Q/C TECHNOLOGIES, INC. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The information set forth below should be read in conjunction with our consolidated financial statements and related notes thereto included elsewhere in this Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements based on our current expectations, assumptions, estimates and projections. These forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those indicated in these forward-looking statements as a result of certain factors, including those discussed in Item 1 of this Annual Report on Form 10-K, entitled “Business,” under “Forward-Looking Statements” and Item 1A of this Annual Report on Form 10-K, entitled “Risk Factors.” References in this discussion and analysis to “us,” “we,” “our,” or “the Company” refer collectively to MyMD Pharmaceuticals, Inc. Our financial statements are prepared in accordance with GAAP. These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this Annual Report on Form 10-K. 60 This annual report on Form 10-K and other reports filed by the Company from time to time with the Securities and Exchange Commission (the “SEC” and such reports, collectively, the “Filings”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the Filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks relating to the Company’s business, industry, and the Company’s operations and results of operations. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results. Important factors that could cause actual results to differ materially from the results and events anticipated or implied by such forward-looking statements include, but are not limited to: ● fluctuation and volatility in market price of our Common Stock due to market and industry factors, as well as general economic, political and market conditions; ● the impact of dilution on our shareholders; ● our ability to realize the intended benefits of the Merger (as defined below) and the Contribution Transaction (as defined below); ● the impact of our ability to realize the anticipated tax impact of the Merger; ● the outcome of litigation or other proceedings we may become subject to in the future; ● delisting of our Common Stock from the Nasdaq; ● our availability and ability to continue to obtain sufficient funding to conduct planned research and development efforts and realize potential profits; ● our ability to develop and commercialize our product candidates, including MYMD-1, Supera-CBD and other future product candidates; ● the impact of the complexity of the regulatory landscape on our ability to seek and obtain regulatory approval for our product candidates, both within and outside of the U.S.; ● the required investment of substantial time, resources and effort for successful clinical development and marketization of our product candidates; ● challenges we may face with maintaining regulatory approval, if achieved; ● the potential impact of changes in the legal and regulatory landscape, both within and outside of the U.S.; ● the impact of the ongoing COVID-19 pandemic on the administration, funding and policies of regulatory authorities, both within and outside of the U.S.; ● our dependence on third parties to conduct pre-clinical and clinical trials and manufacture its product candidates; ● the impact of the ongoing COVID-19 pandemic on our results of operations, business plan and the global economy; ● challenges we may face with respect to our product candidates achieving market acceptance by providers, patients, patient advocacy groups, third party payors and the general medical community; ● the impact of pricing, insurance coverage and reimbursement status of our product candidates; ● emerging competition and rapidly advancing technology in our industry; ● our ability to obtain, maintain and protect our trade secrets or other proprietary rights, operate without infringing upon the proprietary rights of others and prevent others from infringing on its proprietary rights; ● our ability to maintain adequate cyber security and information systems; ● our ability to achieve the expected benefits and costs of the transactions related to the acquisition of Supera Pharmaceuticals, Inc. (“Supera”); ● our ability to effectively execute and deliver our plans related to commercialization, marketing and manufacturing capabilities and strategy; ● emerging competition and rapidly advancing technology in our industry; ● our ability to obtain adequate financing in the future on reasonable terms, as and when we need it; ● challenges we may face in identifying, acquiring and operating new business opportunities; ● our ability to retain and attract senior management and other key employees; ● our ability to quickly and effectively respond to new technological developments; ● changes in political, economic or regulatory conditions generally and in the markets in which we operate; and ● our compliance with all laws, rules, and regulations applicable to our business. 61 Overview Following the closing of the Merger and the Contribution Transaction described below that occurred on April 16, 2021, we have been focused on developing and commercializing two therapeutic platforms based on well-defined therapeutic targets, MYMD-1 and Supera-CBD: ● MYMD-1 is a clinical stage small molecule that regulates the immunometabolic system to treat autoimmune disease, including (but not limited to) multiple sclerosis, diabetes, rheumatoid arthritis, and inflammatory bowel disease. MYMD-1 is being developed to treat age-related illnesses such as frailty and sarcopenia. MYMD-1 works by regulating the release of numerous pro-inflammatory cytokines, such as TNF-α, interleukin 6 (“IL-6”) and interleukin 17 (“IL-17”). MYMD-1 currently is being evaluated in patients with sarcopenia (age-related muscle loss). The company has significant intellectual property coverage to protect these autoimmune indications, as well as therapy as an anti-aging product; ● Supera-CBD is a synthetic analog of cannabidiol (“CBD”) being developed to treat various conditions, including, but not limited to, epilepsy, pain, and anxiety/depression, through its effects on the CB2 receptor, and a monoamine oxidase enzyme (“MAO”) type B. Supera-CBD has shown tremendous promise in treating neuroinflammatory and neurodegenerative diseases, and will be a major focus as the Company moves forward. The rights to Supera-CBD were