i) the former MyMD Florida equity holders owned approximately 77.05% of the outstanding equity of the Company on a fully diluted basis, assuming the exercise in full of the pre-funded warrants to purchase 986,486 shares of Company Common stock and including 4,188,315 shares of Company Common Stock underlying options to purchase shares of MyMD Florida Common Stock assumed by the company at closing and after adjustments based on the Company’s net cash at closing; and (ii) former Akers Biosciences, Inc. stockholders owned approximately 22.95% of the outstanding equity of the Company.
The Merger is being treated as a reverse recapitalization effected by a share exchange for financial accounting and reporting purposes. MyMD Florida is being treated as the accounting acquirer, as its stockholders control the Company after the Merger, even though Akers Biosciences, Inc. was the legal acquirer.
See Note 1 of the Unaudited Condensed Consolidated Financial Statements for additional information.
TABLE OF CONTENTS
| PART I – FINANCIAL INFORMATION | ||
| Item 1. | Condensed Consolidated Financial Statements (Unaudited) | 3 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 31 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 44 |
| Item 4. | Controls and Procedures | 44 |
| PART II – OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 45 |
| Item 1A. | Risk Factors | 45 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 46 |
| Item 3. | Defaults Upon Senior Securities | 46 |
| Item 4. | Mine Safety Disclosures | 46 |
| Item 5. | Other Information | 46 |
| Item 6. | Exhibits | 47 |
| Signatures | 48 | |
| 2 |
PART I - Financial Information
Item 1. Financial Statements.
MYMD PHARMACEUTICALS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
September 30, 2022 and December 31, 2021
(unaudited)
| As of | ||||||||
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and Cash Equivalents | $ | $ | ||||||
| Marketable Securities | ||||||||
| Prepaid Expenses | ||||||||
| Total Current Assets | ||||||||
| Non-Current Assets | ||||||||
| Operating Lease Right-of-Use Assets | ||||||||
| Goodwill | ||||||||
| Investment in Oravax, Inc. | ||||||||
| Total Non-Current Assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES | ||||||||
| Current Liabilities | ||||||||
| Trade and Other Payables | $ | $ | ||||||
| Operating Lease Liability | ||||||||
| Total Current Liabilities | ||||||||
| Non-Current Liabilities | ||||||||
| Due to MyMD Florida Shareholders | ||||||||
| Operating Lease Liability, net of current portion | ||||||||
| Total Non-Current Liabilities | ||||||||
| Total Liabilities | $ | $ | ||||||
| Commitments and Contingencies | ||||||||
| SHAREHOLDERS’ EQUITY | ||||||||
| Preferred Stock, | - | |||||||
| Series D Convertible Preferred Stock, shares designated, | ||||||||
| Common stock, | ||||||||
| Accumulated Deficit | ( | ) | ( | ) | ||||
| Total Shareholders’ Equity | ||||||||
| Total Liabilities and Shareholders’ Equity | $ | $ | ||||||
See accompanying notes to the condensed consolidated financial statements
| 3 |
MYMD PHARMACEUTICALS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Loss
(unaudited)
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of Sales | ||||||||||||||||
| Gross Income | ||||||||||||||||
| Administrative Expenses | ||||||||||||||||
| Research and Development Expenses | ||||||||||||||||
| Interest Expense and Debt Discount | ||||||||||||||||
| Stock Based Compensation | ||||||||||||||||
| Loss from Operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other (Income)/Expenses | ||||||||||||||||
| Interest and Dividend Income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| (Gain)/Loss on Sale of Marketable Securities | ( | ) | ||||||||||||||
| Unrealized (Gain)/Loss on Marketable Securities | ( | ) | ( | ) | ||||||||||||
| Loss on Currency Conversions | ||||||||||||||||
| Gain on Debt Forgiveness | ( | ) | ||||||||||||||
| Uninsured Casualty Loss | ( | ) | ||||||||||||||
| Total Other (Income)/Expense | ( | ) | ( | ) | ||||||||||||
| Loss Before Income Tax | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income Tax Benefit | ||||||||||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic and Diluted loss per common share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average basic and diluted common shares outstanding | ||||||||||||||||
See accompanying notes to the condensed consolidated financial statements
| 4 |
MYMD PHARMACEUTICALS, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Changes in Shareholders’ Equity
For the Nine Ended September 30, 2022 and 2021
(unaudited)
| Series D Convertible | ||||||||||||||||||||||||
| Preferred Stock | Common Stock | |||||||||||||||||||||||
| Shares | Series D | Shares | Common Stock | Accumulated Deficit | Total Equity | |||||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||||||
| Exercise of prepaid equity forward contracts for common stock | - | |||||||||||||||||||||||
| Stock-based compensation – stock options | - | - | ||||||||||||||||||||||
| Stock-based compensation – restricted stock units | - | - | ||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||||||
| Stock-based compensation – stock options | - | - | ||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||
| Balance at June 30, 2022 | ( | ) | ||||||||||||||||||||||
| Net proceeds from private placement of
common shares, net of offering costs of $ | - | |||||||||||||||||||||||
| Stock-based compensation – restricted stock units | - | - | ||||||||||||||||||||||
| Stock-based compensation – stock options | - | - | ||||||||||||||||||||||
| Stock-based compensation – warrants | - | - | ||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||
| Balance at September 30, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||||||
| Common Stock | ||||||||||||||||||||||||||||||||
| Series D | Common | |||||||||||||||||||||||||||||||
| Convertible Preferred Stock | Common Stock | Stock Par | Additional Paid-In | Accumulated | Total | |||||||||||||||||||||||||||
| Shares | Series D | Shares | No Par | $0.0001 | Capital | Deficit | Equity | |||||||||||||||||||||||||
| Balance at December 31, 2020 (restated) | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance at March 31, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||
| Reverse merger with Akers Biosciences Inc effective April 16, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Modification of the terms of pre-merger MyMD stock options per the terms of the merger agreement | - | - | ||||||||||||||||||||||||||||||
| Exercise of prepaid equity forward contracts for common stock | - | |||||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Balance at June 30, 2021 | ( | ) | ||||||||||||||||||||||||||||||
| Stock based compensation for services | ||||||||||||||||||||||||||||||||
| Exercise of warrants for common stock | ||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance at September 30, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
See accompanying notes to the condensed consolidated financial statements
| 5 |
MYMD PHARMACEUTICALS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(unaudited)
| For the Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Accrued interest/dividends | ||||||||
| Amortization of debt discount | ||||||||
| (Gain)/Loss on sale of marketable securities | ( |
) | ||||||
| Unrealized (gain)/loss on marketable securities | ( |
) | ||||||
| Loss on currency conversions | ||||||||
| Gain on forgiveness of debt | ( |
) | ||||||
| Stock based compensation | ||||||||
| Options modification expense | ||||||||
| Options issued to key employees | ||||||||
| Options issued to non-employees | ||||||||
| Warrants issued for services | ||||||||
| Restricted stock units to non-employees | ||||||||
| Change in assets and liabilities | ||||||||
| Prepaid Expenses | ( |
) | ||||||
| Trade and Other Payables | ( |
) | ||||||
| Operating Leases | ||||||||
| Net cash used by operating activities | ( |
) | ( |
) | ||||
| Cash flows from investing activities: | ||||||||
| Purchases of marketable securities | ( |
) | ( |
) | ||||
| Proceeds from sale of marketable securities | ||||||||
| Net cash received in business combination | ||||||||
| Net cash provided by investing activities | ||||||||
| Cash flows from financing activities | ||||||||
| Consumed by the payoff of the line of credit – related party | ( |
) | ||||||
| Net proceeds from line of credit - related party | ||||||||
| Net proceeds from note payable | ||||||||
| Net proceeds from issuance of common stock | ||||||||
| Net proceeds from the exercise of warrants | ||||||||
| Net cash provided (used) by financing activities | ( |
) | ||||||
| Net increase/(decrease) in cash | ( |
) | ||||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | $ | ||||||
| Supplemental cash flow information | ||||||||
| Cash paid for: | ||||||||
| Interest | $ | $ | ||||||
| Income Taxes | $ | $ | ||||||
| Supplemental Schedule of Non-Cash Financing and Investing Activities | ||||||||
| Operating lease right-of-use asset obtained in exchange for lease obligation | $ | $ | ||||||
| Investment in Oravax, Inc. included in trade and other payables. | $ | $ | ||||||
See accompanying notes to the condensed consolidated financial statements
| 6 |
MYMD PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 – Organization and Description of Business
MyMD Pharmaceuticals, Inc., previously known as Akers Biosciences, Inc., is a New Jersey corporation (“MyMD”). These condensed consolidated financial statements include four wholly owned subsidiaries as of September 30, 2022, MyMD Pharmaceuticals (Florida), Inc. (“MyMD Florida”), XYZ Merger Sub, Inc. (“Merger Sub”), Akers Acquisition Sub, Inc. and Bout Time Marketing Corporation, (together, the “Company”). All material intercompany transactions have been eliminated in consolidation.
