UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
For the transition period from ____________ to ____________
Commission
file number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
| (Address of principal executive offices) | (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 Each 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 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.
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 and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definition 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 August 14, 2023, the registrant had shares of its Common Stock, no par value per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
TABLE OF CONTENTS
| PART I – FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements | 3 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 31 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 42 |
| Item 4. | Controls and Procedures | 42 |
| PART II – OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 43 |
| Item 1A. | Risk Factors | 43 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 43 |
| Item 3. | Defaults Upon Senior Securities | 43 |
| Item 4. | Mine Safety Disclosures | 43 |
| Item 5. | Other Information | 44 |
| Item 6. | Exhibits | 44 |
| Signatures | 46 | |
| 2 |
PART I - Financial Information
Item 1. Financial Statements.
MYMD PHARMACEUTICALS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
June 30, 2023 and December 31, 2022
(unaudited)
| As of | ||||||||
| June 30, 2023 | December 31, 2022 | |||||||
| 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 | $ | $ | ||||||
| Due to MyMD Florida Shareholders | ||||||||
| Operating Lease Liability | ||||||||
| Dividends Payable | ||||||||
| Total Current Liabilities | ||||||||
| Non-Current Liabilities | ||||||||
| Operating Lease Liability, net of current portion | ||||||||
| Derivative Liabilities | ||||||||
| Warrant Liabilities | ||||||||
| Total Non-Current Liabilities | ||||||||
| Total Liabilities | $ | $ | ||||||
| Commitments and Contingencies | ||||||||
| Series
F Convertible Preferred Stock, shares designated, | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Preferred
Stock, | ||||||||
| Series D Convertible Preferred
Stock, shares designated, | ||||||||
| Common stock, | ||||||||
| Accumulated Deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
See accompanying notes to these condensed consolidated financial statements.
| 3 |
MYMD PHARMACEUTICALS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Loss
(unaudited)
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Product Revenue | $ | $ | $ | $ | ||||||||||||
| Product Cost of Sales | ||||||||||||||||
| Gross Income | ||||||||||||||||
| Administrative Expenses | ||||||||||||||||
| Research and Development Expenses | ||||||||||||||||
| Stock Based Compensation Expenses | ||||||||||||||||
| Warrant Issuance Expenses | ||||||||||||||||
| Loss from Operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other (Income) Expenses | ||||||||||||||||
| Interest and Dividend Income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| (Gain)/Loss on Sale of Marketable Securities | ||||||||||||||||
| Change in fair value of Marketable Securities | ( | ) | ||||||||||||||
| Change in fair value of Derivatives Liabilities | ||||||||||||||||
| Change in fair value of Warrant Liabilities | ( | ) | ( | ) | ||||||||||||
| Uninsured Casualty Loss | ( | ) | ||||||||||||||
| Total Other Income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss Before Income Tax | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income Tax Benefit | ||||||||||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Preferred Stock Dividends | ||||||||||||||||
| Net Loss Attributable to Common Stockholders | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Basic and Diluted loss per common share | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average basic and diluted common shares outstanding | ||||||||||||||||
See accompanying notes to these condensed consolidated financial statements.
| 4 |
MYMD PHARMACEUTICALS, INC. AND SUBSIDIARIES
previously known as Akers Biosciences, Inc.
