United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: October 31, 2020

☐ 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. 000-56153

 

 

NuGenerex Immuno-Oncology, Inc.

  (Exact name of registrant as specified in its charter) 

Delaware	04-3208418
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

 

10102 USA Today Way, Miramar, Florida 33025

(Address of principal executive office)

Registrant's telephone number: (416) 364-2551 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☒ YES  ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

☒ YES  ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer”,  “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☒
	Emerging Growth Company ☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ YES   ☒ NO

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock		None		None

 

As of December 15, 2020, the registrant had 400,300,000 shares of common stock, $0.001 par value per share, outstanding. 

 

NUGENEREX IMMUNO-ONCOLOGY, INC.

INDEX

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets – October 31, 2020 (unaudited) and July 31, 2020	3
Condensed Statements of Operations - For the three month periods ended October 31, 2020 and 2019 (unaudited)	4
Condensed Statements of Changes in Stockholders’ Deficit for the three months ended October 31, 2020 and 2019 (unaudited)	5
Condensed Statements of Cash Flows - For the three month periods ended October 31, 2020 and 2019 (unaudited)	6
Notes to Interim Financial Information (unaudited)	7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3. Quantitative and Qualitative Disclosures About Market Risk	13
Item 4. Controls and Procedures	13
PART II: OTHER INFORMATION
Item 1. Legal Proceedings	14
Item 1A. Risk Factors	14
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	14
Item 3. Defaults Upon Senior Securities	14
Item 4. Mine Safety Disclosures	14
Item 5. Other Information	14
Item 6. Exhibits	14
Signatures	15

 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements 

NUGENEREX IMMUNO-ONCOLOGY, INC.
CONDENSED BALANCE SHEETS (UNAUDITED)
			October 31,				July 31,
			2020				2020
Assets
Current assets:
Cash		$	39			$	84
Prepaid expenses			20,000				—
Total current assets		$	20,039			$	84
Liabilities
Current liabilities:
Accounts payable and accrued expenses		$	566,937			$	614,349
Payable to Foundation for services			1,315,817				1,315,817
Interest payable to foundation			4,149,900				3,911,141
Total current liabilities			6,032,654				5,841,307
Stockholders’ deficiency
Preferred stock $0.001 par value, 10,000,000 shares authorized, none issued or outstanding			—				—
Common stock, $0.001 par value, 750,000,000 shares authorized; 400,300,000  shares issued, and outstanding			400,300				400,300
Additional paid-in capital			33,749,317				32,182,174
Accumulated deficit			(40,162,232	)			(38,423,697	)
Total Stockholders’ deficiency			(6,012,615	)			(5,841,223	)
Total liabilities and stockholders' deficiency		$	20,039			$	84
The accompanying notes are an integral part of these condensed financial statements

NUGENEREX IMMUNO-ONCOLOGY, INC.
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
		Three months ended October 31,
		2020				2019
Operating expenses
Research and development		$	893,644			$	37,382
General and administrative			606,132				31,804
Total operating expenses			1,499,776				69,186
Operating loss			(1,499,776	)			(69,186	)
Other expense:
Interest expense			(238,759	)			(199,695	)
Net Loss		$	(1,738,535	)		$	(268,881	)
Net Loss per common Share - basic and diluted		$	0.00			$	0.00
Weighted Average Shares -  basic and diluted			400,300,000				400,000,000
The accompanying notes are an integral part of these condensed financial statements

