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 March 31, 2021

 

Commission File Number: 001-27072

 

AIM IMMUNOTECH INC.

(Exact name of registrant as specified in its charter)

  

Delaware		52-0845822
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

 

2117 SW Highway 484, Ocala FL 34473

(Address of principal executive offices) (Zip Code)

 

(352) 448-7797

(Registrant’s telephone number, including area code)

 

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

 

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.

[X] Yes [  ] 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 such shorter period that the registrant was required to submit and post such files).

[X] Yes [  ] 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 definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

[  ] Large accelerated filer	[  ] Accelerated filer
[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 check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [  ] Yes [X] No

  

47,832,997 shares of common stock were outstanding as May 12, 2021.

 

 

 

PART I- FINANCIAL INFORMATION

ITEM 1: Financial Statements

 

AIM IMMUNOTECH INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except for share and per share data)

(Unaudited)

 

		March 31, 2021				December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents		$	48,773			$	38,501
Marketable securities			1,164				501
Funds receivable from New Jersey net operating loss			1,090				1,090
Accounts receivable, net			34				34
Prepaid expenses and other current assets			158				184
Total current assets			51,219				40,310
Property and equipment, net			6,311				6,473
Right of use asset, net			168				179
Patent and trademark rights, net			1,798				1,498
Marketable securities, long term			13,664				15,376
Other assets			929				748
Total assets		$	74,089			$	64,584
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	189			$	383
Accrued expenses			498				442
Current portion of operating lease liability			49				47
Current portion of financing obligation			234				230
Total current liabilities			970				1,102
Long-term liabilities:
Operating lease liability			119				132
Financing obligation arising from sale leaseback transaction (Note 13)			1,816				1,876
Redeemable warrants			217				180
Commitments and contingencies (Notes 11, 12, 13, and 14)
Stockholders’ equity:
Series B Convertible Preferred Stock, stated value $1,000 per share, 725 shares designated, 732 shares issued and outstanding			725				732
Common Stock, par value $0.001 per share, authorized 350,000,000 shares; issued and outstanding 47,832,997 and 42,154,371, respectively			48				42
Additional paid-in capital			415,955				402,541
Accumulated other comprehensive loss			(208	)			(47	)
Accumulated deficit			(345,553	)			(341,974	)
Total stockholders’ equity			70,967				61,294
Total liabilities and stockholders’ equity		$	74,089			$	64,584

 

See accompanying notes to consolidated financial statements.

 

 

AIM IMMUNOTECH INC. AND SUBSIDIARIES

Consolidated Statement of Operations and Comprehensive Loss

(in thousands, except share and per share data)

(Unaudited)

 

		Three months ended March 31,
		2021				2020
Revenues:
Clinical treatment programs - US		$	28			$	43
Clinical treatment programs - Europe			—				2
Total Revenues			28				45
Costs and Expenses:
Production costs			237				204
Research and development			1,424				898
General and administrative			2,112				2,268
Total Costs and Expenses			3,773				3,370
Operating loss			(3,745	)			(3,325	)
Interest and other income			72				21
Interest expense and other finance costs			(50	)			(322	)
Redeemable warrants valuation adjustment			(37	)			(182	)
Gain from sale of Income tax operating losses			181				—
Net Loss			(3,579	)			(3,808	)
Other comprehensive (loss)
Reclassification adjustment for realized investment lost			2				—
Change in unrealized loss on marketable securities available for sale			(163	)			(4	)
Comprehensive loss		$	(3,740	)		$	(3,812	)
Basic and diluted loss per share		$	(0.08	)		$	(0.22	)
Weighted average shares outstanding basic and diluted			45,726,855				17,490,322

 

See accompanying notes to consolidated financial statements.

 

 

AIM IMMUNOTECH INC. AND SUBSIDIARIES

Consolidated Statement of Changes in Stockholders’ Equity

For the Three Months Ended March 31, 2021 and 2020

(in thousands except share data)

(Unaudited)

 

		Series B Preferred				Common Stock Shares				Common Stock				Additional Paid-in Capital				Accumulated other Comprehensive Income (Loss)				Accumulated Deficit				Total Stockholders’ Equity
Balance December 31, 2020		$	732				42,154,371			$	42			$	402,541			$	(47	)		$	(341,974	)		$	61,294
Shares issued for:
Common stock issuances, net of costs			—				5,678,626				6				12,881				—				—				12,887
Equity-based compensation			—				—				—				526				—				—				526
Series B preferred shares converted to common shares			(7	)			—				—				7				—				—				—
Comprehensive loss			—				—				—				—				(161	)			(3,579	)			(3,740	)
Balance March 31, 2021		$	725				47,832,997			$	48			$	415,955			$	(208	)		$	(345,553	)		$	70,967

 

		Series B Preferred				Common Stock Shares				Common Stock				Additional Paid-in Capital				Accumulated other Comprehensive Income (Loss)				Accumulated Deficit				Total Stockholders’ Equity
Balance December 31, 2019		$	778				10,386,754			$	10			$	340,228			$	—			$	(328,109	)		$	12,907
Shares issued for:
Common stock issuance, net of costs			—				17,628,996				18				25,755				—				—				25,773
Warrant modification			—				—				—				46				—				—				46
Equity-based compensation			—				—				—				196				—				—				196
Shares issued to pay accounts payable			—				4,762				—				10				—				—				10
Series B preferred shares converted to common shares			(9	)			—				—				—				—				—				(9	)
Comprehensive loss			—				—				—				—				(4	)			(3,808	)			(3,812	)
Balance March 31, 2020		$	769				28,020,512			$	28			$	366,235			$	(4	)		$	(331,917	)		$	35,111

 

See accompanying notes to consolidated financial statements.

