UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
or
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:
Former name, former address and former fiscal year, if changed since last report: MyMD Pharmaceuticals, Inc.
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 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 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 ☐ No
As of August 19, 2024, the registrant had shares of its Common Stock, par value $ per share, outstanding.
TABLE OF CONTENTS
| PART I – FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements | 3 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 43 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 61 |
| Item 4. | Controls and Procedures | 61 |
| PART II – OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 62 |
| Item 1A. | Risk Factors | 62 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 62 |
| Item 3. | Defaults Upon Senior Securities | 62 |
| Item 4. | Mine Safety Disclosures | 62 |
| Item 5. | Other Information | 63 |
| Item 6. | Exhibits | 63 |
| Signatures | 63 | |
| 2 |
PART I - Financial Information
Item 1. Financial Statements.
TNF PHARMACEUTICALS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
June 30, 2024 and December 31, 2023
(unaudited)
| As of | ||||||||
| June 30, 2024 | December 31, 2023 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Marketable Securities | ||||||||
| Prepaid expenses | ||||||||
| Total Current Assets | ||||||||
| Non-Current Assets | ||||||||
| Lease Right-of-Use | ||||||||
| Goodwill | ||||||||
| Investment in Oravax Medical | ||||||||
| Total Non-Current Assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES | ||||||||
| Current Liabilities | ||||||||
| Trade and Other Payables | $ | $ | ||||||
| Deferred Compensation Payable | ||||||||
| Due to MyMD FL Shareholders | ||||||||
| Lease Liability | ||||||||
| Dividends Payable | ||||||||
| Derivative Liability | ||||||||
| Warrant Liability | ||||||||
| Total Current Liabilities | ||||||||
| Non-Current Liabilities | ||||||||
| Deferred Compensation Payable, net of current | ||||||||
| Derivative Liability, net of current | ||||||||
| Warrant Liability, net of current | ||||||||
| Total Non-Current Liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Mezzanine Equity | ||||||||
| Series F Convertible Preferred Stock, shares designated, par value $ and a stated value of $ | ||||||||
| Series F Convertible Preferred Stock – Discount | ( | ) | ( | ) | ||||
| Series F Convertible Preferred Stock – Derivative | ( | ) | ( | ) | ||||
| Series F-1 Convertible Preferred Stock,
shares designated, par value $
and a stated value of $
per share,
and
shares issued and outstanding as of June 30, 2024 and December 31, 2023. Liquidation preference of $ | ||||||||
| Series F-1 Convertible Preferred Stock – Discount | ( | ) | ||||||
| Series G Convertible Preferred Stock, shares designated, par value $ and a stated value of $ per share, and shares issued and outstanding as of June 30, 2024 and December 31, 2023. Liquidation preference of $ | ||||||||
| Series G Convertible Preferred Stock – Discount | ( | ) | ||||||
| Total Mezzanine Equity | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Preferred Stock, par value $, total preferred shares authorized | ||||||||
| Series D Convertible Preferred Stock, shares designated, $ par value and a stated value of $ | ||||||||
| Common Stock, par value $, shares authorized, and shares issued and outstanding as of June 30, 2024 and December 31, 2023 | ||||||||
| Additional Paid in Capital | ||||||||
| Accumulated Deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities, Mezzanine Equity, and Stockholders’ Equity | $ | $ | ||||||
See accompanying notes to these unaudited condensed consolidated financial statements.
| 3 |
TNF 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, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Product Revenue | $ | $ | $ | $ | ||||||||||||
| Product Cost of Sales | ||||||||||||||||
| Gross Income | ||||||||||||||||
| Administrative Expenses | ||||||||||||||||
| Research and Development Expenses | ||||||||||||||||
| Stock Based Compensation Expenses | ||||||||||||||||
| Series F Warrant Issuance Expenses | ||||||||||||||||
| Series F-1 Warrant Issuance Expenses | ||||||||||||||||
| Series G 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 | ( | ) | ( | ) | ( | ) | ||||||||||
| Loss on issuance of Series F-1 Convertible Preferred Stock | ||||||||||||||||
| Loss on issuance of Series G Convertible Preferred Stock | ||||||||||||||||
| Total Other (Income)/Expense | ( | ) | ( | ) | ||||||||||||
| 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 stock outstanding | ||||||||||||||||
See accompanying notes to these unaudited condensed consolidated financial statements.
