Date: 3/31/2021
Form: 10-K - Annual Report
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File No. 000-27072
AIM IMMUNOTECH INC.
(Exact name of registrant as specified in its charter)
| Delaware | 52-0845822 | |
| (State or other jurisdiction of | (I.R.S. Employer Identification | |
| incorporation or organization) | Number) |
| 2117 SW Highway 484, Ocala FL | 34473 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (352) 448-7797
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||
| Common Stock, par value $0.001 per share | AIM | NYSE American |
Securities registered pursuant to Section 12(g) of the Act:
(Title of Each Class)
NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
| [ ] | Large accelerated filer | [ ] | Accelerated filer |
| [X] | Non-accelerated filer | [X] | Smaller reporting company |
| [ ] | Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by checkmark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
The aggregate market value of the voting and non-voting common equity held by non-affiliates at June 30, 2020, the last business day of the registrant’s most recently completed second fiscal quarter was $83,967,716.
The number of shares of the registrant’s Common Stock outstanding as of March 26, 2021 was 47,821,935.
DOCUMENTS INCORPORATED BY REFERENCE: None.
TABLE OF CONTENTS
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| ITEM 1. | Business |
GENERAL
AIM ImmunoTech Inc. and its subsidiaries (collectively, “AIM”, “Company”, “we” or “us”) are an immuno-pharma company headquartered in Ocala, Florida and focused on the research and development of therapeutics to treat multiple types of cancers, various viruses and immune-deficiency disorders. We have established a strong foundation of laboratory, pre-clinical and clinical data with respect to the development of nucleic acids and natural interferon to enhance the natural antiviral defense system of the human body and to aid the development of therapeutic products for the treatment of certain cancers and chronic diseases.
AIM’s flagship products include Ampligen® (rintatolimod), a first-in-class drug of large macromolecular RNA (ribonucleic acid) molecules, and Alferon N Injection® (Interferon Alfa-N3). A first-in-class drug is also known as a new molecular entity that contains an active moiety. Ampligen has not been approved by the FDA or marketed in the US.
Since the outbreak of SARS-CoV-2, the novel virus that causes COVID-19, we have been actively engaged in determining whether Ampligen could be an effective treatment for this virus or could be part of a vaccine. We believe that Ampligen has the potential to be both an early-onset treatment for and prophylaxis against SARS-CoV-2. Ampligen also has potential as a COVID-19 vaccine strategy that combines Ampligen as an immune enhancer seeking to boost the efficacy of intranasal and other vaccines and, as to intranasal, also convey cross-reactivity and cross-protection against future mutations. We believe that prior studies of Ampligen in SARS-CoV-1 animal experimentation may predict similar protective effects against the new virus.
Beginning in April 2020, we entered into confidentiality and non-disclosure agreements with numerous companies for the potential outsourcing of the production of polymer, enzyme, placebo as well as Ampligen and one Contract Research Organization which may also assist with the planning, presentation and filing of documents with the FDA. These confidentiality and non-disclosure agreements are only the initial step in forging relationships with these entities to obtain contract manufacturers and research partners. No assurance can be given as to how many of these, initial explorations, if any, will result in definitive arrangements or, with regard to potential research partners, what research arrangements will develop and thereafter prove fruitful.
Ampligen represents a dsRNA being developed for globally important cancers, viral diseases and disorders of the immune system. Ampligen has in the clinic demonstrated the potential for standalone efficacy in a number of solid tumors. We have also seen success in increasing survival rates and efficacy in the treatment of animal tumors when Ampligen is used in combination with checkpoint blockade therapies. This success in the field of immuno-oncology has guided our focus toward the potential use of Ampligen as a combinational therapy for the treatment of a variety of solid tumor types. There are currently multiple Ampligen clinical trials testing Ampligen in humans — both underway and planned — at major cancer research centers. Ampligen was used as a monotherapy to treat pancreatic cancer patients in an Early Access Program (EAP) approved by the Inspectorate of Healthcare in the Netherlands at Erasmus Medical Center. In September, we reported receipt of statistically significantly results of positive survival benefit when using Ampligen in patients with locally advanced/metastatic pancreatic cancer after systemic chemotherapy. We will work with our Contract Research Organization, Amarex Clinical Research LLC, to seek FDA “fast-track” and possibly even FDA “breakthrough” designations and to obtain authorization to conduct a follow-up pancreatic cancer Phase 2/3 clinical trial with sites in the Netherlands at Erasmus MC under Prof. van Eijck, and also at major cancer research centers in the United States.
Ampligen is also being evaluated for the treatment of myalgic encephalomyelitis/chronic fatigue syndrome (ME/CFS). We are currently sponsoring an expanded access program for ME/CFS patients in the U.S. In August 2016, we received approval of our New Drug Application (NDA) from Administracion Nacional de Medicamentos, Alimentos y Tecnologia Medica (ANMAT) for commercial sale of Ampligen in the Argentine Republic for the treatment of severe CFS. With regulatory approval in Argentina, Ampligen is the world’s only approved therapeutic for ME/CFS. On June 10, 2020, we received import clearance from ANMAT to import the first shipment of commercial grade vials of Ampligen to Argentina. The next steps in the commercial launch of Ampligen include ANMAT conducting a final inspection of the product and release tests before granting final approval to begin commercial sales. We have supplied GP Pharm with the Ampligen required for testing and ANMAT release. This testing and approval process is currently delayed due to the COVID-19 pandemic and ANMAT’s internal processes. Once final approval by ANMAT is obtained, GP Pharm will begin distributing Ampligen in Argentina. We continue to pursue our Ampligen NDA, for the treatment of CFS with the FDA.
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Alferon N Injection is approved for a category of sexually transmitted diseases infection and patients that are intolerant to recombinant interferon in Argentina. Alferon is the only natural-source, multi-species alpha interferon currently approved for sale in the U.S. for the intralesional treatment of refractory (resistant to other treatment) or recurring external condylomata acuminata/genital warts (GW) in patients 18 years of age or older. Certain types of human papilloma viruses cause GW. We also have approval from ANMAT for the treatment of refractory patients that failed or were intolerant to treatment with recombinant interferon in Argentina.
We operate a 30,000 sq. ft. facility in New Brunswick, NJ, where we conduct testing and have produced limited quantities of active pharmaceutical ingredients (“API”) for our products. We have reviewed our operations at the facility and believe that some of the equipment most likely should be upgraded to realize greater efficiencies, when and if we require more API than is currently in storage. We are also exploring engaging a Contract Manufacturing Organization (“CMO”) to produce API. While we believe we have sufficient API to meet our current needs, we are also continually exploring new efficiencies so as to maximize our ability to fulfill future obligations.
AVAILABLE INFORMATION
We are subject to the information and periodic reporting requirements of the Exchange Act and, in accordance therewith, we file periodic reports, proxy statements and other information with the SEC. Such periodic reports, proxy statements and other information are available for inspection and copying at the website of the SEC www.sec.com. You also may obtain a free copy of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and amendments to those reports on the day of filing with the SEC on our website at http://www.aimimmuno.com under the Investor Relations tab for SEC Filings or by contacting the Investor Relations Department by calling 888-557-6480 or (352) 448-7797 or sending an e-mail message to ir@aimimmuno.com. Our Internet website and the information contained on that website, or accessible from our website, is not intended to be incorporated into this Annual Report on Form 10-K or any other filings we make with the SEC.
OUR PRODUCTS
Our primary pharmaceutical product platform consists of Ampligen®, a first-in-class drug of large macromolecular double-stranded (ds) RNA (ribonucleic acid) molecules, and our FDA-approved natural alpha-interferon product, Alferon N Injection®.
Ampligen®
Ampligen is approved for sale in Argentina for severe Chronic Fatigue Syndrome (CFS) and is an experimental drug in the United States currently undergoing clinical development for the treatment of certain cancers and ME/CFS. Over its developmental history, Ampligen has received various designations, including Orphan Drug Product Designation (FDA and European Medicines Agency (“EMA”)), Treatment protocol (e.g., “Expanded Access” or “Compassionate” use authorization) with Cost Recovery Authorization (FDA) and “promising” clinical outcome recognition based on the evaluation of certain summary clinical reports (“AHRQ” or Agency for Healthcare Research and Quality). Ampligen represents the first drug in the class of large (macromolecular) dsRNA molecules to apply for NDA review. Based on the results of published, peer reviewed pre-clinical studies and clinical trials, we believe that Ampligen may have broad-spectrum anti-viral and anti-cancer properties. We believe that nucleic acid compounds represent a potential new class of pharmaceutical products designed to act at the molecular level for treatment of many human diseases. There are two forms of nucleic acids, deoxyribonucleic acid (“DNA”) and ribonucleic acid (“RNA”). DNA is a group of naturally occurring molecules found in chromosomes, the cell’s genetic machinery. RNA is a group of naturally occurring informational molecules which orchestrate a cell’s behavior which, in turn, regulates the action of groups of cells, including the cells which compromise the body’s immune system. RNA directs the production of proteins and regulates certain cell activities including the activation of an otherwise dormant cellular defense against viruses and tumors. Our drug technology utilizes specifically-configured RNA and is a selective Toll-like Receptor 3 (TLR3) agonist that is administered intravenously. Ampligen has been assigned the generic name rintatolimod by the United States Adopted Names Council (USANC) and has the chemical designation poly(I):poly(C12U).
EAP/clinical trials of Ampligen that have been conducted or that are ongoing include studies of the potential treatment of patients with renal cell carcinoma, malignant melanoma, non-small cell lung, ovarian, breast, colorectal, prostate and pancreatic cancer, ME/CFS, Hepatitis B and HIV.
We have received approval of our NDA from ANMAT for commercial sale of rintatolimod (U.S. tradename: Ampligen) in the Argentine Republic for the treatment of severe CFS. The product will be marketed by GP Pharm, our commercial partner in Latin America. On September 19, 2019, we received clearance from the FDA to ship Ampligen to Argentina for the commercial launch and subsequent sales. We are currently working with GP Pharm on the commercial launch of Ampligen in Argentina. Commercialization in Argentina will require, among other things, GP Pharm to establish disease awareness, medical education, creation of an appropriate reimbursement level, design of marketing strategies and completion of manufacturing preparations for launch and ANMAT conducting a final inspection of the product and release tests before granting final approval to begin commercial sales. This testing and approval process is currently delayed due to the COVID-19 pandemic and ANMAT’s internal processes. Once final approval by ANMAT is obtained, GP Pharm will begin distributing Ampligen in Argentina. We continue to pursue our Ampligen NDA, for the treatment of CFS with the FDA.
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The FDA has authorized an open-label expanded access treatment protocol, (“AMP-511”), allowing patient access to Ampligen in an open-label safety study under which severely debilitated CFS patients have the opportunity to be on Ampligen to treat this very serious and chronic condition. The data collected from the AMP-511 protocol through clinical sites provide safety information regarding the use of Ampligen in patients with CFS. We are establishing an enlarged data base of clinical safety information which we believe will provide further documentation regarding the absence of autoimmune disease associated with Ampligen treatment. We believe that continued efforts to understand existing data, and to advance the development of new data and information, will ultimately support our future filings for Ampligen and/or the design of future clinical studies that the FDA requested in a complete response letter. The FDA approved the increase reimbursement level from $200 to $345 per 200 mg vial of Ampligen, due to increased production costs; which was re-authorized in 2020. At this time, we do not plan on passing this adjustment along to the patients in this program. As of December 31, 2020, there are 10 patients enrolled in this open-label expanded access treatment protocol. In October 2020, we received Institutional Review Board (IRB) approval for the expansion of the AMP-511 Expanded Access Program (EAP) clinical trial for Myalgic Encephalomyelitis/Chronic Fatigue Syndrome (ME/CFS) to include patients previously diagnosed with SARS-CoV-2 following clearance of the virus, but who still demonstrate chronic fatigue-like symptoms.
In May 2016, we entered into a five-year agreement with myTomorrows, a Netherlands based company, for the commencement and management of an Early Access Program (“EAP”) in Europe and Turkey (the “Territory”) related to ME/CFS. Pursuant to the agreement, as amended, myTomorrows also will manage all Early Access Programs and Special Access Programs in Europe, Canada and Turkey to treat pancreatic cancer and ME/CFS patients.
In April 2018, we completed data analysis of an intranasal human safety study of Ampligen plus FluMist® known as AMP-600. The study was previously closed after the US Centers for Disease Control and Prevention (“CDC”) recommended against the use of FluMist®. Intranasal Ampligen in combination with FluMist® was generally well-tolerated in the study.
In June 2018, Ampligen was cited as outperforming two other TLR3 agonists, poly IC and natural double stranded RNA, in creating an enhanced tumor microenvironment for checkpoint blockage therapy in the journal of Cancer Research (http://cancerres.aacrjournals.org/content/early/2018/05/31/0008-5472.CAN-17-3985). In a head-to-head study in explant culture models, Ampligen activated the TLR3 pathway and promoted an accumulation of killer T cells but, unlike the other two TLR3 agonists, it did so without causing regulatory T cell (Treg) attraction. These findings were considered important because they indicate that Ampligen selectively reprograms the tumor microenvironment by inducing the beneficial aspects of tumor inflammation (attracting killer T cells), without amplifying immune suppressive elements such as regulatory T cells. The study was conducted at the University of Pittsburgh and Roswell Park as a part of the NIH-funded P01 CA132714 and Ovarian Cancer Specialized Program of Research Excellence (SPORE). Based upon these findings we and Roswell Park expanded our existing scientific collaboration to advance the clinical development of Ampligen which has shown promise in preclinical studies when combined with checkpoint inhibitors (CPIs). The parties executed a Memorandum of Understanding (“MOU”) designed to further assess the clinical potential of Ampligen in treating certain cancers. This phase I/II study will evaluate the potential of Ampligen to enhance the immune mediated effects of CPIs in patients with advanced solid tumors including bladder, melanoma and renal cell carcinoma. At the moment, this study is on hold as we await updates and next steps from Roswell Park.
In 2018, we completed production of two commercial-size batches of more than 16,000 vials of Ampligen, following its “Fill & Finish” at Jubilant HollisterStier, the Contract Manufacturing Organization. These lots passed all required testing for regulatory release for human use and are being used for multiple programs including the treatment of ME/CFS, the pancreatic cancer EAP in the Netherlands, and will continue to be used for ongoing and future clinical studies in oncology. Additionally, two lots of Ampligen were manufactured in December 2019 and January 2020 at Jubilant. The current manufactured lots of Ampligen have been fully tested and released for commercial product launch in Argentina and for clinical trials. Additionally, in December 2020, we added Pharmaceutics International Inc. (“Pii”) as a “Fill & Finish” provider to enhance our capacity to produce Ampligen. This addition amplifies our manufacturing capability by providing redundancy and cost savings. The contracts augment our existing fill and finish capacity.
Alferon N Injection®
Alferon N Injection is the registered trademark for our injectable formulation of natural alpha interferon. Alferon is the only natural-source, multi-species alpha interferon currently approved for sale in the U.S. and Argentina for the intralesional (within lesions) treatment of refractory (resistant to other treatment) or recurring external genital warts in patients 18 years of age or older. Alferon is also approved in Argentina for the treatment of refractory patients that failed or were intolerant to treatment with recombinant interferons. Certain types of human papilloma viruses (“HPV”) cause genital warts, a sexually transmitted disease (“STD”). According to the CDC, HPV is the most common sexually transmitted infection, with approximately 79 million Americans — most in their late teens and early 20s — infected with HPV. In fact, the CDC states that “HPV is so common that nearly all sexually active men and women get the virus at some point in their lives.” Although they do not usually result in death, genital warts commonly recur, causing significant morbidity and entail substantial health care costs.
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Interferons are a group of proteins produced and secreted by cells to combat diseases. Researchers have identified four major classes of human interferon: alpha, beta, gamma and omega. Alferon N Injection contains a multi-species form of alpha interferon. The world-wide market for injectable alpha interferon-based products has experienced rapid growth and various alpha interferon injectable products are approved for many major medical uses worldwide. Alpha interferons are manufactured commercially in three ways: by genetic engineering, by cell culture, and from human white blood cells. All three of these types of alpha interferon are or were approved for commercial sale in the U.S. Our natural alpha interferon is produced from human white blood cells.
The potential advantages of natural alpha interferon over recombinant (synthetic) interferon produced and marketed by other pharmaceutical firms may be based upon their respective molecular compositions. Natural alpha interferon is composed of a family of proteins containing many molecular species of interferon. In contrast, commercial recombinant alpha interferon products each contain only a single species. Researchers have reported that the various species of interferons may have differing antiviral activity depending upon the type of virus. Natural alpha interferon presents a broad complement of species, which we believe may account for its higher activity in laboratory studies. Natural alpha interferon is also glycosylated (partially covered with sugar molecules). Such glycosylation is not present on the currently U.S. marketed recombinant alpha interferons. We believe that the absence of glycosylation may be, in part, responsible for the production of interferon-neutralizing antibodies seen in patients treated with recombinant alpha interferon. Although cell culture-derived interferon is also composed of multiple glycosylated alpha interferon species, the types and relative quantity of these species are different from our natural alpha interferon.
Alferon N Injection [Interferon alfa-n3 (human leukocyte derived)] is a highly purified, natural-source, glycosylated, multi-species alpha interferon product. There are essentially no neutralizing antibodies observed against Alferon N Injection to date and the product has a relatively low side-effect profile. The recombinant DNA derived alpha interferon formulations have been reported to have decreased effectiveness after one year of treatment, probably due to neutralizing antibody formation.
See “Manufacturing” and “Marketing/Distribution” sections below for more details on the manufacture and marketing/distribution of Alferon N Injection.
PATENTS AND NON-PATENT EXCLUSIVITY RIGHTS
As of December 31, 2020, we had 43 patents worldwide with 10 additional pending patent applications comprising our intellectual property. Please see “Note 5: Patents, Trademark Rights and Other Intangibles (FASB ASC 350 General Intangibles Other than Goodwill)” under Notes to Consolidated Financial Statements for more information on these patents. We continually review our patents’ rights to determine whether they have continuing value.
In February 2020, we filed three provisional patent applications related to Ampligen in our efforts toward joining the global health community in the fight against SARS-CoV-2. These include: 1) Ampligen as a therapy and prophylaxis for COVID-19; 2) Ampligen as part of a proposed intranasal universal coronavirus vaccine; and 3) a high-volume manufacturing process for Ampligen.
In 2016, we received a new Ampligen composition of matter patent in the US (#9,315,538). In 2015, we were granted a new composition of matter patent (#2340307) by the European Patent Office and we received twenty-eight new patents in various EU countries. In 2014, we were granted a new composition of matter patent in the United States (#8722874) covering Ampligen formulations.
The Ampligen U.S. CFS treatment patent (#6130206) expired October 10, 2017 (we believe that the expiration of this patent will have minimal impact on us; see details on U.S. #9315538, U.S. #8722874 and the information from the FDA has granted “orphan drug status” to the drug for CFS below). Our U.S. Ampligen Trademark (#73617687) has been renewed through December 6, 2028. New therapeutic use patent applications are pending. On May 13, 2014, the United States Patent Office issued patent U.S. #8722874 titled “Double-Stranded Ribonucleic Acids with Rugged Physiochemical Structure and Highly Specific Biologic Activity,” with all rights assigned to us. The patent claims a novel form of rugged dsRNA. Rugged dsRNA are nucleic acids with a unique composition and physical characteristic identified with high specificity of binding to Toll-Like Receptor 3 (TLR3), thereby conveying an important range of therapeutic opportunities. The newly discovered form of dsRNA has increased bioactivity and binding affinity to the TLR 3 receptor because of its reduced tendency to form branched dsRNA which can inhibit receptor binding. Pharmaceutical formulations containing the newly discovered nucleic acid as active ingredients and methods of treatment with those formulations are also described in the issued patent. We believe that the issuance of U.S. Patents #9315538 and #8722874 will help ensure that we retain patent protection for novel formulations of Ampligen products until at least 2029.
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In September 2015, the European Patent Office granted the European version of U.S. Patent #9315538, with all rights assigned to us.
In addition to our patent rights relating to Ampligen, the FDA has granted “orphan drug status” to the drug for CFS, HIV/AIDS, renal cell carcinoma, pancreatic cancer, and malignant melanoma. Orphan drug status grants us protection against the potential subsequent approval of other sponsors’ versions of the drug for these uses for a period of seven years following FDA approval of Ampligen for each of these designated uses. The first NDA approval for Ampligen as a new chemical entity will also qualify for four or five years of non-patent exclusivity during which abbreviated new drug applications seeking approval to market generic versions of the drug cannot be submitted to the FDA. (See “Government Regulation” below.)
In May 2011, a new United States Patent #7943147 was granted for the use of Ampligen as a vaccine adjuvant for use with seasonal influenza vaccine to induce an enhanced immune response against H5N1 avian influenza.
With respect to Alferon, the composition is a complex mixture of natural interferon species that is manufactured from human leukocytes obtained from human blood donors. In addition, while it is the current standard by the FDA to treat biological drug products like interferon as “Well Characterized” biologics, a process for which chemical entities can have their identity, purity, impurities, potency, and quality controlled by chemical testing, Alferon, as a natural interferon, does not lend itself well to such testing. Moreover, FDA continues to require that each lot of Alferon we produce be tested and released by the FDA before it can be distributed for commercial sales. Because of the complexity of the Alferon manufacturing process and these additional regulatory requirements, we believe that potential manufacturers of generic, or so-called “bio-similar,” drug products are focused on developing recombinant interferon products, rather than natural interferon products. For these reasons, we believe that not having patent protection should have no or little impact on us. Additionally, at the receipt of the FDA certification for the revised Alferon manufacturing process and techniques in New Brunswick, NJ, it is our intention to file for additional patent protection.
RESEARCH AND DEVELOPMENT (“R&D”)
Our general focus during the past several fiscal years has been on the clinical development of new drug therapies based on natural immune system enhancing technologies for the treatment of immune-based disorders including cancer and CFS. While we have previously estimated milestone dates when significant progress could be reported, the reality of the ongoing SARS-CoV-2 pandemic could mean the re-direction of resources away from ongoing clinical trials and toward the research and development of potential treatments for the coronavirus. In this regard, we have widened our focus to include research and development of potential therapeutic applications for the treatment of COVID-19, including the long-term effects of COVID-19.
Cancer
We have been working with the University of Pittsburgh’s chemokine modulation research initiative which includes the use of Ampligen as a potential adjuvant to modify the tumor microenvironment (TME) with the goal of increasing anti-tumor responses to check point inhibitors (CPI). As part of this collaboration, we haves supplied Ampligen (rintatolimod) to the University. The study, under the leadership of Robert P. Edwards, MD, chair of gynecologic services at Magee-Women’s Hospital of the University of Pittsburgh School of Medicine, and Professor of Surgery Pawel Kalinski, M.D., Ph.D., at Roswell Park, Buffalo, N.Y., involved the chemokine modulatory regimen developed by Dr. Kalinski’s group and successfully completed the Phase 1 dose escalation in patients with resectable colorectal cancer. In the 1st quarter of 2017, Dr. Kalinski relocated to Roswell Park in Buffalo, NY and has established a cancer program which will continue to require a supply of Ampligen.
In October 2018, we signed a clinical trial agreement with Roswell Park to evaluate Ampligen in combination with checkpoint inhibitors (CPIs). The Phase IIa clinical trial will evaluate the immune-mediated effects of cytokine modulation in combination with CPIs in patients with primary resistance to CPI therapy. The protocol will seek to evaluate the combination of Ampligen and CPIs in patients with advanced urothelial carcinoma, renal cell carcinoma and melanoma. Ampligen is our investigational immune-enhancing TLR3 agonist that has demonstrated a robust anti-cancer effect in preclinical models when combined with CPIs. This new agreement expands the extensive prior clinical and preclinical work into the clinical checkpoint blockade arena and offers the opportunity to begin evaluation of this combination therapy in patients with a variety of solid tumors where large numbers of patients do not respond or progress following treatment with standard CPI-based therapy. At the moment, this study is on hold as we await updates and next steps from Roswell Park.
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Currently, six Ampligen clinical trials are underway at university cancer centers testing whether tumor microenvironments can be reprogrammed to increase the effectiveness of cancer immunotherapy, including checkpoint inhibitors:
| ● | Advanced Recurrent Ovarian Cancer - Phase 1 / 2 study of intraperitoneal chemo-immunotherapy in advanced recurrent ovarian cancer; Phase 1 portion establishes intraperitoneal safety. Awaiting publication of Phase I results. https://clinicaltrials.gov/ct2/show/NCT02432378 | |
| ● | Advanced Recurrent Ovarian Cancer - A follow-up Phase 2 study of advanced recurrent ovarian cancer using cisplatin, pembrolizumab, plus Ampligen; up to 45 patients to be enrolled; enrollment has commenced, and numerous patients have commenced treatment. https://clinicaltrials.gov/ct2/show/NCT03734692 | |
| ● | Stage 4 Metastatic Triple Negative Breast Cancer - Phase 2 study of metastatic triple-negative breast cancer using chemokine modulation therapy, including Ampligen and pembrolizumab. All patients have been treated or are in treatment. https://www.clinicaltrials.gov/ct2/show/NCT03599453 | |
| ● | Stage 4 Colorectal Cancer Metastatic to the Liver - Phase 2a study of Ampligen as component of chemokine modulatory regimen on colorectal cancer metastatic to liver; the majority of the 12 planned patients enrolled and treated. https://clinicaltrials.gov/ct2/show/NCT03403634 | |
| ● | Early-Stage Prostate Cancer - Phase 2 study investigating the effectiveness and safety of aspirin and Ampligen with or without interferon-alpha 2b (Intron A) compared to no drug treatments in a randomized three-arm study of patients with prostate cancer before undergoing radical prostatectomy. Patient enrollment has been initiated in this study designed for up to 45 patients. https://clinicaltrials.gov/ct2/show/NCT03899987 | |
| ● | Early-Stage Triple Negative Breast Cancer - Phase 1 study of chemokine modulation plus neoadjuvant chemotherapy in patients with early-stage triple negative breast cancer has received FDA authorization; the objective of this study is to evaluate the safety and tolerability of a combination of Ampligen, celecoxib with or without Intron A, when given along with chemotherapy; the goal of this approach is to increase survival. This study is recruiting patients designed for up to 24 patients. https://clinicaltrials.gov/ct2/show/NCT04081389 |
Six Ampligen clinical trials are planned for initiation in 2021:
| ● | Brain-Metastatic Breast Cancer — Phase 2 study to assess the effectiveness of a three-pronged strategy combining distinct immunotherapy approaches, including Ampligen. Roswell Park and Moffitt Cancer Center have both received “Breakthrough Awards” from the U.S. Department of Defense (DOD). Together, these separate but parallel proposed clinical trials are receiving approximately $15 million in DOD funding to study Ampligen. Roswell Park is currently working on its draft of the IND, which its study and Moffitt’s study require before next steps can be taken. | |
| ● | Stage 4 Refractory Metastatic Colorectal Carcinoma — Phase 2 study that will evaluate Ampligen in combination with pembrolizumab in refractory metastatic colorectal carcinoma at Roswell Park. Up to 25 patients to be enrolled. This is expected to be funded by grants, testing Ampligen and pembrolizumab. See: https://www.clinicaltrials.gov/show/NCT04119830 | |
| ● | Refractory Melanoma — Phase 2 study that will evaluate polarized dendritic cell vaccine, interferon alpha-2, Ampligen and celecoxib for the treatment of HLA-A2+ refractory melanoma at Roswell Park. Up to 24 patients to be enrolled. See: https://www.clinicaltrials.gov/show/NCT04093323 | |
| ● | Stage 4 Urothelial, Melanoma and Renal Cell Carcinoma — Phase 2 study of advanced urothelial (bladder), melanoma and renal cell carcinoma, resistant to checkpoint blockade, that will evaluate Ampligen in combination with a checkpoint blockade therapy at Roswell Park. Protocol design and funding currently being finalized. | |
| ● | Non-Small Cell Lung Cancer — First-line therapy for non-small cell lung cancer with SOC chemotherapy that will evaluate Ampligen in combination with pembrolizumab at University of Nebraska Medical Center. Dr. V. Ernani, PI. Study design and budget being developed. However, we now anticipate an extended delay, as other studies with funding have moved ahead of the Ampligen project. Roswell Park is exploring a pilot study to establish proof of concept. | |
| ● | Advanced Pancreatic Cancer — Phase 2 study in advanced pancreatic cancer using checkpoint blockade plus Ampligen at University of Nebraska Medical Center and Erasmus University. Protocol and budget being developed. This proposed study may be based on data from our Dutch EAP (see below) and UNMC animal experiment showing synergy between Ampligen and checkpoint therapy. A second confirmatory animal trial has been completed; while it did not replicate the previous survival results, it did demonstrate a significant anti-tumor effect. |
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In addition, the National Cancer Institute awarded $14.5 million to Roswell Park to study Ampligen as part of five Roswell Park-led chemokine modulation clinical trials in melanoma, colorectal and ovarian cancers.
In January 2017, the EAP through our agreement with myTomorrows designed to enable access of Ampligen to ME/CFS patients was extended to pancreatic cancer patients beginning in the Netherlands. myTomorrows is our exclusive service provider in Europe and Turkey and will manage all EAP activities relating to the pancreatic cancer extension of the program. In February 2018, the agreement with myTomorrows was extended to cover Canada to treat pancreatic cancer patients, pending government approval. There have been no physician requests to date that would cause the program to move forward with the approval process.
As of the date of this Report, 42 pancreatic cancer patients have received treatment with Ampligen immuno-oncology therapy under the EAP program at Erasmus MC in the Netherlands. Supervised by Prof. Casper van Eijck, MD, the team at Erasmus MC found a statistically significantly positive survival benefit when using Ampligen in patients with locally advanced/metastatic pancreatic cancer after systemic chemotherapy. We will work with our Contract Research Organization, Amarex Clinical Research LLC, to seek FDA “fast-track” and possibly even FDA “breakthrough” designations and to obtain IND authorizations to conduct a follow-up pancreatic cancer Phase 2/3 clinical trial with sites in the Netherlands at Erasmus MC under Prof. van Eijck, and also at major cancer research centers in the United States. Additionally:
| ● | In December 2020, the FDA granted Ampligen Orphan Drug Designation status for the treatment of pancreatic cancer. The Orphan Drug Designation program provides orphan status to drugs and biologics which are defined as those intended for the treatment, prevention or diagnosis of a rare disease or condition, which is one that affects less than 200,000 persons in the United States or meets cost recovery provisions of the act. The status helps incentivize the treatment of therapies to treat unmet medical needs by providing a company with seven years of exclusivity rights once a drug reaches market. | |
| ● | In February 2021, our subsidiary, NV Hemispherx Biopharma Europe, received formal notification from the European Commission (EC) approving the Orphan Medicinal Product Application for Ampligen as a treatment for pancreatic cancer. Orphan products, once commercially approved in the European Union (EU), receive benefits including up to ten years of protection from market competition from similar medicines with similar active component and indication for use that are not shown to be clinically superior. |
In September, we reported receipt of statistically significant results of positive survival benefit when using Ampligen in patients with locally advanced/metastatic pancreatic cancer after systemic chemotherapy versus matched historical controls.
Myalgic Encephalomyelitis/Chronic Fatigue Syndrome (“ME/CFS”)
Myalgic Encephalomyelitis/Chronic Fatigue Syndrome (“ME/CFS”), also known as Chronic Fatigue Immune Dysfunction Syndrome (“CFIDS”) and Chronic Fatigue Syndrome (“CFS”), is a serious and debilitating chronic illness and a major public health problem. ME/CFS is recognized by both the government and private sector as a significant unmet medical need, including the U.S. National Institutes of Health (“NIH”), FDA and the CDC. The CDC states on its website at https://www.cdc.gov/me-cfs/ that “Myalgic encephalomyelitis/chronic fatigue syndrome (ME/CFS) is a serious, long-term illness that affects many body systems. People with ME/CFS are often not able to do their usual activities. At times, ME/CFS may confine them to bed. People with ME/CFS have severe fatigue and sleep problems. ME/CFS may get worse after people with the illness try to do as much as they want or need to do. This symptom is known as post-exertional malaise (PEM). Other symptoms can include problems with thinking and concentrating, pain, and dizziness.”
Many severe ME/CFS patients become completely disabled or totally bedridden and are afflicted with severe pain and mental confusion even at rest. ME/CFS is characterized by incapacitating fatigue with profound exhaustion and extremely poor stamina, sleep difficulties and problems with concentration and short-term memory. It is also accompanied by flu-like symptoms, pain in the joints and muscles, tender lymph nodes, sore throat and new headaches. A distinctive characteristic of the illness is a worsening of symptoms following physical or mental exertion, which do not subside with rest.
In October 2016, an analysis of a subset of CFS patients from the AMP-516 Phase 3 study was performed and presented at the IACFS/ME annual meeting in Fort Lauderdale, FL. The ITT Population (n=208) was separated into two subsets based primarily on baseline CFS symptom duration (2-8 years (n=75) and <2 years plus >8 years (n=133)). Responder analyses of the ITT Population and both subsets were performed. Responder analyses of Ampligen vs. placebo patients improving ET duration from baseline by ≥25% shows over twice the percentage of patients with clinical enhancement in ET effect in the Ampligen cohort compared to placebo for the 2-8-year subset vs. the ITT population. This subset may assist in the design of future clinical studies of Ampligen in the treatment for ME/CFS patients.
The high number of younger people being hospitalized for COVID-19 suggests considerable numbers of people in the prime of their lives may have a COVID-induced ME/CFS-like illness in their future. Individuals with CFS lost an estimated $20,000 in 2002, implying a total societal loss of $9.1 billion. Twenty-five percent ($2.3 billion) resulted from lost household productivity, and the remaining 75% ($6.8 billion) from lost labor force productivity.
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In June of 2020, we filed a provisional patent application for, among other discoveries, the use of Ampligen as a potential early-onset therapy for the treatment of COVID-19 induced chronic fatigue.
Many survivors of the first SARS-CoV-1 epidemic in 2003 continued to report chronic fatigue, difficulty sleeping and shortness of breath months after recovering from the acute illness. “After one year, 17% of patients had not returned to work and 9% more had not returned to their pre-SARS work levels” (Simmaron Research). Now there is increasing evidence that patients with COVID-19 can develop a similar, ME/CFS-like illness. These patients are commonly referred to as “Long Haulers.” http://simmaronresearch.com/2020/04/will-covid-19-leave-an-explosion-of-me-cfs-cases-in-its-wake/
In October 2020, we received Institutional Review Board (IRB) approval for the expansion of the AMP-511 Expanded Access Program (EAP) clinical trial for Myalgic Encephalomyelitis/Chronic Fatigue Syndrome (ME/CFS) to include patients previously diagnosed with SARS-CoV-2 following clearance of the virus, but who still demonstrate chronic fatigue-like symptoms.
On November 2, 2020, we announced the publication of statistically significant data detailing how Ampligen could have a considerable positive impact on people living with ME/CFS when administered in the early stages of the disease. The data were published in PLOS ONE, a peer-reviewed open access scientific journal published by the Public Library of Science. AIM researchers found that the TLR3 agonist Ampligen substantially improved physical performance in a subset of ME/CFS patients.
COVID-19
Following the SARS-CoV-1 outbreak in 2002-03, Ampligen exhibited excellent antiviral properties and protective survival effect in NIH-contracted studies of SARS-infected mice, which is very similar to SARS-CoV-2, the novel virus that causes COVID-19.
| ● | The Barnard 2006 study (https://journals.sagepub.com/doi/abs/10.1177/095632020601700505) found that Ampligen reduced virus lung levels to below detectable limits. | |
| ● | The Day 2009 study (https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2787736/) found that, instead of 100% mortality, there was 100% protective survival. |
We compared key transcription regulatory sequences of SARS-CoV-1 to SARS-CoV-2 and found significant similarities, suggesting highly probable extension of the antiviral effects of Ampligen in the earlier NIH-contracted SARS experiments to COVID-19.
The SARS-CoV-2 virus – which causes COVID-19 – shares important genomic and pathogenic similarities with SARS-CoV-1 (hence its name). Since Ampligen has shown antiviral activity against more distantly related coronaviruses, there was a reasonable probability that the antiviral effects of Ampligen against SARS-CoV-1 will likely extend to SARS-CoV-2, as discussed below, recently, Ampligen has demonstrated in vitro antiviral activity against SARS-CoV-2. We believe that this creates a compelling case for clinical trials to evaluate Ampligen as a potential tool in the fight against COVID-19.
Since the late 2019 outbreak of SARS-CoV-2, we have been actively engaged in determining whether Ampligen could be an effective treatment for this virus or could be part of a vaccine. We believe that Ampligen has the potential to be both an early-onset treatment for and prophylaxis against SARS-Cov-2. We believe that prior studies of Ampligen in SARS-CoV-1 animal experimentation may predict similar protective effects against the new virus.
In February 2020, we filed three provisional patent applications related to Ampligen in our efforts toward joining the global health community in the fight against the deadly coronavirus (See: https://aimimmuno.com/press-release/aim-immunotech-files-provisional-patent-application-for-the-use-of-ampligenr-as-a-potential-therapy-for-covid-19-induced-chronic- fatigue/). Our three provisional patent applications include: 1) Ampligen as a therapy for the coronavirus; 2) Ampligen as part of a proposed intranasal universal coronavirus vaccine that combines Ampligen with inactivated coronavirus, conveying immunity and cross-protection and; 3) a high-volume manufacturing process for Ampligen. Under the Patent Cooperation Treaty of 1970, which provides international protections for patents, these three provisional patent applications were converted in to two international patent applications based on the date of their filings.
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In early April 2020, we entered into a Material Transfer Agreement (MTA) with Shenzhen Smoore Technologies located in Shenzhen China, the world’s largest manufacturer of inhalation devices. Pursuant to this agreement, Smoore has agreed to run preliminary tests in China to the efficacy of Smoore’s inhalation delivery device using Ampligen. Initial testing will include evaluation of Ampligen with regards to safety and characterization of the inhaler vapor properties. Additional testing will study the particle size of various Ampligen concentrations in aqueous solutions obtainable using Smoore’s technology. The goal of these studies is to establish a reproducible method to obtain an Ampligen-containing atomized mist that can deliver biologically active Ampligen deep into the lung airways of humans. There have been delays related to importing Ampligen to China. We are working with Smoore to alleviate these issues and to identify a mutually beneficial course of action that would allow us to move forward with the proposed testing of Ampligen. We will announce when the shipment for testing purposes has been completed. The MTA with Smoore expires on April 1, 2021, with the possibility of continued cooperation between us and Smoore under ongoing consideration.
On August 6, 2020, we contracted Amarex Clinical Research LLC (“Amarex”) to act as our Clinical Research Organization and provide regulatory support with regard to a clinical trial testing Ampligen’s potential as a COVID-19 prophylaxis via intranasal delivery. We anticipate conducting the Phase I study using the Centre for Human Drug Research (CHDR) in The Netherlands. Amarex is expected to help provide monitoring support. For the subsequent Phase II/III studies we expected to incur clinical trial costs of up to $4-5 million. We expect that Phase I will consist of 40 test subjects and cost about $1 million.
In March 2020, the Japanese National Institute of Infectious Diseases (“NIID”) initiated preliminary laboratory testing of Ampligen as a potential treatment for COVID-19. On July 1, 2020, we entered into a trilateral material transfer and research agreement with the NIID and Shionogi & Co., Ltd. (“Shionogi”), one of Japan’s premier pharma companies, to test the Company’s drug Ampligen as a potential vaccine adjuvant for COVID-19. Per this agreement, the details of all preclinical and clinical results will remain confidential until released by NIID and Shionogi. The Company was notified by Shionogi on November 17, 2020 that Shionogi intends to utilize a TLR agonist other than AIM’s Ampligen as Shionogi’s designated adjuvant in its ongoing efforts to develop a potential Shionogi vaccine for COVID-19.
Beginning in April 2020, we entered into confidentiality and non-disclosure agreements with numerous companies for the potential outsourcing of the production of polymer, enzyme, placebo as well as Ampligen, and one Contract Research Organization, Amarex, which will provide regulatory support related to a clinical trial testing Ampligen’s potential as a COVID-19 prophylaxis via intranasal delivery.
In addition, we joined with ChinaGoAbroad (CGA) to facilitate the entry of Ampligen into the People’s Republic of China (PRC) for use as a prophylactic/early-onset therapeutic against COVID-19. CGA is a member-based online information platform and offline advisory firm serving to facilitate two-way international transactions relating to the PRC in collaboration with the China Overseas Development Association (CODA). The relationship with ChinaGoAbroad is ongoing.
On May 11, 2020, the FDA authorized an IND for Roswell Park to conduct a Phase 1/2a study of a regimen of Ampligen and interferon alpha in cancer patients with mild or moderate COVID-19 infections. This new clinical trial, sponsored by the Roswell Park in collaboration with us, will test the safety of this combination regimen in patients with cancer and mild to moderate COVID-19, and the extent to which this therapy will promote clearance of the SARS-CoV-2 virus from the upper airway. It is planned that the phase 1/2a study will enroll up to 44 patients in two stages. Phase 1 will see 12-24 patients receiving both Ampligen and interferon alfa-2b at escalating doses. Once that initial phase is complete, further study participants will be randomized to two arms: one receiving the two-drug combination and a control group who will not receive Ampligen or interferon alfa but will receive best available care. We intend to be a financial sponsor of the study and will provide Ampligen at no charge for this study.
On July 6, 2020, we entered into a clinical trial agreement with Roswell Park pursuant to which Roswell Park will conduct a Phase 1/2a trial of Ampligen (rintatolimod) in combination with interferon alfa, in cancer patients with COVID-19, the disease caused by the SARS-CoV-2 coronavirus. We and the National Cancer Institute are supporting this trial. We reported in September 2020 that recruitment in the trial had begun. See: clinicaltrials.gov/NCT04379518. On November 25, 2020, the first patient in the study had been enrolled and treated.
We also entered into a material transfer agreement with the University of Rochester for a series of in vitro experiments to test the direct antiviral activity of Ampligen on SARS-CoV-2, as well as the mechanism of action. They are currently engaged in experiments with multiple cell lines as they work to establish the study model system. We also entered into a specialized services agreement with Utah State University and have supplied Ampligen to support the University’s Institute for Viral Research in its research into SARS-CoV-2. The Utah State results show that Ampligen was able to decrease SARS-CoV-2 infectious viral yields by 90% at clinically achievable intranasal Ampligen dosage levels.
On October 6, 2020, we received Institutional Review Board (IRB) approval for the expansion of the AMP-511 Expanded Access Program (EAP) clinical trial for Myalgic Encephalomyelitis/Chronic Fatigue Syndrome (ME/CFS) to include patients previously diagnosed with SARS-CoV-2, but who still demonstrate chronic fatigue-like symptoms. Patients in the trial are treated with our flagship pipeline drug Ampligen. On January 6, 2021, we commenced with the treatment of the first previously diagnosed COVID-19 patient with long-COVID symptoms in the AMP-511 study.
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On November 29, 2020, we entered into a Material Transfer and Research Agreement with Leyden Laboratories, B.V., (“Leyden Lab”) to facilitate two proposed studies/research projects:
| ● | An assessment of protective potential of intranasal administration of Ampligen in SARS-CoV-2 Syrian hamster challenge model; and | |
| ● | An assessment of protective potential of intranasal Ampligen in lethal influenza mouse challenge model. |
On January 11, 2021, we entered into a Sponsor Agreement with the Centre for Human Drug Research (CHDR), a foundation located in the Leiden in the Netherlands, to manage a proposed Phase 1 randomized, double-blind study to evaluate the safety and activity of repeated intranasal administration of Ampligen. In February 2021, the Ethics Committee in the Netherlands issued its approval for commencement of the study. The current study plans call for the enrollment of eight healthy subjects in each of four Ampligen treatment groups and eight placebo subjects, for a total of 40 healthy subjects. This will assess the safety, tolerability and biological activity of repeated administration of Ampligen intranasally. The subjects will receive intranasal dosing every other day for 13 days, for a total of seven doses each. We are funding the clinical study. We consider such a study to be an important part of our ongoing efforts to develop an intranasal COVID-19 treatment.
Other Diseases
In Europe, the EMA has approved the Orphan Medicinal Products Designation for rintatolimod (Ampligen) as a potential treatment of Ebola virus disease and for Alferon N Injection, also known as interferon alfa-n3, as a potential treatment of MERS.
We concluded our series of collaborations designed to determine the potential effectiveness of Ampligen and Alferon N as potential preventative and/or therapeutic treatments for Ebola related disorders. Although we believe that the threat of both MERS and Ebola globally may reemerge in the future, it appears that the spread of these disorders has somewhat diminished. As a result, we have elected to focus our research and development efforts on other areas at this time.
MANUFACTURING
The Administracion Nacional de Medicamentos, Alimentos y Tecnologia Medica (ANMAT) in Argentina approved Ampligen for commercial distribution for the treatment of Chronic Fatigue Syndrome (CFS) in 2016. Shipment of the drug product to Argentina was initiated in 2018 to complete the release testing by ANMAT needed for commercial distribution. On September 19, 2019, we received clearance from the FDA to ship Ampligen to Argentina for the commercial launch and subsequent sales. We are currently working with GP Pharma on the commercial launch of Ampligen in Argentina See “Our Products; Ampligen” above.
Jubilant HollisterStier (Jubilant) is our authorized CMO for Ampligen for our approval in Argentina. Since the 2017 engagement of Jubilant to manufacture Ampligen, two lots of Ampligen consisting of more than 16,000 units have been manufactured and released in year 2018. The first lot was designated for human use in the US in the cost recovery CFS program and for expanded oncology clinical trials. The second lot has been designated for these programs in addition to commercial distribution in Argentina for the treatment of CFS. The production of additional polymer (Ampligen intermediates) took place in 2019 at our New Brunswick facility. Additionally, two lots of Ampligen were manufactured in December 2019 and January 2020 at Jubilant. The current manufactured lots of Ampligen have been fully tested and released for commercial product launch in Argentina and for clinical trials.
In December 2020, we added Pharmaceutics International Inc. (“Pii”) as a “Fill & Finish” provider to enhance our capacity to produce the drug Ampligen. This addition amplifies our manufacturing capability by providing redundancy and cost savings. The contracts augment our existing fill and finish capacity.
Alferon is approved by the FDA for commercial sales in the US for the treatment of genital warts. It is also approved by ANMAT in Argentina for commercial sales for the treatment of genital warts and in patients who are refractory to treatment with recombinant interferons.
Commercial sales of Alferon in the United States will not resume until new batches of commercial filled and finished product are produced and released by the FDA. While our facility is approved by the FDA under the Biologics License Application (“BLA”) for Alferon, this status will need to be reaffirmed by an FDA pre-approval inspection. We will also need the FDA’s approval to release commercial product once we have submitted satisfactory stability and quality release data. Currently, the manufacturing process is on hold and there is no definitive timetable to have the facility back online.
We have reviewed our operations at the facility and believe that some of the equipment most likely should be upgraded to realize greater efficiencies, when and if we require more API than is currently in storage. We are also exploring engaging a Contract Manufacturing Organization (“CMO”) to produce API. While we believe we have sufficient API to meet our current needs, we are also continually exploring new efficiencies so as to maximize our ability to fulfill future obligations.
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Licensing/Collaborations/Joint Ventures
To maximize the availability of Ampligen to patients on a worldwide basis, we have embarked on a strategy to license the product and/or to collaborate and/or create a joint venture with companies that have the demonstrated capabilities and commitment to successfully gain approval and commercialize Ampligen in their respective territories of the world. Ideal partners would have the following characteristics: well established global and regional experience and coverage, robust commercial infrastructure, strong track record of successful development and registration of in-licensed products, as well as a therapeutic area fit (ME/CFS, immuno-oncology, etc.).
MARKETING/DISTRIBUTION
In May 2016, we entered into a five-year exclusive Renewed Sales, Marketing, Distribution and Supply Agreement (the “Agreement”) with GP Pharm. Under this Agreement, GP Pharm was responsible for gaining regulatory approval in Argentina for Ampligen to treat severe CFS in Argentina and for commercializing Ampligen for this indication in Argentina. We granted GP Pharm the right to expand rights to sell this experimental therapeutic into other Latin America countries based upon GP Pharm achieving certain performance milestones. We also granted GP Pharm an option to market Alferon N Injection in Argentina and other Latin America countries. See “Our Products; Ampligen” above.
In January 2017, the ANMAT granted a five-year extension to a previous approval to sell and distribute Alferon N Injection (under the brand name “Naturaferon”) in Argentina. This extends the approval until 2022. In February 2013, we received the ANMAT approval for the treatment of refractory patients that failed or were intolerant to treatment with recombinant interferon, with Naturaferon in Argentina.
In May 2016, we entered into a five-year agreement (the “Impatients Agreement”) with Impatients, N.V. (“myTomorrows”), a Netherlands based company, for the commencement and management of an EAP in Europe and Turkey (the “Territory”) related to ME/CFS. Pursuant to the agreement, myTomorrows, as our exclusive service provider and distributor in the Territory, is performing EAP activities. These activities will be directed to (a) the education of physicians and patients regarding the possibility of early access to innovative medical treatments not yet the subject of a Marketing Authorization (regulatory approval) through named-patient use, compassionate use, expanded access and hospital exemption, (b) patient and physician outreach related to a patient-physician platform, (c) the securing of Early Access Approvals (exemptions and/or waivers required by regulatory authorities for medical treatments prior to Marketing Authorization) for the use of such treatments, (d) the distribution and sale of such treatments pursuant to such Early Access Approvals, (e) pharmacovigilance (drug safety) activities and/or (f) the collection of data such as patient-reported outcomes, doctor-reported experiences and registry data. We are supporting these efforts and supplying Ampligen to myTomorrows at a predetermined transfer price. In the event that we receive Marketing Authorization in any country in the Territory, we will pay myTomorrows a royalty on products sold. Pursuant to the Impatients Agreement, the royalty would be a percentage of Net Sales (as defined in the Impatients Agreement) of Ampligen sold in the Territory where Marketing Authorization was obtained, and the maximum royalty would be a percentage of Net Sales. The formula to determine the percentage of Net Sales will be based on the number of patients that are entered into the EAP. We believe that disclosure of the exact maximum royalty rate and royalty termination date could cause competitive harm. However, to assist the public in gauging these terms, the actual maximum royalty rate is somewhere between 2% and 10% and the royalty termination date is somewhere between five and fifteen years from the First Commercial Sale of a product within a specific country. The parties established a Joint Steering Committee comprised of representatives of both parties to oversee the EAP. No assurance can be given that activities under the EAP will result in Marketing Authorization or the sale of substantial amounts of Ampligen in the Territory.
In January 2017, the EAP through our agreement with myTomorrows designed to enable access of Ampligen to ME/CFS patients has been extended to pancreatic cancer patients beginning in the Netherlands. myTomorrows is our exclusive service provider in the Territory and will manage all EAP activities relating to the pancreatic cancer extension of the program.
In February 2018, we signed an amendment to the EAP with myTomorrows. This amendment extended the territory to cover Canada to treat pancreatic cancer patients, pending government approval.
In March 2018, we signed an amendment to the EAP with myTomorrows, pursuant to which myTomorrows will be our exclusive service provider for special access activities in Canada for the supply of Ampligen for the treatment of ME/CFS.
In December 2020, we entered into a signed Letter of Agreement with myTomorrows for the delivery of Ampligen for the treatment of up to 16 pancreatic cancer patients.
In August 2017, we extended our agreement with Asembia LLC, formerly Armada Healthcare, LLC, to undertake the marketing, education and sales of Alferon N Injection throughout the United States. We are currently exploring an expansion of this relationship.
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COMPETITION
The major pharmaceutical competitors for Ampligen include Pfizer, GlaxoSmithKline, Merck & Co., Novartis and AstraZeneca. Biotech competitors include Baxter International, Fletcher/CSI, AVANT Immunotherapeutics, AVI BioPharma and Genta. When we recommence sales of Alferon N Injection, it will compete with Intron® A, an injectable from Merck & Co.
GOVERNMENT REGULATION
Regulation by governmental authorities in the U.S. and foreign countries is and will be a significant factor in the manufacture and marketing of Alferon products and our ongoing research and product development activities. Ampligen and other products developed from the ongoing research and product development activities will require regulatory clearances prior to commercialization. In particular, new drug products for humans are subject to rigorous pre-clinical and clinical testing as a condition for clearance by the FDA and by similar authorities in foreign countries. The process of seeking these approvals, and the ongoing process of compliance with applicable statutes and regulations, has and will continue to require the expenditure of substantial resources. Any failure by us or our collaborators or licensees to obtain, or any delay in obtaining, regulatory approvals could materially adversely affect the marketing of any products developed by us and our ability to receive product or royalty revenue. We have received Orphan Drug designation for certain therapeutic indications, which we believe might under certain conditions help to accelerate the process of drug development and commercialization. Alferon N Injection is only approved for use in intralesional treatment of refractory or recurring external genital warts in patients 18 years of age or older. Use of Alferon N Injection for other applications requires regulatory approval.
We are subject to various federal, state and local laws, regulations and recommendations relating to such matters as safe working conditions, laboratory and manufacturing practices, the experimental use of animals and the use of and disposal of hazardous or potentially hazardous substances, including infectious disease agents, used in connection with our research work.
For more information about the current status of Alferon N Injection and Ampligen, please see “Our Products” above.
HUMAN CAPITAL
As of December 31, 2020, we had personnel consisting of twenty-one (21) full-time employees and two (2) part-time employees. Five (5) of the combined personnel are engaged in our research, development, clinical, and manufacturing effort with eighteen (18) performing regulatory, general administration, data processing, including bio-statistics, financial and investor relations functions. We have no union employees.
While we have been successful in attracting skilled and experienced scientific personnel, there can be no assurance that we will be able to attract or retain the necessary qualified employees and/or consultants in the future.
| ITEM 1A: | Risk Factors |
The following cautionary statements identify important factors that could cause our actual results to differ materially from those projected in the forward-looking statements made in this Form 10-K. Please see “Special Note Regarding Forward Looking Statements” below.
Risks Associated with Our Business
The COVID-19 coronavirus could adversely impact our business, including our clinical trials.
In December 2019, a novel strain of coronavirus, COVID-19, was first reported in China. The coronavirus has since become a worldwide pandemic, with more than 123 million global cases and approximately 2.7 million total deaths, as of March 12, 2021. As the pandemic continues, we could very well experience disruptions that could severely impact our business and clinical trials, including:
| ● | delays or difficulties in enrolling patients in our clinical trials; | |
| ● | delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff; | |
| ● | diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials; | |
| ● | interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others; |
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| ● | limitations in employee resources that would otherwise be focused on the conduct of our clinical trials, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people; | |
| ● | delays in issuing reports, results and publishing papers; | |
| ● | delays in receiving approval from local regulatory authorities to initiate our planned clinical trials; | |
| ● | delays in clinical sites receiving the supplies and materials needed to conduct our clinical trials; | |
| ● | interruption in global shipping that may affect the transport of clinical trial materials, such as investigational drug product used in our clinical trials; | |
| ● | changes in local regulations as part of a response to the COVID-19 coronavirus outbreak which may require us to change the ways in which our clinical trials are conducted, which may result in unexpected costs, or to discontinue the clinical trials altogether; | |
| ● | delays in necessary interactions with local regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or forced furlough of government employees; and | |
| ● | refusal of the FDA to accept data from clinical trials in affected geographies outside the United States. |
The global outbreak of the COVID-19 coronavirus is ongoing. The extent to which the COVID-19 coronavirus may impact our business and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.
The COVID-19 coronavirus could force the closure of our offices and require workers to work from home.
As of the date of this report, due to the importance of our COVID-19 work, our offices are open. The current pandemic could lead to the complete or partial closure of one or more of our offices, or otherwise result in significant disruptions to our business and operations. Such events could materially and adversely impact our operations. In addition, we may permit employees to work remotely in certain cases and such policies may remain in place for an indeterminate amount of time or may be made mandatory by relevant government authorities. There can be no assurance that our technological systems or infrastructure is or will be equipped to facilitate effective remote working arrangements for our employees.
We may require additional financing which may not be available.
The development of our products requires the commitment of substantial resources to conduct the time-consuming research, preclinical development, and clinical trials that are necessary to bring pharmaceutical products to market. As of December 31, 2020, we had approximately $54,378,000 in cash, cash equivalents and marketable securities. We believe, based on our current financial condition, that we have adequate funds to meet our anticipated operational cash needs and fund current clinical trials over approximately the next twenty-four months. At present we do not generate any material revenues from our operations and we do not anticipate doing so in the near future. We may need to obtain additional funding in the future for new studies and/or if current studies do not yield positive results, require unanticipated changes and/or additional studies.