MyMD Florida was formed in 2014 and is a Florida-based clinical development stage biopharmaceutical company that is developing its product candidate, MYMD-1, as an immuno regulator to treat autoimmune diseases, ageing-related diseases. Substantive operations began in 2016 and the Company’s Investigative New Drug application was filed with the U.S. Food and Drug Administration in December 2018. MyMD Florida completed its first-in-human Phase 1 clinical trial in December 2019. A second Phase 1 dosing study was completed in December 2021. MYMD-1 is being developed to treat age-related illnesses such as frailty and sarcopenia. MYMD-1 works by regulating the release of numerous pro-inflammatory cytokines, such as TNF-α, interleukin 6 (“IL-6”) and interleukin 17 (“IL-17”). MYMD-1 currently is being evaluated in a multicenter Phase 2 clinical trial in patients with sarcopenia and frailty (age-related muscle loss). MyMD Florida’s intellectual property portfolio consists of 16 U.S. granted patents, 15 granted foreign patents and 19 pending applications (3 US, 16 foreign).
Supera Pharmaceuticals, Inc. (“Supera”) was formed in September 2018 and is a Florida based development company that is developing its product candidate “Supera-CBD” as an FDA-approved synthetic analog of naturally grown cannabidiols. Substantially all of Supera’s research and development activities in 2020 and 2021 were related to intellectual property development and securing patents, along with product manufacturing and planning initial pre-clinical development activities. During the year ended December 31, 2021, these activities included preclinical work on Supera-CBD confirming it effectiveness in treating anxiety. The preclinical data was presented at the 4th Annual International Cannabinoid Summit describing the superior potency of Supera-CBD. Supera-CBD preclinical genotoxicity studies were completed in February 2022.
On
April 16, 2021, pursuant to the previously announced Agreement and Plan of Merger and Reorganization, dated November 11, 2020 (the “Original
Merger Agreement”), as amended by Amendment No. 1 thereto, dated March 16, 2021 the Original Merger Agreement, as amended by Amendment
No. 1 (the “Merger Agreement”), by and among MyMD, Merger Sub and MyMD Florida, Merger Sub was merged with and into MyMD
Florida, with MyMD Florida continuing after the merger as the surviving entity and a wholly owned subsidiary of MyMD (the “Merger”).
At the effective time of the Merger, without any action on the part of any stockholder, each issued and outstanding share of pre-Merger
MyMD Florida’s common stock, par value $ per share (the “MyMD Florida Common Stock”), including shares underlying
pre-Merger MyMD Florida’s outstanding equity awards, was converted into the right to receive (x) shares (the “Exchange
Ratio”) of MyMD’s common stock, no par value per share (the “Company Common Stock”), (y) an amount in cash, on
a pro rata basis, equal to the aggregate cash proceeds received by the Company from the exercise of any options to purchase shares of
MyMD Florida Common Stock outstanding at the effective time of the Merger assumed by the Company upon closing of the Merger prior to
the second-year anniversary of the closing of the Merger (the “Option Exercise Period”), such payment (the “Additional
Consideration”), and (z) potential milestone payment in shares of Company Common Stock up to the aggregate number of shares issued
by the Company to pre-Merger MyMD Florida stockholders at the closing of the Merger (the “Milestone Payments”) payable upon
the achievement of certain market capitalization milestone events during the 36-month period immediately following the closing of the
Merger (the “Milestone Period”). Immediately following the effective time of the Merger, the Company effected a
| 7 |
On April 16, 2021, MyMD Florida entered into an Asset Purchase Agreement with Supera, a related company through common control, in which Supera was acquired by MyMD Florida through the issuance of shares of pre-Merger MyMD Florida’s common stock. The Supera entity was dissolved pursuant to this transaction.
In connection with the closing of the Merger, the Company changed its name to MyMD Pharmaceuticals, Inc. and the Company’s Common Stock listed on The Nasdaq Capital Market, previously trading through the close of business on April 16, 2021 under the trading symbol “AKER”, commenced trading on The Nasdaq Capital Market, on a post-Reverse Stock Split adjusted basis, under the trading symbol “MYMD” on April 19, 2021.
Note 2 – Significant Accounting Policies
(a) Basis of Presentation
The Condensed Consolidated Financial Statements of the Company are prepared in U.S. Dollars and in accordance with accounting principles generally accepted in the United States of America (US GAAP).
The accompanying unaudited condensed consolidated financial statements have been prepared by the Company. These statements include all adjustments (consisting only of normal recurring adjustments) which management believes necessary for a fair presentation of the statements and have been prepared on a consistent basis using the accounting policies described in Note 2 Significant Accounting Policies included in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission on March 31, 2022 (the “2021 Annual Report”). Certain financial information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the accompanying disclosures are adequate to make the information presented not misleading. The Notes to Consolidated Financial Statements included in the 2021 Annual Report should be read in conjunction with the accompanying interim condensed consolidated financial statements. The interim operating results for the three and nine months ended September 30, 2022 may not be necessarily indicative of the operating results expected for the full year.
The
Company effected a
(b) Use of Estimates and Judgments
The preparation of financial statements in conformity with US GAAP requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements is included in the following notes for recording research and development expenses, impairment of intangible assets and the valuation of share-based payments.
(c) Functional and Presentation Currency
These condensed consolidated financial statements are presented in U.S. Dollars, which is the Company’s functional currency. All financial information has been rounded to the nearest dollar. Foreign Currency Transaction Gains or Losses, resulting from cash balances denominated in Foreign Currencies, are recorded in the Condensed Consolidated Statements of Operations and Comprehensive Loss.
| 8 |
(d) Comprehensive Loss
The Company follows Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) 220 in reporting comprehensive loss. Comprehensive income is a more inclusive financial reporting methodology that includes disclosure of certain financial information that historically has not been recognized in the calculation of net income. Since the Company has no items of other comprehensive income (loss), comprehensive loss is equal to net loss.