Condensed Consolidated Statement of Changes in Shareholders Equity
For the Six Months Ended June 30, 2023 and 2022
(unaudited)
| Series F Convertible | Series D Convertible | Common Stock | ||||||||||||||||||||||||||||||
| Preferred Stock | Preferred Stock | Common | Accumulated | Total | ||||||||||||||||||||||||||||
| Shares | Series F | Shares | Series D | Shares | Stock No Par | Deficit | Equity | |||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||
| Issuance of shares
of Series F Convertible Preferred Stock, net of discount and offering costs of $ | - | - | ||||||||||||||||||||||||||||||
| Series F Convertible Preferred Stock Dividend | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||
| Stock based compensation - stock options | - | - | - | |||||||||||||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||
| Conversion of shares
of Series F Convertible Preferred Stock, July 1, 2023 installment of $ | ( | ) | ( | ) | - | |||||||||||||||||||||||||||
| Conversion of shares
of Series F Convertible Preferred Stock, August 1, 2023 installment of $ | ( | ) | ( | ) | - | |||||||||||||||||||||||||||
| Series F Convertible Preferred Stock Dividend | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||
| Issuance of common stock for vested restricted stock units | - | - | ||||||||||||||||||||||||||||||
| Exercise of prepaid equity forward contract | - | - | ||||||||||||||||||||||||||||||
| Stock based compensation - stock options | - | - | - | |||||||||||||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||
| Series F Convertible | Series D Convertible | Common Stock | ||||||||||||||||||||||||||||||
| Preferred Stock | Preferred Stock | Common | Accumulated | Total | ||||||||||||||||||||||||||||
| Shares | Series F | Shares | Series D | Shares | Stock No Par | Deficit | Equity | |||||||||||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||
| Exercise of prepaid equity forward contracts for common stock | - | - | ||||||||||||||||||||||||||||||
| Stock based compensation - stock options | - | - | - | |||||||||||||||||||||||||||||
| Stock based compensation - restricted stock units | - | - | - | |||||||||||||||||||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||
| Stock based compensation - stock options | - | - | - | |||||||||||||||||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||
See accompanying notes to these condensed consolidated financial statements
| 5 |
MYMD PHARMACEUTICALS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(unaudited)
| For the Six Months Ended | ||||||||
| June 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Loss on sale of marketable securities | ||||||||
| Change in fair value of marketable securities | ||||||||
| Change in fair value of derivatives | ||||||||
| Change in fair value of warrants | ( | ) | ||||||
| Stock based compensation | ||||||||
| Options issued to directors | ||||||||
| Options issued to key employees | ||||||||
| Options issued to non-employees | ||||||||
| 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 (used in)/provided by investing activities | ( | ) | ||||||
| Cash flows from financing activities | ||||||||
| Net proceeds from the issuance of preferred stock | ||||||||
| Net cash provided by financing activities | ||||||||
| Net (decrease)/increase 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 | ||||||||
| Accrual of Series F Convertible Preferred Stock Dividend | $ | $ | ||||||
| Initial fair value of warrant liabilities pursuant to the issuance of Series F Convertible Preferred Stock and Warrants | $ | $ | ||||||
| Initial fair value of derivative liabilities pursuant to the issuance of Series F Convertible Preferred Stock and Warrants | $ | $ | ||||||
See accompanying notes to these condensed consolidated financial statements.
| 6 |
MYMD PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
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 two wholly owned subsidiaries as of June 30, 2023, Akers Acquisition Sub, Inc. and Bout Time Marketing Corporation, (together, the “Company”). All material intercompany transactions have been eliminated in consolidation.
MyMD Pharmaceuticals (Florida), Inc. (“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).
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, XYZ Merger Sub, Inc. (“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” or “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 1-for-2 reverse stock split of the issued and outstanding Company Common Stock (the “Reverse Stock Split”).
| 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 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 Common Stock, listed 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.
On April 8, 2022, the MyMD Florida subsidiary was dissolved and merged into the New Jersey corporation MyMD Pharmaceuticals, Inc. pursuant to an Agreement and Plan of Merger dated April 8, 2022.
MYMD-1 is an oral, next-generation TNF-α inhibitor with the potential to transform the way TNF-α based diseases are treated due to its selectivity and ability to cross the blood brain barrier. Its ease of oral dosing is a significant differentiator compared to currently available TNF-α inhibitors, all of which require delivery by injection or infusion. MYMD-1 has also been shown to selectively block TNF-α action where it is overactivated without preventing it from doing its normal job of responding to routine infection. MYMD-1 is doubly effective at inhibiting inflammation by blocking both TNF-a and IL-6 activity, whereas currently approved anti-TNF and anti-IL-6 treatments for RA can only target one or the other. In addition, in early clinical studies it has not been associated with serious side effects known to occur with traditional immunosuppressive therapies that treat inflammation.
Note 2 – Significant Accounting Policies
(a) Basis of Presentation
The condensed consolidated financial statements of the Company are prepared in U.S. Dollars and in accordance with accounting principles generally accepted in the United States of America (US GAAP).
