What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-03-27 compared with 2022-03-28 · 198 added, 121 removed, 161 unchanged (66% of the section changed)

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dollars, unless otherwise noted.

are a clinical-stage pharmaceutical company focused on the development of safe and effective therapies for patients with cancer and inflammatory

In August 2016, we established a wholly-owned Australian subsidiary, Immix Biopharma Australia Pty Ltd., in order to conduct

various pre-clinical and clinical activities for the development of our product candidates.

have the following two business units:

ImmixBio is focused

on developing Tissue Specific Therapeutics targeting solid tumors and immune-dysregulated diseases.

As of February 2023, 19 patients with

advanced solid tumors were treated with IMX-110, ImmixBio’s lead candidate.

Our majority-owned

subsidiary, Nexcella, Inc., is engaged in the discovery and development of novel

cell therapies for hematologic malignancies (blood cancers) and other indications.

As of February 2023, 42 patients with relapsed/refractory

multiple myeloma (90% overall response rate at therapeutic dose) and 5 relapsed/refractory light chain (AL) amyloidosis patients (100%

organ response, 100% complete response rate) have been treated with next-generation CAR-T NXC-201.

inception, we have devoted substantially all of our resources to developing product and technology rights, conducting research and development,

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losses, the majority of which are attributable to research and development activities and negative cash flows from operations.

funded our operations primarily through the sale of convertible debt.

Currently, our primary use of cash is to fund operating expenses,

which consist primarily of research and development expenditures, and to a lesser extent, general and administrative expenditures.

expect to continue to incur significant expenses and operating losses for the foreseeable future as we advance our product candidates

through all stages of development and clinical trials and, ultimately, seek regulatory approval.

In addition, if we obtain regulatory

approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing,

funded our operations primarily through the sale of convertible debt and equity securities.

Currently, our primary use of cash is to

fund operating expenses, which consist primarily of research and development expenditures, and to a lesser extent, general and administrative

expenditures.

We expect to continue to incur significant expenses and operating losses for the foreseeable future as we advance our product

candidates through all stages of development and clinical trials and, ultimately, seek regulatory approval.

In addition, if we obtain

regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing,

marketing, sales and distribution.

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Master Services Agreement

December 22, 2014, we entered into the MSA with AxioMx which is in the business of developing and supplying custom affinity reagents.

We entered into the MSA to serve as a master agreement governing multiple sets of projects as may be agreed upon us and AxioMx from time

Pursuant to the MSA, we granted AxioMx a non-exclusive, royalty-free, worldwide, non-transferable license to certain of our

intellectual property to perform services pursuant to the MSA, and AxioMx granted us an exclusive product assignment option (“Option”)

which granted us an exclusive, royalty-bearing right, with the right to sublicense, under the Deliverable (as defined in the MSA) to

further research, develop, use, sell, offer for sale, import and export one or more assigned products pursuant to the MSA.

the Option in 2017.

Pursuant to the MSA, AxioMx is entitled to royalties on the sale of any Deliverable that is used for diagnostic,

prognostic or therapeutic purposes, in humans or animals, or for microbiology testing, including food safety testing or environmental

Specifically, we shall pay AxioMx a royalty of 3.5% of Net Sales (as defined in the MSA) of assigned products for each Deliverable

used in licensed products for therapeutic purposes.

In addition, we shall pay AxioMx a royalty of 1.5% of Net Sales of assigned products

for each Deliverable used in licensed products for diagnostic or prognostic purposes;

provided, however, if three Deliverables are used

in an assigned product for diagnostic or prognostic purposes, the royalty shall be 4.5%.

Subject to certain exceptions, the MSA shall

continue for a period of five years from the effective date, unless extended by us and AxioMx.

The MSA may be terminated by either party

upon a material breach of the MSA, which breach remains uncured for 30 days after written notice thereof.

In addition, we may also terminate

the MSA at any time upon 30 days prior written notice to AxioMx.