(e) Cash and Cash Equivalents
The Company considers all highly liquid investments, which include short-term bank deposits (up to three months from date of deposit) that are not restricted as to withdrawal date or use, to be cash equivalents.
(f) Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, marketable securities, receivables and trade and other payables. The carrying value of cash and cash equivalents, receivables and trade and other payables approximate their fair value because of their short maturities.
The framework for measuring fair value provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under FASB ASC 820 are described as follows:
| Level 1 | Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company can access. | ||
| Level 2 | Inputs to the valuation methodology include: | ||
| ● | quoted prices for similar assets or liabilities in active markets; | ||
| ● | quoted prices for identical or similar assets or liabilities in inactive markets; | ||
| ● | inputs other than quoted prices that are observable for the asset or liability; | ||
| ● | inputs that are derived principally from or corroborated by observable market data by correlation or other means | ||
| If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability. | |||
| Level 3 | Inputs to the valuation methodology are unobservable and significant to the fair value measurement. | ||
The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Valuation techniques maximize the use of relevant observable inputs and minimize the use of unobservable inputs.
| 9 |
(f) Fair Value of Financial Instruments, continued
The following is a description of the valuation methodologies used for assets measured at fair value as of September 30, 2022 and December 31, 2021.
Marketable Securities: Valued using quoted prices in active markets for identical assets.
| Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) | Quoted Prices for Similar Assets or Liabilities in Active Markets (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||
| Marketable securities at September 30, 2022 | $ | $ | $ | |||||||||
| Marketable securities at December 31, 2021 | $ | $ | $ | |||||||||
Marketable securities are classified as available for sale and are valued at fair market value. Maturities of the securities are less than one year.
As
of September 30, 2022, the Company held certain mutual funds, which, under FASB ASC 321-10, were considered equity investments. As such,
the change in fair value in the three and nine months ended September 30, 2022 was a gain of $
Gains
and losses resulting from the sales of marketable securities were losses of $
Proceeds
from the sales of marketable securities were $
(g) Prepaid Expenses
Prepaid expenses represent expenses paid prior to the date that the related services are rendered or used are comprised principally of prepaid insurance and research and development expenses.
(h) Concentrations
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash on deposit with financial institutions and accounts receivable. At times, the Company’s cash in banks is in excess of the FDIC insurance limit. The Company has not experienced any loss as a result of these cash deposits. These cash balances are maintained with three banks as of September 30, 2022.
(i) Risk Management of Cash and Investments
It is the Company’s policy to minimize the Company’s capital resources to investment risks, prioritizing the preservation of capital over investment returns. Investments are maintained in securities, primarily publicly traded, short-term money market funds based on highly rated federal, state and corporate bonds, that minimize the risk to the Company’s capital resources and provide ready access to funds.
The Company’s investment portfolios are regularly monitored for risk and are held with one brokerage firm.
| 10 |
(j) Investments
Investments recorded using the cost method will be assessed for any decrease in value that has occurred that is other than temporary and the other than temporary decrease in value shall be recognized. As and when circumstances and facts change, the Company will evaluate the Company’s ability to significantly influence operational and financial policy to establish a basis for converting the investment accounted for using the cost method to the equity method of valuation in accordance with FASB ASC 323.
In accordance with FASB ASC 323, the Company recognizes investments in joint ventures based upon the Company’s ability to significantly influence the operational or financial policies of the joint venture. An objective judgment of the level of influence is made at the time of the investment based upon several factors including, but not limited to the following:
| a) | Representation on the Board of Directors | |
| b) | Participation in policy-making processes | |
| c) | Material intra-entity transactions | |
| d) | Interchange of management personnel | |
| e) | Technological dependencies | |
| f) | Extent of ownership and the ability to influence decision making based upon the makeup of other owners when the shareholder group is small. |
The Company follows the equity method for valuating investments in joint ventures when the existence of significant influence over operational and financial policy has been established, as determined by management; otherwise, the Company will valuate these investments using the cost method.
The investment in Oravax Medical, Inc. (“Oravax”) (Note 3) is accounted for using the cost method.
(k) Property, Plant and Equipment
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Costs include expenditures that are directly attributable to the acquisition of the asset.
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognized within “other (income)/expense” in the Condensed Consolidated Statements of Comprehensive Loss.
Depreciation is recognized over the estimated useful lives of the property, plant and equipment. Leased assets are depreciated over the shorter of the lease term or their useful lives.
The estimated useful lives for the current and comparative periods are as follows:
| Useful Life | ||
| (in years) | ||
| Plant and equipment | ||
| Furniture and fixtures | ||
| Computer equipment & software | ||
| Leasehold Improvements |
Depreciation methods, useful lives and residual values are reviewed at each reporting date.
(l) Intangible Assets
The Company’s long-lived intangible assets, other than goodwill, are assessed for impairment when events or circumstances indicate there may be an impairment. These assets were initially recorded at their estimated fair value at the time of acquisition and assets not acquired in acquisitions were recorded at historical cost. However, if their estimated fair value is less than the carrying amount, other intangible assets with indefinite lives are reduced to their estimated fair value through an impairment charge in the Condensed Consolidated Statements of Comprehensive Loss.
| 11 |
Patents and Trade Secrets
Propriety protection for the Company’s products, technology and process is important to its competitive position. As of October 31, 2022, the Company has 16 issued U.S. patents, 15 foreign patents, three pending U.S. patent applications and 16 foreign patent applications pending in such jurisdictions as Australia, Canada, China, European Union, Israel, Japan and South Korea, which if issued are expected to expire between 2036 and 2041. Management intends to protect all other intellectual property (e.g. copyrights, trademarks and trade secrets) using all legal remedies available to the Company.
The Company records expenses related to the application for and maintenance of patents as a component of research and development expenses on the Condensed Consolidated Statement of Comprehensive Loss.
Patent Costs
Patents may be purchased from third parties. The costs of acquiring the patent are capitalized as patent costs if it represents a future economic benefit to the Company. Once a patent is acquired it is amortized over its remaining useful life and assessed for impairment when necessary.
Other Intangible Assets
Other intangible assets that are acquired by the Company, which have definite useful lives, are measured at cost less accumulated amortization and accumulated impairment losses.
Amortization
Amortization is recognized on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use. The estimated useful lives for the current and comparative periods are as follows:
| Useful Life | ||
| (in years) | ||
| Patents and trademarks |
(m) Goodwill
Goodwill is evaluated annually for impairment or whenever we identify certain triggering events or circumstances that would more likely than not reduce the fair value below its carrying amount. Events or circumstances that might indicate an interim evaluation is warranted include, among other things, unexpected adverse business conditions, economic factors (for example, the loss of key personnel), supply costs, unanticipated competitive activities, and acts by governments and courts.
(n) Recoverability of Long-Lived Assets
In accordance with FASB ASC 360-10-35 “Impairment or Disposal of Long-lived Assets”, long-lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable or that the useful lives of those assets are no longer appropriate. The Company evaluates at each balance sheet date whether events and circumstances have occurred that indicate possible impairment.
| 12 |
The Company determines the existence of such impairment by measuring the expected future cash flows (undiscounted and without interest charges) and comparing such amount to the carrying amount of the assets. An impairment loss, if one exists, is then measured as the amount by which the carrying amount of the asset exceeds the discounted estimated future cash flows. Assets to be disposed of are reported at the lower of the carrying amount or fair value of such assets less costs to sell. Asset impairment charges are recorded to reduce the carrying amount of the long-lived asset that will be sold or disposed of to their estimated fair values. Charges for the asset impairment reduce the carrying amount of the long-lived assets to their estimated salvage value in connection with the decision to dispose of such assets.
