AIM ImmunoTech Inc. 10-K

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis is related to our financial condition and results of operations for the two years ended December 31, 2024. This information should be read in conjunction with our consolidated financial statements and related notes thereto beginning on F-1 of this Form 10-K. Please also see “Special Note Regarding Forward Looking Statements and Summary Risk Factors” in ITEM 1. Business. RESULTS OF OPERATIONS Year ended December 31, 2024 versus year ended December 31, 2023 Our net loss was approximately $17,320,000 and $28,962,000 for the years ended December 31, 2024 and 2023, respectively, representing a decrease in net loss of approximately $11,642,000 or 40% when compared to the same period in 2023. This decrease in net loss for the year ended December 31, 2024, was primarily due to the following: ● a decrease in general and administrative expenses of $7,423,000; ● a decrease in research and development expenses of $4,742,000; ● an increase in interest/other income of $4,123,000; ● a decrease in production costs of $11,000; net with ● a decrease in gain from sale of income tax operating losses of $3,271,000; ● an increase on loss from investments of $293,000; ● an increase in interest expense of $585,000; ● an increase in warrant valuation of $458,000; ● a decrease on the gain from sale of fixed assets of $18,000; and a ● a decrease in revenue of $32,000. 38 Net loss per share was $ (0.31) and $ (0.60) for the years ended December 31, 2024 and 2023, respectively. The weighted average number of shares of our common stock outstanding as of December 31, 2024, was 56,016,870 as compared to 48,585,404 as of December 31, 2023. Revenues Revenues from our Ampligen® Cost Recovery Program were $170,000 and $202,000 for the years ended December 31, 2024 and 2023, representing a decrease of $32,000 which is primarily related to the fluctuation of patient participation. For the years ended December 31, 2024 and 2023, we had no Alferon N Injection® Finished Good product to commercially sell and all revenue was generated from the EAP and our FDA approved open-label treatment protocol, (“AMP 511”), that allows patient access to Ampligen® for treatment in an open-label safety study. Production Costs For the years ended December 31,2024 and 2023, production costs were approximately $31,000 and $42,000, respectively, reflecting a decrease of $11,000 in the current period. This reduction was primarily due to production costs incurred for of the manufacturing of Ampligen in the last quarter of 2023, which did not recur in 2024. Research and Development Costs For the year ended December 31, 2024, research and development (“R&D”) expenses totaled approximately $6,197,000, compared to $10,939,000 in the prior year, representing a decrease of approximately $4,742,000. This reduction was primarily driven by a $3,216,000 decrease in company sponsored clinical trial expenses and a $1,622,000 reduction in outside consultant costs. General and Administrative Expenses For the years ended December 31, 2024 and 2023, general and administrative (“G&A”) expenses were approximately $13,714,000 and $21,137,000, respectively, reflecting a decrease of approximately $7,423,000. This reduction was primarily driven by a $7,211,000 decrease in legal, financial and consulting fees, which were higher in the prior year due to expenses incurred in response to stockholder nomination litigation issues in 2023. Gain (loss) on Investments For the years ended December 31, 2024, and 2023, gain (loss) on investments was approximately ($93,000) and $200,000, respectively, reflecting an increase in investment losses of approximately $293,000. This loss was primarily driven by changes in the fair value of equity investments. Gain (loss) from sale of income tax operating losses In 2024, we recognized a ($1,604,000) impact related to the sale of our net operating losses (NOLs) under the New Jersey Technology Business Tax Certificate Transfer Program, compared to a $1,667,000 benefit in 2023. This decline was primarily due to our company reaching the program’s lifetime cap of $20,000,000 in cumulative NOL sales. Liquidity and Capital Resources Cash used in operating activities for the year ended December 31, 2024, was approximately $14,888,000 compared to approximately $21,267,000 for the same period in 2023, a decrease of $6,379,000. Net cash used in operating activities for the year ended December 31, 2024 was impacted by a net loss of approximately $17,320,000, an improvement from approximately $28,962,000 in 2023. However, since net loss includes significant non-cash expenses, actual cash from operations was influenced by several adjustments. Non-cash adjustments comparing 2024 to 2023 included a decrease of $2,000 in depreciation of property, plant, and equipment, an increase of $10,000 in amortization of patents and trademarks, an increase of $301,000 in amortization of financial obligations. Other significant non-cash expenses included $17,000 in non-cash lease expenses and $443,000 in equity-based compensation. Additionally, we recognized a $293,000 loss on the sale of marketable securities, a $458,000 loss related to the valuation of warrants, a $34,000 loss from patent abandonments. Proceeds from the sale of fixed assets were $0 in 2024, compared to $18,000 in 2023, reflecting a decrease in asset sales and related cash inflows year-over-year. These were partially offset by a $692,000 gain from funds received under the New Jersey NOL program and a $50,000 reduction in prepaid expenses. Changes in working capital also impacted operating cash flows, with a $6,126,000 decrease in accounts payable, a $2,378,000 decrease in accrued expenses, a $1,062,000 increase in other assets, and a $35,000 decrease in lease liabilities. Collectively, these factors contributed to the overall cash flow from operating activities during the period. 