As of December 31, 2021, the MSA has not been amended or extended however,

the royalty obligations described in this paragraph survive the termination of the MSA.

January 5, 2022, we sold 630,000 shares of our common stock in connection with our initial public offering pursuant to the underwriter’s

option to purchase additional shares to cover over-allotments for a purchase price of $5.00 per share.

We received net proceeds of approximately

$2.9 million, after deducting underwriting discounts and commissions and offering expenses borne by us.

December 22, 2014, we entered into a Master Service Agreement (“MSA”) with AxioMx, Inc.

(“AxioMx”) which is in

the business of developing and supplying custom affinity reagents.

We entered into the MSA to serve as a master agreement governing multiple

sets of projects as may be agreed upon us and AxioMx from time to time.

Pursuant to the MSA, we granted AxioMx a non-exclusive, royalty-free,

worldwide, non-transferable license to certain of our intellectual property to perform services pursuant to the MSA, and AxioMx granted

us an exclusive product assignment option (“Option”) which granted us an exclusive, royalty-bearing right, with the right

to sublicense, under the Deliverable (as defined in the MSA) to further research, develop, use, sell, offer for sale, import and export

one or more assigned products pursuant to the MSA.

We exercised the Option in 2017.

Pursuant to the MSA, AxioMx is entitled to royalties

on the sale of any Deliverable that is used for diagnostic, prognostic or therapeutic purposes, in humans or animals, or for microbiology

testing, including food safety testing or environmental monitoring.

Specifically, we shall pay AxioMx a royalty of 3.5% of Net Sales

(as defined in the MSA) of assigned products for each Deliverable used in licensed products for therapeutic purposes.

In addition, we

shall pay AxioMx a royalty of 1.5% of Net Sales of assigned products for each Deliverable used in licensed products for diagnostic or

prognostic purposes;

provided, however, if three Deliverables are used in an assigned product for diagnostic or prognostic purposes,

the royalty shall be 4.5%.

As of December 31, 2022, the MSA has expired and we do not intend to extend the MSA;

however, the royalty

obligations described herein shall survive the termination of the MSA.

and License Agreement with Hadasit and BIRAD

On December 8, 2022, Nexcella

entered into the Agreement with the Licensors pursuant to which the Licensors granted to Nexcella an exclusive, worldwide, royalty-bearing

license in the Territory to an invention entitled “Anti-BCMA CAR-T cells to target plasma cell” to develop, manufacture, have

manufactured, use, market, offer for sale, sell, have sold, export and import Licensed Product.

Pursuant to the Agreement, Nexcella paid

the Licensors an upfront fee of $1,500,000 in December 2022.

Additional quarterly payments totaling approximately $13.0 million are due

through September 2026 along with an annual license fee of $50,000.

Nexcella has agreed to pay royalties to the Licensors equal to 5%

of Net Sales during the Royalty Period.

Nexcella shall pay sales milestone payments of up to $20 million for Net Sales exceeding $700 million and Nexcella has committed to funding

NXC-201 clinical trials in Israel over 4 years for an estimated total cost of approximately $13 million, spread on a quarterly basis over

that period, which Nexcella believes will generate clinical trial data owned by Nexcella.

The term of the Agreement commenced on December

8, 2022 and, unless earlier terminated pursuant to the terms thereof, shall continue in full force and effect until the later of the expiration

of the last Valid Claim under a Licensed Patent or a Joint Patent or Exclusivity Right covering a Licensed Product or the expiration of

a continuous period of 15 years during which there shall not have been a First Commercial Sale of any Licensed Product in any country

in the world.

Licensors may terminate the Agreement immediately if Nexcella or its affiliates or sublicensees commences an action in which

it challenges the validity, enforceability or scope of any of the Licensed Patents or Joint Patents.

In addition, either party may terminate

the Agreement if the other party materially breaches the Agreement and fails to cure such breach within 30 days.