 

  

AIM IMMUNOTECH INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the Three Months Ended March 31, 2021 and 2020

(in thousands)

(Unaudited)

		2021				2020
Cash flows from operating activities:
Net loss		$	(3,579	)		$	(3,808	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation of property and equipment			162				173
Redeemable warrants valuation adjustment			37				182
Warrant modification			—				46
Amortization of patent, trademark rights			65				18
Changes in ROU assets			11				11
Loss on available for sale marketable securities			2				—
Gain from sale of income tax operating losses			(181	)			—
Equity-based compensation			526				196
Amortization of finance and debt issuance costs			36				181
Change in assets and liabilities:
Accounts receivable			—				(2	)
Prepaid expenses and other current assets and other non current assets			26				49
Lease liability			(11	)			(11	)
Accounts payable			(194	)			(307	)
Accrued interest expense			—				139
Accrued expenses			55				(117	)
Net cash used in operating activities			(3,045	)			(3,250	)
Cash flows from investing activities:
Proceeds from sale of marketable securities			2,039				14,116
Purchase of short-term marketable securities			(1,151	)			(10,319	)
Purchase of property and equipment			—				(7	)
Purchase of patent and trademark rights			(365	)			(107	)
Net cash provided by investing activities			523				3,683
Cash flows from financing activities:
Financing obligation payments			(93	)			(86	)
Proceeds from sale of stock, net of issuance costs			12,887				25,773
Net cash provided by financing activities			12,794				25,687
Net increase in cash and cash equivalents			10,272				26,120
Cash and cash equivalents at beginning of period			38,501				1,470
Cash and cash equivalents at end of period		$	48,773			$	27,590
Supplemental disclosures of non-cash investing and financing cash flow information:
Stock issued to settle accounts payable		$	—			$	10
Conversion of Series B preferred		$	7			$	9

  

See accompanying notes to consolidated financial statements.

 

 

AIM IMMUNOTECH INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 1: Business and Basis of Presentation

 

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, 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 United States.

 

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. Given the evolution of uncertainty associated with SAR-CoV-2, there is uncertainty as to the effects on the Company’s financial position, results of operations or cash flows.

 

The full impact of the COVID-19 outbreak continues to evolve, 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.

 

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 the Company’s 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 2020, 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 follow-up pancreatic cancer Phase 2/3 clinical trials with potential 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 its New Drug Application, or 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. 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. 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, the Company anticipates that GP Pharm will begin distributing Ampligen in Argentina. The Company continues to pursue its Ampligen NDA, for the treatment of CFS with the FDA.

 

 

Alferon N Injection is approved for a category of sexually transmitted disease infections 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.

 

The Company operates a 30,000 sq. ft. facility at 783 Jersey Ave, 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, it is also continually exploring new efficiencies so as to maximize its ability to fulfill future obligations. On April 5, 2021, the Company’s board of directors approved the exercise of AIM’s option to re-purchase the New Brunswick facility, pursuant to the terms of the March 16, 2018 sale and lease-back agreement and, thereafter, the Company sold certain equipment and machinery that it determined to be obsolete and no longer needed for current and future manufacturing.

 

In the opinion of management, all adjustments necessary for a fair presentation of such consolidated financial statements have been included. Such adjustments consist of normal recurring items. Interim results are not necessarily indicative of results for a full year.

 

The interim consolidated financial statements and notes thereto are presented as permitted by the Securities and Exchange Commission (“SEC”), and do not contain certain information which will be included in the Company’s annual consolidated financial statements and notes thereto.

 

These consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements for the years ended December 31, 2020 and 2019, contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed on March 31, 2021.

  

Note 2: Net Loss Per Share

 

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 stock options and warrants which amounted to 1,672,825 and 520,508 are excluded from the calculation of diluted net loss per share for the three months ended March 31, 2021 and 2020, respectively, since their effect is antidilutive due to the net loss.

 

Note 3: Equity-Based Compensation

 

The fair value of each option and equity warrant award is estimated on the date of grant using a Black-Scholes-Merton option pricing 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, expected life and forfeiture rates. There were no options granted in the three months ended March 31, 2021 and 2020.