The accompanying unaudited condensed financial statements have been prepared by the Company. These statements include all adjustments (consisting only of normal recurring adjustments) which management believes necessary for a fair presentation of the statements and have been prepared on a consistent basis using the accounting policies described in Note 2 Significant Accounting Policies included in the Notes to Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission on March 31, 2023 (the “2022 Annual Report”). Certain financial information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the accompanying disclosures are adequate to make the information presented not misleading. The Notes to Financial Statements included in the 2022 Annual Report should be read in conjunction with the accompanying interim financial statements. The interim operating results for the six months ended June 30, 2023 may not be necessarily indicative of the operating results expected for the full year.
(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 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
Fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management as of and during the three and six months ended June 30, 2023. The carrying amounts of cash equivalents, accounts receivable, other current assets, other assets, accounts payable, and accrued expenses approximated their fair values as of June 30, 2023 due to their short-term nature. The fair value of the bifurcated embedded derivative related to the convertible preferred stock was estimated using a Monte Carlo simulation model, which uses as inputs the fair value of the Company’s common stock and estimates for the equity volatility and traded volume volatility of the Company’s common stock, the time to maturity of the convertible preferred stock, the risk-free interest rate for a period that approximates the time to maturity, dividend rate, a penalty dividend rate, and the probability of default. The fair value of the warrant liabilities was estimated using the Black Scholes Model which uses as inputs the following weighted average assumptions: dividend yield, expected term in years; equity volatility; and risk-free interest rate.
Fair Value Measurement
The framework for measuring fair value provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under FASB ASC 820 are described as follows:
| Level 1 | Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company can access. | ||
| Level 2 | Inputs to the valuation methodology include: | ||
| ● | quoted prices for similar assets or liabilities in active markets; | ||
| ● | quoted prices for identical or similar assets or liabilities in inactive markets; | ||
| ● | inputs other than quoted prices that are observable for the asset or liability; | ||
| ● | inputs that are derived principally from or corroborated by observable market data by correlation or other means | ||
| If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability. | |||
| Level 3 | Inputs to the valuation methodology are unobservable and significant to the fair value measurement. | ||
The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Valuation techniques maximize the use of relevant observable inputs and minimize the use of unobservable inputs.
| 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 June 30, 2023 and December 31, 2022.
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 June 30, 2023 | $ | $ | $ | |||||||||
| Marketable securities at December 31, 2022 | $ | $ | $ | |||||||||
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 June 30, 2023 and December 31, 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 months ended June 30, 2023 and 2022 was a loss of $
Gains
and losses resulting from the sales of marketable securities were losses of $
Proceeds
from the sales of marketable securities in the six months ended June 30, 2023 and 2022 were $
Fair Value on a Recurring Basis
The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually. The estimated fair value of the warrant liabilities and bifurcated embedded derivatives represent Level 3 measurements. The following table presents information about the Company’s liabilities that are measured at fair value on a recurring basis at June 30, 2023, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| Description | Level | June 30, 2023 | ||||||
| Liabilities: | ||||||||
| Warrant liabilities (Note 3) | 3 | $ | ||||||
| Derivative liabilities (Note 3) | 3 | $ | ||||||
The following table sets forth a summary of the change in the fair value of the warrant liabilities that is measured at fair value on a recurring basis:
| Balance on December 31, 2022 | $ | |||
| Issuance of warrants reported at fair value | ||||
| Change in fair value of warrant liabilities | ( | ) | ||
| Balance on March 31, 2023 | ||||
| Change in fair value of warrant liabilities | ( | ) | ||
| Balance on June 30, 2023 | $ |
The following table sets forth a summary of the change in the fair value of the derivative liabilities that is measured at fair value on a recurring basis:
| Balance on December 31, 2022 | $ | |||
| Issuance of convertible preferred stock with derivative liabilities | ||||
| Change in fair value of derivative liabilities | ||||
| Balance on March 31, 2023 | ||||
| Change in fair value of derivative liabilities | ||||
| Balance on June 30, 2023 | $ |
(g) Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging.” If liability accounting is required, the Company’s derivative instruments are recorded at fair value at the issuance date and re-valued at each reporting date, with changes in the fair value reported in the statements of operations. Derivative assets and liabilities are classified on the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within twelve (12) months of the balance sheet date.
The Company has determined that the Series F Convertible Preferred Stock warrants are derivatives that are required to be accounted for as liabilities. The Company has also determined that the following embedded features in the preferred stock are not clearly and closely related to the debt host instrument: 1) make-whole interest upon a contingent redemption event, 2) make-whole interest upon a conversion event, 3) an installment redemption upon an Equity Conditions Failure (as defined in the Certificate of Designation), and 4) variable share-settled installment conversion and as such are bifurcated from the preferred stock and accounted for as liabilities. The fair value of the warrants and embedded features are estimated using internal valuation models. The Company’s valuation models utilize inputs and other assumptions and may not be reflective of the price at which they can be settled.