Additionally, Licensors

may terminate the Agreement if Nexcella becomes insolvent or files for bankruptcy.

On January 12, 2023, Nexcella

entered into share purchase agreements with certain accredited investors for their purchase of an aggregate 100,152 shares of Nexcella’s

common stock at a purchase price of $6.49 per share, for gross proceeds of approximately $650,000.

In addition, our Chief Executive Officer

and Chief Financial Officer collectively purchased 23,112 shares of Nexcella’s common stock for an aggregate purchase price of $150,000.

As a result of the foregoing offering, as of January 12, 2023, we owned 98% of Nexcella.

On March 22, 2023, we entered into the Sales Agreement with the Sales Agent

pursuant to which we may offer and sell, from time to time, through the Sales Agent, shares of our common stock having an aggregate offering

price of up to $5,000,000, subject to the terms and conditions set forth in the Sales Agreement.

We will pay the Sales Agent a fixed commission

rate of 3.75% of the aggregate gross proceeds from the sale of the shares of our common stock pursuant to the Sales Agreement.

paid an expense deposit of $15,000 to the Sales Agent, which will be applied against the actual out-of-pocket accountable expenses.

have agreed to reimburse the Sales Agent for all expenses related to the offering including, without limitation, the fees and expenses

of the Sales Agent’s legal counsel up to $50,000, and shall reimburse the Sales Agent, upon request, for such costs, fees and expenses

in an amount not to exceed $7,500 on a quarterly basis for the first three fiscal quarters of each year and $10,000 for the fiscal fourth

quarter of each year.

The offering pursuant to the Sales Agreement will terminate upon the earlier of (i) the sale of all of the shares

of common stock subject to the Sales Agreement, and (ii) termination of the Sales Agreement as permitted therein.

We may terminate

the Sales Agreement in our sole discretion at any time by giving ten days’ prior notice to the Sales Agent.

The Sales Agent may

terminate the Sales Agreement under the circumstances specified in the Sales Agreement and in its sole discretion at any time by giving

ten days’ prior notice to us.

In addition, the Sales Agreement may be terminated upon mutual agreement by us and the Sales Agent.

COVID-19 Pandemic and its Impacts on Our Business

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Ended December 31, 2022 compared to the Year Ended December 31, 2021

and Administrative Expense

General and administrative expense was $1,225,487 for the year ended December

31, 2021 compared to $205,703 in the year ended December 31, 2020.

The expenses incurred in both

periods were related to salaries, patent maintenance costs and general accounting and other general consulting expenses, which were higher

for the year ended December 31, 2021 due to preparation for our initial public offering.

and Development Expense

and development expense was $126,527 for the year ended December 31, 2021 compared to $248,149 for the year ended December 31, 2020.

decreased research and development expenses during the year ended December 31, 2021 as compared to the year ended December 31, 2020

were related to our funding situation, ongoing Phase 1b/2a clinical trial, including, but not limited to, CRO and related costs for

maintaining and treating patients in the clinical trial.

We expect to incur increased research and development costs in the future

as our product development activities expand.

Interest expense was $179,853

for the year ended December 31, 2021 compared to $101,976 for the year ended December 31, 2020, related to interest accrued on our

convertible notes payable bearing interest at rates from the applicable federal rate to 6% per annum.

Change in fair value of derivative liability

The change in fair value of

derivative liability was $22,759,829 for the year ended December 31, 2021 compared to $575,000 for the year ended December 31, 2020,

primarily related to an increased probability of a “Qualified Financing” as defined in our convertible notes which occurred

on December 20, 2021.

and Administrative Expenses

and administrative expenses were $4,023,170 for the year ended December 31, 2022 compared to $1,225,487 for the year ended December

expenses incurred in both periods were related to salaries, patent maintenance costs and general accounting and other general consulting

expenses, which were higher for the year ended December 31, 2022 due to the Company becoming a fully reporting public company.

and Development Expenses

and development expenses were $4,195,778 for the year ended December 31, 2022 compared to $126,527 for the year ended December

increased research and development expenses during the year ended December 31, 2022, as compared to the year ended December 30, 2021,

were related to our ongoing Phase 1b/2a clinical trial, including, but not limited to, contract research organization (“CRO”)

and related costs for maintaining and treating patients in the clinical trial.

