Imunon Inc

DECEMBER 31, 2023

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

On September 19, 2022, Celsion Corporation announced a corporate name change to Imunon, Inc. (“Imunon” or the “Company”) reflecting the evolution of the Company’s business focus and its commitment to developing cutting-edge immunotherapies and next-generation vaccines to treat cancer and infectious diseases. The Company’s common stock continues to trade on the Nasdaq Stock Market under the ticker symbol “IMNN.”

Imunon is a fully integrated, clinical-stage biotechnology company focused on advancing a portfolio of innovative treatments that harness the body’s natural mechanisms to generate safe, effective and durable responses across a broad array of human diseases, constituting a differentiating approach from conventional therapies. Imunon is developing its non-viral DNA technology across four modalities. The first modality, TheraPlas®, is developed for the coding of proteins and cytokines in the treatment of solid tumors where an immunological approach is deemed promising. The second modality, PlaCCine®, is developed for the coding of viral antigens that can elicit a strong immunological response. This technology may represent a promising platform for the development of vaccines in infectious diseases. The third modality, FixPlas®, concerns the application of Imunon’s DNA technology to produce universal cancer vaccines, also called tumor associated antigen cancer vaccines. The fourth modality, IndiPlas®, is in the discovery phase and will focus on the development of personalized cancer vaccines, or neoepitope cancer vaccines.

The Company’s lead clinical program, IMNN-001, is a DNA-based immunotherapy for the localized treatment of advanced ovarian cancer currently in Phase 2 development. IMNN-001 works by instructing the body to produce safe and durable levels of powerful cancer-fighting molecules, such as interleukin-12 and interferon gamma, at the tumor site. Additionally, the Company is conducting IND-enabling preclinical studies for the development of a COVID-19 booster vaccine (IMNN-101) and a treatment for the Lassa virus (IMNN-102). The Company has also initiated preclinical work to develop a Trp2 tumor associated antigen cancer vaccine in melanoma (IMNN-201). Imunon will continue to leverage these modalities and to advance the technological frontier of plasmid DNA to better serve patients with difficult-to-treat conditions.

Basis of Presentation

The accompanying consolidated financial statements (“Financial Statements”) of Imunon have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and CLSN Laboratories, Inc. The Company in 2023 dissolved Celsion GmbH. All significant intercompany balances and transactions have been eliminated in consolidation.

Events and conditions arising subsequent to the most recent balance sheet date through the date of the issuance of these Financial Statements have been evaluated for their possible impact on the Financial Statements and accompanying notes. No events and conditions would give rise to any information that required accounting recognition or disclosure in the Financial Statements other than those arising in the ordinary course of business.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Financial Statements and the reported amounts of expenses during the reporting period.

On an ongoing basis, the Company evaluates its estimates using historical experience and other factors, including the current economic environment. Significant items subject to such estimates are assumptions used for purposes of determining stock-based compensation, the fair value of the earn-out milestone liabilities, estimates for contingent liabilities, if any, and accounting for impairment of in-process research and development assets. Management believes its estimates to be reasonable under the circumstances. Actual results could differ significantly from those estimates.

Revenue Recognition

The Company’s sole revenue stream was related to the Hisun agreement described in Note 18, and whose contract has expired. There wereno accounts receivable as of December 31, 2023 and 2022.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and investments purchased with an original maturity of three months or less. A portion of these funds are not covered by FDIC insurance.

Fair Value of Financial Instruments

The carrying values of financial instruments approximate their respective fair values. Management believes that the carrying amounts of the Company’s financial instruments, including cash and cash equivalents and accounts payable approximate fair value due to the short-term nature of those instruments. Short-term investments are recorded at their estimated fair value.

Short-Term Investments

The Company classifies its investments in debt securities with readily determinable fair values as investments available-for-sale in accordance with Accounting Standards Codification (“ASC”) 320,Investments - Debt and Equity Securities. Available-for-sale securities consist of debt securities not classified as trading securities or as securities to be held to maturity. The Company has classified all of its investments as available-for-sale. Unrealized holding gains and losses on available-for-sale securities are reported as a net amount in accumulated other comprehensive gain or loss in stockholders’ equity until realized. Gains and losses on the sale of available-for-sale securities are determined using the specific identification method. The Company’s short-term investments consist of corporate bonds.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is provided over the estimated useful lives of the related assets, ranging from three toseven years, using the straight-line method. Amortization is recognized over the lesser of the life of the asset or the lease term. Major renewals and improvements are capitalized at cost and ordinary repairs and maintenance are charged against operating expenses as incurred. Depreciation expense was approximately $248,000 and $197,000 for the years ended December 31, 2023 and 2022, respectively.

The Company reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An asset is considered impaired if its carrying amount exceeds the future net undiscounted cash flows that the asset is expected to generate. If such asset is considered to be impaired, the impairment recognized is the amount by which the carrying amount of the asset, if any, exceeds its fair value determined using a discounted cash flow model. There wasno impairment of property or equipment during 2023 or 2022.

Deposits

Deposits include real property security deposits and other deposits which are contractually required and of a long-term nature.

