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Item 7. Management’s Discussion and Analysis

2024-04-01 compared with 2023-03-31 · 98 added, 101 removed, 116 unchanged (63% of the section changed)

Discussion and Analysis of Financial Condition and Results of Operations.

Management’s Discussion and Analysis of Financial

Condition and Results of Operations.

following discussion and analysis is related to our financial condition and results of operations for the two years ended December 31,

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net loss was approximately $28,962,000 and $19,445,000 for the years ended December 31, 2023 and 2022, respectively, representing an

increase in net loss of approximately $318,000 when compared to the same period in 2021.

This increase in net loss for the year ended

December 31, 2022, was primarily due to the following:

increase in net loss of approximately $9,517,000 or (49%) when compared to the same period in 2022.

This increase in net loss for the

year ended December 31, 2023, was primarily due to the following:

increase in general and administrative expenses of $8,063,000;

increase in loss on investments of $1,478,000;

increase in research and development expenses of $3,949,000;

increase in production costs of $42,000;

increase in revenue of $61,000;

increase on income from investments of $1,879,000;

increase in interest/other income of $440,000;

decrease in interest expense and finance costs $2,768,000;

decrease in impairment losses of $1,779,000;

decrease in research and development expenses of $682,000;

decrease in production costs of $850,000;

decrease in gain from sale of Income tax operating losses of $829,000;

decrease in gain of sale of fixed assets of $213,000

increase in gain from sale of Income tax operating losses of $177,000;

increase on the gain from sale of fixed assets of $15,000;

decrease of the quarterly revaluation of certain redeemable warrants of $35,000.

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from our Ampligen® Cost Recovery Program were $202,000 and $141,000 for the years ended December 31, 2023 and 2022, representing

an increase of $6,000 which is primarily related to the timing of orders.

an increase of $61,000 which is primarily related to the fluctuation of patient participation.

the years ended December 31, 2023 and 2022, we had no Alferon N Injection® Finished Good product to commercially sell and all revenue

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Ampligen® for treatment in an open-label safety study.

costs were approximately $0 and $850,000, respectively, for the years ended December 31, 2022, and 2021, representing a decrease of $850,000

costs were approximately $42,000 and $0, respectively, for the years ended December 31, 2023 and 2022, representing an increase of $42,000

in production costs in the current period.

The decrease was due primarily to the sale of the facility and no production for 2022 compared

The increase was due to the cost incurred for production of Ampligen that occurred in the

last quarter of 2023.

and Development Costs

Research and Development (“R&D”) costs for the year ended December 31, 2023, were approximately $10,939,000 as compared

to $7,672,000 for the same period a year ago, reflecting a decrease of approximately $682,000.

The primary reason for the decrease in

research and development costs was due to decreases in Company sponsored clinical trials expenses of $1,728,000, offset by increases

in salaries and outside consultant costs of $607,00, $66,000 in rent and $304,000 in patents & trademarks.

to $6,990,000 a year ago, reflecting an increase of approximately $3,949,000.

The primary reason for the increase in research and development

costs was due to the increases in Company sponsored clinical trials expenses of approximately $2,162,000 and an increase in outside consultant

costs of approximately $1,787,000.

and Administrative Expenses

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The increase in G&A expenses during the current period

was mainly due to increases in legal fees of $4,582,000, public relations expenses of $348,000, insurance expenses of $439,000 and general

expense of $51,000 net of decreases in stock compensation of $613,000, salary expenses of $243,000 and depreciation of $12,000.

was largely due to increases in legal fees of approximately $6,500,000 primarily related to responding to an attempt by a group of shareholders

to bypass our bylaws and nominating procedures, and financial consultant fees of $2,407,000 offset by a decrease in stock compensation

We are in the process of submitting an insurance claim and hopes to recover a portion of the legal expenses related to the

shareholder action, but recovery, if any, at this time cannot be determined.

(loss) on Investments

(loss) on investments for the years ended December 31, 2022, and 2021 were approximately ($1,679,000) and ($201,000), respectively, reflecting an increase in the loss on investments of approximately ($1,478,000).

The loss was due to the

change in the fair value of equity investments.

of plant property and equipment and other assets

the year ended December 31, 2022, there was a loss of $0 related to the impairment of plant property and equipment (see Note 2 Summary

of Significant Accounting Policies).

the year ended December 31, 2021, there was a loss of $1,779,000 related to the impairment of plant property and equipment (see Note

2 Summary of Significant Accounting Policies).

expense and finance costs for the year ended December 31, 2022, was $0 compared to $2,768,000 in the prior year, a decrease of $2,768,000

primarily due to the extinguishment of debt of $2,768,000 in 2021.

quarterly revaluation of certain redeemable warrants resulted in a non-cash adjustment to the redeemable warrants liability amounted

to a gain of $35,000 for the year ended December 31, 2022, compared to a gain of approximately $145,000 in December 31, 2021 (see “Financial

(loss) on investments for the years ended December 31, 2023 and 2022 was approximately $200,000 and ($1,679,000), respectively, reflecting

an increased gain on investments of approximately $1,879,000.

