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. 58 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 pandemics, such as COVID-19, 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 pandemics, such as COVID-19, 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. 59 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; MyMD in collaboration with its CRO is in the final stages of preparing the end of Phase II, “A double-blind, randomized, Phase 2 study to investigate the efficacy, tolerability and pharmacokinetics of MYMD1 in the treatment of participants aged 65 years or older with chronic inflammation associated with sarcopenia/frailty” for submission to the FDA. The submission is planned for the beginning of the second quarter of 2024. Exploratory analysis indicates the biomarker sTNFR1 is the most sensitive biomarker for Sarcopenia patients aged 65-75 years old. A phase II study for rheumatoid arthritis, “A double-blind, randomized, placebo-controlled multicenter Phase II proof-of-concept study to evaluate the efficacy, safety, biological activity, and pharmacokinetics of MYMD-1™ added to methotrexate in patients with moderate-to-severe active rheumatoid arthritis” IND application was reviewed and approved by the FDA to begin clinical trials on August 9, 2023. On November 17, 2023 an Annual Report was submitted to the FDA. We completed enrollment in the fourth and final cohort of patients in the Phase 2 Aging and Sarcopenia Study (“A Double-Blind, Placebo-controlled, Randomized Study to Investigate the Efficacy, Tolerability and Pharmacokinetics of MYMD-1 in The Treatment of Participants Aged 65 Years or Older with Chronic Inflammation Associated with Sarcopenia/Frailty”). As mentioned above, MyMD is preparing the submission to the FDA in the beginning of the second quarter of 2024. Exploratory analysis indicates the biomarker sTNFR1 is the most sensitive biomarker for Sarcopenia patients aged 65-75 years old. PK analysis indicates that PK/PD strategy is consistent at measurements of biomarkers 2-4 hours post-dose. There were no serious adverse events reported, no subject dropout’s secondary to an adverse event. Additionally, there were no clinically significant cardiovascular, ECG issues, or neurotoxicity issues with any patients during the study. ● 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. 2021 Merger and Milestone Payments On April 16, 2021, pursuant to the previously announced Agreement and Plan of Merger and Reorganization, dated November 11, 2020 (as subsequently amended, the “Merger Agreement”), by and among the Company, previously known as Akers Biosciences, Inc., XYZ Merger Sub, Inc., a wholly-owned subsidiary of the Company (“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”). The Merger consideration included potential milestone payments to the pre-Merger MyMD Florida stockholders (the “Milestone Payments”) payable in shares of the Company’s Common Stock 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 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. The Company previously owned, through its subsidiary Cystron Biotech, LLC (“Cystron”), an exclusive license from Premas Biotech PVT Ltd. (“Premas”) with respect to Premas’ vaccine platform for the development of a vaccine against COVID-19 and other coronavirus infections. 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 Medical, Inc. (“Oravax”) and, for the limited purpose set forth therein, Premas, the Company caused Cystron to contribute substantially all of the assets associated with its business of developing and manufacturing Cystron’s COVID-19 vaccine candidate to Oravax. Oravax is pursuing the development of the COVID-19 vaccine candidate. 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. MyMD has evaluated 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. 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. Reduction in Workforce During October 2023, the Company implemented a reduction in workforce, eliminating three of the Company’s ten employees. Separated employees were granted a severance package equal to one-quarter of their annual salary. On June 7, 2023, the Company granted the three separated employees’ options to purchase an aggregate of 7,668 shares of Common Stock with an exercise price of $47.10 per share. As consideration for a waiver and release in their separation agreements, the Company amended the employees’ respective June 7, 2023 option agreements to accelerate vesting of the portion of optioned shares that otherwise would have vested upon the first and second anniversaries of the date of grant. The options have an exercise period of twelve months from the date of separation. 