 

 

Stock option for employees’ activity during the three months ended March 31, 2021 is as follows:

 

Stock option activity for employees:

 

		Number of Options				Weighted Average Exercise Price				Weighted Average Remaining Contractual Term (Years)				Aggregate Intrinsic Value
Outstanding January 1, 2021			1,049,695			$	5.38				9.28			$	—
Granted			—				—				—				—
Forfeited			—				—				—				—
Expired			(189	)			68.64				—				—
Outstanding March 31, 2021			1,049,506			$	5.37				9.03			$	—
Vested and expected to vest March 31, 2021			1,049,506			$	5.37				9.03			$	—
Exercisable March 31, 2021			518,194			$	4.73				8.24			$	—

 

Unvested stock option activity for employees:

 

		Number of Options				Weighted Average Exercise Price				Weighted Average Remaining Contractual Term (Years)				Aggregate Intrinsic Value
Unvested January 1, 2021			767,029			$	3.71				9.68			$	—
Granted			—				—				—				—
Expired			(189	)			68.64				—				—
Vested			(235,528	)			2.51				—				—
Unvested March 31, 2021			531,312			$	8.35				7.47			$	—

 

Stock option activity for non-employees:

 

		Number of Options				Weighted Average Exercise Price				Weighted Average Remaining Contractual Term (Years)				Aggregate Intrinsic Value
Outstanding January 1, 2021			166,533			$	11.03				6.88			$	—
Granted			—				—				—				—
Forfeited			—				—				—				—
Expired			(322	)			955.93				—				—
Outstanding March 31, 2021			166,211			$	9.18				7.30			$	—
Vested and expected to vest March 31, 2021			166,211			$	9.18				7.30			$	—
Exercisable March 31, 2021			129,758			$	4.73				7.73			$	—

 

 

Unvested stock option activity for non-employees:

 

		Number of Options				Weighted Average Exercise Price				Weighted Average Remaining Contractual Term (Years)				Aggregate Intrinsic Value
Unvested January 1, 2021			66,202			$	7.24				6.63			$	—
Granted			—				—				—				—
Expired			—				—				—				—
Vested			(29,749	)			4.69				—				—
Unvested March 31, 2021			36,453			$	9.32				5.73			$	—

 

Stock-based compensation expense was approximately $526,000 and $196,000 for the three months ended March 31, 2021 and 2020 resulting in an increase in general and administrative expenses, respectively.

 

As of March 31, 2021, and 2020, respectively, there was approximately $914,000 and $1,324,000 of unrecognized equity-based compensation cost related to options granted under the Equity Incentive Plan.

 

Note 4: Marketable Securities

 

Marketable securities consist of debt securities. As of March 31, 2021, and December 31, 2020, it was determined that none of the marketable securities had an other-than-temporary impairment. At March 31, 2021 and December 31, 2020, all securities were measured as Level 1 instruments of the fair value measurements standard (see Note 12: Fair Value). As of March 31, 2021, and December 31, 2020 the Company held $14,828,000 and $15,877,000 in debt and equity securities, respectively.

 

Debt securities classified as available for sale consisted of:

 

March 31, 2021
(in thousands)

 

Securities		Amortized Cost				Gross Unrealized Gains /(Losses)				Fair Value				Marketable Securities
U.S. Treasury notes		$	5,699			$	(48	)		$	5,651			$	5,651
U.S. Government mortgage backed securities			4,200				(43	)			4,157				4,157
Corporate bonds			5,090				(70	)			5,020				5,020
Totals		$	14,989			$	(161	)		$	14,828			$	14,828

 

December 31, 2020
(in thousands)

 

Securities		Amortized Cost				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

 

 

The following presents available-for-sale securities’ gross unrealized losses and fair value aggregated by the short- and long-term maturity.

 

March 31, 2021
(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		$	1,164			$	(5	)		$	4,487			$	(43	)		$	5,651			$	(48	)
U.S. Government mortgage backed securities			—				—				4,157				(43	)			4,157				(43	)
Corporate bonds			—				—				5,020				(70	)			5,020				(70	)
Totals		$	1,164			$	(5	)		$	13,664			$	(156	)		$	14,828			$	(161	)

 

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	)

 

Note 5: Accrued Expenses

 

Accrued expenses consist of the following:

 

		(in thousands)
		March 31, 2021				December 31, 2020
Compensation		$	16			$	2
Professional fees			279				124
Other expenses			203				316
		$	498			$	442

 

 

 

Note 6: Property and Equipment

 

		(in thousands)
		March 31, 2021				December 31, 2020
Land, buildings and improvements		$	10,547			$	10,547
Furniture, fixtures, and equipment			5,136				5,136
Total property and equipment			15,683				15,683
Less: accumulated depreciation			(9,372	)			(9,210	)
Property and equipment, net		$	6,311			$	6,473

 

Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets, ranging from three to thirty-nine years.

 

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. The lease payments are initially $408,000 per year for two years through March 31, 2020 and will escalate in subsequent years. (See Note 13: Financing Obligation Arising from Sale Leaseback Transaction for more details on the sale leaseback of the property and equipment).

 

On May 13, 2021, the Company completed its re-purchase of the land and building for $4,661,400 pursuant to its repurchase option in the property lease.