| 4 |
TNF PHARMACEUTICALS, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Changes in Stockholders’ Equity
For the Three and Six Months Ended June 30, 2024 and 2023
(unaudited)
| Series F | Series F-1 | Series G | Series D | Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||||
Convertible Preferred Stock | Convertible Preferred Stock | Convertible Preferred Stock | Convertible Preferred Stock | Common Stock Par | Additional | |||||||||||||||||||||||||||||||||||||||||||||||
| Series | Series | Series | Series |
Value | Paid | Accumulated | Total | |||||||||||||||||||||||||||||||||||||||||||||
| Shares | F | Shares | F-1 | Shares | G | Shares | D | Shares | $0.001 | In Capital | Deficit | Equity | ||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for vested restricted stock units | - | - | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Redemption of shares of Series F Convertible Preferred Stock, January 1, 2024 installment of $ | ( | ) | ( | ) | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Accelerated Conversion of shares of Series F Convertible Preferred Stock | ( | ) | ( | ) | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Redemption of shares of Series F Convertible Preferred Stock, February 1, 2024 installment of $ | ( | ) | ( | ) | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Accelerated Conversion of shares of Series F Convertible Preferred Stock | ( | ) | ( | ) | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Series F Convertible Preferred Stock Dividend | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Reclass of warrant liability upon warrant modification | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock based compensation - stock options | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares of Series F-1 Convertible Preferred Stock, net of discount and offering costs of $ | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares of Series G Convertible Preferred Stock, net of discount and offering costs of $ | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
| Accelerated Conversion of shares of Series F Convertible Preferred Stock | ( | ) | ( | ) | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Accelerated Conversion of shares of Series F Convertible Preferred Stock | ( | ) | ( | ) | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Series F Convertible Preferred Stock Dividend | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Stock based compensation - stock options | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||||||||||||||
| Series F | Series F-1 | Series G | Series D | Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||||
Convertible Preferred Stock | Convertible Preferred Stock | Convertible Preferred Stock | Convertible Preferred Stock | Common Stock Par | Additional | |||||||||||||||||||||||||||||||||||||||||||||||
| Series | Series | Series | Series | Value | Paid | Accumulated | Total | |||||||||||||||||||||||||||||||||||||||||||||
| Shares | F | Shares | F-1 | Shares | G | Shares | D | Shares | $0.001 | In Capital | Deficit | Equity | ||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Round-up shares from the | - | - | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| 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 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||||||||||||||
See accompanying notes to these unaudited condensed consolidated financial statements.
| 5 |
TNF PHARMACEUTICALS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(unaudited)
| For the Six Months Ended | ||||||||
| June 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| (Gain)/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 | ( | ) | ||||||
| Loss on issuance of Series F-1 Convertible Preferred Stock | ||||||||
| Loss on issuance of Series G Convertible Preferred Stock | ||||||||
| Stock based compensation | ||||||||
| Options issued to directors | ||||||||
| Options issued to key employees | ||||||||
| Options issued to non-employees | ||||||||
| Change in assets and liabilities | ||||||||
| Prepaid Expenses | ( | ) | ( | ) | ||||
| Trade and Other Payables | ( | ) | ||||||
| Operating Leases | ( | ) | ||||||
| Deferred Compensation Payable | ||||||||
| Dividends Payable | ( | ) | ||||||
| Net cash used by operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchases of marketable securities | ( | ) | ( | ) | ||||
| Proceeds from sale of marketable securities | ||||||||
| Net cash consumed by investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities | ||||||||
| Redemption of Series F Convertible Preferred Stock | ( | ) | ||||||
| Dividends on Series F Convertible Preferred Stock | ( | ) | ||||||
| Premium on Series F Convertible Preferred Stock | ( | ) | ||||||
| Proceeds from issuance of Series F Convertible Preferred Stock | ||||||||
| Proceeds from issuance of Series F-1 Convertible Preferred Stock | ||||||||
| Proceeds from the issuance of Series G Convertible Preferred Stock | ||||||||
| Net cash provided by financing activities | ||||||||
| Net 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 | ||||||||
| Issuance of common stock for redemptions of Series F Convertible Preferred Stock | $ | $ | ||||||
| Accrual of Series F Convertible Preferred Stock Dividend | ||||||||
| Accrual of Series F-1 Convertible Preferred Stock Dividend | ||||||||
| Accrual of Series G 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 | $ | $ | ||||||
| Initial fair value of warrant liabilities pursuant to the issuance of Series F-1 Convertible Preferred Stock and Warrants | $ | $ | ||||||
| Initial fair value of derivative liabilities pursuant to the issuance of Series F-1 Convertible Preferred Stock and Warrants | $ | $ | ||||||
| Initial fair value of warrant liabilities pursuant to the issuance of Series G Convertible Preferred Stock and Warrants | $ | $ | ||||||
| Reclass of warrant liability upon warrant modification for the Series F Warrants | $ | $ | ||||||
See accompanying notes to these unaudited condensed consolidated financial statements.