(o) Right-of-Use Assets
The
Company leased a facility in Tampa, Florida (“Hyde Park”) under an operating lease (“Hyde Park Lease”) with annual
rentals of $
The
Company leased an aircraft under an operating lease (“Supera Aviation Lease”) with annual rentals of $
The
Company leased a facility in Baltimore, Maryland (“2020 Wolfe St”) under an operating lease (“2020 Baltimore Lease”)
with annual rentals of $
The
Company leases a facility in Baltimore, Maryland (“2021 Wolfe St”) under an operating lease (“2021 Baltimore Lease”)
with annual rentals of $
The
Company leases a facility in Tampa, Florida (“Platt St”) under an operating lease (“Platt Street Lease”) with
annual rentals of $
On January 1, 2019 (“Effective Date”), the Company adopted FASB ASC, Topic 842, Leases (“ASC 842”), which increases transparency and comparability by recognizing a lessee’s rights and obligations resulting from leases by recording them on the balance sheet as lease assets and lease liabilities. The new guidance requires the recognition of the right-of-use (“ROU”) assets and related operating and finance lease liabilities on the balance sheet. The Company adopted the new guidance using the modified retrospective approach on January 1, 2019.
The Company elected the package of practical expedients permitted within the standard, which allows an entity to forgo reassessing (i) whether a contract contains a lease, (ii) classification of leases, and (iii) whether capitalized costs associated with a lease meet the definition of initial direct costs. Also, the Company elected the expedient allowing an entity to use hindsight to determine the lease term and impairment of ROU assets and the expedient to allow the Company to not have to separate lease and non-lease components. The Company has also elected the short-term lease accounting policy under which the Company would not recognize a lease liability or ROU asset for any lease that at the commencement date has a lease term of twelve months or less and does not include a purchase option that the Company is more than reasonably certain to exercise.
| 13 |
For contracts entered into on or after the Effective Date, at the inception of a contract, the Company will assess whether the contract is, or contains, a lease. The Company’s assessment is based on: (i) whether the contract involves the use of a distinct identified asset, (ii) whether the Company obtained the right to substantially all the economic benefit from the use of the asset throughout the period, and (iii) whether the Company has the right to direct the use of the asset. Leases entered into prior to January 1, 2020, which were accounted for under ASC 840, were not reassessed for classification.
For operating leases, the lease liability is initially and subsequently measured at the present value of the unpaid lease payments. The Company generally uses its incremental borrowing rate as the discount rate for leases, unless an interest rate is implicitly stated in the lease. The present value of the lease payments is calculated using the incremental borrowing rate for operating leases, which was determined using a portfolio approach based on the rate of interest that the Company would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. The lease term for all the Company’s leases includes the non-cancellable period of the lease plus any additional periods covered by either a Company option to extend the lease that the Company is reasonably certain to exercise, or an option to extend the lease controlled by the lessor. All ROU assets are reviewed for impairment.
Lease expense for operating leases consists of the lease payments plus any initial direct costs and is recognized on a straight-line basis over the lease term.
The Company’s operating leases are comprised of the Hyde Park Lease, the 2021 Baltimore Lease and the Platt Street Lease on the Condensed Consolidated Balance Sheet. The information related to these leases are presented below:
| As of September 30, 2022 | As of December 31, 2021 | |||||||||||||||||||||||
| Platt Street | 2021 Baltimore | Hyde Park | 2021 Baltimore | |||||||||||||||||||||
| Balance Sheet Location | Lease | Lease | Total | Lease | Lease | Total | ||||||||||||||||||
| Operating Lease | ||||||||||||||||||||||||
| Lease Right of Use | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Lease Payable, current | ||||||||||||||||||||||||
| Lease Payable - net of current | ||||||||||||||||||||||||
The following provides details of the Company’s lease expense:
| Three Months Ended September 30, 2022 | Three Months Ended September 30, 2021 | |||||||||||||||||||||||||||
| Platt Street | 2021 Baltimore | Supera Aviation | Hyde Park | 2020 Baltimore | ||||||||||||||||||||||||
| Lease Expenses | Lease | Lease | Total | Lease | Lease | Lease | Total | |||||||||||||||||||||
| Operating Leases | ||||||||||||||||||||||||||||
| Lease Costs | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Nine Months Ended September 30, 2022 | Nine Months Ended September 30, 2021 | |||||||||||||||||||||||||||||||
| Hyde Park | Platt Street | 2021 Baltimore | Supera Aviation | Hyde Park | 2020 Baltimore | |||||||||||||||||||||||||||
| Lease Expenses | Lease | Lease | Lease | Total | Lease | Lease | Lease | Total | ||||||||||||||||||||||||
| Operating Leases | ||||||||||||||||||||||||||||||||
| Lease Costs | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| 14 |
Other information related to leases is presented below:
| As of September 30, 2022 | ||||||||||||||||
| Hyde | Platt | 2021 Baltimore | ||||||||||||||
| Other Information | Park Lease | Street Lease | Lease | Total | ||||||||||||
| Operating Leases | ||||||||||||||||
| Operating cash used | $ | $ | $ | $ | ||||||||||||
| Average remaining lease term | ||||||||||||||||
| Average discount rate | % | % | % | % | ||||||||||||
As of September 30, 2022, the annual minimum lease payments of the Company’s operating lease liabilities were as follows:
| As of September 30, 2022 | ||||||||||||
| Platt | 2021 Baltimore | |||||||||||
| Street Lease | Lease | Total | ||||||||||
| For Years Ending September 30, | ||||||||||||
| 2022 (three months) | $ | $ | $ | |||||||||
| 2023 | ||||||||||||
| 2024 | ||||||||||||
| 2025 | ||||||||||||
| Total future minimum lease payments, undiscounted | $ | $ | $ | |||||||||
| Less: Imputed interest | ||||||||||||
| Present value of future minimum lease payments | $ | $ | $ | |||||||||
(p) Revenue Recognition
The Company will recognize revenue under ASC 606, Revenue from Contracts with Customers. The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods and services transferred to the customer. The following five steps are applied to achieve that core principle:
| 1) | Identify the contract with the customer | |
| 2) | Identify the performance obligations in the contract | |
| 3) | Determine the transaction price | |
| 4) | Allocate the transaction price to the performance obligations in the contract | |
| 5) | Recognize revenue when the company satisfies a performance obligation |
(q) Income Taxes
The Company utilizes an asset and liability approach for financial accounting and reporting for income taxes. The provision for income taxes is based upon income or loss after adjustment for those permanent items that are not considered in the determination of taxable income. Deferred income taxes represent the tax effects of differences between the financial reporting and tax basis of the Company’s assets and liabilities at the enacted tax rates in effect for the years in which the differences are expected to reverse.
The Company evaluates the recoverability of deferred tax assets and establishes a valuation allowance when it is more likely than not that some portion or all the deferred tax assets will not be realized. Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In management’s opinion, adequate provisions for income taxes have been made. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.
