Immix Biopharma, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA IMMIX BIOPHARMA, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Audited Consolidated Financial Statements for the Years Ended December 31, 2022 and 2021: Report of Independent Registered Public Accounting Firm (PCAOB ID: 170 ) F-2 Consolidated Balance Sheets as of December 31, 2022 and 2021 F-3 Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2022 and 2021 F-4 Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2022 and 2021 F-5 Consolidated Statements of Cash Flows for the Years Ended December 31, 2022 and 2021 F-6 Notes to the Consolidated Financial Statements for the Years Ended December 31, 2022 and 2021 F-7 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors Immix Biopharma, Inc. Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Immix Biopharma, Inc. and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ KMJ Corbin & Company LLP We have served as the Company’s auditor since 2021. Irvine, California March 27, 2023 F- 2 Immix Biopharma, Inc. Consolidated Balance Sheets December 31, 2022 December 31, 2021 ASSETS Current assets: Cash $ 13,436,714 $ 17,644,478 Tax receivable 255,705 25,722 Prepaid expenses and other current assets 1,205,398 516,193 Total current assets 14,897,817 18,186,393 Other assets 6,724 - Equipment, net 3,560 5,695 Total assets $ 14,908,101 $ 18,192,088 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable and accrued expenses $ 1,273,296 $ 142,940 Accrued interest - 9,099 Note payable - 50,000 Total current liabilities 1,273,296 202,039 Funds held for subsidiary private offering 475,000 - Total liabilities 1,748,296 202,039 Commitments and contingencies Stockholders’ equity: Preferred stock, $ 0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding - - Common stock, $ 0.0001 par value; 200,000,000 shares authorized; 13,964,485 shares issued and 13,892,122 shares outstanding at December 31, 2022, and 13,228,689 shares issued and outstanding at December 31, 2021 1,397 1,323 Additional paid-in capital 51,156,597 47,618,852 Accumulated other comprehensive income 87,021 125,408 Accumulated deficit ( 37,985,247 ) ( 29,755,534 ) Treasury stock at cost, 72,363 and no shares as of December 31, 2022 and 2021, respectively ( 99,963 ) - Total stockholders’ equity 13,159,805 17,990,049 Total liabilities and stockholders’ equity $ 14,908,101 $ 18,192,088 See accompanying notes to the consolidated financial statements. F- 3 Immix Biopharma, Inc. Consolidated Statements of Operations and Comprehensive Loss 2022 2021 For the Years Ended December 31, 2022 2021 Operating expenses: General and administrative expenses $ 4,023,170 $ 1,225,487 Research and development 4,195,778 126,527 Total operating expenses 8,218,948 1,352,014 Loss from operations ( 8,218,948 ) ( 1,352,014 ) Other expense: Change in fair value of derivative liability - ( 22,759,829 ) Loss on debt extinguishment - ( 86,170 ) Interest expense ( 497 ) ( 179,853 ) Total other expense ( 497 ) ( 23,025,852 ) Loss before provision for income taxes ( 8,219,445 ) ( 24,377,866 ) Provision for income taxes 10,268 6,013 Net loss ( 8,229,713 ) ( 24,383,879 ) Other comprehensive loss: Foreign currency translation ( 38,387 ) ( 6,453 ) Total other comprehensive loss ( 38,387 ) ( 6,453 ) Comprehensive loss $ ( 8,268,100 ) $ ( 24,390,332 ) Loss per common share - basic and diluted $ ( 0.59 ) $ ( 6.64 ) Weighted average shares outstanding – basic and diluted 13,887,309 3,672,611 See accompanying notes to the consolidated financial statements. F- 4 Immix Biopharma, Inc. Consolidated Statements of Stockholders’ Equity For the Years Ended December 31, 2022 and 2021 Common Shares Common Stock Amount Additional Paid-in Capital Accumulated Other Comprehensive Income Accumulated Deficit Treasury Shares Treasury Stock Amount Total Stockholders’ Equity Balance December 31, 2020 3,375,000 $ 338 $ 508,872 $ 131,861 $ ( 5,371,655 ) - $ - $ ( 4,730,584 ) Shares issued for cash proceeds, net of offering costs 4,200,000 420 18,648,514 - - - - 18,648,934 Shares issued for conversion of convertible notes payable, related accrued interest and settlement of derivative liability 5,633,689 563 28,167,882 - - - - 28,168,445 Relative fair value of warrants issued in connection with debt - - 74,603 - - - - 74,603 Stock-based compensation 20,000 2 218,981 - - - - 218,983 Net loss - - - - ( 24,383,879 ) - - ( 24,383,879 ) Foreign currency translation adjustment - - - ( 6,453 ) - - - ( 6,453 ) Balance December 31, 2021 13,228,689 1,323 47,618,852 125,408 ( 29,755,534 ) - - 17,990,049 Shares issued for cash proceeds, net of offering costs 630,000 63 2,913,687 - - - - 2,913,750 Shares issued for cashless exercise of stock options 62,532 6 ( 6 ) - - - - - Shares issued for services 43,264 5 99,995 - - - - 100,000 Stock-based compensation - - 524,069 - - - - 524,069 Repurchase of common shares - - - - - ( 72,363 ) ( 99,963 ) ( 99,963 ) Net loss - - - - ( 8,229,713 ) - - ( 8,229,713 ) Foreign currency translation adjustment - - - ( 38,387 ) - - - ( 38,387 ) Balance December 31, 2022 13,964,485 $ 1,397 $ 51,156,597 $ 87,021 $ ( 37,985,247 ) ( 72,363 ) $ ( 99,963 ) $ 13,159,805 See accompanying notes to the consolidated financial statements. F- 5 Immix Biopharma, Inc. Consolidated Statements of Cash Flows For the Years Ended December 31, 2022 2021 Operating Activities: Net loss $ ( 8,229,713 ) $ ( 24,383,879 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation 524,069 218,983 Shares issued for services 100,000 - Convertible note issued in exchange for services - 60,000 Change in fair value of derivative liability - 22,759,829 Loss on debt extinguishment - 86,170 Amortization of debt discount - 58,157 Depreciation 2,135 2,468 Changes in operating assets and liabilities: Tax receivable ( 236,384 ) 97,667 Prepaid expenses and other current assets ( 691,047 ) ( 502,795 ) Accounts payable and accrued expenses 1,131,736 ( 106,061 ) Accrued interest ( 9,099 ) 120,154 Net cash used in operating activities ( 7,408,303 ) ( 1,589,307 ) Investing Activities: Purchase of equipment - ( 802 ) Net cash used in investing activities - ( 802 ) Financing Activities: Payments of deferred offering costs ( 6,724 ) - Proceeds from convertible notes payable - 200,000 Payments on note payable ( 50,000 ) - Proceeds from sale of common stock, net of offering costs 2,913,750 18,648,934 Funds received for subsidiary private offering 475,000 - Repurchase of common stock ( 99,963 ) - Net cash provided by financing activities 3,232,063 18,848,934 Effect of foreign currency on cash ( 31,524 ) ( 5,433 ) Net change in cash ( 4,207,764 ) 17,253,392 Cash - beginning of year 17,644,478 391,086 Cash - end of year $ 13,436,714 $ 17,644,478 Supplemental Disclosures of Cash Flow Information: Interest paid $ 9,596 $ 1,542 Income taxes paid $ - $ - Supplemental Disclosures of Noncash Financing Information: Relative fair value of warrants issued in connection with convertible debt $ - $ 74,603 Debt discount related to derivative liabilities $ - $ 80,000 Common stock issued upon conversion of notes payable, related accrued interest and settlement of derivative liability $ - $ 28,178,721 Cashless exercise of stock options $ 6 $ - See accompanying notes to the consolidated financial statements. F- 6 Immix Biopharma, Inc. Notes to the Consolidated Financial Statements Note 1 – Nature of Business Immix Biopharma, Inc. (the “Company”) is a clinical-stage pharmaceutical company organized as a Delaware corporation on January 7, 2014 to focus on the development of therapies for patients with cancer and inflammatory diseases. In August 2016, the Company established a wholly-owned Australian subsidiary, Immix Biopharma Australia Pty Ltd. (“IBAPL”), in order to conduct various preclinical and clinical activities for its development candidates. In November 2022, the Company established a majority-owned subsidiary, Nexcella, Inc. (formerly known as Immix Biopharma Cell Therapy, Inc.) (“Nexcella”) in order to conduct various preclinical and clinical activities for its development candidates. Note 2 – Summary of Significant Accounting Policies The accompanying consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). The Company’s fiscal year end is December 31. Risk and Uncertainties - The Company operates in a dynamic and highly competitive industry and is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, protection of proprietary technology, dependence on key personnel, contract manufacturer and contract research organizations, compliance with government regulations and the need to obtain additional financing to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical studies and clinical trials and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance and reporting. The Company believes that changes in any of the following areas could have a material adverse effect on the Company’s future financial position, results of operations, or cash flows; ability to obtain future financing; advances and trends in new technologies and industry standards; results of clinical trials; regulatory approval and market acceptance of the Company’s products; development of sales channels; certain strategic relationships; litigation or claims against the Company based on intellectual property, patent, product, regulatory, or other factors; and the Company’s ability to attract and retain employees necessary to support its growth. Products developed by the Company require approvals from the U.S. Food and Drug Administration (“FDA”) or other international regulatory agencies prior to commercial sales. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained or maintained, that the products will receive the necessary approvals, or that any approved products will be commercially viable. If the Company was denied approval, approval was delayed or the Company was unable to maintain approval, it could have a material adverse impact on the Company. