IMMIX BIOPHARMA, INC. You should read the following discussion and analysis of our financial condition
and plan of operations together with and our accompanying consolidated financial
statements and the related notes appearing elsewhere in this Annual Report on
Form 10-K. In addition to historical information, this discussion and analysis
contains forward-looking statements that involve risks, uncertainties and
assumptions. Our actual results may differ materially from those discussed
below. Factors that could cause or contribute to such differences include, but
are not limited to, those identified below, and those discussed in the section
titled "Risk Factors" included elsewhere in this Annual Report on Form 10-
Overview
We are a clinical-stage pharmaceutical company focused on the development of
safe and effective therapies for patients with cancer and inflammatory diseases.
In
Since inception, we have devoted substantially all of our resources to developing product and technology rights, conducting research and development, organizing and staffing our Company, business planning and raising capital. We operate as one business segment and have incurred recurring losses, the majority of which are attributable to research and development activities and negative cash flows from operations. We have funded our operations primarily through the sale of convertible debt. Currently, our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, and to a lesser extent, general and administrative expenditures. We expect to continue to incur significant expenses and operating losses for the foreseeable future as we advance our product candidates through all stages of development and clinical trials and, ultimately, seek regulatory approval. In addition, if we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. Furthermore, we incur costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenses on other research and development activities.
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AxioMx Master Services Agreement
On
Recent Developments
On
The COVID-19 Pandemic and its Impacts on Our Business
In
Results of Operations
Year Ended
General and Administrative Expense
General and administrative expense was
The expenses incurred in both periods were related to salaries, patent
maintenance costs and general accounting and other general consulting expenses,
which were higher for the year ended
Research and Development Expense
Research and development expense was
The decreased research and development expenses during the year ended
Interest Expense
Interest expense was
Change in fair value of derivative liability
The change in fair value of derivative liability was
Loss on Debt Extinguishment
In
Provision for Income Taxes
Provision for income taxes for the year ended
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Net loss for the year ended
Funding Requirements
Our primary use of cash is to fund operating expenses, which consist of research and development expenditures and various general and administrative expenses. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable, accrued expenses and prepaid expenses.
Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:
? the scope, timing, progress and results of discovery, pre-clinical
development, laboratory testing and clinical trials for our product
candidates;
? the costs of manufacturing our product candidates for clinical trials and in
preparation for regulatory approval and commercialization;
? the extent to which we enter into collaborations or other arrangements with
additional third parties in order to further develop our product candidates;
? the costs of preparing, filing and prosecuting patent applications,
maintaining and enforcing our intellectual property rights and defending
intellectual property-related claims;
? the costs and fees associated with the discovery, acquisition or in-license of
additional product candidates or technologies;
? expenses needed to attract and retain skilled personnel;
? the costs associated with being a public company;
? the costs required to scale up our clinical, regulatory and manufacturing
capabilities;
? the costs of future commercialization activities, if any, including
establishing sales, marketing, manufacturing and distribution capabilities,
for any of our product candidates for which we receive regulatory approval;
and
? revenue, if any, received from commercial sales of our product candidates,
should any of our product candidates receive regulatory approval.
We will need additional funds to meet our operational needs and capital requirements for clinical trials, other research and development expenditures, and general and administrative expenses. We currently have no credit facility or committed sources of capital.
Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of equity offerings, debt financings, government or other third-party funding, commercialization, marketing and distribution arrangements, other collaborations, strategic alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our research, product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
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Cash used in operating activities
Net cash used in operating activities was
Cash used in investing activities
Net cash used by investing activities was
Cash provided by financing activities
Net cash provided by financing activities was
The continuation of the Company as a going concern is dependent upon its ability
to obtain continued financial support from its stockholders, necessary equity
financing to continue operations and the attainment of profitable operations. As
of
We will have additional capital requirements going forward and may need to seek additional financing, which may or may not be available to us.
Critical Accounting Policies
This management's discussion and analysis of our financial condition and results
of operations is based on our consolidated financial statements, which have been
prepared in accordance with
While our significant accounting policies are described in more detail in Note 2 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K, we believe the following accounting policies are the most critical to the judgments and estimates used in the preparation of our consolidated financial statements.
Derivative Instruments - We evaluated our convertible notes to determine if those contracts or embedded components of those contracts qualified as derivatives to be separately accounted for in accordance with Accounting Standards Codification ("ASC") 815, Derivatives and Hedging. The result of this accounting treatment is that the fair value of the embedded derivative is marked to market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statements of operations and comprehensive loss as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.
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In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.