We were able to increase spending on research and development

as a result of closing the IPO in December 2021, and we expect to incur increased research and development costs in the future as our

product development activities expand.

In addition, the Company paid $1,500,000 for an upfront license fee in connection with the Agreement.

in Fair Value of Derivative Liability

The change in fair

value of derivative liability was $0 for the year ended December 31, 2022 compared to $22,759,829 for the year ended December 31, 2021.

The derivative liability related to the probability of a “Qualified Financing” (as defined in our convertible notes), was

reclassified to equity in connection with the automatic conversion of the convertible notes to shares of our common stock in connection

with our initial public offering (“IPO”) in December 2021.

Loss on Debt Extinguishment

In December 2021, in connection

with our IPO, our convertible notes along with the corresponding accrued interest, were automatically converted into

an aggregate of 5,633,689 shares of our common stock.

As a result of the conversion, we recorded a loss on debt

extinguishment of $86,170.

In December 2021, in connection with our IPO, our convertible notes along

with the corresponding accrued interest, were automatically converted into an aggregate of 5,633,689 shares of our common stock.

result of the conversion, we recorded a loss on debt extinguishment of $86,170.

expense was $497 for the year ended December 31, 2022 compared to $179,853 for the year ended December 31, 2021.

Interest expense in

the prior period was related to interest accrued on our convertible notes payable bearing interest at rates from the applicable federal

rate to 6% per annum, all of which were converted to shares of our common stock in connection with our IPO in December 2021.

for Income Taxes

for income taxes for the year ended December 31, 2021 was $6,013 compared to $17,547 for the year ended December 31, 2020, due to

withholding taxes relating to our Australian subsidiary.

Net loss for the year ended

December 31, 2021 was $24,383,879 compared to $1,147,863 for the year ended December 31, 2020, primarily due to the change in fair

value of derivative liability and increase in expenses in preparation for our initial public offering.

for income taxes for the year ended December 31, 2022 was $10,268 compared to $6,013 for the year ended December 31, 2021, due to withholding

taxes relating to our Australian subsidiary.

primary use of cash is to fund operating expenses, which consist of research and development expenditures and various general and administrative

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To the extent that we raise additional capital through the sale of equity

or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or

or convertible debt securities, your ownership interest may be diluted, and the terms of these securities may include liquidation or

other preferences that adversely affect your rights as a common stockholder.

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used in operating activities

Net cash used in operating activities was $1,589,307 for the year ended

December 31, 2021 and $404,694 for the year ended December 31, 2020 and primarily included CRO, clinical site costs and related logistics.

cash used in operating activities was $7,408,303 for the year ended December 31, 2022 and $1,589,307 for the year ended December 31,

2021 and primarily included CRO, clinical site costs and related logistics.

used in investing activities

Net cash used by investing

activities was $802 for the year ended December 31, 2021 and $0 for the year ended December 31, 2020.

We purchased equipment during

the year ended December 31, 2021.

cash used by investing activities was $0 for the year ended December 31, 2022 and $802 for the year ended December 31, 2021.

equipment during the year ended December 31, 2021.

provided by financing activities

Net cash provided by financing

activities was $18,848,934 for the year ended December 31, 2021 and $0 for the year ended December 31, 2020.

We received $18,648,934

in net proceeds from the issuance of our shares of common stock pursuant to our initial public offering during the year ended December

31, 2021, along with $200,000 in proceeds from convertible notes payable.

The continuation of the

Company as a going concern is dependent upon its ability to obtain continued financial support from its stockholders, necessary equity

financing to continue operations and the attainment of profitable operations.