Given our current focus on Ampligen and the high-cost estimates to bring our facility back online, should we focus on our facility, we will need to allocate sufficient funds to finance the revalidation process to initiate commercial manufacturing, thereby readying ourselves for an FDA Pre-Approval Inspection. We also will need to allocate capital to eventually commercialize and sell Ampligen and/or recommence and increase sales of Alferon N Injection or our other products. We have reviewed our operations at our New Brunswick facility and believe that some of the equipment most likely should be upgraded to realize greater efficiencies, when and if we require more API than is currently in storage. We are also exploring engaging a Contract Manufacturing Organization (“CMO”) to produce API. While we believe we have sufficient API to meet our current needs, we are also continually exploring new efficiencies so as to maximize our ability to fulfill future obligations.
We believe, based on our current financial condition, that we have adequate funds to meet our anticipated operational cash needs and fund current clinical trials over approximately the next twenty-four months. If our funds are not adequate, and we are subsequently unable to obtain additional funding, through joint venturing, sales of securities and/or otherwise, our ability to develop our products, commercially produce inventory or continue our operations may be materially adversely affected.
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We may continue to incur substantial losses and our future profitability is uncertain.
As of December 31, 2020, our accumulated deficit was approximately $342,605,000. As with many biotechnology companies we have not yet generated significant revenues from our products and may incur substantial and increased losses in the future. We cannot assure that we will ever achieve significant revenues from product sales or become profitable. We require, and will continue to require, the commitment of substantial resources to develop our products. We cannot assure that our product development efforts will be successfully completed or that required regulatory approvals will be obtained or that any products will be manufactured and marketed successfully, or be profitable.
Our drug and related technologies are investigational and subject to regulatory approval. If we are unable to obtain regulatory approval in a timely manner, or at all, our operations will be materially harmed and our stock adversely affected.
While we have received regulatory approval for the commercialization of Ampligen in Argentina (pending additional release testing and subsequent steps), all of our drugs and associated technologies, other than Alferon N Injection, are investigational in the U.S. and must receive prior regulatory approval by appropriate regulatory authorities for commercial distribution and sale and are currently legally available only through clinical trials in the U.S. with specified disorders. At present, Alferon N Injection is approved for the intralesional treatment of refractory or recurring external genital warts in patients 18 years of age or older. Use of Alferon N Injection for other indications will require regulatory approval in the U.S. and abroad.
Our products, including Ampligen, are subject to extensive regulation by numerous governmental authorities in the U.S. and other countries, including, but not limited to, the FDA in the U.S., the Health Protection Branch (“HPB”) of Canada, the Agency for the European Medicines Agency (“EMA”) in Europe and the Administracion Nacional de Medicamentos, Alimentos y Tecnologia Medica (“ANMAT”) in Argentina. Obtaining regulatory approvals is a rigorous and lengthy process and requires the expenditure of substantial resources. In order to obtain final regulatory approval of a new drug, we must demonstrate to the satisfaction of the regulatory agency that the product is safe and effective for its intended uses and that we are capable of manufacturing the product to the applicable regulatory standards. We require regulatory approval in order to market Ampligen or any other proposed product and receive product revenues or royalties. We cannot assure you that Ampligen will ultimately be demonstrated to be safe and efficacious. While Ampligen is authorized for use in clinical trials in the U.S., we cannot assure you that additional clinical trial approvals will be authorized in the United States or in other countries, in a timely fashion or at all, or that we will complete these clinical trials. In addition, although Ampligen has been authorized by the FDA for treatment use under certain conditions, including provision for cost recovery, there can be no assurance that such authorization will continue in effect.
While we received approval of our Argentinian NDA from ANMAT for commercial sale of rintatolimod (U.S. tradename: Ampligen) in the Argentine Republic for the treatment of severe ME/CFS, ANMAT approval is only an initial, but important, step in the overall successful commercialization of our product. On September 19, 2019, we received clearance from the FDA to ship Ampligen to Argentina for the commercial launch and subsequent sales. There are a number of additional actions that must occur before we would be able to commence commercial sales in Argentina. For example, Ampligen is still in the process of release testing the product that has already been sent.
The FDA’s regulatory review and approval process is extensive, lengthy, expensive and inherently uncertain. To receive approval for a product candidate, we must, among other things, demonstrate to the FDA’s satisfaction with substantial evidence from well-controlled pre-clinical and clinical trials that the product candidate is both safe and effective for each indication for which approval is sought. Before we can sell Ampligen for any use, or promote Alferon for any use other than as Alferon N Injection for treatment of refractory or recurring genital warts, we will need to file the appropriate NDA with the FDA in the U.S. and the appropriate regulatory agency outside of the U.S. where we intend to market and sell such products. At present the only NDA we have filed with the FDA is the NDA for the use of Ampligen to treat CFS. The FDA issued a Complete Response Letter (“CRL”) in February 2013 for this NDA and provided recommendations to address certain outstanding issues before they could approve Ampligen for Commercial Sales. The Agency stated that the submitted data do not provide substantial evidence of efficacy of Ampligen for the treatment of CFS and that the data do not provide sufficient information to determine whether the product is safe for use in CFS due to the limited size of the safety database and multiple discrepancies within the submitted data. The FDA indicated that we needed to conduct additional work. Therefore, ultimate FDA approval, if any, may be delayed indefinitely and may require us to expend more resources than we have available. It is also possible that additional studies, if performed and completed, may not be successful or considered sufficient by the FDA for approval or even to make our applications approvable. If any of these outcomes occur, we may be forced to abandon one or more of our future applications for approval, which might significantly harm our business and prospects. As a result, we cannot predict if or when we might receive regulatory approval for the use of Ampligen to treat CFS or for the use of any other products. Even if regulatory approval from the FDA is received for the use of Ampligen to treat CFS or eventually, for the use of any other product, any approvals that we obtain could contain significant limitations in the form of narrow indications, patient populations, warnings, precautions or contra-indications or other conditions of use, or the requirement that we implement a risk evaluation and mitigation strategy. In such an event, our ability to generate revenues from such products could be greatly reduced and our business could be harmed.
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If we are unable to gain necessary FDA approvals related to Ampligen and Alferon on a timely basis, or we are unable to generate the additional data, successfully complete inspections or obtain approvals as required by the FDA on a timely manner, or at all, or determine that any of our clinical studies are not cost/justified to undertake or if, for that or any other reason, Ampligen, Alferon or one of our other products or production processes do not receive necessary regulatory approval in the U.S. or elsewhere, our operations most likely will be materially and/or adversely affected.
Generally, obtaining approval of a NDA by the FDA, or a comparable foreign regulatory authority, is inherently uncertain. Even after completing clinical trials and other studies, a product candidate could fail to receive regulatory approval for many reasons, including the following:
| ● | not be able to demonstrate to the satisfaction of the FDA that our product candidate is safe and effective for any indication; | |
| ● | the FDA may disagree with the design or implementation of our clinical trials or other studies; | |
| ● | the results of the clinical trials or other studies may not demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks; | |
| ● | the FDA may disagree with our interpretation of data from clinical trials or other studies; | |
| ● | the data collected from clinical trials and other studies of a product candidate may not be sufficient to support the submission of a NDA; | |
| ● | the approval policies or regulations of the FDA may significantly change in a manner rendering our clinical and other study data insufficient for approval; and | |
| ● | the FDA may not approve the proposed manufacturing processes and facilities for a product candidate. |
We may be subject to product liability claims from the use of Ampligen, Alferon N Injection, or other of our products which could negatively affect our future operations. We have limited product liability and clinical trial insurance.
We maintain a limited amount of Products Liability and Clinical Trial insurance coverage world-wide for Ampligen and Alferon due to the minimal amount of historical loss claims regarding these products in the marketplace. Any claims against our products, Ampligen and Alferon N Injection, could have a materially adverse effect on our business and financial condition.
We face an inherent business risk of exposure to product liability claims in the event that the use of Ampligen, Alferon N Injection or other of our products results in adverse effects. This liability might result from claims made directly by patients, hospitals, clinics or other consumers, or by pharmaceutical companies or others manufacturing these products on our behalf. Our future operations may be negatively affected from the litigation costs, settlement expenses and lost product sales inherent to these claims. While we will continue to attempt to take appropriate precautions, we cannot assure that we will avoid significant product liability exposure.
Uncertainty of health care reimbursement for our products.
Our ability to successfully commercialize our products will depend, in part, on the extent to which reimbursement for the cost of such products and related treatment will be available from government health administration authorities, private health coverage insurers and other organizations. Significant uncertainty exists as to the reimbursement status of newly approved health care products, and from time to time legislation is proposed, which, if adopted, could further restrict the prices charged by and/or amounts reimbursable to manufacturers of pharmaceutical products. We cannot predict what, if any, legislation will ultimately be adopted or the impact of such legislation on us. There can be no assurance that third party insurance companies will allow us to charge and receive payments for products sufficient to realize an appropriate return on our investment in product development.
There are risks of liabilities associated with handling and disposing of hazardous materials.
Our business involves the controlled use of hazardous materials, carcinogenic chemicals, and flammable solvents. Although we believe that our safety procedures for handling and disposing of such materials comply in all material respects with the standards prescribed by applicable regulations, the risk of accidental contamination or injury from these materials cannot be completely eliminated. In the event of such an accident or the failure to comply with applicable regulations, we could be held liable for any damages that result. However, we have obtained insurance coverage to mitigate any potential significant loss in this area.
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We rely upon information technology and any failure, inadequacy, interruption or security lapse of that technology, including any cyber security incidents, could harm our ability to operate our business effectively.
Despite the implementation of security measures, our internal computer systems and those of third parties with which we contract are vulnerable to damage from cyber-attacks, computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. System failures, accidents or security breaches could cause interruptions in our operations, and could result in a material disruption of our business operations, in addition to possibly requiring substantial expenditures of resources to remedy. The loss of clinical trial data could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate public disclosure of confidential or proprietary information, we could incur liability and our product development and commercialization efforts could be delayed.
The loss of services of key personnel could hurt our chances for success.
Our success is dependent on the continued efforts of our staff, especially certain doctors and researchers. The loss of the services of personnel key to our operations could have a material adverse effect on our operations and chances for success. The loss of key personnel or the failure to recruit additional personnel as needed could have a materially adverse effect on our ability to achieve our objectives.
Risks Associated with Our Products
In addition to the risks disclosed above, the development of Ampligen is subject to a number of significant risks. Ampligen may be found to be ineffective or to have adverse side effects, fail to receive necessary regulatory clearances, be difficult to manufacture on a commercial scale, be uneconomical to market or be precluded from commercialization by proprietary right of third parties. Our investigational products are in various stages of clinical and pre-clinical development and require further clinical studies and appropriate regulatory approval processes before any such products can be marketed. We do not know when, if ever, Ampligen or our other products will be generally available for commercial sale for any indication. Generally, only a small percentage of potential therapeutic products are eventually approved by the FDA for commercial sale.
To the extent that we are required by the FDA, pursuant to the Ampligen NDA, to conduct additional studies and take additional actions, approval of any applications that we submit may be delayed by several years, or may require us to expend more resources than we have available. It is also possible that additional studies, if performed and completed, may not be successful or considered sufficient by the FDA for approval or even to make our applications approvable. If any of these outcomes occur, we may be forced to abandon one or more of our future applications for approval, which might significantly harm our business and prospects. As a result, we cannot predict when or whether regulatory approval will be obtained for any product candidate we develop.
If approved, one or more of the potential side effects of the drug might deter usage of Ampligen in certain clinical situations and, therefore, could adversely affect potential revenues and physician/patient acceptability of our product.
Alferon N Injection. Although Alferon N Injection is approved for marketing in the United States for intralesional treatment of refractory or recurring external genital warts in patients 18 years of age or older, to date it has not been approved for other indications.
Possible side effects from the use of Ampligen or Alferon N Injection could adversely affect potential revenues and physician/patient acceptability of our product.
Ampligen. We believe that Ampligen has been generally well tolerated with a low incidence of clinical toxicity, particularly given the severely debilitating or life-threatening diseases that have been treated. A mild flushing reaction has been observed in approximately 15-20% of patients treated in our various studies. This reaction is occasionally accompanied by a rapid heartbeat, a tightness of the chest, urticaria (swelling of the skin), anxiety, shortness of breath, subjective reports of “feeling hot”, sweating and nausea. The reaction is usually infusion-rate related and can generally be controlled by reducing the rate of infusion. Other adverse side effects include liver enzyme level elevations, diarrhea, itching, asthma, low blood pressure, photophobia, rash, visual disturbances, slow or irregular heart rate, decreases in platelets and white blood cell counts, anemia, dizziness, confusion, elevation of kidney function tests, occasional temporary hair loss and various flu-like symptoms, including fever, chills, fatigue, muscular aches, joint pains, headaches, nausea and vomiting. These flu-like side effects typically subside within several months.
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The FDA in its February 1, 2013 CRL, provided recommendations to address certain outstanding issues before they could approve Ampligen for Commercial Sales. The Agency stated that the submitted data do not provide sufficient information to determine whether the product is safe for use in CFS due to the limited size of the safety database and multiple discrepancies within the submitted data.
If approved, one or more of the potential side effects of the drug might deter usage of Ampligen in certain clinical situations and therefore, could adversely affect potential revenues and physician/patient acceptability of our product.
Alferon N Injection. At present, Alferon N Injection is approved for the intralesional (within the lesion) treatment of refractory or recurring external genital warts in adults. In clinical trials conducted for the treatment of genital warts with Alferon N Injection, patients did not experience serious side effects; however, there can be no assurance that unexpected or unacceptable side effects will not be found in the future for this use or other potential uses of Alferon N Injection which could threaten or limit such product’s usefulness.
Risks Related to our activities associated with Ampligen’s potential effectiveness as a treatment for SARS-CoV-2
It is not possible to predict the future of the ongoing SARS-CoV-2 global pandemic or the development of potential treatments. No assurance can be given that Ampligen will aid in or be applied to the treatment of this virus.
Significant additional testing and trials will be required to determine whether Ampligen will be effective in the treatment of SARS-CoV-2 in humans and no assurance can be given that it will be the case. We base our belief that Ampligen may be effective in the treatment of SARS-CoV-2 on the result of studies that we reviewed and referenced. No assurance can be given that future studies will not result in findings that are different from those in the studies that we have relied upon. We are one of many companies trying to develop a treatment for this virus, most of whom have far greater resources than us. If one of these companies develops an effective treatment, development of Ampligen for this virus most likely will be adversely affected.
Operating in foreign countries carries with it many risks.
Some of our studies are being conducted in the Netherlands and we may conduct other studies and or we may enter into agreements such as supply agreements. Operating in foreign countries carries with it a number of risks, including potential difficulties in enforcing intellectual property rights. We cannot assure that our potential foreign operations will not be adversely affected by these risks.
Risks Associated with Our Intellectual Property
We may not be profitable unless we can protect our patents and/or receive approval for additional pending patents.
We need to preserve and acquire enforceable patents covering the use of Ampligen for a particular disease in order to obtain exclusive rights for the commercial sale of Ampligen for such disease. We obtained all rights to Alferon N Injection, and we plan to preserve and acquire enforceable patents covering its use for existing and potentially new diseases once we have had a successful FDA Pre Approval Inspection. Our success depends, in large part, on our ability to preserve and obtain patent protection for our products and to obtain and preserve our trade secrets and expertise. Certain of our know-how and technology is not patentable, particularly the procedures for the manufacture of our experimental drug, Ampligen. We also have been issued a patent which affords protection on the use of Ampligen in patients with Chronic Fatigue Syndrome. We have not yet been issued any patents in the United States for the use of Ampligen as a sole treatment for any of the cancers which we have sought to target. For more information on Patents, please see PART I, Item 1 – “Business; Patents”.
We cannot assure that our competitors will not seek and obtain patents regarding the use of similar products in combination with various other agents, for a particular target indication prior to our doing so. If we cannot protect our patents covering the use of our products for a particular disease, or obtain additional patents, we may not be able to successfully market our products.
The patent position of biotechnology and pharmaceutical firms is highly uncertain and involves complex legal and factual questions.
To date, no consistent policy has emerged regarding the breadth of protection afforded by pharmaceutical and biotechnology patents. There can be no assurance that new patent applications relating to our products, process or technology will result in patents being issued or that, if issued, such patents will afford meaningful protection against competitors with similar technology. It is generally anticipated that there may be significant litigation in the industry regarding patent and intellectual property rights. Such litigation could require substantial resources from us and we may not have the financial resources necessary to enforce the patent rights that we hold. No assurance can be made that our patents will provide competitive advantages for our products, process and technology or will not be successfully challenged by competitors. No assurance can be given that patents do not exist or could not be filed which would have a materially adverse effect on our ability to develop or market our products or to obtain or maintain any competitive position that we may achieve with respect to our products. Our patents also may not prevent others from developing competitive products or processes using related technology.
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There can be no assurance that we will be able to obtain necessary licenses if we cannot enforce patent rights we may hold. In addition, the failure of third parties from whom we currently license certain proprietary information or from whom we may be required to obtain such licenses in the future, to adequately enforce their rights to such proprietary information, could adversely affect the value of such licenses to us.
If we cannot enforce the patent rights we currently hold we may be required to obtain licenses from others to develop, manufacture or market our products. There can be no assurance that we would be able to obtain any such licenses on commercially reasonable terms, if at all. We currently license certain proprietary information from third parties, some of which may have been developed with government grants under circumstances where the government maintained certain rights with respect to the proprietary information developed. No assurances can be given that such third parties will adequately enforce any rights they may have or that the rights, if any, retained by the government will not adversely affect the value of our license.
There is no guarantee that our trade secrets will not be disclosed or known by our competitors.
To protect our rights, we require all employees and certain consultants to enter into confidentiality agreements with us. There can be no assurance that these agreements will not be breached, that we would have adequate and enforceable remedies for any breach, or that any trade secrets of ours will not otherwise become known or be independently developed by competitors.
Risks Associated with Our R&D
Due to the inherent uncertainty involved in the design and conduct of clinical trials and the applicable regulatory requirements, including the factors discussed above in “Our Products”, we cannot predict what additional studies and/or additional testing or information may be required by the FDA. Accordingly, we are unable to estimate the nature, timing, costs and necessary efforts to complete these projects nor the anticipated completion dates. In addition, we have no basis for estimating when material net cash inflows may commence. We have yet to generate significant revenues from the sale of these developmental products. As of December 31, 2020, we had approximately $54,378,000 in Cash, Cash Equivalents and Marketable Securities inclusive of Marketable Securities. Please see “We may require additional financing which may not be available” above.
Risks Associated with Our Manufacturing
Our Alferon N Injection Commercial Sales were halted due to lack of finished goods inventory. If we are unable to gain the necessary FDA approvals related to Alferon, our operations most likely will be materially and/or adversely affected.
While our facility is FDA approved under the BLA by the FDA for Alferon, this status will need to be reaffirmed upon the completion of the facility’s upgrades for Alferon. We cannot provide any guarantee that the facility will necessarily pass an FDA pre-approval inspection for Ampligen or Alferon manufacture, which are conducted in separately dedicated areas within the overall New Brunswick manufacturing complex. We have reviewed our operations at the facility and believe that some of the equipment most likely should be upgraded to realize greater efficiencies, when and if we require more API than is currently in storage. We are also exploring engaging a Contract Manufacturing Organization (“CMO”) to produce API.
If we are unable to gain the necessary FDA approvals related to the manufacturing process and/or final product of new Alferon inventory or contract with a CMO, our operations most likely will be materially and/or adversely affected. For more information on Alferon N Injection regarding potential commercial sales, please see PART I, Item 1 - “Business; Manufacturing”.
There are no long-term agreements with suppliers of required materials and services for Ampligen and there are a limited number of raw material suppliers. If we are unable to obtain the required raw materials and/or services, we may not be able to manufacture Ampligen.
A number of essential raw materials are used in the production of Ampligen as well as packaging materials utilized in the fill and finish process. We do not have, but continue to work toward having, long-term agreements for the supply of such materials, when possible. There can be no assurance we can enter into long-term supply agreements covering essential materials on commercially reasonable terms, if at all.
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There are a limited number of suppliers in the United States and abroad available to provide the raw and packaging materials/reagents for use in manufacturing Ampligen and Alferon. At present, we do not have any agreements with third parties for the supply of any of these materials or we are relying on a limited source of reagent suppliers necessary for the manufacture of Alferon. Jubilant Hollister-Stier LLC has manufactured batches of Ampligen for us pursuant to purchase orders. We anticipate that additional orders will be placed upon approved quotes and purchase orders provided by us to Jubilant. On December 22, 2020, we added Pharmaceutics International Inc. (“Pii”) as a “Fill & Finish” provider to enhance our capacity to produce the drug Ampligen. This addition amplifies our manufacturing capability by providing redundancy and cost savings. The contracts augment our existing fill and finish capacity. If we are unable to place adequate acceptable purchase orders with Jubilant or Pii in the future at acceptable prices upon acceptable terms, we will need to find another manufacturer. If we need to find another contract manufacturer to produce Ampligen, it would create a significant delay and expense to get the manufacturer up and running. The costs and availability of products and materials we would need for the production of Ampligen are subject to fluctuation depending on a variety of factors beyond our control, including competitive factors, changes in technology, ownership of intellectual property, FDA and other governmental regulations. There can be no assurance that we will be able to obtain such products and materials on terms acceptable to us or at all.
While we have produced limited quantities of active pharmaceutical ingredients (“API”) for our products in our New Brunswick, NJ facility, we have reviewed our operations at the facility and believe that some of the equipment most likely should be upgraded to realize greater efficiencies, when and if we require more API than is currently in storage. We are also exploring engaging a Contract Manufacturing Organization (“CMO”) to produce API. While we believe we have sufficient API to meet our current needs, we are also continually exploring new efficiencies so as to maximize our ability to fulfill future obligations. Currently, the Alferon manufacturing process is on hold and there is no definitive timetable to have the facility back online. If we are unable to acquire FDA approvals related to the manufacturing process and/or final product of new Alferon inventory or contract with a CMO, our operations most likely will be materially and/or adversely affected. In light of these contingencies, there can be no assurances that the approved Alferon N Injection product will be returned to production on a timely basis, if at all, or that if and when it is again made commercially available, it will return to prior sales levels.
If we are unable to obtain or manufacture the required materials/reagents, and/or procure services needed in the final steps in the manufacturing process, we may be unable to manufacture Ampligen. The costs and availability of products and materials we need for the production of Ampligen are subject to fluctuation depending on a variety of factors beyond our control, including competitive factors, changes in technology, ownership of intellectual property, FDA and other governmental regulations. There can be no assurance that we will be able to obtain such products and materials on terms acceptable to us or at all. For more information on Ampligen manufacturing, please see PART I, Item 1 - “Business; Our Products; Manufacturing” above.
There are a limited number of organizations in the United States available to provide the final manufacturing steps of formulation, fill, finish and packing sets for Alferon N Injection and Ampligen.
There are a limited number of organizations in the United States available to provide the final steps in the manufacturing for Alferon N Injection and Ampligen. To formulate, fill, finish and package our products (“fill and finish”), we require an FDA approved third party CMO.
In January 2017, we approved a quote and provided a purchase order with Jubilant Hollister-Stier LLC pursuant to which Jubilant manufactured batches of Ampligen for us. We anticipate that additional orders will be placed upon approved quotes and purchase orders provided by us to Jubilant. If we are unable to place adequate acceptable purchase orders with Jubilant in the future at acceptable prices upon acceptable terms our business would be materially and adversely affected. Please see the prior risk factor.
In December 2020, we added Pharmaceutics International Inc. (“Pii”) as a “Fill & Finish” provider to enhance our capacity to produce the drug Ampligen. This addition amplifies our manufacturing capability by providing redundancy and cost savings. The contracts augment our existing fill and finish capacity.
Should there be an unanticipated delay in receiving new product or should we experience an unexpected demand for Ampligen, our ability to supply Ampligen most likely will be adversely affected. If we are unable to procure services needed in the final steps in the manufacturing process, we may be unable to manufacture Alferon N Injection and/or Ampligen. The costs and availability of products and materials we need for the production of Ampligen and the commercial production of Alferon N Injection and other products which we may commercially produce are subject to fluctuation depending on a variety of factors beyond our control, including competitive factors, changes in technology, and FDA and other governmental regulations and there can be no assurance that we will be able to obtain such products and materials on terms acceptable to us or at all. For more information on Ampligen and Alferon N Injection manufacturing, please see PART I, Item 1 - “Business; Our Products; Manufacturing” above.
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There is no assurance that upon successful manufacture of a drug on a limited scale basis for investigational use will lead to a successful transition to commercial, large-scale production.
Changes in methods of manufacturing, including commercial scale-up, may affect the chemical structure of Ampligen and other RNA drugs, as well as their safety and efficacy. The transition from limited production of pre-clinical and clinical research quantities to production of commercial quantities of our products will involve distinct management and technical challenges and may require additional management, technical personnel and capital to the extent such manufacturing is not handled by third parties. While we believe that we could successfully upgrade our production capability at our New Brunswick, NJ facility in a commercial scale-up of Ampligen, there can be no assurance that our manufacturing will be successful or that any given product will be determined to be safe and effective, or capable of being manufactured under applicable quality standards, economically, and in commercial quantities, or successfully marketed.
We have limited manufacturing experience for Ampligen and Alferon. We may not be profitable unless we can produce Ampligen, Alferon or other products in commercial quantities at costs acceptable to us.
Ampligen has been produced to date in limited quantities for use in our clinical trials and Early Access Programs. In addition, in Argentina, Ampligen is still in the process of release testing the product that has already been sent. To be successful, our products must be manufactured in commercial quantities in compliance with regulatory requirements and at acceptable costs. We believe that it will not be necessary to increase our current product plans to meet our production obligations. We believe, but cannot assure, that our enhancements to our manufacturing facilities will be adequate for our future needs for the production of our proposed products for large-scale commercialization. We intend to ramp up our existing facility and/or utilize third party facilities if and when the need arises or, if we are unable to do so, to build or acquire commercial-scale manufacturing facilities. We will need to comply with regulatory requirements for such facilities, including those of the FDA pertaining to cGMP requirements or maintaining our BLA status. There can be no assurance that such facilities can be used, built, or acquired on commercially acceptable terms, or that such facilities, if used, built, or acquired, will be adequate for the production of our proposed products for large-scale commercialization or our long-term needs.
We have never produced Ampligen, Alferon or any other products in large commercial quantities. We must manufacture our products in compliance with regulatory requirements in large commercial quantities and at acceptable costs in order for us to be profitable. We intend to utilize third party manufacturers and/or facilities if and when the need arises or, if we are unable to do so, to build or acquire commercial-scale manufacturing facilities. If we cannot manufacture commercial quantities of Ampligen and/or Alferon, or continue to maintain third party agreements for its manufacture at costs acceptable to us, our operations will be significantly affected. If and when the Ampligen NDA is approved, we may need to find an additional vendor to manufacture the product for commercial sales. Also, each production lot of Alferon N Injection is subject to FDA review and approval prior to releasing the lots to be sold. This review and approval process could take considerable time, which would delay our having product in inventory to sell, nor can we provide any assurance as to the receipt of FDA approval of our finished inventory product. There can be no assurances that the Ampligen and/or Alferon can be commercially produced at costs acceptable to us.
Risks Associated with Our Licensing/Collaborations/Joint Ventures
If we are unable to achieve licensing, collaboration and/or joint ventures, our marketing strategy for Ampligen will be part of the differing health care systems around the world along with the different marketing and distribution systems that are used to supply pharmaceutical products to those systems.
We have received approval of our NDA from ANMAT for commercial sale of rintatolimod (U.S. tradename: Ampligen) in the Argentine Republic for the treatment of severe CFS. The product will be marketed by GP Pharm, our commercial partner in Latin America. On September 19, 2019, we received clearance from the FDA to ship Ampligen to Argentina for the commercial launch and subsequent sales. We are currently working with GP Pharma on the commercial launch of Ampligen in Argentina. Commercialization in Argentina will require, among other things, GP Pharm to establish disease awareness, medical education, creation of an appropriate reimbursement level, design of marketing strategies and completion of manufacturing preparations for launch.
The next steps in the commercial launch of Ampligen include ANMAT conducting a final inspection of the product and release tests before granting final approval to begin commercial sales. This testing and approval process is currently delayed due to the COVID-19 pandemic and ANMAT’s internal processes. Once final approval by ANMAT is obtained, GP Pharm will begin distributing Ampligen in Argentina. We continue to pursue our Ampligen NDA, for the treatment of CFS with the FDA.
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Risks Associated with Our Marketing and Distribution
We have limited marketing and sales capability. If we are unable to obtain additional distributors and our current and future distributors do not market our products successfully, we may not generate significant revenues or become profitable.
We have limited marketing and sales capability. We are dependent upon existing and, possibly future, marketing agreements and third-party distribution agreements for our products in order to generate significant revenues and become profitable. As a result, any revenues received by us will be dependent in large part on the efforts of third parties, and there is no assurance that these efforts will be successful.
Our commercialization strategy for Ampligen, if and when it is approved for marketing and sale by the FDA, may include licensing/co-marketing agreements utilizing the resources and capacities of a strategic partner(s). We continue to seek a world-wide marketing partner with the goal of having a relationship in place before approval is obtained. In parallel to partnering discussions, appropriate pre-marketing activities will be undertaken. It is our current intention to control manufacturing of Ampligen on a world-wide basis.
Our commercialization strategy for Alferon N Injection may include the utilization of internal functions and/or licensing/co-marketing agreements that would utilize the resources and capacities of one or more strategic partners. Accordingly, we have engaged Asembia, formerly Armada Healthcare, LLC, to undertake the marketing, education and sales of Alferon N Injection throughout the United States along with GP Pharm for both Ampligen and Alferon in Argentina along with other South American countries.
We cannot assure that our U.S. or foreign marketing strategy will be successful or that we will be able to establish future marketing or third party distribution agreements on terms acceptable to us, or that the cost of establishing these arrangements will not exceed any product revenues. Our inability to establish viable marketing and sales capabilities would most likely have a materially adverse effect on us. There can be no assurances that the approved Alferon N Injection product will be returned to prior sales levels.
Risks Associated with Our Competition
Rapid technological change may render our products obsolete or non-competitive.
The pharmaceutical and biotechnology industries are subject to rapid and substantial technological change. Technological competition from pharmaceutical and biotechnology companies, universities, governmental entities and others diversifying into the field is intense and is expected to increase. Most of these entities have significantly greater research and development capabilities than us, as well as substantial marketing, financial and managerial resources, and represent significant competition for us. There can be no assurance that developments by others will not render our products or technologies obsolete or noncompetitive or that we will be able to keep pace with technological developments.
Our products may be subject to substantial competition.
Ampligen. our flagship product, Ampligen is being evaluated as a potential treatment for COVID-19, myalgic encephalomyelitis/chronic fatigue syndrome (ME/CFS) and COVID-induced CFS symptoms (“Long Haulers”); as well as multiple types of cancers. With regards to COVID-19, multiple global companies are actively working to develop therapies for COVID-19, including several companies which have successfully developed vaccines. It is possible that these or other companies may be developing therapies that are similar to that which we are attempting to develop, and could therefore develop them first. Some of these potential products may have an entirely different approach or means of accomplishing similar therapeutic effects to products being developed by us. These competing products may be more effective and less costly than our products. In addition, conventional drug therapy, surgery and other more familiar treatments may offer competition to our products. Furthermore, many of our competitors have significantly greater experience than we do in preclinical testing and human clinical trials of pharmaceutical products and in obtaining FDA, The Health Protection Branch of the Canada Department of National Health and Welfare (HPB) and other regulatory approvals of products. Accordingly, our competitors may succeed in obtaining FDA, HPB or other regulatory product approvals more rapidly than us. There are no drugs approved for commercial sale with respect to treating CFS in the United States. The dominant competitors with drugs to treat disease indications which we plan to address include Pfizer, GlaxoSmithKline, Merck & Co., Novartis and AstraZeneca. Biotech competitors include Baxter International, Fletcher/CSI, AVANT Immunotherapeutics, AVI BioPharma and Genta. These potential competitors are among the largest pharmaceutical companies in the world, are well known to the public and the medical community, and have substantially greater financial resources, product development, and manufacturing and marketing capabilities than we have. Although we believe our principal advantage is the unique mechanism of action of Ampligen on the immune system, we cannot assure that we will be able to compete.
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Alferon N Injection. Our competitors are among the largest pharmaceutical companies in the world, are well known to the public and the medical community, and have substantially greater financial resources, product development, and manufacturing and marketing capabilities than we have. Alferon N Injection currently competes with Merck’s injectable recombinant alpha interferon product (Intron® A) for the treatment of genital warts. In addition, other pharmaceutical firms offer self-administered topical cream, for the treatment of external genital and perianal warts such as Graceway Pharmaceuticals (Aldara®), Perrigo Company (Imiquimod Cream - Generic Equivalent to Aldara®), Watson Pharma (Condylox®) and MediGene (Veregen®). Alferon N Injection also competes with surgical, chemical, and other methods of treating genital warts. We cannot assess the impact products developed by our competitors, or advances in other methods of the treatment of genital warts, will have on the commercial viability of Alferon N Injection. If and when we obtain additional approvals of uses of this product, we expect to compete primarily on the basis of product performance. Our competitors have developed or may develop products (containing either alpha or beta interferon or other therapeutic compounds) or other treatment modalities for those uses. There can be no assurance that, if we are able to obtain regulatory approval of Alferon N Injection for the treatment of new indications, we will be able to achieve any significant penetration into those markets. In addition, because certain competitive products are not dependent on a source of human blood cells, such products may be able to be produced in greater volume and at a lower cost than Alferon N Injection. Currently, our wholesale price on a per unit basis of Alferon N Injection is higher than that of the competitive recombinant alpha and beta interferon products. Please see risk factor “We may not be profitable unless we can protect our patents and/or receive approval for additional pending patents” above for additional information.
Other companies may succeed in developing products earlier than we do, obtaining approvals for such products from the FDA more rapidly than we do, or developing products that are more effective than those we may develop. While we will attempt to expand our technological capabilities in order to remain competitive, there can be no assurance that research and development by others or other medical advances will not render our technology or products obsolete or non-competitive or result in treatments or cures superior to any therapy we develop.
Risks Associated with an Investment in Our Common Stock:
The market price of our stock may be adversely affected by market volatility
The market price of our common stock has been and is likely to be volatile. This is especially true given the current significant instability in the financial markets, primarily caused by the COVID-19 coronavirus and the major adverse effects it has had and will continue to have on US and worldwide economies and markets. The market price of our stock has significantly increased over the past year, most likely due to our activities related to researching Ampligen’s effectiveness in treating SARS-CoV-2. Should our progress slow or results of testing or activities by others negatively impact our efforts, it is just as likely that our stock price will be significantly adversely affected, and in such case, investors could sustain substantial losses. In addition to the foregoing and, general economic, political and market conditions, the price and trading volume of our stock could fluctuate widely in response to many factors, including:
| ● | announcements of the results of clinical trials by us or our competitors; | |
| ● | announcements of availability or projections of our products for commercial sale; | |
| ● | announcements of legal actions against us and/or settlements or verdicts adverse to us; | |
| ● | adverse reactions to products; | |
| ● | governmental approvals, delays in expected governmental approvals or withdrawals of any prior governmental approvals or public or regulatory agency comments regarding the safety or effectiveness of our products, or the adequacy of the procedures, facilities or controls employed in the manufacture of our products; | |
| ● | changes in U.S. or foreign regulatory policy during the period of product development; | |
| ● | developments in patent or other proprietary rights, including any third-party challenges of our intellectual property rights; | |
| ● | announcements of technological innovations by us or our competitors; | |
| ● | announcements of new products or new contracts by us or our competitors; | |
| ● | actual or anticipated variations in our operating results due to the level of development expenses and other factors; | |
| ● | changes in financial estimates by securities analysts and whether our earnings meet or exceed the estimates; | |
| ● | conditions and trends in the pharmaceutical and other industries; |
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| ● | new accounting standards; | |
| ● | overall investment market fluctuation; | |
| ● | restatement of prior financial results; | |
| ● | notice of NYSE American non-compliance with requirements; and | |
| ● | occurrence of any of the risks described in these risk factors and the risk factors incorporated by reference herein. |
Our common stock is listed for quotation on the NYSE American. For the year ended December 31, 2020, the trading price of our common stock has ranged from $0.56 to $6.10 per share. We expect the price of our common stock to remain volatile. The average daily trading volume of our common stock varies significantly.
Sales of a significant number of shares of our common stock in the public markets, or the perception that such sales could occur, could depress the market price of our common stock.
We may issue shares to be used to meet our capital requirements or use shares to compensate employees, consultants and/or Directors. In this regard, we completed a rights offering to our stockholders and certain option and warrant holders in March 2019, pursuant to which we issued Preferred stock convertible into an aggregate of 26,560,000 shares of common stock and warrants exercisable for up to an additional 26,560,000 shares of common stock. In September 2019 we sold 1,740,550 shares of our common stock and warrant exercisable for 16,037,170 shares of common stock. All of these shares of common stock, including shares issuable upon exercise of warrants, have been registered for public sale. In addition, we have registered securities for public sale pursuant to a universal shelf registration statement and we had been selling shares under this shelf registration statement. Since December 31, 2020, we have sold an aggregate of 5,655,731 shares under our equity distribution agreement with Maxim. As of the date of this report, we no longer have any equity distribution agreements.
We are unable to estimate the amount, timing or nature of future sales of outstanding common stock or instruments convertible into or exercisable for our common stock. Sales of a significant number of shares of our common stock in the public markets, or the perception that such sales could occur as a result of our utilization of our shelf registration statement or otherwise could depress the market price of our common stock and impair our ability to raise capital through the sale of additional equity securities. We cannot predict the effect that future sales of our common stock or the market perception that we are permitted to sell a significant number of our securities would have on the market price of our common stock. Please see Item 7- “Management’s Discussion and Analysis of Financial Condition and Result of Operations; Liquidity and Capital Resources” in PART II.
Provisions of our Certificate of Incorporation and Delaware law could defer a change of our Management which could discourage or delay offers to acquire us.
Provisions of our Certificate of Incorporation and Delaware law may make it more difficult for someone to acquire control of us or for our stockholders to remove existing management, and might discourage a third party from offering to acquire us, even if a change in control or in Management would be beneficial to our stockholders. For example, our Certificate of Incorporation allows us to issue shares of preferred stock without any vote or further action by our stockholders. Our Board of Directors has the authority to fix and determine the relative rights and preferences of preferred stock. Our Board of Directors also has the authority to issue preferred stock without further stockholder approval. As a result, our Board of Directors could authorize the issuance of a series of preferred stock that would grant to holders the preferred right to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of common stock and the right to the redemption of the shares, together with a premium, prior to the redemption of our common stock. On November 14, 2017, at the direction of the Board, we amended and restated the Rights Agreement between us and, American Stock Transfer & Trust Company, LLC, its current Rights Agent. Pursuant to the original Rights Agreement, our Board of Directors declared a dividend distribution of one Right for each outstanding share of common stock to stockholders of record at the close of business on November 29, 2002. Each Right entitles the registered holder to purchase from us a unit consisting of one one-hundredth of a share (a “Unit”) of Series A Junior Participating Preferred Stock, par value $0.01 per share at a Purchase Price of $21.00 per Unit, subject to adjustment.
Special Note Regarding Forward Looking Statements
Certain statements in this Report contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act. These statements are based on our management’s current beliefs, expectations and assumptions about future events, conditions and results and on information currently available to us. Discussions containing these forward-looking statements may be found, among other places, in this “Risk Factors” section; Item 1. “Business”, Part I; Item 3. “Legal Proceedings” and Part II; Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.
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All statements, other than statements of historical fact, included or incorporated herein regarding our strategy, future operations, financial position, future revenues, projected costs, plans, prospects and objectives are forward-looking statements. Words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” “think,” “may,” “could,” “will,” “would,” “should,” “continue,” “potential,” “likely,” “opportunity” and similar expressions or variations of such words are intended to identify forward-looking statements but are not the exclusive means of identifying forward-looking statements.
Among the factors that could cause actual results to differ materially from those indicated in the forward-looking statements are risks and uncertainties inherent in our business including, without limitation: our ability to adequately fund our projects as we will need additional funding to proceed with our objectives, the potential therapeutic effect of our products, the possibility of obtaining regulatory approval, our ability to find senior co-development partners with the capital and expertise needed to commercialize our products and to enter into arrangements with them on commercially reasonable terms, our ability to manufacture and sell any products, our ability to enter into arrangements with third party vendors, market acceptance of our products, our ability to earn a profit from sales or licenses of any drugs, our ability to discover new drugs in the future, changing market conditions, changes in laws and regulations affecting our industry, and issues related to our New Brunswick, New Jersey facility.
With the outbreak of the COVID-19 coronavirus and our prior research into Ampligen’s antiviral activity against Severe Acute Respiratory Syndrome, or SARS, we now are focusing on the potential of Ampligen to serve as a protective prophylaxis and an early-onset therapeutic for the virus. Significant testing and trials will be required to determine whether Ampligen will be effective in the treatment of the COVID-19 coronavirus in humans and no assurance can be given that it will be the case. Our beliefs rely on a number of studies. No assurance can be given that future studies will not result in findings that are different from those reported in the studies we refer to. The pandemic is disrupting world health and world economies and most likely will continue to do so for a long time. While we are able to continue to operate, clearly, like all businesses, we are unable to gauge how bad this pandemic will affect our operations in the future. We reached out to numerous foreign governments related to the COVID-19 coronavirus and, if successful, will be working in these countries. Operating in foreign countries carries with it a number of risks, including potential difficulties in enforcing intellectual property rights. We cannot assure that our potential operations in foreign countries will not be adversely affected by these risks. We have filed provisional patent applications related to the COVID-19 coronavirus. However, these filings do not assure that patents will ultimately be granted.
In February 2013, we received a Complete Response Letter (CRL) from the Food and Drug Administration, or FDA, for our Ampligen New Drug Application, or NDA, for the treatment of CFS. The FDA communicated that we should conduct at least one additional clinical trial, complete various nonclinical studies and perform a number of data analyses. Accordingly, the remaining steps to potentially gain FDA approval of the Ampligen NDA, the final results of these and other ongoing activities could vary materially from our expectations and could adversely affect the chances for approval of the Ampligen NDA. These activities and the ultimate outcomes are subject to a variety of risks and uncertainties, including but not limited to risks that (i) the FDA may ask for additional data, information or studies to be completed or provided; and (ii) the FDA may require additional work related to the commercial manufacturing process to be completed or may, in the course of the inspection of manufacturing facilities, identify issues to be resolved.
In August 2016, we received approval of our NDA from Administracion Nacional de Medicamentos, Alimentos y Tecnologia Medica, or ANMAT, for commercial sale of rintatolimod (U.S. tradename: Ampligen®) in the Argentine Republic for the treatment of severe CFS. The product will be marketed by GP Pharm, our commercial partner in Latin America. We believe, but cannot assure, that this approval provides a platform for potential sales in certain countries within the European Union under regulations that support cross-border pharmaceutical sales of licensed drugs. In Europe, approval in a country with a stringent regulatory process in place, such as Argentina, should add further validation for the product as the Early Access Program, or EAP, as discussed below and underway in Europe in pancreatic cancer. ANMAT approval is only an initial, but important, step in the overall successful commercialization of our product. There are a number of actions that must occur before we could be able to commence commercial sales in Argentina. In September 2019, we received clearance from the FDA to ship Ampligen to Argentina for the commercial launch and subsequent sales. We are currently working with GP Pharma on the commercial launch of Ampligen in Argentina. Commercialization in Argentina will require, among other things, an appropriate reimbursement level, appropriate marketing strategies, completion of manufacturing preparations for launch and ANMAT conducting a final inspection of the product and release tests before granting final approval to begin commercial sales. This testing and approval process is currently delayed due to the COVID-19 pandemic and ANMAT’s internal processes. Approval of rintatolimod for severe CFS in the Argentine Republic does not in any way suggest that the Ampligen NDA in the United States or any comparable application filed in the European Union or elsewhere will obtain commercial approval.
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In May 2016, we entered into a five-year agreement with myTomorrows, a Netherlands based company, for the commencement and management of an EAP in Europe and Turkey related to CFS. Pursuant to the agreement, myTomorrows, as our exclusive service provider and distributor in this territory, is performing EAP activities. In January 2017, the EAP was extended to pancreatic cancer patients beginning in the Netherlands. In February 2018, we signed an amendment to extend the territory to cover Canada to treat pancreatic cancer patients, pending government approval. In March 2018, we signed an amendment to which myTomorrows will be our exclusive service provider for special access activities in Canada for the supply of Ampligen for the treatment of CFS. No assurance can be given that we can sufficiently supply product should we experience an unexpected demand for Ampligen in our clinical studies, the commercial launch in Argentina or pursuant to the EAPs. No assurance can be given that Ampligen will prove effective in the treatment of pancreatic cancer.
Currently, six Ampligen clinical trials are underway, in various phases of development and activity, with a number of subjects enrolled at university cancer centers testing whether tumor microenvironments can be reprogrammed to increase the effectiveness of cancer immunotherapy, including checkpoint blockade. One is at Roswell Park and the other is at the University of Pittsburgh Medical Center. Two additional studies have been approved for enrollment and subjects are being screened for enrollment recruited at Roswell Park and the University of Pittsburgh Medical Center using Ampligen in conjunction with pembrolizumab. No assurance can be given as to the results of these underway trials. Four additional cancer trials in collaboration with University Medical/Cancer Research Centers using Ampligen plus checkpoint blockade are in various pre-enrollment stages. No assurance can be given as to whether some or all of the planned additional oncology clinical trials will occur and they are subject to many factors including lack of regulatory approval(s), lack of study drug, or a change in priorities at the sponsoring universities or cancer centers. Even if these additional clinical trials are initiated, as we are not the sponsor, we cannot assure that these clinical studies or the two studies underway will be successful or yield any useful data. In addition, initiation of planned clinical trials may not occur secondary to many factors including lack of regulatory approval(s) or lack of study drug. Even if these clinical trials are initiated, we cannot assure that the clinical studies will be successful or yield any useful data or require additional funding.
Our overall objectives include plans to continue seeking approval for commercialization of Ampligen in the United States and abroad as well as seeking to broaden commercial therapeutic indications for Alferon N Injection presently approved in the United States and Argentina. We continue to pursue senior co-development partners with the capital and expertise needed to commercialize our products and to enter into arrangements with them on commercially reasonable terms. Our ability to commercialize our products, widen commercial therapeutic indications of Alferon N Injection and/or capitalize on our collaborations with research laboratories to examine our products are subject to a number of significant risks and uncertainties including, but not limited to our ability to enter into more definitive agreements with some of the research laboratories and others that we are collaborating with, to fund and conduct additional testing and studies, whether or not such testing is successful or requires additional testing and meets the requirements of the FDA and comparable foreign regulatory agencies. We do not know when, if ever, our products will be generally available for commercial sale for any indication.
We strived to maximize the outsourcing of certain components of our manufacturing, quality control, marketing and distribution while maintaining control over the entire process through our quality assurance and regulatory groups. We cannot provide any guarantee that the facility or our contract manufacturers will pass an FDA pre-approval inspection for Alferon manufacturing.
The production of new Alferon Active Pharmaceutical Ingredient, or API, inventory will begin at our New Brunswick facility once the validation phase is complete. While the facility has already been approved by the FDA under the Biological License Application, or BLA, for Alferon, this status will need to be reaffirmed by a successful Pre-Approval Inspection by the FDA prior to commercial sale of newly produced inventory product. If and when we obtain a reaffirmation of FDA BLA status and has begun production of new Alferon API, it will need FDA approval as to the quality and stability of the final product before commercial sales can resume. We will need additional funds to finance the revalidation process in our facility to initiate commercial manufacturing, thereby readying ourselves for an FDA Pre-Approval Inspection. If we are unable to gain the necessary FDA approvals related to the manufacturing process and/or final product of new Alferon inventory, our operations most likely will be materially and/or adversely affected. In light of these contingencies, there can be no assurances that the approved Alferon N Injection product will be returned to production on a timely basis, if at all, or that if and when it is again made commercially available, it will return to prior sales levels.
There have been delays related to importing Ampligen to China. We are working with Smoore to alleviate these issues and to identify a mutually beneficial course of action that would allow us to move forward with the proposed testing of Ampligen. We will announce when the shipment for testing purposes has been completed. If we are unable to resolve these issues, we will explore inhalation therapy elsewhere. The MTA with Smoore expires on April 1, 2021, with the possibility of continued cooperation between us and Smoore under ongoing consideration.
We believe, and are investigating, Ampligen’s potential role in enhancing the activity of influenza vaccines. While certain studies involving rodents, non-human primates (monkeys) and healthy human subjects indicate that Ampligen may enhance the activity of influenza vaccines by conferring increased cross-reactivity or cross-protection, further studies will be required and no assurance can be given that Ampligen will assist in the development of a universal vaccine for influenza or other viruses.
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Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
This Report also refers to estimates and other statistical data made by independent parties and by us relating to market size and growth and other data about our industry. This data involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. In addition, projections, assumptions and estimates of our future performance and the future performance of the markets in which we operate are necessarily subject to a high degree of uncertainty and risk.
| ITEM 1B. | Unresolved Staff Comments. |
None.
| ITEM 2. | Properties. |
Our principal executive office is located at 2117 SW Highway 484, Ocala FL 34473 and our finance and human resource office is located at 604 Main Street, Suite 2, Riverton, NJ 08077. We currently lease our principal executive office for $2,100 per month and our accounting and human resource office for about $1,500 per month.
On March 16, 2018, we sold our property located at 783 Jersey Ave., New Brunswick, NJ. This property houses our development and production facilities. The purchase price was $4,080,000 and purchaser received 3,225,806 warrants to purchase common stock. We believe that the sale and lease-back of this building will not have a material impact on our business operations. Simultaneously with the closing of the sale, the purchaser leased the facility back to us. The lease runs for 10 years, with two five-year extensions. The initial annual base rent is $408,000 and will continue for the first and second year. In the third and fourth it will escalate at the rate of 2.5% per year. For all subsequent years it will escalate at the rate of 3% per year. We also will be responsible for additional rent consisting of taxes and certain insurance expenses of the purchaser. The lease contains a repurchase option pursuant to which we can repurchase the facility within the initial 10 year lease period. The purchase price would be based on a multiple of the sale price of $4,080,000. The multiple would be 1.05 plus .0025N where N represents the number of months between lease commencement and closing of repurchase.
| ITEM 3. | Legal Proceedings. |
We commenced an action against BioLife in December of 2017 for Breach of Contract. The amount of damages we are seeking in this matter have yet to be determined. Damages are not covered by insurance. BioLife, the defendant, has filed its Answer, Affirmative Defenses and a Counterclaim in the amount of $96,676 representing the invoices withheld after BioLife indicated that they were not intending to fulfill the balance of the contract. We have denied the allegations of the counterclaim. We conducted one mediation session to date but have been unable to resolve the matter. The parties are currently waiting to start discovery, which we believe will lead to an anticipated trial date. The scheduled dates for these events to transpire have yet to be determined, as they are dependent on the reopening of the Courts, which have been temporarily closed in connection with the declared state of emergency caused by the COVID-19 pandemic. Although it cannot be determined, we believe there is little chance for an unfavorable outcome in this matter.
In 2019, we resolved the claim with our insurance carrier for Business Interruption losses and Extended Business Interruption losses arising from flood damage which occurred at our New Brunswick facility on January 5, 2016. The outstanding matters under the insurance policies were compromised and settled on terms agreeable to the parties.
On October 20, 2020, the Company received correspondence from counsel in Scotland U.K. advising of their representation of Symbiosis Pharmaceutical Services Limited in connection with Symbiosis’ claim that it is owed £110,250.00 (US $152,145.00). The Company denies that any monies are due and owing and the Company has engaged counsel in Scotland to further represent its interests. No judgment can be made as to the likelihood of an unfavorable outcome should a claim be asserted however the Company believes and has been advised that it has meritorious defenses and positions which the Company intends to vigorously assert in the event of the formal assertion of a claim.
| ITEM 4. | Mine Safety Disclosures. |
Not Applicable.
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| ITEM 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. |
Market Information
Our common stock is listed and traded on the NYSE American under the symbol AIM.
Holders of Common Stock
As of March 26, 2021, there were approximately 148 holders of record of our Common Stock. This number was determined from records maintained by our transfer agent and does not include beneficial owners of our securities whose securities are held in the names of various dealers and/or clearing agencies.
Securities Authorized for Issuance Under Equity Compensation Plans
Information about securities authorized for issuance under our equity compensation plans is incorporated herein by reference to Item 12 of Part III of this Annual Report.
Dividends
We have not paid any cash dividends on our Common Stock in recent years. It is management’s intention not to declare or pay dividends on our Common Stock, but to retain earnings, if any, for the operation and expansion of our business.
Recent Sales of Unregistered Securities
During the year ended December 31, 2020, we issued and sold the following unregistered securities:
All share and per share numbers in this have been adjusted to reflect the one-for-44 reverse stock split of our issued and outstanding shares of common stock effected on June 10, 2019.
On July 7, 2020, the board of directors approved up to $500,000 for all directors, officers and employees to buy company shares from us at the market price. As of August 31, 2020, we had issued 10,730 shares of our common stock at a price of $2.33 for a total of $25,000. This plan expired September 10, 2020.
On September 4, 2020, the board of directors approved up to $500,000 for all directors, officers and employees to buy company shares from us at the market price. As of October 31, 2020, we have issued 12,316 shares of our common stock at a price of $2.03 for a total of $25,000. This plan expired November 1 ,2020.
On November 5, 2020, the board of directors approved up to $500,000 for all directors, officers and employees to buy company shares from the Company at the market price. As of December 31, 2020, the Company has issued 14,435 shares of its common stock at a price of $1.72 for a total of $25,000. This plan expired January 2, 2021.
On June 11, 2019, the board of directors approved up to $500,000 for all directors, officers and employees to buy company shares from the Company at the market price. As of June 28, 2019, the Company has issued 67,767 shares of its common stock at prices between $4.03 and $4.37 for a total of $274,000. This plan expired August 19, 2019.
The 2009 Equity Incentive Plan, effective June 24, 2009, as amended, authorizes the grant of non-qualified and incentive stock options, stock appreciation rights, restricted stock and other stock awards. A maximum of 500,000 shares of common stock is reserved for potential issuance pursuant to awards under the 2009 Equity Incentive Plan. Unless sooner terminated, the 2009 Equity Incentive Plan will continue in effect for a period of 10 years from its effective date. During 2018, there were 106,255 options granted by the Company under this Plan.
The 2018 Equity Incentive Plan, effective September 12, 2018, authorizes the grant of (i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) Stock Appreciation Rights, (iv) Restricted Stock Awards, (v) Restricted Stock Unit Awards, (vi) Performance Stock Awards, (vii) Performance Cash Awards, and (viii) Other Stock Awards. Initially, a maximum of 159,091 shares of common stock is reserved for potential issuance pursuant to awards under the 2018 Equity Incentive Plan. Unless sooner terminated, the 2018 Equity Incentive Plan will continue in effect for a period of 10 years from its effective date. On October 17, 2018, the board of directors issued 26,234 options to the officers and directors at the exercise price of $9.68 expiring in 10 years, and on November 14, 2018, the board of directors issued 23 options to each employee, officer and director at the exercise price of $9.68 expiring in ten years. On January 28, 2019, 39,268 options were issued to the officers and directors with an exercise price of $9.68 for a period of ten years with a vesting period of one year.
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The offers, sales and issuances of securities described above was deemed to be exempt from registration under the Securities Act in reliance on either Section 4(a)(2) in that the issuance of securities to the accredited investors did not involve a public offering, or Rule 701 in that the transactions were under compensatory benefit plans and contracts relating to compensation as provided under Rule 701.
| ITEM 6. | Selected Financial Data. |
Not Applicable.
| ITEM 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
The following discussion and analysis is related to our financial condition and results of operations for the two years ended December 31, 2020 This information should be read in conjunction with our consolidated financial statements and related notes thereto beginning on F-1 of this Form 10-K. Please also see “Special Note Regarding Forward Looking Statements” in ITEM 1A. Risk Factors.