 

Note 7: Patents

 

December 31, 2019		$	1,151
Acquisitions			573
Abandonments			(68	)
Amortization			(158	)
December 31, 2020		$	1,498
Acquisitions			365
Amortization			(65	)
March 31, 2021		$	1,798

 

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		$	115
2022			132
2023			152
2024			175
2025			201
Thereafter			1,023
Total		$	1,798

 

 

Note 8: 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 its 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 March 31, 2021, and December 31, 2020, the Company had 725 and 732 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 three months ending March 31, 2021, 7 shares of Series B Convertible Preferred stock were converted into common stock, and for 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.

 

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 January 4, 2021, 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 March 31, 2021, the Company has issued 21,700 shares of its common stock at a price ranging of $2.26 to $2.35 for a total of $50,000. This plan expired March 4, 2021.

 

On March 4, 2021 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 March 31, 2021, the Company had issued 0 shares of its common stock.

 

 

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 July 19, 2019, the Company entered into a new Equity Distribution Agreement (the “2019 EDA”) with Maxim Group LLC (“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 a prior 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. During the period ending March 31, 2021, the Company sold 5,665,731 shares under the 2019 EDA for total gross proceeds of $13,301,526, which includes a 3.5% fee to Maxim of $465,533. The 2019 EDA was terminated in early February 2021.

 

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 March 31, 2021, and December 31, 2020, there were 47,832,997 and 42,154,371 shares outstanding, respectively.

 

Note 9: Cash and Cash Equivalents

 

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

 

 

Note 10: Recent Accounting Pronouncements

 

In August 2020, the FASB issued ASU 2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40)” (“ASU 2020-06”). ASU 2020-06 reduces the number of models used to account for convertible instruments, amends diluted EPS calculations for convertible instruments, and amends the requirements for a contract (or embedded derivative) that is potentially settled in an entity’s own shares to be classified in equity. The amendments add certain disclosure requirements to increase transparency and decision-usefulness about a convertible instrument’s terms and features. Under the amendment, the Company must use the if-converted method for including convertible instruments in diluted EPS as opposed to the treasury stock method. ASU 2020-06 is effective for annual reporting periods beginning after December 15, 2023. Early adoption is allowed under the standard with either a modified retrospective or full retrospective method. The Company early adopted ASU 2020-06 on January 1, 2021 using the modified retrospective method. As a result of Management’s evaluation, the adoption of ASU 2020-06 did not have a material impact on the consolidated financial statements.

 

Note 11: Long-Term Debt

 

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 its 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 $0, for the period ending March 31, 2021 and approximately $70,000, for the period ending March 31, 2020.

 

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.

 

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 March 31, 2021 was $0 and was approximately $56,000 for the period ending March 31, 2020.

 

Note 12: 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.

 

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 unlikely occurrence of a Fundamental Transaction, namely (1) a merger or consolidation with another person; (2) sale of substantially all of its assets; (3) holders of common stock sell 50% or more of outstanding shares; (4) the Company effects an exchange of all its securities for other securities, cash or property, and (5) the Company effects a stock purchase agreement or business combination for more than 50% of outstanding shares. 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 warrant issuances, 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:

 

		March 31, 2021				December 31, 2020
Underlying price per share		$	2.27			$	1.79
Exercise price per share		$	82.50			$	82.50
Risk-free interest rate			0.04	%			0.09	%
Expected holding period			0.42				0.67
Expected volatility			80	%			75	%
Expected dividend yield			-				-

 

The Company utilized the following assumptions to estimate the fair value of the February 2017 Warrants:

 

		March 31, 2021				December 31, 2020
Underlying price per share		$	2.27			$	1.79
Exercise price per share		$	30.25 – 33.00			$	30.25-33.00
Risk-free interest rate			0.10 - 0.11	%			0.12	%
Expected holding period			1.34 – 1.35				1.58 – 1.60
Expected volatility			155	%			130	%
Expected dividend yield			-				-

 

 

The Company utilized the following assumptions to estimate the fair value of the June 2017 Warrants:

 

		March 31, 2021				December 31, 2020
Underlying price per share		$	2.27			$	1.79
Exercise price per share		$	27.50			$	27.50
Risk-free interest rate			0.09	%			0.11	%
Expected holding period			1.17				12.42
Expected volatility			160	%			135	%
Expected dividend yield			-				-

 

The Company utilized the following assumptions to estimate the fair value of the August 2017 Warrants:

 

		March 31, 2021				December 31, 2020
Underlying price per share		$	2.27			$	1.79
Exercise price per share			19.80			$	19.80
Risk-free interest rate			0.07	%			0.11	%
Expected holding period			0.93				1.18
Expected volatility			90	%			110	%
Expected dividend yield			-				-

 

The Company utilized the following assumptions to estimate the fair value of the April 2018 Warrants:

 

		March 31 ,2021				December 31, 2020
Underlying price per share		$	2.27			$	1.79
Exercise price per share		$	17.16			$	17.16
Risk-free interest rate			0.27	%			0.16	%
Expected holding period			2.57				2.81
Expected volatility			135	%			105	%
Expected dividend yield			-				-

 

The Company utilized the following assumptions to estimate the fair value of the March 2019 Warrants:

 