(h) Prepaid Expenses
Prepaid expenses represent expenses paid prior to the date that the related services are rendered or used are comprised principally of prepaid insurance and research and development expenses.
(i) Concentrations
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash on deposit with financial institutions and accounts receivable. At times, the Company’s cash in banks 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 June 30, 2023.
(j) Risk Management of Cash and Investments
It is the Company’s policy to minimize the Company’s capital resources to investment risks, prioritizing the preservation of capital over investment returns. Investments are maintained in securities, primarily publicly traded, short-term money market funds based on highly rated federal, state and corporate bonds, that minimize the risk to the Company’s capital resources and provide ready access to funds.
The Company’s investment portfolios are regularly monitored for risk and are held with one brokerage firm.
| 10 |
(k) Investments
Investments recorded using the cost method will be assessed for any decrease in value that has occurred that is other than temporary and the other than temporary decrease in value shall be recognized. As and when circumstances and facts change, the Company will evaluate the Company’s ability to significantly influence operational and financial policy to establish a basis for converting the investment accounted for using the cost method to the equity method of valuation in accordance with FASB ASC 323.
In accordance with FASB ASC 323, the Company recognizes investments in joint ventures based upon the Company’s ability to significantly influence the operational or financial policies of the joint venture. An objective judgment of the level of influence is made at the time of the investment based upon several factors including, but not limited to the following:
| a) | Representation on the Board of Directors | |
| b) | Participation in policy-making processes | |
| c) | Material intra-entity transactions | |
| d) | Interchange of management personnel | |
| e) | Technological dependencies | |
| f) | Extent of ownership and the ability to influence decision making based upon the makeup of other owners when the shareholder group is small. |
The Company follows the equity method for valuating investments in joint ventures when the existence of significant influence over operational and financial policy has been established, as determined by management; otherwise, the Company will valuate these investments using the cost method.
In accordance with FASB ASC 321-10-35-2, the Company has elected to measure its investment in Oravax Medical, Inc. (“Oravax”) (Note 3) as an equity security without a readily determinable fair value. Under this election, an equity security without a readily available fair value is reflected at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. At each reporting period, the Company is required to make a qualitative assessment considering impairment indicators to evaluate whether the investment is impaired. If deemed impaired, the Company is required to estimate the fair value of the investment and recognize an impairment loss equal to the difference between the fair value of the investment and its carry amount. As of June 30, 2023, the Company performed a qualitative assessment to evaluate whether the investment is impaired and determined that the investment was not impaired and thus no adjustment to fair market value was required as of June 30, 2023.
(l) Property, Plant and Equipment
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Costs include expenditures that are directly attributable to the acquisition of the asset.
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognized within “other (income)/expense” in the Condensed Consolidated Statements of Comprehensive Loss.
Depreciation is recognized over the estimated useful lives of the property, plant and equipment. Leased assets are depreciated over the shorter of the lease term or their useful lives.
The estimated useful lives for the current and comparative periods are as follows:
| Useful Life | ||
| (in years) | ||
| Plant and equipment | ||
| Furniture and fixtures | ||
| Computer equipment & software | ||
| Leasehold Improvements |
Depreciation methods, useful lives and residual values are reviewed at each reporting date.
(m) Intangible Assets
The Company’s long-lived intangible assets, other than goodwill, are assessed for impairment when events or circumstances indicate there may be an impairment. These assets were initially recorded at their estimated fair value at the time of acquisition and assets not acquired in acquisitions were recorded at historical cost. However, if their estimated fair value is less than the carrying amount, other intangible assets with indefinite lives are reduced to their estimated fair value through an impairment charge in the Condensed Consolidated Statements of Comprehensive Loss.
| 11 |
Patents and Trade Secrets
Propriety protection for the Company’s products, technology and process is important to its competitive position. As of June 30, 2023, the Company has 16 issued U.S. patents, 52 foreign patents, three pending U.S. patent applications and 13 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 avenues 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 |
(n) Goodwill
Goodwill is evaluated annually for impairment or whenever we identify certain triggering events or circumstances that would more likely than not reduce the fair value below its carrying amount. Events or circumstances that might indicate an interim evaluation is warranted include, among other things, unexpected adverse business conditions, economic factors (for example, the loss of key personnel), supply costs, unanticipated competitive activities, and acts by governments and courts.