The gain was due to the change in the fair value of equity investments.

revaluation of certain redeemable warrants resulted in a non-cash adjustment to the redeemable warrants liability.

There was no change

for the twelve months ended December 31, 2023, compared with a gain of $35,000 for the twelve months ended December 31, 2022 (see “Financial

Fair Value” for the various factors considered in the valuation of redeemable warrants).

from sale of income tax operating losses

effectively sold $20,500,000 New Jersey state operating losses from 2021 for approximately $1,676,000.

Additionally, we recorded a deferred

tax asset in the amount of $1,118,000 for the current year 2022 operating losses to be sold in 2023.

(see Note 12 Income Taxes (FASB

ASC 740 Income Taxes).

December 2023, we effectively sold $14,156,000 of our New Jersey state net operating loss carryforward and $38,600 in R&D credits

for the year 2022 for approximately $1,313,000.

Additionally, we recorded a deferred tax asset in the amount of approximately $1,604,000

for the current year 2023 operating losses to be sold in 2024.

(see Note 12 Income Taxes (FASB ASC 740 Income Taxes).

and Capital Resources

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The primary reasons for this increase in cash used in operations in 2023 was

related to the loss on marketable securities of $1,679,000, as well as in increase in the prepaid expenses of $151,000 and an increase

in accounts payable of $179,000.

provided by investing activities for the year ended December 31, 2022, was approximately $10,988,000 compared to cash used in 2021

was approximately $631,000, representing a change of $11,619,000.

The primary reason for the change

during the current period is the net purchase and sale of marketable securities activity of $7,359,000 compared to the $243,000 for

the same period in 2021, and by the proceeds from the sale of the asset held for sale of $3,900,000 in 2022.

provided by financing activities for the year ended December 31, 2022, was approximately $80,000 compared to approximately $8,188,000

for the same period in 2021, a decrease of $8,108,000.

The primary reason for this decrease was our receipt of $13,042,000 in net proceeds

from the sale of shares in 2021compared to $80,000 from the proceeds from sale of stock, net of issuance costs in 2022.

As of December

31, 2022, we had approximately $34,190,000 in cash, cash equivalents and marketable securities, inclusive of approximately $7,137,000

in Marketable Securities, representing a decrease of approximately $14,078,000 from December 31, 2021.

an increased net loss during the year of $9,517,000 and a gain on investments of $1,879,000, a decrease in stock compensation of $711,000 which was partially offset by an increase in accounts payable of

$5,887,000 an increase in accrued expenses of $812,000.

used in investing activities for the year ended December 31, 2023, was approximately ($832,000) compared to cash provided by investing

activities in 2022 of approximately $10,988,000, representing a change of $11,820,000.

The primary reason for the change during the

current period is the net purchase and sale of marketable investments activity of ($294,000) compared to the $7,359,000 for

the same period in 2022, and by the proceeds from the sale of property and equipment of $47,000 in 2023, compared with $3,900,000 in

provided by financing activities for the year ended December 31, 2023, was approximately $485,000 compared to approximately $80,000 for

the same period in 2022, an increase of $405,000.

The primary reason for this increase was the receipt of $485,000 in net proceeds from

the sale of shares in 2023 compared to $80,000 from the proceeds from sale of stock, net of issuance costs in 2022.

As discussed below,

in April 2023 we entered into an Equity Distribution Agreement, which was the primary source of additional equity proceeds in 2023 compared

of December 31, 2023, we had approximately $13,070,000 in cash, cash equivalents and marketable investments, inclusive of approximately

$7,631,000 in marketable investments, representing a decrease of approximately $21,120,000 from December 31, 2022.

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 N Injection.

Today, some two years after COVID-19 first appeared, the world has a number of vaccines and some promising therapeutics.

Our quest to prove the antiviral activities of Ampligen continues.

If Ampligen has the broad-spectrum antiviral properties that

we believe that it has, it could be a very valuable tool in treating variants of existing viral diseases, including COVID-19,

or novel ones that arise in the future.

some three years after COVID-19 first appeared, the world has a number of vaccines and some promising therapeutics.

Our quest to prove

the antiviral activities of Ampligen continues.

If Ampligen has the broad-spectrum antiviral properties that we believe that it has,

it could be a very valuable tool in treating variants of existing viral diseases, including COVID-19, or novel ones that arise in the

Unlike most developing therapeutics which attack the virus, Ampligen works differently.

that it activates antiviral immune system pathways that fight not just a particular virus or viral variant, but other similar viruses

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

sixteen months.

We believe that it activates antiviral

immune system pathways that fight not just a particular virus or viral variant, but other similar viruses as well.

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.

In this regard, in April, 2023, we entered into an Equity Distribution Agreement

(the “EDA”), with Maxim Group LLC (“Maxim”), pursuant to which we may sell from time to time, shares of our

common stock having an aggregate offering price of up to $8.5 million through Maxim, as agent.

During the year ended December 31,

2023, we sold 598,114 shares under the EDA for total gross proceeds of approximately $344,000, which includes a 3.0% fee to Maxim of

In February 2022, the SEC declared our universal shelf registration statement on Form S-3 effective.