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from other pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees, consultants and other third parties. Beginning in late 2019, the outbreak of a novel strain of virus named SARS-CoV-2 (severe acute respiratory syndrome coronavirus 2), or coronavirus, which causes coronavirus disease 2019, or COVID-19, has evolved into a global pandemic. The extent of the impact of the coronavirus outbreak on the Company’s business will depend on certain developments, including the duration and spread of the outbreak and the extent and severity of the impact on the Company’s clinical trial activities, research activities and suppliers, all of which are uncertain and cannot be predicted. At this point, the extent to which the coronavirus outbreak may materially impact the Company’s financial condition, liquidity or results of operations is uncertain. The Company has expended and will continue to expend substantial funds to complete the research, development and clinical testing of product candidates. The Company also will be required to expend additional funds to establish commercial-scale manufacturing arrangements and to provide for the marketing and distribution of products that receive regulatory approval. The Company may require additional funds to commercialize its products. The Company is unable to entirely fund these efforts with its current financial resources. If adequate funds are unavailable on a timely basis from operations or additional sources of financing, the Company may have to delay, reduce the scope of or eliminate one or more of its research or development programs which may materially and adversely affect its business, financial condition and operations. F- 7 Use of Estimates in Financial Statement Presentation - The preparation of these consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The Company uses significant judgements when making estimates related to the valuation of deferred tax assets and related valuation allowances, accrual and prepayment of research and development expenses, the valuation of derivative financial instruments, and stock-based compensation. Actual results could differ from those estimates. Forward Stock Split – On October 4, 2021, the Company effected a 3-for-1 forward stock split of its issued and outstanding common stock. Accordingly, all share and per-share amounts relating to the common stock, stock options and warrants for all periods presented in the accompanying consolidated financial statements have been retroactively adjusted, where applicable, to reflect the forward stock split. Principles of Consolidation – The accompanying consolidated financial statements include the accounts of Immix Biopharma, Inc., the accounts of its 100 % owned subsidiary, IBAPL, and the accounts of its majority owned subsidiary, Nexcella. All intercompany transactions and balances have been eliminated in consolidation. For consolidated entities where the Company owns less than 100 % of the subsidiary, the Company records net loss attributable to non-controlling interests in its consolidated statements of operations and comprehensive loss equal to the percentage of the economic or ownership interest retained in such entities by the respective non-controlling parties. Liquidity and Going Concern - These consolidated financial statements have been prepared on a going concern basis, which assumes the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The continuation of the Company as a going concern is dependent upon the ability of the Company to obtain financing to continue operations. In December 2021, the Company received $ 18,648,934 in net proceeds from the initial public offering (“IPO”) of its common stock (see Note 6). In January 2022, the Company raised additional net proceeds of $ 2,913,750 from the exercise of the underwriter’s over-allotment option in connection with the Company’s IPO (See Note 6). On March 22, 2023, the Company entered into an ATM Sales Agreement (the “Sales Agreement”) with ThinkEquity LLC (the “Sales Agent”), pursuant to an “at the Market” offering program (the “ATM Facility”), under which the Company, may, from time to time, issue and sell through the Sales Agent, up to $ 5 million of shares of the Company’s common stock in sales deemed to be “at-the-market offerings” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended (see Note 10). The Company has a history of, and expects to continue to report, negative cash flows from operations and a net loss. While the Company’s estimates of its operating expenses and working capital requirements could be incorrect and the Company may use its cash resources faster than it anticipates, management believes that its cash on hand at December 31, 2022, and funds available to be raised from the ATM Facility, will be sufficient to meet the Company’s working capital requirements through at least March 27, 2024. Concentration of Credit Risk - Periodically, the Company may carry cash balances at financial institutions in excess of the federally insured limit of $ 250,000 , or the Australian insured limit of AUD 250,000 . As of December 31, 2022, the Company had $ 13,975,090 in excess of the FDIC insurance limit and no amounts in excess of the Australian insured limit. The Company has not experienced losses on these accounts and management believes, based upon the quality of the financial institutions, that the credit risk with regard to these deposits is not significant. Equipment – Equipment is recorded at cost and depreciated over its estimated useful lives using the straight-line depreciation method as follows: Schedule of Property and Equipment Estimated Useful Lives Computer equipment 3 years Machinery and equipment 5 years Furniture and office equipment 7 years Repairs and maintenance costs are expensed as incurred. F- 8 Impairment of Long-lived Assets – The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of a long-lived asset is measured by comparison of the carrying amount to the expected future undiscounted cash flows that the asset is expected to generate. Any impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. Fair Value of Financial Instruments – The carrying value of short-term instruments, including cash, tax receivable, accounts payable and accrued expenses, and notes payable approximate fair value due to the relatively short period to maturity for these instruments. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company utilizes a three-level valuation hierarchy for disclosures of fair value measurements, defined as follows: Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments. Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value. Prior to the conversion of the convertible notes payable in December 2021, the Company was required to measure and record its derivative instruments at fair value on a recurring basis (see Notes 4 and 5). Derivative Instruments – Prior to the conversion of the convertible notes payable in December 2021, the Company evaluated its 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 was that the fair value of the embedded derivative was marked to market at each balance sheet date and recorded as a liability. The change in fair value was recorded in the consolidated statements of operations and comprehensive loss as other income or expense. Upon conversion of the derivative instrument, the instrument was marked to fair value at the conversion date and then that fair value was reclassified to equity. The Company determined that the convertible notes contained embedded features that provided the noteholders with multiple settlement alternatives. Certain of these settlement features provided the noteholders the right to receive cash or a variable number of shares upon the completion of a capital raising transaction, change of control or default by the Company, which are referred to as “redemption features.” The redemption features of the convertible notes met the requirements for separate accounting and were accounted for as a single derivative instrument. The derivative instrument was recorded at fair value at inception and was subject to remeasurement to fair value at each balance sheet date, with any changes in fair value recognized in the statements of operations and comprehensive loss (see Notes 4 and 5). Income Taxes – The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and the tax bases of reported assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company must then assess the likelihood that the resulting deferred tax assets will be realized. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. F- 9 The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740-10 which prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken, or expected to be taken, on its tax return. The Company evaluates and records any uncertain tax positions based on the amount that management deems is more likely than not to be sustained upon examination and ultimate settlement with the tax authorities in the tax jurisdictions in which it operates. Australian Tax Incentive – IBAPL is eligible to receive a cash refund from the Australian Taxation Office for eligible research and development (“R&D”) expenditures under the Australian R&D Tax Incentive Program (the “Australian Tax Incentive”). The Australian Tax Incentive is recognized as a reduction to R&D expense when there is reasonable assurance that the relevant expenditure has been incurred, the amount can be reliably measured and that the Australian Tax Incentive will be received. The Company recognized reductions to R&D expense of $ 236,376 and $ 79,978 for the years ended December 31, 2022 and 2021, respectively. Stock-Based Compensation – Stock-based compensation expense represents the estimated grant date fair value of the Company’s equity awards, consisting of stock options issued under the Company’s stock option plan and restricted common stock (see Note 6). The fair value of equity awards is recognized over the requisite service period of such awards (usually the vesting period) on a straight-line basis. The Company estimates the fair value of stock options using the Black-Scholes option pricing model on the date of grant and recognizes forfeitures as they occur. For stock awards for which vesting is subject to performance-based milestones, the expense is recorded over the remaining service period after the point when the achievement of the milestone is probable, or the performance condition has been achieved. Patent Costs – Although the Company believes that its patents have continuing value, the amount of future benefits to be derived from the patents is uncertain. Accordingly, patent costs are expensed as incurred. Advertising Costs – The Company expenses advertising costs as incurred. Advertising costs were not significant during the years ended December 31, 2022 and 2021. Research and Development Costs – Research and 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 the Company’s 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 the Company require substantial completion of research and development, regulatory and marketing approval efforts in order to reach commercial feasibility and has no alternative future use. 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. The Company monitors the progress of the trials and their related activities and adjusts 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. Other Comprehensive Income (Loss) – Other comprehensive income (loss) includes foreign currency translation gains and losses. The cumulative amount of translation gains and losses are reflected as a separate component of stockholders’ equity in the consolidated balance sheets, as accumulated other comprehensive income. F- 10 Foreign Currency Translation and Transaction Gains (Losses) – The Company, and its majority-owned subsidiary Nexcella, maintain their accounting records in U.S. Dollars. The Company’s operating wholly-owned subsidiary, IBAPL, is located in Australia and maintains its accounting records in Australian Dollars, which is its functional currency. Assets and liabilities of the subsidiary are translated into U.S. dollars at exchange rates at the balance sheet date, equity accounts are translated at historical exchange rate and revenues and expenses are translated by using the average exchange rates for the period. Translation adjustments are reported as a separate component of other comprehensive income (loss) in the consolidated statements of operations and comprehensive loss. Foreign currency denominated transactions are translated at exchange rates approximating those in effect at the transaction dates. Exchange gains and (losses) are recognized in income and were $ 2,245 and $ ( 6,093 ) for the years ended December 31, 2022 and 2021, respectively, and are included in general and administrative expenses in the accompanying statements of operations and comprehensive loss. Loss Per Common Share – Basic loss per common share is computed by dividing net loss available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted loss per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive. As of December 31, 2022 and 2021, the Company’s potentially dilutive shares and options, which were not included in the calculation of net loss per share, included stock options and warrants for 2,168,742 and 1,686,984 common shares, respectively. Emerging Growth Company Status - The Company is an “emerging growth company” (“EGC”) as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”), and may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not EGCs. The Company may take advantage of these exemptions until it is no longer an EGC under Section 107 of the JOBS Act and has elected to use the extended transition period for complying with new or revised accounting standards. As a result of this election, the Company’s financial statements may not be comparable to companies that comply with public company Financial Accounting Standards Board (“FASB”) standards’ effective dates. The Company may take advantage of these exemptions up until it is no longer an EGC. Recent Accounting Pronouncements - In August 2020, the FASB issued Accounting Standards Update (“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): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity). ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock, which results in fewer embedded conversion features being separately recognized from the host contract as compared with current U.S. GAAP. Additionally, ASU 2020-06 affects the diluted earnings per share calculation for instruments that may be settled in cash or shares and for convertible instruments and requires enhanced disclosures about the terms of convertible instruments and contracts in an entity’s own equity. ASU 2020-06 allows entities to use a modified or full retrospective transition method and is effective for smaller reporting companies for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. The Company has chosen to early adopt the ASU as of January 1, 2022. Upon adoption, no retrospective changes were required in the Company’s consolidated financial statements. Note 3 – Agreements with Nexcella Subsidiary Founders Agreement Effective December 8, 2022, the Company entered a Founders Agreement with Nexcella (the “Nexcella Founders Agreement”). The Nexcella Founders Agreement provides that prior to a Qualified IPO (as defined in Nexcella’s Amended and Restated Certificate of Incorporation, as amended (the “Nexcella COI”)) or Qualified Change in Control (as defined in the Nexcella COI), the Company shall provide funds to Nexcella as requested by Nexcella, in good faith, to be evidenced by a senior unsecured promissory note. In exchange for the time and capital expended in the formation of Nexcella and the identification of specific assets, the acquisition of which benefit Nexcella, on December 21, 2022, the Company loaned Nexcella approximately $ 2.1 million, evidenced by a senior unsecured promissory note, representing the up-front fee required to acquire Nexcella’s license agreement with Hadasit Medica Research Services & Development, Ltd. (“HADASIT”) and BIRAD Research and Development Company Ltd. (“BIRAD”), and for use as working capital for its research and development activities. The note, which matures on January 31, 2030, accrues interest at a rate of 7.875 % per annum and is convertible into shares of common stock of Nexcella at a conversion price of $ 2.00 per share, subject to adjustment; provided, however, that such note shall automatically convert into shares of Nexcella common stock immediately prior to certain conversion triggers set forth in the note. Nexcella may not prepay the note without the Company’s prior written consent. The Nexcella Founders Agreement has a term of 15 years, which, upon expiration, automatically renews for successive one-year periods unless terminated by the Company upon notice at least six months prior to the end of the term or upon the occurrence of a Change of Control (as defined in the Nexcella Founders Agreement). In connection with the Nexcella Founders Agreement, the Company was issued 250,000 shares of Nexcella’s Class A Preferred Stock, 1,000,000 shares of Nexcella’s Class A Common Stock, and 5,000,000 shares of Nexcella’s common stock. The Class A Preferred Stock is identical to the common stock other than as to conversion rights and the PIK Dividend right (as defined below) and voting rights. Each share of Class A Preferred Stock is convertible, at the Company’s option, into one fully paid and nonassessable share of Nexcella’s common stock, subject to certain adjustments. As a holder of Nexcella’s Class A Preferred Stock, the Company will receive on each March 13 (each a “PIK Dividend Payment Date”) until the date all outstanding Class A Preferred Stock is converted into Nexcella’s common stock or redeemed (and the purchase price is paid in full), pro rata per share dividends paid in additional fully paid and nonassessable shares of Nexcella common stock (“PIK Dividends”) such that the aggregate number of shares of common stock issued pursuant to such PIK Dividend is equal to 2.5 % of Nexcella’s fully-diluted outstanding capitalization on the date that is one business day prior to any PIK Dividend Payment Date. In addition, as a holder of Class A Preferred Stock, the Company shall be entitled to cast for each share of Class A Preferred Stock held as of the record date for determining stockholders entitled to vote on matters presented to the stockholders of Nexcella, the number of votes that is equal to 1.1 times a fraction, the numerator of which is the sum of (A) the shares of outstanding Nexcella common stock and (B) the whole shares of Nexcella common stock into which the shares of outstanding Nexcella Class A Common Stock and the Class A Preferred Stock are convertible and the denominator of which is number of shares of outstanding Nexcella Class A Preferred Stock. Each share of Class A Common Stock is convertible, at the Company’s option, into one fully paid and nonassessable share of Nexcella’s common stock, subject to certain adjustments. In addition, upon a Qualified IPO (as defined the Nexcella COI”) or Qualified Change in Control (as defined in the Nexcella COI), the shares of Class A Common Stock, will automatically convert into one fully paid and nonassessable share of Nexcella’s common stock; provided however, if at that time, the Class A Common Stock is not then convertible into a number of shares of Nexcella common stock (or such other capital stock or securities at the time issuable upon the conversion of the Class A Common Stock) that have a value of: (a) in the case of a Qualified IPO, at