As of December 31, 2021, we have incurred an accumulated

deficit of $29,755,534 and have not yet generated any revenue from operations.

Additionally, management anticipates that its cash on

hand will be sufficient to fund its planned operations for at least 12 months from the filing date of this Annual Report on Form 10-K.

We will have additional capital

requirements going forward and may need to seek additional financing, which may or may not be available to us.

cash provided by financing activities was $3,232,063 for the year ended December 31, 2022 and $18,848,934 for the year ended December

Net cash provided by financing activities in 2022 was primarily related to $2,913,750 in net proceeds from the issuance of

shares of our common stock pursuant to the exercise of the underwriter’s overallotment option to purchase additional shares of

our common stock in connection with our IPO completed in December 2021 and funds of $475,000 received by our subsidiary, Nexcella,

in connection with a private placement offering.

We received $18,648,934 in net proceeds from the issuance of our shares of common stock

pursuant to our initial public offering during the year ended December 31, 2021, along with $200,000 in proceeds from convertible notes

The continuation of the Company as a going concern is dependent upon its

ability to obtain continued financial support from its stockholders, necessary equity financing to continue operations and the attainment

of profitable operations.

As of December 31, 2022, we have incurred an accumulated deficit of $37,985,247 and have not yet generated any

revenue from operations.

Additionally, management anticipates that its cash on hand will be sufficient to fund its planned operations

for at least 12 months from the filing date of this Annual Report on Form 10-K.

will have additional capital requirements going forward and may need to seek additional financing, which may not be available to us on

acceptable terms, if at all.

Accounting Policies

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our significant accounting policies are described in more detail in Note 2 to our audited consolidated financial statements included

elsewhere in this Annual Report on Form 10-K, we believe the following accounting policies are the most critical to the judgments and estimates used

in the preparation of our consolidated financial statements.

Instruments - We evaluated our convertible notes to determine if those contracts or embedded components of those contracts

qualified as derivatives to be separately accounted for in accordance with Accounting Standards Codification (“ASC”) 815,

Derivatives and Hedging .

The result of this accounting treatment is that the fair value of the embedded derivative is marked to

market each balance sheet date and recorded as a liability.

In the event that the fair value is recorded as a liability, the change in

fair value is recorded in the statements of operations and comprehensive loss as other income or expense.

Upon conversion or exercise

of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to

elsewhere in this Annual Report on Form 10-K, we believe the following accounting policies are the most critical to the judgments and

estimates used in the preparation of our consolidated financial statements.

Instruments - We evaluated our convertible notes to determine if those contracts or embedded components of those contracts qualified

as derivatives to be separately accounted for in accordance with Accounting Standards Codification (“ASC”) 815, Derivatives

and Hedging .

The result of this accounting treatment is that the fair value of the embedded derivative is marked to market each balance

sheet date and recorded as a liability.

In the event that the fair value is recorded as a liability, the change in fair value is recorded

in the statements of operations and comprehensive loss as other income or expense.

Upon conversion or exercise of a derivative instrument,

the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.

circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other

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interest rate for a period that approximates the expected term of our stock options and our expected dividend yield.

following table reflects the weighted average assumptions used to estimate the fair value of stock options granted during the year ended

December 31, 2021:

interest rate

2020, no stock options were granted.

following table reflects the weighted average assumptions used to estimate the fair value of stock options granted during the years ended

December 31, 2022 and 2021:

Expected life (years)

Risk-free interest rate

Dividend rate

establishing a public market for the trading of our common stock and due to a lack of company-specific historical and implied volatility

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commensurate with the expected term assumption.

We used the contractual term for the expected term for options granted to employees and

We did not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term

and used the contractual term since the stock options were not issued at-the-money.

We used the simplified method to calculate the expected term for options granted to employees

and directors.

We did not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected

term and used the contractual term since the stock options were not issued at-the-money.