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registration statement, we can sell up to $100 million of our securities and raise additional capital as needed in the future.

can be given as to the amount of funds that could be raised pursuant to this registration statement or the potential dilution to current

stockholders.

Subsequent to the end of 2023, we raised $2,500,000 in net proceeds from the sale of an unsecured Note and entered into an equity

line of credit (see exhibits 10.104 and 10.105).

No assurance can be given as to the amount of funds that could be raised or the

potential dilution to current stockholders.

present we do not generate any material revenues from operations, and we do not anticipate doing so in the near future.

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Accounting Pronouncements

to “Note 2(h) – Recent Accounting Standards and Pronouncements” under Notes to Consolidated Financial Statements.

to “Note 2(g) – Recent Accounting Standards and Pronouncements” under Notes to Consolidated Financial Statements.

Accounting Estimates

Our significant accounting estimates are described in the Notes to Consolidated Financial Statements.

The significant accounting

estimates that we believe are most critical to aid in fully understanding our reported financial results are the

significant accounting estimates are described in the Notes to Consolidated Financial Statements.

The significant accounting estimates

that we believe are most critical to aid in fully understanding our reported financial results are the following:

assess long-lived assets for impairment when events or changes in circumstances indicate that the carrying value of the assets or the

asset grouping may not be recoverable.

Factors that we consider in deciding when to perform an impairment review include significant

under-performance of a business or product line in relation to expectations, significant negative industry or economic trends, and significant

changes or planned changes in the use of the assets.

We measure the recoverability of assets that we will continue to use in our operations

by comparing the carrying value of the asset grouping to our estimate of the related total future undiscounted net cash flows.

asset grouping’s carrying value is not recoverable through the related undiscounted cash flows, the asset grouping is considered

to be impaired.

the event if the carrying value exceeds the future undiscounted net cash flows, we would estimate the fair values using a combination

of market and income approaches.

Under the market approach, fair values would be estimated using published market multiples for comparable

Under the income approach, a discounted cash flow methodology would be used, considering:

(i) management estimates, such as

projections of revenue, operating costs and cash flows, taking into consideration historical and anticipated financial results;

general economic and market conditions;

and (iii) the impact of planned business and operational strategies.

Factors that the Company considers in deciding when to perform an impairment review include significant

decreases in the market price of a long-lived asset or group, a significant adverse change in the extent or manner in which a long-lived

asset (asset group) is being used or its physical condition, a significant adverse change in legal factors or in the business climate

that could affect the value of a long-lived asset (asset group, including an adverse action or assessment by a regulator, an accumulation

of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset (asset group),

a current period operating or cash flow loss combined with a history of operating or cash flow losses or projection or forecast that

demonstrates continuing losses associated with the use of a long-lived asset (asset group) or a current expectation that, more likely

than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated

assessing for impairment, we measure the recoverability of assets that it will continue to use in its operations by comparing the carrying

value of the asset grouping to our estimate of the related total future undiscounted net cash flows.

If an asset grouping’s carrying

value is not recoverable through the related undiscounted cash flows, the asset grouping is considered to be impaired.

measure the impairment by comparing the difference between the asset grouping’s carrying value and its fair value.

We measure our

long-lived assets, in accordance to ASC 360 impairment (patents, trademarks, intangibles, fixed assets) Long-lived assets are considered

a non-financial asset and are recorded at fair value only if an impairment charge is recognized.

Impairments are determined for groups

of assets related to the lowest level of identifiable independent cash flows.

We make subjective judgments in determining the independent

cash flows that can be related to specific asset groupings.

In addition, as we review our manufacturing process and other manufacturing

planning decisions, we must make subjective judgments regarding the remaining useful lives of assets.

When we determine that the useful

lives of assets are shorter than originally estimated, we accelerate the rate of depreciation over the assets’ new, shorter useful

At the end of fiscal year December 31, 2022, we engaged an outside third party to provide a valuation for the impairment of our

patents and trademarks.

The determination was, from a qualitative standpoint, it would appear highly unlikely that there would be any

impairment to the patnets.

(see Note 2 Summary of Significant Accounting Policies)

Long-lived assets

are considered a non-financial asset and are recorded at fair value only if an impairment charge is recognized.

Impairments are determined

for groups of assets related to the lowest level of identifiable independent cash flows.

The Company makes subjective judgments in determining

the independent cash flows that can be related to specific asset groupings.

In addition, as the Company reviews its manufacturing process

and other manufacturing planning decisions, if the useful lives of assets are shorter than the Company had originally estimated, it accelerates

the rate of depreciation over the assets’ new, shorter useful lives.

utilize the guidance contained in ASC 480 Distinguishing Liabilities from Equity in the determination of whether to record warrants and

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Our receivables historically consisted principally of amounts due from wholesale drug companies.

and Qualitative Disclosures About Market Risk.

Quantitative and Qualitative Disclosures About Market Risk.

Financial Statements and Supplementary Data.

see the “Index to Financial Statements and Financial Statement Schedule” on page F-1.

in and Disagreements with Accountants on Accounting and Financial Disclosures.

Changes in and Disagreements with Accountants on Accounting

and Financial Disclosures.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis