AIM ImmunoTech(US:AIM)2022-03-30 16:00PART I Business AIM ImmunoTech is an immuno-pharma company developing therapeutics for cancers, viral diseases, and immune disorders, primarily focusing on Ampligen for various clinical applications Our Products - Ampligen® (rintatolimod) is a first-in-class macromolecular dsRNA drug. It is approved in Argentina for severe Chronic Fatigue Syndrome (CFS) and is under clinical development in the U.S. for certain cancers and ME/CFS. It has received Orphan Drug Designation from the FDA and EMA for several indications4445 - Alferon N Injection® is the only natural-source, multi-species alpha interferon approved in the U.S. and Argentina for treating refractory or recurring external genital warts caused by HPV55 - The company is conducting an open-label expanded access protocol (AMP-511) for Ampligen, providing safety data for its use in CFS patients. This program was expanded in October 2020 to include patients with Post-COVID chronic fatigue-like symptoms50 Patents and Non-Patent Exclusivity Rights - As of December 31, 2021, the company holds 44 patents worldwide with 39 additional patent applications pending58 - In February 2020, three provisional patent applications were filed related to Ampligen's use against SARS-CoV-2, covering its potential as a therapy/prophylaxis, its role in a universal coronavirus vaccine, and a high-volume manufacturing process58 - Ampligen has been granted U.S. patents for novel formulations, extending protection until at least 2029. It also has Orphan Drug Status from the FDA for CFS, HIV/AIDS, renal cell carcinoma, pancreatic cancer, and malignant melanoma, providing seven years of market exclusivity post-approval for each indication6162 Research and Development - The company's R&D focus is on developing new drug therapies for immune-based disorders, including cancer and CFS. The SARS-CoV-2 pandemic has led to a widened focus on potential prophylactic and therapeutic applications for COVID-19 and its long-term effects65 - AIM is advancing Ampligen in immuno-oncology, particularly as an adjuvant to modify the tumor microenvironment and enhance responses to checkpoint inhibitors, in collaboration with institutions like the University of Pittsburgh66 Manufacturing - Ampligen is approved for commercial distribution in Argentina for CFS. The company has engaged Contract Manufacturing Organizations (CMOs) like Jubilant HollisterStier and Pharmaceutics International Inc. (Pii) for 'Fill & Finish' services to enhance production capacity and provide redundancy104105106 - In March 2022, the company entered an agreement to sell its New Brunswick, NJ manufacturing facility for $3.9 million. Future production of Ampligen Active Pharmaceutical Ingredient (API) will rely on one or more CMOs106107 - Commercial sales of Alferon N Injection are on hold until new batches are produced and released by the FDA. The company is not currently manufacturing Alferon N Injection and has no definitive timetable to resume production108 Licensing/Collaborations/Joint Ventures - The company's strategy is to license Ampligen and/or form collaborations or joint ventures with partners who have the capability to gain approval and commercialize the product globally. Ideal partners would have strong global/regional experience, robust commercial infrastructure, and a therapeutic area fit109 Marketing/Distribution - AIM has an exclusive sales, marketing, and distribution agreement with GP Pharm for Ampligen in Argentina and other Latin American countries, which was extended until May 2024110 - The company has an agreement with myTomorrows to manage an Early Access Program (EAP) for Ampligen in Europe, Turkey, and Canada for ME/CFS and pancreatic cancer patients. This agreement was automatically extended in May 2021111113 Competition - Major pharmaceutical competitors for Ampligen include Pfizer, GlaxoSmithKline, Merck & Co., Novartis, and AstraZeneca. Biotech competitors include Baxter International and Genta115 - When Alferon N Injection sales resume, it may compete with Merck & Co.'s Intron® A115 Government Regulation - The company's products are subject to rigorous regulation by governmental authorities in the U.S. (FDA) and foreign countries. New drug products require extensive pre-clinical and clinical testing for clearance, a process that demands substantial resources116 Human Capital - As of December 31, 2021, the company had 21 full-time and two part-time employees. Five are engaged in R&D, clinical, and manufacturing, while 18 perform administrative, regulatory, financial, and investor relations functions. The company has no union employees118 Risk Factors The company faces significant risks including COVID-19 impacts, financing needs, substantial losses, uncertain regulatory approvals, manufacturing reliance, and stock price volatility - The COVID-19 pandemic could adversely impact business, including delays in clinical trial enrollment and operations, and has already delayed the commercial launch in Argentina120121 - The company may require additional financing to fund its projects, as it does not generate material revenues and had an accumulated deficit of approximately $359.087 million as of December 31, 2021123126 - The company's drugs are investigational and subject to a lengthy and uncertain regulatory approval process with the FDA and other global authorities. The