Fair Value
We have issued warrants (the “Warrants”) in August 2016, February 2017, June 2017, August 2017, April 2018, and March 2019 that are single compound derivatives containing both an embedded right to obtain stock upon exercise (a “Call”) and a series of embedded rights to settle the Warrants for cash upon the occurrence of certain events (each, a “Put”). Generally, the Put provisions allow the Warrant Holders liquidity protection; the right to receive cash in certain situations where the Holders would not have a means of readily selling the shares issuable upon exercise of the Warrants (e.g., where there would no longer be a significant public market for our common stock). However, because the contractual formula used to determine the cash settlement value of the embedded Put requires use of certain assumptions, the cash settlement value of the embedded Put can differ from the fair value of the unexercised embedded Call option at the time the embedded Put option is exercised.
We recompute the fair value of the Warrants at the end of each quarterly reporting period. Such value computation includes subjective input assumptions that are consistently applied each period. If we were to alter our assumptions or the numbers input based on such assumptions, the resulting fair value could be materially different.
On September 28, 2018, we entered into a $3,170,000 10% Secured Convertible Promissory Note (the “IR Note”) with Iliad Research and Trading, L.P. (the “Holder”), which was issued to the Holder in conjunction with 500,000 shares of common stock (the “Origination Shares”). We collected $3,000,000 in cash from the Holder during September 2018 and the remainder $170,000 was retained by the Holder for the Holder’s legal fees of $20,000 for the issuance of the IR Note and the Original Issue Discount of $150,000. We incurred $210,000 in third-party fees directly attributed to the issuance of the IR Note. We promised to pay the principal amount, together with guaranteed interest at the annual rate of 10%, with principal and accrued interest on the IR Note due and payable on September 28, 2019, unless converted under terms and provisions as set forth within the IR Note. The IR Note provided the Holder with the right to convert, at any time, all or any part of the outstanding principal and accrued but unpaid interest into shares of our common stock at a conversion price of $0.30 per share. In addition, beginning on March 28, 2019, the IR Note also provided the Holder with the right to redeem all or any portion of the IR Note (“Redemption Amount”). The payments of each Redemption Amount may be made, at our option, in cash, by converting such Redemption Amount into shares of common stock (“Redemption Conversion Shares”), or a combination thereof. The number of Redemption Conversion Shares equals the portion of the applicable Redemption Amount being converted divided by the lesser of $0.30 or 80% of the lowest Volume Weighted Average Price (“VWAP”) during the ten (10) trading days immediately preceding the applicable measurement date (the “Market Price”). The Purchase Agreement required us to reserve at least 8,900,000 shares of common stock from our authorized and unissued common stock to provide for all issuances of common stock under the IR Note. However, the IR Note provided that the aggregate number shares of common stock issued to the Holder under the IR Note and Purchase Agreement shall not exceed 19.99% of the total number of shares of common stock outstanding as of the closing date unless we have obtained stockholder approval of the issuance. The Origination Shares were to be returned to us in the event that we could provide within 30 days of the closing of the transaction certain requested assets as security for repayment of the IR Note. The security was not provided so the Origination Shares remained with the Holder.
We determined the IR Note should be recorded at fair value with subsequent changes in fair value recorded in earnings. This conclusion is based on the redemption conversion feature, which allows the Holder to trigger the redemption of the IR Note for cash or conversion of the IR Note for common shares prior to its maturity date at a price of the lesser of $0.30 per share or the Market Price as defined within the IR Note. The choice of cash redemption or conversion of the IR Note for common shares was at our option. This feature may require us to issue a variable number of common shares to settle the IR Note which was determined to have a predominantly fixed monetary value at inception. On March 13, 2019, we amended the Purchase Agreement pursuant to which we issued the Convertible IR Note (the “Amendment”). The Amendment extended the maturity of the IR Note to September 28, 2020. In addition, the redemption conversion rates were revised to a price to be determined by mutual agreement between us and the Holder. In the event that we and the Holder were unable to reach a mutually agreeable price, we would be required to pay the applicable redemption amount in cash. The maximum amount of the IR Note the Holder will be able to redeem in any given calendar month was $300,000.
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We evaluated the Amendment in accordance with ASC 470, Debt (“ASC 470”) and determined the Amendment was considered an extinguishment of the existing debt and issuance of net debt. As a result, we derecognized the liability and recorded a loss on the extinguishment of debt of $345,000 in 2019 which was equal to the difference between the reacquisition price of the debt and the net carrying amount (amount due at maturity, adjusted for unamortized discounts) of the extinguished debt. Subsequently, the amended note was recorded in accordance with ASC 480 at the fair value that the note was issued with changes in fair value recorded through earnings at each reporting period.
There were a series of debt conversions during 2019 which partially converted $1,400,000 of the $3,408,000 convertible debt, as amended, into stockholders’ equity, adding approximately $1,400,000 to stockholders’ equity. The number of shares issued in these conversions were 204,246 shares. In October 2019 and November 2019 respectively, the Holder redeemed $300,000 pursuant to the terms of the modification. In connection with the IR Note, we recorded a gain equal to $127,000 for the year-end December 31, 2019. See Note 14 Convertible Note Payable.
On August 5, 2019, we issued a Secured Promissory Note (the “CV Note”) with Chicago Venture Partners, L.P. (“CV”). The Note had an original principal amount of $2,635,000, bore interest at a rate of 10% per annum and was to mature in 24 months, unless earlier paid in accordance with its terms. We received proceeds of $1,900,000 after an original issue discount and payment of CV’s legal fees. Pursuant to a Security Agreement between us and CV, repayment of the Convertible Note is secured by substantially all of our assets other than our intellectual property.
During the quarter ending June 30, 2020, CV made redemptions of $650,000 reducing the principal to $1,985,000. On May 29, 2020, we paid off the outstanding CV Note which consisted of principal of $1,985,000, and accrued interest payable of $220,000. The net payment of $1,795,000, less the write off of the origination discount of $369,000 and issuance costs of $6,000, resulted in a gain on extinguishment of $66,000.
On December 5, 2019, we issued a secured Promissory Note (the “AS Note”) to Atlas Sciences L.P. (“AS”). The AS Note has an original principal amount of $2,175,000, bears interest at a rate of 10% per annum and will mature in 24 months, unless earlier paid in accordance with its term. In conjunction with the AS Note, we utilized $1,650,000 of the net proceeds from the AS Note to pay off in full our obligation to Iliad, an entity with affiliations to AS, pursuant to the IR Note We evaluated the IR Note in accordance with ASC 470, Debt (“ASC 470”) and determined the exchange is considered an extinguishment of the existing debt and issuance of new debt. As a result, we derecognized the liability and recorded a loss on the extinguishment of debt of $250,000 which was equal to the difference between the reacquisition price of the debt and the net carrying amount (amount due at maturity, adjusted for unamortized discounts) of the extinguished debt. Subsequently, the AS Note will be recorded in accordance with ASC 470 whereby we will record a liability equal to the proceeds received on December 5, 2019.
On June 19, 2020, we paid off the outstanding AS note consisting of the original principal of $2,175,000 and accrued interest payable of $122,000 less origination discount of $376,000 and issuance costs of $7,000, with a net note payable of $1,838,000, including a gain on extinguishment of $76,000.
RESULTS OF OPERATIONS
Year ended December 31, 2020 versus year ended December 31, 2019
Our net loss was approximately $14,400,000 and $9,404,000 for the years ended December 31, 2020 and 2019, respectively, representing an increase in loss of approximately $4,996,000 or 53% when compared to the same period in 2019. This increase in loss for the year ended December 31, 2020 was primarily due to the following:
| ● | an increase in the loss of the quarterly revaluation of certain redeemable warrants of $1,633,000 which resulted in a non cash loss of $123,000 in the year-ended December 31, 2020 compared to a non-cash gain of $1,510,000 in the year ended December 31, 2019; | |
| ● | an increase in research and development expenses of $1,069,000 or 23%; | |
| ● | an increase in general and administrative expenses of $1,615,000 or 23%; | |
| ● | an increase in other assets impairment losses of $135,000; | |
| ● | an increase in interest expense and finance costs of $245,000; | |
| ● | a decrease in the gain resulting from a settlement with as insurance claim of $1,217,000 in 2019 which did not occur in 2020; and |
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| ● | a decrease of $90,000 in the gain for the fair value adjustment for the convertible note which was paid in full in 2019; offset by: | |
| ● | a decrease in the extinguishment of debt of $487,000 which resulted in a gain of $142,000 for the year ended December 31, 2020 compared to a loss of $345,000 in the year-ended December 31, 2019: | |
| ● | a decrease in production costs of $87,000 or 10%; | |
| ● | an increase in interest/other income of $130,000; and | |
| ● | an increase in revenue from cost recovery of $23,000. |
Net loss per share was $ (0.45) and $(2.58) for the years ended December 31, 2020 and 2019, respectively. The weighted average number of shares of our common stock outstanding as of December 31, 2020 was 31,842,799 as compared to 3,642,717 as of December 31, 2019.
Revenues
Revenues from our Ampligen® Cost Recovery Program were $163,000 and $140,000 for the years ended December 31, 2020 and 2019, respectively. The increase in revenues of $23,000, or 16%, between periods was primarily due to the clinical sites usage.
For the years ended December 31, 2020 and 2019, we had no Alferon N Injection® Finished Good product to commercially sell and all revenue was generated from the EAP and our FDA approved open-label treatment protocol, (“AMP 511”), that allows patient access to Ampligen® for treatment in an open-label safety study.
Production Costs
Production costs were approximately $806,000 and $893,000, respectively, for the years ended December 31, 2020 and 2019, representing a decrease of $87,000 related to repairs and maintenance in the current period.
Research and Development Costs
Overall Research and Development (“R&D”) costs for the year ended December 31, 2020 were approximately $5,720,000 as compared to $4,651,000 for the same period a year ago, reflecting an increase of approximately $1,069,000. The primary reason for the increase in research and development costs was due to increases in Scrap from expired material of $1,095,000, clinical trials of $197,000, outside labs $194,000, patent and trademark abandonments of $113,000 offset by decreases in wages and benefits of $401,000 and outside contractors $123,000.
General and Administrative Expenses
General and Administrative (“G&A”) expenses for the years ended December 31, 2020 and 2019, were approximately $8,654,000 and $7,039,000, respectively, reflecting an increase of approximately $1,615,000 or 23%. The increase in G&A expenses during the current period was mainly due to increases in salaries and benefits of $973,000, accounting, professional and legal fees of $349,000, stock compensation of $184,000, taxes and licenses of $163,000, scientific advisory board of $159,000, offset by decreases in public relations of $90,000 and investment bank fees of $135,000, and travel of $31,000.
Interest and Other Income
Interest and other income for the years ended December 31, 2020 and 2019 was approximately $219,000 and $89,000, respectively, representing an increase of approximately $130,000 or 146%. The primary cause for the increase in investment income during the current period was primarily due to higher balances available to invest in the current period as compared to the prior period.
Impairment of other assets
During the year ended December 31, 2020 there was a loss of $135,000 related to the impairment of other assets consisting of the loss of a deposit to a supplier for use of technology which we are no longer utilizing and was written off.
Interest Expense and Finance Costs
Interest and finance costs for the year ended December 31, 2020 was $672,000 compared to $427,000 in the prior year, an increase of $245,000 or 57%. The increase is mainly attributed to the interest and amortization of costs of the Chicago Ventures and Atlas notes which were extinguished in the second quarter of 2020.
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Extinguishment of debt
Debt extinguishment costs decreased $487,000. There was a gain of $142,000 for the year ended December 31, 2020 compared to a loss of $345,000 in the year-ended December 31, 2019.
Redeemable Warrants
The quarterly revaluation of certain redeemable warrants resulted in a non-cash adjustment to the redeemable warrants liability amounted to a loss of $123,000 for the year ended December 31, 2020 compared to a gain of approximately $1,510,000 in December 31, 2019 which represents a decrease of $1,633,000 or 108% (see “Financial Statements: Note 18: Fair Value” for the various factors considered in the valuation of redeemable warrants).
Gain from sale of income tax operating losses
In December 2020, we effectively sold $11,000,000 New Jersey state net operating loss for approximately $1,090,000 and recorded a deferred tax asset of 96,000. In December 2019, we effectively sold $10,000,000 New Jersey state net operating loss for approximately $776,000 and recorded a deferred tax asset of $129,000.
Convertible Note Payable
The quarterly revaluation of the convertible note resulted in a non-cash adjustment in 2020 of zero and in 2019 amounted to a gain of $90,000.
Other Transactions
During the year ended December 31, 2020 there were no gains or losses from insurance claims, however, in 2019 there was a gain from the insurance loss claim of $1,217,000.
Liquidity and Capital Resources
In September 2019, we raised approximately $8,000,000 in a public offering underwritten by A.G.P./Alliance Global Partners, LLC (“AGP”) pursuant to which we issued (i) 1,740,550 shares of our common stock; (ii) pre-funded warrants exercisable for 7,148,310 shares of common stock (the “Prefunded Warrants”), (iii) warrants to purchase up to an aggregate of 8,887,860 shares of common stock (the “Warrants”); and (iv) a Representative’s Warrant to purchase up to an aggregate of 266,665 shares of common stock (the “Representative’s Warrant”). During 2020, an aggregate of 8,874,000 shares of common stock were issued upon exercise of the Prefunded Warrants.
During the first quarter of 2020 an aggregate of 8,746,990 shares were issued upon exercise of the Warrants for gross proceeds of approximately $8,658,000 and an aggregate of 1,870,000 shares were issued upon exercise of the Prefunded Warrants. In addition, on March 25, 2020, the Representative’s Warrant was amended to permit exercise of such warrant to commence on March 30, 2020. During the first quarter of 2020, the amended warrants were exercised and an aggregate of 266,665 shares are being issued upon exercise of the warrant for gross proceeds of approximately of $264,000.
We entered into an Equity Distribution Agreement (the “2019 EDA”) with Maxim Group LLC (“Maxim”), pursuant to which we could sell from time to time, shares of our Common Stock through Maxim, as agent (the “Offering”). During the year ended December 31, 2020, we sold 20,444,807 shares under the 2019 EDA for total gross proceeds of $53,936,615, which included a 3.5% fee to Maxim of $1,888,727. During 2021, we sold 5,655,731 shares under the 2019 EDA for total gross proceeds of $13,301,526, which includes a 3.5% fee to Maxim of $465,553. The 2019 EDA was terminated in early February 2021.
Cash used in operating activities for the year ended December 31, 2020 was approximately $10,368,000 compared to approximately $9,067,000 for the same period in 2019, an increase of $1,301,000. The primary reasons for this increase in cash used in operations in 2020 was related production cost of 2 Ampligen batches in the amount of $664,000, increase in New Jersey NOL of $314,000, and decrease in accounts payable of $89,000.
Cash used in investing activities for the year ended December 31, 2020 was approximately $9,164,000 compared to $6,147,000 for the same period in 2019, representing a change of $3,017,000. The primary reason for the increase in cash used in investing activities resulted from the purchase of marketable securities of approximately $12,831,000 offset by the sale of marketable securities $10,044,000.
Cash provided by financing activities for the year ended December 31, 2020 was approximately $56,563,000 compared to approximately $16,385,000 for the same period in 2019, an increase of $40,178,000. The primary reasons for this increase was our receipt of $61,216,000 in net proceeds from the sale of shares compared to $15,303,000 from the sale of shares in 2019.
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As of December 31, 2020, we had approximately $54,378,000 in cash, cash equivalents and marketable securities, inclusive of approximately $15,877,000 in Marketable Securities, representing an increase of approximately $45,600,000 from December 31, 2019.
We are committed to a focused business plan oriented toward finding senior co-development partners with the capital and expertise needed to commercialize the many potential therapeutic aspects of our experimental drugs and our FDA approved drug Alferon.
The development of our products requires the commitment of substantial resources to conduct the time-consuming research, preclinical development, and clinical trials that are necessary to bring pharmaceutical products to market. We believe, based on our current financial condition, that we have adequate funds to meet our anticipated operational cash needs and fund current clinical trials over approximately the next twenty-four months. At present we do not generate any material revenues from operations and we do not anticipate doing so in the near future. We may need to obtain additional funding in the future for new studies and/or if current studies do not yield positive results, require unanticipated changes and/or additional studies. If we are unable to commercialize and sell Ampligen and/or recommence material sales of Alferon N Injection, our operations, financial position and liquidity may be adversely impacted, and additional financing may be required. There can be no assurances that, if needed, we will be able to raise adequate funds or enter into licensing, partnering or other arrangements to advance our business goals. We may seek to access the public equity market whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time. We are unable to estimate the amount, timing or nature of future sales of outstanding common stock or instruments convertible into or exercisable for our common stock. Any additional funding may result in significant dilution and could involve the issuance of securities with rights, which are senior to those of existing stockholders. See Part I, Item 1A - “Risk Factors; We may require additional financing which may not be available”.
Certain Relationships and Related Transactions
Refer to PART III, ITEM 13 - “Certain Relationships and Related Transactions, and Director Independence.”
New Accounting Pronouncements
Refer to “Note 2(h) – Recent Accounting Standards and Pronouncements” under Notes to Consolidated Financial Statements.
Disclosure about Off-Balance Sheet Arrangements
None.
Critical Accounting Policies
Financial Reporting Release No. 60 requires all companies to include a discussion of critical accounting policies or methods used in the preparation of financial statements. Our significant accounting policies are described in the Notes to Consolidated Financial Statements. The significant accounting policies that we believe are most critical to aid in fully understanding our reported financial results are the following:
Long-Lived Assets
We assess long-lived assets for impairment when events or changes in circumstances indicate that the carrying value of the assets or the asset grouping may not be recoverable. Factors that we consider in deciding when to perform an impairment review include significant under-performance of a business or product line in relation to expectations, significant negative industry or economic trends, and significant changes or planned changes in its use of the assets. We measure the recoverability of assets that it will continue to use in its operations by comparing the carrying value of the asset grouping to our estimate of the related total future undiscounted net cash flows. If an asset grouping’s carrying value is not recoverable through the related undiscounted cash flows, the asset grouping is considered to be impaired.
We measure the impairment by comparing the difference between the asset grouping’s carrying value and its fair value. Long-lived assets are considered a non-financial asset and are recorded at fair value only if an impairment charge is recognized. Impairments are determined for groups of assets related to the lowest level of identifiable independent cash flows. We make subjective judgments in determining the independent cash flows that can be related to specific asset groupings. In addition, as we review our manufacturing process and other manufacturing planning decisions, we must make subjective judgments regarding the remaining useful lives of assets. When we determine that the useful lives of assets are shorter than originally estimated, we accelerate the rate of depreciation over the assets’ new, shorter useful lives.
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Redeemable Warrants
We utilize the guidance contained in ASC 480 in the determination of whether to record warrants and options as Equity and/or Liability. If the guidance of ASC 480 is deemed inconclusive, we continue our analysis utilizing ASC 815.
Our method of recording the related value is consistent with the standards as defined by the Financial Accounting Standards Board utilizing the concept of “Fair Value” from ASC 820-10-55-1 that states that any fair value measurement requires that the reporting entity, to determine the valuation technique(s) appropriate for the measurement, consider the availability of data with which to develop inputs that represent the assumptions that market participants would use in pricing the asset or liability and the level in the fair value hierarchy within which the inputs fall.
We recomputed the value of the redeemable warrants at the end of each quarterly period. We use the Monte Carlo Simulation approach which includes subjective input assumptions that are consistently applied each quarter. If we were to alter our assumptions or the numbers input based on such assumptions, the resulting fair value could be materially different. As discussed in greater detail in “Fair Value” at the beginning of this ITEM 7, the significant assumptions using this model are: (i) Risk-Free Interest Rate; (ii) Expected Holding Period; (iii) Expected Volatility; (iv) Expected Dividend Yield; (v) Expected Probability of a Fundamental Transaction; (vi) Expected Timing of Announcement of a Fundamental Transaction; (vii) Expected 100 Day Volatility at Announcement of a Fundamental Transaction; (viii) Expected Risk-Free Interest Rate at Announcement of a Fundamental Transaction; and (ix) Expected Time Between Announcement and Consummation of a Fundamental Transaction.
Concentration of Credit Risk
Our policy is to limit the amount of credit exposure to any one financial institution and place investments with financial institutions evaluated as being credit worthy, or in short-term money markets, which are exposed to minimal interest rate and credit risks. We have had bank deposits and overnight repurchase agreements that exceed federally insured limits.
Concentration of credit risk, with respect to receivables, is limited through our credit evaluation process. We do not require collateral on our receivables. Our receivables historically consisted principally of amounts due from wholesale drug companies.
| ITEM 7A. | Quantitative and Qualitative Disclosures About Market Risk. |
Not Applicable.
| ITEM 8. | Financial Statements and Supplementary Data. |
Please see the “Index to Financial Statements and Financial Statement Schedule” on page F-1.
| ITEM 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosures. |
Not Applicable.
| ITEM 9A. | Controls and Procedures. |
Effectiveness of Control Procedures
As of December 31, 2020, the end of the period covered by this report, we carried out an evaluation under the supervision and with the participation of our Management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act. Our disclosure controls and procedures are intended to ensure that the information we are required to disclose in the reports that we file or submit under the Securities Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities Exchange Commission’s rules and forms and (ii) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as the principal executive and financial officers, respectively, to allow final decisions regarding required disclosures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the controls and procedures were effective as of December 31, 2020 to ensure that material information was accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Our management has concluded that the financial statements included in this Form 10-K present fairly, in all material respects our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States of America.
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Changes in Internal Control over Financial Reporting
We made no changes in our internal control over financial reporting during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).
Management’s Report on Internal Control over Financial Reporting
Our Management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rules 13a-15(f) or 15d-15(f), under the Exchange Act. Internal control over financial reporting is a process designed by, or under the supervision of, our principal executive and principal financial officers and affected by our Board of Directors, Management and other personnel, and to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on its financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2020. In making this assessment, Management used the criteria set forth in the framework in 2013 established by the Committee of Sponsoring Organizations of the Treadway Commission Internal Control—Integrated Framework, (COSO). Based on this assessment, Management has not identified any material weaknesses as of December 31, 2020. A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.
Management has concluded that we did maintain effective internal control over financial reporting as of December 31, 2020, based on the criteria set forth in “Internal Control—Integrated Framework” issued by the COSO.
| ITEM 9B. | Other Information. |
None.
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| ITEM 10. | Directors and Executive Officers and Corporate Governance. |
The following sets forth biographical information about each of our Directors and Executive Officers as of the date of this report:
| Name | Age | Position | ||
| Thomas K. Equels, Esq | 68 | Chief Executive Officer, President, and Director | ||
| Peter W. Rodino III | 69 | Chief Operating Officer, General Counsel & Secretary | ||
| William M. Mitchell, M.D., Ph.D. | 85 | Chairman of the Board and Director | ||
| Stewart L. Appelrouth | 67 | Director | ||
| Ellen M. Lintal | 61 | Chief Financial Officer |
Each Director has been elected to serve until the next annual meeting of stockholders, or until his earlier resignation, removal from office, death or incapacity. Each Executive Officer serves at the discretion of the Board of Directors, subject to rights, if any, under contracts of employment.
We believe our Board Members represent a desirable diversity of backgrounds, skills, education and experiences, and they all share the personal attributes of dedication to be effective directors. In recommending Board candidates, Corporate Governance and Nomination Committee considers a candidate’s: (1) general understanding of elements relevant to the success of a publicly traded company in the current business environment; (2) understanding of our business; and (3) diversity in educational and professional background. The Committee also gives consideration to a candidate’s judgment, competence, dedication and anticipated participation in Board activities along with experience, geographic location and special talents or personal attributes. The following are qualifications, experience and skills for Board members which are important to our business and its future:
Leadership Experience: We seek directors who have demonstrated strong leadership qualities. Such leaders bring diverse perspectives and broad business insight to our Company. The relevant leadership experience that we seek includes a past or current leadership role in a large or entrepreneurial company, a senior faculty position at a prominent educational institution or a past elected or appointed senior government position.
Industry or Academic Experience: We seek directors who have relevant industry experience, both with respect to the disease areas where we are developing new therapies as well as with the economic and competitive dynamics of pharmaceutical markets, including those in which our drugs will be prescribed.
Scientific, Legal or Regulatory Experience: Given the highly technical and specialized nature of biotechnology, we desire that certain of our directors have advanced degrees, as well as drug development experience. Since we are subject to substantial regulatory oversight, both here and abroad by the FDA and other agencies, we also desire directors who have legal or regulatory experience.
Finance Experience: We believe that our directors should possess an understanding of finance and related reporting processes, particularly given the complex budgets and long timelines associated with drug development programs.
THOMAS K. EQUELS, has been a Director and serves as our Executive Vice Chairman (since 2008), Chief Executive Officer (since 2016) and President (since 2015). Mr. Equels was the owner of and former President and Managing Director of the Equels Law Firm headquartered in Miami, Florida that focused on litigation. For over a quarter century, Mr. Equels represented national and state governments as well as companies in the banking, insurance, aviation, pharmaceutical and construction industries. Mr. Equels received his Juris Doctor degree with high honors from Florida State University. He received his Bachelor of Science, summa cum laude, from Troy University and also obtained his Masters’ of Science Degree from Troy University. Mr. Equels began his professional career as a military pilot. He served in Vietnam and was awarded two Distinguished Flying Crosses, the Bronze Star, the Purple Heart, and fifteen Air Medals. In 2012, he was Knighted by Pope Benedict.
THOMAS K. EQUELS, Esq. - Director Qualifications:
| ● | Leadership Experience – Military, Owner and former President, Managing Director of Equels Law Firm, Court appointed receiver in numerous industries; |
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| ● | Industry Experience –legal counsel, General Counsel, CFO and CEO to us; and | |
| ● | Scientific, Legal or Regulatory Experience - Law degree with over 25 years as a practicing attorney specializing in litigation, development of clinical trials, creating intellectual property concepts, and established plan to finance drug development. |
WILLIAM M. MITCHELL, M.D., Ph.D., has been a Director since July 1998 and Chairman of the Board since February 2016. Dr. Mitchell is a Professor of Pathology at Vanderbilt University School of Medicine and is a board certified physician. Dr. Mitchell earned a M.D. from Vanderbilt and a Ph.D. from Johns Hopkins University, where he served as House Officer in Internal Medicine, followed by a Fellowship at its School of Medicine. Dr. Mitchell has published over 200 papers, reviews and abstracts that relate to viruses, anti-viral drugs, immune responses to HIV infection, and other biomedical topics. Dr. Mitchell has worked for and with many professional societies that have included the American Society of Investigative Pathology, the International Society for Antiviral Research, the American Society of Clinical Oncology, the American Society of Biochemistry and Molecular Biology, the American Chemical Society, and the American Society of Microbiology. Dr. Mitchell is a member of the American Medical Association. He has served on numerous government review committees, among them the Centers for Disease Control and Prevention (CDC) and the National Institutes of Health, including the initial AIDS and Related Research Review Group. Dr. Mitchell previously served as one of our Directors from 1987 to 1989.
WILLIAM M. MITCHELL, M.D., Ph.D. - Director Qualifications:
| ● | Leadership Experience – Professor at Vanderbilt University School of Medicine. He is a member of the Board of Directors for Chronix Biomedical and is Chairman of its Medical Advisory Board. Additionally, he has served on multiple governmental review committees of the National Institutes of Health, Centers for Disease Control and Prevention and for the European Union, including key roles as Chairman; | |
| ● | Academic and Industry Experience – Well published medical researcher with extensive investigative experience on virus and immunology issues relevant to our scientific business along with being a Director of an entrepreneurial diagnostic company (Chronix Biomedical) that is involved in next generation DNA sequencing for medical diagnostics; and | |
| ● | Scientific, Legal or Regulatory Experience - M.D., Ph.D. and professor at a top ranked school of medicine, and inventor of record on numerous U.S. and international patents who is experienced in regulatory affairs through filings with the FDA. |
STEWART L. APPELROUTH, CPA was appointed as a director and head of the Audit Committee in August 2016 and is a certified public accountant and partner at Appelrouth Farah & Co., P.A., Certified Public Accountants and Advisors. Mr. Appelrouth is also a certified forensic accountant and possesses 40 years of experience in Accounting and Consulting. He is a member of or has affiliations with the AICPA, American College of Forensic Examiners, Association of Certified Fraud Examiners, past member of the Florida Bar Grievance Committee, Florida Institute of Certified Public Accountants and InfraGard Member, a national information sharing program between the Federal Bureau of Investigation and the private sector.
Mr. Appelrouth graduated from Florida State University in 1975 and received his Master’s Degree in Finance from Florida International University in 1980. The Board has determined Mr. Appelrouth to be an Independent Director as required under Section 803(2) of the NYSE: American Company Guide and Rule 10A-3 under the Exchange Act.
STEWART L. APPELROUTH - Director Qualifications:
| ● | Leadership Experience –has served in leadership positions on numerous Boards and other organizations; | |
| ● | Industry Experience – Partner at certified public accounting and advisory firm; Certified Public Accountant and Certified Fraud Examiner; | |
| ● | Regulatory Experience – FINRA Arbitrator. | |
| ● | Financial Expert – over 40 years of accounting and audit experience. |
Information about our Executive Officers
In addition to Mr. Equels (discussed above), the following are (or were) our Executive Officers during fiscal 2020:
PETER W. RODINO III has been a Director since July 2013. On September 30, 2016, Mr. Rodino resigned as a member of our Board to permit him to serve us in a new capacity. Effective October 1, 2016, we retained Mr. Rodino as our Executive Director for Governmental Relations, and as our General Counsel and, as of October 16, 2019, Mr. Rodino assumed the role of Chief Operating Officer. Mr. Rodino has been our Secretary since November 2016. Mr. Rodino has broad legal, financial, and executive experience. In addition to being President of Rodino Consulting LLC and managing partner at several law firms during his many years as a practicing attorney, he served as Chairman and CEO of Crossroads Health Plan, the first major Health Maintenance Organization in New Jersey. He also has had experience as an investment executive in the securities industry and acted as trustee in numerous Chapter 11 complex corporate reorganizations. Previously, as founder and president of Rodino Consulting, Mr. Rodino provided business and government relations consulting services to smaller companies with a focus on helping them develop business plans, implement marketing strategies and acquire investment capital. Mr. Rodino holds a B.S. in Business Administration from Georgetown University and a J.D. degree from Seton Hall University.
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ELLEN M. LINTAL has been our Chief Financial Officer since September 16, 2019. Ms. Lintal has more than two decades of prior public company and non-profit experience. She earned a Bachelor of Science degree in Accounting from Elmira College. Mrs. Lintal served for several years as a Chief Financial Officer and SVP of Finance & Control for an international non-profit Organization and public accounting experience at Corning Inc, Carlisle Companies and AGY where she led the organizational focus on financial management, strategic planning and mergers and acquisitions. Prior to joining the Company Mrs. Lintal was the CFO for the National Wild Turkey Federation, an international non-profit organization.
Key Employee
DAVID R. STRAYER, M.D. has acted as our Medical Director and Chief Scientific Officer since 1986. He has served as Professor of Medicine at the Medical College of Pennsylvania and Hahnemann University. Dr. Strayer is Board Certified in Medical Oncology and Internal Medicine with research interests in the fields of cancer and immune system disorders. He has served as principal investigator in studies funded by the Leukemia Society of America, the American Cancer Society, and the National Institutes of Health. Dr. Strayer attended the School of Medicine at the University of California at Los Angeles where he received his M.D. in 1972.
Audit Committee and Audit Committee Expert
The Audit Committee of our Board of Directors consists of William Mitchell, M.D. and Stewart L. Appelrouth. Dr. Mitchell and Mr. Appelrouth are determined by the Board of Directors to be Independent Directors as required under Section 803(2) of the NYSE: American Company Guide and Rule 10A-3 under the Exchange Act. The Board has determined that Mr. Appelrouth qualifies as an “audit committee financial expert” as that term is defined by Section 803B(2) of the NYSE: American Company Guide and the rules and regulations of the SEC.
We believe Dr. Mitchell and Mr. Appelrouth to be independent of management and free of any relationship that would interfere with their exercise of independent judgment as members of this Committee. The principal functions of the Audit Committee are to (i) assist the Board in fulfilling its oversight responsibility relating to the annual independent audit of our consolidated financial statements and management’s assessment of internal control over financial reporting, the engagement of the independent registered public accounting firm and the evaluation of the independent registered public accounting firm’s qualifications, independence and performance; (ii) prepare the reports or statements as may be required by NYSE American or the securities laws; (iii) assist the Board in fulfilling its oversight responsibility relating to the integrity of our financial statements and financial reporting process and our system of internal accounting and financial controls; (iv) discuss the financial statements and reports with management, including any significant adjustments, management judgments and estimates, new accounting policies and disagreements with management; and (v) review disclosures by our independent registered public accounting firm concerning relationships with us and the performance of our independent accountants.
This Audit Committee formally met five times in 2020 with all committee members in attendance. Our General Counsel and Chief Financial Officer support the Audit Committee in its work. The full text of the Audit Committee’s Charter, as approved by the Board, is available on our website: www.aimimmuno.com in the “Investor Relations” tab under “Corporate Governance”.
Scientific Advisory Board (“SAB”)
The SAB was established to leverage its member’s scientific and pharmaceutical expertise and advice to advance our drug development programs by providing guidance on steering us forward and capitalizing on business opportunities as well as interactions with the FDA. It is responsible for: (i) reviewing all submissions made by us to the FDA and other regulators to ensure that the submissions fully, accurately, and timely describe the status of any clinical trials, tests, or other studies or analyses of drug safety and efficacy undertaken by us, and any agreements, protocols, or guidance provided by relevant regulatory agencies; and (ii) monitoring and supervising our relationship with the FDA. The SAB shall have free and open access to our scientific and executive personnel, including the Chief Scientific Officer and the members of our Board of Directors. The SAB is comprised of William Mitchell, M.D., Chairman, and Ronald Brus, M.D., W. Neal Burnette, M.D., Christopher Nicodemus, M.D., and Philip Ransom Roane, Ph.D. all of whom are members. The SAB reports to the independent directors of the Company and closely interacts with the Disclosure Controls Committee. The SAB met two times in 2020.
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Disclosure Controls Committee (“DCC”)
The DCC reports to the Audit Committee and is responsible for procedures and guidelines on managing disclosure information. The purpose of the DCC is to make certain that information required to be publicly disclosed is properly accumulated, recorded, summarized and communicated to the Board and management. This process is intended to allow for timely decisions regarding communications and disclosures and to help ensure that we comply with related SEC rules and regulations. Ellen M. Lintal is the DCC’s Investor Relations Coordinator and Chairperson. The other members of the DCC are Peter Rodino, our General Counsel, William Mitchell, one of our Independent Directors, Dr. David Strayer, Medical Director and Chief Scientific Officer, Julie Mierau, our Controller, and Ann Marie Coverly, Director of HR and Administration serving as the Deputy Investor Relations Coordinator. The full text of the DCC’s Charter, as approved by the Board, is available on our website: www.aimimmuno.com in the “Investor Relations” tab under “Corporate Governance”. The DCC actively met on numerous occasions in 2020.
Executive Committee
In February 2016, our Board formed the Executive Committee. The Executive Committee reports to the Board and its purpose is to aid the Board in handling matters which, in the opinion of the Chairman of the Board, should not be postponed until the next scheduled meeting of the Board. Mr. Equels, our Chief Executive Officer is the chairman of the Committee, along with two of our independent directors, Mr. Appelrouth and Dr. Mitchell. The full text of the Executive Committee Charter, as approved by the Board, is available on our website: www.aimimmuno.com in the “Investor Relations” tab under “Corporate Governance”. The Committee did not meet in 2020.
Code of Ethics
Our Board of Directors adopted a revision to the 2003 Code of Ethics and business conduct for officers, directors, employees, agents and consultants. The principal amendments included broadening the Code’s application to our agents and consultants, adoption of a regulatory compliance policy and adoption of a policy for protection and use of Company computer technology for business purposes only. On an annual basis, this Code is reviewed and signed by each Officer, Director, employee and strategic consultant with none of the amendments constituting a waiver of provision of the Code of Ethics on behalf of our Chief Executive Officer, Chief Financial Officer, or persons performing similar functions.
You may obtain a copy of this Code by visiting our web site at www.aimimmuno.com (Investor Relations / Corporate Governance) or by written request to our office at 2117 SW Highway 484, Ocala, FL 34473.
| ITEM 11. | Executive Compensation. |
COMPENSATION DISCUSSION AND ANALYSIS
This discussion and analysis describes our executive compensation philosophy, process, plans and practices as they relate to our “Named Executive Officers” (“NEO”) listed below and gives the context for understanding and evaluating the more specific compensation information contained in the narratives, tables and related disclosures that follow. For the purposes of discussion and analysis, the following NEOs are included in the narratives, tables and related disclosures that follow:
| ● | Thomas K. Equels, Chief Executive Officer (“CEO”) and President. | |
| ● | Ellen M. Lintal, Chief Financial Officer (“CFO”); and | |
| ● | Peter Rodino, Chief Operating Officer (“COO”), General Counsel and Company Secretary (“CS”). |
In March 2021, subsequent to the fiscal year ended December 31, 2020, we entered into employment agreements with Peter Rodino and Ellen Lintal. The agreements run for three years and one year, respectively. Compensation is divided into both short- and long-term compensation. Short term (cash) compensation will consist of a base salary of $425,000 and $350,000, respectively. Mr. Rodino and Ms. Lintal will be awarded a year-end target bonus based on performance and goals established by the Compensation Committee. Long term compensation will be provided by 100,000 non-qualified yearly stock options with one-year vesting commencing on November 30, 2021. In addition, Mr. Rodino and Ms. Lintal shall each be entitled to awards (“Event Awards”) equal to 1% of the “Gross Proceeds” from specific events such as licensing agreements or “therapeutic indication” (each, an “Event”). Gross Proceeds means those cash amounts paid to us by the other parties for licensing agreements, therapeutic acquisitions or any other one time cash generating event. Therapeutic indications are for example target organ specific pathologically defined cancer indications, vaccine enhancers, broad spectrum antiviral indications, or medical entities associated with persistent severe fatigue. Mr. Rodino and Ms. Lintal also will each be entitled to an award (an “Acquisition Award”) equal to 1% of the Gross Proceeds, upon the sale of our Company or substantially all of its assets (an “Acquisition”). An Event Award or Acquisition Award shall be paid in cash within 90 days of our receipt of the Gross Proceeds.
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Governance of Compensation Committee
The Compensation Committee consists of the following two directors, each of whom is “independent” under applicable NYSE American rules, a “Non-Employee Director” as defined in Rule 16b-3 under the Exchange Act, and an “Outside Director” as defined under the U.S. Treasury regulations promulgated under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”): Dr. William Mitchell, M.D. (Chair) and Stewart L. Appelrouth. The Compensation Committee makes recommendations concerning salaries and compensation for senior management and other highly paid professionals or consultants to us. The full text of the Compensation Committee’s Charter, as approved by the Board, is available on our website: www.aimimmuno.com in the “Investor Relations” tab under “Corporate Governance”.
This Committee formally met six times in 2020 and all committee members were in attendance for the meetings. Our General Counsel, Chief Financial Officer and Director of Human Resources support the Compensation Committee in its work.
Results of Stockholder Advisory Vote on Executive Compensation
At the October 7, 2020 Annual Meeting of Stockholders, the Stockholders approved the annual, non-binding advisory vote on Executive Compensation.
Objectives and Philosophy of Executive Compensation
The primary objectives of the Compensation Committee of our Board of Directors with respect to Executive compensation are to attract and retain the most talented and dedicated Executives possible, to tie annual and long-term cash and stock incentives to achievement of measurable performance objectives, and to align Executives’ incentives with stockholder value creation. To achieve these objectives, the Compensation Committee expects to implement and maintain compensation plans that tie a substantial portion of Executives’ overall compensation to key strategic financial and operational goals such as the establishment and maintenance of key strategic relationships, the development of our products, the identification and advancement of additional products and the performance of our common stock price. The Compensation Committee evaluates individual Executive performance with the goal of setting compensation at levels the Committee believes are comparable with Executives in other companies of similar size and stage of development operating in the biotechnology industry while taking into account our relative performance, our own strategic goals, governmental regulations and the results of Stockholder Advisory Votes regarding executive compensation.
EXECUTIVE COMPENSATION
The following table provides information on the compensation during the fiscal years ended December 31, 2020 and 2019 of Thomas Equels, our Chief Executive Officer, Ellen Lintal, our Chief Financial Officer, and Peter Rodino, who, during 2018 was our General Counsel and Secretary, constituting the Company’s Named Executive Officers, based on the year ended 2020 for each fiscal year.
Summary Compensation Table
| Name & Principal Position | Year | Salary / Fees $ (2) | Bonus $ | Stock Awards $ | Option Awards $ (1) | Non-Equity Incentive Plan Compensation $ | Change in Pension Valued and NQDC Earnings $ | All Other Compensation $ | Total $ (1) | |||||||||||||||||||||||||||
| Thomas K Equels | 2020 | 806,599 | 652,000 | — | 1,139,267 | — | — | 65,509 | 2,663,375 | |||||||||||||||||||||||||||
| CEO & President (2)3 | 2019 | 703,125 | — | 46,875 | 62,537 | 70,702 | 883,239 | |||||||||||||||||||||||||||||
| Ellen Lintal | 2020 | 239,583 | 177,000 | — | 111,616 | — | — | 25,403 | 553,602 | |||||||||||||||||||||||||||
| CFO (4) | 2019 | 143,750 | — | 10,417 | — | — | — | 33,575 | 187,742 | |||||||||||||||||||||||||||
| Peter Rodino | 2020 | 394,792 | 244,500 | — | 111,616 | — | — | 42,570 | 793,478 | |||||||||||||||||||||||||||
| COO, General Counsel & Secretary (5) | 2019 | 333,333 | — | 21,875 | 29,184 | 45,710 | 430,102 | |||||||||||||||||||||||||||||
Notes:
| (1) | All option awards were valued using the Black-Scholes method. |
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| (2) | For Named Executive Officers, who are also Directors that receive compensation for their services as a Director, the Salary/Fees and Option Awards columns include compensation that was received by them for their role as a member of the Board of Directors. As is required by Regulation S-K, Item 402(c), compensation for services as a Director have been reported within the “Summary Compensation Table” (above) for fiscal years of 2020 and 2019 as well as reported separately in the “Compensation of Directors” section (see below) for calendar year 2020. |
As stated in Thomas Equels’ prior employment contract, he is entitled to 5% of Ampligen sales. In the years 2019 and 2018, a bonus of 5% of Ampligen sales totaled $37,425 and was accrued. In 2020 Mr. Equels’ was paid $44,100, representing the 2020 sales bonus of $6,675 and the previous years accrued sales bonuses of $37,425. Pursuant to his current employment agreement, Mr. Equels is entitled to 3% of the “Gross Proceeds” (as defined in the employment agreement) for “significant events” (as described in the employment agreement) There were no payments during 2020.
| (3) | Mr. Equels’ All Other Compensations consists of: |
| 2020 | 2019 | |||||||
| Life & Disability Insurance | $ | 27,131 | $ | 32,642 | ||||
| Healthcare Insurance | 20,378 | 20,060 | ||||||
| Car Expenses/Allowance | 18,000 | 18,000 | ||||||
| 401(k) Matching Funds | — | — | ||||||
| Total | $ | 65,509 | $ | 70,702 | ||||
| (4) | Ms. Lintal’s All Other Compensations consists of: |
| 2020 | 2019 | |||||||
| Life & Disability Insurance | $ | 2,383 | $ | 3,407 | ||||
| Healthcare Insurance | 8,620 | 19,368 | ||||||
| Car Expenses/Allowance | 14,400 | 10,800 | ||||||
| 401(k) Matching Funds | — | — | ||||||
| Total | $ | 25,403 | $ | 33,575 | ||||
| (5) | Mr. Rodino’s All Other Compensations consists of: |
| 2020 | 2019 | |||||||
| Life & Disability Insurance | $ | 2,542 | $ | 4,560 | ||||
| Healthcare Insurance | 25,629 | 26,750 | ||||||
| Car Expenses/Allowance | 14,400 | 14,400 | ||||||
| 401(k) Matching Funds | — | — | ||||||
| Total | $ | 42,570 | $ | 45,710 | ||||
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Outstanding Equity Awards at Fiscal Year End | Option Awards | Stock Awards | ||||||||||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Options Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that Have Not Vested (#) | Market Value of Shares or Units of Stock that Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested ($) | |||||||||||||||||||||||||
| Thomas K Equels | 569 | — | — | 216.48 | 6/24/2021 | — | — | — | — | |||||||||||||||||||||||||
| President and Chief | 190 | — | — | 153.12 | 6/6/2022 | — | — | — | — | |||||||||||||||||||||||||
| Executive Officer | 569 | — | — | 163.68 | 6/11/2022 | — | — | — | — | |||||||||||||||||||||||||
| 569 | — | — | 163.68 | 6/6/2023 | — | — | — | — | ||||||||||||||||||||||||||
| 285 | — | — | 132.00 | 8/2/2023 | — | — | — | — | ||||||||||||||||||||||||||
| 569 | — | — | 190.08 | 6/6/2024 | — | — | — | — | ||||||||||||||||||||||||||
| 569 | — | — | 132.00 | 6/8/2025 | — | — | — | — | ||||||||||||||||||||||||||
| 569 | — | — | 73.92 | 6/8/2026 | — | — | — | — | ||||||||||||||||||||||||||
| 6,819 | — | — | 24.64 | 6/8/2027 | — | — | — | — | ||||||||||||||||||||||||||
| 323 | — | — | 21.56 | 6/15/2027 | — | — | — | — | ||||||||||||||||||||||||||
| 324 | — | — | 21.56 | 6/30/2027 | — | — | — | — | ||||||||||||||||||||||||||
| 412 | — | — | 21.12 | 7/15/2027 | — | — | — | — | ||||||||||||||||||||||||||
| 473 | — | — | 18.48 | 7/31/2027 | — | — | — | — | ||||||||||||||||||||||||||
| 485 | — | — | 18.04 | 8/15/2027 | — | — | — | — | ||||||||||||||||||||||||||
| 556 | — | — | 15.84 | 8/31/2027 | — | — | — | — | ||||||||||||||||||||||||||
| 8,446 | — | — | 16.28 | 2/13/2028 | — | — | — | — | ||||||||||||||||||||||||||
| 2,841 | — | — | 16.72 | 4/12/2028 | — | — | — | — | ||||||||||||||||||||||||||
| 6,819 | — | — | 13.20 | 5/16/2028 | — | — | — | — | ||||||||||||||||||||||||||
| 5,682 | — | — | 13.20 | 5/16/2028 | — | — | — | — | ||||||||||||||||||||||||||
| 2,444 | 1,222 | — | 13.64 | 7/18/2028 | — | — | — | — | ||||||||||||||||||||||||||
| 6,457 | — | — | 9.68 | 10/17/2028 | — | — | — | — | ||||||||||||||||||||||||||
| 23 | — | — | 9.68 | 11/14/2028 | — | — | — | — | ||||||||||||||||||||||||||
| 9,685 | — | — | 9.68 | 1/28/2029 | — | — | — | — | ||||||||||||||||||||||||||
| — | 300,000 | — | 3.05 | 8/12/2030 | — | — | — | — | ||||||||||||||||||||||||||
| — | 300,000 | — | 1.96 | 11/11/2030 | — | — | — | — | ||||||||||||||||||||||||||
| Total | 55,678 | 601,222 | — | — | — | — | — | |||||||||||||||||||||||||||
| Ellen Lintal | 23 | — | — | 9.68 | 11/14/2029 | — | — | — | — | |||||||||||||||||||||||||
| Chief Financial Officer | — | 75,000 | — | 1.85 | 12/9/2030 | — | — | — | ||||||||||||||||||||||||||
| Total | 23 | 75,000 | — | — | — | — | — | |||||||||||||||||||||||||||
| Peter Rodino | 285 | — | — | 132.00 | 8/2/2023 | — | — | — | — | |||||||||||||||||||||||||
| COO, General Counsel and Secretary | 285 | — | — | 68.65 | 6/21/2026 | — | — | — | — | |||||||||||||||||||||||||
| 151 | — | — | 21.56 | 6/15/2027 | — | — | — | — | ||||||||||||||||||||||||||
| 151 | — | — | 21.56 | 6/30/2027 | — | — | — | — | ||||||||||||||||||||||||||
| 193 | — | — | 21.12 | 7/15/2027 | — | — | — | — | ||||||||||||||||||||||||||
| 221 | — | — | 18.48 | 7/31/2027 | — | — | — | — | ||||||||||||||||||||||||||
| 227 | — | — | 18.04 | 8/15/2027 | — | — | — | — | ||||||||||||||||||||||||||
| 260 | — | — | 15.84 | 8/31/2027 | — | — | — | — | ||||||||||||||||||||||||||
| 3,942 | — | — | 16.28 | 2/13/2028 | — | — | — | — | ||||||||||||||||||||||||||
| 2,273 | — | — | 16.72 | 4/12/2028 | — | — | — | — | ||||||||||||||||||||||||||
| 2,652 | — | — | 13.20 | 5/16/2028 | — | — | — | — | ||||||||||||||||||||||||||
| 1,142 | 569 | — | 13.64 | 7/18/2028 | — | — | — | — | ||||||||||||||||||||||||||
| 3,013 | — | — | 9.68 | 10/17/2028 | — | — | — | — | ||||||||||||||||||||||||||
| 23 | — | — | 9.68 | 11/14/2028 | — | — | — | — | ||||||||||||||||||||||||||
| 4,520 | — | — | 9.68 | 1/28/2029 | — | — | — | — | ||||||||||||||||||||||||||
| — | 75,000 | — | 1.85 | 12/9/2030 | — | — | — | — | ||||||||||||||||||||||||||
| Total | 19,339 | 75,569 | — | — | — | — | — | |||||||||||||||||||||||||||
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Payments on Disability
As of December 31, 2020, we had an employment agreement with Mr. Equels which entitled him to his base salary, applicable benefits otherwise due and payable through the last day of the month in which disability occurs and for an additional two year period. All of his unvested options vest too. On March 24, 2021, we entered into employment agreements with Mr. Rodino and Ms. Lintal which entitled them to their base salary, applicable benefits otherwise due and payable through the last day of the month in which disability occurs and for an additional two year period. All of each NEO’s unvested options vest too. In addition, each NEO has the same short and long-term disability coverage which is available to all eligible employees. The coverage for short-term disability provides up to six months of full salary continuation up to 60% of weekly pay, less other income, with a $1,500 weekly maximum limit. The coverage for group long-term disability provides coverage at the exhaustion of short-term disability benefits of full salary continuation up to 60% of monthly pay, less other income, with a $10,000 monthly maximum limit. The maximum benefit period for the group long-term disability coverage is 60 months for those age 60 and younger at the time of the claim with the coverage period proportionately reduced with the advanced age of the eligible employee to a minimum coverage period of 12 months for those of 69 years old and older as of the date of the claim. For the period June 2010 through December 2020, Mr. Equels was entitled to receive total disability coverage of $400,000 pursuant to his employment agreement and payable by us.
Payments on Death
Pursuant to their employment agreements, the NEOS are entitled to their base salary and applicable benefits otherwise due and payable through the last day of the month in which death occurs and for an additional two year period. In addition, all of their unvested options vest. Each NEO, has coverage of group life insurance, along with accidental death and dismemberment benefits, consistent to the dollar value available to all eligible employees. The benefit is equal to two times current salary or wage with a maximum limit of $300,000, plus any supplemental life insurance elected and paid for by the NEO. For the period June 2010 and through December 2020, Mr. Equels is entitled to receive total death benefit coverage of $3,000,000 pursuant to his employment agreement and payable by us.
Estimated Payments Following Severance — Named Executive Officers (NEO)
Pursuant to his employment agreement, Mr. Equels is entitled to severance benefits on certain types of employment terminations not related to a change in control or termination not for cause. Mr. Rodino and Ms. Lintal are not covered by an employment severance agreement and therefore would only receive severance as determined by the Compensation Committee in its discretion.
The dollar amounts below assume that the termination occurred on January 1, 2021. The actual dollar amounts to be paid can only be determined at the time of the NEO’s separation from us based on their prevailing compensation and employment agreements along with any determination by the Compensation Committee in its discretion.
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| Name | Event | Cash Severance ($) | Value of Stock Awards That Will Become Vested (1) ($) | Continuation of Medical Benefits ($) | Additional Life Insurance ($) | Total ($) | ||||||||||||||||
| Thomas K. Equels, | Involuntary (no cause) | $ | 4,180,000 | $ | 1,139,000 | — | — | $ | 5,319,000 | |||||||||||||
| CEO & President | Termination (for cause) | — | — | — | — | — | ||||||||||||||||
| Death or disability | $ | 4,180,000 | $ | 1,139,000 | — | — | $ | 5,319,000 | ||||||||||||||
| Termination by employee or retirement | — | $ | 1,139,000 | — | — | $ | 1,139,000 | |||||||||||||||
| Ellen Lintal | Involuntary (no cause) | — | — | — | — | — | ||||||||||||||||
| CFO | Termination (for cause) | — | — | — | — | — | ||||||||||||||||
| Death or disability | — | — | — | — | — | |||||||||||||||||
| Termination by employee or retirement | — | — | — | — | — | |||||||||||||||||
| Peter Rodino | Involuntary (no cause) | — | — | — | — | — | ||||||||||||||||
| COO, General Counsel and | Termination (for cause) | — | — | — | — | — | ||||||||||||||||
| Secretary | Death or disability | — | — | — | — | — | ||||||||||||||||
| Termination by employee or retirement | — | — | — | — | — | |||||||||||||||||
Notes:
| (1) | Consists of stock options contractually required per the employee’s respective employment agreement or arrangement to be granted during each calendar year of the term under our 2018 Equity Incentive Plan. The stock options have a ten-year term and an exercise price equal to the closing market price of our common stock on the date of grant. The value was obtained using the Black-Scholes-Merton pricing model for stock-based compensation in accordance with FASB ASC 718. |
Payments on Termination in Connection with a Change in Control of Named Executive Officers
Pursuant to their employment agreements, each NEO is entitled to severance benefits on certain types of employment terminations related to a change in control. In such event, the term of their employment agreements would automatically be extended for three additional years, except where such change in control occurs as a result of certain “significant events” (as described in his or her employment agreement).
The dollar amounts in the chart below assume that change in control termination occurred on January 1, 2021, based on the employment agreements that existed at that time. The actual dollar amounts to be paid can only be determined at the time of the NEO’s separation from us based on their prevailing compensation and employment agreements along with any determination by the Compensation Committee in its discretion.
Estimated Benefits on Termination Following a Change in Control — December 31, 2020
The following table shows potential payments to the NEO if employment terminates following a change in control under contracts, agreements, plans or arrangements at December 31, 2020. The amounts assume a January 4, 2021 termination date regarding base pay and use of the opening price of $1.79 on the NYSE American for our common stock at that date.
| Name | Aggregate Severance Pay ($) | PVSU Acceleration (2) ($) | Early Vesting of Restricted Stock (4) (5) ($) | Early Vesting of Stock Options and SARs (3) ($) | Acceleration (5) ($) | Welfare Benefits Continuation ($) | Outplacement Assistance ($) | Parachute Tax Gross-up Payment ($) | Total ($) | |||||||||||||||||||||||||||
| Thomas K. Equels | 3,472,000 | (1) | — | — | 1,139,000 | $ | 1,298,843 | (4) | — | — | — | $ | 5,909,843 | |||||||||||||||||||||||
| Ellen Lintal | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Peter Rodino | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Notes:
| (1) | This amount represents the Base Salary and benefits for the remaining current term of the NEO’s employment agreement plus a three-year extension in the term upon the occurrence of a termination from a change in control. The employment agreement with Mr. Equels has a term through December 31, 2025. This amount excludes the following payments as they cannot be calculated unless and until certain events occur: Mr. Equels is entitled to 3% of the “Gross Proceeds” (as defined in the employment agreement) for “significant events” (as described in his employment agreement) and 3% of the Gross Proceeds from any sale of our company or substantially all of our assets. |
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| (2) | This amount represents the payout of all outstanding performance-vesting share units (“PVSU”) awarded on a change in control at the target payout level with each award then pro-rated based on the time elapsed for the applicable three-year performance period. | |
| (3) | This amount is the intrinsic value [fair market value] on January 1, 2018 ($0.18 per share) minus the per share exercise price of $0.30 of all unvested stock options for each NEO, including Stock Appreciation Rights (“SAR”). Any option with an exercise price of greater than fair market value was assumed to be cancelled for no consideration and, therefore, had no intrinsic value. | |
| (4) | This amount represents the options to be issued annually for the remaining term of the NEO’s employment agreement plus a three-year extension in the occurrence of termination from a change in control. For the purpose of this schedule, a NYSE American closing price at January 4, 2021of $1.79 was used with an estimated exercise price of $0.30 for Mr. Equels. The value was obtained using the Black-Scholes-Merton pricing model for stock-based compensation in accordance with FASB ASC 718. | |
| (5) | Any purchase rights represented by the Option not then vested shall, upon a change in control, shall become vested. |
Post-Employment Compensation
The following is a description of post-employment compensation payable to the respective NEO. If a NEO does not have a specific benefit, they will not be mentioned in the subsection. In such event, the NEO does not have any such benefits upon termination unless otherwise required by law.