| 6 |
TNF PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
Note 1 – Organization and Description of Business
TNF Pharmaceuticals, Inc. is a Delaware corporation (“TNF” or the “Company”) that was incorporated in New Jersey prior to the Reincorporation (as defined below). On July 22, 2024, the Company changed its name from MyMD Pharmaceuticals, Inc. to TNF Pharmaceuticals, Inc. by filing a certificate of amendment to its certificate of incorporation with the Secretary of State of Delaware. In addition, effective before the open of market trading on July 24, 2024, the Company’s Common Stock ceased trading under the ticker symbol “MYMD” and began trading on the Nasdaq Stock Market under the ticker symbol “TNFA.”
These condensed consolidated financial statements include two wholly owned subsidiaries as of June 30, 2024, Akers Acquisition Sub, Inc. and Bout Time Marketing Corporation (together, the “Company”). All material intercompany transactions have been eliminated in consolidation.
MYMD-1 is an oral, next-generation TNF-α inhibitor with the potential to transform the way TNF-α based diseases are treated due to its selectivity and ability to cross the blood brain barrier. Its ease of oral dosing is a significant differentiator compared to currently available TNF-α inhibitors, all of which require delivery by injection or infusion. MYMD-1 has also been shown to selectively block TNF-α action where it is overactivated without preventing it from doing its normal job of responding to routine infection. MYMD-1 is doubly effective at inhibiting inflammation by blocking both TNF-a and IL-6 activity, whereas currently approved anti-TNF and anti-IL-6 treatments for rheumatoid arthritis can only target one or the other. In addition, in early clinical studies it has not been associated with serious side effects known to occur with traditional immunosuppressive therapies that treat inflammation.
At the Company’s annual meeting of stockholders held on July 31, 2023, the stockholders approved a plan to merge the Company with and into a newly formed wholly owned subsidiary, MyMD Pharmaceuticals, Inc., a Delaware corporation (“MyMD Delaware”), with MyMD Delaware being the surviving corporation, for the purpose of changing the Company’s state of incorporation from New Jersey to Delaware (the “Reincorporation”). The Reincorporation was effected as of March 4, 2024. In connection with the Reincorporation to Delaware, the par value of the common and preferred stock was changed to $ per share.
MyMD Delaware is deemed to be the successor issuer of MyMD New Jersey under Rule 12g-3 of the Securities Exchange Act of 1934, as amended.
The Reincorporation did not result in any change in the Company’s name, business, management, fiscal year, accounting, location of the principal executive offices, assets or liabilities. In addition, the Company’s common stock retained the same CUSIP number and continued to trade on the Nasdaq Capital Market under the symbol “MYMD.” Holders of shares of the Company’s common stock did not have to exchange their existing MyMD New Jersey stock certificates for MyMD Delaware stock certificates.
As of the Effective Date of the Reincorporation, the rights of the Company’s stockholders are governed by the Delaware General Corporation Law, the MyMD Delaware Certificate of Incorporation and the Bylaws of MyMD Delaware.
On
February 14, 2024, the Company effected a
On July 25, 2024, the Company increased the number of authorized shares of the Company’s Common Stock from to and made a corresponding change to the number of authorized shares of the Company’s capital stock by filing a Certificate of Amendment to its Certificate of Incorporation with the Secretary of State of the State of Delaware (the “Share Increase”). The Share Increase was approved by the Company’s stockholders at the Company’s special meeting of stockholders held on July 24, 2024.