NUGENEREX IMMUNO-ONCOLOGY, INC.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT (UNAUDITED)
			Common Stock
			Shares				Amount				Additional Paid-in Capital				Accumulated Deficit				Total Stockholders’ Deficit
Balance at August 1, 2019			400,000,000			$	400,000			$	32,050,986			$	(36,834,887	)		$	(4,383,901	)
Contributions from Generex			—				—				26,586				—				26,586
Net loss			—				—				—				(268,881	)			(268,881	)
Balance at October 31, 2019			400,000,000			$	400,000			$	32,077,572			$	(37,103,768	)		$	(4,626,196	)
			Common Stock
			Shares				Amount				Additional Paid-in Capital				Accumulated Deficit				Total Stockholders’ Deficit
Balance at August 1, 2020			400,300,000			$	400,300			$	32,182,174			$	(38,423,697	)		$	(5,841,223	)
Contributions from Generex			—				—				1,567,143				—				1,567,143
Net loss			—				—				—				(1,738,535	)			(1,738,535	)
Balance at October 31, 2020			400,300,000			$	400,300			$	33,749,317			$	(40,162,232	)		$	(6,012,615	)
The accompanying notes are an integral part of these condensed financial statements

NUGENEREX IMMUNO-ONCOLOGY, INC.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
		Three months ended October 31,
		2020				2019
Cash flows from operating activities
Net loss		$	(1,738,535	)		$	(268,881	)
Changes in operating assets and liabilities:
Interest payable to foundation			238,759				199,695
Accounts payable and accrued expenses			1,519,731				283,524
Prepaid expenses			(20,000	)			—
Net decrease in cash			(45	)			214,338
Cash, beginning			84				389
Cash, ending		$	39			$	214,727
SUPPLEMENTAL CASH FLOW INFORMATION:
Non-cash investing and financing activities
Expenses paid by parent as non-cash capital contributions		$	1,567,143			$	26,586
The accompanying notes are an integral part of these condensed financial statements

Note 1 – Nature of Operations and Going Concern:

NuGenerex Immuno-Oncology, Inc. (“the Company’) is an oncology company focused on the modulation of the immune system to treat cancer. To that end, the Company is developing immunotherapeutic products and vaccines based on proprietary, patented platform technology, Ii-Key.

The accompanying financial statements of Nugenerex Immuno-Oncology, Inc. (the “Company”) have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which contemplates continuation of the Company as a going concern. The Company has experienced recurring net losses and negative cash flows from operations since inception and has both accumulated deficits of approximately $40.2 million and a working capital deficiency of approximately $6.0 million as of October 31, 2020. The Company’s parent, Generex Biotechnology Corporation (“Generex”) has funded substantially all the Company’s underlying working capital deficiencies. The uncertain economic fallout from the COVID -19 pandemic may also adversely affect our operations (See Commitments and Contingencies). These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

The Company will continue to require substantial funds to implement its business plans.  Management’s plans, to meet its operating cash flow requirements, include financing activities such as public or private placements of its common stock, preferred stock offerings, and issuances of debt and convertible debt instruments. There are no assurances that such additional funding will be achieved and that the Company will succeed in its future operations. Management is also actively pursuing financial and strategic alternatives, including strategic investments and divestitures, industry collaboration activities and strategic partners.

These financial statements do not include any adjustments to the recoverability and classification of recorded assets amounts and classification of liabilities that might be necessary should the Company not be able to continue as a going concern. The Company’s inability to obtain required funding in the near future or its inability to obtain funding on favorable terms will have a material adverse effect on its operations and strategic development plan for future growth. If the Company cannot successfully raise additional capital and implement its strategic development plan, its liquidity, financial condition, and business prospects will be materially and adversely affected, and the Company may have to cease operations.

Note 2 – Summary of Significant Accounting Policies:

 Basis of Presentation

The Company’s is a wholly owned subsidiary of, Generex and the Company has been dependent on Generex to fund its operations. Generex does not have costs centralized or shared services departments serving all its subsidiaries, accordingly, no allocations of centralized or shared service are necessary or included in the financial statements, as they are de-minimis.

The accompanying unaudited condensed financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments, which include only normal recurring adjustments, considered necessary for a fair presentation have been included. The Company’s fiscal year ends on July 31 of each calendar year.

Operating results for the three months ended October 31, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending July 31, 2021.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods.

