Imunon Inc

Results of Operations

Comparison of Fiscal Year Ended December 31, 2023 and Fiscal Year Ended December 31, 2022.

For the year ended December 31, 2023, our net loss was $19.5 million compared to a net loss of $35.9 million for the year ended December 31, 2022. The Company recognized $1.3 million and $1.6 million in tax benefits from the sale of its New Jersey NOLs under the NOL Program in each of the fourth quarters of 2023 and 2022, respectively. As of December 31, 2023, the Company had $15.7 million in cash and cash equivalents, short-term investments, and interest receivable to fund its operations. The Company also has a $1.3 million receivable from the sale of the Company’s State of New Jersey NOLs. The Company’s primary sources of cash have been proceeds from the issuance and sale of its common stock via its ATM program and other funding transactions. There can be no assurance that the Company will be able to do so in the future on a timely basis on terms acceptable to the Company, or at all. The Company has not yet commercialized any of its product candidates. Even if the Company commercializes one or more of its product candidates, it may not become profitable in the near term. The Company’s ability to achieve profitability depends on several factors, including its ability to obtain regulatory approval for its product candidates, successfully complete any post-approval regulatory obligations and successfully commercialize its product candidates alone or in partnership.

Such conditions raise substantial doubts about the Company’s ability to continue as a going concern. Based on the above, management has determined there is substantial doubt regarding our ability to continue as a going concern. The report of our independent registered public accounting firm for the year ended December 31, 2023 includes an explanatory paragraph which expresses substantial doubt about our ability to continue as a going concern.

Management’s plan includes raising funds from the issuance and sale of its common stock via its ATM program and other funding transactions. However, as mentioned above, there is no assurance such funding will be available to the Company or that it will be obtained on terms favorable to the Company or will provide the Company with sufficient funds to meet its objectives. The Company’s financial statements do not include any adjustments relating to the recoverability and classification of assets, carrying amounts or the amount and classification of liabilities that may be required should the Company be unable to continue as a going concern.

Licensing Revenue

In January 2013, we entered into a technology development contract with Zhejiang Hisun Pharmaceutical Co. Ltd. (“Hisun”), pursuant to which Hisun paid us a non-refundable technology transfer fee of $5.0 million to support our development of ThermoDox® in the China territory. The $5.0 million received as a non-refundable payment from Hisun in the first quarter 2013 has been recorded to deferred revenue and was amortized over the ten-year term of the agreement; therefore, we recognized revenue of $500,000 in the year 2022. As of December 31, 2022, this contract has been fully amortized and recognized as revenue.

Research and Development Expenses

Research and development (“R&D”) expenses decreased $0.4 million to $11.3 million in 2023 from $11.7 million in 2022. Costs associated with the OVATION 2 Study were $1.2 and $1.5 million in 2023 and 2022, respectively. Costs associated with the OPTIMA Study were insignificant in 2023 compared to $1.0 million in 2022. Other clinical and regulatory costs were $1.8 million in 2023 compared to $1.9 million in 2022. R&D costs associated with the development of IMNN-001 to support the OVATION 2 Study were $1.5 million in 2023, a decrease from $3.7 million in same period of 2022. The development of the PLACCINE DNA vaccine technology platform increased to $4.5 million in 2023 compared to $2.4 million in 2022. CMC costs increased to $2.2 million in 2023 compared to $1.2 million in 2022.

General and Administrative Expenses

General and administrative expenses decreased to $9.7 million in 2023 compared to $13.7 million in 2022. This decrease is primarily attributable to lower non-cash stock compensation expenses of $1.3 million, employee related costs of $0.8 million, legal expenses of $1.0 million, insurance costs of $0.6 million, public company expenses of $0.2 million offset by higher consulting fees of $0.2 million.

Change in Earn-out Milestone Liability

The total aggregate purchase price for the acquisition of assets from EGEN included potential future earn-out payments contingent upon achievement of certain milestones. The difference between the aggregate $30.4 million in future earn-out payments and the $13.9 million included in the fair value of the acquisition consideration at June 20, 2014 was based on the Company’s risk-adjusted assessment of each milestone and utilizing a discount rate based on the estimated time to achieve the milestone. The milestone liability is fair valued at the end of each quarter and any change in the value is recognized in our financial statements.

On March 28, 2019, the Company and EGWU, Inc, entered into an amendment to the Asset Purchase Agreement discussed in Note 13 to our financial statements included in this Annual Report. Pursuant to the Amended Asset Purchase Agreement, payment of the earnout milestone liability related to the Ovarian Cancer Indication of $12.4 million has been modified. The Company has the option to make the payment as follows:

At December 31, 2022, the Company wrote off the earn-out milestone liability as a result of the requirements not being achieved and recognized a non-cash gain of $5.4 million during 2022 as a result of the change in the fair value of the earn-out milestone liability. The Company fair value of the milestone liability was zero at December 31, 2023.

Impairment of Goodwill and IPR&D

Due to the continuing deterioration of public capital markets in the biotech industry and its impact on market capitalization rates in this sector, IPR&D was reviewed for impairment. Having conducted a quantitative analysis of the company’s IPR&D assets, the Company concluded the IPR&D asset was impaired during the fourth quarter of 2022. As of December 31, 2022, the Company wrote off the $13.4 million carrying value of this asset, thereby recognizing a non-cash charge of $13.4 million in the fourth quarter of 2022. The Company fair value of the IPR&D was zero at December 31, 2023.

Investment income and interest expense

The Company recognized interest expense of $0.2 million in 2023 compared to $5.0 million in 2022. As more fully discussed in Note 9 to our financial statements included in this Annual Report, in June 2021, the Company entered into a $10 million loan facility with Silicon Valley Bank. The Company immediately used $6 million from this facility to retire all outstanding indebtedness with Horizon Technology Finance Corporation.

Investment income from the Company’s short-term investments was $1.2 million in 2023 compared to $0.5 million in 2022.

Income Tax Benefit

Annually, the State of New Jersey enables approved technology and biotechnology businesses with New Jersey NOLs the opportunity to sell these losses through the NOL Program, thereby providing cash to companies to help fund their research and development and business operations. During 2021, the New Jersey State Legislature increased the maximum lifetime benefit per company from $15 million to $20 million, which will allow the Company to participate in this innovative funding program in future years. After the cumulative NOL sales through 2023, the Company has approximately $0.4 million remaining under the NOL Program.

The Company entered into an agreement to sell the approved portion of the New Jersey NOLs applied for in 2023 for $1.3 million. At December 31, 2023, the Company evaluated the valuation reserve for its NOLs associated with its New Jersey NOLs and reduced the valuation reserve and recognized $1.3 million as a deferred tax asset and an income tax benefit. The Company completed the sale of these NOLs in March of 2024.

During the fourth quarter of 2022, the Company entered into an agreement to sell the approved portion of the New Jersey NOLs applied for in 2022 for $1.6 million. At December 31, 2022, the Company evaluated the valuation reserve for its tax net operating losses associated with its New Jersey NOLs and reduced the valuation reserve and recognized $1.6 million as a deferred tax asset and an income tax benefit. The Company completed the sale of these NOLs in January of 2023.