Recent Events
The February 2023 Offering
On
February 21, 2023, the Company entered into a Securities Purchase Agreement (the “Series F Purchase Agreement”) with
certain accredited investors (the “Series F 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 $
In connection with
the Private Placements (as defined herein), (i) the conversion price of the Series F Preferred Shares was adjusted to $ per share
pursuant to the full ratchet anti-dilution provisions contained in the Series F Certificate of Designations and, (ii) the exercise price
of the Series F Warrants was adjusted to $
| 7 |
Series F Convertible Preferred Stock
The
Series F Preferred Shares became convertible upon issuance into Common Stock (the “Series F Conversion Shares”) at the election
of the holder at any time at an initial conversion price of $
Prior
to the Series F Certificate of Amendment (as defined below), the Company was initially required to redeem the Series F Preferred
Shares in 12 equal monthly installments, commencing on July 1, 2023.
On
April 5, 2024, the Company entered into an Omnibus Waiver and Amendment (the “Omnibus Agreement”) with the Required
Holders (as defined in the Series F Certificate of Designations). Pursuant to the Omnibus Agreement, the Required Holders agreed (i)
to defer payment of the monthly installment amounts due on March 1, 2024, and April 1, 2024 (the “Installments”), under
Section 9(a) of the Series F Certificate of Designations, until May 1, 2024, and (ii) to waive any breach or violation of the Series
F Purchase Agreement, the Series F Certificate of Designations, or the Series F Warrants resulting from missing the Installments.
The Company may require holders to convert their Series F Preferred Shares into shares of Common Stock if the closing price of the
Common Stock exceeds $
per share (as adjusted for the Reverse Stock Split) (subject to adjustment for stock splits, stock dividends, stock combinations,
recapitalizations or other similar events) for 20 consecutive trading days and the daily dollar trading volume of the Common Stock
exceeds $
On
May 20, 2024, the Company entered into an Omnibus Waiver, Consent, Notice and Amendment (the “Series F Agreement”) with the
Required Holders (as defined in the Series F Certificate of Designations). Pursuant to the Series F Agreement, the Required Holders agreed
to (i) amend the Series F Purchase Agreement to amend certain terms relating to purchase rights thereunder, (ii) waive certain rights
under the Series F Purchase Agreement and Series F Certificate of Designations in respect of the issuance of the Company’s Series
F-1 Convertible Preferred Stock, with a par value of $ per share and a stated value of $
| 8 |
The
holders of the Series F Preferred Shares are 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 Series F Certificate of Designations. Further, the Series F 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 Series F Certificate of Designations or Series F Warrants.
The Series F Preferred Shares are classified in temporary equity as the holder of the Series F Preferred Stock has the right to require the Company to redeem for cash all or any portion of such holder’s shares upon the suspension from trading or the failure of the Common Stock to be trading or listed (as applicable) on an eligible market for a period of five (5) consecutive trading days. The Series F Preferred Stock is not unconditionally redeemable and is only conditionally puttable at the holder’s option upon this trading suspension or failure. This would not be considered to be within the Company’s control.
The
Series F 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 Series F Certificate of Designations), and 4) variable share-settled installment conversion. These features were bundled together,
assigned probabilities of being affected and measured at fair value. Subsequent changes in fair value of these features are recognized
in the Condensed Consolidated Statements of Comprehensive Loss. The Company estimated at issuance the $
The
discount to the fair value is included as a reduction to the carrying value of the Series F Preferred Shares. The Company recorded a total discount of $
| 9 |
During
the three months ended June 30, 2024 and 2023, the Company recorded $
Series F Common Stock Warrants
Pursuant
to the February 2023 Offering, the Company issued to investors the Series F Warrants to purchase
The
Series F 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 Series F 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. The fair value of the Series F Warrants
of $
Transaction
costs incurred attributable to the issuance of the Series F Warrants of $
During
the three months ended June 30, 2024, the Company recorded $
During
the three months ended June 30, 2023, the Company recorded a gain of $
| 10 |
On
May 14, 2024, the Company entered into an Amendment (the “Series F Warrant Amendment”) with the Series F Investors in
the February 2023 Offering, effective as of March 31, 2024. The Series F Warrant Amendment modified certain terms of the Series F
Warrants relating to the rights of the holders of the Series F Warrants to provide that, in the event of a Fundamental Transaction
(as defined in the Series F Warrants) that is not within the Company’s control, including the Fundamental Transaction not
being approved by the Company’s Board of Directors, the holder of the Series F Warrant shall only be entitled to receive from
the Company or any successor entity the same type or form of consideration (and in the same proportion), at the Black Scholes Value
of the unexercised portion of such Series F Warrant, that is being offered and paid to the holders of the Company’s common
stock in connection with the Fundamental Transaction. The modification resulted in the reclassification of the Series F Warrants to
be considered equity classified as they were no longer in the scope of ASC 815. In accordance with ASC 815-40, the Company
remeasured the Series F Warrant liabilities at $
Series F-1 Private Placement
On
May 20, 2024, the Company entered into a Securities Purchase Agreement (the “Series F-1 Purchase Agreement”) with
certain accredited investors (the “Series F-1 Investors”) pursuant to which it agreed to sell to the Series F-1
Investors (i) an aggregate of
shares of the Company’s newly-designated Series F-1 Preferred Stock, initially convertible into up to
shares of Common Stock at a conversion price of $
Series F-1 Preferred Stock
The
Series F-1 Preferred Stock became convertible upon issuance into Common Stock (the “Series F-1 Conversion Shares”) at
the election of the holder at any time at an initial conversion price of $
The
Company is required to redeem the Series F-1 Preferred Stock in seven (7) equal monthly installments, commencing on December 1, 2024.