60 Going Concern As of December 31, 2023, the Company’s cash on hand was $2,681,010 and marketable securities were $2,242,106. The Company has incurred a net loss attributable to shareholders of $8,218,163 for the year ended December 31, 2023. As of December 31, 2023, the Company had working capital of $828,253 and stockholders’ equity of $12,369,572 including an accumulated deficit of $101,977,067. During the year ended December 31, 2023, cash flows used in operating activities were $12,980,625. The Company does not currently have sufficient available liquidity to fund its operations for at least the next 12 months. Such factors raise substantial doubt about our ability to sustain operations for at least one year from the issuance of the audited financial statements included in this Annual Report. The accompanying financial statements do not include any adjustments related to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should we be unable to continue as a going concern. In response to these conditions and events, we are evaluating various financing strategies to obtain sufficient additional liquidity to meet our operating and capital requirements for the next twelve months following the date of this Annual Report. The potential sources of financing that we are evaluating include one or any combination of secured or unsecured debt, convertible debt and equity in both public and private offerings. We also plan to finance near-term operations with our cash on hand, as well as by exploring additional ways to raise capital. There is no assurance we will manage to raise additional capital or otherwise increase cash flows, if required. The sources of financing described above that could be available to us and the timing and probability of obtaining sufficient capital depend, in part, on our further developing and commercializing our product candidates and on future capital market conditions. If our current assumptions regarding the pace of such development are incorrect, or if there are any other changes or differences in our current assumptions that negatively impact our financing strategy, we may have to reduce expenditures or significantly delay, scale back or discontinue the development or commercialization of our product candidates. Nasdaq Deficiency As previously disclosed, on October 11, 2023, we received a written notice (the “Notice”) from the Listing Qualifications Department of the Nasdaq Stock Market indicating that for the last 30 consecutive business days, the bid price for our Common Stock had closed below the minimum $1.00 per share requirement for continued listing on Nasdaq pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”). The letter also indicated that the Company would be provided with a compliance period until April 8, 2024 (the “Compliance Period”), in which to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A). Effective as of 4:05 p.m. Eastern Standard Time on February 14, 2024, we effected the Reverse Stock Split of our common stock at a ratio of one-for-thirty. Simultaneously with the Reverse Stock Split, number of shares of our common stock authorized for issuance was reduced from 500,000,000 shares to 16,666,666 shares, and our authorized capital stock was reduced from 550,000,000 shares to 66,666,666 shares. Our common stock continued to be traded on the Nasdaq Capital Market under the symbol MyMD and began trading on a split-adjusted basis at market open on February 15, 2024. On March 4, 2024, we were notified by Nasdaq that we had regained compliance with all Nasdaq listing requirements and the matter was closed. 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. 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. 61 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. Four of our six 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. Although treated as components of general and administrative expenses, we have chosen to disclose the following significant items separately: Stock Based Compensation Stock based compensation includes the fair market value, as determined using the Black-Scholes option pricing model, of stock options issued to key staff and consultants. 62 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 Years Ended December 31, 2023 and 2022 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, 2023 and 2022. For the Year Ended December 31, Percent Description 2023 2022 Change Operating Expenses General and Administrative 5,442,886 5,520,150 (1.4 ) Research and Development $ 7,867,795 9,067,422 (13.2 ) Stock Based Compensation 3,049,537 695,191 338.7 Warrant Issuance Expenses 762,834 - 100.0 Total Operating Expenses $ 17,123,052 $ 15,282,763 12.0 Loss from Operations (17,123,052 ) (15,282,763 ) (12.0 ) Other Income (Expense), net 13,123,102 85,427 15,261.8 Net Loss $ (3,999,950 ) $ (15,197,336 ) 73.7 Preferred Stock Dividends 4,218,213 - 100.0 Net Loss Attributable to Common Shareholders $ (8,218,163 ) $ (15,197,336 ) 45.9 Revenue We had no revenue from operations during the years ended December 31, 2023 and 2022. 