Tax benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon settlement. A liability for “unrecognized tax benefits” is recorded for any tax benefits claimed in the Company’s tax returns that do not meet these recognition and measurement standards. As of September 30, 2022, and December 31, 2021, no liability for unrecognized tax benefits was required to be reported.
| 15 |
There is no income tax benefit for the losses for the three and nine months ended September 30, 2022 and 2021 since management has determined that the realization of the net deferred assets is not assured and has created a valuation allowance for the entire amount of such tax benefits.
The Company’s policy for recording interest and penalties associated with tax audits is to record such items as a component of general and administrative expense. There were no amounts accrued for penalties and interest for the three and nine months ended September 30, 2022 and 2021. The Company does not expect its uncertain tax position to change during the next twelve months. Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its position.
Basic earnings per common share is based on the weighted average number of shares outstanding during the periods presented. Diluted earnings per share is computed using the weighted average number of common shares plus dilutive common share equivalents outstanding during the period. Potential common shares that would have the effect of increasing diluted earnings per share are considered anti-dilutive.
Diluted net loss per share is computed using the weighted average number of shares of common and dilutive potential common stock outstanding during the period.
As the Company reported a net loss for the three and nine months ended September 30, 2022 and 2021, common stock equivalents were anti-dilutive.
| For the Three and Nine Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Stock Options | ||||||||
| Warrants to purchase common stock | ||||||||
| Pre-funded Warrants to purchase common stock | ||||||||
| Series D Preferred Convertible Stock | ||||||||
| Warrants to purchase Series C Preferred stock | ||||||||
| Total potentially dilutive shares | ||||||||
The Company accounts for stock-based compensation under the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 718, “Compensation - Stock Compensation”, which requires the measurement and recognition of compensation expense for all stock-based awards made to employees and directors based on estimated fair values on the grant date. The Company estimates the fair value of stock-based awards on the date of grant using the Black-Scholes model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods using the straight-line method. In June 2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting (the “2018 Update”). The amendments in the 2018 Update expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. Prior to the 2018 Update, Topic 718 applied only to share-based transactions to employees. Consistent with the accounting requirement for employee share-based payment awards, nonemployee share-based payment awards within the scope of Topic 718 are measured at grant-date fair value of the equity instruments that an entity is obligated to issue when the good has been delivered or the service has been rendered and any other conditions necessary to earn the right to benefit from the instruments have been satisfied.
| 16 |
The Company has elected to account for forfeiture of stock-based awards as they occur.
(t) Reclassifications
Certain prior year amounts have been reclassified to conform to the current year’s presentation.
(u) Recently Issued Accounting Pronouncements
Recently Issued Accounting Pronouncements Adopted
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt - Modifications and Extinguishments (Subtopic 470-50), Compensation - Stock Compensation (Topic 718), and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40), Issuer’s Accounting for Certain Modifications or Exchanges or Freestanding Equity - Classified Written Call Options. The amendments in this Update clarify an issuer’s accounting for modifications or exchanges of freestanding equity - classified written call options (for example, warrants) that remain equity classified after modification or exchange. The amendments are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. Early adoption is permitted for all entities, including adoption in an interim period. If an entity elects to early adopt the amendments in this Update in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes the interim period. The adoption of this ASU had no material impact on the Company’s condensed consolidated financial statements and related disclosure.
Recently Issued Accounting Pronouncements Not Adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (“ASU-2016-13”). ASU 2016-13 affects loans, debt securities, trade receivables, and any other financial assets that have the contractual right to receive cash. The ASU requires an entity to recognize expected credit losses rather than incurred losses for financial assets. ASU 2016-13 is effective for the fiscal year beginning after December 15, 2022, including interim periods within that fiscal year. The Company expects that there would be no material impact on the Company’s condensed consolidated financial statements upon the adoption of this ASU.
Note 3 – Recent Developments, Liquidity and Management’s Plans
Acquisition and Disposition of Cystron
The
Company acquired
| 17 |
On March 18, 2021, the Company and the Cystron Sellers, which are also shareholders of Oravax, entered into a Termination and Release Agreement terminating the MIPA effective upon consummation of the Contribution Agreement. In addition, the Cystron Sellers agreed to waive any change of control payment triggered under the MIPA as a result of the Merger.
On April 16, 2021, pursuant to the Contribution and Assignment Agreement, dated March 18, 2021 (the “Contribution Agreement”) by and among the Company, Cystron, Oravax and, for the limited purpose set forth therein, Premas, the parties consummated the transactions contemplated therein. Pursuant to the Contribution Agreement, among other things, the Company caused Cystron to contribute substantially all of the assets associated with its business of developing and manufacturing Cystron’s COVID-19 vaccine candidate to Oravax (the “Contribution Transaction”).
As
of December 31, 2021, all amounts due to Premas under the Contribution Agreement have been paid. (Note: Pursuant to the Contribution
Agreement, a total of $
Agreement and Plan of Merger and Reorganization
On November 11, 2020, MyMD, Merger Sub, and MyMD Florida entered into the Merger Agreement (Note 1).
In
accordance with ASC 805, the Company accounted for the transaction as a reverse merger with Akers Biosciences, Inc. (“Akers”)
as the legal acquirer and pre-Merger MyMD Florida as the accounting acquirer. As a result of the transaction, the Company recognized
Goodwill totaling $
Akers’ valuation was based upon common shares outstanding and vested restricted stock units (“RSU’) with a fair market value of $ per share, the closing price of Akers common shares on the NASDAQ Stock Exchange on April 16, 2021.
| Valuation Analysis | ||||
| Total Consideration | $ | |||
| Cash and Cash Equivalents | ||||
| Marketable Securities | ||||
| Other Receivables | ||||
| Prepaid Expenses | ||||
| Investment in Oravax, Inc. | ||||
| Trade and Other Payables | ( | ) | ||
| Net Tangible Assets Acquired | $ | |||
| Excess of Purchase Price Over Net Assets Acquired to be Allocated to Goodwill | $ | |||
| 18 |
The holders of approximately % of outstanding shares of Company Common Stock are subject to lockup agreements pursuant to which such stockholders have agreed, except in limited circumstances, not to transfer, grant an option with respect to, sell, exchange, pledge or otherwise dispose of, or encumber, any shares of Company capital stock for 180 days following the effective time of the Merger. For the subsequent 180 days after the initial 180-day lock-up period, any disposal of Company Common Stock must be only in accordance with the volume limitations set forth in paragraph (2) of Rule 144 promulgated under the Securities Act of 1933, as amended (the “Act”).
Pursuant to the terms and conditions of the Merger Agreement, not later than 30 days after the Option Exercise Period, the Company will pay stockholders of MyMD Florida the Additional Consideration from the exercise of any MyMD Florida options assumed by the Company prior to the second-year anniversary of the Merger; provided, however, the amount of such payment will not exceed the maximum amount of cash consideration that may be received by stockholders of MyMD Florida without affecting the intended tax consequences of the Merger. As of the date of this report, there have been no exercises of the MyMD Florida options assumed by the Company.
Under the terms of the Merger Agreement, the Company has agreed to pay contingent consideration in combined company common stock to MYMD Florida stockholders if the combined company meets certain market capitalization milestones, referred to as Milestone Events, during the period commencing on the business day following the closing date of the merger and ending on the 36-month anniversary of such date, referred to as the Milestone Period. The Milestone Events and corresponding Milestone Payments are set forth in the table below.
| Milestone Event | Milestone Payment | |
| $ | ||
| $ | ||
| 19 |
For purposes of the table above, “market capitalization” means, with respect to any trading day, the product of (i) the total outstanding shares of the combined company common stock and (ii) the volume weighted average trading price for the combined company common stock for such trading day.