Termination for Cause
All of our NEOs can be terminated for cause. For each NEO “Cause” means willful engaging by any NEO in illegal conduct, gross misconduct or gross violation of our Code of Ethics and Business Conduct for Officers, which is demonstrably and materially injurious to our company. Mr. Equel’s agreement provides that he shall not be deemed to have been terminated for Cause unless and until we initiate a process by delivery to him a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the directors of the Board specifying the grounds for termination. After reasonable notice to Mr. Equels and an opportunity for him to be heard, the issues shall be adjudicated by a retired Florida judge or a Florida certified mediator mutually acceptable to the Board of Directors and Mr. Equels. Termination requires a finding that Mr. Equels was guilty of intentional and material misconduct according to the standards set forth above, and specifying the particulars thereof in detail supported by legally admissible evidence and utilizing the legal standard of beyond reasonable doubt. In the event that an NEO’s employment is terminated for Cause, we shall pay such NEO, at the time of such termination, only the compensation and benefits otherwise due and payable to him or her through the last day of his actual employment by us.
Termination without Cause
In the event that an NEO is terminated at any time without “Cause”, we shall pay to him or her, at the time of such termination, the compensation and benefits otherwise due and payable through the last day of the then current term of his or her Agreement. However, benefit distributions that are made due to a “separation from service” occurring while he or she is a Named Executive Officer shall not be made during the first six months following separation from service. Rather, any distribution which would otherwise be paid to him or her during such period shall be accumulated and paid to him or her in a lump sum on the first day of the seventh month following the “separation from service”. All subsequent distributions shall be paid in the manner specified.
Death or Disability
An NEO can be terminated for death or disability. “Disability” means the NEO’s inability effectively to carry out substantially all of his or her duties by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. In the event his or her employment is terminated due to his or her death or disability, we will pay him or her (or their estate as the case may be), at the time of such termination, his or her base salary, applicable benefits, and immediate vesting of unvested stock options. In the event of permanent disability, we will provide an additional two years of base salary.
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Compensation of Directors
Our Compensation, Audit and Corporate Governance and Nomination Committees, consist of Dr. William M. Mitchell, Compensation and Corporate Governance and Nomination Committee Chair, and Stewart L. Appelrouth, Audit Committee Chair, both of whom are independent Board of Director members.
We reimburse Directors for travel expenses incurred in connection with attending board, committee, stockholder and special meetings along with other Company business-related expenses. We do not provide retirement benefits or other perquisites to non-employee Directors under any current program.
There was no cost of living increase granted in 2019 or 2020. Directors’ fees were being deferred beginning in August 2018. When cash became available, they were paid their deferred fees in 2019.
All Directors have been granted options to purchase common stock under our Stock Option Plans and/or Warrants to purchase common stock. We believe such compensation and payments are necessary in order for us to attract and retain qualified outside directors. Options shares for stock compensation were issued under the 2009 and 2018 Equity Incentive Plans.
Director Compensation – 2020 & 2019
| Name and Title of Director | Year | Fees Earned or Paid in Cash $ | Stock Award $ | Option Award $ | Non-Equity Incentive Plan Compensation $ | Change in Pension Value & Nonqualified Deferred Compensation Earnings $ | All Other Compensation As Director $ | Total $ | ||||||||||||||||||||||||
| T. Equels | 2020 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
| Executive Vice Chairman | 2019 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
| W. Mitchell | 2020 | 182,462 | 112,158 | — | — | — | 294,620 | |||||||||||||||||||||||||
| Chairman of the Board (1) | 2019 | 182,462 | — | 37,766 | — | — | — | 220,228 | ||||||||||||||||||||||||
| S. Appelrouth Director (1) | 2020 | 182,462 | — | 112,158 | — | — | — | 294,620 | ||||||||||||||||||||||||
| 2019 | 182,462 | — | 37,766 | — | — | — | 220,228 | |||||||||||||||||||||||||
Notes:
| (1) | Independent Director of the Company. Beginning August 16, 2018, the independent directors are deferring payment of 100% of their director’s fees until cash is available. During 2019 cash became available and the directors were paid their deferred compensation. |
| ITEM 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. |
The following table sets forth as of March 26, 2021, the number and percentage of outstanding shares of Common Stock beneficially owned by:
| ● | Each person, individually or as a group, known to us to be deemed the beneficial owners of five percent or more of our issued and outstanding Common Stock; | |
| ● | Each of our Directors and the Named Executives Officers; and | |
| ● | All of our officers and directors as a group. | |
| ● | Total number of shares of Common Stock at March 26, 2021 was 47,821,935. |
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| Name and Address of | Shares Beneficially | % Of Shares | ||||||
| Beneficial Owner | Owned | Beneficially Owned | ||||||
| Thomas K. Equels, Executive Vice Chairman, Chief Executive Officer, President* | 866,530 | (1) | **0.02 | % | ||||
| Peter W. Rodino III, Chief Operating Officer, General Counsel, Secretary* | 144,153 | (2) | ** | % | ||||
| William M. Mitchell, M.D., Chairman of the Board of Directors* | 156,482 | (3) | ** | % | ||||
| Stewart L. Appelrouth, Director* | 171,753 | (4) | ** | % | ||||
| Ellen Lintal, Chief Financial Officer* | 99,144 | (5) | ** | % | ||||
| All directors and executive officers as a group (5 persons) | 1,438,062 | 0.03 | % | |||||
** Less than 1%
(1) For Mr. Equels, shares beneficially owned include 55,678 shares issuable upon exercise of options and excludes 601,222 shares issuable upon exercise of options not vested or not exercisable within the next 60 days.
(2) For Mr. Rodino, shares beneficially owned include 19,339 shares issuable upon exercise of options and excludes 75,569 shares issuable upon exercise of options not vested or not exercisable within the next 60 days.
(3) For Dr. Mitchell, shares beneficially owned include 29,328 shares issuable upon exercise of options and excludes 50,742 shares issuable upon exercise of options not vested or not exercisable within the next 60 days. Also includes 190 shares of common stock owned by his spouse and 194 shares owned by family trusts.
(4) For Mr. Appelrouth, shares beneficially owned include 28,473 shares issuable upon exercise of options and excludes 50,742 shares issuable upon exercise of options not vested or not exercisable within the next 60 days.
(5) For Ms. Lintal, shares beneficially owned include 23 shares issuable upon exercise of options and excludes 75,000 shares issuable upon exercise of options not vested or not exercisable within the next 60 days.
The following table gives information about our Common Stock that may be issued upon the exercise of options, warrants and rights under all of our equity compensation plans as of December 31, 2020:
| Plan Category | Number of Securities to be issued upon exercise of outstanding options, warrants and rights | Weighted Average Exercise Price Per Share | Number of securities Remaining available for future issuance under equity compensation plans (excluding securities reflected in column) (a) | |||||||||
| (a) | (c) | |||||||||||
| Equity compensation plans approved by security holders: | 218,729 | $ | 2.759 | 28,268 | ||||||||
| Equity compensation plans not approved by security holders: | 376,236 | $ | 13.09 | — | ||||||||
| Total | 591,965 | $ | 2.63 | 228,268 | ||||||||
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| ITEM 13. | Certain Relationships and Related Transactions, and Director Independence. |
Review, Approval or Ratification of Transactions with Related Persons
Our policy is to require that any transaction with a related party required to be reported under applicable SEC rules, other than compensation related matters and waivers of our code of business conduct and ethics, be reviewed and approved or ratified by a majority of independent, disinterested Directors. We have adopted procedures in which the Audit Committee shall conduct an appropriate review of all related party transactions for potential conflict of interest situations on an annual and case-by-case basis with the approval of this Committee required for all such transactions.
We have employment agreements with certain of our executive officers and have granted such Officers and Directors options and warrants to purchase our Common Stock, as discussed under the headings, Item 11. “Executive Compensation”, and Item 12. “Security Ownership of Certain Beneficial Owners and Management”, as noted above.
| ITEM 14. | Principal Accountant Fees and Services. |
All audit and professional services are approved in advance by the Audit Committee to assure such services do not impair the auditor’s independence from us. The total fees by BDO USA, LLP (“BDO”) and Morrison, Brown, Argiz & Farra LLC (“MBAF”) for 2020 were $52,500 and $301,000, respectively. Total fees by MBAF for 2019 were $391,000. The following table shows the aggregate fees for professional services rendered during the year ended December 31, 2020 and 2019.
| Amount ($) | ||||||||
| 2020 | 2019 | |||||||
| Description of Fees: | ||||||||
| Audit Fees | $ | 260,000 | $ | 299,500 | ||||
| Audit-Related Fees | 93,500 | 91,500 | ||||||
| Tax Fees | — | — | ||||||
| All Other Fees | — | — | ||||||
| Total | $ | 353,500 | $ | 391,000 | ||||
Audit Fees
Audit fees include the audit of our annual financial statements and the review of our financial statements included in our quarterly reports and services in connection with statutory and regulatory filings.
Audit-Related Fees
Represents the fees for assurance and related services that were reasonably related to the performance of the audit or review of our financial statements. Audit-related fees include professional services related to the Company’s filing of SEC Form S-3 and S-8 (i.e., stock shelf offering procedures).
The Audit Committee has determined that BDO’s rendering of these audit-related services and all other fees were compatible with maintaining auditor’s independence. The Board of Directors considered BDO to be well qualified to serve as our independent public accountants. The Committee also pre-approved the charges for services performed in 2020 and 2019.
The Audit Committee pre-approves all auditing and accounting services and the terms thereof (which may include providing comfort letters in connection with securities underwriting) and non-audit services (other than non-audit services prohibited under Section 10A(g) of the Exchange Act or the applicable rules of the SEC or the Public Company Accounting Oversight Board) to be provided to us by the independent auditor; provided, however, the pre-approval requirement is waived with respect to the provisions of non-audit services for us if the “de minimus” provisions of Section 10A (i)(1)(B) of the Exchange Act are satisfied. This authority to pre-approve non-audit services may be delegated to one or more members of the Audit Committee, who shall present all decisions to pre-approve an activity to the full Audit Committee at its first meeting following such decision.
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| ITEM 15. | Exhibits and Financial Statement Schedules. |
Financial Statements and Schedules - See index to financial statements on page F-1 of this Annual Report. All other schedules called for under regulation S-X are not submitted because they are not applicable or not required, or because the required information is included in the financial statements or notes thereto.
| (i) | Exhibits - See exhibit index below. |
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| 51 |
| 52 |
| 53 |
| * | Filed herewith. |
| (1) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K filed March 15, 2019 and is hereby incorporated by reference. |
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| (2) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Registration Statement on Form S-1 (No. 33-93314) filed November 2, 1995 and is hereby incorporated by reference. |
| (3) | Filed with the Securities and Exchange Commission as Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A filed on September 16, 2011 and is hereby incorporated by reference. |
| (4) | Filed with the Securities and Exchange Commission as Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A filed on June 27, 2016 and is hereby incorporated by reference. |
| (5) | Filed with the Securities and Exchange Commission on November 14, 2017 as an exhibit to the Company’s Registration Statement on Form 8-A12B (No. 0-27072) and is hereby incorporated by reference. |
| (6) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Form S-3 Registration Statement (No. 333-205228) on June 25, 2015 and is hereby incorporated by reference. |
| (7) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s annual report on Form 10-K (No. 000-27072) for the year ended December 31, 2008 and is hereby incorporated by reference. |
| (8) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s quarterly report on Form 10-Q (No. 000-27072) for the period ended June 30, 2010 and is hereby incorporated by reference. |
| (9) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s annual report on Form 10-K (No. 000-27072) for the year ended December 31, 2005 and is hereby incorporated by reference. |
| (10) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Annual Report on Form 10-K (No. 000-27072) for the year ended December 31, 2009 and is hereby incorporated by reference. |
| (11) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K (No. 000-27072) dated May 28, 2010 and is hereby incorporated by reference. |
| (12) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s quarterly report on Form 10-Q (No. 000-27072) for the period ended March 31, 2011 and is hereby incorporated by reference. |
| (13) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s quarterly report on Form 10-Q (No. 000-27072) for the period ended September 30, 2011 and is hereby incorporated by reference. |
| (14) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K (No. 000-27072) filed September 23, 2011 and is hereby incorporated by reference. |
| (15) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K (No. 000-27072) filed December 12, 2011 and is hereby incorporated by reference. |
| (16) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Annual Report on Form 10-K (No. 000-27072) for the year ended December 31, 2011 and is hereby incorporated by reference. |
| (17) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K (No. 000-27072) filed August 15, 2012 and is hereby incorporated by reference. |
| (18) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K (No. 000-27072) filed July 23, 2012 and is hereby incorporated by reference. |
| (19) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s annual report on Form 10-K (No. 000-27072) for the year ended December 31, 2013 and is hereby incorporated by reference. |
| (20) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s annual report on Form 10-K (No. 000-27072) for the year ended December 31, 2014 and is hereby incorporated by reference. |
| 55 |
| (21) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s annual report on Form 10-K (No. 000-27072) for the year ended December 31, 2017 and is hereby incorporated by reference left blank. |
| (22) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K (No. 000-27072) filed June 23, 2015 and is hereby incorporated by reference. |
| (23) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K (No. 000-27072) filed August 4, 2015 and is hereby incorporated by reference. |
| (24) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s quarterly report on Form 10-Q (No. 000-27072) for the period ended June 30, 2015 and is hereby incorporated by reference. |
| (25) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s quarterly report on Form 10-Q (No. 1-13441) for the period ended September 30, 2015 and is hereby incorporated by reference. |
| (26) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K (No. 000-27072) filed November 23, 2015 and is hereby incorporated by reference. |
| (27) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K (No. 000-27072) filed December 15, 2015 and is hereby incorporated by reference. |
| (28) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K (No. 000-27072) filed January 14, 2016 and is hereby incorporated by reference. |
| (29) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K (No. 000-27072) filed February 4, 2016 and is hereby incorporated by reference. |
| (30) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K (No. 000-27072) filed March 1, 2016 and is hereby incorporated by reference. |
| (31) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s amended quarterly report on Form 10-Q/A (No. 000-27072) for the period ended September 30, 2011 and is hereby incorporated by reference. |
| (32) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s quarterly report on Form 10-Q for the period ended March 31, 2016 and is hereby incorporated by reference. |
| (33) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K filed June 10, 2016 and is hereby incorporated by reference. |
| (34) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s quarterly report on Form 10-Q for the period ended June 30, 2016 and is hereby incorporated by reference. |
| (35) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s quarterly report on Form 10-Q/A for the period ended March 31, 2016 and is hereby incorporated by reference. |
| (36) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K filed September 1, 2016 and is hereby incorporated by reference. |
| (37) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K/A filed May 8, 2017 and is hereby incorporated by reference. |
| (38) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K filed February 3, 2017 and is hereby incorporated by reference. |
| (39) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K filed August 29, 2017 and is hereby incorporated by reference. |
| (40) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K filed August 23, 2017 and is hereby incorporated by reference. |
| (41) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K filed June 1, 2017 and is hereby incorporated by reference. |
| 56 |
| (42) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s quarterly report on Form 10-Q (No. 000-27072) for the period ended March 31, 2017 and is hereby incorporated by reference. |
| (43) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K filed March 22, 2018 and is hereby incorporated by reference. |
| (44) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K filed April 20, 2018 and is hereby incorporated by reference. |
| (45) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K filed May 6, 2018 and is hereby incorporated by reference. |
| (46) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s quarterly report on Form 10-Q (No. 000-27072) for the period ended September 30, 2018 and is hereby incorporated by reference. |
| (47) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Registration Statement on Form S-1 (No. 333-226057) filed July 2, 2018 and is hereby incorporated by reference. |
| (48) | Filed with the Securities and Exchange Commission as Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A filed on August 3, 2018 and is hereby incorporated by reference. |
| (49) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K filed October 4, 2018 and is hereby incorporated by reference. |
| (50) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K filed March 8, 2019 and is hereby incorporated by reference. |
| (51) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Registration Statement on Form S-1/A (No. 333-229051) filed February 6, 2019 and is hereby incorporated by reference. |
| (52) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K filed June 5, 2019 and is hereby incorporated by reference. |
| (53) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K filed August 23, 2019 and is hereby incorporated by reference. |
| (54) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K filed May 2, 2019 and is hereby incorporated by reference. |
| (55) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K filed July 22, 2019 and is hereby incorporated by reference. |
| (56) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s quarterly report on Form 10-Q (No. 000-27072) for the period ended June 30, 2019 and is hereby incorporated by reference. |
| (57) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K filed August 26, 2019 and is hereby incorporated by reference. |
| (58) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K filed September 27, 2019 and is hereby incorporated by reference. |
| (59) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Registration Statement on Form S-1/A (No. 333-233657) filed September 24, 2019 and is hereby incorporated by reference. |
| (60) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K filed December 11, 2018 and is hereby incorporated by reference. |
| (61) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K filed February 27, 2019 and is hereby incorporated by reference. |
| 57 |
| (62) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K filed December 11, 2019 and is hereby incorporated by reference. |
| (63) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K filed March 26, 2020 and is hereby incorporated by reference. |
| (64) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K filed April 6, 2020 and is hereby incorporated by reference. |
| (65) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K filed April 27, 2020 and is hereby incorporated by reference. |
| (66) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s quarterly report on Form 10-Q (No. 000-27072) for the period ended June 30, 2020 and is hereby incorporated by reference. |
| (67) | Filed with the Securities and Exchange Commission as an exhibit to the Company’s quarterly report on Form 10-Q (No. 000-27072) for the period ended September 30, 2020 and is hereby incorporated by reference. |
(b) Financial Statement Schedules
All schedules have been omitted because either they are not required, are not applicable or the information is otherwise set forth in the financial statements and related notes thereto.
| Item 16. | Form 10-K Summary |
None.
| 58 |
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| AIM IMMUNOTECH INC. | ||
| By: | /s/ Thomas K. Equels | |
| Thomas K. Equels | ||
| Chief Executive Officer | ||
March 30, 2021
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange of 1934, as amended, this report has been signed below by the following persons on behalf of this Registrant and in the capacities and on the dates indicated.
| /s/ Thomas K Equels | Chief Executive Officer & President, | March 30, 2021 | ||
| Thomas K. Equels | Director of the Board | |||
| /s/ William Mitchell | Chairman of the Board | March 30, 2021 | ||
| William Mitchell, M.D., Ph.D. | and Director | |||
| /s/ Stewart L Appelrouth | Director | March 30, 2021 | ||
| Stewart L. Appelrouth | ||||
| /s/ Ellen M Lintal | Chief Financial Officer | March 30, 2021 | ||
| Ellen M Lintal |
| 59 |
AIM IMMUNOTECH INC. AND SUBSIDIARIES
Index to Consolidated Financial Statements
| F-1 |
Report of Independent Registered Public Accounting Firm
Stockholders and Board of Directors
AIM ImmunoTech Inc.
Ocala, Florida
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of AIM ImmunoTech Inc. (the “Company”) as of December 31, 2020, the related consolidated statement of operations and comprehensive loss, stockholders’ equity, and cash flows for the year ended December 31, 2020 and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020, and the results of its operations and its cash flows for the year ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Calculation of the fair value of redeemable warrants
As discussed in Note 18 to the consolidated financial statements, the Company has certain redeemable warrants issued in conjunction with offerings that contain a cash settlement feature upon the occurrence of a Fundamental Transaction. The Company calculates the fair value of the redeemable warrants at the end of each quarterly reporting period using a Monte Carlo Simulation, which includes subjective assumptions. Subsequent changes in the fair value of the redeemable warrants are recorded in the consolidated statement of operations and comprehensive loss. As of December 31, 2020, the fair value of the redeemable warrants was approximately $180 thousand.
We identified the calculation of the fair value of the redeemable warrants as a critical audit matter. Specifically, there was a high degree of management subjectivity and judgment in selecting the assumptions used in the Monte Carlo Simulation, including the expected probability of a Fundamental Transaction and the expected stock price volatility. Auditing these elements involved especially subjective auditor judgment due to the nature and extent of audit effort required to address these matters, including the use of personnel with specialized skill and knowledge to evaluate the Company’s Monte Carlo Simulation.
The primary procedures we performed to address this critical audit matter included:
| ● | Testing management’s process for developing the fair value estimate and evaluating the significant assumptions used to calculate the fair value of the redeemable warrants, including the probability of a Fundamental Transaction and testing the accuracy and completeness of data used by management to estimate the fair value of the redeemable warrants, including considering evidence obtained in other areas of the audit to determine if contradictory evidence existed. | |
| ● | Utilizing personnel with specialized skills and knowledge in valuation to assist in evaluating (i) the appropriateness of the Monte Carlo Simulation model, and (ii) the expected stock price volatility range that was independently developed in consideration of daily historical stock price volatility information. |
/s/ BDO USA, LLP
We have served as the Company’s auditor since 2021.
Miami, Florida
March 30, 2021
| F-2 |
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders of AIM ImmunoTech Inc.
Opinion on the Financial Statement
We have audited the accompanying balance sheet of AIM ImmunoTech Inc. (the “Company”) as of December 31, 2019, and the related statement of operations, stockholders’ equity and cashflows for the year in the period ended December 31, 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and the results of its operations and its cash flows for the year in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Morrison, Brown, Argiz & Farra, LLC
We have served as the Company’s auditor since 2018.
Miami, Florida
March 30, 2020
| F-3 |
AIM IMMUNOTECH INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 2020 and 2019
(in thousands, except for share and per share amounts)
| 2020 | 2019 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 38,501 | $ | 1,470 | ||||
| Marketable securities | 501 | 7,308 | ||||||
| Funds receivable from New Jersey net operating loss | 1,090 | 776 | ||||||
| Accounts receivable, net | 34 | 44 | ||||||
| Prepaid expenses and other current assets | 184 | 848 | ||||||
| Total current assets | 40,310 | 10,446 | ||||||
| Property and equipment, net | 6,473 | 7,116 | ||||||
| Right of use asset, net | 179 | 152 | ||||||
| Patent and trademark rights, net | 1,498 | 1,151 | ||||||
| Marketable securities, long term | 15,376 | — | ||||||
| Other assets | 748 | 1,889 | ||||||
| Total assets | $ | 64,584 | $ | 20,754 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 383 | $ | 472 | ||||
| Accrued expenses | 442 | 403 | ||||||
| Current portion of operating lease liability | 47 | 38 | ||||||
| Current portion of financing obligation | 230 | 214 | ||||||
| Total current liabilities | 1,102 | 1,127 | ||||||
| Long-term liabilities: | ||||||||
| Operating lease liability | 132 | 114 | ||||||
| Notes payable | — | 3,910 | ||||||
| Financing obligation arising from sale leaseback transaction (Note 19) | 1,876 | 2,104 | ||||||
| Redeemable warrants | 180 | 57 | ||||||
| Commitments and contingencies (Notes 9, 11, 12, 14, 15 and 19) | ||||||||
| Stockholders’ equity: | ||||||||
| Series B Convertible Preferred Stock, stated value $1,000 per share, 732 shares designated, 778 shares issued and outstanding | 732 | 778 | ||||||
| Common Stock, par value $0.001 per share, authorized 350,000,000 shares; issued and outstanding 42,154,371 and 10,386,754, respectively | 42 | 10 | ||||||
| Additional paid-in capital | 402,541 | 340,228 | ||||||
| Accumulated other comprehensive loss | (47 | ) | — | |||||
| Accumulated deficit | (341,974 | ) | (327,574 | ) | ||||
| Total stockholders’ equity | 61,294 | 13,442 | ||||||
| Total liabilities and stockholders’ equity | $ | 64,584 | $ | 20,754 | ||||
See accompanying notes to consolidated financial statements.
| F-4 |
AIM IMMUNOTECH INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Loss
(in thousands, except share and per share data)
| Years ended December 31, | ||||||||
| 2020 | 2019 | |||||||
| Revenues: | ||||||||
| Clinical treatment programs - US | $ | 144 | $ | 110 | ||||
| Clinical treatment programs - Europe | 19 | 30 | ||||||
| Total Revenues | 163 | 140 | ||||||
| Costs and Expenses: | ||||||||
| Production costs | 806 | 893 | ||||||
| Research and development | 5,720 | 4,651 | ||||||
| General and administrative | 8,654 | 7,039 | ||||||
| Impairment of other assets | 135 | — | ||||||
| Total Costs and Expenses | 15,315 | 12,583 | ||||||
| Operating loss | (15,152 | ) | (12,443 | ) | ||||
| Interest and other income | 219 | 89 | ||||||
| Interest expense and other finance costs | (672 | ) | (427 | ) | ||||
| Settlement of litigation/Insurance Claim | — | 1,217 | ||||||
| Extinguishment of debt | 142 | (345 | ) | |||||
| Fair value of convertible note adjustment | — | 90 | ||||||
| Redeemable warrants valuation adjustment | (123 | ) | 1,510 | |||||
| Gain from sale of income tax operating losses | 1,186 | 905 | ||||||
| Net Loss | (14,400 | ) | (9,404 | ) | ||||
| Other comprehensive (loss) | ||||||||
| Unrealized loss on marketable securities | (47 | ) | — | |||||
| Net comprehensive loss | $ | (14,447 | ) | $ | (9,404 | ) | ||
| Basic and diluted loss per share | $ | (0.45 | ) | $ | (2.58 | ) | ||
| Weighted average shares outstanding basic and diluted | 31,842,799 | 3,642,717 | ||||||
See accompanying notes to consolidated financial statements.
| F-5 |
AIM IMMUNOTECH INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders’ Equity
(in thousands except share data)
| Common | Accumulated | |||||||||||||||||||||||||||
| Series B | Common | Stock | Additional | other | Total | |||||||||||||||||||||||
| Preferred | Stock | .001 | Paid-in | Comprehensive | Accumulated | Stockholders’ | ||||||||||||||||||||||
| Shares | Shares | Par Value | Capital | Income (Loss) | Deficit | Equity | ||||||||||||||||||||||
| Balance December 31, 2018 | — | 1,107,607 | $ | 1 | $ | 323,749 | $ | — | $ | (318,170 | ) | $ | 5,580 | |||||||||||||||
| Shares issued for: | ||||||||||||||||||||||||||||
| Common Stock issuance, net of costs | — | 8,956,228 | 9 | 16,946 | — | — | 16,955 | |||||||||||||||||||||
| Convertible note origination shares | — | 204,246 | — | 1,473 | — | — | 1,473 | |||||||||||||||||||||
| Deemed dividends | — | — | — | (135 | ) | — | — | (135 | ) | |||||||||||||||||||
| Equity based compensation | — | 1,932 | — | 853 | — | — | 853 | |||||||||||||||||||||
| Redeemable warrants | — | — | — | (2,787 | ) | — | — | (2,787 | ) | |||||||||||||||||||
| Shares issued to pay accounts payable | — | 116,741 | — | 129 | — | — | 129 | |||||||||||||||||||||
| Series B preferred shares issued, net of offering costs | 5,312 | — | — | — | — | — | 5,312 | |||||||||||||||||||||
| Series B preferred shares converted to Common shares | (4,534 | ) | — | — | — | — | — | (4,534 | ) | |||||||||||||||||||
| Net comprehensive loss | — | — | — | — | — | (9,404 | ) | (9,404 | ) | |||||||||||||||||||
| Balance December 31, 2019 | 778 | 10,386,754 | 10 | 340,228 | — | (327,574 | ) | 13,442 | ||||||||||||||||||||
| Shares issued for: | ||||||||||||||||||||||||||||
| Common Stock issuance, net of costs | — | 31,761,210 | 32 | 61,216 | — | — | 61,248 | |||||||||||||||||||||
| Warrant Modification | — | — | — | 46 | — | — | 46 | |||||||||||||||||||||
| Equity-based compensation | — | — | — | 1,036 | — | — | 1,036 | |||||||||||||||||||||
| Shares issued to pay accounts payable | — | 6,407 | — | 15 | — | — | 15 | |||||||||||||||||||||
| Series B preferred shares converted to Common shares | (46 | ) | — | — | — | — | — | (46 | ) | |||||||||||||||||||
| Net comprehensive loss | — | — | — | — | (47 | ) | (14,400 | ) | (14,447 | ) | ||||||||||||||||||
| Balance December 31, 2020 | 732 | 42,154,371 | $ | 42 | $ | 402,541 | $ | (47 | ) | $ | (341,974 | ) | $ | 61,294 | ||||||||||||||
See accompanying notes to consolidated financial statements
| F-6 |
AIM IMMUNOTECH INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
Years ended December 31,
| 2020 | 2019 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (14,400 | ) | $ | (9,404 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation of property and equipment | 665 | 735 | ||||||
| Redeemable warrants valuation adjustment | 123 | (1,236 | ) | |||||
Abandonment of patents and trademarks | 158 | — | ||||||
| Fair value of convertible note adjustment | — | (70 | ) | |||||
Allowance for bad debt recovery | (30 | ) | — | |||||
| Warrant modification | 46 | — | ||||||
| Extinguishment of convertible note | 142 | 345 | ||||||
| Amortization of patent, trademark rights | 68 | 57 | ||||||
| Changes in ROU assets | (27 | ) | 37 | |||||
| Inventory write-off | 1,095 | — | ||||||
| Impairment of other assets | 135 | — | ||||||
| Gain from sale of income tax operating losses | (96 | ) | (129 | ) | ||||
| Equity-based compensation | 1,036 | 853 | ||||||
| Amortization of finance and debt issuance costs | 112 | 288 | ||||||
| Change in assets and liabilities: | ||||||||
| Accounts receivables | 40 | 191 | ||||||
| Funds receivable from New Jersey net operating loss | (314 | ) | 83 | |||||
| Prepaid expenses and other current assets and other non current assets | 671 | 29 | ||||||
| Lease liability | 27 | (37 | ) | |||||
| Accounts payable | (89 | ) | (207 | ) | ||||
| Accrued interest expense | 231 | 129 | ||||||
| Accrued expenses | 39 | (731 | ) | |||||
| Net cash used in operating activities | (10,368 | ) | (9,067 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Proceeds from sale of marketable securities | 10,044 | — | ||||||
| Purchase of short-term marketable securities | (18,613 | ) | (5,782 | ) | ||||
| Purchase of property and equipment | (22 | ) | (68 | ) | ||||
| Purchase of patent and trademark rights | (573 | ) | (297 | ) | ||||
| Net cash used in investing activities | (9,164 | ) | (6,147 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Financing obligation payments | (355 | ) | (340 | ) | ||||
| Proceeds from note payable, net of issuance costs | — | 3,632 | ||||||
| Payoff of note payable | (4,330 | ) | (2,210 | ) | ||||
| Proceeds from sale of stock, net of issuance costs | 61,248 | 15,303 | ||||||
| Net cash provided by financing activities | 56,563 | 16,385 | ||||||
| Net increase in cash and cash equivalents | 37,031 | 1,171 | ||||||
| Cash and cash equivalents at beginning of period | 1,470 | 299 | ||||||
| Cash and cash equivalents at end of period | $ | 38,501 | $ | 1,470 | ||||
| Supplemental disclosures of non-cash investing and financing cash flow information: | ||||||||
| Stock issued to settle accounts payable | $ | 15 | $ | 129 | ||||
| Conversion of note payable in shares | $ | — | 1,236 | |||||
| Conversion of Series B preferred | $ | 46 | 4,534 | |||||
| Operating Lease – Right of Use Assets | $ | 66 | $ | 188 | ||||
See accompanying notes to consolidated financial statements.
| F-7 |
AIM IMMUNOTECH INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| (1) | Business |
AIM ImmunoTech Inc. and its subsidiaries (collectively, “AIM” or the “Company”) are an immuno-pharma company headquartered in Ocala, Florida and focused on the research and development of therapeutics to treat multiple types of cancers, various viruses and immune-deficiency disorders. The Company has established a strong foundation of laboratory, pre-clinical and clinical data with respect to the development of nucleic acids and natural interferon to enhance the natural antiviral defense system of the human body and to aid the development of therapeutic products for the treatment of certain cancers and chronic diseases.
AIM’s flagship products include Ampligen® (rintatolimod), a first-in-class drug of large macromolecular RNA (ribonucleic acid) molecules, and Alferon N Injection® (Interferon Alfa-N3). A first-in-class drug is also known as a new molecular entity that contains an active moiety. Ampligen has not been approved by the FDA or marketed in the US.
Since the outbreak of SARS-CoV-2, the novel virus that causes COVID-19, the Company has been actively engaged in determining whether Ampligen could be an effective treatment for this virus or could be part of a vaccine. The Company believes that Ampligen has the potential to be both an early-onset treatment for and prophylaxis against SARS-CoV-2. Ampligen also has potential as a COVID-19 vaccine strategy that combines Ampligen as an immune enhancer seeking to boost the efficacy of the vaccine and also convey cross-reactivity and cross-protection against future mutations. The Company believes that prior studies of Ampligen in SARS-CoV-1 animal experimentation may predict similar protective effects against the new virus.
Beginning in April 2020, the Company entered into confidentiality and non-disclosure agreements with numerous companies for the potential outsourcing of the production of polymer, enzyme, placebo as well as Ampligen and one Contract Research Organization which may also assist with the planning, presentation and filing of documents with the FDA. These confidentiality and non-disclosure agreements are only the initial step in forging relationships with these entities to obtain contract manufacturers and research partners. No assurance can be given as to how many of these, initial explorations, if any, will result in definitive arrangements or, with regard to potential research partners, what research arrangements will develop and thereafter prove fruitful.
Ampligen represents an RNA being developed for globally important cancers, viral diseases and disorders of the immune system. Ampligen has in the clinic demonstrated the potential for standalone efficacy in a number of solid tumors. The Company has also seen success in increasing survival rates and efficacy in the treatment of animal tumors when Ampligen is used in combination with checkpoint blockade therapies. This success in the field of immuno-oncology has guided our focus toward the potential use of Ampligen as a combinational therapy for the treatment of a variety of solid tumor types. There are currently multiple Ampligen clinical trials testing Ampligen in humans — both underway and planned — at major cancer research centers. Ampligen was used as a monotherapy to treat pancreatic cancer patients in an Early Access Program (EAP) approved by the Inspectorate of Healthcare in the Netherlands at Erasmus Medical Center. In September, AIM reported receipt of statistically significantly results of positive survival benefit when using Ampligen in patients with locally advanced/metastatic pancreatic cancer after systemic chemotherapy. AIM will work with its Contract Research Organization, Amarex Clinical Research LLC, to seek FDA “fast-track” and possibly even FDA “breakthrough” designations and to obtain authorization to conduct a follow-up pancreatic cancer Phase 2/3 clinical trial with sites in the Netherlands at Erasmus MC under Prof. van Eijck, and also at major cancer research centers in the United States.
Ampligen is also being evaluated for the treatment of myalgic encephalomyelitis/chronic fatigue syndrome (ME/CFS). AIM is currently sponsoring an expanded access program for ME/CFS patients in the U.S. In August 2016, the Company received approval of our NDA from Administracion Nacional de Medicamentos, Alimentos y Tecnologia Medica (ANMAT) for commercial sale of Ampligen in the Argentine Republic for the treatment of severe CFS. With regulatory approval in Argentina, Ampligen is the world’s only approved therapeutic for ME/CFS. On June 10, 2020, the Company received import clearance from ANMAT to import the first shipment of commercial grade vials of Ampligen to Argentina. The next steps in the commercial launch of Ampligen include ANMAT conducting a final inspection of the product and release tests before granting final approval to begin commercial sales. AIM has supplied GP Pharm with the Ampligen required for testing and ANMAT release. Once final approval by ANMAT is obtained, GP Pharm will begin distributing Ampligen in Argentina. The Company continues to pursue our Ampligen New Drug Application, or NDA, for the treatment of CFS with the FDA.
Alferon N Injection is approved for a category of sexually transmitted diseases infection and patients that are intolerant to recombinant interferon in Argentina. Alferon is the only natural-source, multi-species alpha interferon currently approved for sale in the U.S. for the intralesional treatment of refractory (resistant to other treatment) or recurring external condylomata acuminata/genital warts (GW) in patients 18 years of age or older. Certain types of human papilloma viruses cause GW. AIM also has approval from ANMAT for the treatment of refractory patients that failed or were intolerant to treatment with recombinant interferon in Argentina.
| F-8 |
The Company operates a 30,000 sq. ft. facility in New Brunswick, NJ, where it conducts testing and has produced limited quantities of active pharmaceutical ingredients (“API”) for its products. The Company has reviewed its operations at the facility and believes that some of the equipment most likely should be upgraded to realize greater efficiencies, when and if it requires more API than is currently in storage. The Company is also exploring engaging a Contract Manufacturing Organization (“CMO”) to produce API. While the Company believes it has sufficient API to meet its current needs, is also continually exploring new efficiencies so as to maximize its ability to fulfill future obligations.
The consolidated financial statements include the financial statements of AIM ImmunoTech Inc. and its wholly-owned subsidiaries, which are incorporated in Delaware and are dormant. The Company’s foreign subsidiary, Hemispherx Biopharma Europe N.V./S.A., was established in Belgium in 1998. All significant intercompany balances and transactions have been eliminated in consolidation.
| (2) | Summary of Significant Accounting Policies |
(a) Cash and Cash Equivalents
Cash and Cash Equivalents consist of cash and money market accounts and total $38,501,000 and $1,470,000 at December 31, 2020 and 2019, respectively.
(b) Marketable Securities
Marketable securities consist of mutual funds and debt securities. The Company’s securities are stated at fair value. The Company records changes in fair value of mutual funds in results of operations and the changes in fair value of debt securities in other comprehensive income.
(c) Property and Equipment, net
| (in thousands) December 31, | ||||||||
| 2020 | 2019 | |||||||
| Land, buildings and improvements | $ | 10,547 | $ | 10,547 | ||||
| Furniture, fixtures, and equipment | 5,136 | 5,114 | ||||||
| Total property and equipment | 15,683 | 15,661 | ||||||
| Less: accumulated depreciation and amortization | (9,210 | ) | (8,545 | ) | ||||
| Property and equipment, net | $ | 6,473 | $ | 7,116 | ||||
Property and equipment are recorded at cost. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the respective assets, ranging from three to thirty-nine years.
(d) Patent and Trademark Rights, net
Patents and trademarks are stated at cost (primarily legal fees) and are amortized using the straight line method over the established useful life of 17 years. The Company reviews its patents and trademark rights periodically to determine whether they have continuing value or their value has become impaired. Such review includes an analysis of the patent and trademark’s ultimate revenue and profitability potential. Management’s review addresses whether each patent continues to fit into the Company’s strategic business plans.
(e) Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure (“GAAP”) of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the reporting period. Actual results could differ from those estimates, and those differences may be material. Accounts requiring the use of significant estimates include valuation allowances for inventory, determination of other-than-temporary impairment on securities, valuation of deferred taxes, patent and trademark valuations, stock-based compensation calculations, building valuation, fair value of warrants, convertible note payable and contingency accruals.
| F-9 |
Impact of the Novel Coronavirus
On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19 outbreak”) and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally.
The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. As such, it is uncertain as to the full magnitude that the pandemic will have on the Company’s financial condition, liquidity, and future results of operations.
Management is actively monitoring the global situation on its financial condition, liquidity, operations, scientific collaborations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for fiscal year 2021.
Although the Company cannot estimate the length or gravity of the impact of the COVID-19 outbreak at this time, if the pandemic continues, it may have a material adverse effect on the Company’s results of future operations, financial position, and liquidity for the fiscal year 2021.
Coronavirus Aid, Relief and Economic Security Act
On March 27, 2020, the U.S. Government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law. The CARES Act includes various income and payroll tax provisions. The Company has analyzed the tax provisions of the CARES Act and determined they have no significant financial impact to the consolidated financial statements. The Company has no intention of taking advantage of other benefits but will continue to evaluate the impact on the Company’s financial position.
(f) Revenue
Effective January 1, 2018, the Company adopted Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers, using the modified retrospective method and there was no impact to financial position and results of operations as a result of the adoption. This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Overall, adoption of the new standard did not result in an adjustment to amounts previously reported in our consolidated financial statements and there were no other significant changes impacting the timing or measurement of our revenue or our business processes and controls.
Revenue from the sale of Ampligen under cost recovery clinical treatment protocols approved by the FDA is recognized when the product is shipped. The Company has no other obligation associated with its products once shipment has been accepted by the customer.
Revenue from the sale Ampligen under the EAP is recognized as the product is distributed and administered to patients involved in the cost recovery program.
(g) Accounting for Income Taxes
Deferred income tax assets and liabilities are determined based on differences between the financial statement reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws in effect when the differences are expected to reverse. The measurement of deferred income tax assets is reduced, if necessary, by a valuation allowance for any tax benefits which are not expected to be realized. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in the period that such tax rate changes are enacted.
| F-10 |
The Company applies the provisions of FASB ASC 740-10 Uncertainty in Income Taxes. As a result of the implementation, there has been no material change to the Company’s tax positions as they have not paid any corporate income taxes due to operating losses. With the exception of net operating losses generated in New Jersey, all tax benefits will likely not be recognized due to the substantial net operating loss carryforwards which will most likely not be realized prior to expiration. With no tax due for the foreseeable future, the Company has determined that a policy to determine the accounting for interest or penalties related to the payment of tax is not necessary at this time.
Immaterial Revision of Previously Reported Amounts
During the preparation of the consolidated financial statements as of and for the period ended December 31, 2020, Management noted an error in the Company’s previously issued Consolidated Financial Statements. The error in the amount of approximately $535,000 related to the Company’s accounting for income taxes that resulted in a deferred tax benefit associated with the sale of net operating losses. In evaluating whether the previously issued Consolidated Financial Statements were materially misstated, the Company applied the guidance of ASC 250, Accounting Changes and Error Corrections, SEC Staff Accounting Bulletin (“SAB”) Topic 1.M, Assessing Materiality and SAB Topic 1.N, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements and concluded that the effect of the errors on prior period financial statements was immaterial. The cumulative effect of adjustments required to correct the misstatements in the Consolidated Financial Statements years prior to 2019 are reflected in the revised opening accumulated deficit balance as of January 1, 2019. The cumulative effect of those adjustments on all periods reduced previously reported accumulated deficit by approximately $406,000. As a result, certain amounts presented in the Company’s Consolidated Balance Sheet and Consolidated Statement of Operations have been revised from the amounts previously reported to correct this error which include an adjustment to decrease Accumulated deficit in the amount of approximately $406,000, increase Other assets in the amount of approximately $535,000, increase Gain from the sale of income tax operating losses of approximately $129,000, decrease Net loss in the amount of approximately $129,000 and increase Basic and diluted loss per share of $(0.04).
(h) Recent Accounting Standards and Pronouncements
In February 2016, the FASB issued ASU 2016-02 - Leases, which amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU 2016-02 will be effective for annual reporting periods beginning after December 15, 2018, and early adoption of is permitted as of the standard’s issuance date. ASU 2016-02 allows a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The Company evaluated the effects and the adoption of this guidance will have on the consolidated financial statements. (See Note 12 : Leases).
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Measurement of Credit Losses on Financial Instruments, and subsequent amendments to the guidance, ASU 2018-19 in November 2018 and ASU 2020-02 in February 2020. The standard significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The standard will replace today’s “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. For available-for-sale debt securities, entities will be required to record allowances rather than reduce the carrying amount, as they do today under the other-than-temporary impairment model. It also simplifies the accounting model for purchased credit-impaired debt securities and loans. The amendment will affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. ASU 2018-19 clarifies that receivables arising from operating leases are accounted for using lease guidance and not as financial instruments. The amendments should be applied on either a prospective transition or modified-retrospective approach depending on the subtopic. This ASU will be effective for us beginning the first day of our 2023 fiscal year. Early adoption is permitted. We are evaluating the impact of adoption of this ASU on our financial condition, results of operations and cash flows, and, as such, we are not able to estimate the effect the adoption of the new standard will have on our financial statements.
Other recent accounting pronouncements issued by the FASB did not or are not believed by management to have a material impact on the Company’s present or future financial statements.
(i) Stock-Based Compensation
The Company accounts for its stock-based compensation awards in accordance with FASB ASC Topic 718, “Compensation – Stock Compensation”, which requires recognition of compensation expense related to stock-based compensation awards over the period during which an employee is required to provide service for the award. Compensation expense is equal to the fair value of the award at the date of grant, net of estimated forfeitures.
| F-11 |
(j) Accounts Receivable, net
Concentration of credit risk, with respect to accounts receivable, is limited due to the Company’s credit evaluation process. The Company does not require collateral on its receivables. The Company’s receivables were $34,000 and $44,000, net of $30,000 allowance for doubtful accounts, as of December 31, 2020 and 2019, respectively.
(k) Common Stock Per Share Calculation
Basic and diluted net loss per share is computed using the weighted average number of shares of Common Stock outstanding during the period. Equivalent Common shares, consisting of 548,374, and 8,351,113 of stock options and warrants, are excluded from the calculation of diluted net loss per share for the years ended December 31, 2020 and 2019, respectively, since their effect is antidilutive due to the net loss of the Company.
(l) Long-Lived Assets
The Company assesses long-lived assets for impairment when events or changes in circumstances indicate that the carrying value of the assets or the asset grouping may not be recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant under-performance of a business or product line in relation to expectations, significant negative industry or economic trends, and significant changes or planned changes in its use of the assets. The Company measures the recoverability of assets that it will continue to use in its operations by comparing the carrying value of the asset grouping to our estimate of the related total future undiscounted net cash flows. If an asset grouping’s carrying value is not recoverable through the related undiscounted cash flows, the asset grouping is considered to be impaired.
The Company measures the impairment by comparing the difference between the asset grouping’s carrying value and its fair value. Long-lived assets are considered a non-financial asset and are recorded at fair value only if an impairment charge is recognized. Impairments are determined for groups of assets related to the lowest level of identifiable independent cash flows. The Company makes subjective judgments in determining the independent cash flows that can be related to specific asset groupings. In addition, as the Company reviews its manufacturing process and other manufacturing planning decisions, the useful lives of assets are shorter than the Company had originally estimated, it accelerates the rate of depreciation over the assets’ new, shorter useful lives.
| (3) | Inventories |
The Company uses the lower of first-in, first-out (“FIFO”) cost or net realizable value method of accounting for inventory.
Commercial sales of Alferon in the U.S. will not resume until new batches of commercial filled and finished product are produced and released by the Food and Drug Administration (“FDA”). While the facility is approved by the FDA under the Biologics License Application (“BLA”) for Alferon, this status will need to be reaffirmed by an FDA pre-approval inspection. The Company also will need the FDA’s approval to release commercial product once it has submitted satisfactory stability and quality release data. Currently, the manufacturing process is on hold and there is no definitive timetable to have the facility back online. The Company estimates it will need approximately $10,000,000 to commence the manufacturing process. Due to the Company extending the timeline of Alferon production to an excess of one year, the Company reclassified Alferon work in process inventory of $1,095,000 to other assets within our balance sheet as of December 31, 2019.
Based on the Company’s current oncology and growing projects related to COVID-19 and ability to ready the manufacturing plant to utilize the current Alferon work in process in a timely manner prior to expiration of the WIP the Company concluded to write off the value of the Alferon as of December 31, 2020 and included within Research and Development expenses on the Consolidated Statement of Comprehensive Loss.
| (4) | Marketable Securities |
Marketable securities consist of mutual funds and debt securities. At December 31, 2020 and 2019, it was determined that none of the marketable securities had an other-than-temporary impairment. At December 31, 2020 and December 31, 2019, all securities were measured as Level 1 instruments of the fair value measurements standard (See Note 18: Fair Value). As of December 31, 2020 and December 31, 2019 the Company held $15,877,000 and $7,308,000 in debt and equity securities respectively. As of December 31, 2019 there were no debt securities.
| F-12 |
Debt Securities classified as available for sale consisted of:
December 31, 2020
(in thousands)
| Securities | Amortized Cost | Gross Unrealized Gains /(Losses) | Gross Unrealized Gains /(Losses) | Fair Value | Marketable Securities | |||||||||||||||
| U.S. Treasury notes | $ | 5,746 | $ | — | $ | (47 | ) | $ | 5,699 | $ | 5,699 | |||||||||
| U.S. Government mortgage backed securities | 4,890 | — | (52 | ) | 4,838 | 4,838 | ||||||||||||||
| Corporate bonds | 5,288 | — | 52 | 5,340 | 5,340 | |||||||||||||||
| Totals | $ | 15,924 | $ | — | $ | (47 | ) | $ | 15,877 | $ | 15,877 | |||||||||
December
31, 2020
(in thousands)
| Less than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||
| Securities | Fair Value | Gross Unrealized Gains | Fair Value | Gross Unrealized Gains | Fair Value | Gross Unrealized Gains | ||||||||||||||||||
| U.S. Treasury notes | $ | 501 | $ | — | $ | 5,245 | $ | (47 | ) | $ | 5,699 | $ | (47 | ) | ||||||||||
| U.S. Government mortgage backed securities | — | — | 4,890 | (52 | ) | 4,838 | (52 | ) | ||||||||||||||||
| Corporate bonds | — | — | 5,288 | 52 | 5,340 | 52 | ||||||||||||||||||
| Totals | $ | 501 | $ | — | $ | 15,423 | $ | (47 | ) | $ | 15,877 | $ | (47 | ) | ||||||||||
December 31, 2019
(in thousands)
| Securities | Fair Value | Short-Term Investments | ||||||
| Mutual Funds | $ | 7,308 | $ | 7,308 | ||||
| Totals | $ | 7,308 | $ | 7,308 | ||||
Net gain and loss recognized during 2020 and 2019 respectively was $1,000 and $3,000.
| (5) | Patents, Trademark Rights, net |
| December 31, 2018 | $ | 911 | ||
| Acquisitions | 297 | |||
| Amortization | (57 | ) | ||
| December 31, 2019 | $ | 1,151 | ||
| Acquisitions | 573 | |||
| Amortization | (68 | ) | ||
| Abandonments | (158 | ) | ||
| December 31, 2019 | $ | 1,498 |
| F-13 |
Patents and trademarks are stated at cost (primarily legal fees) and are amortized using the straight-line method of the estimated useful life of 17 years. During the years ended December 31, 2020, the Company decided not to pursue certain patents in various countries for strategic reasons and recorded abandonment charges which are included in research and development.
Amortization of patents and trademarks for each of the next five years is as follows:
| Year Ending December 31, | ||||
| 2021 | $ | 75 | ||
| 2022 | 89 | |||
| 2023 | 105 | |||
| 2024 | 124 | |||
| 2025 | 146 | |||
| Thereafter | 959 | |||
| Total | $ | 1,498 | ||
| (6) | Accrued Expenses |
Accrued expenses at December 31, 2020 and 2019 consist of the following:
| (in thousands) December 31, | ||||||||
| 2020 | 2019 | |||||||
| Compensation | $ | 2 | $ | 94 | ||||
| Professional fees | 124 | 73 | ||||||
| Clinical trial expenses | — | 56 | ||||||
| Other expenses | 316 | 180 | ||||||
| $ | 442 | $ | 403 | |||||
| (7) | Stockholders’ Equity |
(a) Preferred Stock
The Company is authorized to issue 5,000,000 shares of $0.01 par value preferred stock with such designations, rights and preferences as may be determined by the Board of Directors. Of our authorized preferred stock, 250,000 shares have been designated as Series A Junior Participating Preferred Stock and 8,000 shares have been designated as Series B Convertible Preferred Stock. The Series B Convertible Preferred Stock has a stated value $1,000 per share.
The Company is authorized to issue 8,000 Series B Convertible Preferred Stock, no par value, stated value $1,000 per share. As of December 31, 2020, and December 31, 2019, the Company had 732 and 778 shares of Series B Convertible Preferred Stock outstanding, respectively. Each such Preferred Share is convertible into 114 shares of common stock.
Pursuant to a registration statement relating to a rights offering declared effective by the SEC on February 14, 2019, AIM distributed to its holders of common stock and to holders of certain options and warrants as of February 14, 2019, at no charge, one non-transferable subscription right for each share of common stock held or deemed held on the record date. Each right entitled the holder to purchase one unit, at a subscription price of $1,000 per unit, consisting of one share of Series B Convertible Preferred Stock with a face value of $1,000 (and immediately convertible into common stock at an assumed conversion price of $8.80) and 114 warrants with an assumed exercise price of $8.80. The warrants are exercisable for five years after the date of issuance. The net proceeds realized from the rights offering were approximately $4,700,000. During the twelve months ending December 31, 2020, 46 shares of Series B Convertible Preferred Stock were converted into common stock.
(b) Common Stock
The Company has authorized shares of 350,000,000 with specific limitations and restrictions on the usage of 8,000,000 of the 350,000,000 authorized shares.
| F-14 |
In June 2019, the Company effected a 44-to-1 reverse stock split of the outstanding shares, in order to become compliant with the NYSE regulations. This did not affect the number of authorized shares. All references herein to shares of common stock, options, warrants and preferred stock have been adjusted to give effect to this reverse stock split.
On July 7, 2020, the board of directors approved up to $500,000 for all directors, officers and employees to buy company shares from the Company at the market price. As of August 31, 2020, the Company has issued 10,730 shares of its common stock at a price of $2.33 for a total of $25,000. This plan expired September 10,2020.
On September 4, 2020, the board of directors approved up to $500,000 for all directors, officers and employees to buy company shares from the Company at the market price. As of October 31, 2020, the Company has issued 12,316 shares of its common stock at a price of $2.03 for a total of $25,000. This plan expired November 1,2020.
On November 5, 2020, the board of directors approved up to $500,000 for all directors, officers and employees to buy company shares from the Company at the market price. As of December 31, 2020, the Company has issued 14,435 shares of its common stock at a price of $1.72 for a total of $25,000. This plan expired January 2, 2021.
On June 11, 2019, the board of directors approved up to $500,000 for all directors, officers and employees to buy company shares from the Company at the market price. As of June 28, 2019, the Company has issued 67,767 shares of its common stock at prices between $4.03 and $4.37 for a total of $274,000. This plan expired August 19, 2019.
On September 27, 2019, the Company closed a public offering underwritten by A.G.P./Alliance Global Partners, LLC (the “Offering”) of (i) 1,740,550 shares of Common Stock; (ii) pre-funded warrants exercisable for 7,148,310 shares of Common Stock (the “Pre-funded Warrants”), and (iii) warrants to purchase up to an aggregate of 8,888,860 shares of Common Stock (the “Warrants”). In conjunction with the Offering, a Representative’s Warrant to purchase up to an aggregate of 266,665 shares of common stock (the “Representative’s Warrant”). The shares of Common Stock and Warrants were sold at a combined Offering price of $0.90, less underwriting discounts and commissions. Each Warrant sold with the shares of Common Stock represents the right to purchase one share of Common Stock at an exercise price of $0.99 per share. The Pre-Funded Warrants and Warrants were sold at a combined Offering price of $0.899, less underwriting discounts and commissions. The Pre-Funded Warrants were sold to purchasers whose purchase of shares of Common Stock in the Offering would otherwise result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% of the Company’s outstanding Common Stock immediately following the consummation of the Offering, in lieu of shares of Common Stock. Each Pre-Funded Warrant represents the right to purchase one share of Common Stock at an exercise price of $0.001 per share. The Pre-Funded Warrants are exercisable immediately and may be exercised at any time until the Pre-Funded Warrants are exercised in full. A registration statement on Form S-1, relating to the Offering was filed with the SEC and was declared effective on September 25, 2019, the net proceeds were approximately $7,200,000. During the year ending December 31, 2020, 1,870,000 of the Pre-funded Warrants were exercised and 7,687,860 Warrants were exercised. In addition, on March 25, 2020, the Representative’s Warrant was amended to permit exercise of such warrant to commence on March 30, 2020. These warrants were exercised on March 31, 2020 and an aggregate of 266,665 shares were issued upon exercise of this warrant for gross proceeds of approximately $264,000 and a $46,000 expense for the warrant modification.