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The
holders of the Series F-1 Preferred Stock are 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 Series F-1 Certificate of Designations. Further, the Series F-1 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 Series F-1 Certificate of Designations or Series F-1 Warrants.
The Series F-1 Preferred Shares are classified as temporary equity as the holder of the Series F-1 Preferred Stock has the right to require the Company to redeem for cash all or any portion of such Holder’s shares upon the suspension from trading or the failure of the Common Stock to be trading or listed (as applicable) on an eligible market for a period of five (5) consecutive Trading Days. The Series F-1 Preferred Stock is not unconditionally redeemable and is only conditionally puttable at the Holder’s option upon this trading suspension or failure. This would not be considered to be within the Company’s control.
The
estimated fair value of the Series F-1 Preferred Stock on the issuance date of approximately $
The
approximately $
Series F-1 Warrants
The Series F-1 Warrants were accounted for as liabilities
based on the following analysis. The Series F-1 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 Series F Certificate of Designations), and 4) variable share-settled installment conversion.
These features were bundled together, assigned probabilities of being affected and measured at fair value. Subsequent changes in fair
value of these features are recognized in the Condensed Consolidated Statements of Comprehensive Loss. The Company estimated at issuance
the $
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Pursuant
to the Series F-1 Private Placement, the Company issued to investors (i) the Series F-1 Long-Term Warrants to purchase
The exercise price of the Series F-1 Warrants and the number of shares issuable upon exercise of the Series F-1 Warrants are subject to customary adjustments for stock dividends, stock splits, reclassifications and the like, and subject to price-based adjustment, on a “full ratchet” basis, in the event of any issuances of Common Stock, or securities convertible, exercisable or exchangeable for Common Stock, at a price below the then-applicable exercise price (subject to certain exceptions). Upon any such price-based adjustment to the exercise price, the number of shares issuable upon exercise of the Series F-1 Warrants will be increased proportionately.
On
August 16, 2024, the Company entered into (i) an Amendment (the “Series F-1 Long Term Warrant Amendment”) with the
Series F-1 Investors, effective as of June 30, 2024 relating to the Series F-1 Long Term Warrants, and (ii) an Amendment (the
“Series F-1 Short Term Warrant Amendment” and, together with the Series F-1 Long Term Warrant Amendment, the
“Series F-1 Warrant Amendments”) with the Series F-1 Investors, effective as of June 30, 2024 relating to the Series F-1
Short Term Warrants. The Series F-1 Warrant Amendments modified certain terms of the Series F-1 Warrants relating to the rights of
the holders of the Series F-1 Warrants to provide that, in the event of a Fundamental Transaction (as defined in the Series F-1
Warrants) that is not within the Company’s control, including the Fundamental Transaction not being approved by the
Company’s Board of Directors, the holder of the Series F-1 Warrant shall only be entitled to receive from the Company or any
successor entity the same type or form of consideration (and in the same proportion), at the Black Scholes Value of the unexercised
portion of such Series F-1 Warrant, that is being offered and paid to the holders of the Company’s Common Stock in connection
with the Fundamental Transaction. Additionally, the Series F-1 Warrant Amendments amend the definition of Black Scholes Value
related to the volatility input which is now an expected volatility equal to the 30 day volatility, obtained from the
“HVT” function on Bloomberg (determined utilizing a 365 day annualization factor) as of the trading day immediately
following the earliest to occur of (1) the public disclosure of the applicable Fundamental Transaction and (2) the date of a
holder’s request. The modification resulted in the reclassification of the Series F-1 Warrants to be considered equity
classified as they were no longer in the scope of ASC 815. In accordance with ASC 815-40, the Company remeasured the Series F-1
Warrants at fair value as of July 25, 2024 ($
Series G Private Placement
On
May 20, 2024, the Company entered into a Securities Purchase Agreement (the “Series G Purchase Agreement” and
collectively with the Series F-1 Purchase Agreement, each a “Purchase Agreement” and collectively, the “Purchase
Agreements”) with certain accredited investors (the “Series G Investors” and collectively with the Series F-1
Investors, the “Investors”), with certain accredited investors (the “Series G Investors”), pursuant to which
it agreed to sell to the Series G Investors (i) an aggregate of
shares of the Company’s newly-designated Series G Preferred Stock, initially convertible into up to