Liquidity
As
of September 30, 2022, the Company’s cash on hand was $
The Company evaluated the current cash requirements for operations in conjunction with management’s strategic plan and believes that the Company’s current financial resources as of the date of the issuance of these condensed consolidated financial statements are sufficient to fund its current operating budget and contractual obligations as of September 30, 2022 as they fall due within the next twelve-month period, alleviating any substantial doubt raised by the Company’s historical operating results and satisfying its estimated liquidity needs for twelve months from the issuance of these condensed consolidated financial statements.
Note 4 – Trade and Other Payables
Trade and other payables consist of the following:
September 30, 2022 | December 31, 2021 | |||||||
| Accounts Payable – Trade | $ | $ | ||||||
| Accrued Expenses | ||||||||
| $ | $ | |||||||
| 20 |
Note 5 – Notes Payable
Secured Promissory Note
On
November 11, 2020, concurrently with the execution of the Merger Agreement, the Company agreed to provide a bridge loan up to an aggregate
principal amount of $
As
of September 30, 2022 and December 31, 2021 MyMD had advanced MyMD Florida $
Equity incentive Plans
2013 Stock Incentive Plan
On January 23, 2014, the Company adopted the 2013 Stock Incentive Plan (“2013 Plan”). The 2013 Plan was amended by the Board on January 9, 2015 and September 30, 2016, and such amendments were ratified by shareholders on December 7, 2018. The 2013 Plan provides for the issuance of up to shares of the Company’s common stock. As of September 30, 2022, grants of restricted stock and options to purchase shares of Common Stock have been issued pursuant to the 2013 Plan, and shares of Common Stock remain available for issuance.
2016 Stock Incentive Plan
On December 21, 2016, the shareholders approved, and the Company adopted the 2016 Stock Incentive Plan (“2016 Plan”). The 2016 Plan provides for the issuance of up to shares of the Company’s common stock. As of September 30, 2022, grants of options to purchase shares of Common Stock have been issued pursuant to the 2016 Plan, and shares of Common Stock remain available for issuance.
2017 Stock Incentive Plan
On August 7, 2017, the shareholders approved, and the Company adopted the 2017 Stock Incentive Plan (“2017 Plan”). The 2017 Plan provides for the issuance of up to shares of the Company’s common stock. As of September 30, 2022, grants of restricted stock and options to purchase shares of Common Stock have been issued pursuant to the 2017 Plan, and shares of Common Stock remain available for issuance.
2018 Stock Incentive Plan
On December 7, 2018, the shareholders approved, and the Company adopted the 2018 Stock Incentive Plan (“2018 Plan”). On August 27, 2020, the 2019 Plan was modified to increase the total authorized shares. The 2018 Plan, as amended, provides for the issuance of up to shares of the Company’s common stock. As of September 30, 2022, grants of RSUs and restricted stock to purchase shares of Common Stock have been issued pursuant to the 2018 Plan, and shares of Common Stock remain available for issuance.
| 21 |
2021 Stock Incentive Plan
On April 15, 2021, the shareholders approved, and the Company adopted the 2021 Stock Incentive Plan (“2021 Plan”). The 2021 Plan provides for the issuance of up to shares of the Company’s common stock. As of September 30, 2022, grants of RSUs and stock options to purchase shares of Common Stock have been issued pursuant to the 2021 Plan, and shares of Common Stock remain available for issuance.
Stock Options
| Weighted | ||||||||||||||||||||
| Average | ||||||||||||||||||||
| Weighted | Weighted | Remaining | ||||||||||||||||||
| Number | Average | Average | Contractual | Aggregate | ||||||||||||||||
| of | Exercise | Grant Date | Term | Intrinsic | ||||||||||||||||
| Shares | Price | Fair Value | (years) | Value | ||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | |||||||||||||||||
| Granted | $ | |||||||||||||||||||
| Exercised | - | - | - | |||||||||||||||||
| Forfeited | - | - | ||||||||||||||||||
| Canceled/Expired | - | - | ||||||||||||||||||
| Balance at September 30, 2022 | $ | |||||||||||||||||||
| Exercisable as of September 30, 2022 | $ | |||||||||||||||||||
The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the closing stock price of $ for the Company’s common shares on September 30, 2022 and the closing stock price of $ for the Company’s common shares on December 31, 2021.
On
January 28, 2022, the Company’s Compensation Committee approved the issuance of stock options under the 2021 Stock Incentive
Plan. These shares had a grant date fair value of $ per share or a cumulative fair market value of $
On
June 21, 2022, the Company granted stock options under the 2021 Stock Incentive Plan to a third-party consultant in consideration
of services rendered. These shares had a grant date fair value of $ per share or a cumulative fair market value of $
During
the three months ended September 30, 2022 and 2021, the Company incurred stock option expenses totaling $
Assumption of MyMD Florida Stock Options
In 2016, pre-Merger MyMD Florida adopted the MyMD Pharmaceuticals, Inc. Amended and Restated 2016 Equity Incentive Plan (the “2016 Plan”). The 2016 Plan provided for the issuance of up to shares of pre-Merger MyMD Florida common stock. As of September 30, 2022, options to purchase shares of common stock have been issued pursuant to the plan and 0 shares of common stock remain available for issuance.
Pursuant to the Merger Agreement, effective as of the effective time of the Merger, the Company assumed pre-Merger MyMD Florida’s Second Amendment to Amended and Restated 2016 Stock Incentive Plan (the “2016 Plan”), assuming all of pre-Merger MyMD Florida’s rights and obligations with respect to the options issued thereunder. As of the effective date of the Merger, no additional awards could be issued under the 2016 Plan.
| 22 |
In addition, under the terms of the Merger Agreement, the Company assumed all of pre-Merger MyMD Florida’s rights and obligations under pre-Merger MyMD Florida’s stock options that were outstanding immediately prior to the effective time of the Merger, and each such stock option, whether or not vested, was converted into a stock option representing the right to purchase shares of Company Common Stock, on terms substantially the same as those in effect immediately prior to the effective time, except that the number of shares of Company Common Stock issuable and the exercise price per share of such stock options was adjusted by the Exchange Ratio. Additionally, the number of shares and exercise price per share of Company Common Stock under the assumed pre-Merger MyMD Florida stock options was further adjusted by the Reverse Stock Split.
The
Company assumed
Restricted Stock Units
On September 11, 2020, the Compensation Committee of the Board of Directors approved grants totaling Restricted Stock Units to the Company’s four directors. Each RSU had a grant date fair value of $ which shall be amortized on a straight-line basis over the vesting period into administrative expenses within the Consolidated Statement of Comprehensive Loss. .
On April 16, 2021, concurrently with the closing of the Merger, pursuant to the terms of the RSU Agreements between the Company and four board of directors, the RSUs granted on September 11, 2020 under the 2018 Plan, as amended, accelerated and vested in full.
Per the terms of the RSU agreements, the Company, at the Company’s sole discretion, may settle the RSUs in cash, or part cash and part common stock. As there is no intention to settle the RSUs in cash, the Company accounted for these RSUs as equity.