least $ 5,000,000 based on the initial offering price in such initial public offering, or (b) in the case of a Qualified Change in Control, at least $ 5,000,000 in cash or at least $ 5,000,000 of equity based on the implied value of a share of Nexcella common stock resulting from the price paid upon the consummation of such Qualified Change of Control, the Class A Common Stock will automatically convert into such number of shares of Nexcella common stock (or such other capital stock or securities at the time issuable upon the conversion of the Class A Common Stock) that have a value of $ 5,000,000 based in the initial offering price in such initial public offering or the implied value of a share of Nexcella common stock resulting from the price paid upon the consummation of such Qualified Change of Control (or if such Qualified Change of Control results in the Class A Shares being exchanged solely for cash, then $ 5,000,000 in cash). The Company shall be entitled to cast such number of votes equal to the number of whole shares of Nexcella common stock into which the Company’s Class A Common Stock is convertible as of the record date for determining stockholders entitled to vote on matters presented to the stockholders of Nexcella. In addition to the foregoing, the Company shall be entitled to one vote for each share of Nexcella common stock held by it. Except as provided by law or by the Nexcella COI, holders of Nexcella Class A Common Stock and Class A Preferred Stock shall vote together with the holders of Nexcella common stock, as a single class. F- 11 As additional consideration under the Nexcella Founders Agreement, Nexcella will also: (i) pay an equity fee in shares of common stock, payable within five business days of the closing of any equity or debt financing for Nexcella or any of its respective subsidiaries that occurs after the effective date of the Nexcella Founders Agreement and ending on the date when the Company no longer has majority voting control in Nexcella’s voting equity, equal to 2.5% of the gross amount of any such equity or debt financing; and (ii) pay a cash fee equal to 4.5% of Nexcella’s annual Net Sales (as defined in the Nexcella Founders Agreement), payable on an annual basis, within 90 days of the end of each calendar year. In the event of a Change of Control, Nexcella will pay a one-time change in control fee equal to five times the product of (A) Net Sales for the 12 months immediately preceding the Change of Control and (B) 4.5% . Management Services Agreement Effective as of December 8, 2022, the Company entered into a Management Services Agreement (the “Nexcella MSA”) with Nexcella. Pursuant to the terms of the Nexcella MSA, the Company will render management, advisory and consulting services to Nexcella. Services provided under the Nexcella MSA may include, without limitation, (i) advice and assistance concerning any and all aspects of Nexcella’s operations, clinical trials, financial planning and strategic transactions and financings and (ii) conducting relations on behalf of Nexcella with accountants, attorneys, financial advisors and other professionals (collectively, the “Services”). At the request of the Company, Nexcella shall utilize clinical research services, medical education, communication and marketing services and investor relations/public relation services of companies or individuals designated by the Company, provided those services are offered at market prices. In consideration for the Services, Nexcella will pay the Company an annual base management and consulting fee of $ 500,000 (the “Annual Consulting Fee”), payable in advance in equal quarterly installments on the first business day of each calendar quarter in each year; provided, however, that such Annual Consulting Fee shall be increased to $ 1.0 million for each calendar year in which Nexcella has Net Assets (as defined in the Nexcella MSA) in excess of $ 100 million at the beginning of the calendar year. Notwithstanding the foregoing, the first Annual Consulting Fee payment shall be made on the first business day of the calendar quarter immediately following the completion of the first equity financing for Nexcella that is in excess of $ 10 million in gross proceeds. The first payment shall include all amounts in arrears from the effective date of the Nexcella MSA through such payment as well as the amounts in advance for such first quarterly payment. Actual and direct out-of-pocket expenses reasonably incurred by the Company in performing the Services shall be reimbursed to the Company by Nexcella. The Nexcella MSA shall continue for a period of five years from the effective date thereof and shall be automatically extended for additional five year periods unless the Company and Nexcella provide written notice to not extend the term at least 90 days prior to the end of the term, unless the Nexcella MSA is terminated earlier by mutual agreement of the Company and Nexcella. Note 4 – Notes Payable Convertible Notes On September 1, 2016, the Company entered into a secured convertible promissory note, as amended, with an entity affiliated with a stockholder of the Company for aggregate borrowings of $ 3,000,000 (as amended, “2016 Note”). The 2016 Note was scheduled to mature on March 31, 2022 , and bore interest at the applicable federal rate per annum. The 2016 Note was secured by (i) all of the Company’s purchased equipment (to the extent not already encumbered) and (ii) any amounts received as a tax rebate or incentive during the term of the 2016 Note. On December 20, 2021, the outstanding principal and accrued interest were converted into shares of the Company’s common stock in connection with the Company’s IPO (see below). On October 30, 2018, the Company entered into an unsecured convertible promissory note in the principal amount of $ 250,000 (as amended, “2018 Note”). The 2018 Note was scheduled to mature on March 31, 2022 , and bore interest at 4 % per annum. On December 20, 2021, the outstanding principal and accrued interest were converted into shares of the Company’s common stock in connection with the Company’s IPO (see below). On October 30, 2019, the Company entered into a series of unsecured convertible promissory notes (as amended, “2019 Notes”) in the aggregate principal amount of $ 800,000 . The 2019 Notes were scheduled to mature on March 31, 2022 and bore interest at 6 % per annum. On December 20, 2021, the outstanding principal and accrued interest was converted into shares of the Company’s common stock in connection with the Company’s IPO (see below). In March and April 2021, the Company issued a series of unsecured convertible promissory notes (“2021A Notes”) in the aggregate principal amount of $ 260,000 to the Company’s Chief Financial Officer and Alwaysraise LLC, an entity in which the Company’s Chief Financial Officer is the sole member. Of the $ 260,000 principal amount, the Company received $ 200,000 in cash proceeds and issued a $ 60,000 note in exchange for services. The 2021A Notes were scheduled to mature on March 1, 2023 , and bore interest at 6 % per annum. In connection with the issuance of the 2021A Notes, the Company issued ten-year warrants to purchase 156,000 shares of the Company’s common stock at an exercise price of $ 0.80 per share. The warrants were valued using the Black-Scholes option pricing model with the following inputs: an expected and contractual life of 10 years, an assumed volatility of 117 %, a zero dividend rate, and a risk free rate of 1.70 %. The relative fair value of the warrants amounting to $ 74,603 was recorded to debt discount and was amortized to interest expense through the date of the Company’s IPO, at which time the outstanding principal and accrued interest was converted into shares of the Company’s common stock (see below). F- 12 The 2016 Note, 2018 Note, 2019 Notes and 2021A Notes are collectively referred to as the “Notes.” In the event that the Company issued and sold shares of its equity securities (“Equity Securities”) to investors (the “Investors”) prior to the maturity dates of the Notes in an equity financing with total proceeds to the Company of not less than $ 10,000,000 (including the conversion of the Notes, other indebtedness or other convertible securities issued for capital raising purposes (e.g., Simple Agreements for Future Equity)) (a “ Qualified Financing”), then the outstanding principal amount of the Notes and any unpaid accrued interest would automatically convert in whole without any further action by the holders into Equity Securities sold in the Qualified Financing at a conversion price equal to the lesser of (i) the price paid per share for Equity Securities by the Investors in the Qualified Financing multiplied by 0.80, and (ii) the quotient resulting from dividing $ 10,000,000 by the number of pre-split outstanding shares of the common stock of the Company immediately prior to the Qualified Financing (assuming conversion of all securities convertible into common stock and exercise of all outstanding options and warrants, including all shares of common stock reserved and available for future grant under any equity incentive or similar plan of the Company, and/or any equity incentive or similar plan created or increased in connection with Qualified Financing, and including the shares of equity securities of the Company issued for capital raising purposes (e.g., Simple Agreements for Future Equity)). The issuance of Equity Securities pursuant to the conversion of the Notes were subject to the same terms and conditions applicable to Equity Securities sold in the Qualified Financing. Upon the occurrence of a change of control prior to a Qualified Financing or maturity, the 2019 Notes and the 2021A Notes would upon the election of the holders either (i) become due and payable upon closing of such change of control in cash in an amount equal to (a) the