(o) Recoverability of Long-Lived Assets
In accordance with FASB ASC 360-10-35 “Impairment or Disposal of Long-lived Assets”, long-lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable or that the useful lives of those assets are no longer appropriate. The Company evaluates at each balance sheet date whether events and circumstances have occurred that indicate possible impairment.
| 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.
(p) 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 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 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 June 30, 2023 | As of December 31, 2022 | |||||||||||||||||||||||
| Platt Street | 2021 Baltimore | Platt Street | 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 June 30, 2023 | Three Months Ended June 30, 2022 | |||||||||||||||||||||||||||
| Platt Street | 2021 Baltimore | Hyde Park | Platt Street | 2021 Baltimore | ||||||||||||||||||||||||
| Lease Expenses | Lease | Lease | Total | Lease | Lease | Lease | Total | |||||||||||||||||||||
| Operating Leases | ||||||||||||||||||||||||||||
| Lease Costs | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |||||||||||||||||||||||||||
| Platt Street | 2021 Baltimore | Hyde Park | Platt Street | 2021 Baltimore | ||||||||||||||||||||||||
| Lease Expenses | Lease | Lease | Total | Lease | Lease | Lease | Total | |||||||||||||||||||||
| Operating Leases | ||||||||||||||||||||||||||||
| Lease Costs | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| 14 |
Other information related to leases is presented below:
| Platt Street | 2021 Baltimore | |||||||||||
| Other Information | Lease | Lease | Total | |||||||||
| Operating Leases | ||||||||||||
| Operating cash used | $ | $ | $ | |||||||||
| Average remaining lease term | ||||||||||||
| Average discount rate | % | % | % | |||||||||
As of June 30, 2023, the annual minimum lease payments of the Company’s operating lease liabilities were as follows:
| Platt Street | 2021 Baltimore | |||||||||||
| Lease | Lease | Total | ||||||||||
| For Years Ending December 31, | ||||||||||||
| 2023 | ||||||||||||
| 2024 | ||||||||||||
| 2025 | ||||||||||||
| Total future minimum lease payments, undiscounted | $ | $ | $ | |||||||||
| Less: Imputed interest | ||||||||||||
| Present value of future minimum lease payments | $ | $ | $ | |||||||||
(q) Revenue Recognition
The Company will recognize revenue under ASC 606, Revenue from Contracts with Customers. The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods and services transferred to the customer. The following five steps are applied to achieve that core principle:
| 1) | Identify the contract with the customer | |
| 2) | Identify the performance obligations in the contract | |
| 3) | Determine the transaction price | |
| 4) | Allocate the transaction price to the performance obligations in the contract | |
| 5) | Recognize revenue when the company satisfies a performance obligation |
(r) Income Taxes
The Company utilizes an asset and liability approach for financial accounting and reporting for income taxes. The provision for income taxes is based upon income or loss after adjustment for those permanent items that are not considered in the determination of taxable income. Deferred income taxes represent the tax effects of differences between the financial reporting and tax basis of the Company’s assets and liabilities at the enacted tax rates in effect for the years in which the differences are expected to reverse.
The Company evaluates the recoverability of deferred tax assets and establishes a valuation allowance when it is more likely than not that some portion or all the deferred tax assets will not be realized. Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In management’s opinion, adequate provisions for income taxes have been made. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.
Tax benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon settlement. A liability for “unrecognized tax benefits” is recorded for any tax benefits claimed in the Company’s tax returns that do not meet these recognition and measurement standards. As of June 30, 2023 and December 31, 2022, no liability for unrecognized tax benefits was required to be reported.
| 15 |
There was no income tax benefit recorded for the losses for the three and six months ended June 30, 2023 and 2022 since management determined that the realization of the net deferred tax assets is not more likely than not to be realized and has recorded a full valuation allowance on the net deferred tax assets.
The
Company’s policy for recording interest and penalties associated with tax audits is to record such items as a component of general
and administrative expenses. There were
Tax years from 2019 through 2022 remain subject to examination by federal and state jurisdictions.