Research and Development Costs

Expenditures for research and development are expensed as incurred and include, among other costs, those related to the production of experimental drugs, and amounts incurred for conducting clinical trials. Amounts expected to be received from governments under research and development tax credit arrangements are offset against current research and development expense.

The Company has started Ii Key viral vaccine research in the current quarter in an effort to become revenue producing and bring vaccines to market on behalf of the parent company Generex Biotechnology. In effect, the Company has incurred increased expenses to achieve that goal with the financial support of the parent company in the current period.

Income Taxes

NGIO is included in the Generex consolidated federal tax return. All tax provisions and the related tax liabilities and assets have been computed using the separate return method, as if the company was the legal taxpayer.

Income taxes are accounted for under the asset and liability method prescribed by FASB Accounting Standards Codification (“ASC”) Topic 740. These standards require a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more likely than not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements. Deferred income taxes are recorded for temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities. Deferred tax assets and liabilities reflect the tax rates expected to be in effect for the years in which the differences are expected to reverse. A valuation allowance is provided if it is more likely than not that some or all of the deferred tax asset will not be realized.

Revenue

The Company expects to generate revenue from licenses to access its intellectual property.

If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues attributed to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgement to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time. At the inception of each arrangement that contain development milestones, the Company evaluates whether the development milestones included are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not generally considered probable of being achieved until those approvals are received.

New Accounting Standards

The Company has reviewed the FASB issued Accounting Standards Update (“ASU”) accounting pronouncements and interpretations thereof that have effective dates during the periods reported and in future periods. The Company does not believe that any new or modified standards will have a material impact on the Company’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.

Note 3 - Commitments and Contingencies:

Commitments

On November 20, 2018, the Company entered into a clinical trial agreement with NSABP Foundation, Inc. (“NSABP”) under which NSABP will conduct clinical research using the Company’s AE37 peptide immunotherapeutic vaccine in combination with pembrolizumab (Ketruda®) for the treatment of metastatic triple negative breast cancer. The Company has agreed to pay NSABP an amount not to exceed $2,118,461 based on NAABP achieving various milestones. The Company recognized $0 and $251,459 as research and development related to the clinical trial agreement with NSABP for the periods ending October 31, 2020 and 2019 respectively.

The Clinical Trial Agreement terminates upon the completion of the obligations under such agreement. The Clinical Trial Agreement may be terminated by (i) any party if the authorization to conduct the Phase II clinical trial is revoked by the FDA; if the human and/or toxicology results support termination; safety concerns; if the manufacture of a drug used in the Phase II clinical trial has been exhausted or (ii) by NSABP if NGIO fails to pay NSABP an undisputed amount under the Clinical Trial Agreement.

On July 7, 2020 we entered into an agreement with Ajinomoto Bio-Pharma Services (“Ajin”) under which Ajin will manufacture one cGMP batch of AE 37. We may cancel the agreement by providing Ajin written notice. If we cancel the project, we will be subject to cancellation fees and be required to reimburse Ajin’s unbilled costs prior to the effective date of the cancellation. The estimated total payments required under this agreement are $243,900, including shipping and material estimates, of which Ajin has billed us $126,950 related to this agreement which is recognized as in research and development in our statement of operations. Of the $130,450 that was billed $4,500 is related to the period ending on October 31, 2020.

On October 2, 2020, the Company entered into an agreement with Polypeptide Laboratories San Diego to provide services for individual studies and projects, which may include synthetic process development, chemical synthesis, analytical method development and analysis of peptides and any other services relating to chemistry services requested from the Company. NGIO shall conduct research activities and pay Polypeptide Laboratories San Diego for fees, expenses, and pass-through costs in accordance with each work order.