39 Cash provided by investing activities was $4,706,000 in 2024, a significant improvement from $(832,000) in 2023, reflecting a $5,538,000 year-over-year increase. The primary driver of this improvement was $5,623,000 in proceeds from the sale of marketable securities in 2024, compared to $1,299,000 in 2023. Additionally, purchases of marketable securities declined to $361,000 in 2024 from $1,593,000 in the prior year, further contributing to the positive cash flow impact. The Company continued investing in intellectual property, with $538,000 spent on patents and trademarks in 2024, compared to $585,000 in 2023. Capital expenditures included $18,000 in purchases of property, plant, and equipment (PP&E) in 2024, whereas 2023 included $47,000 in proceeds from the sale of PP&E. The overall increase in net investing cash flow was primarily attributable to higher proceeds from marketable securities and lower investment purchases, improving the company’s liquidity position. Cash provided by financing activities totaled $6,444,000 in 2024, a significant increase compared to $485,000 in 2023, reflecting a $5,959,000 year-over-year improvement. This increase was primarily driven by $892,000 in net proceeds from the sale of stock in 2024, up from $485,000 in 2023. Additionally, the company secured $2,500,000 in proceeds from the issuance of notes payable, compared to zero in the prior year. Another key factor was a $3,303,000 non-cash warrant valuation adjustment in 2024, which had no comparable entry in 2023. In 2024, we repaid $251,000 in debt, whereas no debt repayments were made in 2023. These financing activities strengthened the company’s liquidity position and provided additional capital to support ongoing operations and strategic initiatives. Our principal source of liquidity is our cash and cash equivalents, marketable securities, and proceeds from financing activities to provide the necessary funding to meet our obligations as they become due. As noted above, as of December 31, 2024, we had approximately $3,977,000 in cash, cash equivalents and marketable securities, inclusive of approximately $2,276,000 in marketable securities, representing a decrease of approximately $9,093,000 from December 31, 2023. In addition, we have suffered losses from operations as of December 31, 2024, and have a working capital deficit. These conditions raise substantial doubt regarding our ability to continue as a going concern for a period of at least one year from the date of the issuance of these consolidated financial statements. See Note 1 to our audited Consolidated Financial Statements. Please see “Risk Factors - We have a history of losses, expect to continue to incur losses in the near term and may not achieve or sustain profitability in the future, and as a result, there is a substantial doubt about our ability to continue as a going concern.” The accompanying audited consolidated financial statements have been prepared assuming that we will continue as a going concern. On December 31, 2024, our current liabilities exceeded our current assets by $5,359,000 which raised doubt about our ability to continue as a going concern. Additionally, at December 31, 2024, our stockholders’ equity was below the minimum requirements for continued listing on the NYSE American. Management evaluated the conditions, and their significance of those conditions related to our ability to meet our obligations and determined that the primary cause of the working capital deficit was related to an accounts payable balance of approximately $6,400,000. This balance includes approximately $4,900,000 of legal fees related to litigation. We are currently negotiating with the law firm to reduce prior billings. These negotiations are ongoing and could, if resolved favorably to us, partially alleviate the working capital deficit. On September 6, 2024, an amendment to an agreement dated April 7, 2022, was executed by us and Amarex clarifying and changing the nature of the remaining execution fee of $725,437. The amendment allowed that the remainder would not be exclusive to the agreement dated on April 7, 2022, that the nature of the payment changed from an execution fee to a fully refundable deposit, and that it could be applied to any invoice upon mutual agreement of the parties, removed the threshold contingencies, and if such invoices were not sufficient to exhaust the balance, that the refund would be refunded in cash. Due to the changes brought about by the amendment, the nature of the payment changed to deposit status. At December 31, 2024, we had an outstanding deposit of $653,000 which may be used to offset future clinical research expenditures. This deposit is listed as a non-current asset on the balance sheet but could provide working capital if the timing of expenditures are realized within the next 12 months. As a research and development company, we are conducting research necessary to bring our product, Ampligen, to market. As such, we primarily rely on financing activities to provide the necessary funding to meet our obligations as they become due. AIM has a long and demonstrated history of success in these efforts, however, there is no assurance that we will be successful in attaining the necessary funding in the future. 