shares of the Company’s Common Stock, at a conversion price of $
Series G Preferred Stock
The
Series G Preferred Shares became convertible upon issuance into Common Stock (the “Series G Conversion Shares”) at the election
of the holder at any time at an initial conversion price of $
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The
holders of the Series G Preferred Shares will be entitled to dividends of
Notwithstanding the foregoing, the Company’s ability to settle conversions and make dividend make-whole payments using shares of Common Stock is subject to certain limitations set forth in the Series G Certificate of Designations. Further, the Series G Certificate of Designations contains a certain beneficial ownership limitation, which applies to each Series G Investor other than PharmaCyte Biotech, Inc., after giving effect to the issuance of shares of Common Stock issuable upon conversion of the Series G Preferred Shares or as part of any dividend make-whole payment under the Series G Certificate of Designations.
On June 17, 2024, the Company entered into an Amendment Agreement (the “Series G Amendment”) with the Required Holders (as defined in the Series G Certificate of Designations). Pursuant to the Series G Amendment, the Required Holders agreed to amend the Series G Certificate of Designations by filing a Certificate of Amendment (“Series G Certificate of Amendment”) to the Series G Certificate of Designations with the Secretary of State of the State of Delaware (the “Secretary of State”) to increase the number of authorized shares of Series G Preferred Stock from to , in order to authorize a sufficient number of shares of Series G Preferred Stock for the payment of PIK Shares. On June 17, 2024, the Company filed the Series G Certificate of Amendment with the Secretary of State, thereby amending the Series G Certificate of Designations. The Series G Certificate of Amendment became effective with the Secretary of State upon filing.
The Series G Preferred Shares are classified as temporary equity as the holder of the Series G Preferred Stock has the right to require the Company to redeem for cash all or any portion of such Holder’s shares upon the suspension from trading or the failure of the Common Stock to be trading or listed (as applicable) on an eligible market for a period of five (5) consecutive Trading Days. The Series G Preferred Stock is not unconditionally redeemable and is only conditionally puttable at the Holder’s option upon this trading suspension or failure. This would not be considered to be within the Company’s control.
The
estimated fair value of the Series G Preferred Stock on the issuance date of approximately $
The
approximately $
Since
the fair value of the liabilities required to be subsequently measured at fair value exceeds the net proceeds received, the excess of
the fair value over the net proceeds received is recognized as a loss in earnings. As such, the Company recognized a loss on the issuance
of preferred stock of approximately $
On August 8, 2024, the Company entered into an Amendment Agreement (the “August Series G Amendment”) with the Required Holders (as defined in the Series G Certificate of Designations). Pursuant to the August Series G Amendment, the Required Holders agreed to amend the Series G Certificate of Designations by filing a Certificate of Amendment (“August Series G Certificate of Amendment”) to the Series G Certificate of Designations with the Secretary of State to adjust the calculation of the PIK Shares. On August 8, 2024, the Company filed the August Series G Certificate of Amendment with the Secretary of State, thereby amending the Series G Certificate of Designations. The August Series G Certificate of Amendment became effective with the Secretary of State upon filing.
Series G Warrants
The
Series G 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 Series F Certificate of Designations), and 4) variable share-settled installment conversion. These features were bundled together,
assigned probabilities of being affected and measured at fair value. Subsequent changes in fair value of these features are recognized
in the Condensed Consolidated Statements of Comprehensive Loss. The Company estimated at issuance the $
Pursuant
to the Series G Private Placement, the Company issued to investors (i) the Series G Long-Term Warrants to purchase
The exercise price of the Series G Warrants and the number of shares issuable upon exercise of the Series G Warrants are subject to customary adjustments for stock dividends, stock splits, reclassifications and the like, and subject to price-based adjustment, on a “full ratchet” basis, in the event of any issuances of Common Stock, or securities convertible, exercisable or exchangeable for Common Stock, at a price below the then-applicable exercise price (subject to certain exceptions). Upon any such price-based adjustment to the exercise price, the number of shares issuable upon exercise of the Series G Warrants will be increased proportionately.