previously owned by Supera and were acquired by MyMD Florida (as defined below) immediately prior to the closing of the Merger. Closing of the Merger and Reverse Stock Split On April 16, 2021, pursuant to the previously announced Agreement and Plan of Merger and Reorganization, dated November 11, 2020 (the “Original Merger Agreement”), as amended by Amendment No. 1 thereto, dated March 16, 2021 (the Original Merger Agreement, as amended by Amendment No. 1, the “Merger Agreement”), by and among MyMD, a New Jersey corporation previously known as Akers Biosciences, Inc., XYZ Merger Sub, Inc. (“Merger Sub”), and MyMD Pharmaceuticals (Florida), Inc., a Florida corporation previously known as MyMD Pharmaceuticals, Inc. (“MyMD Florida”), Merger Sub was merged with and into MyMD Florida, with MyMD Florida continuing after the merger as the surviving entity and a wholly owned subsidiary of the Company (the “Merger”). At the effective time of the Merger, without any action on the part of any stockholder, each issued and outstanding share of pre-Merger MyMD Florida’s Common Stock, par value $0.001 per share (the “MyMD Florida Common Stock”), including shares underlying pre-Merger MyMD Florida’s outstanding equity awards, was converted into the right to receive (x) 0.7718 shares (the “Exchange Ratio”) of the Company’s Common Stock, no par value per share (the “Company Common Stock” or “Common Stock”), (y) an amount in cash, on a pro rata basis, equal to the aggregate cash proceeds received by the Company from the exercise of any options to purchase shares of MyMD Florida Common Stock outstanding at the effective time of the Merger assumed by the Company upon closing of the Merger prior to the second-year anniversary of the closing of the Merger (the “Option Exercise Period”), such payment (the “Additional Consideration”), and (z) potential milestone payment in shares of Company Common Stock up to the aggregate number of shares issued by the Company to pre-Merger MyMD Florida stockholders at the closing of the Merger (the “Milestone Payments”) payable upon the achievement of certain market capitalization milestone events (the “Milestone Events”) during the 36-month period immediately following the closing of the Merger (the “Milestone Period”). The Milestone Events and corresponding Milestone Payments are set forth in the table below. Milestone Event Milestone Payment Market capitalization of the combined company for at least ten (10) trading days during any 20 consecutive trading day period during the Milestone Period is equal to or greater than $500,000,000 (the “First Milestone Event”). $20,000,000 For every $250,000,000 incremental increase in market capitalization of the combined company after the First Milestone Event to the extent such incremental increase occurs for at least 10 trading days during any 20 consecutive trading day period during the Milestone Period, up to a $1,000,000,000 market capitalization of the combined company. $10,000,000 per each incremental increase (it being understood, however, that, if such incremental increase results in market capitalization equal to $1,000,000,000, such $10,000,000 payment in respect of such incremental increase shall be payable without duplication of any amount payable in respect of a Second Milestone Event, as defined below). Market capitalization of the combined company for at least 10 trading days during any 20 consecutive trading day period during the Milestone Period is equal to or greater than $1,000,000,000 (the “Second Milestone Event”) $25,000,000 For every $1,000,000,000 incremental increase in market capitalization of the combined company after the Second Milestone Event to the extent such incremental increase occurs for at least 10 trading days during any 20 consecutive trading day period during the Milestone Period. $25,000,000 per each incremental increase 62 For purposes of the table above, “market capitalization” means, with respect to any trading day, the product of (i) the total outstanding shares of the combined company Common Stock and (ii) the volume weighted average trading price for the combined company Common Stock for such trading day. Immediately following the effective time of the Merger, the Company effected a 1-for-2 reverse stock split of the issued and outstanding Company Common Stock (the “Reverse Stock Split”). Upon completion of the Merger and the transactions contemplated in the Merger Agreement, (i) the former MyMD Florida equity holders owned approximately 77.05% of the outstanding equity of the Company on a fully diluted basis, assuming the exercise in full of the pre-funded warrants to purchase 986,486 shares of Company Common stock and including 4,188,315 shares of Company Common Stock underlying options to purchase shares of MyMD Florida Common Stock assumed by the company at closing and after adjustments based on the Company’s net cash at closing; and (ii) former Akers Biosciences, Inc. stockholders own approximately 22.95% of the outstanding equity of the Company. Effective as of 4:05 pm Eastern Time on April 16, 2021, we filed an amendment to its Amended and Restated Certificate of Incorporation to effect the Reverse Stock Split. As a result of the Reverse Stock Split, immediately following the effective time of the Merger, every two shares of our Common Stock held by a stockholder immediately prior to the Reverse Stock Split were combined and reclassified into one share of our Common Stock. No fractional shares were issued in connection with the Reverse Stock Split. Each stockholder who did not have a number of shares evenly divisible pursuant to the Reverse Stock Split ratio and who would otherwise be entitled to receive a fractional share of our Common Stock was entitled to receive an additional share of our Common Stock. In connection with the closing of the Merger, we changed our name to MyMD Pharmaceuticals, Inc. and our trading symbol on The Nasdaq Capital Market to MYMD. For additional information concerning the Merger, please see Note 3 to the Company’s Consolidated Financial Statements. Closing of Contribution and Assignment Agreement We acquired 100% of the membership interests of Cystron Biotech, LLC (“Cystron”) pursuant to a Membership Interest Purchase Agreement, dated March 23, 2020 (as amended by Amendment No. 1 on May 14, 2020, the “MIPA”) from certain selling parties (the “Cystron