40 Potential Delisting from the NYSE American . The closing price of our common stock on the NYSE American on March 24, 2025 was $0.14 per share. On December 11, 2024, we received an official notice of noncompliance with the NYSE American’s continued listing requirements. This includes the need for us to have stockholders’ equity of $6.0 million or more. The NYSE American’s review showed that we were not in compliance with that requirement. As required, we submitted a plan (the “Plan”) to the NYSE American illustrating how we can regain compliance by June 11, 2026. The Plan includes a number of ways to raise capital. The NYSE American accepted our Plan on February 26, 2025. If we are not able to regain compliance by June 11, 2026, our common stock may be delisted from the NYSE American. As of December 31, 2024, our stockholders’ deficit was ($1.3) million. We must increase our stockholders’ equity to be at least $6 million to regain compliance with this rule. If we are not able to raise sufficient capital as set forth in the Plan or by other means, we may be unable to regain compliance with the NYSE American’s listing standards and our securities could be subject to delisting. In the event that the price of our Common Stock drops to $0.10 per share, our Common Stock will automatically be delisted from the NYSE American. As part of the Plan, we will be holding a special meeting of stockholders solely for the purpose of authorizing a reverse split of our outstanding shares. The proxy statement for that meeting has been filed with the SEC and is available on the SEC’s website. We believe that effecting a reverse split will assist us with raising capital we need to continue our business and avoiding an automatic delisting if the stock price drops to $0.10 per share. 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 N Injection. 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 do not have adequate funds to meet our anticipated operational cash needs and fund current clinical trials. At present we do not generate any material revenues from operations, and we do not anticipate doing so in the near future. We will need to obtain additional funding in the future to continue operations and for new studies and/or if current studies do not yield positive results, require unanticipated changes and/or additional studies. Today, some four 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. Unlike most developing therapeutics which attack the virus, Ampligen works differently. 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. 41 At present we do not generate any material revenues from operations, and we do not anticipate doing so in the near future. We will need to obtain additional funding in the future for new studies and/or if current studies do not yield positive results, require unanticipated changes and/or additional studies. If we are unable to commercialize and sell Ampligen and/or recommence material sales of Alferon N Injection, our operations, financial position and liquidity may be adversely impacted, and additional financing may be required. There can be no assurances that, if needed, we will be able to raise adequate funds or enter into licensing, partnering or other arrangements to advance our business goals. We may seek to access the public equity market whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time. We are unable to estimate the amount, timing or nature of future sales of outstanding common stock or instruments convertible into or exercisable for our common stock. Any additional funding may result in significant dilution and could involve the issuance of securities with rights, which are senior to those of existing stockholders. See Part I, Item 1A - “Risk Factors; We will require additional financing which may not be available ”. Certain Relationships and Related Transactions Refer to PART III, ITEM 13 - “Certain Relationships and Related Transactions, and Director Independence. New Accounting Pronouncements Refer to “Note 2(h) – Recent Accounting Standards and Pronouncements” under Notes to Consolidated Financial Statements. Critical 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 following: Long-Lived Assets We assess long-lived assets for impairment when events or changes in circumstances indicate that the carrying value of the assets or the asset grouping may not be recoverable. Factors that 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 useful life. When 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. We measure the impairment by comparing the difference between the asset grouping’s carrying value and its fair value. Long-lived assets are considered a non-financial asset and are recorded at fair value only if an impairment charge is recognized. Impairments are determined for groups of assets related to the lowest level of identifiable independent cash flows. 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. Research & Development (R&D) Expenses We expense R&D costs as incurred. However, we estimate and accrue costs related to clinical trials, third-party contract research organizations (CRO’s), manufacturing development, and preclinical studies based on services performed. Material changes in assumptions could significantly impact R&D expenses in any given period. 42 Stock-Based Compensation We grant stock options, the valuation of which requires significant judgement. To estimate their fair value, we use the Black-Scholes model, which involves assumptions about stock volatility, expected option life, and risk-free interest rates. Changes in estimated volatility or expected option life could have a material impact stock-based compensation expenses. ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk. Not Applicable. ITEM 8. Financial Statements and Supplementary Data. Please see the “Index to Financial Statements and Financial Statement Schedule” on page F-1. ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures. None.