On August 16, 2024, the Company
entered into (i) an Amendment (the “Series G Long Term Warrant Amendment”) with the Series G Investors, effective as of
June 30, 2024 relating to the Series G Long Term Warrants, and (ii) an Amendment (the “Series G Short Term Warrant
Amendment” and, together with the Series G Long Term Warrant Amendment, the “Series G Warrant Amendments”) with
the Series G Investors, effective as of June 30, 2024 relating to the Series G Short Term Warrants. The Series G Warrant Amendments
modified certain terms of the Series G Warrants relating to the rights of the holders of the Series G Warrants to provide that, in
the event of a Fundamental Transaction (as defined in the Series G Warrants) that is not within the Company’s control,
including the Fundamental Transaction not being approved by the Company’s Board of Directors, the holder of the Series G
Warrant shall only be entitled to receive from the Company or any successor entity the same type or form of consideration (and in
the same proportion), at the Black Scholes Value (as defined in the Series G Warrants) of the unexercised portion of such Series G
Warrant, that is being offered and paid to the holders of the Company’s Common Stock in connection with the Fundamental
Transaction. Additionally, the Series G Warrant Amendments amend the definition of Black Scholes Value related to the volatility
input which is now an expected volatility equal to the 60 day volatility, obtained from the “HVT” function on Bloomberg
(determined utilizing a 365 day annualization factor) as of the trading day immediately following the earliest to occur of (1) the
public disclosure of the applicable Fundamental Transaction and (2) the date of a holder’s request. The modification resulted
in the reclassification of the Series G Warrants to be considered equity classified as they were no longer in the scope of ASC 815.
In accordance with ASC 815-40, the Company remeasured the Series G Warrants at fair value as of July 25, 2024 ($
Registration Rights Agreements
In
connection with the Series F-1 Private Placement,
In
connection with the Series G Private Placement,
In connection with the Registration Rights Agreements, the Company filed a registration statement on Form S-3 covering such securities, which registration statement was filed on June 21, 2024, amended on August 8, 2024 and declared effective by the SEC on August 12, 2024. Under the Series F-1 Registration Rights Agreement, the Company is obligated to pay certain liquidated damages to the Series F-1 Investors if the Company failed to file the Series F-1 Registration Statement when required, failed to file or cause the Series F-1 Registration Statement to be declared effective by the SEC when required, or fails to maintain the effectiveness of the Series F-1 Registration Statement.
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Private Placement Warrants
Nasdaq Stockholder Approval
The
Company’s ability to issue Series F-1 Conversion Shares and Series G Conversion Shares and Series F-1 Warrant Shares and Series
G Warrant Shares using shares of Common Stock is subject to certain limitations set forth in the Series F-1 Certificate of Designations
and Series G Certificate of Designations, as applicable. Prior to the Nasdaq Stockholder Approval (as defined below), such limitations
included a limit on the number of shares that could be issued until the time that the Company’s stockholders have approved the
issuance of more than
Executive Officer Contract Amendments and Separations
Dr.
Chapman’s employment agreement terminated on June 14, 2024. Pursuant to a General Release and Severance Agreement (the
“Separation Agreement”), dated as of June 14, 2024, Dr. Chapman is entitled to (i) payment in the amount of $
Effective November 13, 2023, the Company entered into an amendment to the employment agreement of Dr. Adam Kaplin, its Chief Scientific Officer, providing that Dr. Kaplin’s employment and had an initial term of four months, which the parties had the option to mutually agree to extend for additional consecutive terms of one month each. The amendment further provided that, in the event of termination without cause by the Company prior to the end of the initial term, Dr. Kaplin shall receive his monthly base salary through the end of the initial term. The amendment further provided that all outstanding and unvested shares granted pursuant to the Nonqualified Stock Option Agreement, dated June 7, 2023, between the Company and Dr. Kaplin shall accelerate upon the termination of Dr. Kaplin’s employment. Dr. Kaplin’s amendment further provided that, in the event of a termination for any reason prior to the end of the first renewal term following the end of the initial term, the Company will continue to cover the costs of Dr. Kaplin’s health insurance coverage through the end of the first renewal term, subject to the execution and timely return of a release. Dr. Kaplin’s employment was terminated effective April 15, 2024.