		March 31, 2021				December 31, 2020
Underlying price per share		$	2.27			$	1.79
Exercise price per share		$	8.80			$	8.80
Risk-free interest rate			0.34	%			0.19	%
Expected holding period			2.94				3.19
Expected volatility			125	%			105	%
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 $0.00 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:

 

	a.	The Company only has one product that is FDA approved but which will not be available for commercial sales for 18 months at the earliest;
	b.	The Company flagship product is approved only in Argentina for Severely Debilitated Chronic Fatigue Syndrome patients;
	c.	The Company may have to perform additional clinical trials for FDA approval of its flagship product;
	d.	Industry and global market conditions continue to include uncertainty, adding risk to any transaction;
	e.	Available capital for a potential buyer in a cash transaction continues to be limited;
	f.	The nature of a life science company is heavily dependent on future funding and high costs, including research & development;
	g.	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
	h.	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 stated above, the Company used a discrete uniform probability distribution over the Expected Holding Period to model 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., using historical stock prices), the numbers input change from period to period (e.g., the actual historical prices input for the relevant period).

 

The Company applies FASB ASC 820 that defines fair value, establishes a framework for measuring fair value in U.S. GAAP, 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 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 certain U.S. and government agency debt and equity securities that are traded in an active market.
●	Level 2 – Observable inputs other than Level 1 prices such as quoted 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.
●	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 September 30, 2020, the Company has classified the warrants with cash settlement features 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 these warrants.

 

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 March 31, 2021
		Total				Level 1				Level 2				Level 3
Assets:
Marketable securities		$	14,828			$	14,828			$	—			$	—
Liabilities:
Redeemable warrants		$	217				—				—				217

 

 

		(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

 

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, 2020		$	180
Fair value adjustment			37
Balance at March 31, 2021		$	217

 

 

Note 13: 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 6 Property and Equipment” above are the property and equipment involved in this transaction. Depreciation on the building will continue until a sale has been recognized. See Note 15 Subsequent Events.

Future minimum payments required under the Financing Obligation and the balance of the Finance Obligation as of March 31, 2021, are as follows:

 

During the year:

 

		(in thousands)
2021		$	321
2022			437
2023			449
2024			463
2025			477
Thereafter			1,091
Total of payments			3,238
Less deferred issuance costs			(185	)
Less discount on debt instrument			(795	)
Less imputed interest			(208	)
Total balance			2,050
Less current portion			(234	)
Long term portion		$	1,816

 

Interest expense relating to this financing agreement was $14,000 for the three months ended March 31, 2021 and $16,000 for the three months ended March 31, 2020.

 

Note 14: Leases

 

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 March 31, 2021, the weighted-average remaining term is 1.67 years.

 

The Company has determined that the incremental borrowing rate is 10% as of March 31, 2021 based upon the recently completed financing transaction in December 2019.

 

Year Ending March 31,
2021		$	42
2022			55
2023			45
2024			49
2025			26
Thereafter			12
Less imputed interest			(61	)
Total		$	168

 

As of March 31, 2021, the balance of the right of use assets was $168,000 and the corresponding lease liability balance was $168,000. Total rent expense was $11,000 for the three months ended March 31, 2021 and $11,000 for the three months end March 31, 2020.

 

Note 15: Subsequent Events

 

On May 13, 2021, the Company completed its re-purchase of its New Brunswick, New Jersey facility pursuant to the repurchase option in the facility lease for $4,661,400.

 

 

ITEM 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

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 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section; Part II, Item 1 “Legal Proceedings”; and Part II, Item 1A “Risk Factors”.

 

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 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.

 

 

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 oncology 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. Four studies are at Roswell Park and two studies are at the University of Pittsburgh Medical Center. 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 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 Shenzhen 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. AIM and Smoore signed a two-month extension of the MTA on April 1, 2021 and are working toward agreement on a longer extension.

 

 

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.

 

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.

 

Overview

 

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.

 

Our 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 trials with potential 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. 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. 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.

 

Alferon N Injection is approved for a category of sexually transmitted disease infections 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. Related, on April 5, 2021, the Company approved a proposal from Polysciences Inc. (“Polysciences”) for the manufacture of AIM’s Poly I and Poly C12U polynucleotides and associated test methods at Polysciences’ Warrington, Penn. location to enhance the Company’s capacity to produce the polymer precursors to Ampligen. The Company is working with Polysciences to finalize a Service Agreement and a Quality Agreement.

 

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. 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. On June 10, 2020, we received import clearance from ANMAT to import the first shipment of commercial grade vials of Ampligen to Argentina. 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. AIM has 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.

 

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 2021. At this time, we do not plan on passing this adjustment along to the patients in this program. As of March 31, 2021, there are 11 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; 1 of the 11 patients enrolled has post COVID 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. The agreement automatically extends for a period of 12 months on May 20, 2021.

 

 

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.

 

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.

 

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 have 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 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. This study is on hold as we await next steps from Roswell Park.

 

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.

 

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.