On April 20, 2018, the Company entered into Securities Purchase Agreements (the “Purchase Agreements”) with certain investors (the “Investors”) for the sale by the Company of an aggregate of 150,000 shares (the “Common Shares”) of the Company’s Common Stock, par value $0.001 per share (the “Common Stock”), at a purchase price of $17.16 per share. Concurrently with the sale of the Common Shares, pursuant to the Purchase Agreements the Company also sold 150,000 warrants, 50% of which are Class A Warrants and 50% of which are Class B Warrants (collectively, the “Warrants”). The Company received gross proceeds from the sale of the Warrants solely to the extent such Warrants are exercised for cash. Both classes of Warrants will not be exercisable until six months after issuance and will have an exercise price of $17.16 per share, subject to adjustments as provided under the terms of the Warrants. The Class A Warrants and Class B Warrants will expire, respectively, two and five years after the date on which they are first exercisable. The closing of the sales of these securities under the Purchase Agreements took place on April 24, 2018. The Company received net proceeds from the transactions of $2,343,820 after deducting certain fees due to the placement agent and the Company’s transaction expenses.
On May 2, 2019, the Company entered into an agreement with the holders of the August 23, 2017 and April 20, 2018 respectively. The warrant exercise price was reduced to $6.60 and 103,410 warrants were exercised, reducing the liability attributed to the warrants by approximately $404,000, and the Company realized about $682,000 in net proceeds, resulting in an addition to stockholders’ equity of approximately $1,086,000.
On November 27, 2017, the Company reactivated its equity distribution agreement (the “EDA”) with Maxim Group LLC (“Maxim”). During the year ended December 31, 2019, the Company sold an aggregate of 49,463 shares under the EDA for proceeds of $827,000 net of $25,000 in commissions.
| F-15 |
On July 19, 2019, the Company entered into a new Equity Distribution Agreement (the “2019 EDA”) with Maxim, pursuant to which it could sell from time to time, shares of its Common Stock through Maxim, as agent (the “Offering”). The 2019 EDA replaced the EDA with Maxim. For the year ended December 31, 2020, the Company sold 20,444,807 shares under the 2019 EDA for total gross proceeds of $53,936,615, which includes a 3.5% fee to Maxim of $1,888,727.
The 2018 Equity Incentive Plan, effective September 12, 2018, authorizes the grant of (i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) Stock Appreciation Rights, (iv) Restricted Stock Awards, (v) Restricted Stock Unit Awards, (vi) Performance Stock Awards, (vii) Performance Cash Awards, and (viii) Other Stock Awards. Initially, a maximum of 7,000,000 shares of Common Stock is reserved for potential issuance pursuant to awards under the 2018 Equity Incentive Plan. Unless sooner terminated, the 2018 Equity Incentive Plan will continue in effect for a period of 10 years from its effective date. On October 17, 2018, the Board of Directors issued 26,324 options to the officers and directors at the exercise price of $9.68 expiring in 10 years, and on November 14, 2018, the Board of Directors issued 23 options to each employee, officer and director at the exercise price of $9.68 expiring in ten years. On January 28, 2019, 27,570 options were issued to each of these officers with an exercise price of $9.68 for a period of ten years with a vesting period of one year. In August 2020, 400,000 options were issued to each of these officers with an exercise price range of $2.77 to $3.07 for a period of ten years with a vesting period of one year. During December 2020, 675,000 options were issued to employees with an exercise price range of $1.85 to $1.96 for a period of ten years with a vesting period of one year.
As of December 31, 2020, and 2019, there were 42,154,371 and 10,386,754 shares outstanding, respectively.
(c) Equity Financings
See (b) above
(d) Common Stock Options and Warrants
(i) Stock Options
The Equity Incentive Plan of 2009, effective June 24, 2009, as amended, authorizes the grant of non-qualified and incentive stock options, stock appreciation rights, restricted stock and other stock awards. A maximum of 22,000,000 shares of common stock is reserved for potential issuance pursuant to awards under the Equity Incentive Plan of 2009. Unless sooner terminated, the Equity Incentive Plan of 2009 will continue in effect for a period of 10 years from its effective date.
The 2018 Equity Incentive Plan, effective September 12, 2018, authorizes the grant of (i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) Stock Appreciation Rights, (iv) Restricted Stock Awards, (v) Restricted Stock Unit Awards, (vi) Performance Stock Awards, (vii) Performance Cash Awards, and (viii) Other Stock Awards. Initially, a maximum of 7,000,000 shares of common stock is reserved for potential issuance pursuant to awards under the 2018 Equity Incentive Plan. Unless sooner terminated, the 2018 Equity Incentive Plan will continue in effect for a period of 10 years from its effective date. On October 17, 2018, the Board of Directors issued 26,234 options to the officers and directors at the exercise price of $9.68 expiring in 10 years, and on November 14, 2018, the Board of Directors issued 23 options to each employee, officer and director at the exercise price of $9.68 expiring in ten years. On January 28, 2019, 27,570 options were issued to each of these officers with an exercise price of $9.68 for a period of ten years with a vesting period of one year.
The Equity Incentive Plans of 2009 and 2018 are administered by the Board of Directors. The Plans provide for awards to be made to such Officers, other key employees, non-employee Directors, consultants and advisors of the Company and its subsidiaries as the Board may select.
Stock options awarded under the Plans may be exercisable at such times (not later than 10 years after the date of grant) and at such exercise prices (not less than fair market value at the date of grant) as the Board may determine. The Board may provide for options to become immediately exercisable upon a “change in control”, which is defined in the Plans to occur upon any of the following events: (a) the acquisition by any person or group, as beneficial owner, of 20% or more of the outstanding shares or the voting power of the outstanding securities of the Company; (b) either a majority of the Directors of the Company at the annual stockholders meeting has been nominated other than by or at the direction of the incumbent Directors of the Board, or the incumbent Directors cease to constitute a majority of the Company’s Board; (c) the Company’s stockholders approve a merger or other business combination pursuant to which the outstanding common stock of the Company no longer represents more than 50% of the combined entity after the transaction; (d) the Company’s stockholders approve a plan of complete liquidation or an agreement for the sale or disposition of all or substantially all of the Company’s assets; or (e) any other event or circumstance determined by the Company’s Board to affect control of the Company and designated by resolution of the Board as a change in control.
| F-16 |
The fair value of each option award is estimated on the date of grant using a Black-Scholes-Merton pricing option valuation model. Expected volatility is based on the historical volatility of the price of the Company’s stock. The risk-free interest rate is based on U.S. Treasury issues with a term equal to the expected life of the option and equity warrant. The Company uses historical data to estimate expected dividend yield, life and forfeiture rates. The expected life of the options and equity warrants was estimated based on historical option and equity warrant holders’ behavior and represents the period of time that options and equity warrants are expected to be outstanding. The fair values of the options and equity warrants granted were estimated based on the following weighted average assumptions:
| Year Ended December 31, | ||||||||
| 2020 | 2019 | |||||||
| Risk-free interest rate | 0.3% - 0.46 | % | 2.6 | % | ||||
| Expected dividend yield | — | — | ||||||
| Expected life | 5 years | 5 years | ||||||
| Expected volatility | 115.24% - 116.79 | % | 82.60 | % | ||||
| Weighted average grant date fair value for options and equity warrants issued | $2.28 per option for 1,025,000 options | $9.68 per option for 39,267 options | ||||||
The exercise price of all stock options and equity warrants granted was equal to or greater than the fair market value of the underlying common stock on the date of the grant.
Information regarding the options approved by the Board of Directors under Equity Plan of 2009 is summarized below. The plan expired June 24, 2019:
| 2020 | 2019 | |||||||||||||||||||||||
| Shares | Option Price | Weighted Average Exercise Price | Shares | Option Price | Weighted Average Exercise Price | |||||||||||||||||||
| Outstanding, beginning of year | 132,615 | 13.20 – 2,127.84 | 31.65 | 144,060 | 13.20 -2,127.84 | 15.84 | ||||||||||||||||||
| Granted | — | — | — | — | — | |||||||||||||||||||
| Forfeited | (2,935 | ) | 9.68 – 380.16 | 82.38 | (11,445 | ) | 13.20 – 2,127.84 | 37.45 | ||||||||||||||||
| Exercised | — | — | — | — | — | |||||||||||||||||||
| Outstanding, end of year | 129,680 | 13.20-2,127.84 | 23.05 | 132,615 | 13.20 - 2,127.84 | 31.65 | ||||||||||||||||||
| Exercisable, end of year | 98,138 | 13.20-2,127.84 | 50,552 | 13.20 – 2,127.84 | ||||||||||||||||||||
| Weighted average remaining contractual life (years) | 5.6 years | 6.7 years | ||||||||||||||||||||||
Information regarding the options approved by the Board of Directors under the Equity Plan of 2018 is summarized below:
| 2020 | 2019 | |||||||||||||||||||||||
| Shares | Option Price | Weighted Average Exercise Price | Shares | Option Price | Weighted Average Exercise Price | |||||||||||||||||||
| Outstanding, beginning of year | 61,806 | 9.68 | 9.68 | 27,029 | — | — | ||||||||||||||||||
| Granted | 1,025,000 | 1.85 – 3.07 | 2.33 | 39,268 | 9.68 | 9.68 | ||||||||||||||||||
| Forfeited | (257 | ) | 9.68 – 16.72 | 2.75 | (4,491 | ) | — | — | ||||||||||||||||
| Exercised | — | — | — | — | — | — | ||||||||||||||||||
| Outstanding, end of year | 1,086,549 | 1.85 – 9.68 | 2.75 | 61,806 | 9.68 | 9.68 | ||||||||||||||||||
| Exercisable, end of year | 243,750 | 1.85 – 9.68 | 2.75 | 49,376 | 9.68 | 9.68 | ||||||||||||||||||
| Weighted average remaining contractual life (years) | 9.4 years | 9.1 years | ||||||||||||||||||||||
| Available for future grants | 38,268 | 87,798 | ||||||||||||||||||||||
| F-17 |
Stock option activity during the years ended December 31, 2020 and 2019 is as follows:
Stock option activity for employees
| Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contracted Term (Years) | Aggregate Intrinsic Value | |||||||||||||
| Outstanding December 31, 2018 | 116,149 | $ | 33.00 | 5.89 | — | |||||||||||
| Granted | 27,570 | 9.68 | — | — | ||||||||||||
| Forfeited | (15,972 | ) | 19.76 | — | — | |||||||||||
| Outstanding December 31, 2019 | 127,747 | $ | 29.61 | 6.41 | — | |||||||||||
| Granted | 925,000 | 2.28 | 9.78 | — | ||||||||||||
| Forfeited | (2,483 | ) | 19.50 | |||||||||||||
| Expired | (569 | ) | 348.48 | — | — | |||||||||||
| Outstanding December 31, 2020 | 1,049,695 | $ | 5.38 | 9.28 | — | |||||||||||
| Vested and expected to vest at December 31, 2020 | 1,049,695 | $ | 5.38 | 9.28 | — | |||||||||||
| Exercisable at December 31, 2020 | 282,666 | $ | 6.57 | 8.00 | — | |||||||||||
The weighted-average grant-date fair value of employee options granted during the year 2020 was $2,110,250 for 925,000 options at $2.28 per option and during year 2019 was $267,000 for 27,570 options at $9.68 per option.
Unvested stock option activity for employees:
| Number of Options | Weighted Average Exercise Price | Average Remaining Contracted Term (Years) | Aggregate Intrinsic Value | |||||||||||||
| Unvested December 31, 2018 | 100,177 | $ | 21.12 | 8.62 | — | |||||||||||
| Granted | 27,570 | 9.68 | 9.10 | — | ||||||||||||
| Vested | (59,464 | ) | 12.02 | 8.40 | — | |||||||||||
| Forfeited | — | — | — | — | ||||||||||||
| Unvested December 31, 2019 | 68,283 | $ | 23.79 | 7.48 | — | |||||||||||
| Granted | 925,000 | 2.28 | 9.78 | — | ||||||||||||
| Vested | (226,254 | ) | 3.93 | 7.53 | — | |||||||||||
| Forfeited | — | — | — | — | ||||||||||||
| Unvested December 31, 2020 | 726,209 | $ | 3.71 | 10.16 | — | |||||||||||
| F-18 |
Stock option activity for non-employees during the year:
| Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contracted Term (Years) | Aggregate Intrinsic Value | |||||||||||||
| Outstanding December 31, 2018 | 55,130 | $ | 29.92 | 5.69 | — | |||||||||||
| Granted | 11,697 | 9.68 | — | — | ||||||||||||
| Exercised | — | — | — | — | ||||||||||||
| Forfeited | (152 | ) | 151.52 | — | — | |||||||||||
| Outstanding December 31, 2019 | 66,675 | $ | 24.09 | 5.47 | — | |||||||||||
| Granted | 100,000 | 2.77 | 9.58 | — | ||||||||||||
| Exercised | — | — | — | — | ||||||||||||
| Forfeited | (142 | ) | 104.29 | — | — | |||||||||||
| Outstanding December 31, 2020 | 166,533 | $ | 11.03 | 7.54 | — | |||||||||||
| Vested and expected to vest at December 31, 2020 | 166,533 | $ | 11.03 | 7.54 | — | |||||||||||
| Exercisable at December 31, 2020 | 59,222 | $ | 5.95 | 9.15 | — | |||||||||||
The weighted-average grant-date fair value of non-employee options granted during year 2020 was $277,000 for 100,000 options at $2.77 per option and during the year 2019 was $113,000 for 11,697 options at $9.68 per option.
Unvested stock option activity for non-employees:
| Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contracted Term (Years) | Aggregate Intrinsic Value | |||||||||||||
| Unvested December 31, 2018 | 55,130 | $ | 13.64 | 5.84 | — | |||||||||||
| Granted | 11,697 | 9.68 | — | — | ||||||||||||
| Vested | — | — | — | — | ||||||||||||
| Forfeited | (152 | ) | 151.52 | — | — | |||||||||||
| Unvested December 31, 2019 | 66,675 | $ | 12.80 | 5.59 | — | |||||||||||
| Granted | 100,000 | 2.77 | 9.58 | — | ||||||||||||
| Vested | (59,364 | ) | 5.95 | — | — | |||||||||||
| Forfeited | — | — | — | — | ||||||||||||
| Unvested December 31, 2020 | 107,311 | $ | 7.24 | 6.88 | — | |||||||||||
Stock-based compensation expense was approximately $1,036,000 and $853,000 for the years ended December 31, 2020, and 2019 resulting in an increase in general and administrative expenses and loss per share of $0.03 and $0.23, respectively.
As of December 31, 2020, and 2019, there was $1,599,000 and $696,000, respectively, of unrecognized stock-based compensation cost related to options granted under the Equity Incentive Plans. Stock-based compensation related to options granted under the Equity Incentive Plans will be recorded over the vesting period which is typically one year or upon reaching agreed upon company and/or individual performance milestones being met which is indefinite.
| F-19 |
(ii) Stock Warrants
Stock warrants are issued as needed by the Board of Directors and have no formal plan.
The fair value of each warrant award is estimated on the date of grant using a Black-Scholes-Merton pricing option valuation model. Expected volatility is based on the historical volatility of the price of the Company’s stock. The risk-free interest rate is based on U.S. Treasury issues with a term equal to the expected life of the warrant. The Company uses historical data to estimate expected dividend yield, life and forfeiture rates. The expected life of the warrants was estimated based on historical option holder’s behavior and represents the period of time that options are expected to be outstanding. There were 16,907,471 granted in 2019 at $0.99 - $8.80 per warrant. No warrants were granted in 2020.
Information regarding warrants outstanding and exercisable into shares of common stock is summarized below:
| 2020 | 2019 | |||||||||||||||||||||||
| Shares | Warrant Price | Weighted Average Exercise Price | Shares | Warrant Price | Weighted Average Exercise Price | |||||||||||||||||||
| Outstanding, beginning of year | 10,201,761 | $ | .909 – 469.92 | $ | 1.54 | 325,802 | $ | 17.16-469.92 | $ | 15.84 | ||||||||||||||
| Granted | — | — | — | 16,907,471 | 0.99-8.80 | 1.23 | ||||||||||||||||||
| Forfeited | — | — | — | (930 | ) | 269.28 | 269.28 | |||||||||||||||||
| Exercised | (9,826,661 | ) | 0.90-8.80 | 0.97 | (7,030,582 | ) | 0.80-8.80 | 1.42 | ||||||||||||||||
| Outstanding, end of year | 375,100 | $ | 0.99-469.92 | $ | 116.38 | 10,201,761 | $ | 0.90 – 469.92 | $ | 1.54 | ||||||||||||||
| Exercisable | 375,100 | $ | 0.99-469.92 | $ | 116.38 | 10,201,761 | $ | 0.90 – 469.92 | $ | 1.54 | ||||||||||||||
| Weighted average remaining contractual life | 5.75 years | 6.75 years | ||||||||||||||||||||||
| Years exercisable | 2021-2024 | 2020-2024 | ||||||||||||||||||||||
Stock warrants are issued at the discretion of the Board. In 2020 there were no warrants issued and in 2019, there were 16,907,471 warrants issued at a weighted average price of $1.23. 9,826,661 warrants were exercised in 2020 and 7,030,582 were exercised in 2019.
| (8) | Segment and Related Information |
The Company operates in one segment, which performs research and development activities related to Ampligen and other drugs under development. The Company’s revenues for the two-year period ended December 31, 2020, were earned in the United States and overseas. All assets are maintained in the United States of America.
| (9) | Research, Consulting and Supply Agreements |
In 2016, the Company entered into a five-year agreement (the “Impatients Agreement”) with Impatients, N.V. (“myTomorrows”), a Netherlands based company, for the commencement and management of an EAP in Europe and Turkey (the “Territory”) related to ME/CFS. Pursuant to the agreement, myTomorrows, as the exclusive service provider and distributor in the Territory, is performing EAP activities.
Jubilant HollisterStier (Jubilant) is AIM’s authorized CMO for Ampligen for the approval in Argentina. In 2017, the Company entered into a purchase order with Jubilant pursuant to which Jubilant will manufacture batches of Ampligen® for the Company. Since the 2017 engagement of Jubilant, four lots of Ampligen consisting of more than 16,000 units have been manufactured and released in year 2018. The first lot was designated for human use in the US in the cost recovery CFS program and for expanded oncology clinical trials. The second lot has been designated for these programs in addition to commercial distribution in Argentina for the treatment of CFS. We paid Jubilant $320,000 in 2017 and $1,078,000 in 2018 for a total of $1,398,000 to date for these services. In 2019, the Company entered into a purchase order with Jubilant pursuant to which Jubilant will manufacture two additional batches of Ampligen for the Company. Two commercial size batches will be filled and finished for human use in early 2020. The company paid Jubilant $383,320 in 2019 to date for these services.
The production of additional polymer (Ampligen intermediates) took place in 2019 at the Company’s New Brunswick facility. Additionally, two lots of Ampligen were manufactured in December 2019 and January 2020 at Jubilant. The current manufactured lots of Ampligen have been fully tested and released for commercial product launch in Argentina and for clinical trials.
| F-20 |
In December 2020, AIM added Pharmaceutics International Inc. (“Pii”) as a “Fill & Finish” provider to enhance the Company’s capacity to produce the drug Ampligen. This addition amplifies AIM’s manufacturing capability by providing redundancy and cost savings. The contracts augment AIM’s existing fill and finish capacity. As agreed to in the Master Services Agreement, the terms of each of AIM’s projects with Pii will be negotiated separately and defined in individual Service Contracts.
| (10) | 401(k) Plan |
The Company has a defined contribution plan, entitled the AIM ImmunoTech Employees 401(k) Plan and Trust Agreement (the “401(k) Plan”). Full time employees of the Company are eligible to participate in the 401(k) Plan following one year of employment. Subject to certain limitations imposed by federal tax laws, participants are eligible to contribute up to 15% of their salary (including bonuses and/or commissions) per annum. Participants’ contributions to the 401(k) Plan may be matched by the Company at a rate determined annually by the Board of Directors.
Each participant immediately vests in his or her deferred salary contributions, while Company contributions will vest over one year. A 6% Company matching contribution was established, effective as of January 1, 2010 through December 31, 2015. As of January 1, 2016, the matching has been terminated. For 2020 and 2019, the Company made no contributions towards the 401(k) Plan in these years.
| (11) | Royalties, License and Employment Agreements |
The Company had contractual agreements with Named Executive Officers, exclusive of Mr. Pascale, who retired in September 2019, (“Officers”) in 2020, and 2019. The aggregate annual base compensation for these Officers under their respective contractual agreements for 2020, and 2019 was $ 850,000, and $750,000, respectively. In addition, certain of these Officers were entitled to receive performance bonuses of up to 25% or 20% of their respective annual base salary, at the sole discretion of the Compensation Committee of the Board of Directors. In 2020 and 2019, Officers’ bonuses were $913,500 and $0 respectively.
In 2020, equity was granted as a form of compensation to these Officers.
| a. | The Company granted 300,000 ten-year options to purchase common stock with exercise prices of $3.05 per share to vest in a year to Thomas K. Equels, Chief Executive Officer. | |
| b. | The Company granted 300,000 ten-year options to purchase common stock with exercise prices of $1.96 per share to vest in a year to Thomas K. Equels, Chief Executive Officer. | |
| c. | The Company granted 75,000 ten-year options to purchase common stock with exercise prices of $1.85 per share which vest in one year to Peter Rodino, Chief Operating Officer and General Counsel. | |
| d. | The Company granted 75,000 ten-year options to purchase common stock with exercise prices of $1.85 per share which vest in one year to Ellen Lintal, Chief Financial Officer. |
In 2019, equity was granted as a form of compensation to these Officers:
| a. | The Company granted 9,685 ten-year options to purchase common stock with exercise prices of $9.68 per share to vest in a year to Thomas K. Equels, Chief Executive Officer. | |
| b. | The Company granted 4,520 ten-year options to purchase common stock with exercise prices of $9.68 per share which vest in one year to Peter Rodino, Chief Operating Officer and General Counsel. | |
| c. | The Company granted to Thomas K. Equels, Chief Executive Officer, 97,500 shares of Restricted Stock Awards with an exercise price ranging from $0.40 to $0.55 per share which vest in 6 months, for 25% cut in salary. | |
| d. | The Company granted to Peter Rodino, Chief Operating Officer General Counsel, 45,500 Restricted Stock Awards with an exercise price ranging from $0.40 to $0.55 per share which vest in 6 months, for 25% cut in salary. | |
| e. | The Company granted to Ellen M. Lintal, Chief Financial Officer, 22,528 shares of Restricted Stock Awards with an exercise price ranging from $0.40 to $0.55 per share which vest in 6 months, for 25% cut in salary. |
The Company recorded stock compensation expense of approximately $433,000 and $118,000 during the years ended December 31, 2020 and 2019 respectively with regard to these issuances.
| (12) | Leases |
In February 2016, the FASB established Topic 842, Leases, by issuing ASU No. 2016-02, which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; ASU No. 2018-11, Targeted Improvements; and ASU No. 2018-20, Narrow-Scope Improvements for Lessors. The new standard establishes a right-of-use model (ROU) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.
| F-21 |
The new standard was effective for the Company on January 1, 2019, with early adoption permitted. A modified retrospective transition approach was required, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. If an entity chooses the second option, the transition requirements for existing leases also apply to leases entered into between the date of initial application and the effective date. The entity must also recast its comparative period financial statements and provide the disclosures required by the new standard for the comparative periods. The Company adopted the new standard on January 1, 2019 and used the effective date as the date of initial application.
The new standard provides several optional practical expedients in transition. The Company elected the ‘package of practical expedients’, which permits it not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. The Company elected all the new standard’s available transition practical expedients other than the use-of hindsight.
The new standard also provides practical expedients for an entity’s ongoing accounting. The Company elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, it will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition. The Company also elected the practical expedient to not separate lease and non-lease components for leases of office equipment.
This standard had a material effect on the Company’s financial statements. The most significant effect related to the recognition of new ROU assets and lease liabilities on the balance sheet for real estate and equipment operating leases and providing significant new disclosures about the Company’s leasing activities.
The Company entered into a Lease Agreement for a term of five years commencing on September 14, 2020 with Fraser Advanced Information Systems, pursuant to which the Company agreed to lease two Sharp copiers. The base of $1,415 per month.
On June 13, 2018, the Company entered into a Lease Agreement for a term of six years commencing on July 1, 2018 with SML FL Holdings LLC, pursuant to which the Company agreed to lease approximately 3,000 rentable square feet. The base rent increases by 3% each year, and ranges from $2,100 per month for the first year to $2,785 per month for the sixth year.
On May 1, 2019, the Company entered into a Lease Agreement for a term of three years commencing on May 1, 2019 with 604 Associates LLC, pursuant to which the Company agreed to lease approximately 3,000 rentable square feet. The base rent is $1,500 per month for the term of the lease.
The expected lease term includes both contractual lease periods and, when applicable, cancelable option periods when it is reasonably certain that the Company would exercise such options. The Company’s leases have remaining lease terms between 6 months and 4 years. As of December 31, 2020, the weighted-average remaining term is 1.92 years.
The Company has determined that the incremental borrowing rate is 10% as of December 31, 2020 based upon the recently completed financing transaction in December 2019.
| Year Ending December 31, | ||||
| 2021 | $ | 52 | ||
| 2022 | 48 | |||
| 2023 | 47 | |||
| 2024 | 34 | |||
| 2025 | 18 | |||
| Less imputed interest | (20 | ) | ||
| Total | $ | 179 | ||
As of December 31, 2020, the balance of the right of use assets was $179,000 and the corresponding lease liability balance was $179,000. The total rent expense for the years ended December 31, 2020 and 2019 amounted to approximately $53,000 and $59,000, respectively. The total short term rent expense for the years ended December 31, 2020 and 2019 amounted to approximately $34,000 and $23,000, respectively.
| F-22 |
| (13) | Income Taxes (FASB ASC 740 Income Taxes) |
The Company’s applies the provisions of FASB ASC 740-10 Uncertainty in Income Taxes. As a result of the implementation, there has been no material change to the Company’s tax positions as they have not paid any corporate income taxes due to operating losses. With the exception of net operating losses and research and development credits generated in New Jersey, all tax benefits will likely not be recognized due to the substantial net operating loss carryforwards which will most likely not be realized prior to expiration.
As of December 31, 2020, the Company has approximately $180.8M of Federal net operating loss carryforwards (expiring in the years 2021 through 2038) and $33.7M of Federal net operating loss with no expiration date available to offset future federal taxable income. The Company also has approximately $13.1M of New Jersey state net operating loss carryforwards (expiring in 2041) available to offset future state taxable income and net operating loss carryforwards in Belgium of approximately $2.8M with no expiration. In December 2020, the Company effectively sold $10,000,000 of its New Jersey state net operating loss carryforward for the year 2019 for approximately $1,090,000. In December 2019, the Company effectively sold $8,000,000 of its New Jersey state net operating loss carryforward for the year 2018 for approximately $776,000.
The utilization of certain state net operating loss carryforwards may be subject to annual limitations. With no tax due for the foreseeable future, the Company has determined that a policy to determine the accounting for interest or penalties related to the payment of tax is not necessary at this time.
Under the Tax Reform Act of 1986, the utilization of a corporation’s net operating loss carryforward is limited following a greater than 50% change in ownership. Due to the Company’s prior and current equity transactions, the Company’s net operating loss carryforwards may be subject to an annual limitation generally determined by multiplying the value of the Company on the date of the ownership change by the federal long-term tax-exempt rate. Any unused annual limitation may be carried forward to future years for the balance of the net operating loss carryforward period.
Deferred income taxes reflect the net tax effects of temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and the carrying amounts used for income tax purposes. In assessing the realizability of deferred tax assets, Management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. With the exception of net operating losses generated in New Jersey which can be surrendered for 80% of their values, due to the uncertainty of the Company’s ability to realize the benefit of the deferred tax asset, the remainder of our deferred tax assets are fully offset by a valuation allowance at December 31, 2020 and 2019.
The components of the net deferred tax assets and liabilities as of December 31, 2020 and 2019 consist of the following:
| (in thousands) | ||||||||
| Deferred tax assets: | December 31, | |||||||
| 2020 | 2019 | |||||||
| Net operating losses | $ | 46,648 | $ | 44,653 | ||||
| Amortization & depreciation | 150 | 150 | ||||||
| R&D credits | — | 69 | ||||||
| Stock compensation | 271 | 223 | ||||||
| Total deferred tax assets | 47,069 | 45,095 | ||||||
| Deferred tax liabilities: | ||||||||
| Research and development costs | (91 | ) | (91 | ) | ||||
| Deferred tax assets, net | 46,978 | 45,004 | ||||||
| Less: Valuation allowance | (46,346 | ) | (44,468 | ) | ||||
| Deferred tax assets, net | 632 | 536 | ||||||
| F-23 |
Deferred tax assets are included within other assets in the accompanying Consolidated Balance Sheets. The benefits of deferred tax assets are included within the gain from sale of income tax operating losses in the accompanying Consolidated Statements of Comprehensive Loss.
| (14) | Convertible Note Payable |
On September 28, 2018, the Company entered into a $3,170,000 10% Secured Convertible Promissory Note (the “IR Note”) with Iliad Research and Trading, L.P. (the “Holder”), which was issued to the Holder in conjunction with 500,000 shares of common stock (the “Origination Shares”). The Company collected $3,000,000 in cash from the Holder during September 2018 and the remainder $170,000 was retained by the Holder for the Holder’s legal fees of $20,000 for the issuance of the IR Note and the Original Issue Discount of $150,000. The Company incurred $210,000 in third-party fees directly attributed to the issuance of the IR Note. The Company promised to pay the principal amount, together with guaranteed interest at the annual rate of 10%, with principal and accrued interest on the IR Note due and payable on September 28, 2019, unless converted under terms and provisions as set forth within the IR Note. The IR Note provides the Holder with the right to convert, at any time, all or any part of the outstanding principal and accrued but unpaid interest into shares of the Company’s common stock at a conversion price of $0.30 per share. In addition, beginning on March 28, 2019, the IR Note also provides the Holder with the right to redeem all or any portion of the IR Note (“Redemption Amount”). The payments of each Redemption Amount may be made, at the option of the Company, in cash, by converting such Redemption Amount into shares of common stock (“Redemption Conversion Shares”), or a combination thereof. The number of Redemption Conversion Shares equals the portion of the applicable Redemption Amount being converted divided by the lesser of $0.30 or 80% of the lowest Volume Weighted Average Price (“VWAP”) during the ten (10) trading days immediately preceding the applicable measurement date (the “Market Price”). The Purchase Agreement requires the Company to reserve at least 8,900,000 shares of common stock from its authorized and unissued common stock to provide for all issuances of common stock under the IR Note. However, the IR Note provides that the aggregate number shares of common stock issued to the Holder under the IR Note and Purchase Agreement shall not exceed 19.99% of the total number of shares of common stock outstanding as of the closing date unless the Company has obtained stockholder approval of the issuance. The Origination Shares were to be returned to the Company in the event that the Company could provide within 30 days of the closing of the transaction certain requested assets as security for repayment of the IR Note. The security was not provided so the Origination Shares remained with the Holder.
The Company determined the IR Note should be recorded at fair value with subsequent changes in fair value recorded in earnings. This conclusion is based on the redemption conversion feature, which allows the Holder to trigger the redemption of the IR Note for cash or conversion of the IR Note for common shares prior to its maturity date at a price of the lesser of $0.30 per share or the Market Price as defined within the IR Note. The choice of cash redemption or conversion of the IR Note for common shares is at the option of the Company. This feature may require the Company to issue a variable number of common shares to settle the IR Note which was determined to have a predominantly fixed monetary value at inception.
On March 13, 2019, the Company amended the Purchase Agreement pursuant to which it issued the Convertible IR Note (the “Amendment”). The Amendment extends the maturity of the IR Note to September 28, 2020. In addition, the redemption conversion rates were revised to a price to be determined by mutual agreement between the Company and the Holder. In the event that the Company and the Holder are unable to reach a mutually agreeable price, the Company will be required to pay the applicable redemption amount in cash. The maximum amount of the IR Note the Lender will be able to redeem in any given calendar month is $300,000.
The Company evaluated the Amendment in accordance with ASC 470, Debt (“ASC 470”) and determined the Amendment is considered an extinguishment of the existing debt and issuance of net debt. As a result, the Company derecognized the liability and recorded a loss on the extinguishment of debt of $345,000 in 2019 which was equal to the difference between the reacquisition price of the debt and the net carrying amount (amount due at maturity, adjusted for unamortized discounts) of the extinguished debt. Subsequently, the amended note was recorded in accordance with ASC 480 at the fair value that the note was issued with changes in fair value recorded through earnings at each reporting period.
There were a series of debt conversions during 2019 which partially converted $1,400,000 of the $3,408,000 convertible debt, as amended, into stockholders’ equity, adding approximately $1,400,000 to stockholders’ equity. The number of shares issued in these conversions were 204,246 shares. In October 2019 and November 2019 respectively, the lender redeemed $300,000 pursuant to the terms of the modification. In connection with the IR Note, the Company recorded a gain equal to $127,000 for the year-end December 31, 2019. See Note 15: Note Payable.
| F-24 |
Interest expense associated with the IR Note was $0 for the year ended December 31, 2020, and $224,000 for the year ended December 31, 2019.
| (15) | Note Payable |
On August 5, 2019, the Company issued a Secured Promissory Note (the “CV Note”) with Chicago Venture Partners, L.P. (the “CV”). The Note has an original principal amount of $2,635,000, bears interest at a rate of 10% per annum and will mature in 24 months, unless earlier paid in accordance with its terms. The Company received proceeds of $1,900,000 after an original issue discount and payment of Lender’s legal fees. Pursuant to a Security Agreement between the Company and the Lender, repayment of the Note is secured by substantially all of our assets other than its intellectual property.
During the quarter ending June 30, 2020, the Holder made redemptions of $650,000 reducing the principal to $1,985,000. On May 29, 2020, the Company paid off the outstanding CV note consisting of principal of $1,985,000, and accrued interest payable of $220,000. The net payment of $1,795,000, less the write off of the origination discount of $369,000 and issuance costs of $6,000, resulted in a gain on extinguishment of $66,000.
Interest expense associated with the CV Note was approximately $116,000, for the year ended December 31, 2020 and was approximately $241,000, for the year ended December 31, 2019, which included approximately $127,000 associated with the amortization of applicable discounts to the CV Note.
On December 5, 2019, the Company issued a secured Promissory Note (the “AS Note”) to Atlas Sciences L.P. (“AS”). The AS Note has an original principal amount of $2,175,000, bears interest at a rate of 10% per annum and will mature in 24 months, unless earlier paid in accordance with its term. In conjunction with the AS Note, the Company utilized $1,650,000 of the net proceeds from the AS Note to pay off in full its obligation to Iliad, an entity with affiliations to AS, pursuant to the IR Note (see Note 14).
The Company evaluated the IR Note transaction in accordance with ASC 470, Debt (“ASC 470”) and determined the exchange is considered an extinguishment of the existing debt and issuance of new debt. As a result, the Company derecognized the liability and recorded a loss on the extinguishment of debt of $250,000 which was equal to the difference between the reacquisition price of the debt and the net carrying amount (amount due at maturity, adjusted for unamortized discounts) of the extinguished debt. Subsequently, the AS Note was recorded in accordance with ASC 470 whereby the Company recorded a liability equal to the proceeds received on December 5, 2019.
On June 19, 2020, the Company paid off the outstanding AS note which consisted of original principal of $2,175,000, and accrued interest payable of $122,000 less origination discount of $376,000 and issuance costs of $7,000, with a net note payable of $1,838,000, including a gain on extinguishment of $76,000.
Interest expense associated with AS Note for the period ending December 31, 2020 was $106,000, and was approximately $37,000 for the year ended December 31, 2019.
| (16) | Certain Relationships and Related Transactions |
The Company has an employment agreement with its Chief Executive Officer and has granted its executive officers and directors options and warrants to purchase its common stock. Please see details of these Employment Agreements in Note 11 - Royalties, License and Employment Agreements.
As set forth in Section 3(c)(ii) of his prior employment agreement, Mr. Equels earned $8,000 and $7,000 for 5% of the Ampligen cost recovery sales in 2020 and 2019, respectively.
| (17) | Concentrations of Credit Risk |
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash, cash equivalents, investments and accounts receivable. The Company places its cash with high-quality financial institutions and, at times, such amounts in non-interest-bearing accounts may be in excess of Federal Deposit Insurance Corporation insurance limits. There were no credit-based sales for 2020 and 2019.
| (18) | Fair Value |
The Company is required under U.S. GAAP to disclose information about the fair value of all the Company’s financial instruments, whether or not these instruments are measured at fair value on the Company’s consolidated balance sheets.
| F-25 |
The Company estimates that the fair values of cash and cash equivalents, other assets, accounts payable and accrued expenses approximate their carrying values due to the short-term maturities of these items. The Company also has certain warrants with a cash settlement feature in the occurrence of a Fundamental Transaction. The fair value of the redeemable warrants (“Warrants”) related to the Company’s August 2016, February 2017, June 2017, August 2017, April 2018, and March 2019 common stock and warrant issuance, are calculated using a Monte Carlo Simulation. While the Monte Carlo Simulation is one of a number of possible pricing models, the Company has determined it to be industry accepted and fairly presented the fair value of the Warrants. As an additional factor to determine the fair value of the Put’s liability, the occurrence probability of a Fundamental Transaction event was factored into the valuation.
The Company recomputes the fair value of the Warrants at the issuance date and the end of each quarterly reporting period. Such value computation includes subjective input assumptions that are consistently applied each period. If the Company were to alter its assumptions or the numbers input based on such assumptions, the resulting fair value could be materially different.
The Company utilized the following assumptions to estimate the fair value of the August 2016 Warrants:
| December 31, | December 31, | |||||||
| 2020 | 2019 | |||||||
| Underlying price per share | $ | 1.79 | $ | 0.54 | ||||
| Exercise price per share | $ | 82.50 | $ | 82.50 | ||||
| Risk-free interest rate | 0.09 | % | 1.58 | % | ||||
| Expected holding period | 0.67 | 1.67 | ||||||
| Expected volatility | 90 | % | 96 | % | ||||
| Expected dividend yield | — | — | ||||||
The Company utilized the following assumptions to estimate the fair value of the February 2017 Warrants:
| December 31, | December 31, | |||||||
| 2020 | 2019 | |||||||
| Underlying price per share | $ | 1.79 | $ | 0.54 | ||||
| Exercise price per share | $ | 30.25-$33.00 | $ | 30.25-$33.00 | ||||
| Risk-free interest rate | 0.12 | % | 1.6 | % | ||||
| Expected holding period | 1.58-1.60 | 2.59-2.60 | ||||||
| Expected volatility | 160 | % | 89 | % | ||||
| Expected dividend yield | — | — | ||||||
The Company utilized the following assumptions to estimate the fair value of the June 2017 Warrants:
| December 31, | December 31, | |||||||
| 2020 | 2019 | |||||||
| Underlying price per share | $ | 1.79 | $ | 0.54 | ||||
| Exercise price per share | $ | 27.50 | $ | 27.72 | ||||
| Risk-free interest rate | 0.11 | % | 1.60 | % | ||||
| Expected holding period | 1.42 | 2.42 | ||||||
| Expected volatility | 175 | % | 91 | % | ||||
| Expected dividend yield | — | — | ||||||
| F-26 |
The Company utilized the following assumptions to estimate the fair value of the August 2017 Warrants:
| December 31, | December 31, | |||||||
| 2020 | 2019 | |||||||
| Underlying price per share | $ | 1.79 | $ | 0.54 | ||||
| Exercise price per share | $ | 19.80 | $ | 19.80 | ||||
| Risk-free interest rate | 0.11 | % | 1.59 | % | ||||
| Expected holding period | 1.18 | 2.18 | ||||||
| Expected volatility | 165 | % | 94 | % | ||||
| Expected dividend yield | — | — | ||||||
The Company utilized the following assumptions to estimate the fair value of the April 2018 Warrants:
| December 31, | December 31, | |||||||
| 2020 | 2019 | |||||||
| Underlying price per share | $ | 1.79 | $ | 0.54 | ||||
| Exercise price per share | $ | 17.16 | $ | 17.16 | ||||
| Risk-free interest rate | 0.16 | % | 1.59%-1.65% | |||||
| Expected holding period | 2.81 | 0.82-3.82 | ||||||
| Expected volatility | 130 | % | 86% - 124% | |||||
| Expected dividend yield | — | — | ||||||
The Company utilized the following assumptions to estimate the fair value of the March 2019 Warrants:
| December 31, | December 31, | |||||||
| 2020 | 2019 | |||||||
| Underlying price per share | $ | 1.79 | $ | 0.54 | ||||
| Exercise price per share | $ | 8.80 | $ | 8.80 | ||||
| Risk-free interest rate | 0.19 | % | 1.66 | % | ||||
| Expected holding period | 3.19 | 4.19 | ||||||
| Expected volatility | 125 | % | 87 | % | ||||
| Expected dividend yield | — | — | ||||||
The significant assumptions using the Monte Carlo Simulation approach for valuation of the Warrants are:
| (i) | Risk-Free Interest Rate. The risk-free interest rates for the Warrants are based on U.S. Treasury constant maturities for periods commensurate with the remaining expected holding periods of the warrants. | |
| (ii) | Expected Holding Period. The expected holding period represents the period of time that the Warrants are expected to be outstanding until they are exercised. The Company utilizes the remaining contractual term of the Warrants at each valuation date as the expected holding period. | |
| (iii) | Expected Volatility. Expected stock volatility is based on daily observations of the Company’s historical stock values for a period commensurate with the remaining expected holding period on the last day of the period for which the computation is made. | |
| (iv) | Expected Dividend Yield. Expected dividend yield is based on the Company’s anticipated dividend payments over the remaining expected holding period. As the Company has never issued dividends, the expected dividend yield is 0% and this assumption will be continued in future calculations unless the Company changes its dividend policy. | |
| (v) | Expected Probability of a Fundamental Transaction. The possibility of the occurrence of a Fundamental Transaction triggering a Put right is extremely remote. As discussed above, a Put right would only arise if a Fundamental Transaction 1) is an all cash transaction; (2) results in the Company going private; or (3) is a transaction involving a person or entity not traded on a national securities exchange. The Company believes such an occurrence is highly unlikely because: |
| 1. | The Company only has one product that is FDA approved but is currently not available for commercial sales. | |
| 2. | The Company will have to perform additional clinical trials for FDA approval of its flagship product. |
| F-27 |
| 3. | Industry and market conditions continue to include a global market recession, adding risk to any transaction. | |
| 4. | Available capital for a potential buyer in a cash transaction continues to be limited. | |
| 5. | The nature of a life sciences company is heavily dependent on future funding and high fixed costs, including Research & Development. | |
| 6. | The Company has minimal revenues streams which are insufficient to meet the funding needs for the cost of operations or construction at their manufacturing facility; and | |
| 7. | The Company’s Rights Agreement and Executive Agreements make it less attractive to a potential buyer. |
With the above factors utilized in analysis of the likelihood of the Put’s potential Liability, the Company estimated the range of probabilities related to a Put right being triggered as:
| Range of Probability | Probability | |||
| Low | 0.5 | % | ||
| Medium | 1.0 | % | ||
| High | 5.0 | % | ||
The Monte Carlo Simulation has incorporated a 5.0% probability of a Fundamental Transaction to date for the life of the securities.
| (vi) | Expected Timing of Announcement of a Fundamental Transaction. As the Company has no specific expectation of a Fundamental Transaction, for reasons elucidated above, the Company utilized a discrete uniform probability distribution over the Expected Holding Period to model in the potential announcement of a Fundamental Transaction occurring during the Expected Holding Period. | |
| (vii) | Expected 100 Day Volatility at Announcement of a Fundamental Transaction. An estimate of future volatility is necessary as there is no mechanism for directly measuring future stock price movements. Daily observations of the Company’s historical stock values for the 100 days immediately prior to the Warrants’ grant dates, with a floor of 100%, were utilized as a proxy for the future volatility. | |
| (viii) | Expected Risk-Free Interest Rate at Announcement of a Fundamental Transaction. The Company utilized a risk-free interest rate corresponding to the forward U.S. Treasury rate for the period equal to the time between the date forecast for the public announcement of a Fundamental Transaction and the Warrant expiration date for each simulation. | |
| (ix) | Expected Time Between Announcement and Consummation of a Fundamental Transaction. The expected time between the announcement and the consummation of a Fundamental Transaction is based on the Company’s experience with the due diligence process performed by acquirers and is estimated to be six months. The Monte Carlo Simulation approach incorporates this additional period to reflect the delay Warrant Holders would experience in receiving the proceeds of the Put. |
While the assumptions remain consistent from period to period (e.g., utilizing historical stock prices), the numbers input change from period to period (e.g., the actual historical prices input for the relevant period). The carrying amount and estimated fair value of the above Warrants was approximately $180,000 and $57,000 at December 31, 2020 and 2019, respectively.
The Company applies FASB ASC 820 (formerly Statement No. 157 Fair Value Measurements) that defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. The guidance does not impose any new requirements around which assets and liabilities are to be measured at fair value, and instead applies to asset and liability balances required or permitted to be measured at fair value under existing accounting pronouncements. The Company measures its warrant liability for those warrants with a cash settlement feature at fair value.
FASB ASC 820-10-35-37 (formerly SFAS No. 157) establishes a valuation hierarchy based on the transparency of inputs used in the valuation of an asset or liability. Classification is based on the lowest level of inputs that is significant to the fair value measurement. The valuation hierarchy contains three levels:
| ● | Level 1 – Quoted prices are available in active markets for identical assets or liabilities at the reporting date. Generally, this includes debt and equity securities that are traded in an active market. | |
| ● | Level 2 – Observable inputs other than Level 1 prices such as quote prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Generally, this includes debt and equity securities that are not traded in an active market. |
| F-28 |
| ● | Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or other valuation techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. As of December 2020, the Company has classified the warrants with cash settlement features and a convertible note payable as Level 3. Management evaluates a variety of inputs and then estimates fair value based on those inputs. As discussed above, the Company utilized the Monte Carlo Simulation Model in valuing the warrants and the convertible note. |
The table below presents the balances of assets and liabilities measured at fair value on a recurring basis by level within the hierarchy as:
| (in thousands) As of December 31, 2020 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| Assets: | ||||||||||||||||
| Marketable securities | $ | 15,877 | $ | 15,877 | $ | — | $ | — | ||||||||
| Liabilities: | ||||||||||||||||
| Redeemable warrants | $ | 180 | — | — | $ | 180 | ||||||||||
| (in thousands) As of December 31, 2019 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| Assets: | ||||||||||||||||
| Marketable securities | $ | 7,308 | $ | 7,308 | $ | — | $ | — | ||||||||
| Liabilities: | ||||||||||||||||
| Redeemable warrant | $ | 57 | — | — | $ | 57 | ||||||||||
The changes in Level 3 Liabilities measured at fair value on a recurring basis are summarized as follows (in thousands):
| Redeemable warrants: | ||||
| Balance at December 31, 2019 | $ | 57 | ||
| Fair value adjustments | 123 | |||
| Balance at December 31, 2020 | $ | 180 |
| (19) | Financing Obligation Arising from Sale Leaseback Transaction |
On March 16, 2018, the Company sold land and a building for $4,080,000 and concurrently entered into an agreement to lease the property back for ten years at $408,000 per year for two years through March 31, 2020. The lease payments will increase 2.5% per year for the next three years through March 31, 2023 and the lease payments will increase 3% for the remaining five years through March 31, 2028. The sale of the property includes an option to repurchase the property at fair value which does not permanently transfer all the risks and rewards of ownership to the buyer. The option to repurchase the property also would be at a higher price than the sales price and is considered likely based upon the Company’s plans going forward. Because the sale of the property includes the option to repurchase the property and includes the above attributes, the transaction was accounted for as a financing transaction whereby the Company debited cash for the amount of cash received and credited financing obligation. The Company will continue to report the property as an asset and the property will continue to be depreciated. If the option is exercised, the cash payment by the seller-lessee is to pay off the financing obligation. As part of the sale of this building, warrants were provided to the buyer for the purchase of up to 3,225,806 shares of Company common stock for a period of five years at an exercise price of $0.3875 per share, 125% of the closing price of the common stock on the NYSE American on the date of execution of the letter of intent for the purchase. The warrants cannot be exercised to the extent that any exercise would result in the purchaser owning in excess of 4.99% of the Company’s issued and outstanding shares of common stock.
The Property and equipment in “Note 7 Stockholders’ Equity” above are the property and equipment involved in this transaction. Depreciation on the building will continue until a sale has been recognized.
Future minimum payments required under the Financing Obligation and the balance of the Finance Obligation as of December 31, 2020, are as follows:
| During the Year: | (amount in thousands) | |||
| 2021 | $ | 426 | ||
| 2022 | 437 | |||
| 2023 | 449 | |||
| 2024 | 463 | |||
| 2025 | 477 | |||
| Thereafter | 1,091 | |||
| Total of Payments | $ | 3,343 | ||
| Less Deferred Issuance Costs | (192 | ) | ||
| Less Discount on Debt Instrument | (824 | ) | ||
| Less Imputed Interest | (221 | ) | ||
| Total Balance | $ | 2,106 | ||
| Less Current Portion | (230 | ) | ||
| Long Term Portion | $ | 1,876 | ||
Interest expense relating to this financing agreement was $61,000 for the year ended December 31, 2020 an $67,000 for the year ended December 31, 2019.
| F-29 |
| (20) | Subsequent Events |
In January 2021, the Company entered into a sponsorship agreement with the Centre for Human Drug Research (“CHDR”) for a proposed clinical study on the safety of the Company’s drug Ampligen as an intranasal therapy. CHDR, an independent institute located in Leiden in the Netherlands, will conduct and manage the proposed clinical study, titled “A Phase I, Randomized, Double-Blind, Placebo-Controlled Study to Evaluate the Safety and Activity of Repeated Intranasal Administration of Ampligen (Poly I:Poly C12U) in Healthy Subjects.” The Company is funding the clinical study at a cost of approximately $980,000.
In February 2021, the Company completed its At-The-Market (ATM) facility and closed the ATM’s Equity Distribution Agreement (EDA) with Maxim Group LLC.
In February 2021, the Company received formal notification from the European Commission (“EC”) that the European Medicines Agency (“EMA”) has designated Ampligen as an Orphan Medicinal Product (“OMP”) for treatment of pancreatic cancer. Medications that have an OMP designation by the EMA, once commercially approved in the European Union (“EU”), receive benefits including up to ten years of protection from market competition from similar medicines with similar active component and indication for use that are not shown to be clinically superior.
In March 2021, the Company entered into employment agreements with Peter Rodino and Ellen Lintal. The agreements run for three years and one year, respectively. Compensation is divided into both short- and long-term compensation. Short term (cash) compensation will consist of a base salary of $425,000 and $350,000, respectively. Mr. Rodino and Ms. Lintal will be awarded a year-end target bonus based on performance and goals established by the Compensation Committee. Long term compensation will be provided by 100,000 non-qualified yearly stock options with one-year vesting commencing on November 30, 2021. In addition, Mr. Rodino and Ms. Lintal shall each be entitled to awards (“Event Awards”) equal to 1% of the “Gross Proceeds” from specific events such as licensing agreements or “therapeutic indication” (each, an “Event”). Gross Proceeds means those cash amounts paid to the Company by the other parties for licensing agreements, therapeutic acquisitions or any other one time cash generating event. Therapeutic indications are for example target organ specific pathologically defined cancer indications, vaccine enhancers, broad spectrum antiviral indications, or medical entities associated with persistent severe fatigue. Mr. Rodino and Ms. Lintal also will each be entitled to an award (an “Acquisition Award”) equal to 1% of the Gross Proceeds, upon the sale of the Company or substantially all of its assets (an “Acquisition”). An Event Award or Acquisition Award shall be paid in cash within 90 days of our receipt of the Gross Proceeds.
| F-30 |
Exhibit 4.23
Description of Common Stock
The following summary description of the common stock of AIM ImmunoTech Inc. (“we”, “our” or “us”) is based on the provisions of our amended and restated certificate of incorporation as amended (“Certificate of Incorporation”), as well as our amended and restated bylaws (“Bylaws”), and the applicable provisions of the Delaware General Corporation Law. This information is qualified entirely by reference to the applicable provisions of our Certificate of Incorporation, Bylaws, and the Delaware General Corporation Law. Our Certificate of Incorporation and Bylaws have previously been filed as exhibits with the Securities and Exchange Commission.
Voting Rights
Holders of our common stock are entitled to one vote per share in the election of directors and on all other matters on which stockholders are entitled or permitted to vote. Holders of our common stock are not entitled to cumulative voting rights.
Dividend Rights
Subject to the terms of any then outstanding series of preferred stock, the holders of our common stock are entitled to dividends in the amounts and at times as may be declared by our board of directors out of funds legally available therefor.
Liquidation Rights
Upon liquidation or dissolution, holders of our common stock are entitled to share ratably in all net assets available, if any, for distribution to stockholders after we have paid, or provided for payment of, all of our debts and liabilities, and after payment of any liquidation preferences to holders of any then outstanding shares of preferred stock.
Other Matters
Holders of our common stock have no redemption, conversion or preemptive rights. There are no sinking fund provisions applicable to our common stock. The rights, preferences and privileges of the holders of our common stock are subject to the rights of the holders of shares of any series of preferred stock that we may issue in the future.
All of our outstanding shares of common stock are fully paid and nonassessable.
Anti-Takeover Effects of Provisions of Delaware Law, Our Certificate of Incorporation,
Our Bylaws and Our Stockholders’ Rights Plan
Delaware Anti-Takeover Law
Section 203 of the Delaware General Corporation Law
We are subject to Section 203 of the Delaware General Corporation Law, which prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years after the date that such stockholder became an interested stockholder, with the following exceptions:
| ● | before such date, our board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; | |
| ● | upon completion of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction began, excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) those shares owned (i) by persons who are directors and also officers and (ii) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or | |
| ● | on or after such date, the business combination is approved by our board of directors and authorized at an annual or special meeting of the stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock that is not owned by the interested stockholder. | |
| In general, Section 203 defines business combination to include the following: | ||
| ● | any merger or consolidation involving the corporation and the interested stockholder; | |
| ● | any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder; | |
| ● | subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder; | |
| ● | any transaction involving the corporation that has the effect of increasing the proportionate share of the stock or any class or series of the corporation beneficially owned by the interested stockholder; or | |
| ● | the receipt by the interested stockholder of the benefit of any loss, advances, guarantees, pledges or other financial benefits by or through the corporation. |
In general, Section 203 defines an “interested stockholder” as an entity or person who, together with the person’s affiliates and associates, beneficially owns, or within three years before the time of determination of interested stockholder status did own, 15% or more of the outstanding voting stock of the corporation.
Certificate of Incorporation and Bylaws
Our certificate of incorporation and/or bylaws provide that:
| ● | our bylaws may be amended or repealed by our board of directors or our stockholders; | |
| ● | our board of directors will be authorized to issue, without stockholder approval, preferred stock, the rights of which will be determined at the discretion of our board of directors and that, if issued, could operate as a “poison pill” to dilute the stock ownership of a potential hostile acquirer to prevent an acquisition that our board of directors does not approve; | |
| ● | our stockholders do not have cumulative voting rights, and therefore our stockholders holding a majority of the shares of common stock outstanding will be able to elect all of our directors; and | |
| ● | our stockholders must comply with advance notice provisions to bring business before or nominate directors for election at a stockholder meeting. |
Stockholder Rights Plan
On November 19, 2002, our board of directors declared a dividend distribution of one Right (a “Right”) for each outstanding share of common stock to stockholders of record at the close of business on November 29, 2002. On November 14, 2017, at the direction of our board of directors, we amended and restated our Rights Agreement with American Stock Transfer & Trust Company, LLC, as amended and restated, or the Rights Agreement. Each Right entitles the registered holder to purchase from us a unit consisting of one one-hundredth of a share, or a Unit, of Series A Junior Participating Preferred Stock, par value $0.01 per share, or the Series A Preferred Stock, at a Purchase Price of $21.00 per Unit, subject to adjustment. The description and terms of the Rights are set forth in the Rights Agreement. The foregoing description of the Rights and the Rights Agreement are qualified in their entire by reference to the disclosure in our Registration Statement on Form 8-A12B (No. 0-27072) and the Rights Agreement filed therewith, filed with the SEC on November 14, 2017, with such filing and exhibit being herein incorporated by reference.