On October 5, 2020, the Company and its parent Generex Biotechnology Corporation, (collectively “Generex”) entered into a Distribution and Licensing Agreement (the “Agreement”) with Bintai Healthcare SDN BHD, a subsidiary of Bintai Kinden Corporation Berhad of Malaysia (“Bintai”) for the exclusive rights to distribute, sell, develop and commercialize the Generex Ii-Key-SARS-CoV-2 coronavirus vaccine (the “Vaccine”) in Malaysia and South East Asia countries, with right of first refusal to commercialize the Vaccine within New Zealand, Australia and the Global Halal markets (the “Territory”). The Agreement, among other things, consists of Bintai providing 100% funding for U.S. clinical development, manufacturing and commercial registration of the Vaccine for the Territory.

Payable to Foundation

On February 1, 2007, the Company entered into a clinical study agreement (the “CSA”) with a Henry M. Jackson Foundation (“Foundation”) for two Phase II clinical trials to determine if a vaccine containing AE37 plus GM-CSF or another peptide vaccine compound (GP2) plus GM-CSF improved patient outcomes. The Foundation conducted the study, under the sponsorship of an institute affiliated with the United States Military until the IND #12229 was transferred to NGIO (then Antigen Express), after which HJF continued trial management on behalf of NGIO. In consideration for the study the Company agreed to total compensation of $2,700,000 at various intervals over the term of the agreement.

On September 1, 2013 the Foundation and the Company entered into a forbearance agreement (the “Forbearance Agreement”) under which the Company acknowledged they were $1,315,817 in arrears in its payment and interest obligations to the Foundation under the CSA (the “Original Forbearance Amount”). Pursuant to the Forbearance Agreement, the Company and the Foundation in exchange for the Foundations deferring the Company’s overdue payments, future payments and interest, the Company agreed, among other things to pay the Foundation certain royalties and accelerated payments (“Forbearance Payments”) .Effective August 1, 2015, the Company capitalized all outstanding unpaid interest on the outstanding balance. For the period ended October 31, 2020 and 2019, the Company recorded interest expense in the amount of $238,759 and $199,695, respectively, in the statements of operations. As of October 31,2020 and July 31, 2020 the Company has recorded accrued interest of $4,149,900 and $3,911,141, respectively.

Related Party

Expenses paid by Generex on behalf of the Company have been treated as capital contributions from Generex as Generex will not be reimbursed by the Company for these expenses. For the three-month periods ended October 31, 2020 and 2019, Generex paid expenses of $1,567,143 and $26,586, respectively. Certain shared expenses incurred by Generex, such as the shared corporate headquarters, have not been allocated to the Company as they are de minimus.

COVID-19

The ongoing coronavirus outbreak at the beginning of 2020 has impacted various businesses throughout the world, including travel restrictions and the extended shutdown of certain businesses in impacted geographic regions. If the coronavirus outbreak situation should continue to worsen, we may experience disruptions to our business including, but not limited disruptions of our ongoing clinical trials and the operations of our partners.

The extent to which the coronavirus impacts our operations or those of our third-party partners will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information that may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others. Any such disruptions or losses we incur could have a material adverse effect on our financial results and our ability to conduct business as expected.

Note 4 - Stockholders’ Deficiency:

Common Stock

On July 14, 2020, the Company entered into a purchase agreement with an investor Oasis Capital, LLC (“Oasis”) pursuant to which Oasis has agreed to purchase from the Company up to $50,000,000 of common stock at 92% of the market price for the period of five (5) consecutive trading days immediately subject to a put notice on such date on which the purchase price is calculated in accordance with the terms and conditions of the agreement (subject to certain limitations) from time to time over a 36-month period. We also issued to Oasis 300,000 shares under the Oasis Capital Agreement as a commitment fee in connection with a registration statement. This transfer has been accounted through common stock and additional paid in capital which has no net effect on equity.