outstanding principal amount plus any unpaid accrued interest, plus (b) a repayment premium equal to 200% of the outstanding principal amount, or (ii) be converted such that the outstanding principal balance and any unpaid accrued interest would convert into shares of the Company’s common stock at a conversion price equal to the quotient resulting from dividing $ 10,000,000 by the number of outstanding shares of common stock of the Company immediately prior to the change of control (assuming conversion of all securities convertible into common stock and exercise of all outstanding options and warrants, and including the shares of equity securities of the Company issuable upon the conversion of notes, other indebtedness or other convertible securities issued for capital raising purposes). On December 20, 2021, in connection with the Company’s IPO, which was deemed a Qualified Financing, the Notes along with the corresponding accrued interest, were automatically converted into an aggregate of 5,633,689 shares of the Company’s common stock. As a result of the conversion, the Company recorded a loss on debt extinguishment of $ 86,170 . The Notes contained embedded derivative instruments, including automatic conversion into equity securities upon completion of a Qualified Financing, that were required to be bifurcated and accounted for separately as a single derivative instrument initially and subsequently measured at fair value with the change in fair value recorded in other income (expense) in the accompanying consolidated statements of operations and comprehensive loss. The Company determined that the issuance date fair values of the derivative instruments for the 2016 Note, 2018 Note, and 2019 Notes, was nominal based on its assumptions of probabilities of a Qualified Financing or change of control transaction. For the 2021A Notes issued during March and April 2021, the Company recorded the fair value of the derivative instruments of $ 80,000 , as a debt discount on the issuance dates which was amortized to interest expense through the date of the Company’s IPO, at which time the 2021A Notes were converted into shares of the Company’s common stock. During the year ended December 31, 2021, the Company recognized expense of $ 22,759,829 related to the change in fair value of the derivative instruments. Upon the conversion of the Notes, the Company reclassified the estimated fair value of the derivative liability of $ 23,414,829 to additional paid-in capital. Interest expense related to the Notes was $ 118,904 for the year ended December 31, 2021. Amortization of the debt discounts related to the 2021A Notes was $ 58,157 for the year ended December 31, 2021. Note Payable – Related Party On September 14, 2014, the Company issued an unsecured promissory note in the principal amount of $ 50,000 to a stockholder of the Company. The note matured on September 14, 2017 and bore interest at 2.5 % per annum. On June 9, 2021, the note was amended to extend the maturity date to September 14, 2022 . On May 26, 2022, the Company repaid the outstanding principal balance and accrued interest in full. As of December 31, 2022 and 2021, the outstanding principal balance on this note was $ 0 and $ 50,000 , respectively. Interest expense related to the note was $ 497 and $ 1,250 for the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022 and 2021, accrued interest on the note was $ 0 and $ 9,099 , respectively. F- 13 Note 5 – Fair Value Measurements As of December 31, 2022 and 2021, the Company had no assets or liabilities required to be measured at fair value on a recurring basis. The fair value of the embedded derivative instrument identified in the Notes was estimated using a two-step approach to valuation, employing a probability-weighted scenario valuation method and then comparing the instrument’s value with-and-without the derivative features in order to estimate their combined fair value, using unobservable inputs, which are classified as Level 3 within the fair value hierarchy. In order to estimate the fair value of the Notes, the Company estimated the future payoff in each scenario, discounted them to a present value and then probability weighted them based upon the Company’s best likelihood of each event occurring. The primary inputs for the valuation approach included the probability of achieving various settlement scenarios that provide the noteholders the rights or the obligations to receive cash or a variable number of shares upon the completion of a Qualified Financing. At December 31, 2020, the Company estimated a 5% probability of a Qualified Financing occurring, a de minimis probability of a change of control occurring and a 20% probability of bankruptcy or dissolution of the Company. As of December 31, 2020, the embedded derivative was remeasured to $ 575,000 . Immediately prior to the conversion of the Notes in connection with the Company’s IPO, the Company estimated a 100% probability of a Qualified Financing occurring, a de minimis probability of a change of control occurring and a 0% probability of bankruptcy or dissolution of the Company. Accordingly, the estimated fair value of the embedded derivative was remeasured at $ 23,414,829 . A loss of $ 22,759,829 related to the change in fair value of the derivative liability was recorded during the year ended December 31, 2021. There were no transfers among Level 1, Level 2 or Level 3 categories in the years ended December 31, 2022 and 2021. The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities for the year ended December 31, 2021: Summary of Changes in Fair Value of Level 3 Financial Liabilities Debt Derivative Balance, January 1, 2021 $ 575,000 Additions – initial issuance of 2021A Notes recognized as debt discount 80,000 Loss from change in fair value included in earnings 22,759,829 Loss from change in fair value included in earnings 22,759,829 Reclassification to additional paid-in capital upon conversion of convertible notes payable ( 23,414,829 ) Balance, December 31, 2021 $ - Note 6 – Stockholders’ Equity The Company has authorized 200,000,000 shares of common stock and 10,000,000 shares of preferred stock each with a par value of $ 0.0001 per share. On January 5, 2022, the Company sold 630,000 shares of its common stock pursuant to the full exercise of the over-allotment option in connection with the Company’s IPO. The shares were sold at the IPO price of $ 5.00 per share, resulting in gross proceeds of $ 3,150,000 and bringing the total gross proceeds of the IPO to $ 24,150,000 . In connection with the exercise of the over-allotment, the Company paid $ 243,275 in offering costs resulting in net proceeds of $ 2,913,750 and bringing total net proceeds to $ 21,562,684 . During the year ended December 31, 2022, the Company issued 43,264 shares of its common stock with a fair value of $ 100,000 for services. During the year ended December 31, 2022, the Company purchased 72,363 shares of its common stock at a cost of $ 99,963 pursuant to its share repurchase program. The shares are being held in treasury. The share repurchase plan was approved by the Company’s board of directors (“Board of Directors” or “Board”) on May 9, 2022 and authorized the repurchase of up to $ 1,000,000 of the Company’s common stock. The share repurchase plan expired on December 31, 2022. During the year ended December 31, 2022, the Company issued 62,532 shares of its common stock upon the cashless exercise of 140,992 stock options. On December 20, 2021, the Company closed on its IPO of 4,200,000 shares offered at a price of $ 5.00 for gross proceeds of $ 21,000,000 . In connection with the offering the Company paid $ 2,351,066 in offering costs resulting in net proceeds of $ 18,648,934 . F- 14 On December 20, 2021, in connection with the IPO, the Notes along with the related accrued interest, were automatically converted into an aggregate of 5,633,689 shares of the Company’s common stock. On December 20, 2021, the Company issued 20,000 shares of restricted common stock to an unrelated third party for entering into an investor relations contract. The stock was valued at a share price of $ 2.95 , the closing price of the Company’s common stock on date of issuance, for a total value of $ 59,000 related to services which is included in general and administrative expenses. Fair Value of Common Stock – prior to establishing a public market Prior to establishing a public market for the Company’s common stock, the estimated fair value of the Company’s common stock was determined by the Company’s Board of Directors as of the date of each option grant, with input from management, considering the Company’s most recently available third-party valuations of common stock, and the 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. Third-party valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation . The Company’s common stock valuations were prepared using a hybrid method that incorporated elements of both a probability-weighted expected return method (“PWERM”) and an option pricing method (“OPM”). The OPM was based on the Black-Scholes option pricing model, which allows for the identification of a range of possible future outcomes. The OPM treats common stock and convertible instruments as call options on the total equity value of a company, with exercise prices based on the value thresholds at which the allocation among the various holders of a company’s securities changes. A discount for lack of marketability of the common stock was applied to arrive at an indication of value for the common stock. PWERM involves a forward-looking analysis of the possible future outcomes of the enterprise. This method is particularly useful when discrete future outcomes can be predicted at a relatively high confidence level with a probability distribution. Discrete future outcomes considered under the PWERM included an initial public