Potential Effects of Authorized but Unissued Stock
We have shares of common stock and preferred stock available for future issuance without stockholder approval. We may utilize these additional shares for a variety of corporate purposes, including future public offerings to raise additional capital, to facilitate corporate acquisitions or payment as a dividend on the capital stock.
The existence of unissued and unreserved common stock and preferred stock may enable our board of directors to issue shares to persons friendly to current management or to issue preferred stock with terms that could render more difficult or discourage a third-party attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise, thereby protecting the continuity of our management. In addition, our board of directors has the discretion to determine designations, rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences of each series of preferred stock, all to the fullest extent permissible under the Delaware General Corporation Law and subject to any limitations set forth in our certificate of incorporation. The purpose of authorizing our board of directors to issue preferred stock and to determine the rights and preferences applicable to such preferred stock is to eliminate delays associated with a stockholder vote on specific issuances. The issuance of preferred stock, while providing desirable flexibility in connection with possible financings, acquisitions and other corporate purposes, could have the effect of making it more difficult for a third-party to acquire, or could discourage a third-party from acquiring, a majority of our outstanding voting stock.
Exhibit 10.75
EXPLANATORY NOTE: [***] INDICATES THE PORTION OF THIS EXHIBIT
THAT HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND
(II) WOULD BE COMPETITIVELY HARMFUL IN PUBLICLY DISCLOSED.
Victoria Scott, Director of Quality & Regulatory Affairs
2117 SW Highway 484
Ocala, FL 34473
Corporate Phone: (352) 448-7797
Corporate Fax: (352)480-4620
Email: Victoria.Scott@AIMimmuno.com
Submitted By:
Pharmaceutics International, Inc. (Pii)
Kevin Kelly, Head of Sales
10819 Gilroy Road
Hunt Valley, MD 21031
Corporate Phone: (410) 584-0001
Mobile: (610) 349-3745
Corporate Fax: (410) 527-0525
Email: kkelly@pharm-int.com
Project Number 27AIM01
EXPLANATORY NOTE: [***] INDICATES THE PORTION OF THIS EXHIBIT
THAT HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND
(II) WOULD BE COMPETITIVELY HARMFUL IN PUBLICLY DISCLOSED.
Executive Summary
Introduction:
Pharmaceutics International, Inc. (Pii) is a solutions-oriented, science-driven Contract Development and Manufacturing Organization (CDMO), with over 25 years of proven success in providing dosage form development and cGMP manufacturing services to the global biopharmaceutical industry. Through continuous Investment and Innovation, Pii strives to be the preferred partner of choice for both injectable and oral delivery drug products. Providing outstanding service and value, combined with our experience and relevant expertise, makes Pii uniquely qualified to support product success for our partners.
Pii Delivers Strong Value to its Partners:
A Sustainable Business Partner:
| ● | Over 25 years of product development, regulatory approval and commercial production success | |
| ● | Foundation in Pharmaceutics Know-How, applied to all programs and products | |
| ● | Broad partner base ranging from virtual and emerging Pharma to multi-national organizations | |
| ● | Continued capital investments ($125M since 2016) with planned facility expansions |
Compelling Facilities:
| ● | Over 360,000 square feet of state-of-the-art product development and cGMP manufacturing space | |
| ● | Containment suites for handling high potency compounds and hormones | |
| ● | Formulation development center-of-excellence and fully-equipped analytical laboratories – all service offerings located in Hunt Valley, MD | |
| ● | Registered with the DEA for Schedule I-V Controlled Substances |
Compliant Quality Systems & Processes:
| ● | Ongoing investments & improvements toward the highest quality & compliance standards | |
| ● | FDA, MHRA, EMA inspected facilities with 11 new product approvals since 2017 | |
| ● | Audit history with Regulatory Agencies and Partners |
Science & Innovation Driven:
| ● | Highly skilled team of seasoned industry leaders | |
| ● | Unparalleled depth of scientific training, project management and enterprise-wide experience brought to every program and partner | |
| ● | Solutions provider with an unwavering commitment to exceeding every partners’ expectations |
Flexible & Reliable:
| ● | Product development tailored to the characteristics of the API and partners’ objectives | |
| ● | Project timelines driven by agreed upon milestones and development strategies | |
| ● | Demonstrated speed to Clinic as well as sustainable Commercial supply |
27AIM01.01 | December 22, 2020 | Page 2 of 27 |
| CONFIDENTIAL |
Primary Contacts
| Name | Title | Phone Number | Email Address | |||
| Kevin Kelly | Head of Sales | [***] | [***] | |||
| Devan Patel | Sr. Director, Project Management | [***] | [***] | |||
| Trish Petty | Accounts Receivable Billing/Collections Specialist | [***] | [***] |
27AIM01.01 | December 22, 2020 | Page 3 of 27 |
| CONFIDENTIAL |
This proposal is comprised of three sections, which together are this “Agreement”:
| I. | Project Definition and Scope |
| II. | Timing and Project Initiation |
| III. | Costs |
| IV. | Legal and Signatures |
Quotation is valid for thirty (30) days
I. Project Definition and Scope
AIM ImmunoTech Inc., (“Client” or “Customer”) requests Pharmaceutics International, Inc., (“Pii”) to perform technical transfer supporting cGMP manufacturing services of Ampligen (Rintatolimod) Sterile Solution 2.5mg/mL for AIM ImmunoTech, Inc.
Indication: Severely debilitated patients with chronic fatigue syndrome (cfs)
Intended Country of Distribution: United States
“Product” in this Agreement refers to “Ampligen (Rintatolimod) Sterile Solution 2.5mg/mL”
Active Pharmaceutical Ingredient (“API”) refers to “Rintatolimod”
API Handling: Store at “-20°C”
Finished Product Handling: Store at “Store at 2-8°C”
| 1. | Environmental Health and Safety (EH&S) Assessment |
| 1.1 | Pii will conduct an environmental health and safety (EH&S) assessment. If a certifiable toxicologist report that includes both Occupational Exposure Limit (OEL) and Acceptable Daily Exposure (ADE) values cannot be provided by AIM ImmunoTech Inc., then an outside toxicologist will assess the API and calculate both an OEL and ADE value. The OEL value will be used to assess the level of containment needed to safely manufacture the Product, per Pii’s SOP. The ADE value, will be used to calculate an acceptable residual limit per Pii’s SOP for cleaning and to evaluate potential for cross-contamination. |
27AIM01.01 | December 22, 2020 | Page 4 of 27 |
| CONFIDENTIAL |
| 2. | Materials
Intended Country of Distribution: United States |
| 2.1 | AIM ImmunoTech Inc. will supply: |
| ● | Background Summary | |
| ● | API with Certificate of Analysis (“C of A”), Safety Data Sheet (“SDS”), Bovine Spongiform Encephalopathy/Transmissible Spongiform Encephalopathy Statement (“BSE/TSE”), Melamine statement and all other supporting documentation available | |
| ● | The cost of API | |
| Poly I is $[***] per gram | ||
| Poly C12U is $[***] per gram | ||
| ● | Analytical Methods | |
| ● | Reference standard and impurities | |
| ● | Drug product technical data package if any | |
| ● | API DMF and/or technical data package from the manufacturer or the Client, if any | |
| ● | Safety Information: Investigator's Brochure or Summaries of Pre-clinical safety/activity data, where available, including: |
| ○ | Safety Pharmacology Studies | |
| ○ | Mutagenicity Studies (e.g. AMES test | |
| ○ | Non-GLP and/or GLP acute and sub-chronic/chronic toxicity trials in any | |
| ○ | Pharmacology Summary | |
| ○ | Teratogenicity Studies |
| ● | The above information will be used to determine allowable residual carryover limits used in cleaning validation and to determine the appropriate level of containment and personal protection equipment (PPE) required. |
| 2.2 | Pii will order and invoice to AIM ImmunoTech Inc.: (Reference under Cost Sections) |
| ● | API (If requested by AIM ImmunoTech Inc.) | |
| ● | Excipients | |
| ● | Packaging Components | |
| ● | Analytical Columns | |
| ● | Tooling, Change Parts (if required) | |
| ● | Capital Equipment (if needed with AIM ImmunoTech Inc.'s authorization) | |
| ● | Personal Protective Equipment (if required) | |
| ● | Disposables |
27AIM01.01 | December 22, 2020 | Page 5 of 27 |
| CONFIDENTIAL |
| 2.3 | API - Pii will receive with manufacturer’s Certificate of Analysis (C of A) and will release from vendor CoA for use in R&D Lab Batch(es). Pii will perform Full Release per approved specification for use in cGMP batch(es). | |
| 2.4 | Excipients - Pii will receive with manufacturer’s Certificate of Analysis (C of A) and will release from vendor CoA for use in R&D Lab Batch(es). Pii will perform Full Release per approved specification for use in cGMP batch(es). | |
| 2.5 | Packaging - Pii will receive with manufacturer’s Certificate of Analysis (C of A) and will release from vendor CoA for use in R&D Lab Batch(es). Pii will perform Full Release per approved specification for use in cGMP batch(es).
Any item or service (e.g. API, excipient, analytical testing) specified by AIM ImmunoTech Inc. that differs from Pii's provider, requires a GMP evaluation by AIM ImmunoTech Inc., that the supplier of the item or service has been found to be in substantial compliance with the applicable national regulations (e.g. US, EU, JP). If applicable, the Pii Master Quality Agreement will elaborate further on this and other "Quality Agreement" requirements. |
| 3. | Analytical Support |
| 3.1 | Evaluation of each test in regards to validation requirements: Pii will review analytical methods proposed and conduct an evaluation to assess the levels and types of validation that are phase appropriate for the new drug product for each test required. This assures compliance with regulatory guidance depending on the phase of research. AIM ImmunoTech Inc. needs to allow for four to five weeks at the initiation of the project for analytical methods evaluation. | |
| 3.2 | Cleaning Method: Pii will develop an analytical method to evaluate the effectiveness of the cleaning procedure and perform validation of the analytical method. This includes recovery studies from materials similar to the surfaces of cGMP equipment that is to be used for this program. | |
| 3.3 | API Methods: Pii will review the manufacturer’s C of A and methods. Pii will perform ID and Micro only on the incoming Drug substance/Polymers based on package received from AIM ImmunoTech Inc.: |
| ● | Microbial enumeration (USP 61) | |
| ● | Bacterial Endotoxin | |
| ● | ID by UV |
27AIM01.01 | December 22, 2020 | Page 6 of 27 |
| CONFIDENTIAL |
| 3.4 | Drug Product Methods: Pii will perform Method Transfer (where applicable), and will perform USP Method Verification(where applicable) of the following methods: |
| ● | Bacterial Endotoxin | |
| ● | Sterility |
| USP testing is expected to be conducted for these tests. Any product specific testing or compendial testing outside of USP will require additional development and testing procedures. |
| 3.5 | Analytical Method: perform ID and Micro Only Protocols for the drug product will be prepared by Pii and approved by AIM ImmunoTech Inc. if required. | |
| 3.6 | Method Transfer |
| ● | Method Transfer Pre-requisite: |
| ○ | Method has been established | |
| ○ | Method has been validated | |
| ○ | Validation report/package is available for review | |
| ○ | Method transfer process will be supported by the laboratory where the method had been established. Method precision samples will be tested concurrently by Pii and this laboratory. |
| 4. | Technical Transfer/Process Development Number of Primary Prototype(s): 1 experiment |
| 4.1 | Pii will review the technical data package supplied by AIM ImmunoTech Inc. and will develop a plan outlining the process development | |
| 4.2 | Pii will develop formulation(s) based on the agreed-to Formulation Development Plan. | |
| 4.3 | Pii will perform: |
| ● | Cleaning activities/requirements to support a Quality Risk Management Plan (QRMP) to ensure cross contamination controls are in place for cGMP production. |
| 4.4 | Based upon the data generated, Pii and AIM ImmunoTech Inc. will make a decision on how to proceed on the formulation and process. |
27AIM01.01 | December 22, 2020 | Page 7 of 27 |
| CONFIDENTIAL |
| 5. | (OPTIONAL) Manufacture of Technical Transfer Batch Strengths: 2.5mg/mL Theoretical Batch Size: up to 750L No. Batches: 1 |
| 5.1 | Pii will manufacture 1 technical transfer batch. | |
| 5.2 | Material Testing Requirements: See Section 2. | |
| 5.3 | All manufacturing activities will be recorded in a batch record. | |
| 5.4 | Pii will use equipment train based on the proposed process from Section 6. | |
| 5.5 | Pii will perform the following in-process tests: |
| ● | Density | |
| ● | Bioburden | |
| ● | Osmolality | |
| ● | UV |
| 5.6 | Pii will perform the following finished product tests: |
| ● | Bacterial Endotoxin | |
| ● | Sterility |
| 5.7 | Based upon the data generated, Pii and AIM ImmunoTech Inc. will mutually agree on how to proceed. |
| 6. | Manufacture of Submission Batches Strength: 2.5mg/mL Theoretical Batch Size: up to 750L No. Batches: 3 |
| 6.1 | All materials used for the manufacture of the batches will be fully released by Pii unless otherwise specified by AIM ImmunoTech Inc.. See Materials: Section 2. | |
| 6.2 | Pii will prepare master production records (MPR) based on the experience of manufacturing the batch(es). The batch records will be approved by AIM ImmunoTech Inc. at least one (1) week prior to the manufacture. | |
| 6.3 | The batches will be manufactured under cGMP conditions as directed in the production records. | |
| 6.4 | Pii will perform the following in-process tests on the active batches: |
| ● | Density | |
| ● | Bioburden |
| 6.5 | Pii will perform the following finished product tests or as per the specifications: |
| ● | Bacterial Endotoxin | |
| ● | Sterility |
27AIM01.01 | December 22, 2020 | Page 8 of 27 |
| CONFIDENTIAL |
EXPLANATORY NOTE: [***] INDICATES THE PORTION OF THIS EXHIBIT
THAT HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND
(II) WOULD BE COMPETITIVELY HARMFUL IN PUBLICLY DISCLOSED.
| 7. | Stability Program for Submission Batches No. Stability Protocols: 6 protocols [3 batches x 2 configurations] [Upright and Inverted] |
| 7.1 | Stability of the Active Packaged Product: |
| ● | Pii will prepare a protocol for each batch & configuration, which will be approved by the Client. The stability program is to be initiated as soon as the batch(es) are manufactured, primary/secondary packaged and each protocol is signed. If additional points are needed, they will be billed at the point charge rate. | |
| ● | Sufficient samples will be placed on stability to meet the stability protocol requirements. The stability protocols will include the following conditions and time point(s): |
| Conditions | Initial * | 6 month | 12 month | 18 month | 24 month | 30 month | 36 month | 42 month | 48 month | 54 month | 60 month |
| [***] |
m |
m | m | m | m | m | m | m | m | m | m |
| [***] | m | m |
| x – Test (Inverted/Upright) m – Microbial |
| * Release data will be used at initial time if stability is initiated within one (1) month from manufacture |
| The following tests will be performed on the batch(es), if not specified in the approved protocol otherwise: |
| ● | Bacterial Endotoxin | |
| ● | Sterility |
27AIM01.01 | December 22, 2020 | Page 9 of 27 |
| CONFIDENTIAL |
| 8. | (OPTIONAL) Process Validation Studies |
| 8.1 | Pii will prepare validation protocols, based on the engineering batch, which will be reviewed and approved by Eagle Pharmaceuticals, Inc. prior to beginning the validation batches. |
| ■ | Process Validation Protocol will be generated to assess the following: |
| ○ | Manufacturing process validation | |
| ○ | Mixing Study |
| ■ | Evaluating the in-process tests/CQA’s |
| ○ | In-Process testing as per the Batch Record | |
| ○ | In-Process checks for sterility, assay, and impurities for beginning, middle, and end samples for a total of 3 samples. | |
| ○ | Filtration |
| ■ | Filter Flush Studies (if not previously performed) |
| ● | Evaluate particulate matter, moisture content, assay, impurities for up to 3 samples of appropriate flush volume |
| ○ | Sample evaluation for filtration step (assumes filter assembly change out) for beginning, middle, and end samples for a total of 3 samples. | |
| ○ | Finished Product Testing |
| 9. | Project Management |
| 9.1 | The project kickoff meeting is the first opportunity for AIM ImmunoTech Inc. and Pii to perform a detailed review of all of the items required in making the project successful. In our experience, many clients make scope adjustments at this point of the project. It is for this reason that all quotations and project timelines communicated by Pii to AIM ImmunoTech Inc. are subject to revision until the project scope is finalized during the project kickoff meeting. | |
| 9.2 | Pii runs each project through project teams. This method has a proven record of success. The personnel selected as team representatives will have a direct impact on the level of success of the project. AIM ImmunoTech Inc. and Pii are responsible for selecting the appropriate personnel to represent each company. Expectations of members will include team and meeting participation, knowledge of the project and plan, maintaining open communication with other team members, following up on requests of the team, and building a positive working relationship between companies. Additionally, in order to maintain effective communication once a project has been initiated, Pii requests that all AIM ImmunoTech Inc. project inquiries be communicated through the Pii project leader. |
27AIM01.01 | December 22, 2020 | Page 10 of 27 |
| CONFIDENTIAL |
| ● | Initiation of signed Agreement |
| ○ | Business Development Kick-Off | |
| ○ | Review Agreement | |
| ○ | Background information from Business Manager | |
| ○ | Additional requirements |
| ● | Internal Pii Kick-Off meeting |
| ○ | Functional Team Members identified | |
| ○ | Review Agreement | |
| ○ | Assemble needs/concerns |
| ● | Kick-Off Meeting with AIM ImmunoTech Inc. |
| ○ | Review Agreement | |
| ○ | Agenda driven | |
| ○ | High-level timeline presented | |
| ○ | Agree to communication strategy | |
| ○ | Agree to timeline/schedule |
| ● | Ongoing Project Management |
| ○ | Agree to regular project meetings |
| ■ | Agendas | |
| ■ | Timelines | |
| ■ | Meeting notes |
| ○ | On-going monitoring/reporting | |
| ○ | Billing/review & sign off on invoices | |
| ○ | Initiate stability protocols |
| 9.3 | Provided that there are ongoing billable activities taking place (excluding stability), Pii will provide Project Management support to monitor the progress of the project against established timelines and will provide AIM ImmunoTech Inc. with updates. The Project Manager will coordinate with Pii’s project team and AIM ImmunoTech Inc. and commit up to two 45 minute teleconference meetings per month. The fee for Project Management is included in Section II: Cost. |
27AIM01.01 | December 22, 2020 | Page 11 of 27 |
| CONFIDENTIAL |
| 10. | General Support |
| 10.1 | cGMP batch records will be prepared by Pii and approved by AIM ImmunoTech Inc. QA. Changes to the batch record(s) one (1) week prior to manufacturing could lead to additional charges. | |
| 10.2 | Pii Quality Assurance department will audit and ensure cGMP compliance for the manufacturing of the batches. | |
| 10.3 | Waste from the manufacturing process will be incinerated. Any unused excipients will be destroyed after expiry date, as it arises. | |
| 10.4 | Pii will prepare necessary supporting CMC documentation for NDA submission using standard Pii report protocols. | |
| 10.5 | Support for FDA deficiency letter responses and/or information requests will be charged at $[***]/hour. This may involve personnel from QA, technical operations, project management and/or executive oversight for these functions. Deficiency letter items may include revisions of test methods, drug substance specifications and drug product specifications, batch records, and technical writing support. | |
| 10.6 | Dedicated excipients and packaging components will be destroyed or shipped back to AIM ImmunoTech with prior authorization, three (3) months after completion of the manufacturing campaign(i.e., after completion of all 3 registration batches) . AIM ImmunoTech Inc. will be charged an incineration fee of $[***] per pallet for the destruction of materials. If however, AIM ImmunoTech Inc. elects to collect materials from Pii a $500 charge will apply. | |
| 10.7 | If AIM ImmunoTech Inc. elects for Pii to store finished product longer than three (3) months then there will be a storage charge of $[***]per month per pallet. |
| II. | Timing and Project Initiation: |
The project will commence upon receipt of the signed Agreement, the drug substance, and the initiation payment, thereafter payments are due thirty (30) days from the date of invoice. Unpaid balances shall bear interest at a rate of 18% per annum unless determined not to be properly payable.
A timeline will be provided once the Agreement is signed and the project kick-off meeting has been completed between Pii and the AIM ImmunoTech Inc..
27AIM01.01 | December 22, 2020 | Page 12 of 27 |
| CONFIDENTIAL |
| III. | Cost: |
The cost table below lists the cost of each step of the program. If Pii and the AIM ImmunoTech Inc. mutually agree that any scope changes or additional work is required, these additional activities will be covered under separate change order.
| Cost Table Estimates | |||
| Pii Activity | Estimates | Subtotal | |
| 1. | EH&S Assessment | ||
| ● Environmental Health and Safety (EH&S) Assessment and QRMP | $[***] | $[***] | |
| 2. | Analytical Support | ||
| ● Cleaning – Develop and Validate | $[***] | $[***] | |
● Risk Assessment of Analytical Methods i) Review Validation Report ● API Methods – Perform ID and Micro Testing only on the API’s per section 3.3 ● Drug Product Methods – Method Transfer and USP qualification per section 3.4 |
$[***] | ||
● Documentation - Prepare Analytical Method Protocols - Reports (as required) - Methods/Specifications/SOP | |||
| 3. | Materials (Estimate – Actuals will be billed) | ||
API: ● Full release testing will be charged at $12,000 / lot ● ID release at $3,500 / lot ● Assumes the two polymers (APIs) will require ID and Micro only. Assumes only 3 lot of each drug substance. Assuming 3 lots of each drug substance x 2 APIs(polymers) x $3,500/lot =$21,000 |
$[***]
|
*Section 3 is an estimate of material testing costs only. Actuals will be invoiced based upon usage or program specific materials being tested. | |
Excipients: ● USP/NF and EP/JP full release testing will be charged at $8,500 / lot ● PII will use stock excipients where applicable and may opt to charge on a per kg basis ● Assumes use of 4 excipients with 1 lot only being full tested: Sodium Phosphate Dibasic-7-Hydrate, Sodium Phosphate Monobasic, Sodium Chloride, Magnesium Chloride Hexahydrate ● ID release at $1,500 / lot
|
$[***] | ||
27AIM01.01 | December 22, 2020 | Page 13 of 27 |
| CONFIDENTIAL |
| Cost Table Estimates | |||
| Pii Activity | Estimates | Subtotal | |
Packaging Components: ● USP/NF full release testing will be charged at $[***]/ lot ● PII will use stock components where applicable and may opt to charge on a per unit basis ● Assumes one lot of vials, stoppers, and flip-off seals being fully released ● ID release at $[***]/ lot |
$[***] | ||
Note: ● Any outsourced testing not conducted at Pii for API, Excipients, or Packaging Components will be invoiced as a pass through + handling costs as per the terms of the agreement. |
|||
| 4. | Tech Transfer/Process Development | ||
● R/D Laboratory Manufacturing up to 5 L (1 experiment, notebook documentation) ● Studies may include: ○ Cleanability Assessment (support QRMP) ● Analytical Support (testing as per section 4.4, if required) |
$[***] | $[***] | |
| 5. | OPTIONAL: Manufacture of Feasibility Batch | ||
● Manufacturing of 1 batch ($[***]per batch) ● In-process testing ● Finished Product Testing |
$[***] | ||
● Documentation ● Manufacturing Protocol ● Draft Batch Records) | |||
| 6. | Manufacture of Registration Batches | ||
● Manufacturing of 3 cGMP Registration batches ($183,750 per batch) ● In-process testing ● Finished Product Testing |
$[***] | $[***] | |
● Documentation (#1) ● Master Batch Records (MBR) ● Certificate of Analysis and Certificate of Compliance | |||
● (OPTIONAL) Process Validation Studies ($30,000 for PV studies) ● Perform Process Validation Studies as outlined in section 8 ● Includes Process Validation Master Plan ● Includes Process Validation Protocol and Report |
$[***] | ||
27AIM01.01 | December 22, 2020 | Page 14 of 27 |
| CONFIDENTIAL |
| 7. | Stability Program for Registration Batches | ||
| Stability Programs (3 batches placed on stability at same time) | |||
● Stability 60M Program 2-8C ● Upright ○ Microbial Testing (10 pull points for upright x 3 batches x $[***]) ● Inverted: ○ Microbial Testing (10 pull points for inverted x 3 batches x $[***]) ● Stability 12M Program 25C ● Inverted: ○ Microbial Testing ( 2 pull points for inverted x 3 batches x $[***])) |
$[***] | $[***] | |
| 8. | Project Management | ||
● Project Timelines ● The Project Manager will coordinate with Pii’s project team and the Client and commit up to two 45-minute teleconference meetings per month, and up to one quarterly face-to-face meeting. |
$[***] | $[***] | |
| 9. | General Support | ||
● Administrative support (i.e., Change Controls) ● Supply Chain Management (i.e., phase appropriate vendor qualification, procurement, sample handling) |
$[***] | $[***] | |
| Sub-Total: | $[***] | ||
Estimated Costs for Pass Through: (for budgeting purposes only; Estimated at 15% of sub-total. Actuals will be billed as noted herein and excludes CAPEX that may be required) |
$[***] | ||
| Materials Estimate (section 3): | $[***] | ||
| Estimated Project Total: | $[***] | ||
In addition to the above costs:
| ● | AIM ImmunoTech Inc. shall pay to Pii upon receipt of Pii’s invoice by AIM ImmunoTech Inc. for all non-capital materials (excipients, packaging components, HPLC columns, analytical standards, microbial testing and tooling) used in the study at cost plus 10%. Pii shall obtain AIM ImmunoTech Inc.’s prior written approval for any expenditure greater than $[***]. For high priced items more than $5,000, Pii will charge cost plus 5% to AIM ImmunoTech Inc.. Pii shall invoice AIM ImmunoTech Inc. for all reasonable and normal out-of-pocket travel-related expenses, including airfare, room & board, car rental and the like, of Pii during any technology transfer phase or project update meetings requested in advance by AIM ImmunoTech Inc.. | |
| ● | Any OOS investigation and testing that is not considered to be Pii laboratory error after mutual review by both parties will be billed at a rate of $[***]/hour. Anything over 40 hours must be pre-approved by AIM. |
27AIM01.01 | December 22, 2020 | Page 15 of 27 |
| CONFIDENTIAL |
| ● | Any excipients, materials or components ordered as specialized items (not standard stock items) for use in the project will be invoiced in full to AIM ImmunoTech Inc.. A handling fee will apply as noted above. Payment is due within 30 days of receipt of invoice by AIM ImmunoTech Inc.. | |
| ● | Any remaining stock of specialized items ordered on behalf of AIM ImmunoTech Inc. or shipped to Pii by AIM ImmunoTech Inc. will be shipped to AIM ImmunoTech Inc. upon notification by Pii. AIM ImmunoTech Inc. will be solely responsible for cost of shipment and a shipment preparation fee of $[***] will be applied. | |
| ● | Shipments outside of Agreement work scope will be invoiced as per the following: | |
| a) | Shipment requests with three (3) day notice or more will be charged at $[***] plus shipping costs and a 10% service charge on shipping. | |
| b) | Shipment requests with two (2) day notice will be charged at $[***] plus shipping costs and a 10% service charge on shipping. | |
| c) | Shipment requests with twenty-four (24) hour notice will be charged at $[***] plus shipping costs and a 10% service charge on shipping. |
Non-Stability Payment Schedule
| Milestones | Activity | Amount Due |
Contract Initiation (non-refundable) for Ampligen (Rintatolimod) Sterile Solution 2.5mg/mL ● Section 1 @ $[***] ● Section 2 @ $[***] ● Section 4 @ $[***] ● Section 6 @ $[***] ● Section 8 @ $[***] ● Section 9 @ $[***]
Please remit Contract Initiation payment along with signed Agreement to Pii.
|
$[***] | |
Initiation of Manufacture of Registration Batch #1 for Ampligen (Rintatolimod) Sterile Solution 2.5mg/mL
● Batch Record Issued to Manufacturing/Production at Pii
|
$[***] | |
Completion of Manufacturing of Registration Batch #1 for Ampligen (Rintatolimod) Sterile Solution 2.5mg/mL
● Provision of Pii QA Reviewed Batch Record
|
$[***] |
27AIM01.01 | December 22, 2020 | Page 16 of 27 |
| CONFIDENTIAL |
Disposition of Registration Batch #1 for Ampligen (Rintatolimod) Sterile Solution 2.5mg/mL
● Pii QA Disposition Document for Batch
|
$[***] | |
Initiation of Manufacture of Registration Batch #2 for Ampligen (Rintatolimod) Sterile Solution 2.5mg/mL
● Batch Record Issued to Manufacturing/Production at Pii
|
$[***] | |
Completion of Manufacturing of Registration Batch #2 for Ampligen (Rintatolimod) Sterile Solution 2.5mg/mL
● Provision of Pii QA Reviewed Batch Record
|
$[***] | |
Disposition of Registration Batch #2 for Ampligen (Rintatolimod) Sterile Solution 2.5mg/mL
● Pii QA Disposition Document for Batch
|
$[***] | |
Initiation of Manufacture of Registration Batch #3 for Ampligen (Rintatolimod) Sterile Solution 2.5mg/mL
● Batch Record Issued to Manufacturing/Production at Pii
|
$[***] | |
Completion of Manufacturing of Registration Batch #3 for Ampligen (Rintatolimod) Sterile Solution 2.5mg/mL
● Provision of Pii QA Reviewed Batch Record
|
$[***] | |
Disposition of Registration Batch #3 for Ampligen (Rintatolimod) Sterile Solution 2.5mg/mL
● Pii QA Disposition Document for Batch
|
$[***] | |
| OPTIONAL | Initiation of Manufacturing of Feasibility Batch of Ampligen (Rintatolimod) Sterile Solution 2.5mg/mL ($[***])
● Draft Batch Record Sent to AIM ImmunoTech for Review
|
|
| OPTIONAL | Completion of Manufacturing of Feasibility Batch of Ampligen (Rintatolimod) Sterile Solution 2.5mg/mL ($[***])
● Draft of the Executed Batch Record Sent to AIM ImmunoTech for Review
|
|
| OPTIONAL | Initiation of Process Validation Protocol for Ampligen (Rintatolimod) Sterile Solution 2.5mg/mL ($[***])
● Draft of Process Validation Protocol sent to AIM ImmunoTech |
|
| OPTIONAL | Completion of Process Validation Protocol for Ampligen (Rintatolimod) Sterile Solution 2.5mg/mL ($[***])
● Draft of the Executed Process Validation Protocol sent to AIM ImmunoTech |
|
| TOTAL | $[***] |
27AIM01.01 | December 22, 2020 | Page 17 of 27 |
| CONFIDENTIAL |
Stability Pull Point Cost and Tables:
Stability for the active Registration Batches will be charged per pull point including testing and storage. If samples stored at 30°C/65%RH are tested, they will be charged per pull point.
Stability Study Payment Schedule for Registration Batches
| Invoice Issue Date | Description | Amount Due |
Stability Initiation |
Stability Initiation Fee for the Active Registration Batches for Ampligen (Rintatolimod) Sterile Solution 2.5mg/mL- (non-refundable up to six months)
Microbial: 2-8°C (1 pull points x 2 pkg. config. x $[***]) Microbial: 25°C (1 pull point x 1 pkg. config x $[***])
|
$[***] |
Month 14 |
12th month stability pull points for Ampligen (Rintatolimod) Sterile Solution 2.5mg/mL
Microbial: 2-8°C (1 pull points x 2 pkg. config. x $[***]) Microbial: 25°C (1 pull point x 1 pkg. config x $[***])
|
$[***] |
| Month 20 | 18th month stability pull point for Ampligen (Rintatolimod) Sterile Solution 2.5mg/mL
Microbial: (1 pull points x 2 pkg. config. x $[***])
|
$[***] |
| Month 26 | 24th month stability pull point for Ampligen (Rintatolimod) Sterile Solution 2.5mg/mL
Microbial: (1 pull points x 2 pkg. config. x $[***])
|
$[***] |
| Month 32 | 30th month stability pull point for Ampligen (Rintatolimod) Sterile Solution 2.5mg/mL
Microbial: (1 pull points x 2 pkg. config. x $[***])
|
$[***] |
| Month 38 | 36th month stability pull point for Ampligen (Rintatolimod) Sterile Solution 2.5mg/mL
Microbial: (1 pull points x 2 pkg. config. x $1,100)
|
$[***] |
27AIM01.01 | December 22, 2020 | Page 18 of 27 |
| CONFIDENTIAL |
| Month 44 | 42nd month stability pull point for Ampligen (Rintatolimod) Sterile Solution 2.5mg/mL
Microbial: (1 pull points x 2 pkg. config. x $[***])
|
$[***] |
| Month 50 | 48th month stability pull point for Ampligen (Rintatolimod) Sterile Solution 2.5mg/mL
Microbial: (1 pull points x 2 pkg. config. x $[***])
|
$[***] |
| Month 56 | 54th month stability pull point for Ampligen (Rintatolimod) Sterile Solution 2.5mg/mL
Microbial: (1 pull points x 2 pkg. config. x $[***])
|
$[***] |
| Month 62 | 60th month stability pull point for Ampligen (Rintatolimod) Sterile Solution 2.5mg/mL
Microbial: (1 pull points x 2 pkg. config. x $[***])
|
$[***] |
| Total for each batch | $[***] | |
| Total for 3 Registration batches | $[***] |
| NOTE: | Release testing will be considered time 0; however, if the product is not set within thirty (30) days of manufacturing then the initial time point will be required. This cost is not included in this table; therefore, Pii will invoice the AIM ImmunoTech Inc. separately for the initial time point. |
27AIM01.01 | December 22, 2020 | Page 19 of 27 |
| CONFIDENTIAL |
IV. Legal and Signatures
1. CONFIDENTIALITY
The parties acknowledge that the Confidentiality Agreement between the parties dated August 13th, 2020 (the "Confidentiality Agreement") shall continue to govern the parties' respective obligations to one another with regard to the confidential information each has disclosed to the other and shall continue to disclose to the other in connection with this Agreement. The parties' respective obligations with regard to any such confidential information shall survive the termination of this Agreement in accordance with the terms of the Confidentiality Agreement.
2. OWNERSHIP OF MATERIALS AND INFORMATION
All data, information, reports and any and all related documentation, which are developed, generated or derived, directly or indirectly, by Pii (or by any subcontractor or agent of Pii) for Customer during the course of this Agreement (the "Data"), and all inventions, discoveries, formulae, procedures, any other intellectual property, and any improvements thereto, whether patentable or not, which result or evolve directly, during the course of this Agreement or as a result of the services performed hereunder by Pii (or by any subcontractor or agent of Pii) (together with any Data relating thereto, the "Inventions"), shall be and remain the sole and exclusive property of Customer if related to the Product; provided, however, any Inventions made, developed or discovered solely by Pii (or by any subcontractor or agent of Pii) that constitute an invention, improvement or other intellectual property relating generally (i.e., not solely to the Product) to drug delivery technology, formulation, analysis or manufacturing process of pharmaceutical products (together with any Data relating thereto, "Pii Inventions"), shall be and remain the property of Pii, and Pii hereby grants to Customer a perpetual, irrevocable, worldwide, royalty-free, exclusive license (with the right to sublicense) to develop, use, manufacture and sell such Pii Inventions in connection with the development, use, manufacture and sale of the Product, provided, further that the foregoing license shall not be exclusive with respect to a Product that is a non-patented (or non-patent pending) compound. Except as specifically set forth herein, neither Pii nor its employees or agents shall have or acquire any right, title or interest in Inventions. If related to the Product, Pii shall promptly disclose in writing to Customer any Inventions. If related to the Product and to the extent not Pii Inventions, Pii shall assign any and all rights in any Inventions to Customer and shall assist Customer, at no cost to Pii, in perfecting its rights in such Inventions.
3. TERMINATION
Customer, but not Pii, may terminate this Agreement at any time and for any reason at the sole discretion of Customer upon thirty (30) days advance written notice to Pii. Upon such termination, Customer shall pay all costs incurred by Pii for work performed prior to the effective date of termination, provided Pii provides written evidence that such costs have been incurred and such work performed. Either party may terminate this Agreement if the other party is in default of any of its material obligations set forth herein, and such breach is not cured within sixty (60) days, which time period shall be reduced to ten (10) days for any default of any monetary obligation, after the breaching party's receipt of a written notice from the non-breaching party that describes such breach in reasonable detail.
27AIM01.01 | December 22, 2020 | Page 20 of 27 |
| CONFIDENTIAL |
4. NOTIFICATION OF SUB-CONTRACT LABS
Insofar as Pii anticipates using contract laboratories for some of the activities described in this Agreement, Pii shall notify Customer when use of such contract laboratories becomes necessary. Pii shall be responsible for assuring that any contract lab used complies with Pii's obligations hereunder.
5. WARRANTIES
Pii warrants and covenants that it will perform all of its obligations under this Agreement in accordance with all applicable United States laws and regulations. Without limiting the generality of the foregoing, Pii warrants and covenants that its services hereunder shall be performed in conformity with the requirements for its services set forth in Section A, Project Definition and Scope above (the "Requirements") and all Product will be manufactured in compliance with current good manufacturing practices set forth by the United States Food and Drug Administration ("cGMP"). Pii also warrants and covenants that, to Pii's actual knowledge, the performance of Pii’s services hereunder (including manufacture of Product) will not infringe or misappropriate any intellectual property right of any third party, except to the extent such services are provided in accordance with any the Requirements or other written instructions given by Customer. Except as specifically set forth in this Agreement, Pii MAKES NO EXPRESS OR IMPLIED WARRANTIES OR COVENANTS, STATUTORY OR OTHERWISE, CONCERNING THE DELIVERABLES. WITHOUT LIMITING THE FOREGOING, Pii MAKES NO IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE REGARDING THE DELIVERABLES.
6. ACCEPTANCE OF SHIPMENTS; NON-CONFORMANCE
(a) Pii shall have the right not to deliver Product to Customer if Pii determines that such Product is non-conforming or is otherwise defective ("Non-Deliverable Product"). As long as, with respect to any batch of Non-Deliverable Product, Pii has performed its Services in accordance with the terms and conditions of this Agreement: (i) Pii shall be entitled to payment for its Services actually performed hereunder, and (ii) Pii shall not be responsible for the cost of replacement API required for Pii's replacement of Non-Deliverable Product.
27AIM01.01 | December 22, 2020 | Page 21 of 27 |
| CONFIDENTIAL |
(b) Unless otherwise instructed by Customer in writing, Pii will not deliver any batch to Customer unless Pii provides to Customer a Certificate of Analysis on or before the date of delivery that certifies that the Product meets the product specifications for the Product set forth in this Agreement (a "COA"). Within thirty (30) days following delivery to Customer, Customer shall have the right to give Pii notice of rejection of any Product that, in whole or part, fails to conform to the COA. Upon receipt of a notice of rejection from Customer, Pii shall conduct an internal investigation. Customer shall at all times supply Pii with any evidence it has that relates to whether any Product delivered to Customer by Pii is non-conforming with the COA. Failure by Customer to give timely notice of rejection shall constitute acceptance by it of the shipment to which the notice of rejection would have otherwise applied. In the event of any disagreement between Pii and Customer relating to Product non-conformance with the COA, the parties will use good faith efforts to reach an amicable resolution of such disagreement. In the event that resolution cannot be reached, a mutually agreed upon, neutral, independent third party laboratory shall be brought in to resolve the disagreement upon the request of either party. The results of the independent laboratory shall be binding on the parties and non-appealable, and the cost of such independent laboratory shall be borne by the party hereunder determined by the independent laboratory to be the non-prevailing party in such disagreement. Subject to the provisions of Section 7(d) below, for any Product properly rejected pursuant to this Section 6(b), such Product shall be returned by Customer to Pii at Pii's expense and shall be replaced by Pii at no extra charge to Customer, subject to the Customer's provision to Pii of materials required pursuant to the terms of this Agreement for Pii's services, including any active pharmaceutical ingredient ("API"); and in the event Pii cannot replace such returned Product, it shall refund to Customer the amount paid therefor.
(c) Notwithstanding anything to the contrary contained herein, as long as Pii has performed its Services in accordance with the terms and conditions of this Agreement, Pii shall not be responsible for the stability of any Product.
7. INDEMNIFICATION
(a) Customer shall indemnify, defend and hold harmless Pii, and Pii’s affiliates, and its and their stockholders, directors, officers, employees and agents from and against any and all claims, losses, liabilities, lawsuits, proceedings, costs and expenses, including without limitation, reasonable attorney’s fees and the cost of recalls arising out of or in connection with: (i) injuries and/or death to humans resulting from the use of any materials provided to Pii by or on behalf of Customer (including all manufactured products or materials resulting from the provision of Pii's services hereunder), including, without limitation, claims based on negligence, warranty, strict liability or any other theory of product liability or a violation of applicable laws or regulations, except to the extent that such injuries or violations are the result of Pii’s negligence or willful misconduct in performing the services hereunder or breach of any covenant or agreement hereunder, (ii) negligence or willful misconduct in advertising, labeling, or improper handling and storage of Customer-provided materials or Product by any person other than Pii, (iii) any instructions given by Customer in connection with any materials provided to Pii by or on behalf of Customer or Pii's services provided hereunder, (iv) any misrepresentation by Customer or breach by Customer of any covenant, representation, warranty or agreement hereunder or (v) patent infringement relating to any materials provided to Pii by Customer or Pii's services provided hereunder to the extent that such infringement does not arise as a result of a breach of any representation or warranty of Pii hereunder.
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| CONFIDENTIAL |
(b) Pii shall indemnify and hold harmless Customer and Customer's affiliates, and its and their stockholders, directors, officers, employees and agents from and against any and all claims, losses, liabilities, lawsuits, proceedings, costs and expenses, including without limitation, reasonable attorney’s fees and the cost of recalls arising out of or in connection with: (i) any negligence or willful misconduct of Pii in performing the services hereunder, or (ii) any misrepresentation by Pii or breach by Pii of any covenant, representation, warranty or agreement hereunder.
(c) In no event shall either party be liable to the other for indirect damages or consequential damages, including without limitation, lost profits or revenues.
(d) NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, Pii’S TOTAL LIABILITY TO CUSTOMER FOR COSTS OF REPLACEMENT CUSTOMER MATERIALS INCLUDING API WITH RESPECT TO ANY BATCH OF PRODUCT, FROM ALL CAUSES OF ACTION OF ANY KIND, SHALL BE LIMITED TO AN AMOUNT EQUAL TO the LESSER OF (i) THE cost of such CUSTOMER MaterialS INCLUDING API for such batch OR (ii) TEN PERCENT (10%) OF THE AMOUNT PAID OR PAYABLE TO Pii BY CUSTOMER HEREUNDER FOR THE MANUFACTURE OF SUCH BATCH.
EACH PARTY ACKNOWLEDGES THAT THE FOREGOING LIMITATIONS OF LIABILITY REFLECTS THE ALLOCATION OF RISK SET FORTH IN THIS AGREEMENT AND CUSTOMER ACKNOWLEDGES THAT Pii ADVISED CUSTOMER THAT Pii WOULD NOT HAVE ENTERED INTO THIS AGREEMENT ABSENT SUCH LIMITATIONS OF LIABILITY.
8. FORCE MAJEURE
Failure of any party to perform its obligations under this Agreement (except the obligation to make payments) shall not subject such party to any liability or place it in breach of any term or condition of this Agreement to the other party if such failure is caused by any cause beyond the reasonable control of such non-performing party, including, without limitation, acts of God, fire, explosion, flood, drought, war, riot, sabotage, embargo, interruption of or delay in transportation, a national health emergency or compliance with any order or regulation of any government entity acting with color of right.
9. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (exclusive of its conflicts of laws provisions).
10. DISPUTES; ARBITRATION
(a) Except as provided in clause (c) below or in Section 6 with respect to disputes regarding non-conforming shipments, all disputes, controversies or claims arising out of or relating to the operation or interpretation of this Agreement shall be resolved by arbitration before one arbitrator in accordance with the Commercial Rules of the American Arbitration Association. The arbitrator shall be jointly selected by the parties. Any award rendered by the arbitrator shall be final and binding upon the parties and judgment upon any such award may be entered in any court having jurisdiction thereof. Arbitration shall be conducted in Delaware.
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| CONFIDENTIAL |
(b) The arbitrator shall award attorneys' fees and other costs of the arbitration, including the fees and expenses of the arbitrator, to the prevailing party, as determined by the arbitrator.
(c) Notwithstanding anything to the contrary contained in this Section, in the event of any breach or threatened breach of this Agreement by either party that the other party believes will cause irreparable harm and damage to it, such party shall be entitled to an injunction, restraining order restraining such breach or threatened breach by the other party and all other remedies which shall be available to it at law or in equity and the parties irrevocably submit to the jurisdiction of any state or federal court sitting in the State of Delaware over any such suit, action or proceeding. Customer irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.
11. NON-SOLICITATION AND HIRING
During the term of this Agreement and for a period of two (2) years thereafter, regardless of the reason for such termination, neither party will, directly or indirectly, without the prior written consent of the other party, solicit or hire, as an employee or independent contractor, any person who is, or was at any time, employed by or under contract with the other party, unless at the time of the solicitation or hiring, at least one (1) year shall have elapsed since the person was last employed by or under contract with the other party.
12. MISCELLANEOUS
(a) Waiver; Integration; Modification. The waiver of the breach of any term or provision of this Agreement shall not operate as or be construed to be a waiver of any other or subsequent breach of this Agreement. This Agreement sets forth the entire agreement between the parties with respect to the subject matter of this Agreement and merges and supersedes all prior discussions, agreements and understandings of every nature between them. No modification or amendment to this Agreement or any other agreement with respect to the subject matter of this Agreement shall be effective unless stated in writing and signed by the parties.
(b) Construction. Whenever the context may require, the singular form of names and pronouns shall include the plural and vice-versa. The section and subsection headings are included solely for the convenience of the parties and shall not be used in the interpretation of this Agreement. No rule of construction shall apply to this Agreement that construes any language, whether ambiguous, unclear or otherwise, in favor of or against any party based on the party that drafted such language.
(c) Counterparts; Electronic Delivery and Signature. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument, and by electronic (PDF) or facsimile delivery thereof. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE PARTIES EXPRESSLY ACKNOWLEDGE AND AGREE THAT THIS AGREEMENT MAY BE EXECUTED BY ANY PARTY HERETO VIA ELECTRONIC SIGNATURE, AS DEFINED IN THE MARYLAND UNIFORM ELECTRONIC TRANSACTIONS ACT, MARYLAND CODE, COMMERCIAL LAW ARTICLE, TITLE 21 (THE “ELECTRONIC TRANSACTIONS ACT”), AND THAT ANY SUCH ELECTRONIC SIGNATURE SHALL HAVE THE SAME FORCE AND EFFECT AS IF IT WAS AN ORIGINAL SIGNATURE AND SHALL BE BINDING TO THE FULLEST EXTENT PERMITTED UNDER THE ELECTRONIC TRANSACTIONS ACT.
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| CONFIDENTIAL |
(d) Survival. No termination or expiration of this Agreement shall relieve the parties hereto of any obligation hereunder which by their terms are intended to or may survive the termination or expiration of this Agreement.
(e) Relationship Between Parties. Pii's relationship to Customer shall be that of an independent contractor. No persons engaged by Pii shall be considered under the provisions of this Agreement or otherwise as an employee of Customer. Nothing contained in this Agreement shall create or imply the creation of a partnership between Customer and Pii and neither party shall have any authority (actual or apparent) to bind the other.
(f) Delivery. Pii shall choose a commercially reasonable method of freight shipment and carrier for the deliverables hereunder, unless Customer has specified a particular method of shipment and carrier to Pii. All costs associated with freight, insurance, packaging and custom duties shall be paid by Customer. Risk of loss, damage and delay shall pass to Customer Ex Works (Incoterms 2010) Pii's shipping dock.
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| CONFIDENTIAL |
In order to process this contract, please provide the following information:
AIM ImmunoTech Inc. Financial Set Up Form
Is a PO required on invoices? _____________Yes_________________________
If yes, please provide PO along with signed contract
Billing Contact: _Dean Maude________________________________________________
Email Address: _dean.maude@aimimmuno.com______________________________________________
Phone Number: 352-448-7797, ext 105_______________________________________________
Billing Address:
Street: __2117 SW Highway 484
Corporate Phone: (352) 448-7797
Corporate Fax: (352)480-4620
____________________________________________________
City and State: __ Ocala, FL
______________________________________________
Zip Code: __34473
__________________________________________________
Country: __USA___________________________________________________
Email Address to send invoices: ___ dean.maude@aimimmuno.com _______________________________
Any additional email addresses for invoices (if applicable):
_vishwajeet.atodaria@aimimmuno.com___________________________________________________________
**Please provide a completed W-9 to accountsreceivable@pharm-int.com
27AIM01.01 | December 22, 2020 | Page 26 of 27 |
| CONFIDENTIAL |
AGREED AND ACCEPTED
| Pharmaceutics International, Inc. | AIM ImmunoTech Inc. | |
| /s/John Guthrie | /s/ Peter W. Rodino, III, JD | |
| John Guthrie | Authorized Agent or Representative | |
| Chief Financial Officer | Title: Chief Operating Officer | |
| 12/22/2020 / 1:09 PM EST | 12/22/2020/ 3:18 PM EST | |
| Date | Date |
Please send the fully executed Agreement as a PDF via email to:
Michelle Ava: [***]
Kevin: [***]
Please email a copy of the Purchase Order (PO) to: accountsreceivable@pharm-int.com
Please remit Project Initiation payment along with signed Agreement to Pii:
Pharmaceutics International, Inc.
P.O. Box 6259
Hermitage PA 16148-0923
or transfer funds to:
[***]
27AIM01.01 | December 22, 2020 | Page 27 of 27 |
| CONFIDENTIAL |
Exhibit 10.76
EXPLANATORY NOTE: [***] INDICATES THE PORTION OF THIS EXHIBIT
THAT HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND
(II) WOULD BE COMPETITIVELY HARMFUL IN PUBLICLY DISCLOSED.
AGREEMENT
The undersigned:
| 1. | The CENTRE FOR HUMAN DRUG RESEARCH (CHDR), a foundation located in Leiden in the Netherlands having its registered office at Zernikedreef 8, 2333CL LEIDEN, The Netherlands, and in the present matter lawfully represented by its Chief Executive Officer Prof Dr J. Burggraaf and its Chief Scientific Officer Dr Geert Jan Groeneveld (hereinafter referred to as “CHDR”); and |
| 2. | AIM ImmunoTech Inc. having its registered office at 2117 SW Highway 484, Ocala, Florida 34473, United States, hereby lawfully represented by its President and Chief Executive Officer Thomas K. Equels (hereinafter referred to as “Client”), together referred to as “Parties” and individually as a “Party”, hereby make this Agreement (“Agreement”) dated as of January 8, 2021(the “Effective Date”). |
Whereas:
| A. | The Client is interested in a Phase I randomized, double-blind study to evaluate the safety and activity of repeated intranasal administration of Ampligen® (Poly I:Poly C12U) in healthy subjects; | |
| B. | CHDR has the facilities and know-how to carry out such a clinical study; | |
| C. | Client and CHDR are, in the performance of this Agreement, in compliance with the obligations arising out of the Good Clinical Practice Guidelines and the Dutch Act on Medical-scientific Research Involving Human Subjects. |
Agree as follows:
Article 1: Definitions and interpretation
The following terms shall have the meaning ascribed to them below:
“Agreement”: means the terms and conditions of this main document, together with all Annexes referred herein.
“Effective Date”: shall mean the date this Agreement takes effect.
“Clinical Trial”: Any investigation in human subjects intended to discover or verify the clinical, pharmacological and/or other pharmacodynamic effects of an investigational product(s) (the “Product”), and/or to identify any adverse reactions to an investigational product(s), and/or to study absorption, distribution, metabolism, and excretion of an investigational product(s) with the object of ascertaining its safety and/or efficacy. The terms clinical trial and clinical study are synonymous. This definition is in line with article 1.12 of the Good Clinical Practice Guideline.
“Confidential Information”: shall mean any information belonging to either Party that is not in the public domain and was disclosed to the other Party for the purposes described in this Agreement, among which but not exclusively, any Intellectual Property of either Party.
“Intellectual Property (IP)”: any patents, supplementary protection certificates, rights to inventions, registered designs, copyright and related rights, database rights, design rights, topography rights, trademarks, service marks, trade names and domain names, trade secrets, rights in unpatented know-how, rights of confidence and any other intellectual or industrial property rights of any nature including all applications (or rights to apply) for, and renewals or extensions of such rights and all similar or equivalent rights or forms of protection which subsist or will subsist now or in the future in any part of the world.
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“Background IP”: shall mean any Intellectual Property, other than Foreground IP, already owned by Parties on the Effective Date.
“Foreground IP”: shall mean any Intellectual Property is conceived, created or developed by, or by a contractor, either Party in the course of the work conducted in the course of this Project.
Article 2: Scope of the Agreement
Client instructs CHDR, and CHDR accepts this instruction, to conduct research (hereinafter the “Project”) as described in more detail in the proposal/ protocol entitled: “A Phase I, Randomized, Double-Blind Study to Evaluate the Safety and Activity of Ampligen® (Poly I:Poly C12U) in Healthy Subjects at Low Risk for Coronavirus Disease-2019 (COVID-19)”, (“the “Protocol”), which is annexed to this Agreement as Annex 1. The Protocol shall be considered to constitute an integral part of this Agreement. The Protocol shall establish the means for obtaining insurance coverage for the Project. All of the above shall be only applicable on the condition precedent that the Protocol is approved by the Medical Ethics Review Committee.
CHDR shall perform the Project in accordance with industry best practices, reasonable care and skill and in compliance with all laws, rules and regulations applicable to the Project (“Applicable Laws”).
If necessary, CHDR will be allowed, after consultation with and the express written approval of Client, to involve the services of third persons or organisations for specific matters, provided that CHDR shall procure that such third persons and organisations are subject to obligations of confidentiality which are no less strict than the obligations in force for personnel of CHDR. In as far as these third persons or organisations have access to personal data, CHDR will enter into a data processing agreement with these third persons or organisations as detailed in the processing agreement between CHDR and the Client.
Article 3: Prices and payment
The Parties have agreed on a Quotation for this Project as shown in Annex 2. Client shall be invoiced by CHDR according to the Payment schedule in Annex 3. Payment terms are thirty (30) days after date of invoice. These amounts do not include applicable Dutch value added tax (which is not applicable to US companies who provide a W-8BEN-E form). After being invoiced by CHDR, Client shall transfer the amount by the indicated payment date to the bank account indicated on the invoice. These fees were agreed upon by the Parties on the basis that Client and CHDR carry out the tasks and activities described in Annex I.
Article 4: Coordination
Each of the contracting Parties will name a person within its organisation who is responsible for maintaining contacts on the executive level. For CHDR this person will be Dr Geert Jan Groeneveld, MD, for scientific and medical items, and Prof Dr J. Burggraaf for financial and contractual items. For the Client this person will be Dr David R. Strayer for scientific and medical items and Peter W. Rodino, III, for financial and contractual items.
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Article 5: Intellectual Property
| 5.1 | It is recognised and understood that the ownership of any Background IP of Client and CHDR pre-existing as of the Effective Date and used in the course of this Project, is not affected by this Agreement. |
| 5.2 | Any IP to any know-how, material, discovery or invention, whether patentable or not, conceived or conceived and reduced to practice as a result of the work conducted in the course of this Project (an “Invention”) shall be owned or co-owned by the Party or Parties that developed it, unless the Invention is either “Product Foreground IP” or “Clinical Trial Foreground IP”. An Invention shall be considered “Product Foreground IP” if it relates to the Product of the Company in the Clinical Trial. An Invention shall be considered “Clinical Trial Foreground IP” if it relates to clinical trial methodology, the techniques and technology that may be used by CHDR. Product Foreground IP shall belong to the Client and Clinical Trial Foreground IP shall belong to CHDR. |
Article 6: Obligations of Client
Client undertakes to use reasonable efforts to enable CHDR to carry out the Project. This obligation includes, among other things: (a) providing CHDR with all available and relevant information concerning the drug or drugs with which the Project is concerned, including in particular any information which may be relevant to the safe implementation of the Project; and (b) supplying CHDR with the above-mentioned drug or drugs free of charge, in good time and in sufficient quantities as set forth in the Protocol.