Registration Statements

The Company filed three Form S-1s for Registration of Securities pursuant to the Securities Act of 1933 (the Securities Act”) on September 14, 2020. One Registration Statement relates to the offer and sale of up to 1,700,000 shares of common stock NGIO, by the selling stockholders. The second Form S-1 for Registration statement registered 100,000 shares of Series A Cumulative Redeemable Perpetual Preferred Stock at $0.001 par value per share. The third filing, is to register shares of $0.001 par value per share common stock and shares of common stock issuable upon exercise of Common Stock Purchase Warrants. The number of shares to be registered and the offering price have not yet been determined.

Note 5–Income taxes:

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on net deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. At October 31, 2020, the Company had a full valuation allowance against its deferred tax assets, accordingly the Company did not recognize an income tax benefit for losses incurred during the three-month period ended October 31, 2020.

 

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

As used herein, the terms the “Company,” “NGIO,” “we,” “us,” or “our” refer to NuGenerex Immuno Oncology, Inc., a Delaware corporation. The following discussion and analysis by management provides information with respect to our financial condition and results of operations for the three month periods ended October 31, 2020 and 2019.

Forward-Looking Statements 

We have made statements in this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this Quarterly Report on Form 10-Q of NGIO for the three months ended October 31, 2020 that may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"). The Act limits our liability in any lawsuit based on forward-looking statements that we have made. All statements, other than statements of historical facts, included in this Quarterly Report that address activities, events or developments that we expect or anticipate will or may occur in the future, including such matters as our projections, future capital expenditures, business strategy, competitive strengths, goals, expansion, market and industry developments and the growth of our businesses and operations, are forward-looking statements. These statements are based on currently available operating, financial and competitive information. These statements can be identified by introductory words such as “may,” "expects," “anticipates,” "plans," "intends," "believes," "will," "estimates" or words of similar meaning, and by the fact that they do not relate strictly to historical or current facts. Our forward-looking statements address, among other things:

•

the risks associated with international operations; (including pandemics and public health problems, such as the outbreak of novel coronavirus (COVID-19);

•

our expectations concerning product candidates for our technologies;

•

our expectations concerning existing or potential development and license agreements for third-party collaborations, acquisitions, and joint ventures;

•

our expectations concerning product candidates for our technologies;

•

our expectations regarding the cost of raw materials and labor, consumer preferences, the effect of government regulations on the Company’s business, the Company’s ability to compete in its industry, as well as future economic and other conditions both generally and in the Company’s specific geographic markets;

•

our expectations of when regulatory submissions may be filed or when regulatory approvals may be received; and

•

Our expectations of when commercial sales of our products in development may commence and when actual revenue from the product sales may be received.

 

Any or all of our forward-looking statements may turn out to be wrong. They may be affected by inaccurate assumptions that we might make or by known or unknown risks and uncertainties. Actual outcomes and results may differ materially from what is expressed or implied in our forward-looking statements. Among the factors that could affect future results are: 

•

the inherent uncertainties of product development based on our new and as yet not fully proven technologies;

•

the risks and uncertainties regarding the actual effect on humans of seemingly safe and efficacious formulations and treatments when tested clinically;

•

the inherent uncertainties associated with clinical trials of product candidates;

•

the inherent uncertainties associated with the process of obtaining regulatory approval to market product candidates;

•

the inherent uncertainties associated with commercialization of products that have received regulatory approval;

•

the decline in our stock price; and

•

our current lack of financing for operations and our ability to obtain the necessary financing to fund our operations and effect our strategic development plan.

 

We caution investors that the forward-looking statements contained in this Quarterly Report must be interpreted and understood in light of conditions and circumstances that exist as of the date of this Quarterly Report. We expressly disclaim any obligation or undertaking to update or revise forward-looking statements to reflect any changes in management's expectations resulting from future events or changes in the conditions or circumstances upon which such expectations are based.