Sellers”). Cystron is a party to a License and Development Agreement (as amended and restated on March 19, 2020, in connection with our entry into the MIPA, the “License Agreement”) with Premas Biotech PVT Ltd. (“Premas”) whereby Premas granted Cystron, amongst other things, an exclusive license with respect to Premas’ genetically engineered yeast (S. cerevisiae)-based vaccine platform, D-Crypt™, for the development of a vaccine against COVID-19 and other coronavirus infections. We had partnered with Premas on this initiative as we sought to advance this COVID-19 vaccine candidate through the regulatory process, both with the U.S. Food and Drug Administration (“FDA”) and the office of the drug controller in India. Premas was primarily responsible for the development of the COVID-19 vaccine candidate through proof of concept and was entitled to receive milestone payments upon achievement of certain development milestones through proof of concept. As of May 14, 2020, Premas had successfully completed its vaccine prototype and obtained transmission electron microscopic (TEM) images of the recombinant virus like particle (VLP) assembled in yeast. In July 2020, animal studies for the COVID-19 vaccine candidate were initiated in India. In addition, we announced that Premas had successfully completed the manufacturing process for the VLP vaccine candidate. On August 27, 2020, we announced with Premas positive proof of concept results from the animal studies conducted during a four-week test of the COVID-19 vaccine candidate in mice. On March 18, 2021, the Company and the Cystron Sellers, which are also shareholders of Oravax Medical, Inc. (“Oravax”), entered into a Termination and Release Agreement terminating the MIPA effective upon consummation of the Contribution Agreement (as defined below). In addition, the Cystron Sellers agreed to waive any change of control payment triggered under the MIPA as a result of the Merger. On April 16, 2021, pursuant to the Contribution and Assignment Agreement, dated March 18, 2021 (the “Contribution Agreement”) by and among the Company, Cystron, Oravax and, for the limited purpose set forth therein, Premas, the parties consummated the transactions contemplated therein. Pursuant to the Contribution Agreement, effective upon the closing of the Merger, the Company agreed (i) to contribute an amount in cash equal to $1,500,000 to Oravax and (ii) cause Cystron to contribute substantially all of the assets associated with its business or developing and manufacturing Cystron’s COVID-19 vaccine candidate to Oravax (the “Contribution Transaction”). In consideration for the Company’s commitment to consummate the Contribution Transaction, Oravax issued to the Company 390,000 shares of its capital stock (equivalent to 13% of Oravax’s outstanding capital stock on a fully diluted basis) and assumed all of the obligations or liabilities in respect of the assets of Cystron (excluding certain amounts due to Premas), including the obligations under the license agreement with Premas. In addition, Oravax agreed to pay future royalties to the Company equal to 2.5% of all net sales of products (or combination products) manufactured, tested, distributed and/or marketed by Oravax or its subsidiaries. For additional information concerning the Contribution Transaction, please see Note 3 to the Company’s Consolidated Financial Statements. 63 Following the Contribution Transaction, Oravax is pursuing the development of the COVID-19 vaccine candidate. MyMD is currently evaluating several options with respect to its interest in Oravax, including a potential distribution of Oravax shares to the MyMD shareholders. This would make Oravax a publicly held company. MyMD’s interest in Oravax consists of 13% of Oravax’s outstanding shares of capital stock and the rights to a 2.5% royalty on all future net sales. In addition, MyMD currently has the right to designate a member of the board of directors of Oravax, pursuant to which Mr. Joshua Silverman, our Chairman of the Board, has been designated to serve as a director of Oravax. Financial Operations Overview We will not generate revenue from product sales unless and until we successfully complete clinical development, obtain regulatory approval for, and successfully commercialize our MYMD-1 and Supera-CBD product candidates. The lengthy process of securing marketing approvals for new drugs requires the expenditure of substantial resources. Any significant delay or failure to obtain regulatory approvals would materially adversely affect our product candidate’s development efforts and our business overall. In addition, if we obtain regulatory approval for MYMD-1 and/or Supera-CBD, we expect to incur significant expenses related to developing our commercialization capability to support product sales, marketing, manufacturing and distribution activities. We anticipate that our expenses will increase significantly as we: ● advance the development of our MYMD-1 and Supera-CBD; ● initiate and continue research and preclinical and clinical development of potential new product candidates; ● maintain, expand and protect our intellectual property as it pertains to MYMD-1 and Supera-CBD; ● expand our infrastructure and facilities to accommodate our growing employee base and ongoing development activities; ● establish agreements with contract research organizations, or CROs, and third-party contract manufacturing organizations, or CMOs, in connection with our Supera-CBD preclinical studies, MYMD-1 ongoing and planned clinical trials, Supera-CBD clinical trials and the development of our manufacturing capabilities for MYMD-1 and Supera-CBD; ● develop the large-scale manufacturing processes and capabilities for the commercialization of our MYMD-1 and Supera-CBD drug products; ● seek marketing approvals for our MYMD-1 and Supera-CBD product candidates that successfully complete clinical trials and ● establish a sales, marketing and distribution infrastructure to commercialize MYMD-1 and Supera-CBD should we obtain marketing approval As a result of these anticipated expenditures, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. 