63 Administrative Expenses The table below summarizes our administrative expenses for the years ended December 31, 2023 and 2022 as well as the percentage of change year-over-year: For the Years Ended December 31, Percent Description 2023 2022 Change Personnel Costs $ 1,410,950 $ 1,169,180 20.7 Professional Service Costs 1,043,247 1,609,513 (35.2 ) Stock Market & Investor Relations Costs 901,079 961,540 (6.3 ) Other Administrative Costs 2,087,610 1,779,917 17.3 Total Administrative Expense $ 5,442,886 $ 5,520,150 (1.4 ) Personnel costs increased $241,770 during the year ended December 31, 2023. The increase is attributable to changes in the base salary for two executives, bonuses, and the accumulated personal time off and severance paid to separated employees in October and November 2023. Professional services costs decreased $566,266 during the year ended December 31, 2023. These costs included legal, accounting and specialized consulting services related to the initial and quarterly calculation of the fair market value of the Series F Convertible Preferred Stock and its’ components. The decrease is primarily related to a reduction in the usage of general consultants and the allocation of consulting services between the administrative and research and development functions. Stock market and investor relations costs decreased $60,461 during the year ended December 31, 2023. These costs include the annual Nasdaq listing fees, activities related to keeping the shareholder base informed through press releases, presentations and other communication efforts, transfer agent fees, and the costs of annual shareholder meetings. Other administrative expenses increased $307,693 during the year ended December 31, 2023. These costs include Board expenses, business insurance, corporate travel, and other general business expenses. The increase is attributable to an increase in corporate travel expenses, offset by small reductions in most other general business expense categories. Research and Development Expenses The table below summarizes our research and development expenses for the years ended December 31, 2023 and 2022 as well as the percentage of change year-over-year: For the Year Ended December 31, Percent Description 2023 2022 Change Salaries and Wages $ 1,765,488 $ 1,087,574 62.3 Development Programs 5,593,041 3,728,568 50.0 Professional Services 329,271 119,809 174.8 Regulatory Expenses 21,574 4,121,848 (89.5 ) Other Research and Development Expenses 158,421 9,623 1,546.3 Total Research and Development Expenses $ 7,867,795 $ 9,067,422 (13.2 ) Salaries and wages increased $677,914 during the year ended December 31, 2023. The increase is attributable to changes in the base salary for an executive, bonuses, and the accumulated personal time off and severance paid to separated employees in October 2023. Development program costs include those associated with pre-clinical development, clinical trials and other material and development programs. Costs increased $1,864,473 during the year ended December 31, 2023, a result of the completion of pre-clinical toxicology studies and the Phase 2 Sarcopenia clinical trial, the analysis of the Phase 2 Sarcopenia study results, and the acquisition of base compounds for use in on-going studies. Professional services costs increased $209,462 during the year ended December 31, 2023. These costs are primarily related to legal and patent related fees associated with the protection of our intellectual property and the allocation of consulting services between the research and development and administrative functions. Regulatory expenses decreased $4,100,274 during the year ended December 31, 2023. 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. These non-recurring regulatory services were completed in 2022. Other research and development expenses increased $148,798 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. The increase is attributable to specialized freight costs for materials and travel in support of the studies and data analysis of the Phase 2 Sarcopenia trial results. 64 Stock-Based Compensation During the year ended December 31, 2023, stock-based compensation totaled $3,049,536. These expenses include stock options issued to directors, staff, and service providers. During the year ended December 31, 2022, stock-based compensation totaled $695,191 for stock options issued to staff and service providers, restricted stock units and Common Stock warrants issued for services. Other Income and Expense The table below summarizes our other income and expenses for the years ended December 31, 2023 and 2022 as well as the percentage of change year-over-year: For the Years Ended December 31, Percent Description 2023 2022 Change Interest and Dividend Income $ 455,570 $ 83,991 442.4 Gain/(Loss) on Sale of Marketable Securities 416 (5,964 ) 107.0 Gain on changes in fair value of Marketable Securities 514 2,958 (82.6 ) Gain on changes in fair value of Derivative Liabilities 3,088,800 - 100.0 Gain on changes in fair value of Warrant Liabilities 9,756,000 - 100.0 Uninsured Casualty Gain/(Loss) (178,198 ) 4,442 (4,111.7 ) Total Other Income/(Expense) $ 13,123,102 $ 85,427 15,261.8 Other income, net of expenses, totaled $13,123,102 for the year ended December 31, 2023, and other income, net of expenses, totaled $85,427 for the year ended December 31, 2022. During the year ended December 31, 2023 