FDA issued a Complete Response Letter for the Ampligen NDA for CFS in 2013, requiring at least one additional clinical trial127130 - Manufacturing risks include the halt of Alferon N Injection sales due to lack of inventory, reliance on a limited number of raw material suppliers for Ampligen, and the need to engage CMOs for API production following the sale of the New Brunswick facility159161163 Properties The company's principal offices are leased, and its New Brunswick, NJ manufacturing facility was sold for $3.9 million in March 2022 after being re-purchased in May 2021 - The principal executive office is located in Ocala, FL, and the finance/HR office is in Riverton, NJ, both under lease agreements195 - In March 2022, the company agreed to sell its New Brunswick, NJ property for $3.9 million. This facility was re-purchased in May 2021 after being sold in a sale-and-leaseback transaction in March 2018195196 Legal Proceedings The company is involved in a breach of contract lawsuit against BioLife, with a counterclaim of $96,676, currently in discovery with a trial anticipated in late 2022 - AIM commenced a breach of contract action against BioLife in December 2017. BioLife has filed a counterclaim for $96,676. The parties are engaged in discovery, with a trial anticipated in late 2022197 PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on NYSE American under 'AIM', with approximately 150 holders of record as of March 25, 2022, and no cash dividends paid recently as earnings are retained for operations - The company's common stock is listed on the NYSE American under the symbol AIM199 - As of March 25, 2022, there were approximately 150 holders of record of the Common Stock200 - The company has not paid any cash dividends recently and does not intend to, instead retaining earnings for business operations201 Management's Discussion and Analysis of Financial Condition and Results of Operations For 2021, the company's net loss increased to $19.1 million due to debt extinguishment and R&D expenses, with cash decreasing to $48.3 million, though current funds are deemed adequate for the next 24 months Financial Performance Comparison (2021 vs. 2020) | Metric | 2021 (in thousands) | 2020 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Net Loss | $19,127 | $14,400 | $4,727 (Increase) | | Revenues | $135 | $163 | -$28 (Decrease) | | R&D Costs | $7,672 | $5,720 | $1,952 (Increase) | | G&A Expenses | $8,672 | $8,654 | $18 (Increase) | | Loss on Debt Extinguishment | $2,701 | -$142 (Gain) | $2,843 (Increase in Loss) | | Net Loss Per Share | $(0.40) | $(0.45) | N/A | - The increase in net loss was primarily driven by a $2.7 million loss on the extinguishment of debt related to the repurchase of the manufacturing facility and a $2.0 million increase in R&D expenses for company-sponsored clinical trials207211216 Liquidity and Capital Resources - As of December 31, 2021, the company had approximately $48.3 million in cash, cash equivalents, and marketable securities, a decrease of $6.1 million from year-end 2020223 Cash Flow Summary (2021 vs. 2020) | Cash Flow Activity | 2021 (in thousands) | 2020 (in thousands) | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | ($13,965) | ($10,368) | | Net Cash Used in Investing Activities | ($631) | ($9,164) | | Net Cash Provided by Financing Activities | $8,188 | $56,563 | - Management believes that current funds are adequate to meet operational cash needs and fund clinical trials for approximately the next twenty-four months224 Critical Accounting Policies - Key critical accounting policies include the assessment of long-lived assets for impairment and the valuation of redeemable warrants226 - The company uses a Monte Carlo Simulation to recompute the fair value of redeemable warrants quarterly. This valuation uses Level 3 inputs, which are highly subjective and require significant judgment, particularly regarding the probability of a 'Fundamental Transaction'230 Controls and Procedures As of December 31, 2021, the company's management, including the CEO and CFO, concluded that its disclosure controls and procedures were effective, and internal control over financial reporting was effective with no material weaknesses identified - Management, including the CEO and CFO, evaluated disclosure controls and procedures and concluded they were effective as of December 31, 2021233 - Based on an assessment using the COSO framework, management concluded that the company maintained effective internal control over financial reporting as of December 31, 2021, with no material weaknesses identified236 PART III Directors, Executive Officers and Corporate Governance The company's leadership includes CEO Thomas K. Equels and Chairman William M. Mitchell, with governance overseen by various committees including Audit, Scientific Advisory, Disclosure Controls, and Executive, alongside a Code of Ethics - Key executive officers include Thomas K. Equels (CEO), Peter W. Rodino III (COO), and Ellen M. Lintal (CFO). The Board of Directors is chaired by William M. Mitchell, M.D., Ph.D.239 - The Board has determined that director Stewart L. Appelrouth qualifies as an 'audit committee financial expert'256 - The company maintains several governance committees, including an Audit Committee, Scientific Advisory Board (SAB), Disclosure Controls Committee (DCC), and an Executive Committee, each