64 Components of our Results of Operations Revenue We have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the near future. If our research and development efforts with MYMD-1 and Supera-CBD are successful, we may generate revenue from product sales or through license agreements with third parties. Operating Expenses Our operating expenses are broken into several components, including research and development and general and administrative costs. We expect operating expenses to increase as we progress through the various clinical trials in the development of MYMD-1 and Supera-CBD. Research and Development Our research and development expenses primarily consist of costs associated with the development of MYMD-1 and Supera-CBD. These costs include, but are not limited to: ● Salaries, wages and benefits of the research and development staff; ● Contractual agreements with third parties including contract research organizations, preclinical activities and clinical trials; ● Outside consultants including fees and expenses; ● Laboratory supplies and equipment; ● Regulatory compliance; and ● Patent application and maintenance costs to protect our intellectual property. Six of our nine employees are principally involved in research and development activities for either MYMD-1 or Supera-CBD. Their salaries, wages and benefits are captured as a component of research and development but not allocated to specific projects. We utilize third party contractors and consultants with expertise in specific research or development activities to perform work under the supervision of our researchers. We believe this allows us to control costs and to progress through the development cycle and to utilize our staff more efficiently. It is difficult to project with absolute accuracy the duration or final cost of the development of MYMD-1 and Super-CBD or if revenue will be generated from the commercialization of these components. The process of achieving regulatory approval is very costly and time consuming. A few of the many factors that contribute to costs of duration include: ● Size and scope of pre-clinical trials; ● The phases of clinical development and the stage of our product candidates in the cycle; ● Per subject trial costs; ● The number of sites required for the trials and the availability of appropriate sites to perform the trials; ● The time that is required to enroll the appropriate number of trial participants; and ● The time required to achieve the approval of regulatory agencies. General and Administrative General and administrative expenses primarily consist of salaries, wages and benefits for our employees in the executive, legal and accounting functions and third-party costs for legal, accounting, insurance, investor relations, stock market and board expenses. We expect general and administrative expenses to decline over the near-term. We incurred significant non-recurring legal and accounting fees in 2021 associated with the Merger with Akers Biosciences and we do not anticipate the addition of new general and administrative staff. Although treated as components of general and administrative expenses, we have chosen to disclose the following significant items separately: Interest Expense and Accretion of Debt Discount (related party) Interest expense and accretion of debt discount are the financing costs associated with the line-of-credit established between MYMD and The Starwood Trust (the “Line of Credit”), which was terminated upon the closing of the Merger with Akers Biosciences and paid in full along with the accumulated interest due. Stock Based Compensation Stock based compensation includes the fair market value, as determined by Black-Scholes, of stock options issued to key staff and consultants. Stock Option Modification Expenses Stock option modification expenses includes the re-valuation of the outstanding stock options that was performed in relation to the Merger with Akers Biosciences. 65 Other Income (Expense), net Other income (expense), net consists of interest and dividends earned on our cash, cash equivalents, and investments, gains on the sale marketable securities, losses on equity investments, gains on the forgiveness of debt and an uninsured casualty loss. Results of Operations Summary of Statements of Operations for the Fiscal Years Ended December 31, 2022 and 2021 We are focused on developing and commercializing two therapeutic platforms based on well-defined therapeutic targets, MYMD-1 and Supera-CBD. The following table summarized the results of operations for the years ended December 31, 2022 and 2021. For the Year Ended December 31, Percent Description 2022 2021 Change Operating Expenses Research and Development $ 9,067,422 6,745,104 34.4 General and Administrative 5,520,150 6,420,092 (14.0 ) Interest Expense & Accretion of Debt Discount - 608,460 (100.0 ) Stock Based Compensation 695,191 - 100.0 Stock Option Modifications - 15,036,051 (100.0 ) Total Operating Expenses 15,282,763 28,809,707 (47.0 ) Loss from Operations (15,282,763 ) (28,809,707 ) (47.0 ) Other Income (Expense), net 85,427 (1,079,338 ) (107.9 ) Net Loss $ (15,197,336 ) $ (29,889,045 ) (49.2 ) Revenue We had no revenue from operations during the years ended December 31, 2022 and 2021. Research and Development Expenses The table below summarizes our research and development expenses for the years ended December 31, 2022 and 2021 as well as the percentage of change year-over-year: For the Year Ended December 31, Percent Description 2022 2021 Change Salaries and Wages $ 1,087,574 $ 808,554 34.5 Development Programs 3,728,568 4,815,617 (22.6 ) Professional Services 119,809 34,790 244.4 Regulatory Expenses 4,121,848 1,057,702 289.7 Other Research and Development Expenses 9,623 28,441 (66.2 ) Total Research and Development Expenses $ 9,067,422 $ 6,745,104 34.4 Salaries and wages increased $279,020 during the year ended December 31, 2022. The increase is attributed to the full year costs of a staff member added in May 2021 and bonuses paid to three employees. Development program costs include those associated with pre-clinical development, clinical trials and other material and development programs. Costs decreased $1,087,049 during the year ended December 31, 2022 as a result of the completion of pre-clinical toxicology studies, the completion of Phase 1 clinical trials and the acquisition of base compounds for current and future trails. Professional services costs increased $85,019 during the year ended December 31, 2022. These costs are primarily related to legal and patent related fees associated with the protection of our intellectual property. Regulatory expenses increased $3,064,146 during the year ended December 31, 2022. Regulatory expenses include clinical research organizations (CRO) and regulatory consulting fees associated with Phase 2 clinical study designs, protocol preparations and the maintenance of the investigator brochures. Other research and development expenses declined $18,818 during the year ended December 31, 2022. These expenses include laboratory supplies, training and travel for department personnel while working with third-party trial sites. 