For options granted to non-employees, we utilized

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The risk-free interest rate was based on a U.S.

treasury instrument whose term was consistent with the expected

treasury instrument whose term is consistent with the expected

term of the stock options.

The expected dividend yield was assumed to be zero, as we had never paid dividends and did not have plans

to pay any dividends on our common stock.

The expected dividend yield was assumed to be zero, as we had never paid dividends and do not have current

plans to pay any dividends on our common stock.

Value of Common Stock

Prior to establishing a public market for our common stock, the estimated fair value of our common stock had been determined by our

board of directors as of the date of each option grant, with input from management, considering our most recently available third-party

valuations of common stock, and our board of directors’ assessment of additional objective and subjective factors that it believed

were relevant and which may have changed from the date of the most recent valuation through the date of the grant.

to establishing a public market for our common stock, the estimated fair value of our common stock had been determined by our board of

directors as of the date of each option grant, with input from management, considering our most recently available third-party valuations

of common stock, and our board of directors’ assessment of additional objective and subjective factors that it believed were relevant

and which may have changed from the date of the most recent valuation through the date of the grant.

valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting

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Our common stock valuations

were prepared using a hybrid method that incorporates elements of both a probability-weighted expected return method (“PWERM”)

were prepared using a hybrid method that incorporated elements of both a probability-weighted expected return method (“PWERM”)

and an option pricing method (“OPM”).

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public offering liquidity event and stay private outcomes, as well as the values the Company expects those outcomes could yield.

Prior to establishing

a public trading market of our capital stock, our board of directors exercised reasonable judgment and considered a number of objective

and subjective factors to determine its estimate of the fair value of our common stock, including changes in the following factors between

the date of the March 31, 2021 valuation and the grant date:

to establishing a public trading market of our capital stock, our board of directors exercised reasonable judgment and considered a number

of objective and subjective factors to determine its estimate of the fair value of our common stock, including changes in the following

factors between the date of the March 31, 2021 valuation and the grant date:

business, financial condition and results of operations, including related industry trends affecting our operations;

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of directors had used significantly different assumptions or estimates, our equity-based compensation expense could have been materially

Research and Development Costs

development costs are expensed as incurred.

Research and development costs consist primarily of clinical research fees paid to

consultants and outside service providers, other expenses relating to design, development and testing of our

therapy candidates, and for license and milestone costs related to in-licensed products and technology.

Costs incurred in obtaining

technology licenses are charged to research and development expense if the technology licensed has not reached commercial

feasibility and has no alternative future use.

Such licenses purchased by us require substantial completion of research

and development, regulatory and marketing approval efforts in order to reach commercial feasibility and has no alternative future

Clinical trial

costs are a component of research and development expenses.

The Company estimates expenses incurred for clinical trials that are in

process based on services performed under contractual agreements with clinical research organizations and actual clinical

investigators.

Included in the estimates are (1) the fee per patient enrolled as specified in the clinical trial contract with each

institution participating in the clinical trial and (2) progressive data on patient enrollments obtained from participating clinical

trial sites and the actual services performed.

Changes in clinical trial assumptions, such as the length of time estimated to enroll

all patients, rate of screening failures, patient drop-out rates, number and nature of adverse event reports, and the total number

of patients enrolled can impact the average and expected cost per patient and the overall cost of the clinical trial.

monitor the progress of the trials and their related activities and adjust expense accruals, when applicable.

Adjustments to

accruals are charged to expense in the period in which the facts give rise to the adjustments become known.

Accounting Pronouncements

Note 2 to our audited consolidated financial statements found elsewhere in this Annual Report on Form 10-K for a description of

recent accounting pronouncements applicable to our consolidated financial statements.

Note 2 to our audited consolidated financial statements found elsewhere in this Annual Report on Form 10-K for a description of recent

accounting pronouncements applicable to our consolidated financial statements.

April 5, 2012, the JOBS Act was enacted.

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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