Pre-merger Akers Biosciences, Inc. recorded expenses totaling $ for the acceleration of the vesting of RSUs, the holders immediately surrendered RSUs with a fair market value of $ for the withholding of federal and state income taxes, as directed by the holders, which was recorded as Payroll Taxes Payable on the date of the Merger. The withholding obligations were paid by the Company on June 30, 2021. As of November 10, 2022, the vested RSUs have not been converted to common shares of the Company.
| 23 |
On October 14, 2021, the Compensation Committee of the Board of Directors approved grants totaling Restricted Stock Units to the Company’s six directors and seven key employees. Each RSU had a grant date fair value of $ which will be amortized upon vesting into administrative expenses within the Condensed Consolidated Statement of Comprehensive Loss. Such RSUs were granted under the 2021 Plan. Vesting of each RSU is:
| ● | ||
| ● | ||
| ● | ||
| ● | In the event that (i) a change in control occurs or (ii) the participant incurs a termination of service by the Company without cause or due to the participant’s death or total and permanent disability, then all unvested units shall become vested units immediately upon the occurrence of such event. |
As of September 30, 2022, none of the vesting milestones have been met.
On January 28, 2022, the Compensation Committee of the Board of Directors approved a grant of RSUs to a sub-contractor with a grant date fair value of $ and vested immediately. Such RSUs were granted under the 2021 Plan. The Company recorded expenses of $ and $ which is included Stock Based Compensation on the Condensed Consolidated Statement of Comprehensive Loss during the three and nine months ended September 30, 2022.
On July 7, 2022, the Compensation Committee of the Board of Directors approved a grant of RSUs to a sub-contractor with a grant date fair value of $ and vested immediately. Such RSUs were granted under the 2021 Plan. The Company recorded expenses of $ which is included Stock Based Compensation on the Condensed Consolidated Statement of Comprehensive Loss during the three and nine months ended September 30, 2022.
The following is the status of outstanding restricted stock units outstanding as of September 30, 2022 and changes for the nine months ended September 30, 2022:
| Weighted | ||||||||
| Average | ||||||||
| Number of | Grant Date | |||||||
| RSUs | Fair Value | |||||||
| Balance at December 31, 2021 | $ | |||||||
| Granted | ||||||||
| Exercised | ||||||||
| Forfeited | ||||||||
| Canceled/Expired | ||||||||
| Balance at September 30, 2022 | $ | $ | ||||||
| Exercisable as of September 30, 2022 | $ | $ | ||||||
As
of September 30, 2022 and December 31, 2021, the unamortized value of the RSUs was $
Note 7 – Equity
Preferred Stock
The holders of preferred shares or preferred warrants are entitled to vote per share, as limited by the Certificate of Designation for each class of preferred shares or warrants, at meetings of the Company. As of September 30, 2022, shares of Preferred Stock were authorized and four classes of Preferred Stock or Warrants are designated.
| 24 |
Series D Convertible Preferred Stock
On
March 24, 2020, the Company designated Series D Convertible Preferred Shares,
A
holder of Preferred Stock is entitled at any time to convert any whole or partial number of shares of Preferred Stock into shares of
the Company’s common stock determined by dividing the Stated Value of the Preferred Stock being converted by the conversion price
of $
Subject to the Beneficial Ownership Limitation, on any matter presented to the Company’s stockholders for their action or consideration at any meeting of the Company’s stockholders (or by written consent of stockholders in lieu of a meeting), each holder of Preferred Stock will be entitled to cast the number of votes equal to the number of whole shares of the Company’s common stock into which the shares of Preferred Stock beneficially owned by such holder are convertible as of the record date for determining stockholders entitled to vote on or consent to such matter (taking into account all Preferred Stock beneficially owned by such holder). Except as otherwise required by law or by the other provisions of the Company’s certificate of incorporation, the holders of Preferred Stock will vote together with the holders of the Company’s common stock and any other class or series of stock entitled to vote thereon as a single class.
A holder of Preferred Stock shall be entitled to receive dividends as and when paid to the holders of the Company’s common stock on an as-converted basis.
As of September 30, 2022, the Company had shares of Series D Convertible Preferred Stock outstanding which represent underlying shares of the Company Common Stock.
Common Stock
Pursuant to the Merger Agreement, on April 16, 2021, the Company filed an amended and restated certificate of incorporation (the “A&R Charter”) with the Secretary of State of the State of New Jersey, which was approved by the Company’s stockholders on April 15, 2021. Among other things, the A&R Charter (i) changed the Company’s name to MyMD Pharmaceuticals, Inc., (ii) increased the number of shares of Company Common Stock available from shares to a total of shares of the Company’s Common Stock, (iii) changed the structure of the board of directors from a classified board of three classes to a non-classified board of a single class, and (iv) simplified and consolidated various provisions.
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The holders of common shares are entitled to one vote per share at meetings of the Company.
On
February 11, 2021, shares of common stock issued pursuant to that certain Securities Purchase Agreement, dated November 11, 2020,
by and between the Company and certain institutional and accredited investors were cancelled and
On May 18, 2021, prefunded warrants were exercised in exchange for shares of common stock.
On
August 5, 2021, the Company issued shares of the Company’s common stock with a fair market value of $
On
December 9, 2021, holders of common stock options were exercised for shares of the Company’s common stock at an exercise
price of $ per common share. The net proceeds of $
On February 16, 2022, prefunded warrants were exercised in exchange for shares of common stock.
On
August 17, 2022, pursuant to a securities purchase agreement with certain institutional and accredited investors, dated August 15,
2022, the Company issued and sold in a registered direct offering (the “August Offering”) an aggregate of
Common Stock Warrants
The table below summarizes the warrant activity for the nine months ended September 30, 2022:
| Weighted | Average | |||||||||||||||
| Average | Remaining | Aggregate | ||||||||||||||
| Number of | Exercise | Contractual | Intrinsic | |||||||||||||
| Warrants | Price | Term (years) | Value | |||||||||||||
| Balance at December 31, 2021 | $ | $ | ||||||||||||||
| Granted | - | |||||||||||||||
| Exercised | - | - | ||||||||||||||
| Forfeited | - | - | ||||||||||||||
| Canceled/Expired | ( | ) | - | - | ||||||||||||
| Balance at September 30, 2022 | $ | $ | ||||||||||||||
| Exercisable as of September 30, 2022 | $ | $ | ||||||||||||||
The
aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the closing stock price
of $
On
July 7, 2022, the Company issued warrants to purchase up to
shares of its common stock at an exercise price of $
On
August 17, 2022, in connection with the August Offering, the Company issued unregistered investor warrants to purchase up to
Pre-funded Common Stock Warrants
The table below summarizes the pre-funded warrant activity for the nine months ended September 30, 2022:
| Weighted | Average | |||||||||||||||
| Average | Remaining | Aggregate | ||||||||||||||
| Number of | Exercise | Contractual | Intrinsic | |||||||||||||
| Warrants | Price | Term (years) | Value | |||||||||||||
| Balance at December 31, 2021 | $ | - | $ | |||||||||||||
| Granted | - | - | ||||||||||||||
| Exercised | ( | ) | - | - | ||||||||||||
| Forfeited | - | - | ||||||||||||||
| Canceled/Expired | - | - | ||||||||||||||
| Balance at September 30, 2022 | $ | - | $ | |||||||||||||
| Exercisable as of September 30, 2022 | $ | - | $ | |||||||||||||
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All pre-funded warrants were vested on date of grant and are exercisable at any time. The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying award and the closing stock price of $ for the Company’s common shares on September 30, 2022 and the closing stock price of $ for the Company’s common stock on December 31, 2021.