We determined that the convertible notes contain embedded features that provide the noteholders with multiple settlement alternatives. Certain of these settlement features provide the noteholders the right to receive cash or a variable number of shares upon the completion of a capital raising transaction, change of control or default by us, which are referred to as "redemption features."
Stock-Based Compensation - We measure all stock-based awards granted based on their estimated fair value on the date of the grant and recognize the corresponding compensation expense for those awarded to employees and directors over the requisite service period, which is generally the vesting period of the respective award, and for those awarded to nonemployees over the period during which services are rendered by nonemployees until completed. We have typically issued stock options with service-based vesting conditions and we record the expense for these awards using the straight-line method.
We estimate the fair value of each stock option grant using the Black-Scholes option-pricing model, which uses as inputs the fair value of our common stock and assumptions we make for the volatility of our common stock, the expected term of our stock options, the risk-free interest rate for a period that approximates the expected term of our stock options and our expected dividend yield.
The following table reflects the weighted average assumptions used to estimate
the fair value of stock options granted during the year ended
Volatility 117-128 % Expected life (years) 10.0 Risk-free interest rate 1.37-1.74 % Dividend rate - %
In 2020, no stock options were granted.
Before establishing a public market for the trading of our common stock and due
to a lack of company-specific historical and implied volatility data, we based
the estimate of expected stock price volatility on the historical volatility of
a representative group of publicly traded companies for which historical
information was available. The historical volatility was generally calculated
based on a period of time commensurate with the expected term assumption. We
used the contractual term for the expected term for options granted to employees
and directors. We did not have sufficient historical exercise data to provide a
reasonable basis upon which to estimate the expected term and used the
contractual term since the stock options were not issued at-the-money. For
options granted to non-employees, we utilized the contractual term. The
risk-free interest rate was based on a
Fair Value of Common Stock
Prior to establishing a public market for our common stock, the estimated fair value of our common stock had been determined by our board of directors as of the date of each option grant, with input from management, considering our most recently available third-party valuations of common stock, and our board of directors' assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent valuation through the date of the grant.
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Third-party valuations were performed in accordance with the guidance outlined
in the
The OPM is based on the Black-Scholes option pricing model, which allows for the identification of a range of possible future outcomes. The OPM treats common stock and convertible instruments as call options on the total equity value of a company, with exercise prices based on the value thresholds at which the allocation among the various holders of a company's securities changes. A discount for lack of marketability of the common stock is applied to arrive at an indication of value for the common stock.
PWERM involves a forward-looking analysis of the possible future outcomes of the enterprise. This method is particularly useful when discrete future outcomes can be predicted at a relatively high confidence level with a probability distribution. Discrete future outcomes considered under the PWERM include an initial public offering, as well as non-initial public offering market-based outcomes. Determining the fair value of the enterprise using the PWERM requires the Company to develop assumptions and estimates for both the probability of an initial public offering liquidity event and stay private outcomes, as well as the values the Company expects those outcomes could yield.
Prior to establishing a public trading market of our capital stock, our board of
directors exercised reasonable judgment and considered a number of objective and
subjective factors to determine its estimate of the fair value of our common
stock, including changes in the following factors between the date of the
? our business, financial condition and results of operations, including related
industry trends affecting our operations;
? the likelihood of achieving a liquidity event, such as an initial public
offering or sale of our company, given prevailing market conditions;
? the lack of marketability of our common stock;
? the market performance of comparable publicly traded companies; and
? U.S. and global economic and capital market conditions and outlook.
The assumptions underlying our board of directors' valuations represented our board's best estimates, which involved inherent uncertainties and the application of our board's judgment. As a result, if factors or expected outcomes had changed or our board of directors had used significantly different assumptions or estimates, our equity-based compensation expense could have been materially different.
Recent Accounting Pronouncements
See Note 2 to our audited consolidated financial statements found elsewhere in this Annual Report on Form 10-K for a description of recent accounting pronouncements applicable to our consolidated financial statements.
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On
We have chosen to take advantage of the extended transition periods available to emerging growth companies under the JOBS Act for complying with new or revised accounting standards until those standards would otherwise apply to private companies provided under the JOBS Act. As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates for complying with new or revised accounting standards.
Subject to certain conditions set forth in the JOBS Act, as an "emerging growth
company," we intend to rely on certain of these exemptions, including, without
limitation, (i) providing an auditor's attestation report on our internal
controls over financial reporting pursuant to Section 404(b) of the
Sarbanes-Oxley Act and (ii) complying with the requirement adopted by the
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