Article 7: Obligations of CHDR
| 7.1 | CHDR shall use its best efforts to complete the Project according to the estimated timelines, as shown in Annex 4. |
| 7.2 | CHDR shall immediately inform Client in writing if CHDR becomes aware that circumstances are such that there will be a substantial delay in the progress of the Project. In such an event the Parties shall, by mutual consent, make an arrangement concerning the consequences of the delay on the subsequent implementation of the Project and/or this Agreement. |
| 7.3 | CHDR shall give Client’s monitoring personnel access to all files which have been collated on the individual volunteers and shall allow these personnel to make copies of such files, either in whole or in part, but only in as far as the personal data in the files concerned has been made anonymous. |
Article 8: Data analyses and publication
| 8.1 | CHDR shall be entitled to use the data and analysis, which have been received under the terms of the Project (hereinafter the “Data”), for publications in and/or oral presentations to the scientific media and/or forums, with the understanding that CHDR shall not do so unless it has previously informed Client of the proposed publications or presentations and provided such publications and/or presentations to Client for review and comment not less than thirty (30) days before such proposed use. |
| The authorship of such a publication shall reflect the contribution of individual employees of the Client and CHDR. A joint publication is the preferred form. | |
| 8.2 | If Client can demonstrate that the postponement of a publication or presentation intended CHDR is necessary to protect its intellectual property rights, CHDR shall postpone such publication or presentation, but CHDR shall not be required to do so for a period of longer than three months after the study’s completion unless Client requires more than three months in order to safeguard its rights and the interests connected with its rights outweigh the interests CHDR may have in the proposed publication or presentation, with a maximum of 12 months after the study’s completion. A postponement request shall, in no circumstances, result in the cancellation of any publication or presentation by CHDR. In all cases, agreements on publication needs to be in accordance with the “Revised CCMO Directive on the Assessment of Clinical Trial Agreements” dated 30 August 2011”. |
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Article 9: Reporting
| 9.1 | The Data pertaining to the Product generated in the course of this Project shall be the sole property of Client, subject to the provisions of article 8 related to CHDR’s right to publish and/or present. Client’s entitlement to the study report (‘Report’) shall not affect CHDR’s copyright or reproduction rights with regard to the publications or presentations described in article 8 above. |
| 9.2 | Client shall have the rights to submit the Report and the Data to any drug regulatory authority in any country whatsoever and to use the Report and the Data in order to obtain patents or other similar rights with respect to the Product investigated in the course of this Project. |
| 9.3 | Client may refer to the Report and the Data in any publication, with the understanding that the interpretations and/or conclusions set out in such publications shall be purely Client’s responsibility and cannot be attributed to CHDR, unless CHDR has given its prior written consent to the interpretation(s) or conclusion(s) concerned. |
Article 10: Insurance
In accordance with the Dutch “Medical Research involving Human Subjects Act” and the “Decree containing rules for Compulsory Insurance in Medical-scientific Research involving Human Subjects 2015”, CHDR shall insure the subjects who participate in the Project for the following maximum amounts:
(1) € 650.000,— (i.e. six hundred and fifty thousand Euro) per claim per subject;
(2) € 5.000.000,— (i.e. five million Euro) per medical research project;
(3) € 7.500.000,— (i.e. seven million and five hundred thousand Euro) for the total sum for injuries arising out of medical research projects per insurance year.
Article 11: Liability
| 11.1 | Client is not liable towards CHDR for any damage to the health of a volunteer that may directly result from his or her participation in the Project. This exclusion shall not apply if and to the extent that the damage to the health of the volunteer exceeds the insurance coverage which CHDR has taken out. |
| 11.2 | The exclusion of article 11.1 shall also not apply if the damage to the health of the volunteer was caused by any defect, as defined in article 6:186 of the Dutch Civil Code, in the drug or drugs which Client provided to CHDR. Next to the definition in the above mentioned article, the term “defect” also entails constituting any instance in which Client has, pursuant to its obligation to provide information as described in article 6 above, provided CHDR with incomplete or inaccurate information on the Product or drug(s). |
| 11.3 | Except in situations of intentional damage or gross negligence, CHDR is not liable to Client for any damage, including, but not limited to, any damage resulting from Client’s use of the Data, delays in the implementation of the Project or the non-completion of the Project. |
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Article 12: Indemnity
Client agrees to indemnify and hold CHDR, their officers and employees harmless from any liability, loss or damage they may suffer as a result of claims, demands, costs or judgments against them arising out of the activities to be carried out pursuant to the obligations of this Agreement, including, but not limited to, the use by Client of the results obtained from the activities performed by CHDR under this Agreement; provided, however, that any such liability, loss or damage resulting from the following Subsections “a” or “b” is excluded from this Agreement to indemnify and hold harmless:
a. the negligent failure of CHDR to substantially comply with applicable governmental requirements; or
b. the negligence or willful wrongdoing of any officer or employee of CHDR
Article 13: Force Majeure; Continuity
Neither Party shall be considered in default of the performance of its obligations under this Agreement to the extent that the performance of such obligations is prevented by war, civil disturbance, fire, water damage, floods, sit-ins, lock-outs, government measures or any other event, occurrence or condition which is not caused, in whole or in part, by such Party and which is beyond the reasonable control of such Party.
If, as a result of illness on the part of (an) employee(s) of CHDR, CHDR employee(s) advising Client is (are) not able to continue rendering (their) his services to Client, CHDR shall undertake to find (a) replacement(s) within thirty (30) days.
Article 14: Duration
This Agreement comes into force as from the Effective Date mentioned above and has been concluded for the duration of the Project. The Project shall end in accordance with the agreed timelines, unless sooner terminated in accordance with the terms hereof. The parties agree that the term may be extended by mutual written agreement if events beyond control delay completion of the Services beyond the expiration date. The Parties explicitly agree that as they have included a retention period for any personal data collected during the Project, the data will be retained by CHDR under the processing agreement as detailed in article 16.1 and 16.2 of this Agreement.
Article 15: Termination
| 15.1 | This Agreement may be terminated earlier by Both Parties, but needs to be in accordance with the “Revised CCMO Directive on the Assessment of Clinical Trial Agreements” dated 30 August 2011, in the event: |
| ● | if the judgement of the competent medical research ethics committee that has assessed the study is irrevocably revoked; | |
| ● | if a reasonable case can be made for terminating the study in the interests of the health of the research subjects; | |
| ● | if it transpires that continuation of the study cannot serve any scientific purpose, and this is confirmed by the medical research ethics committee that has issued a positive decision on the study; | |
| ● | if one of the parties has been declared insolvent or a bankruptcy/winding-up petition has been filed in respect of one of the parties or the financier, or one of the parties or the is dissolved as a legal entity; | |
● |
if the principal investigator is no longer capable of performing the tasks of the principal investigator, and no replacement agreeable to both parties can be found; | |
| ● | if one of the two parties fails to comply with the obligations arising from the agreement and, provided compliance is not permanently impossible, this compliance has not taken place within thirty days of the defaulting party receiving a written request to comply, unless failure to comply is not in reasonable proportion to the premature termination of the study; | |
| ● | if circumstances beyond the control of both parties make it unreasonable to require the study’s continuation. |
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| 15.2 | In all cases of termination of this Agreement the Parties shall cooperate in order to ensure volunteers’/ patients’ safety, continue appropriate treatment, deliver the work results and comply with all applicable regulations. |
| 15.3 | In the event of preliminary termination of the Clinical Trial, not being the result of a material breach of the obligations by CHDR as laid down in this Agreement, the total sums payable by Client pursuant to this Agreement shall be equitably prorated for actual work performed up to and including the date of termination, including non-cancellable services with sub-contractors or reserved beds for 6 weeks after date of termination. |
Article 16: Confidentiality and Data Privacy
| 16.1. | All processing of personal data will be in accordance with the General Data Protection Regulation (“GDPR”). Client shall act as Controller under the GDPR. CHDR shall act as the Processor (as defined in the GDPR) on behalf of the Client. For this reason, Client and CHDR shall enter into a data processing agreement (Annex 6) outlining their respective responsibilities. |
| 16.2. | Termination of the Agreement on any ground whatsoever shall have as its effect that the Processor Agreement shall survive, unless the Parties agree otherwise in writing. |
| 16.3. | In case Client is established outside the European Union (“EU”), Client will appoint a representative in the EU, in writing. |
| 16.4. | CHDR shall obtain informed consent from the Clinical Trial subjects in order to allow for processing of the personal data from the Clinical Trial subjects. |
| 16.5. | The Parties agree to adhere to the principles of medical confidentiality in relation to Clinical Trial Subjects involved in the Clinical Trial. |
| 16.6. | Personal data (as defined in the GDPR) shall not be disclosed to the Client by CHDR or its Principal Investigator unless this is required to satisfy the requirements of the Protocol or for the purpose of adverse event monitoring or adverse event reporting, or in relation to a claim or proceeding brought by the Clinical Trial subject in connection with the Clinical Trial. The Parties shall not disclose the identity of Clinical Trial subjects to third Parties without prior written consent of the Clinical Trial subject, except in accordance with the provisions of the GDPR, or in relation to a claim or proceedings brought by the Clinical Trial subject in connection with the Clinical Trial. |
| 16.7. | Hereby, the Client requests CHDR to retain the personal data collected under the Protocol for the Client for 25 years after database lock. After the lapse of the retention period, the Client requests CHDR to anonymize the personal data, after which identification of the data subject will no longer be possible. |
| 16.8. | The Client hereby instructs CHDR to process the personal data under this Agreement not solely based on informed consent of the data subject, but also based on article 6(1)(a) and (f) and 9(2)(j) of the GDPR. |
| 16.9. | As CHDR is the Processor, the Client instructs CHDR to handle study subject requests’ pertaining to article 15 until 18 and 20 until 22 of the GDPR. As it is of the utmost importance to retain the study data as a complete dataset for the purpose of pharmacovigilance obligations of the Client as well as to preserve the integrity of the study data for scientific purposes, the Client therefore instructs CHDR to limit the exercise of: |
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| a. | article 16 GDPR (right to rectification), to the extent that factual errors concerning name and address may be corrected; | |
| b. | article 17 GDPR (right to erasure); | |
| c. | article 18 GDPR (right to restriction of processing); | |
| d. | article 20 GDPR (right to data portability); | |
| e. | article 21 GDPR (right to object), and; | |
| f. | article 22 GDPR (the right to not to be subject to automated individual decision-making, including profiling). |
| 16.10. | CHDR and Client shall ensure that only those of their officers and employees (and in the case of Client those of its Affiliates) directly concerned with the carrying out of this Agreement have access to the Confidential Information of the other Party. Each Party undertakes to treat as strictly confidential and not to disclose to any third party any Confidential Information of the other Party, except where disclosure is required by a Regulatory Authority or by law. The Party required to make the disclosure shall inform the other within a reasonable time prior to being required to make the disclosure, of the requirement to disclose and the information required to be disclosed. Each Party undertakes not to make use of any Confidential Information of the other Party, other than in accordance with this Agreement, without the prior written consent of the other Party. |
| 16.11. | The obligations of confidentiality set out in article 15.2 shall not apply to information which: |
| (1) | is or becomes part of the public domain by any other means than a wrongful act or breach of this Agreement by the Parties; | |
| (2) | was or becomes in the Parties’ lawful possession prior to the disclosure without restriction on disclosure; | |
| (3) | has been independently developed by the receiving Party and is not subject to a duty of confidentiality. |
Article 17: Assignment
Without the other Party’s written consent, neither Party shall assign the whole or any part of this Agreement or any claim arising from it to any third party; provided, however, that notwithstanding the foregoing, Client may assign all of its rights and obligations hereunder without such consent to an affiliate of Client or to a successor in interest by reason of merger, consolidation or sale of all or substantially all the assets of Client. Subject to the foregoing, this Agreement shall inure to the benefit of and be binding on the Parties’ successors and assigns. Any assignment in violation of the foregoing shall be null and void and wholly invalid, the assignee in any such assignment shall acquire no rights whatsoever, and the non-assigning Party shall not recognize, nor shall it be required to recognize, such assignment.
Article 18: Changes / Waiver
This Agreement or parts of this Agreement can only be changed with the written consent of both Parties. Similarly, no waiver of the provisions of this Agreement shall be valid or binding on either Party unless in writing and signed by both Parties.
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Article 19: Applicable law and competent court
| 19.1 | The entire relationship between the Parties and any and all claims and disputes arising out of or in connection with this Agreement (including the Annexes) and all other agreements relating thereto (including any non-contractual claims and disputes) shall be exclusively governed by and construed in accordance with the laws of the Delaware in the United States. |
| 19.2 | Any disputes regarding or in connection with the Processing Agreement shall be exclusively decided by arbitration. The number of arbitrators shall be three. Each party shall choose one arbiter, whom together shall appoint the third arbitrators. The seat of arbitration shall be the Netherlands. The governing laws shall be the laws of the Netherlands. |
Article 20: Miscellaneous
| 20.1 | Notices. All notices from one Party to the other will be in writing to the addresses set forth above. Notices shall be sent by overnight courier, certified mail, return receipt requested, or by other means of delivery requiring a written acknowledged receipt. All notices shall be effective upon receipt. |
| 20.2 | Independent Contractor. The business relationship of CHDR to Client is that of an independent contractor and not of a partner, joint venture, employer, employee or any other kind of relationship. |
| 20.3 | Severability. In the event that any one or more of the provisions contained in this Agreement will, for any reason, be held to be invalid, illegal or unenforceable in any respect, that invalidity, illegality or unenforceability will not affect any other provisions of this Agreement, and all other provisions will remain in full force and effect. |
This Agreement is drawn up in duplicate and signed in:
| Leiden on …11…/…01…/…2021……. | Ocala , Florida USA on 01/082021 |
| /s/ Prof Dr. Jacobus Burggraaf | /s/ Peter W. Rodino | |
| Centre for Human Drug Research | AIM ImmunoTech Inc. | |
Prof Dr Jacobus Burggraaf Chief Executive Officer |
Peter W. Rodino, III General Counsel & Chief Operating Officer | |
| /s/ Dr Geert Jan Groeneveld | ||
| Centre
for Human Drug Research
Dr Geert Jan Groeneveld Chief Scientific Officer |
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Annexes:
Annex 1. Protocol / Synopsis
Annex 2. Quotation
Annex 3. Payment Schedule
Annex 4. Timelines
Annex 5. List of responsibilities
Annex 6. Processor Agreement
[Remainder of Page Intentionally Left Blank]
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Annex 1.
Project Description
Hereby incorporated by reference, Protocol AMP-COV-100 (CHDR2049) , dated 08 January 2021 and entitled A Phase I, Randomized, Double-Blind, Placebo-Controlled Study to Evaluate the Safety and Activity of Repeated Intranasal Administration of Ampligen® (Poly I:Poly C12U) in Healthy Subjects.
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Annex 2. Quotation
| [***] |
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Annex 3. Payment Schedule
[***]
Payments to be made to
[***]
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Annex 4. Estimated Timelines
| Signed Protocol, signed contract, IMPD, IB, Insurance certificate | 05 January 2021 |
| Submission to Ethics Committee/Competent Authority (EC/CA) | 11 January 2021 |
| Expected Approval EC/CA | End of January 2021 |
| Delivery drug supplies by Client | End of January 2021 |
| Start Recruitment | 01 February 2021 |
| First Subject First Dose (FSFD) | 05 March 2021 |
| Last Subject Last Dose (LSLD) | 21 June 2021 |
| Database Lock (DBL) | 6 weeks after LSLV |
| Headline results | 3 weeks after DBL |
| First draft Clinical Study Report (CSR) | 9 weeks after DBL |
| Final draft CSR | 2 weeks after receipt of comments on the draft version of CSR |
| Final data transfer | TBD |
NB – all above timelines are subject to any EC/CA approval and Protocol amendments. Furthermore, at the time of signing this Agreement, a global pandemic is in progress involving COVID-19 and therefore the timelines are subject to change according to the measures requested by the Dutch authorities (government, RIVM, IGJ, CCMO) to address the situation at the time of the Project execution.
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Annex 5. List of responsibilities
| ACTIVITY | Client | CHDR | Third Party |
| STUDY START UP | |||
| 1. Design the study | X | X | |
| 2. Write the protocol | X | ||
| 3. Review the protocol | X | X | |
| 4. Prepare CHDR site-specific subject information sheet and informed consent | X | ||
| 5. Prepare IB and IMPD (or SPC when applicable) | X | ||
| 6. Receipt, storage and accountability of drug supplies | X | ||
| 7. Provide labels for PK samples | X | ||
| 8. Prepare randomisation code | X | ||
| STUDY INITIATION | |||
| 1. Collect pre-study documents | X | ||
| 2. Obtain approval from Ethics Committee | X | ||
| STUDY CONDUCT | |||
| 1. Recruitment and screening of subjects | X | ||
| 2. Execute study procedures | X | ||
| 3. Perform subjects’ supervision during study | X | ||
| 4. Perform ongoing procedures described in the protocol | X | ||
| 5. Perform end of study evaluation of subjects | X | ||
| 6. Administration site clinical trial file | X | ||
| 7. Serious Adverse Events (SAE) recording | X | ||
| 8. Notify SAE to Client | X | ||
| 9. Notify SAE to Health Authorities and Ethics Committee | X | ||
| 10. Sample handling | X | ||
| 13. Monitoring by external party | X | ||
| DATA MANAGEMENT | |||
| 1. Development & design of CHDR database (not CDISC) | X | ||
| 2. Data entry (double data entry for CRF) | X | ||
| 3. Data QC | X | ||
| 4. eCRF data entry | X |
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| 5. Address Client queries | X | ||
| 6. Data verification before database lock | X | ||
| 7. Database lock | X | ||
| 8. Integration of PD data or other data in database | X | ||
| PD ASSESSMENT | |||
| 1. Organize shipment of PD samples | X | ||
| 2. PD sample analysis | X | ||
| STATISTICAL ANALYSIS | |||
| 1. Write the Statistical Analysis Plan (SAP) | X | ||
| 2. Review SAP | X | X | |
| 3. Provide Interim safety/PD analysis reports | X | ||
| 4. Provide Blind Data Review (BDR) report | X | ||
5. Perform, PD (incl. non-compartmental analysis) and safety analysis |
X | ||
| 6. Provide safety/PD analysis reports | X | ||
| 7. Review safety/PD analysis reports | X | X | |
| MEDICAL WRITING | |||
| 1. Produce integrated CSR | X | ||
| 2. Prepare scientific publication (Subject to Article 9.1.) | X | X |
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Annex 6
PROCESSOR AGREEMENT
| 1. | AIM ImmunoTech Inc., having its registered office at at 2117 SW Highway 484, Ocala, Florida 34473, United States lawfully represented in this matter by its President and Chief Executive Officer Thomas K. Equels, M.S. J.D. (hereinafter: “the Controller”); and | |
| 2. | Centre for Human Drug Research having its registered office at Zernikedreef 8, 2333CL in Leiden, the Netherlands lawfully represented in this matter by its Chief Executive Officer Prof Dr J. Burggraaf (hereinafter “the Processor”). |
hereinafter also referred to collectively as: “the Parties” and individually as “a Party”;
WHEREAS:
| (a) | the Processor provides services for the benefit of the Controller, as set out in the sponsor agreement between the Client and CHDR (as defined below); | |
| (b) | the services entail the processing of Personal Data, including Data concerning health; | |
| (c) | the Processor solely processes the data concerned on the instructions of the Controller and not for purposes of his own; | |
| (d) | as of 25 May 2018 Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 (General Data Protection Regulation) will be applicable. |
DECLARE TO HAVE AGREED THE FOLLOWING:
Article 1 Definitions
| 1.1. | In this Processor Agreement the following capitalised terms shall have the following meanings |
| a. | General Data Protection Regulation (GDPR): Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC; | |
| b. | Personal Data: any information relating to an identified or identifiable natural person (‘Data Subject’); an identifiable natural person is one who can be identified, directly or indirectly, in particular by reference to an identifier such as a name, an identification number, location data, an online identifier or to one or more factors specific to the physical, physiological, genetic, mental, economic, cultural or social identity of that natural person as defined in article 4 of the GDPR; | |
| c. | Processing: any operation or set of operations which is performed on personal data or on sets of personal data, whether or not by automated means, such as collection, recording, organisation, structuring, storage, adaptation or alteration, retrieval, consultation, use, disclosure by transmission, dissemination or otherwise making available, alignment or combination, restriction, erasure or destruction, as defined in article 4 of the GDPR; | |
| d. | Controller: the natural or legal person, public authority, agency or other body which, alone or jointly with others, determines the purposes and means of the processing of personal data; where the purposes and means of such processing are determined by Union or Member State law, the controller or the specific criteria for its nomination may be provided for by Union or Member State law, as defined in article 4 of the GDPR; |
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| e. | Processor: a natural or legal person, public authority, agency or other body which processes personal data on behalf of the Controller, as defined in article 4 of the GDPR; | |
| f. | Sub-Processor: any non-subordinated third party engaged by the Processor in the processing of Personal Data within the scope of the Agreement, other than Employees; | |
| g. | Third party: a natural or legal person, public authority, agency or body other than the Data Subject, Controller, Processor and persons who, under the direct authority of the controller or processor, are authorised to process personal data, as defined in article 4 of the GDPR; | |
| h. | Consent of the Data Subject any freely given, specific, informed and unambiguous indication of the Data Subject’s wishes by which he or she, by a statement or by a clear affirmative action, signifies agreement to the processing of personal data relating to him or her, as defined in article 4 of the GDPR; | |
| i. | Personal data breach: a breach of security leading to the accidental or unlawful destruction, loss, alteration, unauthorised disclosure of, or access to, personal data transmitted, stored or otherwise processed, as defined in article 4 of the GDPR; | |
| j. | Data concerning health: Personal data related to the physical or mental health of a natural person, including the provision of health care services, which reveal information about his or her health status, as defined in article 4 of the GDPR; | |
| k. | Genetic data: personal data relating to the inherited or acquired genetic characteristics of a natural person which give unique information about the physiology or the health of that natural person and which result, in particular, from an analysis of a biological sample from the natural person in question, as defined in article 4 of the GDPR; | |
| l. | Biometric data: personal data resulting from specific technical processing relating to the physical, physiological or behavioural characteristics of a natural person, which allow or confirm the unique identification of that natural person, such as facial images or dactyloscopic data | |
| m. | Data Protection Officer (DPO): a person who advises, informs and reports independently either of the Parties about the protection of personal data, who acts in accordance with the articles 37-39 of the GDPR; | |
| n. | Incident: means either |
| i | an investigation into or a seizure of Personal Data by government officers or a serious suspicion that this will take place; | |
| ii | a personal data breach within the meaning of article 4(12) GDPR; |
| o. | Agreement: the sponsor agreement between Controller and Processor concerning CHDR2049; | |
| p. | Study Protocol: the document that describes the objective(s), design, methodology, statistical considerations and organisation of a clinical study; | |
| q. | Study: the clinical study as described in the Study Protocol. |
| 1.2. | Wherever this Processor Agreement refers to certain standards, the most recent version of that standard is always referred to. To the extent that the standard concerned is no longer maintained, the most recent version of the logical successor of that standard that represents the state of art in the subject matter of the standard referred to should be read instead. |
Article 2. Subject-Matter of this Processor Agreement
| 2.1. | This Processor Agreement concerns the processing of Personal Data by the Processor on the instructions of the Controller within the scope of the performance of the Agreement or Agreements. |
| 2.2. | The Parties are concluding the Agreement or Agreements in order to make use of the Processor’s expertise in the areas of processing and securing Personal Data for the purposes ensuing from the Agreement or Agreements and further described in this Processor Agreement. The Processor guarantees that he is properly qualified for this purpose. |
| 2.3. | This Processor Agreement forms an inseparable part of the Agreement or Agreements. To the extent that the provisions of the Processor Agreement are inconsistent with the provisions of the Agreement or Agreements, the provisions of the Processor Agreement shall prevail. |
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Article 3. Execution of processing
| 3.1. | The Processor guarantees that he will only process Personal Data for the benefit of the Controller to the extent that: |
| a. | this is necessary for the performance of the Agreement or | |
| b. | the Controller has given further written instructions for that purpose. |
| 3.2. | Within the scope of the provisions of Article 3.1 under a.), the Processor shall only process the Personal Data in accordance with the Agreement and the Study Protocol that is drawn up in accordance with the Agreement. Part of the written instructions within the scope of Article 3.1 under b.) will be the Data Transfer Agreement between the Controller and the Processor specifying the technical method, timelines and specifications of any data transfer. |
| 3.3. | The Processor will only process the types of personal data from the Data Subjects participating in the study, as laid down in the Study Protocol. |
| 3.4. | The Processor shall follow all reasonable instructions given by the Controller in connection with the processing of the Personal Data. The Processor shall immediately inform the Controller if the instructions are – in his view - in breach of the applicable legislation relating to personal data. |
| 3.5. | Without prejudice to the provisions of the first paragraph of this Article 3, the Processor shall be allowed to process Personal Data if any legal requirement (including any court or administrative orders based thereon) requires that processing by him. In that case the Processor shall inform the Controller, before the processing, of the intended processing and the legal requirement, unless that law or court or administrative orders prohibit such information on important grounds of public interest. The Processor shall enable the Controller, where possible, to raise a defence against this mandatory processing and shall also otherwise restrict the mandatory processing to what is strictly necessary. |
| 3.6. | The Processor shall demonstrably process the Personal data in a proper and careful manner and in agreement with his obligations as a Processor under the GDPR, and other laws and regulations. Within that scope the Processor shall in any event maintain a record of the processing activities within the meaning of Article 30 GDPR and provide the Controller with a copy of that record at the latter’s first request. |
| 3.7. | In regard to processing Data concerning health, the Processor guarantees that he will not act in breach of the applicable health legislation. |
| 3.8. | Unless the Processor has obtained the Controller’s explicit prior written consent, he shall not process Personal Data or arrange for the processing of Personal Data by himself or by third parties in countries outside the European Union (“EU”), unless the Processor is legally obliged so by law. If the latter is the case, the Processor informs the Controller of that legal requirement before processing, unless that law prohibits such information. Processing Personal Data or arranging for the processing of Personal Data outside of the EU will take place under the conditions as set out in annex 3. |
| 3.9. | The Processor guarantees that the Employees involved have signed non-disclosure agreements and shall allow the Controller to review these non-disclosure agreements at the latter’s request. Before providing the Controller with a copy of the Study data processed by the Processor, the Processor will pseudonymise the data by removing name and address information of the study subjects. |
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Article 4. Security of Personal Data and monitoring
| 4.1. | The Processor shall demonstrably take appropriate and effective technical and organisational security measures (Annex 2), which correspond, given the state of the art and the costs involved therein, with the nature of the Personal Data to be processed, in order to protect the Personal Data from loss, unauthorised review, corruption or any form of unlawful processing and also to guarantee the (timely) availability of the data. These security measures include measures that may already have been provided for in the Agreement. The measures shall in any event include: |
| a. | measures to ensure that only authorised Employees have access to the Personal Data for the described purposes; | |
| b. | measures ensuring that the Processor and his Employees and Sub-Processors can only access the Personal Data via registered accounts, with an adequate logging of such accounts, which allow access to only the Personal Data which the person or legal person needs to access; | |
| c. | measures to protect the Personal data from accidental or unlawful destruction, accidental loss or amendment or unauthorised or unlawful storage, processing, access or disclosure; | |
| d. | measures for the purpose of identifying weaknesses in relation to the processing of Personal Data in the systems used to provide services to the Controller; | |
| e. | measures to guarantee the timely availability of the Personal Data; | |
| f. | measures to ensure that the Personal Data are separated in a logical way from the Personal Data the Processor is processing either for himself or on behalf of third parties. |
| 4.2. | The Controller shall be entitled to monitor (or arrange for the monitoring of) the compliance with the measures set out above in Articles 4.1 The Processor shall in any event allow the Controller, if so requested by the Controller, to investigate (or arrange for the investigation of) this at least once a year at a time to be determined by mutual agreement between the Parties and, furthermore, whenever the Controller has a reason for doing so, based on information or privacy incidents (or the suspicion that such incidents have occurred). The Processor shall reasonably lend assistance with such an investigation. The Processor shall follow any instructions for the adjustment of his security policies that the Controller may reasonably give following such an investigation, within a reasonable period of time. |
| 4.3. | The Parties acknowledge that security requirements keep changing and that effective security requires frequent reviews and the regular improvement of outdated security measures. The Processor shall therefore periodically review the measures as implemented on the basis of this Article 4 and, where necessary, improve the measures in order to keep meeting the obligations of this Article 4. The foregoing shall not affect the Controller’s power of instruction to take (or arrange for the taking of) additional measures, if necessary. |
Article 5. Monitoring, information duties and incident management
| 5.1. | The Processor shall actively monitor breaches of the security measures and report on any personal data breaches to the Controller in agreement with this Article 5. |
| 5.2. | After becoming aware of an incident, the Processor shall notify the Controller without undue delay and provide the latter on that occasion with all the relevant information about: |
| 1) | the nature of the Incident; | |
| 2) | the Personal data that have or may have been affected; | |
| 3) | the discovered and probable consequences of the Incident; and | |
| 4) | the measures taken or to be taken in order to address the Incident or to limit the consequences/damage as much as possible. |
| 5.3. | Without prejudice to the other obligations of this Article, the Processor shall take the measures he may reasonably be expected to take in order to address the Incident as soon as possible or to limit the further consequences of that Incident as much as possible. The Processor shall consult the Controller without delay in order to make further agreements about this subject. |
| 5.4. | The Controller hereby instructs the Processor in advance to investigate an Incident, formulate a correct response and take appropriate follow-up steps with regard to the Incident. If the Dutch Data Protection Authority (“Autoriteit Persoonsgegevens”) needs to be notified, the Controller will instruct the Processor accordingly. This also applies to the Data Subject as provided in Article 5.7. |
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| 5.5. | The Processor shall always have written procedures in place which enable him to provide the Controller with an immediate reaction in respect of an Incident and to effectively cooperate with the Controller in order to handle the Incident. The Processor shall provide the Controller with a copy of such procedures, if so requested by the Controller. |
| 5.6. | Any notifications pursuant to Article 5.2 shall be immediately directed to the Controller or, if relevant, to the Employees of the Controller as identified by the Controller in writing during the term of this Processor Agreement. If the Controller has appointed a Data Protection Officer (DPO), the notifications shall be directed to this DPO. |
| 5.7. | The Processor may not provide information about Incidents to Data Subjects or other third parties, except where the Processor has a legal obligation to do so or the Parties have so agreed otherwise. |
| 5.8. | If and to the extent that the Parties have agreed that the Processor shall have direct contact with the authorities or other third parties with regard to an Incident, then the Processor shall keep the Controller informed hereof on a continuous basis. |
Article 6. Assistance duties
| 6.1. | The GDPR and other (privacy) legislation grant Data Subjects certain rights. The Processor shall assist the Controller in such manner as described in the Agreement |
| 6.2. | The Processor shall forward any complaint by or request from a Data Subject relating to the processing of Personal Data that he has received to the Controller without delay. CHDR will remove any information that can lead to identification of the study subject and ensure that the information can be identified only by the study number. |
| 6.3. | On the Controller’s first request the Processor shall provide the Controller with all the relevant information on the aspects of his processing of the Personal Data, so that the Controller can demonstrate, partly on the basis of that information, that he is complying with the applicable (privacy) legislation. |
| 6.4. | On the Controller’s first request the Processor shall also lend all the required assistance with the performance of the legal obligations the Controller has under the applicable privacy legislation (such as performing a PIA). |
Article 7. Engagement of Sub-Processors
| 7.1. | The Processor shall not outsource his activities that consist of the processing of Personal Data or that require the processing of Personal Data to a Sub-Processor without the Controller’s prior written consent. The foregoing shall not apply to the Sub-Processors mentioned in Annex 1, of which the Controller has ascertained that the processing is within the mandate given to the Processor under this Processing Agreement. |
| 7.2. | Where the Controller consents to the engagement of a Sub-Processor, the Processor shall impose obligations on this Sub-Processor that are (at minimum) equal to the Processor’s own obligations under the Processor Agreement or the law and which shall fit within the scope of the processing mandate granted to Processor under this Processing Agreement. The Processor shall record these arrangements in writing and shall monitor their compliance by the Sub-Processor. In particular, the Processor shall impose on the Sub-Processor the obligation to implement appropriate technical and organizational measures in such a manner that the processing will meet all obligations under the GDPR. The Processor shall provide the Controller with a copy of the agreement or agreements entered into with the Sub-Processor at the Controller’s request. |
| 7.3. | The Controller’s consent for the outsourcing of work to a Sub-Processor does not alter the fact that the use of Sub-Processors in a non-EU country requires consent in agreement with Article 3.7 of this Processor Agreement. |
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Article 8. Confidentiality
| 8.1. | The processor is obliged to keep any Personal Data received from or processed for the Controller confidential. |
| 8.2. | Each Party shall keep any information received from the other Party confidential unless |
| a. | The other Party has given explicit consent in writing, | |
| b. | The information is already public without the interference of the receiving Party, | |
| c. | The processor is legally obliged to provide the information because of a law suit or a legal obligation. |
| 8.3. | If article 8.2 under c is applicable, the Processor informs the Controller of that legal requirement before processing, unless that law prohibits such information. |
Article 9. Liability
| 9.1. | Each Party shall be responsible and liable for his own actions. |
| 9.2. | The Controller shall indemnify the Processor and hold the Processor harmless from all claims, actions, rights of third parties and fines and other enforcement actions of the any Data Protection Authority which are the immediate consequence of an imputable shortcoming by the Controller and/or his contractors and/or Processors in the performance of his obligations under this Processor Agreement and/or any violation of the GDPR by the Controller and/or his contractors and/or Processors. The same holds true for any liability coming forth from an action or omission of any Sub-Processor contracted by Processor for the purposes of the execution of the Agreement and/or this Processing Agreement. |
| 9.3. | Any restriction of liability shall also cease to apply for the Party concerned in the case of an intentional act or omission or gross negligence on the part of that Party. |
| 9.4. | Parties agree that in case of discrepancies pertaining to liability between the Processor Agreement and the Agreement, the Processor Agreement prevails. |
Article 11. Term and termination
| 11.1. | This Processor Agreement shall take effect on the date on which it is signed. The Processor Agreement shall end 25 years after database lock. |
| 11.2. | After it has been signed by both parties, the Processor Agreement shall form an integral and inseparable part of the Agreement. However, termination of the Agreement on any ground whatsoever does not terminate the Processor Agreement, unless the Parties agree otherwise in writing. |
| 11.3. | Obligations which are intended to continue also after the termination of this Processor Agreement in view of their nature shall continue to apply after the termination of this Processor Agreement. These provisions for instance include those which ensue from the provisions on confidentiality, liability, dispute resolution and the applicable law. |
| 11.4. | Without prejudice to the provisions on this subject in the Agreement, either Party shall be entitled to suspend the performance of this Processor Agreement and the Agreement relating to it or to dissolve it with immediate effect without the intervention of the court, if: |
| g. | the other Party is dissolved or ceases to exist otherwise; | |
| h. | the other Party materially fails in the performance of his obligations under this Processor Agreement and that failure has not been remedied within 30 days following written notice of default; | |
| i. | either Party is declared bankrupt or applies for a moratorium. |
| 11.5. | The Controller shall be entitled to dissolve (“ontbinden”) this Processor Agreement and the Agreement with immediate effect, if the Processor indicates that he is not able (or no longer able) to comply with the reliability requirements imposed on personal data processing in the legislation and/or in the case-law. |
| 11.6. | Without the Controller’s explicit and written consent, the Processor may not transfer this Processor Agreement and the rights and obligations connected with this Processor Agreement to a third party. |
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Article 12. Retention period of Personal Data
| 12.1. | The Processor shall not retain the Personal Data any longer than is strictly necessary in any form that can lead to the identification of the Data Subject, taking into account the retention period as laid down in the Agreement. The Controller instructs the Processor to anonymize the Personal Data after the retention period has lapsed. |
| 12.2. | At the choice of the Controller, the Processor deletes or returns all the personal data to the Controller after the end of the provision of services relating to processing, and deletes existing copies unless Union or Dutch law requires storage of the personal data, pursuant to article 28(3)(g) of the GDPR, for as far as this is compatible with ICH-GCP and the applicable Dutch legislation pertaining to clinical studies. |
Article 13. Intellectual Property Rights
| 13.1. | To the extent that the Personal Data or their collection is protected by an intellectual property right, the Controller grants the Processor consent to use the Personal Data within the scope of the performance of this Processor Agreement, the Agreement and the Study Protocol. |
Article 14. Final provisions
| 14.1. | The recitals form an inseparable part of this Processor Agreement. |
| 14.2. | If one or more of the provisions of this Processor Agreement are null and void or voidable, the other provisions shall continue in full effect. |
| 14.3. | This Processor Agreement can only be changed upon written consent of both Parties. |
| 14.4. | The Parties shall endeavor to resolve any conflicts by mutual agreement. This includes the possibility of ending the dispute by means of mediation to be decided by mutual agreement. |
| 14.5. | All notices from one Party to the other will be in writing to the address set forth hence after. Notices shall be sent by overnight courier, certified mail, return receipt requested or by other means of a delivery requiring a written acknowledged receipt. All notices shall be effective upon receipt. |
Contact details Controller
DPO:
Jelmer Pieters MBA CIPP/E
[***]
Contact details Processor:
| [***] |
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Article 15 Applicable law and competent court
| 15.1. | This Processor Agreement is exclusively governed and construed in accordance with the laws of the Netherlands. |
| 15.2. | Any disputes regarding or in connection with the Processing Agreement shall be exclusively decided by arbitration. The number of arbitrators shall be three. Each party shall choose one arbiter, whom together shall appoint the third arbitrators. The seat of arbitration shall be the Netherland. The governing laws shall be the laws of the Netherlands. |
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This Processor Agreement is drawn up in duplicate and signed in:
| Leiden on 31/01/2021 | Ocala, Florida USA on 01/29/2021 |
| /s/ Dr Jacobus Burggraaf | /s/ Peter W. Rodino | |
| Centre for Human Drug Research | AIM ImmunoTech Inc. | |
| Prof Dr Jacobus Burggraaf | Peter W. Rodino, III | |
| Chief Executive Officer | General Counsel |
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Annex 1 Sub-Processors
Pharmacy:
Apotheek LUMC
LUMC, L0-P30, Albinusdreef 2, 2333 ZA Leiden, The Netherlands
Safety Laboratory Analysis:
Afdeling Klinische Chemie en Laboratoriumgeneeskunde (AKCL)
LUMC, E2-P, Albinusdreef 2, Leiden, 2333ZA, Netherlands
Safety Laboratory Analysis (microbiology):
Centraal Klinisch Microbiologisch Laboratorium (CKML)
LUMC, E4-P, Albinusdreef 2, Leiden, 2333ZA, Netherlands
Archive management
Iron Mountain Nederland B.V.
Cairostraat 1
3047 BB Rotterdam
Cloud
services
Microsoft Azure
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Annex
2 Technical and Organizational Measures of Processor
The Processor shall implement and maintain the following technical and organizational measures:
| (1) Access control to premises and facilities |
| Measures to prevent unauthorised persons from gaining access to data processing systems with which Personal Data are processed or used: |
| Measure | Check applicable | |
| Are the access points secured? | [X] | |
| Which measures are in place to ensure access control? | ||
| – Magnetic card | [X] | |
| – Chip card | [ ] | |
| – Key | [ ] | |
| – Works security | [ ] | |
| – Surveillance facilities | [X] | |
| – CCTV | [X] | |
| – alarm system | [X] | |
| – Others: | [ ] | |
| Admission control system to restrict access to authorized employees | [X] | |
| Porter (24/7) | [ ] | |
| Regulations regarding external staff, cleaning staff, and visitors | [X] | |
| Regulations of access control regarding telecommuters/homeworkers | [X] | |
| (2) Access control to systems | ||
| Measures to prevent data processing systems from being used without authorisation: | ||
| Measure | Check applicable | |
| Determined, secured storage places for data carriers (e.g. USB sticks) | [X] | |
| Only authorized persons can access data carriers | [X] | |
| Data carriers are management according to a determined process | [X] | |
| Data carriers for different principals are kept separately | [ ] | |
| Data carriers can be securely destroyed | [X] | |
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| (3) Access control to data | ||
| Measures to ensure that persons entitled to use a data processing system have access only to the data to which they have a right of access, and that Personal Data cannot be read, copied, modified or removed without authorisation in the course of processing or use and after storage: | ||
| Measure | Check applicable | |
| Only authorized persons can access IT systems | [X] | |
| There are differing permissions for example for reading, deleting, changing | [X] | |
| There are differing permissions for access to data, applications, and operating system | [X] | |
| There is a process to regulate data recovery from a backup | [X] | |
| The use of applications and files is recorded | [X] | |
| Testing and production environments are separate | [X] | |
| (4) Transmission control | ||
| Measures to ensure that Personal Data cannot be read, copied, modified or removed without authorisation during electronic transmission or during their transport or storage on data media, and that it is possible to check and establish to which bodies a transfer of Personal Data by means of data transmission facilities is envisaged: | ||
| Measure | Check applicable | |
| Data carriers are sent securely | [X] | |
| Data carrier transports are escorted | [ ] | |
| All data is transmitted only in encrypted form | [X] | |
| E-mail is sent encrypted | [X] | |
| Data transfers are secured through an encrypted VPN or similar | [X] | |
| Only authorized persons can transfer and receive data Dedicated Data Transfer Agreement will be concluded for each study as agreed per Article 3.2. | [X] | |
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| (5) Data entry control | ||
| Measures to ensure that it is possible to subsequently check and establish whether and by whom Personal Data have been input into, modified in, or removed from, data processing systems: | ||
| Measure | Check applicable | |
| Only persons with specific permissions can enter data | [X] | |
| Data entry is recorded | [X] | |
| Administrative action (for example changing user permissions) is recorded | [X] | |
| (6) Data Processing control | ||
| Measures to ensure that Personal Data processed on a commissioned basis are processed strictly in accordance with the instructions of the principal: | ||
| Measure | Check applicable | |
| Employees are given express data protection instructions | [X] | |
| Employees are bound by secrecy obligations | [X] | |
| (7) Availability control | ||
| Measures to ensure that Personal Data are protected from accidental destruction or loss: | ||
| Measure Check applicable | ||
| A data backup maintained on at least a daily basis | [X] | |
| Data carriers are stored disaster-proof | [X] | |
| There is a determined process in case of emergencies | [X] | |
| Systems are redundant | [X] | |
| There is an uninterruptible power source | [X] | |
| A business continuity management policy is place | [X] | |
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| (8) Separation control | ||
| Measures to ensure that data collected for different purposes are processed separately: | ||
| Measure | Check applicable | |
| Data of principals are kept on physically separated systems | [ ] | |
| Data of principals are kept logically separated | [X] | |
| Different employees deal with the data of different | [ ] | |
| Backups are kept physically separated for different principals | [ ] | |
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Annex 3. Processing outside of the EU
Introduction
Transfers are not defined in the GDPR. However, article 44 of the GDPR indicates that any transfers to third countries or international organizations may not take place unless the transfer is compliant with chapter V of the GDPR. CHDR interprets transfer as meaning both (1) the act of sending data actively to a party located in another country outside of the EU and (2) entering the data in a system that is hosted in a country outside of the EU. Furthermore, any possibility for processing the personal data from a location located outside the EU shall be qualified as transfer.
As indicated in article 3.8 of this Processor Agreement, the Parties will describe in this annex on which ground an international transfer of personal data outside of the EU shall take place. Below, three steps have been described. The Parties will have to verify step-by-step whether one of the steps applies.
Please note that the Parties cannot choose on which lawful basis they will transfer the data to a third party in a country outside of the EU. If Step I applies, that will be the basis for the transfer. Only if a step is not applicable, Parties may proceed with the following step.
The Parties will then need to indicate on which legal basis the transfers shall be based and will indicate which data shall be transferred to which party and country.
Step I.
Please check and indicate whether the Controller or any third party (including sub-processors) to whom the data is sent (hereinafter: “Receiving Party”) is located in a country within the EU. If that is the case, this annex is not applicable. If the Receiving Party is located outside the EU, please verify whether there is an adequacy decision for the country in which the Receiving Party is located via the following web-link: https://ec.europa.eu/info/law/law-topic/data-protection/data-transfers-outside-eu/adequacy-protection-personal-data-non-eu-countries_en
On the 1 October 2020, the European Commission had recognized:
| ● | Andorra; | |
| ● | Argentina; | |
| ● | Canada (commercial organizations); | |
| ● | Faroe islands, | |
| ● | Guernsey; | |
| ● | Israel; | |
| ● | Isle of Man; | |
| ● | Japan | |
| ● | Jersey; | |
| ● | New Zealand; | |
| ● | Switzerland; | |
| ● | Uruguay; |
As providing adequate protection.
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If there is an adequacy decision, the personal data can be transferred to the third country based on the adequacy decision.
Please indicate in the text box below that the processing will take place based on an adequacy decision, if that is the case.
Please indicate here whether an Adequacy decision is applicable and for which country:
………………………………………..third country: ………………………………
Step II.
If there is no adequacy decision, please verify whether appropriate safeguards have been provided by the Receiving Party. These can be:
| (a) | a legally binding and enforceable instrument between public authorities or bodies; | |
| (b) | binding corporate rules in accordance with Article 47 GDPR; | |
| (c) | standard data protection clauses adopted by the Commission in accordance with the examination procedure referred to in Article 93(2) GDPR; | |
| (d) | standard data protection clauses adopted by a supervisory authority and approved by the Commission pursuant to the examination procedure referred to in Article 93(2) of the GDPR; | |
| (e) | an approved code of conduct pursuant to Article 40 GDPR together with binding and enforceable commitments of the controller or processor in the third country to apply the appropriate safeguards, including as regards data subjects’ rights; or | |
| (f) | an approved certification mechanism pursuant to Article 42 GDPR together with binding and enforceable commitments of the controller or processor in the third country to apply the appropriate safeguards, including as regards data subjects’ rights. | |
| (g) | contractual clauses between the controller or processor and the controller, processor or the recipient of the personal data in the third country or international organization; subject to authorization from the competent supervisory authority; or | |
| (h) | provisions to be inserted into administrative arrangements between public authorities or bodies which include enforceable and effective data subject rights, subject to authorization of the competent supervisory authorities . |
In addition to the existence of appropriate safeguards, CHDR has to verify with the Receiving Party that enforceable data subject rights and effective legal remedies for data subjects are available. If that is the case, please indicate below in the text box on which appropriate safeguards the personal data will be transferred.
Please indicate which appropriate safeguards have been provided by the Receiving Party: …………………………………………………………………..
CHDR has asked the Receiving Party if enforceable data subject rights and effective legal remedies for data subjects are available. The answer was:
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If the answer was: there are no appropriate safeguards or if there are appropriate safeguards but no enforceable data subject rights or effective legal remedies available for data subjects, please proceed to Step III.
Step III.
If there are no appropriate safeguards, the transfer of the data is only allowed if one of the conditions named in article 49(1) of the GDPR applies. The Parties will then only be allowed to transfer the data if the data
subject has explicitly consented to the proposed transfer after having been informed of the possible risks of such transfers for the data subjects due to the absence of an adequacy decision and appropriate safeguards. Please note that all requirements for consent under the GDPR need to be met.
Please amend the informed consent document for the study accordingly and indicate below in the textbox on which grounds the transfer will take place.
Please confirm here that there is no adequacy decision by the European Commission, that there are no appropriate safeguards and that therefore the lawful basis of the transfer is explicit consent: we confirm that there is no adequacy decision by the European Commission and that there are no appropriate safeguards. Therefore, the lawful basis of the transfer is explicit consent.
EXHIBIT 10.77
EXPLANATORY NOTE: [***] INDICATES THE PORTION OF THIS EXHIBIT
THAT HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND
(II) WOULD BE COMPETITIVELY HARMFUL IN PUBLICLY DISCLOSED.
MATERIAL TRANSFER AND RESEARCH AGREEMENT
This Agreement is made as of November 29, 2020 (“Effective Date”) by and between AIM IMMUNOTECH INC. (“AIM”), a corporation incorporated under the laws of Delaware, having an Offices at 2117 SW Hwy 484 Ocala Fl 34473 as the supplier of the experimental drug Ampligen® and Ronald Brus, individually and on behalf of Leyden Laboratories, B.V. (“Leyden Labs”) having an office at Keizersgracht 290A, 1016 EW Amsterdam, The Netherlands, (together referred to as “Companies”). AIM and Leyden Labs shall be referred to individually as a “Party” and together as the “Parties.”
WHEREAS, the Leyden Labs wishes to receive Confidential Information (as defined below) pertaining to AIM’s inventions and know-how and also receive samples of AIM’s drug Ampligen®, solely for purposes of conducting studies described in Exhibits A and B (“Research Projects”). It is the shared goal of the Parties to translate what is learned into clinical research projects involving patients. This, it is understood, would require a separate license agreement, and
WHEREAS, AIM is willing to provide Ampligen® to Leyden Labs solely for purposes of conducting Research Projects on the following terms and conditions, and
WHEREAS, the Parties agree that the commitments under this Agreement are not exclusive and that any Party may enter into similar agreements with third parties.
WHEREAS, AIM is providing Rintatolimod, also known as Ampligen® (“Study Drug”) and information to Leyden Labs to perform the two experiments attached as Exhibits A and B (Research Projects).
WHEREAS, this study is specific to a broad spectrum anti-viral prophylaxis principally intranasally and not as a part of any vaccine program.
NOW THEREFORE, in consideration of the premises and the mutual agreements and undertakings herein set forth, Leyden Labs and AIM hereby agree as follows:
1. DEFINITIONS. Whenever used in this Agreement, the following terms will have the following meanings:
1.1 “Confidential Information” means any confidential or proprietary information, knowledge, intellectual property including but not limited to trade secrets and unpublished patent applications, pre-clinical and clinical information or data, technical and/or non-technical material or property, relating to RNA pharmaceutical products and technologies, including but not limited to double-stranded RNA compounds and in particular the double-stranded RNA compound trademarked Ampligen® provided under this Agreement. A party disclosing Confidential Information shall be a “disclosing party” and a party receiving same shall be a “receiving party.” The Confidential Information disclosed or provided by the disclosing party under this Agreement is additionally governed by the Mutual Confidentiality Agreement between the Parties, dated as of October 23, 2020 (“Confidentiality Agreement”) which is incorporated by reference herein. Confidential Information also includes Trade Secret. Trade Secret means any information, including a formula, pattern, compilation, program, device, method, technique, or process that (i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can derive economic value from its disclosure or use and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
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1.2 “Material Events” means events, as AIM is a public company therefore, any agreements in AIM’s judgement, that are required to be publicly disclosed under Federal and state securities laws, rules and regulations, including events that AIM has customarily disclosed in the past, including this agreement, will be considered material and as such reports will be filed in AIMs 8K, 10K and 10Qs that address AIM’s contractual relationships.
2. PROVIDING OF MATERIAL FOR THE RESEARCH PROJECTS.
2.1 AIM shall provide to the Company such Ampligen® [***] as described in Exhibits A and B which as may be reasonably requested by the Company from time to time for purposes of the Research Projects, and shall be used by Leyden Labs solely for the purpose of conducting the Research Projects ( exhibits A&B).
2.2 The Parties shall provide to each other such Confidential Information as is necessary for purposes of the Research Projects. The Parties shall exercise reasonable efforts to maintain the confidentiality of the Confidential Information.
2.3 Leyden Labs will utilize the Confidential Information exchanged and Ampligen provided solely for the purposes of conducting the Research Projects and will not provide Ampligen to other entities outside of Leyden Labs without the express permission of AIM.
2.4 Leyden Labs will promptly and diligently pursue the Research Projects in a scientific manner, documenting in reproducible form the work performed and results achieved in pursuing the Research Projects and disclose updates on the Research Projects to AIM as described in Article 5 herein.
2.5 Due to research regulations Ampligen will be shipped as frozen Aliquots directly to Leyden Labs with appropriate instructions for storage and use.
3. INTELLECTUAL PROPERTY.
3.1 Ownership of and title to all trademarks, patents and other intellectual property rights in all inventions, discoveries, and other intellectual property (all herein “Intellectual Property”) which are made, conceived, reduced to practice, generated by or arising out of the Research Projects under this Agreement shall follow inventorship under U.S. patent and trademark law. Inventions made solely by Leyden Labs shall be owned solely by the Leyden Labs. Inventions made by the Parties shall be owned by the Parties jointly.
3.2 Nothing in the Agreement should be construed as a license or authorization from AIM for any use of any of AIM’s trademarks including the trademark Ampligen®.
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3.3 Inventions made solely by AIM include, at least, all patents and patent applications including provisional patent applications, whether published or unpublished, filed by AIM, assigned to AIM, or issued to AIM in the United States, Holland and worldwide. These inventions made solely by AIM, including multiple patents and applications, and including patents and patent applications comprising Ampligen®, and also including any composition comprising Ampligen® or a therapeutic double-stranded RNA, are owned solely by AIM. Nothing in this Agreement should be construed as a license to any intellectual property, patents, and patent applications owned solely by AIM. However, AIM is willing to negotiate a license to these intellectual property and developments.
3.4 AIM currently has Ampligen and therapeutic double-stranded RNA, as a broad spectrum anti-viral prophylaxis, as part of provisional patent applications and any rights to it for this purpose would have to part of a separate commercial agreement and it is understood by Leyden that AIM has the priority associated with the existing provisional patents. Further, it is understood that AIM may have “provisional rights” in existing patent applications, for example, after their publication.
4. CONFIDENTIALITY.
4.1 Please see the attached Mutual Confidentiality Agreement signed and dated by all Parties which remains in full force and effect and which is incorporated by reference in Section 1.1.
5. DISCLOSURE
5.1 Results of the Research Projects (“Results”) including efficacy and safety data are provided without warranty of any type and Leyden Labs shall not be liable to AIM in any way for use of such Results. AIM is authorized to use updates of data as they are made available to AIM, including data from pre-clinical studies which is needed for submission to the FDA, other regulatory bodies and timely disclosure of Material Events to the public or where it is needed to comply with applicable laws and regulations. The Parties shall not publish or present the Results without prior written consent of the other Party, which consent shall not be unreasonably withheld.
5.2 Leyden Labs will provide AIM with a report every three (3) months and with a final written report within sixty (60) days after the conclusion of Research Projects described in Exhibits A and B. If requested by AIM, Leyden Labs will confirm within a reasonable period of time, but no later than thirty (30) days, any oral progress reports with follow-up summary written reports. The written reports will include descriptions of the methods used and results obtained together with any other pertinent findings from the Research Projects.
6. INDEMNIFICATION
6.1 The Parties shall indemnify, defend and hold harmless the other Party, its directors, officers, employees against any third party claims, including reasonable attorney’s fees for defending those claims (each, a “Claim”), to the extent a Claim arises out of improper use, storage, or disposal of the drug(s), unless such Claim is solely due to the gross negligence or material and willful misconduct of the indemnified Party.
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7. TERMINATION.
7.1 This Agreement shall terminate upon the earlier of (a) the completion of the Research Projects, (b) the written agreement signed by authorized representatives of the Company, or (c) one (1) year from the Effective Date; provided that, the provisions of Articles 3, 4 and 6, and Section 8.5 and 8.6 shall survive the termination of this Agreement indefinitely.
8. MISCELLANEOUS.
8.1 Notices. All notices required or permitted to be given under this Agreement will be given in writing and will be effective when either personally delivered (including delivery by Federal Express or other internationally recognized courier), or when sent by facsimile, addressed as follows:
To Leyden Laboratories, B.V.:
Dennis de Vlaam
Keizersgracht 290 A
1016 EW Amsterdam
The Netherlands
+31-652-643-650
Dennis.devlaam@Leydenlabs.com
To AIM ImmunoTech Inc.:
Thomas K. Equels
AIM ImmunoTech Inc.
2117 SW Highway 484
Ocala, Florida 34473
Or such other address as each Party may hereinafter specify by written notice to the other under this Section 8.1. Such notices and communications will be deemed effective on the date of personal delivery or upon confirmed answer back by facsimile.
8.2 Entire Agreement; Amendment and Waivers. This Agreement, including the Confidentiality Agreement incorporated in this Agreement, is the entire agreement between Leyden Labs and AIM with respect to the specific subject matter hereof. This Agreement may not be modified, amended or terminated, nor may any term hereof be waived, except by an instrument in writing, signed by authorized representatives of both Leyden Labs and AIM.