 

 

A total of 42 pancreatic cancer patients 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 follow-up pancreatic cancer Phase 2/3 clinical trials with potential 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) granting Orphan Medicinal Product Designation 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 International Association for Chronic Fatigue Syndrome/Myalgic Encephalomyelitis (IACFS/ME) annual meeting in Fort Lauderdale, FL. The intent to treat (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 exercise tolerance (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. According to a 2016 journal article, the estimated annual cost of lost productivity related to ME/CFS was $9-37 billion in the United States, and for direct medical costs it was $9-14 billion.

 

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.

 

 

On April 1, 2020, we entered into a Material Transfer and Research Agreement (MTA) with Shenzhen Smoore Technology to study the utilization of an innovative Smoore inhalation delivery device and Ampligen as a potential treatment approach for the SARS-CoV-2 pandemic. 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. AIM and Smoore signed a two-month extension of the MTA on April 1, 2021 and are working toward agreement on a longer extension.

 

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. Amarex is providing us with monitoring support for our Phase I study with the Centre for Human Drug Research CHDR in The Netherlands. For the subsequent Phase II/III studies we expect to incur clinical trial costs of up to $4-5 million.

 

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 and monitoring support related to a clinical trial testing Ampligen’s intranasal safety and 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 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. This study was recently amended to add 20 patients, with 10 randomized to receive a single dose of Ampligen and 10 patients to receive current best therapies.

 

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.

 

 

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 Phase 1 randomized, double-blind study to evaluate the safety and activity of repeated intranasal administration of Ampligen. The study protocol calls for the enrollment of eight healthy subjects in each of four Cohorts to receive Ampligen. In addition, two healthy subjects in each Cohort will receive placebo, for a total of 40 healthy subjects. The subjects will receive intranasal dosing every other day for 13 days, for a total of seven doses each. This study will assess the safety, tolerability and biological activity of repeated administration of Ampligen intranasally. The protocol design is for subjects in Cohort 1 to receive 75 μg of Ampligen or a matching placebo, Cohort 2 to receive 200 μg of Ampligen or a matching placebo, Cohort 3 to receive 500 μg of Ampligen or a matching placebo, and Cohort 4 to receive 1250 μg of Ampligen or a matching placebo. We are sponsoring and funding the study. In April 2021, dosing of Cohort 2 in the Phase 1 clinical study was completed with no serious adverse events reported, and paving the way for escalation of the dose in Cohort 3. The trial is a critical step in our ongoing efforts to develop Ampligen as a potential prophylaxis or treatment for COVID-19 and other respiratory viral diseases.

 

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.

 

On April 5, 2021, we entered into an MTA with the University of Cagliari Dipartimento di Scienze della Vita e dell’Ambiente (UNICA), an educational institution, under the laws of Italy, located in Monserrato (Cagliari), Italy. The MTA relates to the research and development of the effects of Ampligen and its ability to induce interferon production in several cell lines and also on the ability of the Ebola virus protein VP35 to bind to viral dsRNA and impede interferon’s upregulation and activity, and on Ampligen’s ability to reverse VP35 inhibition of interferon production in biological systems.

 

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. On June 10, 2020, we received import clearance from ANMAT to import the first shipment of commercial grade vials of Ampligen to Argentina. 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. These lots have been designated for human use in the US in the cost recovery CFS program and for expanded oncology clinical trials. 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 addition, we have supplied GP Pharm with the Ampligen required for testing and ANMAT release. Once final approval by ANMAT is obtained, we anticipate that GP Pharm will begin distributing Ampligen in Argentina.

 

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 New Brunswick facility and determined that some of the equipment 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. In this regard, on April 5, 2021, we approved a proposal from Polysciences Inc. (“Polysciences”) for the manufacture of our Poly I and Poly C₁₂U polynucleotides and associated test methods at Polysciences’ Warrington, PA location to enhance our capacity to produce the polymer precursors to the drug Ampligen. We are working with Polysciences to finalize a Service Agreement and a Quality Agreement and will notify the market when those are complete.

 

On April 5, 2021, our board of directors approved the exercise of our option to re-purchase the New Brunswick manufacturing facility, pursuant to the terms of the March 16, 2018 sale and lease-back agreement and, thereafter, we sold certain equipment and machinery that we determined to be obsolete and no longer needed for current and future manufacturing.

 

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.

 

401(k) Plan

 

Each participant immediately vests in his or her deferred salary contributions, while our contributions will vest over one year. Our 6% matching contribution was reinstated effective January 1, 2021. For the three months ended March 31, 2021, our contributions towards the 401(k) Plan were approximately $37,000.

 

New Accounting Pronouncements

 

See “Note 10: Recent Accounting Pronouncements”.

 

Disclosure About Off-Balance Sheet Arrangements

 

None.

 

 

Critical Accounting Policies

 

There have been no material changes in our critical accounting policies and estimates from those disclosed in Part II; Item 7: “Management’s Discussion and Analysis of Financial Condition and Results of Operations; Critical Accounting Policies” contained in our Annual Report on Form 10-K for the year ended December 31, 2020.