Overview

We are an oncology company focused on the modulation of the immune system to treat cancer. To that end, we are developing immunotherapeutic products and vaccines based on our proprietary, patented platform technology, Ii-Key. The Ii-Key is a peptide derived from the major histocompatibility complex (“MHC”) Class II associated invariant chain (Ii) that regulates the formation, trafficking, and antigen-presenting functions of MHC class II complexes, essential for the activation of T cells in the immune response. T cells recognize antigenic epitopes when they are 'presented' to them by specific molecules, termed (MHC) on the surface of infected or malignant cells. This interaction activates the T cells, stimulating a multicellular cascade of actions that eliminates the diseased cell and protects against future disease recurrence.

The following discussion and analysis by management provides information with respect to our financial condition and results of operations for the three months ended October 31, 2020 and 2019.  

Results of Operations

Three months ended October 31, 2020 compared to Three months ended October 31, 2019

We reported a net loss of $1,738,535 and $483,264 for the three month periods, ended October 31, 2020, and October 31, 2019, respectively, reflecting an increase in the reported net loss of $1,255,271 or 260%. The increase in the net loss resulted from a $39,064 increase in interest expense, an increase of $641,879 or 255% in research and development expense and an increase of $574,328 in general and administrative expenses.

The $574,328 increase in general and administrative expenses for the three months ended October 31, 2020 versus the comparative period in the prior period is due to primarily professional fees, which accounted for approximately $541,477 of the increase which includes $500,000 for consulting services in connection with obtaining regulatory approval for our Ii-Key-SARS-CoV-2 Peptide Vaccine in Malaysia. The Company also incurred $16,000 of accounting fees in relation to regulatory reporting. The $641,879 increase in research and development expenses for the three months ending October 31, 2020 versus the comparative period is due to testing the Ii-Key-SARS-CoV-2 Peptide Vaccine and laboratory testing and analysis. These research and development projects accounted for $171,129, and $567,062 of the total research and development expense.

Our interest expense for the three months ended October 31, 2020 increased by $39,064 compared to the three months ended October 31, 2019 due to the additional principal resulting from the compounding of interest accrued on the payable to Foundation.

Financial Condition, Liquidity and Resources

COVID-19

The ongoing coronavirus outbreak which began in China at the beginning of 2020 has impacted various businesses throughout the world, including travel restrictions and the extended shutdown of certain businesses in impacted geographic regions. If the coronavirus outbreak situation should continue to worsen, we may experience disruptions to our business including, but not limited disruptions of our ongoing clinical trials and the operations of our partners.

While we expect delays in research and development, the extent to which the coronavirus impacts our operations or those of our third-party partners will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information that may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others. Any such disruptions or losses we incur could have a material adverse effect on our financial results and our ability to conduct business as expected.

Sources of Liquidity

To date, we have financed our activities primarily through capital contributions from Generex, our majority shareholder. Generex in the past has raised capital for our operations through private placements of Generex common stock, securities convertible into Generex common stock, and investor loans. We will require additional funds to support our working capital requirements and any development or other activities or will need to curtail its research and development and other planned activities or suspend operations. While Generex owns over 90% of our common stock, going forward, we will rely both on financing from third parties and from Generex, which may sell shares of our common stock, to fund our operations, development, and other activities.

As a public company, NGIO will begin to incur costs for corporate activities such as executives, corporate accounting for external reporting, and investor relations. Reasonable estimates of such costs are not available.

As of December 14, 2020, our cash position is not sufficient for twelve months of operations. Generex has financed our activities to date. Our cash balances have remained low throughout fiscal 2021.

Management may seek to meet all or some of our operating cash flow requirements through financing activities, such as public or private placement of our common stock, preferred stock offerings and offerings of debt and convertible debt instruments as well as through merger or acquisition opportunities.

In addition, management is actively pursuing financial and strategic alternatives, including strategic investments and divestitures, industry collaboration activities, and potential strategic partners.