Effective November 13, 2023, the Company entered into a mutual employment separation agreement with Paul M. Rivard, its Chief Legal Officer. The separation agreement provides for a lump-sum severance payment equal to three months of his normal base salary in exchange for a waiver and release. The separation agreement further provides that Mr. Rivard will be deemed a contractor providing services to the Company for purposes of any awards previously granted to him under the 2021 Plan if at the relevant time(s) he is providing services to the Company while under the employ of a law firm representing the Company.
Director’s Deferral of Board Service Fees
On
November 13, 2023, the Board approved certain adjustments to the director fees. Mr. Silverman’s fees were decreased from
$
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Note 2 – Significant Accounting Policies
(a) Basis of Presentation
The condensed consolidated financial statements of the Company are prepared in U.S. Dollars and in accordance with accounting principles generally accepted in the United States of America (US GAAP).
The accompanying unaudited condensed financial statements have been prepared by the Company. These statements include all adjustments (consisting only of normal recurring adjustments) which management believes necessary for a fair presentation of the statements and have been prepared on a consistent basis using the accounting policies described in Note 2 Significant Accounting Policies included in the Notes to Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the Securities and Exchange Commission on April 1, 2024 (the “2023 Annual Report”). Certain financial information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the accompanying disclosures are adequate to make the information presented not misleading. The Notes to Financial Statements included in the 2023 Annual Report should be read in conjunction with the accompanying interim financial statements. The interim operating results for the three and six months ended June 30, 2024 may not be necessarily indicative of the operating results expected for the full year or any future period.
(b) Use of Estimates and Judgments
The preparation of financial statements in conformity with US GAAP requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements is included in the following notes for recording the fair value of financial instruments, derivative financial instruments valuations, research and development expenses, impairment of intangible assets and the valuation of share-based payments.
(c) Functional and Presentation Currency
These condensed consolidated financial statements are presented in U.S. Dollars, which is the Company’s functional currency. All financial information has been rounded to the nearest dollar. Foreign Currency Transaction Gains or Losses, resulting from cash balances denominated in Foreign Currencies, are recorded in the Condensed Consolidated Statements of Comprehensive Loss.
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(d) Comprehensive Income (Loss)
The Company follows Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) 220 in reporting comprehensive income. Comprehensive income (loss) is a more inclusive financial reporting methodology that includes disclosure of certain financial information that historically has not been recognized in the calculation of net income (loss). Since the Company has no items of other comprehensive income (loss), comprehensive loss is equal to net loss.
(e) Cash and Cash Equivalents
The Company considers all highly liquid investments, which include short-term bank deposits (up to three months from date of deposit) that are not restricted as to withdrawal date or use, to be cash equivalents.
(f) Fair Value of Financial Instruments
Fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management as of and during the three and six months ended June 30, 2024. The carrying amounts of cash equivalents, accounts receivable, other current assets, other assets, accounts payable, and accrued expenses approximated their fair values as of June 30, 2024 due to their short-term nature. The fair value of the bifurcated embedded derivative related to the convertible preferred stock was estimated using a Monte Carlo simulation model, which uses as inputs the fair value of the Company’s common stock and estimates for the equity volatility and traded volume volatility of the Company’s common stock, the time to maturity of the convertible preferred stock, the risk-free interest rate for a period that approximates the time to maturity, dividend rate, a penalty dividend rate, and the probability of default. The fair value of the warrant liabilities was estimated using the Black Scholes Model which uses as inputs the following weighted average assumptions: dividend yield, expected term in years; equity volatility; and risk-free interest rate.
Fair Value Measurement
The framework for measuring fair value provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under FASB ASC 820 are described as follows:
| Level 1 | Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company can access. | |
| Level 2 | Inputs to the valuation methodology include: |
| ● | quoted prices for similar assets or liabilities in active markets; | |
| ● | quoted prices for identical or similar assets or liabilities in inactive markets; | |
| ● | inputs other than quoted prices that are observable for the asset or liability; | |
| ● | inputs that are derived principally from or corroborated by observable market data by correlation or other means |
| If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability. | ||
| Level 3 | Inputs to the valuation methodology are unobservable and significant to the fair value measurement. |