66 Administrative Expenses The table below summarizes our administrative expenses for the years ended December 31, 2022 and 2021 as well as the percentage of change year-over-year: For the Years Ended December 31, Percent Description 2022 2021 Change Personnel Costs $ 1,169,180 $ 1,396,375 (16.3 ) Professional Service Costs 1,609,513 1,725,200 (6.7 ) Stock Market & Investor Relations Costs 961,540 895,741 7.3 Other Administrative Costs 1,779,917 2,402,776 (25.9 ) Total Administrative Expense $ 5,520,150 $ 6,420,092 (14.0 ) Personnel costs decreased $227,195 during the year ended December 31, 2022. During the year ended December 31, 2021, bonuses were included in general and administrative expenses, regardless of the employee’s primary responsibilities. During the year ended December 31, 2022, these bonuses were allocated to the appropriate department based upon the employee’s responsibilities. Professional services costs decreased $115,687 during the year ended December 31, 2022. These costs included legal and accounting and specialized consulting services related to the Merger as well as other legal and accounting services regularly incurred in the course of business. The decrease is primarily related to non-recurring legal and accounting expenses recorded during the year ended December 31, 2021 that were related to the Merger. Stock market and investor relations costs increased $65,799 during the year ended December 31, 2022. These costs include the annual Nasdaq listing fees, activities related to keeping the shareholder base informed through press releases, presentations and other communication efforts and the costs of annual shareholder meetings. Other administrative expenses decreased $622,859 during the year ended December 31, 2022. These costs include Board expenses, business insurance, corporate travel and the settlement of shareholder litigation related to the Merger. We incurred significant decreases in costs associated with the terminated aircraft lease, corporate travel and legal settlements which was offset by increases director’s fees and business insurance costs. Interest Expense and Accretion of Debt Discount The Line of Credit included a requirement to issue one share of stock for each dollar borrowed. The fair market value, as determined using Black-Scholes, was amortized over the remaining life of the Line of Credit. The Line of Credit also carried an annualized 5% interest rate. The Line of Credit was terminated on April 16, 2021 in connection with the Merger and was paid in full on April 28, 2021. Stock-Based Compensation During the year ended December 31, 2022, stock-based compensation totaled $695,191. These expenses include stock options issued to staff and service providers, restricted stock units and Common Stock warrants issued for services. During the year ended December 31, 2021, we did not incur any stock-based compensation expenses. Stock Option Modification Expenses During the year ended December 31, 2022, we did not incur any stock option modification expenses. During the year ended December 31, 2021, we recorded $15,036,051 in stock option modification expenses related to the 4,188,315 pre-Merger MyMD Florida options that were assumed by MyMD upon the consummation of the Merger. Other Income and Expense The table below summarizes our other income and expenses for the years ended December 31, 2022 and 2021 as well as the percentage of change year-over-year: For the Years Ended December 31, Percent Description 2022 2021 Change Interest and Dividend Income $ (83,991 ) $ (8,907 ) 843.0 Gain on Debt Forgiveness - (180,257 ) (100.0 ) (Gain)/Loss on FMV of Equity Investments (2,958 ) 42,793 (106.9 ) (Gain)/Loss on Investments 5,964 (39,597 ) (115.1 ) Uninsured Casualty (Gain)/Loss (4,442 ) 1,265,306 (100.4 ) Total Other (Income)/Expense $ (85,427 ) $ 1,079,338 (107.9 ) 67 Other income, net of expenses, totaled $85,427 for the year ended December 31, 2022, and other expenses, net of income, totaled $1,079,338 for the year ended December 31, 2021. During the year ended December 31, 2022 interest and dividend income, the changes in fair value of our investments and realized gains from the sale of investments are primarily the result of rising interest rates. The gain on debt forgiveness totaling $180,257 resulted from (i) $109,657 from the negotiated settlement of the amounts due under the related party Line of Credit, aircraft lease and personal loans and (ii) $70,600 from the forgiveness of the Payroll Protection Program loans received in 2020. For the year ended December 31, 2021, we identified an uninsured casualty loss of $1,265,306 related to wire fraud due to a compromised electronic mail account. This incident began in late August 2021 and was discovered on October 26, 2021. The Company’s internal review of disbursements made during the period of the incident did not identify any additional losses. A third-party forensic technology company’s investigation confirmed that we were a victim of wire fraud due to a compromised electronic mail account. Following the incident, we have taken measures to enhance our electronic mail security and have modified our internal procedures to ensure the authenticity of payment instructions. Despite these prophylactic measures, the risk of such cyber-attacks against us or our third-party providers and business partners remain a serious issue. Cybersecurity incidents are pervasive, and the risks of cybercrime are complex and continue to evolve. Although we are making significant efforts to maintain the security and integrity of our information systems and are exploring various measures to manage the risk of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging. During the year ended December 31, 2022, we recovered $4,442 from the receiving financial institution. Income Taxes As of December 31, 2022, and 