 

RESULTS OF OPERATIONS

 

Three months ended March 31, 2021 versus three months ended March 31, 2020

 

Net Loss

 

Our net loss was approximately $3,579,000 and $3,808,000 for the three months ended March 31, 2021 and 2020, respectively, representing a decrease in loss of approximately $229,000 or 6%. This decrease in loss was primarily due to the following:

 

●	an increase in research and development expenses of $526,000;
●	an increase in production costs of $33,000;
●	an increase of $145,000 from the 2020 quarterly reevaluation of certain redeemable warrants;
●	an increase in income tax operating tax of $181,000;
●	a decrease in revenue of $17,000; offset by
●	a decrease in selling, general and administrative cost of $156,000;
●	a decrease in interest expense and other finance cost of $272,000; and
●	an increase in interest income of $51,000.

 

Net loss per share was $(0.08) and $(0.22) for the three months ended March 31, 2021 and 2020, respectively. The weighted average number of shares of our common stock outstanding as of March 31, 2021 was 45,726,855 as compared to 17,490,322 as of March 31, 2020.

 

Revenues

 

Revenues from our Ampligen® Cost Recovery Program were $28,000 and $45,000 for the quarters ended March 31, 2021 and 2020, respectively. There was a decrease in revenues of $17,000. The change in revenue is related to timing of orders and shipments in the three months ending March 31, 2020. The 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 $237,000 and $204,000, respectively, for the three months ended March 31, 2021 and 2020, representing an increase of $33,000 in production costs in the current period. These costs primarily represent production expenses related to increased roof maintenance in the three months ending March 31, 2021

 

Research and Development Costs

 

Research and Development (“R&D”) costs for the quarter ended March 31, 2021 were approximately $1,424,000 as compared to $898,000 for the quarter ended March 31, 2020 reflecting an increase of approximately $526,000 or 59%. The reason for the increase in research and development costs was due to increases in clinical expenses of $695,000, maintenance and engineering of $16,000 offset by decreases in Ampligen compliance and stability of $168,000 and clinical research of $19,000 and cost recovery of $10,000.

 

General and Administrative Expenses

 

General and Administrative (“G&A”) expenses for the quarters ended March 31, 2021 and 2020 were approximately $2,112,000 and $2,268,000, respectively, reflecting a decrease of approximately $156,000 or 7%. The decrease in G&A expenses during the current period was mainly due to a decrease in salaries, benefits and other compensation of $141,000, public relations of $54,000 and professional fees of $24,000, offset by increases in insurance of $35,000 and taxes of $45,000.

 

 

Interest Income

 

Interest income increased $51,000 in the three months ended March 31, 2021 compared to the three months ended March 31, 2020, driven by the increase in investments from the proceeds from stock sales.

 

Interest Expense and Other Finance Costs

 

Interest and other finance costs decreased $272,000 in the three months ended March 31, 2021 mostly due to the costs associated with the long-term debt which were in effect in the three months ended March 31, 2020. The long-term debt was extinguished in the second quarter of 2020.

 

Redeemable Warrants

 

The quarterly revaluation of certain redeemable warrants resulted in a non-cash adjustment to the redeemable warrants liability for the three months ended March 31, 2021 which amounted to a loss of approximately $37,000 compared to a loss of $182,000 for March 31, 2020 (see Note 12: Fair Value - for the various factors considered in the valuation of redeemable warrants).

 

Income Tax Operating Losses

 

The quarterly income tax benefit for the three months ended March 31, 2021 amounted to a gain of approximately $181,000 due primarily to the provision of the 2020 New Jersey NOL.

 

Liquidity and Capital Resources

 

As of March 31, 2021, we had approximately $63,601,000 in cash, cash equivalents and marketable securities. As of December 31, 2020, we had approximately $54,378,000 in cash, cash equivalents and marketable securities. Cash used in operating activities for the three months ended March 31, 2021 was $3,045,000 compared to $3,250,000. The primary reasons for the decrease was the increase in accounts payable offset by increased other receivables.

 

Cash used in investing activities for the three months ended March 31, 2021 was approximately $523,000 compared to $3,683,000 for the same period in 2020, representing a decrease of $3,160,000. The primary reason for the decrease during the current period is the purchase of marketable securities of $1,151,000 offset by the sale of marketable securities of $2,039,000.

 

Cash provided by financing activities for the three months ended March 31, 2021 was approximately $12,794,000 compared to approximately $25,687,000 for the same period in 2020, a decrease of $12,891,000. The primary reason for the decrease in the three months ended March 31, 2021 is our receipt of net proceeds of approximately $12,887,000 from the sale common stock pursuant to our 2019 EDA with Maxim Group compared to $25,773,000 for the same period in 2020.

 

On August 6, 2020, we contracted 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. For Phase I we anticipate providing approximately $514,000 to Amarex. In Phase II we anticipate providing approximately an additional $650,000. (see “Covid-19” above).

 

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.

 

 

The proceeds from our financings have been used to fund infrastructure growth including manufacturing, regulatory compliance and market development along with our efforts regarding the Ampligen manufacturing, Ampligen NDA.

 

ITEM 3: Quantitative and Qualitative Disclosures About Market Risk

 

We had approximately $63,601,000 in cash, cash equivalents and marketable securities as of March 31, 2021 as compared to $54,378,000 at December 31, 2020.