We will continue to require substantial funds to continue research and development, including preclinical studies and clinical trials of our product candidates, further clinical trials for AE37 and to commence sales and marketing efforts if the FDA or other regulatory approvals are obtained.  Currently, the phase II clinical study using AE37 in combination with pembrolizumab (Keytruda ®) for treatment of metastatic triple negative breast cancer and Li Key research for vaccines are our only ongoing research and development projects in this regard, we have committed to provide the NASBP Foundation, Inc. financial support for clinical research using AE37 in combination with pembrolizumab (Keytruda ®) up to $2,118,461 upon NASBP achieving certain milestones. As of October 31, 2020, we have incurred $612,063 against this commitment.

Cash Flows for the Three Months ended October 31, 2020

For the three months ended October 31, 2020, we used $45 in cash from operating activities. There were no cash flows from financing or investing activities. The use for operating activities included a net loss of $1,738,535 and an increase in prepaid expenses of $20,000, offset by an increase in interest payable to the foundation of $238,759,and an increase in accounts payable and accrued expenses of $1,519,731, of which $1,567,143 is attributable to expenses paid by the parent company, and an increase in prepaid expenses of $20,000.

Cash Flows for the Three Months ended October 31, 2019

For the three months ended October 31, 2019, we used $45 in cash from operating activities. There were no cash flows from financing or investing activities. The use for operating activities included a net loss of $483,264, an increase in interest payable to the foundation of $199,695 and a  increase in accounts payable of $283,524, of which $26,586 was attributable to expenses paid by the parent company. 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

NGIO is a smaller reporting company and not required to provide Quantitative and Qualitative Disclosures about Market Risk pursuant to Regulation S-K 305 (e).

Item 4. Controls and Procedures

As of October 31, 2020, our Chief Executive Officer and Interim-Chief Financial Officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) and concluded that, subject to the inherent limitations, our disclosure controls and procedures were not effective due to the existence of several significant deficiencies culminating in material weaknesses in our internal control over financial reporting because of inadequate segregation of duties over authorization, review and recording of transactions, as well as the financial reporting of such transactions.

We have been working and are currently working to remediate the material weaknesses described above, including assessing the need for additional remediation steps and implementing additional measures to remediate the underlying causes that gave rise to the material weaknesses. We believe we have taken appropriate and reasonable steps to make the necessary improvements to remediate these deficiencies, however we cannot be certain that our remediation efforts will ensure that our management designs, implements and maintains adequate controls over our financial processes and reporting in the future or that the changes made will be sufficient to address and eliminate the material weaknesses previously identified. Our inability to remedy any additional deficiencies or material weaknesses that may be identified in the future could, among other things, have a material adverse effect on our business, results of operations and financial condition, as well as impair our ability to meet our quarterly, annual and other reporting requirements under the Securities Exchange Act of 1934 in a timely manner, and require us to incur additional costs or to divert management resources.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

On October 2, 2020, Generex and its subsidiary, NuGenerex Distribution Solutions, LLC, were named as a defendant in an action brought by AVEM Medical, LLC, formerly known as Medisource Partners, LLC and Pantheon Medical – Foot & Ankle, LLC in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida, Civil Division. The complaint alleges that the Company breached an Asset Purchase Agreement. The Company intends to vigorously defend the case.

Item 1A. Risk Factors.

NGIO is a smaller reporting company defined by Rule 12b-2 of the Exchange Act and not required to provide Risk Factors.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

On July 14, 2020, the Company issued 300,000 shares to Oasis under the Oasis Capital Agreement as a commitment fee in connection with a registration statement filed on September 14, 2020. 

Item 3. Defaults Upon Senior Securities. 

None

Item 4. Mine Safety Disclosures.

Not applicable

Item 5. Other Information.

None 

Item 6. Exhibits.

None.

 SIGNATURES

Pursuant to the requirements 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.

	NUGENEREX IMMUNO-ONCOLOGY, INC.
	(Registrant)
Date: December 15, 2020	By:	/s/ Joseph Moscato
		Joseph Moscato
		President and Chief Executive Officer
Date: December 15, 2020	By:	/s/ Mark Corrao
		Mark Corrao
		Chief Financial Officer