Basic earnings per common share is based on the weighted average number of shares outstanding during the periods presented. Diluted earnings per share is computed using the weighted average number of common shares plus dilutive common share equivalents outstanding during the period. Potential common shares that would have the effect of increasing diluted earnings per share are considered anti-dilutive.
Diluted net loss per share is computed using the weighted average number of shares of Common Stock and dilutive potential Common Stock outstanding during the period.
As the Company reported a net loss for the three and six months ended June 30, 2023 and 2022, Common Stock equivalents were anti-dilutive.
| For
the Three Months Ended June 30, | For
the Six Months Ended June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Stock Options | ||||||||||||||||
| Warrants to purchase common stock | ||||||||||||||||
| Pre-funded Warrants to purchase common stock | ||||||||||||||||
| Unvested Restricted Stock Units | ||||||||||||||||
| Series C Convertible Preferred Warrants | ||||||||||||||||
| Series D Preferred Convertible Stock | ||||||||||||||||
| Series F Convertible 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 non-employees. Prior to the 2018 Update, Topic 718 applied only to share-based transactions to employees. Consistent with the accounting requirement for employee share-based payment awards, nonemployee share-based payment awards within the scope of Topic 718 are measured at grant-date fair value of the equity instruments that an entity is obligated to issue when the good has been delivered or the service has been rendered and any other conditions necessary to earn the right to benefit from the instruments have been satisfied.
The Company has elected to account for forfeiture of stock-based awards as they occur.
| 16 |
(u) Research and Development Costs
In accordance with FASB ASC 730, research and development costs are expensed as incurred and consist of fees paid to third parties that conduct certain research and development activities on the Company’s behalf.
(v) Recently Issued Accounting Pronouncements
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.
In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This standard establishes an impairment model (known as the current expected credit loss (“CECL”) model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses, which is intended to result in a timelier recognition of losses. Under the CECL model, entities will estimate credit losses over the entire contractual term of the instrument (considering estimated prepayments, but not expected extensions or modifications) from the date of initial recognition of the financial instrument. Measurement of expected credit losses are to be based on relevant forecasts that affect collectability. The scope of financial assets within the CECL methodology is broad and includes trade receivables from certain revenue transactions and certain off-balance sheet credit exposures. Different components of the guidance require modified retrospective or prospective adoption.
In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments-Credit Losses. ASU 2018-19 clarifies that receivables arising from operating leases are not within the scope of the credit losses standard. Instead, entities would need to apply other U.S. GAAP, namely Topic 842 (Leases), to account for changes in the collectability assessment for operating leases. Other than operating lease receivables, Partnership trade receivables include receivables from finance leases and equipment sales. Under Topic 606 (Revenue from Contracts with Customers), revenue is recognized when, among other criteria, it is probable that the entity will collect the consideration to which it is entitled for goods or services transferred to a customer. At the point that finance lease receivables are recorded, they become subject to the CECL model and estimates of expected credit losses over their contractual life will be required to be recorded at inception based on historical information, current conditions, and reasonable and supportable forecasts. Trade receivables derived from equipment sales are of short duration and there is not a material difference between incurred losses and expected losses.
In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, which amends and clarifies several provisions of Topic 326. In May 2019, the FASB issued ASU 2019-05, Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief, which amends Topic 326 to allow the fair value option to be elected for certain financial instruments upon adoption. ASU 2019-10 extended the effective date of ASU 2016-13 until December 15, 2022. The Company adopted this new guidance, including the subsequent updates to Topic 326, on January 1, 2023 and the adoption did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures.
| 17 |
Recently Issued Accounting Pronouncements Not Adopted
Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the Company’s condensed consolidated financial statements. As new accounting pronouncements are issued, the Company will adopt those that are applicable under the circumstances.