offering, as well as non-initial public offering market-based outcomes. Determining the fair value of the enterprise using the PWERM required the Company to develop assumptions and estimates for both the probability of an initial public offering liquidity event and stay private outcomes, as well as the values the Company expected those outcomes could yield. Prior to establishing a public trading market of the Company’s capital stock, the Company’s Board of Directors exercised reasonable judgment and considered a number of objective and subjective factors to determine its estimate of the fair value of the Company’s common stock, including changes in the following factors between the date of the valuation and the grant date: ● the Company’s business, financial condition and results of operations, including related industry trends affecting the Company’s operations; ● the likelihood of achieving a liquidity event, such as an initial public offering or sale of the Company, given prevailing market conditions; ● the lack of marketability of the Company’s common stock; ● the market performance of comparable publicly traded companies; and ● U.S. and global economic and capital market conditions and outlook. The assumptions underlying the Company’s Board of Directors’ valuations represented the Board’s best estimates, which involved inherent uncertainties and the application of the Board’s judgment. As a result, if factors or expected outcomes had changed or the Company’s Board of Directors had used significantly different assumptions or estimates, the Company’s equity-based compensation expense could have been materially different. Following the completion of our IPO, the Company’s Board of Directors began determining the fair value of the Company’s common stock based on the quoted market prices of its common stock. F- 15 Stock Options In 2016, the Board of Directors of the Company approved the Immix Biopharma, Inc. 2016 Equity Incentive Plan (the “2016 Plan”). The 2016 Plan allows for the Board of Directors to grant various forms of incentive awards covering up to 417,120 shares of common stock. During the year ended December 31, 2021, the Board of Directors amended the 2016 Plan to increase the aggregate number of shares available for issuance under the 2016 Plan to 1,761,120 shares of common stock. On September 10, 2021, the Board of Directors approved the 2021 Equity Incentive Plan (the “2021 Plan”) which reserves and makes available for future issuance under the 2021 Plan (i) 900,000 shares of common stock, plus (ii) the number of shares of common stock reserved, but unissued under the 2016 Plan, and (iii) the number of shares of common stock underlying forfeited awards under the 2016 Plan, provided that shares of common stock issued under the 2021 Plan with respect to an Exempt Award (as defined in the 2021 Plan) shall not count against such share limit. Subsequent to September 10, 2021, no further awards shall be issued under the 2016 Plan, but all awards under the 2016 Plan which were outstanding as of September 10, 2021 (including any Grandfathered Arrangement (as defined in the 2021 Plan)) shall continue to be governed by the terms, conditions and procedures set forth in the 2016 Plan and any applicable award agreement. As of December 31, 2022, there are 748,886 awards remaining to be issued under the 2021 Plan. During the year ended December 31, 2022, the Company granted options to purchase 500,000 shares of the Company’s common stock to officers of the Company, and granted options to purchase 91,250 shares of the Company’s common stock to non-employee members of the Board of Directors and scientific advisors of the Company. The exercise price of the options is $ 2.64 -$ 5.83 and the options expire ten years following grant. These options vest in equal monthly installments beginning on the grant date ranging from 12 to 48 months . During the year ended December 31, 2021, the Company granted options to purchase 736,500 shares of the Company’s common stock to officers of the Company, and granted options to purchase 292,500 shares of the Company’s common stock to non-employee members of the Board of Directors and scientific advisors of the Company. The exercise price of the options is $ 0.80 -$ 1.86 and the options expire ten years following grant. These options vest in equal monthly installments beginning on the grant date ranging from 24 to 48 months . The Company estimated the fair value of the stock options using the Black-Scholes option pricing model. The fair value of stock options is being amortized on a straight-line basis over the requisite vesting period of the awards. The fair value of stock options was estimated using the following assumptions for the year ended December 31, 2022: an expected and contractual life of 5.27 - 10 years, an assumed volatility of 117 %- 124 %, a zero dividend rate, a risk free rate of 1.70 %- 3.06 %, and fair value of common stock of $ 2.21 -$ 5.50 . The fair value of stock options was estimated using the following assumptions for the year ended December 31, 2021: an expected and contractual life of 10 years, an assumed volatility of 117 % - 128 % , a zero dividend rate, a risk free rate of 1.37 %- 1.74 %, and fair value of common stock of $ 0.83 . The Company recognized stock-based compensation of $ 476,746 and $ 159,983 related to stock options for the years ended December 31, 2022 and 2021, respectively, which is included in general and administrative expenses. As of December 31, 2022, the Company had unrecognized stock-based compensation expense of $ 1,554,372 , related to unvested stock options, which is expected to be recognized over the weighted-average vesting period of 1.65 years. The following table summarizes the stock option activity under the 2021 Plan for the years ended December 31, 2022 and 2021: Schedule of Stock Option Activity Options Weighted-Average Exercise Price Per Share Outstanding and exercisable, January 1, 2021 291,984 $ 1.33 Granted 1,029,000 $ 1.60 Exercised - $ - Forfeited - $ - Expired - $ - Outstanding, December 31, 2021 1,320,984 $ 1.54 Granted 591,250 $ 2.70 Exercised ( 140,992 ) $ 1.33 Forfeited - $ - Expired - $ - Outstanding and expected to vest, December 31, 2022 1,771,242 $ 1.94 F- 16 The following table discloses information regarding outstanding and exercisable options at December 31, 2022: Schedule of Stock Outstanding and Exercisable Outstanding Exercisable Exercise Price Number of Option Shares Weighted Average Exercise Price Weighted Average Remaining Life (Years) Number of Option Shares Weighted Average Exercise Price $ 0.80 256,500 $ 0.80 8.20 224,438 $ 0.80 $ 1.33 150,992 $ 1.33 2.67 150,992 $ 1.33 $ 1.86 772,500 $ 1.86 8.47 289,377 $ 1.86 $ 2.64 580,000 $ 2.64 9.54 85,419 $ 2.64 $ 5.83 11,250 $ 5.83 9.04 2,578 $ 5.83 1,771,242 $ 1.94 8.29 752,804 $ 1.54 Aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock option and the fair value of the Company’s common stock for stock options that were in-the-money at period end. As of December 31, 2022, the intrinsic value for the options vested and outstanding was $ 603,294 and $ 858,809 , respectively. The total intrinsic value of stock options exercised during the year ended December 31, 2022 was $ 148,982 . Stock Warrants On January 5, 2022, in connection with the issuance of shares of the Company’s common stock pursuant to the exercise of the over-allotment discussed above, the Company issued warrants for the purchase of 31,500 shares of the Company’s common stock with a term of 5 years and an exercise price of $ 6.25 per share, which warrants vested six months after the date of issuance. In March and April 2021, in connection with the issuance of the 2021A Notes as discussed in Note 4, the Company issued warrants for the purchase of 156,000 shares of the Company’s common stock, with a term of 10 years and an exercise price of $ 0.80 per share which vested immediately. In December 2021, in connection with the IPO discussed above, the Company issued warrants for the purchase of 210,000 shares of the Company’s common stock, with a term of 5 years and an exercise price of $ 6.25 per share which vested six months after the date of issuance. The following table summarizes the stock warrant activity for the years ended December 31, 2022 and 2021: Schedule of Stock Warrant Activity Warrants Weighted-Average Exercise Price Per Share Outstanding and exercisable, January 1, 2021 - $ - Granted 366,000 $ 3.93 Exercised - $ - Forfeited - $ - Expired - $ - Outstanding and exercisable, December 31, 2021 366,000 $ 3.93 Granted 31,500 $ 6.25 Exercised - $ - Forfeited - $ - Expired - $ - Outstanding and exercisable, December 31, 2022 397,500 $ 4.11 The following table discloses information regarding outstanding and exercisable warrants at December 31, 2022: F- 17 Schedule of Stock Outstanding and Exercisable Outstanding Exercisable Exercise Price Number of Option Shares Weighted Average Exercise Price Weighted Average Remaining Life (Years) Number of Option Shares Weighted Average Exercise Price $ 0.80 156,000 $ 0.80 8.23 156,000 $ 0.80 $ 6.25 241,500 $ 6.25 3.96 241,500 $ 6.25 397,500 $ 4.11 5.64 397,500 $ 4.11 Aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock warrant and the fair value of the Company’s common stock for stock warrants that were in-the-money at period end. As of December 31, 2022, the intrinsic value for the warrants vested and outstanding was $ 232,440 . Nexcella Equity Transactions The Nexcella 2022 Plan allows for the Board of Directors to grant various forms of incentive awards covering i) up to 375,000 shares of common stock and ii) up to 1,125,000 options to purchase shares of common stock. As of December 31, 2022, there were 25,000 shares of common stock available for issuance under the Nexcella 2022 Plan. No incentive stock options have been issued pursuant to the Nexcella 2022 Plan as of December 31, 