2021, we had U.S. federal net operating loss carry forwards of approximately $107.1 million and $101.9 million, respectively. Approximately $57.7 million of the U.S. federal net operating loss generated in tax years beginning before January 1, 2018 expire beginning with the year ending December 31, 2023 through 2037. The remaining U.S. federal net operating loss of approximately $49.4 million does not expire, however it is limited to 80% of each subsequent year’s net income. As of December 31, 2022, and 2021, we had U.S. state net operating loss carry forwards of approximately $41.0 million and $38.2 million, respectively, some of which expire beginning with the year ending December 31, 2023 through 2042. Under Section 382 of the Code, use of our net operating loss carryforwards is limited if we experience a cumulative change in ownership of greater than 50% in a moving three-year period. We experienced an ownership change as a result of the Merger and therefore our ability to utilize our net operating loss carryforwards and certain credit carryforwards are limited. The limitation is determined by the fair market value of our common stock outstanding immediately prior to the ownership change, multiplied by the applicable federal rate. It is expected that the Merger caused our net operating loss carryforwards to be limited. However, the limitation had no impact on our financial statements since we recorded a full valuation allowance for our deferred tax assets as of December 31, 2022 and 2021. (See Note 8 to the Consolidated Financial Statements) Liquidity and Capital Resources As of December 31, 2022, the Company’s cash and cash equivalents on hand was $749,090 and marketable securities were $4,086,902. The Company has incurred net losses of $15,197,336 and $29,889,045 for the years ended December 31, 2022 and 2021, respectfully. As of December 31, 2022, the Company had working capital of $2,632,796 and a stockholders’ equity of $14,695,056 including an accumulated deficit of $93,758,904. During the year ended December 31, 2022, cash flows used in operating activities were $12,270,068, consisting primarily of a net loss from operations of $15,197,336 offset by an increase in trade and other payables of $1,686,595, a decrease in prepaid expenses of $540,560 and non-cash stock compensation expenses of $695,191. Since inception, the Company has met its liquidity requirements principally through the sale of its Common Stock in public and private placements. See also “Recent Developments” below. Management has evaluated the Company’s current cash requirements for operations in conjunction with management’s strategic plan and believes that the Company’s current financial resources as of the date of the issuance of these consolidated financial statements, are sufficient to fund its current operating budget and contractual obligations as of December 31, 2022 as they fall due within the next twelve-month period , alleviating any substantial doubt raised by the Company’s historical operating results and satisfying its estimated liquidity needs for twelve months from the issuance of these consolidated financial statements. Operating Activities Our net cash used by operating activities totaled $12,270,068 during the year ended December 31, 2022. Net cash used consisted principally of the net loss from operations of $15,197,336 partially offset by an increase in trade and other payables of $1,686,595, a decrease in prepaid expenses of $540,560 and non-cash stock compensation expenses of $695,191. Our net cash used by operating activities totaled $19,516,475 during the year ended December 31, 2021. Net cash used consisted principally of the net losses from operations of $29,889,045 and a decrease in trade and other payables of $4,268,961 partially offset by non-cash option modification expenses of $15,036,051. 68 Investing Activities Our net cash provided by investing activities totaled $6,913,163 for the year ended December 31, 2022 as compared to cash provided by investing activities totaling $19,850,625 during the year ended December 31, 2021. During the year ended December 31, 2022 we purchased securities totaling $4,836,837 and sold securities totaling $11,750,000. During the year ended December 31, 2021 we purchased securities totaling $13,403, sold securities totaling $18,483,176 and received $1,380,852 from the merger. Financing Activities Net cash provided by financing activities during the year ended December 31, 2022 was $5,550,028 which consisted of the net proceeds from the sale of Common Stock. Net cash provided by financing activities during the year ended December 31, 2021 was $73,533 which consisted of the payoff of our Line of Credit totaling $3,062,444 offset by proceeds of $120,000 from the Line of Credit and $1,826,137 from a Secured Promissory Note made to us by pre-Merger MyMD Florida which was paid off at the time of the Merger and net proceeds of $1,189,840 from the exercise of warrants for Common Stock. August 2022 Offering On August 15, 2022, we entered into a securities purchase agreement (the “August 2022 SPA”) with certain accredited and institutional investors pursuant to which we agreed to issue 1,411,764 shares of Common Stock (the “August 2022 Shares”) in a registered direct offering and unregistered warrants to purchase up to an aggregate of 1,411,764 shares of Common Stock in a concurrent private placement (the “August 2022 Warrants”). The August 2022 Warrants have an exercise price of $5.25 per share, became exercisable six months following the date of issuance and have a term of exercise equal to five years from the initial exercise date. We received net proceeds from the sale of the August 2022 Shares and the August 2022 Warrants, after deducting fees and other estimated offering expenses payable by the Company, of approximately $5.5 million. As of March 29, 2023, none of the August 2022 Warrants have been exercised and 1,411,764 of the August 2022 Warrants remain outstanding. Critical Accounting Policies The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results inevitably will differ from those estimates, and such differences may be material to the financial statements. The most significant accounting estimates inherent in the preparation of our financial statements include estimates associated with revenue recognition, impairment analysis of intangibles