8.3 Severability; Enforcement. If any provision of this Agreement, or the application thereof to any person, place, or circumstance, is held by a court of competent jurisdiction to be invalid, unenforceable, or void, as written, in whole or in part, such provision will be deemed to be amended to the extent necessary to be enforceable and applied by such court in the broadest possible manner, consistent with enforceability, and the remainder of this Agreement and such provisions as applied to other persons, places, and circumstances will remain in full force and effect.
8.4 Assignment; Binding Effect. This Agreement may not be assigned, nor may any of the rights or obligations be delegated, without the prior approval of both Parties.
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8.5 Remedies. The Parties agree that in the event of any breach or threatened breach of any of the covenants herein, the damage or imminent damage to the value and the goodwill of a Party may be irreparable and extremely difficult to estimate, making any remedy extremely difficult to estimate, and/or making any remedy at law or in damages inadequate. Accordingly, the Parties agree that they will be entitled to seek injunctive relief against the other Party in the event of any breach of any such terms of this Agreement, in addition to any other relief (including damages) available under this Agreement or under law.
8.6 Governing Law. The validity, interpretation, enforceability, and performance of this Agreement will be governed by and construed in accordance with the laws of the State of Florida, U.S.A. without regard to the application of conflict laws.
8.7 Force Majeure. No Party will be liable to the other for any failure or delay in the performance of its obligations to the extent such failure or delay is caused by fire, flood, earthquakes, other elements of nature, acts of war, terrorism, riots, civil disorders, rebellions or revolutions, disease, epidemics, quarantines, pandemics, acts of government, a declared state of emergency, delays in visas, changes in laws and governmental policies, or other conditions beyond its reasonable control following execution of this Agreement. If the performance by either Party of any of its obligations under this Agreement (including making a payment) is prevented by any such circumstances, then such Party shall communicate the situation to the other as soon as possible, and the Parties shall endeavor to limit the impact to the Projects. The Parties agree to mitigate risks to the Research Projects and personnel, and to amend Research Projects period of performance and milestones if possible.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date.
| AIM ImmunoTech, Inc. | |||
| By: | /s/ Peter W. Rodino | Date: November 27, 2020 | |
| Name: | Peter. W. Rodino | ||
| Title: | General Counsel | ||
| Leyden Labs & Co., Ltd. | |||
| By: | /s/ Ronald Brus | Date: 26 November 2020 | |
| Name: | Ronald Brus | ||
| Title: | jointly authorized director | ||
| By: | /s/ Dinko Valerio | Date: 23 November 2020 | |
| Name: | Dinko Valerio | ||
| Title: | jointly authorized director | ||
| Ronald Brus | |||
| By: | /s/Ronald Brus | Date: 26 November 2020 | |
| Name: | Ronald Brus | ||
| Title: | |||
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Exhibit A – Research Projects
Assessment of protective potential of intranasal administration of Ampligen in SARS-CoV-2 Syrian hamster challenge model.
Following intranasal infection of hamsters SARS-CoV-2 virus replicates efficiently in the lungs, causing severe pathological lung lesions sharing characteristics with SARS-CoV-2−infected human lung. We will perform a dose-finding study with Ampligen in Syrian hamsters. (Dose and Schedule to be discussed and agreed upon with AIM)
Hamsters [***]
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Exhibit B – Research Project
Research outline for Ampligen dose finding studies in mouse influenza challenge model.
Assessment of protective potential of intranasal administration of Ampligen in lethal influenza mouse challenge model.
Study Outline:
[***]
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CONFIDENTIALITY AGREEMENT
This Mutual Confidentiality Agreement (“Agreement”) is entered into as of October 23, 2020 (the “Effective Date”) between Leyden Laboratories B.V., located at Keizersgracht 290 A. 1016 EW Amsterdam, the Netherlands (“Leyden Labs”) and AIM ImmunoTech Inc located at 2117 SW Highway 484, Ocala FL 34473 (“AIM”). Leyden Labs and AIM shall be hereinafter sometimes referred to individually as a “Party” and collectively as the “Parties.”
RECITALS
WHEREAS, both Parties are in possession of certain information, more specifically related to vaccine technologies, adjuvant technologies and the combination of these technologies that each Party believes might be of interest to the other and each Party desires to disclose such information to explore possible opportunities to exploit this information in a mutually beneficial manner (the “Purpose of this Agreement”).
WHEREAS, in accomplishing the Purpose of this Agreement Leyden and AIM may exchange information which (1) defined below and (2) is related to the Purpose of this Agreement, (hereinafter “Confidential Information”); and
WHEREAS, Leyden Labs and AIM wish to set forth their understanding as to how Confidential Information will be treated in achieving the Purpose of this Agreement.
NOW, THEREFORE, in consideration of the premises set forth above and the mutual covenants hereinafter set forth and other good and valuable consideration the sufficiency of which is hereby acknowledged, Leyden Labs and AIM, intending to be legally hereby agree as follows:
AGREEMENT
| 1. | Disclosure. Leyden Labs and AIM may each disclose to the other certain Confidential Information in accomplishing the Purpose of this Agreement. All Confidential Information shall be deemed proprietary information. |
| 2. | Confidential Information. The term Confidential Information means all technical data, information, reports, presentation materials, interpretations, forecasts and other records to the extent they contain information which is not available to the general public and which either party provides to the other under this Agreement (including, without limitation, descriptions, discoveries, know-how, trade secrets, inventions, patent disclosures and applications, drawings, tests, results, recombinant DNA vectors, genes, cell lines, experimental designs and protocols, biological materials, application devices, samples, design prototypes, and related information). To the extent practicable, confidential information may be disclosed, orally or visually, in documentary, tangible, intangible, or electronic form. Confidential Information also shall include any opinions, judgments or recommendations developed or information derived from Confidential Information. |
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| 3. | Exceptions. The obligations regarding Confidential Information under this Agreement shall not apply to any information which: |
| (a) | Is or becomes available to the general public without fault of the party which received such information; | |
| (b) | Was previously known to the party receiving the information through no fault of the Party to the Agreement disclosing the information, as evidenced by tangible, or electronic records or other competent evidence and the receiving party is not subject to a Confidentiality Agreement with the nondisclosing Party of this Agreement; | |
| (c) | Subsequently is rightfully obtained from a third party who lawfully possessed the information and who had the right to make such disclosures; | |
| (d) | Is independently developed by the Party receiving the information without the assistance of Confidential Information as evidenced by tangible, or electronic records or other competent evidence. | |
| The disclosing party’s Confidential Information may be disclosed by the receiving party as required to be disclosed to the public directly or be accessed by a freedom of information request as a result of an order of a court of law or other governmental body, provided the receiving party gives the disclosing party prompt written notice of such requirement prior to such disclosure and assistance in obtaining an order protecting the information from public disclosure. | ||
| 4. | Use and Obligations. Confidential Information shall be used exclusively for accomplishing the Purpose of this Agreement. Confidential Information shall not become the property of the Party receiving the Confidential Information, shall be kept confidential and shall be protected from disclosure by that Party exercising at least the same degree of care as it uses to protect its own proprietary information. Furthermore, no right is granted to make, sue, or sell materials described in the Confidential Information. Any employee, consultant or other agent to whom a recipient Party discloses Confidential Information must be subject to confidentiality obligations covering the Confidential Information to the same or greater extent as the recipient Party is obligated by this Agreement. Each Party will keep a record of the location of the Confidential Information. |
| 5. | Procedure for Required Disclosure. In the event that Leyden Labs or AIM is requested or required to disclose (i) any Confidential Information or (ii) any opinions, judgments or recommendations developed from the Confidential Information, the Party holding the Confidential Information will, prior to disclosing such Confidential Information, provide the other Party with prompt notice of such requests(s) or requirements(s) so that the other Party may seek appropriate legal protection or waive compliance with the provisions of this Agreement. If no legal protection or waiver is obtained and the Party holding the Confidential Information is, in the opinion of its counsel, compelled by law to disclose certain Confidential Information, it may disclose that Confidential Information. The Party holding the Confidential Information will not oppose action by and will cooperate with the Party to obtain legal protection or other reliable assurance that confidential treatment will be accorded the Confidential Information. |
| 6. | Return of Confidential Information. At the request of either Party, the other Party and its representatives shall (a) within fourteen (14) days return or destroy all physical representations of the Confidential Information; and (b) not retain any copies, extracts or reproductions in whole or in part of such written Confidential Information, except for one copy retained for legal archival purposes. The obligation to destroy or return does not apply to Confidential Information that is stored on back-up tapes and similar media that are not readily accessible to the receiving Party. |
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| 7. | Accuracy and Completeness. Neither the Party providing the Confidential Information nor any of its representatives make any representation, express or implied, as to the accuracy or completeness of the Confidential Information. The Party providing the Confidential Information and its representatives shall not have any liability relating to or resulting from the use of the Confidential Information or any errors therein or omissions therefrom. |
| 8. | Confidentiality of the Exchange. Neither Leyden Labs nor AIM shall disclose that Confidential Information has been made available, that discussions or negotiations are taking place concerning a possible transaction involving the Parties or any of the terms, conditions or other facts with respect thereto. |
| 9. | No Rights or License Granted. No disclosure to either Party hereunder shall be construed to grant to the receiving Party any rights whatever to or license to the providing Parties Confidential Information, patents, inventions and proprietary information, or any innovation, invention, technological development, product, or materials or information that is the result of either Parties use of such Confidential Information, in all events except as otherwise provided in a separate express written agreement between and among the Parties hereto. |
| 10. | No Formal Business Obligations. Each Party agrees that unless and until a definitive agreement between the parties with respect to any business relationship or transaction has been executed and delivered, neither Party shall be under any legal obligation to the other Party of any kind whatsoever with respect to any business arrangement or transaction by virtue of this Agreement or any written or oral expression with respect to such business arrangement or transaction by any of its directors, officers, employees, agents or any other representatives or its advisors, except for the matters specifically agreed to in this Agreement. Each Party further agrees that neither Party shall have any obligation to authorize or pursue with the other or any other Party any business arrangement or transaction. Each Party understands that the other Party has, as of the date hereof, not authorized any such arrangement or transaction. |
| 11. | Term; Termination. This Agreement will be effective as of the Effective Date and continue for a term of five (5) years. This agreement may be terminated by either Leyden Labs or AIM at any time upon thirty (30) days written notice to the other. Upon termination of this Agreement, all Confidential Information and any copies shall be returned or destroyed pursuant to Paragraph 6. Notwithstanding termination of this Agreement, the obligations of confidentiality in the Agreement will remain in effect for a period of five (5) years from the date any Confidential Information is received by either Leyden Labs or AIM. |
| 12. | Modification and Assignment. This Agreement may only be modified by written agreement signed by both Leyden Labs and AIM and shall be binding upon both Leyden Labs and AIM, their representatives, successors and assigns. This Agreement shall not be assignable by either Leyden Labs or AIM without the prior written consent of the other provided, however, either Party may assign this Agreement in conjunction with the sale of all or substantially all of its assets to a third-party acquirer. |
| 13. | Applicable Laws. This Agreement shall be interpreted in accordance with the laws of the State of Florida. |
| 14. | Reservation of Rights. Nothing in this Agreement shall be construed to prevent, during the term hereof or thereafter, either Leyden Labs or AIM from (1) using in any manner, or disclosing in any way to one or more third parties, any and all of its own Confidential Information or (2) entering into negotiations or agreements with third parties concerning its own Confidential Information. |
| 10 |
| 15. | Access to Evaluation. Either Leyden Labs or AIM shall have a right to obtain a copy of opinions, judgments or recommendations developed from the Confidential Information or from information derived therefrom, the results of any research and testing performed in the course of evaluating the Confidential Information pursuant to this Agreement. All information obtained pursuant to this Paragraph 15 shall be subject to the confidentiality provisions of this Agreement during the term of this Agreement and for a full year period following termination thereof. |
| 16. | Breach of Agreement. In the event of any breach of this agreement by the receiving Party, the non-breaching Party, in addition to any other remedy to which it may be entitled in law or equity, shall be entitled to an injunction or injunctions to prevent breaches of this agreement. The breaching party agrees to waive and use its best efforts to cause the other recipients to waive, any requirement for the securing or posting of any bond in connection with such remedy. The breaching party also agrees to reimburse all costs and expenses, including attorney’s fees, incurred by the other party in successfully enforcing this agreement in the event a court of competent jurisdiction determines that the breaching party has willingly breached this agreement. |
| No Warranty. All Confidential Information is provided “as is” without warranty of any kind, whether express or implied herein. The disclosing Party does not represent or warrant the accuracy or completeness of the Confidential Information. Accordingly, the entire risk of using the Confidential Information remains with the receiving Party. | |
| No failure or delay by either Leyden Labs or AIM in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof or the exercise of any other right, power or privilege hereunder. |
IN WITNESS WHEREOF, Leyden Labs and AIM have executed this Agreement on this the 23rd day of October 2020.
| For Leyden Labs: | For AIM ImmunoTech Inc.: | |||
| /s/ Dennis de Vlaam | /s/ Peter W. Rodino | |||
| Name: | D. de Vlaam | Name: | Peter W. Rodino, III | |
| Its: | Head of Operations | Its: | General Counsel | |
| 11 |
Exhibit 10.78
EXPLANATORY NOTE: [***] INDICATES THE PORTION OF THIS EXHIBIT
THAT HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND
(II) WOULD BE COMPETITIVELY HARMFUL IN PUBLICLY DISCLOSED.
Amendment 01 to Project AIM02
Statement of Work and Budget for
Original Amarex Project No.:
AIM02_Phase 1 & 2
Prepared for:
AIM ImmunoTech Inc.
2117 SW Highway 484
Ocala, FL 34473
Prepared by:
Amarex Clinical Research, LLC
20201 Century Boulevard
Germantown, MD 20874
Phone: (301) 528-7000
Fax: (301) 528-2300
Amendment Date: December 30, 2020
This Amendment 1 to the Amarex Project AIM02 is prepared for the exclusive use of AIM, for the work indicated herein. It is proprietary and not to be copied or distributed outside of AIM.
Amarex Confidential and Proprietary | |
| Amendment 01 to AIM02 Contract | 12/30/20 |
| Additional Services | Page 1 |
1. Terms and Conditions
Made this 30th day of December, 2020 (the “Effective Date”) to the Project Agreement made on the 6th day of August, 2020 (the “Agreement) by and between:
AIM Immunotech Inc., a corporation with its principal place of business at 2117 SW Highway 484, Ocala, FL 34473 (hereinafter “AIM”), AND
Amarex Clinical Research, LLC, a for-profit Maryland limited liability company with its principal place of business at 20201 Century Boulevard, Germantown, Maryland 20874. (hereinafter “Amarex”).
WHEREAS AIM has requested and Amarex has agreed to provide certain Services in addition to those in the Agreement relating to additional services.
NOW THEREFORE, the parties hereby agree to amend the Agreement as follows:
| 1. | Amarex agrees to provide the Services as listed in Section 2, Project Statement of Work. | |
| 2. | AIM agrees to pay Amarex the costs noted in Section 4, Amendment Budget. | |
| 3. | AIM will pay the costs associated with the Amendment according to Section 5, Payment Schedule. |
This Amendment may be signed in any number of counterparts, which, when taken together, will constitute one and the same Amendment.
IN WITNESS WHEREOF, the authorized representatives of the parties have duly executed this agreement as of the Effective Date.
FOR AND BEHALF OF:
| For and on behalf of AIM Immunotech Inc.: | For and on behalf of Amarex Clinical Research, LLC: | |||
| Print Name: | Peter W. Rodino | Print Name: | Kazem Kazempour | |
| Signature: | /s/ Peter W. Rodino | Signature: | /s /Kazem Kazempour | |
| Title: | COO | Title: | President and CEO (Member) | |
| Date: | 1/5/2021 | Date: | 1/6/2021 | |
Amarex Confidential and Proprietary | |
| Amendment 01 to AIM02 Contract | 12/30/20 |
| Additional Services | Page 2 |
2. Project Statement of Work
Amarex will support AIM in clinical trial work, to include:
| ● | Monitoring of the Phase I Unit in the Netherlands by a local Dutch monitor. | |
| ● | Setup and maintenance of a shadow TMF, and investigator site files can be provided if the Phase I Unit does not do this itself. Training of a backup CRA can be conducted, if needed. |
Assumptions
| Activity / resource | Unit | |
| Patients, territories and sites | ||
| Enrolled patients | 40 | |
| Sites | 1 | |
| Countries | 1 (NL) | |
| CRAs | 1 (backup CRA training billed if required) | |
| Study duration (months) | ||
| Set up duration | 1.0 | |
| Conduct | 5 | |
| Closure duration | 1.0 | |
| Meetings and visits | ||
| KO TC | 1 | |
| Investigator meetings | NA | |
| Sponsor/CRO Study Team Teleconferences | 9x 1hr TCs in total Fortnightly during set up Monthly during Conduct Fortnightly during closure | |
| Site visits | ||
| PSVs | 0 | |
| SIVs | 1 | |
| MVs - Conduct | 6 (1x 1 day visit and 5x 2 day visits) | |
| COVs | 1 |
3. Timelines
Amarex will begin working upon approval of this Amendment.
Amarex Confidential and Proprietary | |
| Amendment 01 to AIM02 Contract | 12/30/20 |
| Additional Services | Page 3 |
4. Amendment Budget
Services
| CLINICAL SITE SERVICES | ||||||||||||||||||
| Bid ID | Service | Unit Description | Unit Cost $ | No. Units | Total Cost $ | Category Total $ | ||||||||||||
| Study start-up (1 months) | ||||||||||||||||||
| 1 | Study familiarisation | Once | $ [***] | 1 | $ [***] | |||||||||||||
| 2 | Study KO meeting (TC) | Once | $ [***] | 1 | $ [***] | |||||||||||||
| 3 | Preparation of PM Plans | Plans | $ [***] | 4 | $ [***] | |||||||||||||
| 4 | Site initiation | Sites | $ [***] | 1 | $ [***] | |||||||||||||
| 5 | In-house SCRA activities - set up including site communication | Site / months | $ [***] | 1 | $ [***] | |||||||||||||
| 6 | Sponsor TCs - set up | Alternate Weeks | $ [***] | 2 | $ [***] | $ [***] | ||||||||||||
| Conduct (5 months) | ||||||||||||||||||
| 7 | Monitoring Visits | IMV | $ [***] | 6 | $ [***] | |||||||||||||
| 8 | In-house SCRA activities - conduct including site communication | cohorts | $ [***] | 4 | $ [***] | |||||||||||||
| 9 | Sponsor TCs - Conduct | monthly | $ [***] | 5 | $ [***] | $ [***] | ||||||||||||
| Study closure (1 months) | ||||||||||||||||||
| 10 | Close-Out | COVs | $ [***] | 1 | $ [***] | |||||||||||||
| 11 | In-house SCRA activities - closure including site communication | Site / months | $ [***] | 1 | $ [***] | |||||||||||||
| 12 | Sponsor TCs - closure | Alternate Weeks | $ [***] | 2 | $ [***] | $ [***] | ||||||||||||
| TOTAL | $ [***] | |||||||||||||||||
Optional Services
| OPTIONAL SERVICES | ||||||||||||||||||
| Bid ID | Service | Unit Description | Unit Cost $ | No. Units | Total Cost $ | Category Total $ | ||||||||||||
| Study start-up (1 months) | ||||||||||||||||||
| 13 | Backup CRA familiarization and training | per CRA | $ [***] | 1 | $ [***] | |||||||||||||
| 14 | Set up shadow TMF | Sites | $ [***] | 1 | $ [***] | |||||||||||||
| 15 | Set up ISFs | Sites | $ [***] | 1 | $ [***] | $ [***] | ||||||||||||
| Conduct (5 months) | ||||||||||||||||||
| 16 | Maintenance of TMF - Conduct | Site / months | $ [***] | 5 | $ [***] | $ [***] | ||||||||||||
| Study closure (1 months) | ||||||||||||||||||
| 17 | Return of TMF to sponsor | Sites | $ [***] | 1 | $ [***] | $ [***] | ||||||||||||
Amarex Confidential and Proprietary | |
| Amendment 01 to AIM02 Contract | 12/30/20 |
| Additional Services | Page 4 |
Estimated Pass-Through
| Estimated Pass-Through Costs | ||||||||||||||||||
| Bid ID | Service | Unit Description | Unit Cost $ | No. Units | Total Cost $ | Category Total $ | ||||||||||||
| 1 | Printing/Shipping | site months | $ [***] | 7 | $ [***] | |||||||||||||
| 2 | Communications | TCs | $ [***] | 9 | $ [***] | $ [***] | ||||||||||||
| ESTIMATED TOTAL | $ [***] | |||||||||||||||||
5. Payment Schedule
| Payment Description | Percentage Due | Amount | ||
| Monthly Unit-Based Billing | TBD | TBD |
AIM will be billed according to the same terms and provisions as outlined in the Agreement.
Amarex Confidential and Proprietary | |
| Amendment 01 to AIM02 Contract | 12/30/20 |
| Additional Services | Page 5 |
Exhibit 10.79
FIRST AMENDMENT TO MANUFACTURE AND SUPPLY AGREEMENT
This First Amendment to the Manufacture and Supply Agreement (the “First Amendment”) is made effective as of December 23, 2020 (the “Effective Date”), by and between Pharmaceutics International, Inc. (“PII”) and AIM Immuno Tech Inc. (“Customer”).
EXPLANATORY STATEMENT
PII and Customer entered into a Manufacture and Supply Agreement dated as of December, December 22, 2020 (the “Agreement”). The parties have agreed to amend the terms of the Agreement upon the terms and conditions set forth herein. Capitalized terms not otherwise defined herein shall be as defined in the Agreement.
NOW, THEREFORE, in consideration of the covenants and agreements set forth herein and in the Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
The following language shall be added to Section 16 Miscellaneous.
“16.12 Customer is a public company therefore, any agreements in Customer’s judgement, that are required to be publicly disclosed as a material event under Federal and state securities laws, rules and regulations, including events that AIM has customarily disclosed in the past, including this agreement, will be considered material and as such reports will be filed in AIMs 8K, 10K and 10Qs that address Customer’s contractual relationships.”
Except as modified by the terms of this First Amendment, the Agreement shall continue to be in full force and effect and, by their signatures below, the parties hereto agree to be bound by all of the terms and conditions of the Agreement, as amended hereby.
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment under seal as of the Effective Date.
| AIM IMMUNOTECH INC. | PHARMACEUTICS INTERNATIONAL, INC. | |||
| By: | /s/ Peter W. Rodino, III, J.D. | By: | /s/ John Guthrie | |
| Name: | Peter W. Rodino, III, J.D. | Name: | John Guthrie | |
| Title: | Chief Operating Officer | Title: | CFO | |
Exhibit 10.80
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into as of the 24th day of March 2021, between AIM ImmunoTech Inc., a Delaware corporation (the “Company”), and Peter W. Rodino, III, of Fort Myers, Florida (the “Employee” or “Rodino”) and amends and restates in its entirety any prior Employment Agreements between the parties.
RECITALS
WHEREAS, the Company desires to continue to employ Rodino as its Chief Operating Officer, General Counsel;
WHEREAS, Rodino is the Chief Operating Officer, General Counsel and a member of the executive management team of The Company Chief Operating Officer and General Counsel, and does not currently have an employment agreement.
WHEREAS, the CEO and the Board deems Rodino’s performance to be outstanding and recommends an employment agreement be entered;
WHEREAS, the Employee and the Company wish to state the terms and conditions of the Agreement herein;
NOW, THEREFORE, the Company and the Employee, in consideration of the mutual covenants and promises set forth herein, agree the foregoing Recitals are true and correct and are incorporated into and made part of this Agreement, and hereby further agree as follows:
1. Duties of Employee. The Employee shall, during the Employment Period (as defined below), be designated as the Chief Operating Officer and General Counsel. In the Employee’s capacity as such, he shall perform such duties and functions for the Company as are customarily performed by the _ Chief Operating Officer and General Counsel of public corporations in the pharmaceutical research field at similar development status and pharmaceutical function.
2. Term. This Agreement shall commence on March 24, 2021 and shall terminate on March 31, 2024 (the “Initial Termination Date”) unless sooner terminated in accordance with Section 6 hereof or unless renewed as hereinafter provided (such period of employment together with any extension thereto hereinafter being called the “Employment Period”). This Agreement shall be automatically renewed for successive three (3) year periods after the initial Termination Date unless written notice of refusal to renew is given by one party to the other at least 180 days prior to the Initial Termination Date or the expiration date of any renewal period. In the event of a change in control (CIC) not triggered by a section 3(c) acquisition award, the term of this agreement shall be extended for three years on the date of CIC.
3. Compensation.
(a) As compensation for the services to be performed hereunder, the Company shall pay to the Employee a combination of short term (cash) and long term (options) compensation. Short term compensation will consist of a base salary $425,000 and discretionary bonus based on performance goals established by the Compensation Committee. Long term compensation will be provided by 100,000 non-qualified yearly stock options with one year vesting on November 30, 2021, and each anniversary date thereafter for advancing the long term objectives of the Company established by the Board of Directors and with long-term performance goal evaluation by the Compensation Committee. The exercise price for options of common stock will be equal to 100% of the closing price of the Company stock on the NYSE Amex on the trading date immediately preceding the date of the award.
| Page 1 of 7 |
(b) The Company agrees that the amounts set-forth herein as yearly and long-term salary compensation will not be reduced during the term of the agreement. Increases will be reevaluated each year at the discretion of the Compensation Committee based upon excellent performance and using appropriate comparator biotechnology/pharmaceutical companies as a guide.
(c) Awards of 1% Gross Proceeds will be made for significant events such licensing agreements or therapeutic indication acquisitions. For purposes herein, Gross Proceeds shall mean those cash amounts paid to the Company by the other parties for licensing agreement, therapeutic acquisitions, or any other one time cash generating event. (therapeutic indications are for example target organ specific pathologically defined cancer indications, vaccine enhancers, broad spectrum antiviral indications, or medical entities associated with persistent severe fatigue). Additionally, employee shall be entitled to acquisition awards of 1% Gross Proceeds related to any sale of the Company, or any sale of a substantial portion of Company assets not in the ordinary course of it business. Gross proceeds shall not include (i) any amounts paid to the Company as reimbursement of expenses incurred; (ii) any amounts paid to the Company in consideration for the Company’s assets (i.e., plant, property, equipment, investments, etc.) except in the context of an acquisition of all or a large part of the company, equity or other securities except in the context of an acquisition of all or a large part of the company; (iii) federal or state grants or tax deferrals and product sales (Ampligen, Alferon or derivative products). All such awards shall be paid in cash within 90 days of the receipt of the Gross Proceeds by the Company.
In the event of termination without Cause the Employee shall be entitled to receive these One Time awards under the conditions provided by the Agreement and will be based upon Gross Proceeds received by the Company with respect to any joint ventures, corporate partnering, or acquisition arrangements entered into by the Company during the term of this Agreement.
4. Automobile Allowance. The Employer agrees to pay to the Employee, during the term of this Agreement and in addition to other salary and benefits herein provided, the sum of $14,400 per year payable monthly, as a vehicle allowance to be used to purchase, rent, lease, or own, operate and maintain a vehicle or vehicles in Florida (the “Area”). The Employee shall be responsible to maintain personal umbrella insurance in the yearly amount of $2M and shall further be responsible for all expense’s attendant to the purchase, operation, maintenance, repair, and regular replacement of said vehicle. Rental Car expenses for business travel outside of the “Area” shall be reimbursable as a business expense.
5. Fringe Benefits.
(a) During the Employment Period, the Employee shall be entitled to receive such fringe benefits as shall be applicable from time to time to the Company’s executives generally, including but not limited to such 401(k), vacation (4 weeks/year, group life and health insurance, and disability benefit plans as may be maintained by the Company from time to time. Employee shall be entitled to four weeks paid vacation. Health Insurance for Employee and all eligible dependents shall be provided by the Company.
(b) The Employee acknowledges that the Company may become subject to the health care non-discrimination rules of Internal Revenue Code Section 105(h) as made applicable by Section 10101(d) of the Patient Protection and Affordable Care Act. If the Company determines that it is or will be subject to such non-discrimination rules and that the health care insurance benefit provided by this section would cause a violation of such rules, the parties shall execute an amendment to this Agreement modifying the health care insurance benefit in such a manner that the benefit does not cause a violation of such non-discrimination rules.
| Page 2 of 7 |
6. Termination.
(a) The Company, at the sole discretion of the CEO and no other officer or director, may discharge the Employee for Cause at any time as provided herein. For purposes hereof, Cause shall mean the willful engaging by Employee in illegal conduct, gross misconduct or gross violation of the Company’s Code of Ethics and Business Conduct for Officers, which is demonstrably and materially injurious to the Company. For purposes of this Agreement, no act, or failure to act, on Employee’s part shall be deemed “willful” unless done intentionally by Employee. Termination requires a finding that Employee was guilty of intentional and material misconduct according to the standards set forth above, and specifying the particulars thereof in detail supported by legally admissible evidence and utilizing the legal standard of beyond all reasonable doubt. Employee may appeal the CEO’s termination to the Board of Directors and the Board’s determination shall be binding.
(b) The employment of the Employee shall terminate upon the death or disability of the Employee. For purposes of this subsection (b), “disability” shall mean the inability of the Employee effectively to carry out substantially all of his duties hereunder by reason of any medically determinable physical or mental impairment which can be expected to result in near-term death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months.
7. Effect of Termination.
(a) In the event that the Employee’s employment is properly terminated for Cause pursuant to subsection 6(a), the Company shall pay to the Employee, at the time of such termination, only the salary and benefits otherwise due and payable to him under Section 3a through the last day of his actual employment by the Company subsequent to any appeal of termination to the Board.
(b) In the event that the Employee is terminated at any time without Cause as defined in subsection 6(a), the Company shall pay to the Employee, at the time of such termination, the compensation and benefits otherwise due and payable to him under Sections 3 and 4 through the last day of the then current term of this Agreement.
(c) In the event the Employee’s employment is terminated by death or disability pursuant to 6(b), the Company shall pay to the Employee or his estate, at the time of such termination, the Base Salary, applicable benefits, and immediate vesting of stock options required by 7(b). In the event of death or permanent disability, the Company will provide two years of base salary if less than two years is left on the contract as per 7(b).
8. Employee’s Representations and Warranties. The Employee hereby represents and warrants to the Company that he has the right to enter into this Agreement, and his execution, delivery and performance of this Agreement (a) will not violate any contract to which the Employee is a party or any applicable law or regulation nor give rise to any rights in any other person or entity and (b) Employee is not under any physical or medical impediment that would preclude performance for the term on the agreement.
| Page 3 of 7 |
9. Confidentiality, Invention and Non-Compete Agreement. The Employee confirms his obligation to be bound by the terms of a Confidentiality, Invention and Non-Compete Agreement attached hereto as Exhibit “A”.
10. Offices. Rodino may conduct the business of the Company at the Company’s Florida based headquarters in Ocala, Florida, and Rodino’s home office/local Fort Myers offices. The Company shall supply that equipment necessary for full telephone, telefax and internet access at all these locations and supply a portable computer capable of remote access while employee travels domestically and internationally on Company business as a condition of employment.
11. Expenses. The Company shall be responsible for all business-related expenses of Employee, who shall provide substantiation, in accordance with IRS regulations, as to all such expenses. Employee agrees to reimburse the Company for all unrelated or personal expenses within one month. The expenditures shall be as prescribed or limited by the Company’s Travel & Expense policies and procedures.
12. Notices. Any notice or other communication pursuant to this Agreement shall be in writing and shall be sent by telecopy or by certified or registered mail addressed to the respective parties as follows:
If to the Company, to:
AIM ImmunoTech Inc.
2117 SW Highway 484
Ocala Florida 34473
Attn: Thomas Equels, CEO
If to the Employee, to:
Peter W. Rodino, III
or to such other address as the parties shall have designated by notice to the other parties given in accordance with this section. Any notice or other communication shall be deemed to have been duly given if personally delivered or mailed via registered or certified mail, postage prepaid, return receipt requested, or, if sent by telecopy, when confirmed.
13. Survival. Notwithstanding anything in section 2 hereof to the contrary, the Confidentiality, Invention and Non-Compete Agreement shall survive any termination of this Agreement or any termination of the Employee’s services.
14. Modification. No modification or waiver of this Agreement or any provision hereof shall be binding upon the party against whom enforcement of such modification or waiver is sought unless it is made in writing and signed by or on behalf of both parties hereto.
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15. Miscellaneous.
(a) This Agreement shall be subject to and construed in accordance with the laws of the State of Florida. Furthermore, the parties acknowledge that the Company has had independent counsel representing it in this matter.
(b) The waiver by either party of a breach of any provision of this Agreement by the other party shall not operate and be construed as a waiver or a continuing waiver by that party of the same or any subsequent breach of any provision of this Agreement by the other party.
(c) If any provisions of this Agreement or the application thereof to any person or circumstance shall be determined by an arbitrator (or panel of arbitrators) or any court of competent jurisdiction to be invalid or unenforceable to any extent, the remainder hereof, or the application of such provision to persons or circumstances other than those as to which it is so determined to be invalid or unenforceable, shall not - be affected thereby, and each provision hereof shall be valid and shall be enforced to the fullest extent permitted by law.
(d) This Agreement shall be binding on and inure to the benefit of the parties hereto and their respective heirs, executors and administrators, successors and assigns.
| i. | Notwithstanding anything to the contrary in this Agreement, no Deferred Payments will be paid or otherwise provided until Employee has a “separation from service” within the meaning of Section 409A. Similarly, no severance payable to Employee, if any, pursuant to this Agreement that otherwise would be exempt from Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(9) will be payable until Employee has a “separation from service” within the meaning of Section 409A. |
If any payment or benefit (including payments and benefits pursuant to this Agreement) Executive would receive in connection with a Change in Control from the Company or otherwise (“Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment shall be equal to the Reduced Amount. The “Reduced Amount” shall be either (x) the largest portion of the Payment that would result in no portion of the Payment being subject to the Excise Tax, or (y) the largest portion, up to and including the total, of the Payment, whichever amount, after taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in the Executive’s receipt, on an after-tax basis, of the greater amount of the Payment notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a Reduced Amount is paid, (i) the Payment shall be paid only to the extent of the Reduced Amount, and Executive shall have no rights to any additional payments and/or benefits constituting the Payment, and (ii) reduction in payments and/or benefits shall occur in the following order: (1) reduction of cash payments; (2) cancellation of accelerated vesting of equity awards other than stock options; (3) cancellation of accelerated vesting of stock options; and (4) reduction of other benefits paid to Executive. If acceleration of compensation from Executive’s equity awards is to be reduced, such acceleration of vesting shall be canceled in the reverse order of the date of grant.
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| ii. | Any severance payments or benefits under this Agreement that would be considered Deferred Payments will be paid on, or, in the case of installments, will not commence until, the 60th day following Employee’s separation from service, or, if later, such time as required by Section (d)iii. Except as required by Section (d)iii, any installment payments that would have been made to Employee during the 60-day period immediately following Employee’s separation from service but for the preceding sentence will be paid to Employee on the 60th day following Employee’s separation from service and the remaining payments shall be made as provided in this Agreement. In no event will Employee have discretion to determine the taxable year of payment for any Deferred Payments. | |
| iii. | Notwithstanding anything to the contrary in this Agreement, if Employee is a “specified employee” within the meaning of Section 409A at the time of Employee’s separation from service (other than due to death), then the Deferred Payments that are payable within the first 6 months following Employee’s separation from service, will, to the extent required to be delayed pursuant to Section 409A(a)(2)(B) of the Code, become payable on the date 6 months and 1 day following the date of Employee’s separation from service. All subsequent Deferred Payments, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit. Notwithstanding anything herein to the contrary, if Employee dies following Employee’s separation from service, but prior to the 6-month anniversary of the separation from service, then any payments delayed in accordance with this paragraph will be payable in a lump sum as soon as administratively practicable after the date of Employee’s death and all other Deferred Payments will be payable in accordance with the payment schedule applicable to each payment or benefit. Each payment and benefit payable under this Agreement is intended to constitute a separate payment for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations. | |
| iv. | Any amount paid under this Agreement that satisfies the requirements of the “short-term deferral” rule set forth in Section 1.409A-1(b)(4) of the Treasury Regulations will not constitute Deferred Payments. | |
| v. | Any amount paid under this Agreement that qualifies as a payment made as a result of an involuntary separation from service pursuant to Section 1.409A-1(b)(9)(iii) of the Treasury Regulations that does not exceed the Section 409A Limit (as defined below) will not constitute Deferred Payments. | |
| vi. | The foregoing provisions and all compensation and benefits provided for under this Agreement are intended to comply with or be exempt from the requirements of Section 409A so that none of the severance payments and benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities or ambiguous terms herein will be interpreted to be exempt or so comply. The Company and Employee agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actual payment to Employee under Section 409A. |
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| vii. | Definitions: |
A. Section 409A. “Section 409A” means Section 409A of the U.S. Internal Revenue Code (the “Code”) and any final regulations and guidance thereunder and any applicable state law equivalent, as each may be amended or promulgated from time to time.
B. Section 409A Limit. “Section 409A Limit” will mean 2 times the lesser of: (i) Employee’s annualized compensation based upon the annual rate of pay paid to Employee during the Employee’s taxable year preceding the Employee’s taxable year of Employee’s separation from service as determined under Treasury Regulation Section 1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service guidance issued with respect thereto; or (ii) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Internal Revenue Code for the year in which Employee’s separation from service occurred.
IN WITNESS WHEREOF, this Agreement has been signed by the parties hereto on the dates set forth next to their signature and this Agreement takes effect on the date of the last signature.
| For AIM ImmunoTech Inc. | For Employee | |
| /s/Thomas K Equels | /s/ Peter W. Rodino | |
| Thomas K. Equels, Esq. | Peter W. Rodino, III | |
| President, CEO, BoD Executive Vice-Chairman | Chief Operating Officer and | |
| General Counsel |
| Page 7 of 7 |
Exhibit 10.81
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into as of the 24th day of March 2021, between AIM ImmunoTech Inc., a Delaware corporation (the “Company”), and Ellen M. Lintal of The Villages, Florida (the “Employee” or “Lintal “and amends and restates in its entirety any prior Employment Agreements between the parties.
RECITALS
WHEREAS, the Company desires to continue to employ Lintal as its Chief Financial Officer,
WHEREAS, Lintal is the Chief Financial Officer and a member of the executive management team of The Company Chief Financial Officer, and does not currently have an employment agreement.
WHEREAS, the CEO and the Board deems Lintal’s performance to be outstanding and recommends an employment agreement be entered;
WHEREAS, the Employee and the Company wish to state the terms and conditions of the Agreement herein;
NOW, THEREFORE, the Company and the Employee, in consideration of the mutual covenants and promises set forth herein, agree the foregoing Recitals are true and correct and are incorporated into and made part of this Agreement, and hereby further agree as follows:
1. Duties of Employee. The Employee shall, during the Employment Period (as defined below), be designated as the Chief Financial Officer. In the Employee’s capacity as such, she shall perform such duties and functions for the Company as are customarily performed by the Chief Financial Officer of public corporations in the pharmaceutical research field at similar development status and pharmaceutical function.
2. Term. This Agreement shall commence on March 24th ,2021, and shall terminate on March 31, 2022 (the “Initial Termination Date”) unless sooner terminated in accordance with Section 6 hereof or unless renewed as hereinafter provided (such period of employment together with any extension thereto hereinafter being called the “Employment Period”). This Agreement shall be automatically renewed for successive three (3) year terms after the initial Termination Date unless written notice of refusal to renew is given by one party to the other at least 180 days prior to the Initial Termination Date or the expiration date of any renewal period. In the event of a change in control (CIC) not triggered by a section 3(c) acquisition award, the term of this agreement shall be extended for three years on the date of CIC.
3. Compensation.
(a) As compensation for the services to be performed hereunder, the Company shall pay to the Employee a combination of short term (cash) and long term (options) compensation. Short term compensation will consist of a base salary $350,000 and discretionary bonus based on performance goals established by the Compensation Committee. Long term compensation will be provided by 100,000 non-qualified yearly stock options with one year vesting on November 30, 2021, and each anniversary date thereafter for advancing the long term objectives of the Company established by the Board of Directors and with long-term performance goal evaluation by the Compensation Committee. The exercise price for options of common stock will be equal to 100% of the closing price of the Company stock on the NYSE Amex on the trading date immediately preceding the date of the award.
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(b) The Company agrees that the amounts set-forth herein as yearly and long-term salary compensation will not be reduced during the term of the agreement. Increases will be reevaluated each year at the discretion of the Compensation Committee based upon excellent performance and using appropriate comparator biotechnology/pharmaceutical companies as a guide.
(c) Awards of 1% Gross Proceeds will be made for significant events such licensing agreements or therapeutic indication acquisitions. For purposes herein, Gross Proceeds shall mean those cash amounts paid to the Company by the other parties for licensing agreement, therapeutic acquisitions, or any other one time cash generating event. (therapeutic indications are for example target organ specific pathologically defined cancer indications, vaccine enhancers, broad spectrum antiviral indications, or medical entities associated with persistent severe fatigue). Additionally, employee shall be entitled to acquisition awards of 1% Gross Proceeds related to any sale of the Company, or any sale of a substantial portion of Company assets not in the ordinary course of it business. Gross proceeds shall not include (i) any amounts paid to the Company as reimbursement of expenses incurred; (ii) any amounts paid to the Company in consideration for the Company’s assets (i.e., plant, property, equipment, investments, etc.) except in the context of an acquisition of all or a large part of the company, equity or other securities except in the context of an acquisition of all or a large part of the company; (iii) federal or state grants or tax deferrals and product sales (Ampligen, Alferon or derivative products). All such awards shall be paid in cash within 90 days of the receipt of the Gross Proceeds by the Company.
In the event of termination without Cause the Employee shall be entitled to receive these One Time awards under the conditions provided by the Agreement and will be based upon Gross Proceeds received by the Company with respect to any joint ventures, corporate partnering, or acquisition arrangements entered into by the Company during the term of this Agreement.
4. Automobile Allowance. The Employer agrees to pay to the Employee, during the term of this Agreement and in addition to other salary and benefits herein provided, the sum of $14,400.00 per year payable monthly, as a vehicle allowance to be used to purchase, rent, lease, or own, operate and maintain a vehicle or vehicles in Florida (the “Area”). The Employee shall be responsible to maintain personal umbrella insurance in the yearly amount of $2M and shall further be responsible for all expense’s attendant to the purchase, operation, maintenance, repair, and regular replacement of said vehicle. Rental Car expenses for business travel outside of the “Area” shall be reimbursable as a business expense.
5. Fringe Benefits.
(a) During the Employment Period, the Employee shall be entitled to receive such fringe benefits as shall be applicable from time to time to the Company’s executives generally, including but not limited to such 401(k), vacation (4 weeks/year, group life and health insurance, and disability benefit plans as may be maintained by the Company from time to time. Employee shall be entitled to four weeks paid vacation. Health Insurance for Employee and all eligible dependents shall be provided by the Company.
(b) The Employee acknowledges that the Company may become subject to the health care non-discrimination rules of Internal Revenue Code Section 105(h) as made applicable by Section 10101(d) of the Patient Protection and Affordable Care Act. If the Company determines that it is or will be subject to such non-discrimination rules and that the health care insurance benefit provided by this section would cause a violation of such rules, the parties shall execute an amendment to this Agreement modifying the health care insurance benefit in such a manner that the benefit does not cause a violation of such non-discrimination rules.
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6. Termination.
(a) The Company, at the sole discretion of the CEO and no other officer or director, may discharge the Employee for Cause at any time as provided herein. For purposes hereof, Cause shall mean the willful engaging by Employee in illegal conduct, gross misconduct or gross violation of the Company’s Code of Ethics and Business Conduct for Officers, which is demonstrably and materially injurious to the Company. For purposes of this Agreement, no act, or failure to act, on Employee’s part shall be deemed “willful” unless done intentionally by Employee. Termination requires a finding that Employee was guilty of intentional and material misconduct according to the standards set forth above, and specifying the particulars thereof in detail supported by legally admissible evidence and utilizing the legal standard of beyond all reasonable doubt. Employee may appeal the CEO’s termination to the Board of Directors and the Board’s determination shall be binding.
(b) The employment of the Employee shall terminate upon the death or disability of the Employee. For purposes of this subsection (b), “disability” shall mean the inability of the Employee effectively to carry out substantially all of his duties hereunder by reason of any medically determinable physical or mental impairment which can be expected to result in near-term death, or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months.
7. Effect of Termination.
(a) In the event that the Employee’s employment is properly terminated for Cause pursuant to subsection 6(a), the Company shall pay to the Employee, at the time of such termination, only the salary and benefits otherwise due and payable to him under Section 3a through the last day of his actual employment by the Company subsequent to any appeal of termination to the Board.
(b) In the event that the Employee is terminated at any time without Cause as defined in subsection 6(a), the Company shall pay to the Employee, at the time of such termination, the compensation and benefits otherwise due and payable to him under Sections 3 and 4 through the last day of the then current term of this Agreement.
(c) In the event the Employee’s employment is terminated by death or disability pursuant to 6(b), the Company shall pay to the Employee or his estate, at the time of such termination, the Base Salary, applicable benefits, and immediate vesting of stock options required by 7(b). In the event of death or permanent disability, the Company will provide two years of base salary if less than two years is left on the contract as per 7(b).
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8. Employee’s Representations and Warranties. The Employee hereby represents and warrants to the Company that he has the right to enter into this Agreement, and his execution, delivery and performance of this Agreement (a) will not violate any contract to which the Employee is a party or any applicable law or regulation nor give rise to any rights in any other person or entity and (b) Employee is not under any physical or medical impediment that would preclude performance for the term on the agreement.
9. Confidentiality, Invention and Non-Compete Agreement. The Employee confirms his obligation to be bound by the terms of a Confidentiality, Invention and Non-Compete Agreement attached hereto as Exhibit “A”.
10. Offices. Lintal may conduct the business of the Company at the Company’s Florida based headquarters in Ocala, Florida, and home office. The Company shall supply that equipment necessary for full telephone, telefax and internet access at all these locations and supply a portable computer capable of remote access while employee travels domestically and internationally on Company business as a condition of employment.
11. Expenses. The Company shall be responsible for all business-related expenses of Employee, who shall provide substantiation, in accordance with IRS regulations, as to all such expenses. Employee agrees to reimburse the Company for all unrelated or personal expenses within one month. The expenditures shall be as prescribed or limited by the Company’s Travel & Expense policies and procedures.
12. Notices. Any notice or other communication pursuant to this Agreement shall be in writing and shall be sent by telecopy or by certified or registered mail addressed to the respective parties as follows:
If to the Company, to:
AIM ImmunoTech Inc.
2117 SW Highway 484
Ocala Florida 34473
Attn: Thomas Equels, CEO
If to the Employee, to:
Ellen M. Lintal
_____________
or to such other address as the parties shall have designated by notice to the other parties given in accordance with this section. Any notice or other communication shall be deemed to have been duly given if personally delivered or mailed via registered or certified mail, postage prepaid, return receipt requested, or, if sent by telecopy, when confirmed.
13. Survival. Notwithstanding anything in section 2 hereof to the contrary, the Confidentiality, Invention and Non-Compete Agreement shall survive any termination of this Agreement or any termination of the Employee’s services.
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14. Modification. No modification or waiver of this Agreement or any provision hereof shall be binding upon the party against whom enforcement of such modification or waiver is sought unless it is made in writing and signed by or on behalf of both parties hereto.
15. Miscellaneous.
(a) This Agreement shall be subject to and construed in accordance with the laws of the State of Florida. Furthermore, the parties acknowledge that the Company has had independent counsel representing it in this matter.
(b) The waiver by either party of a breach of any provision of this Agreement by the other party shall not operate and be construed as a waiver or a continuing waiver by that party of the same or any subsequent breach of any provision of this Agreement by the other party.
(c) If any provisions of this Agreement or the application thereof to any person or circumstance shall be determined by an arbitrator (or panel of arbitrators) or any court of competent jurisdiction to be invalid or unenforceable to any extent, the remainder hereof, or the application of such provision to persons or circumstances other than those as to which it is so determined to be invalid or unenforceable, shall not - be affected thereby, and each provision hereof shall be valid and shall be enforced to the fullest extent permitted by law.
(d) This Agreement shall be binding on and inure to the benefit of the parties hereto and their respective heirs, executors and administrators, successors and assigns.
| i. | Notwithstanding anything to the contrary in this Agreement, no Deferred Payments will be paid or otherwise provided until Employee has a “separation from service” within the meaning of Section 409A. Similarly, no severance payable to Employee, if any, pursuant to this Agreement that otherwise would be exempt from Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(9) will be payable until Employee has a “separation from service” within the meaning of Section 409A. | |
| If any payment or benefit (including payments and benefits pursuant to this Agreement) Executive would receive in connection with a Change in Control from the Company or otherwise (“Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment shall be equal to the Reduced Amount. The “Reduced Amount” shall be either (x) the largest portion of the Payment that would result in no portion of the Payment being subject to the Excise Tax, or (y) the largest portion, up to and including the total, of the Payment, whichever amount, after taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in the Executive’s receipt, on an after-tax basis, of the greater amount of the Payment notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a Reduced Amount is paid, (i) the Payment shall be paid only to the extent of the Reduced Amount, and Executive shall have no rights to any additional payments and/or benefits constituting the Payment, and (ii) reduction in payments and/or benefits shall occur in the following order: (1) reduction of cash payments; (2) cancellation of accelerated vesting of equity awards other than stock options; (3) cancellation of accelerated vesting of stock options; and (4) reduction of other benefits paid to Executive. If acceleration of compensation from Executive’s equity awards is to be reduced, such acceleration of vesting shall be canceled in the reverse order of the date of grant. |
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| ii. | Any severance payments or benefits under this Agreement that would be considered Deferred Payments will be paid on, or, in the case of installments, will not commence until, the 60th day following Employee’s separation from service, or, if later, such time as required by Section (d)iii. Except as required by Section (d)iii, any installment payments that would have been made to Employee during the 60-day period immediately following Employee’s separation from service but for the preceding sentence will be paid to Employee on the 60th day following Employee’s separation from service and the remaining payments shall be made as provided in this Agreement. In no event will Employee have discretion to determine the taxable year of payment for any Deferred Payments. | |
| iii. | Notwithstanding anything to the contrary in this Agreement, if Employee is a “specified employee” within the meaning of Section 409A at the time of Employee’s separation from service (other than due to death), then the Deferred Payments that are payable within the first 6 months following Employee’s separation from service, will, to the extent required to be delayed pursuant to Section 409A(a)(2)(B) of the Code, become payable on the date 6 months and 1 day following the date of Employee’s separation from service. All subsequent Deferred Payments, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit. Notwithstanding anything herein to the contrary, if Employee dies following Employee’s separation from service, but prior to the 6-month anniversary of the separation from service, then any payments delayed in accordance with this paragraph will be payable in a lump sum as soon as administratively practicable after the date of Employee’s death and all other Deferred Payments will be payable in accordance with the payment schedule applicable to each payment or benefit. Each payment and benefit payable under this Agreement is intended to constitute a separate payment for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations. | |
| iv. | Any amount paid under this Agreement that satisfies the requirements of the “short-term deferral” rule set forth in Section 1.409A-1(b)(4) of the Treasury Regulations will not constitute Deferred Payments. | |
| v. | Any amount paid under this Agreement that qualifies as a payment made as a result of an involuntary separation from service pursuant to Section 1.409A-1(b)(9)(iii) of the Treasury Regulations that does not exceed the Section 409A Limit (as defined below) will not constitute Deferred Payments. |
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| vi. | The foregoing provisions and all compensation and benefits provided for under this Agreement are intended to comply with or be exempt from the requirements of Section 409A so that none of the severance payments and benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities or ambiguous terms herein will be interpreted to be exempt or so comply. The Company and Employee agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actual payment to Employee under Section 409A. | |
| vii. | Definitions: |
A. Section 409A. “Section 409A” means Section 409A of the U.S. Internal Revenue Code (the “Code”) and any final regulations and guidance thereunder and any applicable state law equivalent, as each may be amended or promulgated from time to time.
B. Section 409A Limit. “Section 409A Limit” will mean 2 times the lesser of: (i) Employee’s annualized compensation based upon the annual rate of pay paid to Employee during the Employee’s taxable year preceding the Employee’s taxable year of Employee’s separation from service as determined under Treasury Regulation Section 1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service guidance issued with respect thereto; or (ii) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Internal Revenue Code for the year in which Employee’s separation from service occurred.
IN WITNESS WHEREOF, this Agreement has been signed by the parties hereto on the dates set forth next to their signature and this Agreement takes effect on the date of the last signature.
| For AIM ImmunoTech Inc. | For Employee | |
| /s/Thomas K Equels | /s/Ellen M. Lintal | |
| Thomas K. Equels, Esq. | Ellen M. Lintal | |
| President, CEO, BoD Executive Vice-Chairman | Chief Financial Officer |
| Page 7 of 7 |
Exhibit 21
Subsidiaries
| US Subsidiaries: | Status | |
| BioPro Corp. | Dormant | |
| BioAegean Corp. | Dormant | |
| Foreign Subsidiaries: | ||
| Hemispherx Biopharma Europe N.V./S.A. (Belgium) |
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
AIM ImmunoTech Inc.
Ocala, Florida
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-118903, 333-155528, 333-160499, 333-209060, 333-220296, 333-227543 and 333-240315), Form S-3 (No. 333-205228 and 333-226059) and Form S-1 (No. 333-217671, 333-220756, 333-226057, 333-229051 and 333-233657) of AIM ImmunoTech Inc. of our report dated March 30, 2021, relating to the consolidated financial statements, which appears in this Form 10-K.
/s/ BDO USA, LLP
Miami, Florida
March 30, 2021
Exhibit 23.2
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
| 1. | Registration Statement (Form S-8 No. 333-118903) | |
| 2. | Registration Statement (Form S-8 No. 333-155528) | |
| 3. | Registration Statement (Form S-8 No. 333-160499) | |
| 4. | Registration Statement (Form S-8 No. 333-209060) | |
| 5. | Registration Statement (Form S-8 No. 333-220296) | |
| 6. | Registration Statement (Form S-8 No. 333-227543) | |
| 7. | Registration Statement (Form S-8 No. 333-240315) | |
| 8. | Registration Statement (Form S-3 No. 333-205228) | |
| 9. | Registration Statement (Form S-3 No. 333-226059) | |
| 10. | Registration Statement (Form S-1 No. 333-217671) | |
| 11. | Registration Statement (Form S-1 No. 333-220756) | |
| 12. | Registration Statement (Form S-1 No. 333-226057) | |
| 13. | Registration Statement (Form S-1 No. 333-229051) | |
| 14. | Registration Statement (Form S-1 No. 333-233657) |
of our report dated March 30, 2020, with respect to the consolidated financial statements of AIM ImmunoTech Inc. included in this Annual Report (Form 10-K) of AIM ImmunoTech Inc. for the year ended December 31, 2019.
/s/ Morrison, Brown, Argiz & Farra, LLC
Miami, Florida
March 30, 2021
EXHIBIT 31.1
CERTIFICATIONS PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT OF 2002
I, Thomas K. Equels certify that:
| 1. | I have reviewed this annual report on Form 10-K of AIM ImmunoTech Inc. | |||
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |||
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; | |||
| 4. | The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: | |||
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |||
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |||
| c. | Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |||
| d. | Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and | |||
| 5. | The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions): | |||
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and | |||
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. | |||
| Date: March 30, 2021 | |
| /s/ Thomas K. Equels | |
| Thomas K. Equels, Esq. | |
| Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATIONS PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT OF 2002
I, Ellen M. Lintal, certify that:
| 1. | I have reviewed this annual report on Form 10-K of AIM ImmunoTech Inc.; | |||
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |||
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; | |||
| 4. | The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: | |||
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |||
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |||
| c. | Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |||
| d. | Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and | |||
| 5. | The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions): | |||
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and | |||
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. | |||
| Date: March 30, 2021 | |
| /s/ Ellen M. Lintal | |
| Ellen M. Lintal | |
| Chief Financial Officer |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of AIM ImmunoTech Inc. (the “Company”) on Form 10-K for the year ended December 31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas K. Equels, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
| Date: March 30, 2021 | |
| /s/ Thomas K. Equels | |
| Thomas K. Equels, Esq. | |
| Chief Executive Officer |
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of AIM ImmunoTech Inc. (the “Company”) on Form 10-K for the year ended December 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ellen M. Lintal, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
| Date: March 30, 2021 | |
| /s/ Ellen M. Lintal | |
| Ellen M. Lintal | |
| Chief Financial Officer |