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. During the year ended December 31, 2023, we recorded a gain of $3,088,800 related to the change in fair value of the derivative liabilities. We estimated the $61,000 fair value of the bifurcated embedded derivative at December 31, 2023 using a Monte Carlo simulation model, with the following inputs: the fair value of our common stock of $0.26 ($7.80 post reverse split) on the valuation date, estimated equity volatility of 140.0%, estimated traded volume volatility of 150.0%, the time to maturity of 0.5 year, a discounted market interest rate of 6.40%, dividend rate of 10.0%, a penalty dividend rate of 15.0%, and probability of default of 3.90%. During the year ended December 31, 2023, we recorded a gain of $9,756,000 related to the change in fair value of the warrant liabilities. The fair value of the Warrants of approximately $867,000 was estimated at December 31, 2023 utilizing the Black Scholes Model using the following weighted average assumptions: dividend yield 0%; remaining term of 4.15 years; equity volatility of 120.0%; and a risk-free interest rate of 3.91%. For the year ended December 31, 2023, we identified a casualty loss of $178,198 related to wire fraud due to a compromised electronic mail account. This incident occurred on May 17, 2023 and was discovered on July 20, 2023 when the vendor notified us of a delinquent invoice. An investigation determined that the original invoice from the vendor, sent to our consultant on this project, was intercepted and resent with altered wring instructions from a domain name that varied from the actual vendor’s domain by one character. We notified our cyber insurance carrier on November 9, 2023.During the year ended December 31, 2022, we recovered $4,442 from a financial institution involved in an October, 2021 incident. Income Taxes As of December 31, 2023, and 2022, we had U.S. federal net operating loss carry forwards of approximately $113.1 million and $107.1 million, respectively. Approximately $51.5 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, 2024 through 2037. The remaining U.S. federal net operating loss of approximately $61.6 million does not expire, however it is limited to 80% of each subsequent year’s net income. As of December 31, 2023, and 2022, we had U.S. state net operating loss carry forwards of approximately $45.2 million and $41.0 million, respectively, some of which expire beginning with the year ending December 31, 2024 through 2043. 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, 2023 and 2022 (See Note 7 to the Consolidated Financial Statements). Liquidity and Capital Resources As of December 31, 2023, the Company’s cash on hand was $2,681,010 and marketable securities were $2,242,106. The Company has incurred a net loss attributable to shareholders of $8,218,163 for the year ended December 31, 2023. As of December 31, 2023, the Company had working capital of $828,253 and stockholders’ equity of $12,369,572 including an accumulated deficit of $101,977,067. During the year ended December 31, 2023, cash flows used in operating activities were $12,980,625. Since inception, the Company has met its liquidity requirements principally through the sale of its common and preferred stock in public and private placements; however, there is no assurance that management will be able to obtain additional financing in the future. These factors raise substantial doubt about the Company’s ability to continue as a going concern. For more information, see the section above titled “Going Concern.” Operating Activities Our net cash used by operating activities during the year ended December 31, 2023, were $12,980,625, consisting primarily of a net loss of $3,999,950 and fair value adjustments of $3,088,800 for derivatives and $9,756,000 for warrants related to the Preferred Shares offset by non-cash share-based compensation of $3,049,537, an increase in trade and other payables of $1,042,997 and a decrease in prepaid expenses of $327,439. 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. 65 Investing Activities Our net cash provided by investing activities totaled $1,845,726 for the year ended December 31, 2023 as compared to cash provided by investing activities totaling $6,913,163 during the year ended December 31, 2022. During the year ended December 31, 2023 we purchased securities totaling $13,454,304 and sold securities totaling $15,300,000. During the year ended December 31, 2022 we purchased securities totaling $4,836,837 and sold securities totaling $11,750,000. Financing Activities Net cash provided by financing activities during the year ended December 31, 2023 was $13,066,819 which consisted of 14,685,689 for the net proceeds from the sale of Preferred Stock offset by $89,635 for the redemption of Preferred Stock, $1,452,145 for dividends and $77,090 for premiums related to the Preferred Stock. 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. 