Series C Convertible Preferred Stock Warrants
The table below summarizes the warrant activity for the nine months ended September 30, 2022:
| Weighted | Average | |||||||||||||||
| Average | Remaining | Aggregate | ||||||||||||||
| Number of | Exercise | Contractual | Intrinsic | |||||||||||||
| Warrants | Price | Term (years) | Value | |||||||||||||
| Balance at December 31, 2021 | $ | $ | ||||||||||||||
| Granted | - | - | ||||||||||||||
| Exercised | - | - | ||||||||||||||
| Forfeited | - | - | ||||||||||||||
| Canceled/Expired | - | - | ||||||||||||||
| Balance at September 30, 2022 | $ | $ | ||||||||||||||
| Exercisable as of September 30, 2022 | $ | $ | ||||||||||||||
The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the closing stock price of $ for the Company’s common shares on September 30, 2022 and the closing stock price of $ for the Company’s common shares on December 31, 2021. All Series C Convertible Preferred Stock Warrants were vested on date of grant.
Note 8 – Commitments and Contingencies
Scientific Advisory Board
On
February 1, 2021, the Company formed the Scientific Advisory Board to (i) provide strategic advice and make recommendations to management
regarding current and planned research and development programs, (ii) advise management regarding the scientific merit of technology
or products involved in licensing and acquisition opportunities and (iii) provide strategic advice to management regarding emerging science
and technology issues and trends. During the three months ended September 30, 2022 and 2021, the Company incurred costs of $
COVID-19
In December 2019, a novel strain of coronavirus, COVID-19, was reported to have surfaced in Wuhan, China and has reached multiple other countries, resulting in government-imposed quarantines, travel restrictions and other public health safety measures, including in the United States and India. On March 12, 2020, the WHO declared COVID-19 to be a global pandemic. The various precautionary measures taken by many governmental authorities around the world in order to limit the spread of COVID-19 have had and may continue to have an adverse effect on the global markets and global economy. Such government-imposed precautionary measures may have been relaxed in certain countries or states, but there is no assurance that more strict measures will not be put in place again due to a resurgence in COVID-19 cases.
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The ultimate impact of the global COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on the Company’s business, vaccine development efforts, healthcare systems or the global economy as a whole. However, the effects have had and will likely continue to have a material impact on the Company’s operations, liquidity and capital resources, and the Company will continue to monitor the COVID-19 situation closely.
Severe and/or long-term disruptions in the Company’s operations may negatively impact the Company’s business, operating results and financial condition in other ways as well. Specifically, the Company anticipates that the stress of COVID-19 on healthcare systems generally around the globe may negatively impact regulatory authorities and the third parties that the Company may engage in connection with the development and testing of its product candidates.
The anticipated economic consequences of the COVID-19 pandemic have adversely impacted financial markets, resulting in high share price volatility, reduced market liquidity, and substantial declines in the market prices of the shares of most publicly traded companies, including MyMD. Volatile or declining markets for equities could adversely affect the Company’s ability to raise capital when needed through the sale of shares of common stock or other equity securities. Should these market conditions persist when the Company needs to raise capital, and if the Company is able to sell shares of its common stock under then prevailing market conditions, it might have to accept lower prices for its shares and issue a larger number of shares than might have been the case under better market conditions, resulting in significant dilution of the interests of the Company’s shareholders.
Litigation and Settlements
Raymond Akers Actions
On April 14, 2021, Raymond F. Akers, Jr., Ph.D. filed a lawsuit against MyMD Pharmaceuticals, Inc. (p/k/a Akers Biosciences, Inc.) in the Superior Court of New Jersey, Law Division, Gloucester County (the “First Raymond Akers Action”). Mr. Akers asserts one common law whistleblower retaliation claim against the Company.
On September 23, 2021, the Court granted MyMD Pharmaceutical, Inc.’s (“MyMD’s”) Motion to Dismiss Plaintiff’s Amended Complaint and dismissed Plaintiff’s Amended Complaint. The Court indicated that Mr. Akers is “free to file another complaint, however, tort-based ‘Pierce’ allegations, and/or CEPA claims are barred by the statute of limitations.”
On March 1, 2022, Mr. Akers filed a second action against MyMD in the Superior Court of New Jersey, Law Division, Gloucester County (the “Second Raymond Akers Action”) again asserting one common law whistleblower retaliation claim against the Company. The Company believes that the Second Raymond Akers Action is without merit and, moreover, was filed against the Court’s specific admonition that Plaintiff does not attempt to circumvent the statute of limitations.
On May 27, 2022, the Court granted-in-part and denied-in-part MyMD’s Motion to Dismiss Plaintiff’s Complaint. The Court reaffirmed the ruling in the First Raymond Akers Action that any tort-based Pierce claims are time-barred. However, the Court denied the Motion as it pertained to Plaintiff’s contract-based Pierce claim and “Repayment of Monies Owed” claim. On July 29, 2022, MyMD filed its Answer, which included affirmative defenses. As of October 31, 2022, the Second Raymond Akers Action is in the discovery phase.
All legal fees incurred were expensed as and when incurred.
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Note 9 – Related Parties
SRQ Patent Holdings and SRQ Patent Holdings II
MyMD is a party to two Amended and Restated Confirmatory Patent Assignment and Royalty Agreements, both dated November 11, 2020, with SRQ Patent Holdings and SRQ Patent Holdings II, under which MyMD (or its successor) will be obligated to pay to SRQ Patent Holdings or SRQ Patent Holdings II (or its designees) certain royalties on product sales or other revenue received on products that incorporate or are covered by the intellectual property that was assigned to MyMD. The royalty is equal to 8% of the net sales price on product sales and, without duplication, 8% of milestone revenue or sublicense compensation. SRQ Patent Holdings and SRQ Patent Holdings II are affiliates of Mr. Jonnie Williams, Sr. No revenue has been received subject to these agreements as of September 30, 2022 and 2021.
Mr. Jonnie Williams, Sr.
The
Company recorded an obligation to Mr. Williams, a shareholder, for various expenses incurred on behalf of the Company between 2016 and
2019. The balance due of $
Supera Aviation I, LLC
In
October 2018, the Company entered a three-year leasing agreement with Supera Aviation I, LLC, a company owned by a shareholder, for a
Gulfstream IV-SP aircraft with an annual leasing fee of $
On
April 28, 2021, the Company reached a negotiated settlement with Supera Aviation I, LLC to retire the $
Lines of credit payable
In
November 2018, Supera entered into a revolving credit facility which allows for borrowings of up to $
In
May 2019, the pre-Merger MyMD entered into a revolving credit facility which allows for borrowings of up to $
On
April 28, 2021, in accordance with the Merger, the Company paid $
Note 10 – Employee Benefit Plan
The
Company maintains a defined contribution benefit plan under section 401(k) of the Internal Revenue Code covering substantially all qualified
employees of the Company (the “401(k) Plan”). Under the 401(k) Plan, the Company matches
The
Company made matching contributions to the 401(k) Plan during the three months ended September 30, 2022 and 2021 of $
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Note 11—Paycheck Protection Program Loan
On
April 16, 2020, the Company received loan proceeds in the amount of approximately $
The
amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during the eight-week period. The
unforgiven portion of the PPP loan is payable over two years at an annual interest rate of