 

To the extent that our cash and cash equivalents exceed our near-term funding needs, we intend to invest the excess cash in money market accounts, high-grade corporate bonds or fixed-income type bond funds. We employ established conservative policies and procedures to manage any risks with respect to investment exposure.

 

ITEM 4: Controls and Procedures

 

Our Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”) performed an evaluation of the effectiveness of our disclosure controls and procedures, which have been designed to permit us to effectively identify and timely disclose important information. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on that evaluation, our CEO and CFO concluded that the controls and procedures were effective as of March 31, 2021, to ensure that material information was accumulated and communicated to our management, including our CEO and CFO, is appropriate to allow timely decisions regarding required disclosure.

 

During the three months ended March 31, 2021, we have made no change in our internal controls over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

 

 

Part II – OTHER INFORMATION

 

ITEM 1: Legal Proceedings

 

Nothing new during the quarter ended March 31, 2021. Please see Part I, Item 3. Legal Proceedings in our Annual Report on Form 10-K for the year ended December 31, 2020.

 

ITEM 1A: Risk Factors

 

Please carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 31, 2021, which could materially affect our business, financial condition, or future results. The risks described in the above report are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and operating results. Please also see “Special Note Regarding Forward-Looking Statements” above.

 

The COVID-19 coronavirus could adversely impact our business, including our clinical trials. We cannot predict the ultimate effects of the Covid-19 pandemic on our business

 

In December 2019, a novel strain of coronavirus, COVID-19, was first reported in China. The coronavirus has since spread to six continents and has been diagnosed in countries in which there are planned or active clinical trial sites studying Ampligen. As COVID-19 continues to spread, 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;
	●	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 continues to rapidly evolve. The extent to which the COVID-19 coronavirus may impact our business, clinical trials and financial condition 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. While we are not able to estimate the effects of the COVID-19 outbreak, if the pandemic continues, it may have a material adverse effect on our results of future operations, financial position, and liquidity.

 

 

ITEM 2: Unregistered Sales of Equity Securities and Use of Proceeds

 

On February 24, 2021 and February 25, 2021, we sold, respectively, 11,062 shares and 10,638 shares of our common stock in private transactions at purchase prices, respectively, of $2.26 and $2.25 per share. No commissions were paid with regard to these sales. The sales were made pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended.

 

ITEM 3: Defaults upon Senior Securities

 

None.

 

ITEM 4: Mine Safety Disclosures

 

Not Applicable.

 

ITEM 5: Other Information

 

On May 13, 2021, we completed our re-purchase of our New Brunswick, New Jersey facility pursuant to the repurchase option in the facility lease for $4,661,400.

 

ITEM 6: Exhibits

 

(a)

Exhibits

 

10.1		April 19, 2021 Purchase and Sale Agreement with Phoenix Equipment Corporation, Branford Auctions, LLC and Perry Videx LLC .*
10.2		Material Transfer and Research agreement with Roswell Park Comprehensive Cancer Center executed on April 14, 2021 (Portions of this Agreement have been redacted in compliance with Regulation S-K Item 601(b)(10)).*
10.3		May 1, 2021 extension of April 1, 2020 Material Transfer and Research Agreement with Shenzhen Smoore Technology Limited.*
10.4		Material Transfer And Research Agreement with the University of Cagliari Dipartimento di Scienze della Vita e dell’Ambiente executed on April 5, 2021 (Portions of this Agreement have been redacted in compliance with Regulation S-K Item 601(b)(10)).*
10.5		May 12, 2021 Amendment to the Renewed Sales, Marketing, Distribution and Supply Agreement with GPPharm. (Portions of this Agreement have been redacted in compliance with Regulation S-K Item 601(b)(10))*
10.6		January 11, 2021 Sponsor Agreement with Centre for Human Drug Research. (Portions of this Agreement have been redacted in compliance with Regulation S-K Item 601(b)(10))**
10.7		March 24, 2021 employment agreement with Peter Rodino.**
10.8		March 24, 2021 employment agreement with Ellen Lintal.**
31.1		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 from the Company’s Chief Executive Officer.*
31.2		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 from the Company’s Chief Financial Officer.*
32.1		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 from the Company’s Chief Executive Officer.*
32.2		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 from the Company’s Chief Financial Officer.*

 

 

101.INS		XBRL Instance Document * ***
101.SCH		XBRL Taxonomy Extension Schema Document * ***
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document * ***
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document * ***
101.LAB		XBRL Taxonomy Extension Label Linkbase Document * ***
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document * ***

 

* Filed herewith.

 

** Filed with the Securities and Exchange Commission as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed March 31, 2021 and is hereby incorporated by reference.

 

*** Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities and Exchange Act of 1934, as amended and otherwise are not subject to liability under those sections.

 

 

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.

 

	AIM IMMUNOTECH INC.
	/s/ Thomas K. Equels
	Thomas K. Equels, Esq.
	Chief Executive Officer & President
	/s/ Ellen M. Lintal
	Ellen M. Lintal
	Chief Financial Officer
Date: May 17, 2021