with specific oversight responsibilities257260261262 Executive Compensation For fiscal year 2021, Named Executive Officers received total compensation including base salary, bonuses, and stock options, with new employment agreements established in March 2021 for the COO and CFO 2021 Summary Compensation Table for Named Executive Officers | Name & Principal Position | Year | Salary ($) | Bonus ($) | Option Awards ($) | All Other Compensation ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Thomas K. Equels (CEO & President) | 2021 | 850,000 | 352,500 | 473,038 | 86,106 | 1,761,644 | | Ellen Lintal (CFO) | 2021 | 350,000 | 102,500 | 132,346 | 49,893 | 634,739 | | Peter Rodino (COO, General Counsel) | 2021 | 425,000 | 102,500 | 132,346 | 57,949 | 717,795 | - In March 2021, the company entered into new employment agreements with Peter Rodino (3-year term) and Ellen Lintal (1-year term), establishing base salaries of $425,000 and $350,000, respectively, plus performance-based bonuses and long-term stock option awards265 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters As of March 25, 2022, all directors and executive officers collectively owned 1,606,385 shares, representing 0.034% of common stock, including options, with no individual owning 1% or more Security Ownership of Management (as of March 25, 2022) | Name | Shares Beneficially Owned | % of Shares Beneficially Owned | | :--- | :--- | :--- | | Thomas K. Equels (CEO) | 957,677 | <1% | | Peter W. Rodino III (COO) | 153,193 | <1% | | William M. Mitchell, M.D. (Chairman) | 156,474 | <1% | | Stewart L. Appelrouth (Director) | 241,126 | <1% | | Ellen Lintal (CFO) | 97,915 | <1% | | All directors and executive officers as a group (5 persons) | 1,606,385 | 0.034% | Principal Accountant Fees and Services BDO USA, LLP's total fees increased to $485,000 in 2021 from $353,500 in 2020, primarily due to higher audit and new tax fees, all pre-approved by the Audit Committee Accountant Fees (2021 vs. 2020) | Fee Type | 2021 ($) | 2020 ($) | | :--- | :--- | :--- | | Audit Fees | 370,000 | 260,000 | | Audit-Related Fees | 42,000 | 93,500 | | Tax Fees | 73,000 | 0 | | All Other Fees | 0 | 0 | | Total | 485,000 | 353,500 | PART IV Exhibits and Financial Statement Schedules This section indexes all exhibits filed with the 10-K report, including corporate governance documents, material contracts, and certifications, with financial statement schedules omitted as information is elsewhere - This section contains a comprehensive list of exhibits filed with the annual report, including the Certificate of Incorporation, bylaws, material contracts, employment agreements, and various certifications312313314 Financial Statements Report of Independent Registered Public Accounting Firm BDO USA, LLP issued an unqualified audit opinion on AIM ImmunoTech's 2021 and 2020 financial statements, identifying the fair value calculation of redeemable warrants as a critical audit matter due to subjective Monte Carlo Simulation assumptions - The auditor, BDO USA, LLP, issued an unqualified opinion, stating the financial statements are fairly presented in accordance with U.S. GAAP347 - A Critical Audit Matter was identified concerning the calculation of the fair value of redeemable warrants, due to the subjective assumptions (e.g., probability of a Fundamental Transaction, stock price volatility) used in the company's Monte Carlo Simulation model351352 Consolidated Balance Sheets As of December 31, 2021, total assets decreased to $57.7 million from $64.6 million, total liabilities decreased to $0.8 million from $3.3 million, and total stockholders' equity decreased to $56.9 million from $61.3 million Consolidated Balance Sheet Data (as of Dec 31) | Account | 2021 (in thousands) | 2020 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $32,093 | $38,501 | | Total current assets | $50,213 | $40,310 | | Total Assets | $57,699 | $64,584 | | Total current liabilities | $673 | $1,102 | | Total Liabilities | $820 | $3,290 | | Total Stockholders' Equity | $56,879 | $61,294 | Consolidated Statements of Comprehensive Loss For 2021, net loss increased to $19.1 million from $14.4 million in 2020, primarily due to higher operating expenses including asset impairment and debt extinguishment loss, partially offset by a gain from tax operating losses Consolidated Statements of Comprehensive Loss (for the year ended Dec 31) | Metric | 2021 (in thousands) | 2020 (in thousands) | | :--- | :--- | :--- | | Total Revenues | $135 | $163 | | Total Costs and Expenses | $18,973 | $15,315 | | Operating Loss | ($18,838) | ($15,152) | | Net Loss | ($19,127) | ($14,400) | | Basic and Diluted Loss Per Share | ($0.40) | ($0.45) | Consolidated Statements of Cash Flows For 2021, net cash used in operating activities increased to $14.0 million, while net cash from financing dropped to $8.2 million, resulting in a $6.4 million net decrease in cash, ending with $32.1 million Consolidated Statements of Cash Flows (for the year ended Dec 31) | Cash Flow Activity | 2021 (in thousands) | 2020 (in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | ($13,965) | ($10,368) | | Net cash used in investing activities | ($631) | ($9,164) | | Net cash provided by financing activities | $8,188 | $56,563 | | Net (decrease) increase in cash | ($6,408) | $37,031 | | Cash and cash equivalents at end of period | $32,093 | $38,501 |