and stock-based compensation. Our financial position, results of operations and cash flows are impacted by the accounting policies we have adopted. In order to get a full understanding of our financial statements, one must have a clear understanding of the accounting policies employed. A summary of our critical accounting policies is presented within the notes to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K. Our management’s discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of our financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our financial statements. These items are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates could occur in the future. We base our estimates on historical experience, known trends and events, and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may materially differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, we believe that the following accounting policies are those most significant to the judgments and estimates used in the preparation of our consolidated financial statements. Income Taxes The Company utilizes an asset and liability approach for financial accounting and reporting for income taxes. The provision for income taxes is based upon income or loss after adjustment for those permanent items that are not considered in the determination of taxable income. Deferred income taxes represent the tax effects of differences between the financial reporting and tax basis of the Company’s assets and liabilities at the enacted tax rates in effect for the years in which the differences are expected to reverse. The Company evaluates the recoverability of deferred tax assets and establishes a valuation allowance when it is more likely than not that some portion or all the deferred tax assets will not be realized. Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In management’s opinion, adequate provisions for income taxes have been made. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary. 69 Tax benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon settlement. A liability for “unrecognized tax benefits” is recorded for any tax benefits claimed in the Company’s tax returns that do not meet these recognition and measurement standards. For the years ended December 31, 2022 and 2021, no liability for unrecognized tax benefits was required to be reported. There was no income tax benefit recorded for the losses for the years ended December 31, 2022 and 2021 since management determined that the realization of the net deferred tax assets is not more likely than not to be realized and has recorded a full valuation allowance on the net deferred tax assets. The Company’s policy for recording interest and penalties associated with tax audits is to record such items as a component of general and administrative expense. There were no amounts accrued for penalties and interest for the years ended December 31, 2022 and 2021. The Company does not expect its uncertain tax position to change during the next twelve months. Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its position. Tax years from 2019 through 2022 remain subject to examination by federal and state jurisdictions. Share-based compensation We account for share-based payments by recognizing compensation expense based upon the estimated fair value of the share-based payments on the date of grant. We determine the estimated fair value of the share-based payments granted using the fair market value of the stock in the case of restricted stock awards or Black-Scholes option pricing model in the case of stock options and recognize compensation costs ratably over the requisite service period which approximates the vesting period using the graded method. To calculate the fair value of the options, certain assumptions are made regarding components of the model, including the fair value of the underlying Common Stock, risk-free interest rate, volatility, expected dividend yield and expected option life. Changes to the assumptions could cause significant adjustments to the valuation. We calculate our volatility assumptions using the actual changes in the market value of our stock. Forfeitures are recognized as they occur. Our historical option exercises do not provide a reasonable basis to estimate an expected term due to the lack of sufficient data. Therefore, we estimate the expected term by using the simplified method. The simplified method calculates the expected term as the average of the vesting term plus the contractual life of the options. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of the grant for treasury securities of similar maturity. The assumptions used in determining the fair value of share-based awards represent our best estimates, but the estimates involve inherent uncertainties and the application of our judgment. As a result, if factors change and we use significantly different assumptions or estimates, our share-based compensation expense could be materially different in the future. Off-Balance Sheet Arrangements We have no significant known off balance sheet arrangements. Recent Developments February 2023 Offering On February 21, 2023, we entered into a Securities Purchase Agreement (the “February 2023 SPA”) with certain accredited investors, pursuant to which we agreed to sell in a registered direct offering (the “February 2023 Offering”) (i) an aggregate of 15,000 shares (the “Series F Preferred Shares”) of our newly-designated Series F Convertible Preferred Stock, with a stated value of $1,000 per Preferred Share and without par value (the “Series F Preferred Stock”), convertible into shares of Common Stock (the “Series F Conversion Shares”) pursuant to the terms of the Certificate of Designations of the Series F Preferred Stock (the “Certificate of Designation”), and (ii) 6,651,885 warrants (the “February 2023 Warrants”) to acquire up to an aggregate of 6,651,885 shares of Common Stock, subject to adjustment (the “February 2023 Warrant Shares”). The Conversion Price (as defined below) is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like, and subject to price-based adjustment in the event of any issuances of Common Stock, or securities convertible, exercisable or exchangeable for Common Stock, at a price below the then-applicable Conversion Price (subject to certain exceptions). 