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 47,059 shares of Common Stock (the “August 2022 Shares”) in a registered direct offering and unregistered warrants to purchase up to an aggregate of 47,063 shares of Common Stock in a concurrent private placement (the “August 2022 Warrants”). The August 2022 Warrants have an exercise price of $157.50 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 December 31, 2023, none of the August 2022 Warrants have been exercised and 47,063 of the August 2022 Warrants remain outstanding. 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 (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) warrants (the “February 2023 Warrants”) to acquire up to an aggregate of 6,651,885 shares of Common Stock (pre-split), 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). Following the Reverse Stock Split, (i) the Conversion Price was adjusted to $3.18 per share pursuant to the terms of the Certificate of Designations, and (ii) the Exercise Price was adjusted to $3.18 per share and the number of February 2023 Warrant Shares was adjusted proportionately to 4,716,904 shares pursuant to the terms of the February 2023 Warrants. 66 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. As of December 31, 2023, there were 6,833 Series F Preferred Shares outstanding and February 2023 Warrants outstanding to purchase up to 4,716,904 shares of Common Stock. 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 became convertible upon issuance into the Conversion Shares at the election of the holder at any time at an initial conversion price of $2.255 (pre-split) (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). Following the Reverse Stock Split, the Conversion Price for the Preferred Shares was adjusted to $3.18 per share pursuant to the terms of the Certificate of Designations. The Company is 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 $6.60 (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 $202.95 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 are entitled to dividends of 10% per annum, compounded monthly, which are 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 accrue dividends at the rate of 15% per annum. In connection with a Triggering Event, each holder of Series F Preferred Shares is 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 is 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 became exercisable immediately upon issuance, have an exercise price of $2.255 per share (pre-split) (as adjusted, 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). Upon any such price-based adjustment to the Exercise Price, the number of Warrant Shares issuable upon exercise of the Warrants will be increased proportionately. The Warrants were issued with an initial Exercise Price of $2.255 per share (pre-split). Following the Reverse Stock Split, the Exercise Price for the Warrants was adjusted to $3.18 per share and the number of February 2023 Warrant Shares was adjusted to 4,716,904 shares pursuant to the terms of the Warrants. 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. 67 Critical Accounting Estimates 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. 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, 2023 and 2022, 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, 2023 and 2022 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, 2023 and 2022. 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 2023 remain subject to examination by federal and state jurisdictions. 68 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 Reverse Stock Split Effective as of 4:05 p.m. Eastern Standard Time on February 14, 2024, we effected the Reverse Stock Split of our common stock at a ratio of one-for-thirty. Simultaneously with the Reverse Stock Split, number of shares of our common stock authorized for issuance was reduced from 500,000,000 shares to 16,666,666 shares, and our authorized capital stock was reduced from 550,000,000 shares to 66,666,666 shares. All share and per share information in this report have been retroactively adjusted to reflect the Reverse Stock Split. Delaware Reincorporation On March 4, 2024, MyMD New Jersey merged with and into its wholly owned subsidiary, MyMD Delaware, with MyMD Delaware being the surviving corporation, pursuant to the Plan of Merger for the purpose of changing the Company’s state of incorporation from New Jersey to Delaware. MyMD Delaware is deemed to be the successor issuer of MyMD New Jersey under Rule 12g-3 of the Securities Exchange Act of 1934, as amended. The Reincorporation did not result in any change in the Company’s name, business, management, fiscal year, accounting, location of the principal executive offices, assets or liabilities. In addition, the Company’s common stock retains the same CUSIP number and continues to trade on the Nasdaq Capital Market under the symbol “MYMD.” As of the Effective Date of the Reincorporation, the rights of the Company’s stockholders are governed by the Delaware General Corporation Law, the MyMD Delaware Certificate of Incorporation, and the Bylaws of MyMD Delaware. 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.