2022. During the year ended December 31, 2022, Nexcella entered into subscription agreements for the sale of 73,188 common shares of Nexcella, at a purchase price of $ 6.49 per share for total proceeds of $ 475,000 . As of December 31, 2022, the offering had not yet closed, and the shares were not issued by Nexcella as of December 31, 2022, and accordingly, the Company has recorded the proceeds of $ 475,000 in funds held for subsidiary private offering in the accompanying consolidated balance sheet at December 31, 2022 (see Note 10). On December 8, 2022, Nexcella issued 350,000 shares of Nexcella restricted common stock to the officers of the Company for services to be performed, which vest in 48 equal monthly installments. The stock was valued at a share price of $ 6.49 on the date of issuance, which represents the most recent cash sales price of Nexcella’s common stock, for a total value of $ 2,271,500 related to services, of which $ 47,323 was included in general and administrative expenses for the year ended December 31, 2022. As of December 31, 2022, the Company had unrecognized stock-based compensation expense of $ 2,224,177 , related to unvested restricted common stock, which is expected to be recognized over the remaining vesting period of 3.9 years. Note 7 – Licenses Acquired On December 8, 2022, Nexcella entered into a Research and License agreement with HADASIT and BIRAD (collectively, the “Licensors”) to acquire intellectual property rights pertaining to CAR-T (the “H&B License”). Pursuant to the H&B License, Nexcella paid the Licensors an upfront license fee of $ 1.5 million in December 2022 (included in research and development expenses on the consolidated statements of operations and comprehensive loss). Additional quarterly payments totaling approximately $13.0 million are due through September 2026 along with an annual license fee of $ 50,000 . Future royalty payments of 5 % are due on net sales of licensed products, combined with sales milestone payments in the aggregate amount of up to $ 20 million when annual net sales reach certain thresholds for each licensed product. The royalties for each licensed product on a country-to-country basis are to be paid through the latter of (a) the expiration of the last-to-expire valid claim under a licensed patent (if any) in such country; (b) the date of expiration of any other Exclusivity Right (as defined in the H&B License) or data protection period granted by a regulatory or other governmental authority with respect to a licensed product that provides exclusivity in the relevant country; or (c) the end of a period of 15 years from the date of the First Commercial Sale (as defined in the H&B License) of the applicable Licensed Product (as defined in the H&B License) in such country. Note 8 – Income Taxes The Company is subject to taxation in the United States, California and Australia. At December 31, 2022, the Company had federal, state, and foreign net operating loss (“NOL”) carryforwards of approximately $ 5,800,000 , $ 5,800,000 and $ 1,500,000 , respectively. The federal loss carryforwards generated after 2017 of approximately $ 5,800,000 will carryforward indefinitely and can be used to offset up to 80% of future annual taxable income, while those loss carryforwards generated prior to 2018 begin expiring in 2034, unless previously utilized . State loss carryforwards also begin expiring in 2034, unless previously utilized, while the Company’s foreign loss carryforward do not expire . The Company also has federal and California research and development credit carryforwards totaling approximately $ 110,000 and $ 106,000 , respectively, at December 31, 2022. The Federal credits begin to expire in 2034, unless previously utilized, while the State credits do not expire . The Company also has foreign withholding tax carryforwards totaling $ 67,000 at December 31, 2022. The foreign withholding tax carryforward credit begins to expire in 2028, unless previously utilized . F- 18 The Company’s NOL and credit carryforwards to offset future taxable income may be subject to a substantial annual limitation as a result of ownership changes that could occur in the future pursuant to Internal Revenue Code Sections 382 and 383. These ownership changes may limit the amount of NOL and credit carryforwards that can be utilized to offset future taxable income and income tax, respectively. In general, an “ownership change” as defined by the tax code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percent of the outstanding stock of a company by certain stockholders or public groups. The Company’s federal income tax returns from 2019 forward, state income tax returns from 2018 forward, and its Australian tax returns beginning in 2020 are subject to examination by tax authorities. A reconciliation of the provision for income taxes to the amount computed by applying the statutory federal income tax rate to the loss from operations for the years ended December 31, 2022 and 2021 is as follows: Schedule of Provision for Income Taxes Year Ended December 31, 2022 Year Ended December 31, 2021 Expected income tax benefit computed at the statutory rate $ ( 1,736,301 ) $ ( 5,119,352 ) State income tax benefit, net of federal benefit, net of valuation allowance - - Foreign rate differential 14,228 ( 6,232 ) Foreign losses not benefited 119,362 32,407 Tax effect of: Change in valuation allowance 1,692,278 299,385 Change in fair value of derivative liability - 4,779,564 Other permanent items and tax credits ( 180,713 ) ( 2,491 ) Other non-deductible expenses 91,196 22,732 Provision for income taxes $ 10,268 $ 6,013 Net deferred tax assets are comprised of the following as of December 31, 2022 and 2021: Schedule of Deferred Tax Assets December 31, 2022 December 31, 2021 Net operating losses $ 1,920,819 $ 739,168 Foreign tax credits 73,326 63,058 Federal & state research credit carryforwards 216,418 32,602 Stock-based compensation 1,167,687 105,750 Valuation allowance ( 3,378,250 ) ( 940,578 ) Net deferred tax assets $ - $ - Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use existing deferred tax assets. Based on the weight of available evidence, including the Company’s history of operating losses, management has determined that it is more likely than not that the Company’s net deferred tax assets will not be realized. Accordingly, a valuation allowance has been established by the Company to fully offset these net deferred tax assets. For the years ended December 31, 2022 and 2021, domestic and foreign pre-tax loss were: Schedule of Pre-tax Loss December 31, 2022 December 31, 2021 Loss before income taxes - Domestic $ 7,741,995 $ 24,253,224 Loss before income taxes – Foreign 477,450 124,642 Loss before income taxes - Consolidated $ 8,219,445 $ 24,377,866 F- 19 Note 9 – Commitments and Contingencies Indemnifications In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and may provide for indemnification of the counterparty. The Company’s exposure under these agreements is unknown because it involves claims that may be made against it in the future but have not yet been made. To date, the Company has not been subject to any claims or been required to defend any action related to its indemnification obligations. The Company indemnifies each of its directors and officers for certain events or occurrences, subject to certain limits, while the director is or was serving at the Company’s request in such capacity, as permitted under Delaware law and in accordance with its certificate of incorporation and bylaws. The term of the indemnification period lasts as long as the director or officer may be subject to any proceeding arising out of acts or omissions of such individual in such capacity. The maximum amount of potential future indemnification is unlimited. The Company believes that the fair value of these indemnification obligations is minimal. Accordingly, the Company has not recognized any liabilities relating to these obligations as of December 31, 2022 and 2021. Royalty Agreement On December 22, 2014, the Company entered into a Master Service Agreement (“MSA”) with AxioMx, Inc. (“AxioMx”). AxioMx is in the business of developing and supplying custom affinity reagents. AxioMx and the Company entered into the MSA to serve as a master agreement governing multiple sets of projects as may be agreed upon by them from time to time. Pursuant to the MSA, AxioMx is entitled to royalties on the sale of any Deliverable (as defined in the MSA) 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, the Company 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, the Company 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%. Through December 31, 2022, no amounts have been paid or accrued under the MSA. As of December 31, 2022, the MSA has expired and the Company does not intend to extend the MSA; however, the royalty obligations shall survive the termination of the MSA . Legal Proceedings From time to time we may be involved in claims that arise during the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, we do not currently have any pending litigation to which we are a party or to which our property is subject that we believe to be material. Regardless of the outcome, litigation can be costly and time consuming, and it can divert management’s attention from important business matters and initiatives, negatively impacting our overall operations. Employment Agreements On June 18, 2021, the Company entered into an Employment Agreement with Ilya Rachman (as amended, the “Rachman Employment Agreement”), effective for a three-year term. Pursuant to the Rachman Employment Agreement, the Company employs Dr. Rachman as Chief Executive Officer and Dr. Rachman was entitled to a base salary of $ 360,000 annually. Dr. Rachman was also entitled to a performance-based bonus of 100 % of the base salary (subject to, and determined by, the