70 At closing, we received net proceeds from the February 2023 Offering of approximately $14.1 million, after deducting various fees and expenses. We intend to use the net proceeds from this offering for general corporate purposes. Series F Preferred Shares The terms of the Series F Preferred Shares are as set forth in the form of Certificate of Designation. The Series F Preferred Shares will be convertible into the Conversion Shares at the election of the holder at any time at an initial conversion price of $2.255 (the “Conversion Price”). The Conversion Price is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like, and subject to price-based adjustment in the event of any issuances of Common Stock, or securities convertible, exercisable or exchangeable for Common Stock, at a price below the then-applicable Conversion Price (subject to certain exceptions). The Company will be required to redeem the Series F Preferred Shares in 12 equal monthly installments, commencing on July 1, 2023. The amortization payments due upon such redemption are payable, at the company’s election, in cash, or subject to certain limitations, in shares of Common Stock valued at the lower of (i) the Conversion Price then in effect and (ii) the greater of (A) 80% of the average of the three lowest closing prices of the Company’s Common Stock during the thirty trading day period immediately prior to the date the amortization payment is due or (B) the Floor Price (as defined below). For purposes of the Certificate of Designation, the “Floor Price” means the lower of (x) $0.4014 and (y) 20% of the “Minimum Price” (as defined in Rule 5635 of the Rules of the Nasdaq Stock Market) on the date of the Nasdaq Stockholder Approval (as defined below) (subject to adjustment for stock splits, stock dividends, stock combinations, recapitalizations or other similar events) or, in any case, such lower amount as permitted, from time to time, by the Nasdaq Stock Market. The Company may require holders to convert their Series F Preferred Shares into Conversion Shares if the closing price of the Common Stock exceeds $6.765 per share (subject to adjustment for stock splits, stock dividends, stock combinations, recapitalizations or other similar events) for 20 consecutive trading days and the daily dollar trading volume of the Common Stock exceeds $3,000,000 per day during the same period and certain equity conditions described in the Certificate of Designation are satisfied. The holders of the Series F Preferred Shares will be entitled to dividends of 10% per annum, compounded monthly, which will be payable in cash or shares of Common Stock at the Company’s option, in accordance with the terms of the Certificate of Designation. Upon the occurrence and during the continuance of a Triggering Event (as defined in the Certificate of Designation), the Series F Preferred Shares will accrue dividends at the rate of 15% per annum. In connection with a Triggering Event, each holder of Series F Preferred Shares will be able to require the Company to redeem in cash any or all of the holder’s Series F Preferred Shares at a premium set forth in the Certificate of Designation. Upon conversion or redemption, the holders of the Series F Preferred Shares are also entitled to receive a dividend make-whole payment. The holders of Series F Preferred Shares have no voting rights on account of the Series F Preferred Shares, other than with respect to certain matters affecting the rights of the Series F Preferred Shares. The Company will be subject to certain affirmative and negative covenants regarding the incurrence of indebtedness, acquisition and investment transactions, the existence of liens, the repayment of indebtedness, the payment of cash in respect of dividends (other than dividends pursuant to the Certificate of Designation), distributions or redemptions, and the transfer of assets, among other matters. There is no established public trading market for the Series F Preferred Shares and the Company does not intend to list the Series F Preferred Shares on any national securities exchange or nationally recognized trading system. February 2023 Warrants The February 2023 Warrants are exercisable immediately upon issuance at an exercise price of $2.255 per share (the “Exercise Price”) and expire five years from the date of issuance. The Exercise Price is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like, and subject to price-based adjustment, on a “full ratchet” basis, in the event of any issuances of Common Stock, or securities convertible, exercisable or exchangeable for Common Stock, at a price below the then-applicable Exercise Price (subject to certain exceptions). There is no established public trading market for the February 2023 Warrants and the Company does not intend to list the February 2023 Warrants on any national securities exchange or nationally recognized trading system Nasdaq Stockholder Approval Our ability to issue Series F Conversion Shares and February 2023 Warrant Shares using shares of Common Stock is subject to certain limitations set forth in the Certificate of Designation, including a limit on the number of shares that may be issued until the time, if any, that our stockholders have approved the issuance of more than 19.9% of our outstanding shares of Common Stock in accordance with the Nasdaq Listing Rules (the “Nasdaq Stockholder Approval”). In the February 2023 SPA we agreed to seek the Nasdaq Stockholder Approval at a meeting of stockholders. Certain stockholders, who beneficially held approximately 44% of our outstanding Common Stock as of the date of the February 2023 SPA, are party to a voting agreement pursuant to which, among other things, each such stockholder agreed, solely in their capacity as a stockholder, to vote all of their shares of Common Stock in favor of the approval of the Nasdaq Stockholder Approval and against any actions that could adversely affect our ability to perform our obligations under the February 2023 SPA. The voting agreement also places certain restrictions on the transfer of the shares of Common Stock held by the signatories thereto. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Not applicable. Item 8. Financial Statements and Supplementary Data. The information required by this Item 8 is included at the end of this Annual Report on Form 10-K beginning on page F-1. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. Not applicable.