Note 3 – Recent Developments, Liquidity and Management’s Plans
Closing of the Merger and Reverse Stock Split
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, a New Jersey corporation previously known as Akers Biosciences, Inc., XYZ Merger Sub, Inc. (“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 $ 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 the Company’s Common Stock, no par value per share (the “Company Common Stock” or “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 (the “Milestone Events”) during the 36-month period immediately following the closing of the Merger (the “Milestone Period”). The Milestone Events and corresponding Milestone Payments are set forth in the table below.
| Milestone Event | Milestone Payment | |
| $ | ||
| $ | ||
| $ | ||
| $ |
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.
| 18 |
Immediately
following the effective time of the Merger,
Effective as of 4:05 pm Eastern Time on April 16, 2021, we filed an amendment to its Amended and Restated Certificate of Incorporation to effect the Reverse Stock Split. As a result of the Reverse Stock Split, immediately following the effective time of the Merger, every two shares of our Common Stock held by a stockholder immediately prior to the Reverse Stock Split were combined and reclassified into one share of our Common Stock. No fractional shares were issued in connection with the Reverse Stock Split. Each stockholder who did not have a number of shares evenly divisible pursuant to the Reverse Stock Split ratio and who would otherwise be entitled to receive a fractional share of our Common Stock was entitled to receive an additional share of our Common Stock.
The February 2023 Offering
On
February 21, 2023, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain accredited
investors (the “Investors”), pursuant to which it agreed to sell to the Investors (i) an aggregate of shares of the
Company’s newly-designated Series F convertible preferred stock with a stated value of $
Series F Convertible Preferred Stock
The
Preferred Shares will be convertible into Common Stock (the “Conversion Shares”) at the election of the holder at any
time at an initial conversion price of $
The
holders of the Preferred Shares will be entitled to dividends of
Notwithstanding the foregoing, the Company’s ability to settle conversions and make amortization and dividend make-whole payments using shares of Common Stock is subject to certain limitations set forth in the Certificate of Designations, including a limit on the number of shares that may be issued until the time, if any, that the Company obtains the Stockholder Approval. Further, the Certificate of Designations contains a certain beneficial ownership limitation after giving effect to the issuance of shares of Common Stock issuable upon conversion of, or as part of any amortization payment or dividend make-whole payment under, the Certificate of Designations or Warrants.
| 19 |
The Certificate of Designations includes certain Triggering Events (as defined in the Certificate of Designations), including, among other things, the Company’s failure to pay any amounts due to the holders of the Preferred Shares when due. In connection with a Triggering Event, each holder of Preferred Shares will be able to require the Company to redeem in cash any or all of the holder’s Preferred Shares at a premium set forth in the Certificate of Designations.
The
Preferred Shares were determined to be more akin to a debt-like host than an equity-like host. The Company identified the following embedded
features that are not clearly and closely related to the debt host instrument: 1) make-whole interest upon a contingent redemption event,
2) make-whole interest upon a conversion event, 3) an installment redemption upon an Equity Conditions Failure (as defined in the Certificate
of Designation), and 4) variable share-settled installment conversion. These features were bundled together, assigned probabilities of
being affected and measured at fair value. Subsequent changes in fair value of these features are recognized in the Condensed Consolidated
Statement of Comprehensive Loss. The Company estimated at issuance the $
The
discount to the fair value is included as a reduction to the carrying value of the Preferred Shares. During the six months ended June
30, 2023, the Company recorded a total discount of $
During
the three and six months ended June 30, 2023, the Company recorded a loss of $
During
the three months ended June 30, 2023, the Company made redeemed $
Common Stock Warrants
Pursuant
to the February 2023 Offering, the Company issued to investors Warrants to purchase
The
Warrants were determined to be within the scope of ASC 480-10 as they are puttable to the Company at Holders’ election upon the
occurrence of a Fundamental Transaction (as defined in the agreements). As such, the Company recorded the Warrants as a liability at
fair value with subsequent changes in fair value recognized in earnings. The Company utilized the Black Scholes Model to calculate the
value of these warrants issued during the six months ended June 30, 2023. The fair value of the Warrants of $
Transaction
costs incurred attributable to the issuance of the Warrants of $
During
the three and six months ended June 30, 2023, the Company recorded a gain of $
Liquidity
As
of June 30, 2023, 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 June 30, 2023 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.
| 20 |
Note 4 – Trade and Other Payables
Trade and other payables consist of the following:
June 30, 2023 | December 31, 2022 | |||||||
| Accounts Payable – Trade | $ | $ | ||||||
| Accrued Expenses | ||||||||
| $ | $ | |||||||
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 June 30, 2023, 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 June 30, 2023, grants of any kind remain outstanding 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 June 30, 2023, 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 June 30, 2023, 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 June 30, 2023, grants of RSUs and stock options to purchase shares of Common Stock have been issued pursuant to the 2021 Plan, and