Board in its sole discretion) plus additional performance bonuses to be determined by the Board. On July 14, 2022, the Compensation Committee of the Board of Directors approved a new compensation package for Dr. Rachman, and on November 9, 2022, the Company entered into an amendment to the Rachman Employment Agreement dated as of June 18, 2021 pursuant to which (i) Dr. Rachman’s annual base salary was increased to $ 425,000 , retroactive as of January 1, 2022 and (ii) entitling Dr. Rachman to a performance-based bonus of up to 50 % of his base salary (subject to, and determined by, the Board in its sole discretion) plus additional performance bonuses to be determined by the Board. In addition, on July 14, 2022, the Company issued Dr. Rachman options to purchase up to 250,000 shares of the Company’s common stock at an exercise price of $ 2.64 per share. Unless terminated by the Company without “cause” or by Dr. Rachman with “good reason” (as such terms are defined in the Rachman Employment Agreement), upon termination, Dr. Rachman will be entitled only to his base salary through the date of termination, valid expense reimbursements and unused vacation pay. If terminated by the Company without “cause” or by Dr. Rachman with “good reason,” he is entitled to be paid his base salary through the end of the term at the rate of 150 %, valid expense reimbursements and accrued but unused vacation pay. Dr. Rachman’s employment agreement contains provisions for the protection of the Company’s intellectual property and contains non-compete restrictions in the event of his termination other than by the Company without “cause” or by Dr. Rachman with “good reason” (generally imposing restrictions on (i) employment or consultation with competing companies or customers, (ii) recruiting or hiring employees for a competing company and (iii) soliciting or accepting business from our customers for a period of six months following termination) . Pursuant to the Rachman Employment Agreement, Dr. Rachman may serve as a consultant to, or on boards of directors of, or in any other capacity to other companies provided that they will not interfere with the performance of his duties to the Company. F- 20 On March 18, 2021, the Company entered into a Management Services Agreement with Alwaysraise LLC, an entity which Gabriel Morris, the Company’s Chief Financial Officer and a member of the Board, is sole member, effective for a three-year term, which was amended effective June 18, 2021 (as amended, the “Morris MSA”). Pursuant to the Morris MSA, the Company employs Mr. Morris as Chief Financial Officer and Mr. Morris was entitled to a base salary of $ 240,000 annually beginning in December 2021 ($ 120,000 annually prior). Mr. Morris was also entitled to a performance-based bonus of 100 % of the base salary (subject to, and determined by, the Board in its sole discretion) plus additional performance bonuses to be determined by the Board. On July 14, 2022, the Compensation Committee of the Board of Directors approved a new compensation package for Mr. Morris, and on November 9, 2022, the Company entered into an amendment to the Morris MSA dated as of March 24, 2021 pursuant to which (i) Mr. Morris’ annual base salary was increased to $ 425,000 , retroactive as of January 1, 2022 and (ii) entitling Mr. Morris to a performance-based bonus of up to 50 % of his base salary (subject to, and determined by, the Board in its sole discretion) plus additional performance bonuses to be determined by the Board. In addition, on July 14, 2022, the company issued Mr. Morris options to purchase up to 250,000 shares of the Company’s common stock at an exercise price of $ 2.64 per share. Unless terminated by the Company without “cause” or by Alwaysraise LLC (as such terms are defined in the Morris MSA), upon termination, Mr. Morris will be entitled only to his base salary through the date of termination, valid expense reimbursements and unused vacation pay. If terminated by the Company without “cause,” he is entitled to be paid his base salary through the end of the term at the rate of 150 %, valid expense reimbursements and accrued but unused vacation pay. The Morris MSA contains provisions for the protection of the Company’s intellectual property and confidential information. On June 24, 2021, the Company issued an offer letter to Graham Ross Oncology Consulting Services Ltd., a United Kingdom company, of which Graham Ross, the Company’s consulting Acting Chief Medical Officer and Head of Clinical Development is the sole member, regarding Dr. Ross’ provision of consultative services to the Company (the “Offer Letter”). Pursuant to the Offer Letter (signed by Dr. Ross on June 24, 2021), Dr. Ross is entitled to an hourly rate for his consulting services and an option grant. On June 24, 2021, the Company also signed a mutual confidentiality and non-disclosure agreement with Graham Ross Oncology Consulting Services Ltd. Collaboration Agreement In August 2021, the Company entered into a Clinical Collaboration and Supply Agreement with BeiGene Ltd. (“BeiGene”) for a combination Phase 1b clinical trial in solid tumors of IMX-110 and anti-PD-1 Tislelizumab (the subject of a collaboration and license agreement among BeiGene and Novartis). Under the terms of the agreement, the Company will conduct the combination trial. The cost of Tislelizumab manufacture and supply (including shipping, taxes and duty if applicable and any third-party license payments that may be due) will be solely borne by BeiGene. To date, no amounts have been paid to BeiGene. Note 10 – Subsequent Events Nexcella Private Placement Offering On January 12, 2023, the Company, through its majority-owned subsidiary, Nexcella, closed on a private placement offering in which it sold an aggregate of 100,152 shares of Nexcella’s common stock at a purchase price of $ 6.49 , for gross proceeds of approximately $ 650,000 . The Company’s Chief Executive Officer purchased 7,704 shares of Nexcella’s common stock for a purchase price of $ 50,000 in the private placement offering. In addition, the Company’s Chief Financial Officer through Alwaysraise, LLC and Alwaysraise Ventures I, L.P., entities affiliated with the Company’s Chief Financial Officer, purchased an aggregate of 15,408 shares of Nexcella’s common stock in the private placement offering for $ 100,000. F- 21 Common Stock Issuance – Marketing Services Agreement On March 16, 2023, the Company, issued 6,700 shares of the Company’s common stock valued at $ 12,730 , pursuant to a marketing services agreement for future services to be provided to the Company. ATM Sales Agreement On March 22, 2023, the Company entered into an ATM Sales Agreement (the “Sales Agreement”) with ThinkEquity LLC (the “Sales Agent”), pursuant to which the Company may offer and sell, from time to time, through the Sales Agent, shares (the “Shares”) of the Company’s common stock, par value $ 0.0001 per share, having an aggregate offering price of up to $ 5,000,000 , subject to the terms and conditions set forth in the Sales Agreement. The Shares will be offered and sold pursuant to the Company’s prospectus supplement, dated March 22, 2023, filed by the Company with the Securities and Exchange Commission (the “SEC”), to the prospectus forming a part of the Company’s shelf Registration Statement on Form S-3 (File No. 333-269100) filed by the Company with the SEC (the “Registration Statement”) on January 3, 2023 and declared effective by the SEC on January 11, 2023. The aggregate market value of Shares eligible for sale under the Sales Agreement will be subject to the limitations of General Instruction I.B.6 of Form S-3. Under the Sales Agreement, the Sales Agent may sell the Shares in sales deemed to be “at-the-market offerings” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended (the “Securities Act”), including sales made directly on or through The Nasdaq Capital Market or any other existing trading market for the Common Stock, in negotiated transactions at market prices prevailing at the time of sale or at prices related to such prevailing market prices, and/or any other method permitted by law. The Company may instruct the Sales Agent not to sell any Shares if the sales cannot be effected at or above the price designated by the Company from time to time. Upon delivery of a placement notice and subject to the terms and conditions of the Sales Agreement, the Sales Agent will use commercially reasonable efforts, consistent with its normal trading and sales practices, applicable state and federal law, rules and regulations, and the rules of The Nasdaq Capital Market, to sell the Shares from time to time based upon the Company’s instructions, including any price, time or size limits specified by the Company. The offering pursuant to the Sales Agreement will terminate upon the earlier of (i) the sale of all of the Shares subject to the Sales Agreement, and (ii) termination of the Sales Agreement as permitted therein. The Company may terminate the Sales Agreement in its 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 the Company. In addition, the Sales Agreement may be terminated upon mutual agreement of the Company and the Sales Agent. The Company will pay the Sales Agent a fixed commission rate of 3.75 % of the aggregate gross proceeds from the sale of the Shares pursuant to the Sales Agreement. The Company has paid an expense deposit of $ 15,000 to the Sales Agent, which will be applied against the actual out-of-pocket accountable expenses that will be paid by the Company to the Sales Agent in connection with the offering. The Company has 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 Company has also agreed to provide indemnification and contribution to the Sales Agent with respect to certain liabilities, including liabilities under the Securities Act. F- 22 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.