In-Process Research and Development, Other Intangible Assets and Goodwill

During 2014, the Company acquired certain assets of EGEN, Inc. As more fully described in Note 6, the acquisition was accounted for under the acquisition method of accounting which required the Company to perform an allocation of the purchase price to the assets acquired and liabilities assumed. Under the acquisition method of accounting, the total purchase price is allocated to net tangible and intangible assets and liabilities based on their estimated fair values as of the acquisition date.

Impairment or Disposal of Long-Lived Assets

The Company assesses the impairment of its long-lived assets under accounting standards for the impairment or disposal of long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. For long-lived assets to be held and used, the Company recognizes an impairment loss only if its carrying amount is not recoverable through its undiscounted cash flows and measures the impairment loss based on the difference between the carrying amount and fair value. See Note 5 for information on impairment losses of its in*-*process research and development.

Comprehensive Income (Loss)

ASC 220,Comprehensive Income, establishes standards for the reporting and display of comprehensive income (loss) and its components in the Company’s consolidated financial statements. The objective of ASC 220 is to report a measure of comprehensive income (loss) of all changes in equity of an enterprise that result from transactions and other economic events in a period other than transactions with owners. Comprehensive gains (losses) result from changes in unrealized gains and losses from investment in debt securities.

Research and Development

Research and development costs are expensed as incurred. Equipment and facilities acquired for research and development activities that have alternative future uses are capitalized and charged to expense over their estimated useful lives.

Net Loss per Share of Common Stock

Basic and diluted net loss per common share was computed by dividing net loss for the year by the weighted average number of shares of common stock outstanding, both basic and diluted, during each period. The impact of common stock equivalents has been excluded from the computation of diluted weighted average common shares outstanding in periods where there is a net loss, as their effect is anti-dilutive.

For the years ended December 31, 2023 and 2022, the total number of shares of common stock issuable upon exercise of warrants and equity awards was 1,255,642 and 988,389, respectively. For the years ended December 31, 2023 and 2022, diluted loss per common share is the same as basic loss per common share as all options and all other warrants that were convertible into shares of the Company’s common stock were excluded from the calculation of diluted earnings attributable to common stockholders per common share as their effect would be anti-dilutive.

Income Taxes

Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in results of operations in the period that the tax rate change occurs. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. In accordance with ASC 740,Income Taxes, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position taken would be sustained in a tax examination, presuming that a tax examination will occur. The Company recognizes interest and/or penalties related to income tax matters in the income tax expense category.

As more fully discussed in Note 10, on November 28, 2023, the Company received approval from the New Jersey Economic Development Authority to sell $1.3 million of its New Jersey net operating losses (“NOLs”), recognizing a tax benefit for the year ended December 31, 2023 for the net proceeds (approximately $1.3 million) by reducing the net operating loss valuation allowance. As more fully discussed in Note 10, on November 28, 2023, the Company was notified by the New Jersey Economic Development Authority that its application was approved and the Company entered into an agreement to sell this NOL. On March 22, 2024, the Company received approximately $1.3 million upon completion of the sale of the 2023 NOLs. During 2022, the Company received approval to sell $1.6 million of its New Jersey NOLs, receiving net proceeds of approximately $1.6 million. As part of the Technology Business Tax Certificate Program sponsored by The New Jersey Economic Development Authority, emerging biotechnology companies with unused NOLs and unused research and development credits are allowed to sell these benefits to other New Jersey-based companies. 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 for up to an additional $0.4 million in net operating losses under this maximum lifetime benefit (see Note 2).

Stock-Based Compensation

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09,Compensation-Stock Compensation, which simplifies various aspects of accounting for share-based payments. The areas for simplification involve several aspects of the accounting for share-based payment transactions, including the income tax consequences and classification on the statements of cash flows. The Company recognizes the effect of forfeitures in compensation cost when they occur.

*Recent Accounting Pronouncements *

From time to time, new accounting pronouncements are issued by the FASB and are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued accounting pronouncements will not have a material impact on the Company’s consolidated financial position, results of operations, and cash flows, or do not apply to its operations.

In December 2023, the FASB issued ASU No. 2023-09,Improvements to Income Tax Disclosures, which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. ASU No. 2023-09 is effective for fiscal years beginning after December 15, 2024 and allows for adoption on a prospective basis, with a retrospective option. Early adoption is permitted. The Company is currently evaluating the impact of the ASU on the income tax disclosures within the consolidated financial statements.

2. FINANCIAL CONDITION AND GOING CONCERN UNCERTAINTY

Since inception, the Company has incurred substantial operating losses, principally from expenses associated with the Company’s research and development programs, clinical trials conducted in connection with the Company’s drug candidates, and applications and submissions to the FDA. The Company has not generated significant revenue and has incurred significant net losses in each year since inception. For the year ended December 31, 2023, the Company had a net loss of $19.5 million and used $19.0 million to fund operations. As of December 31, 2023, the Company has incurred approximately $388 million of cumulative net losses. As of December 31, 2023, the Company had $15.7 million in cash and cash equivalents, short-term investments, and interest receivable and $1.3 million net proceeds from the sale of its New Jersey net operating losses. The Company has substantial future capital requirements to continue its research and development activities and advance its drug candidates through various development stages. The Company believes these expenditures are essential for the commercialization of its drug candidates and technologies.

The Company expects its operating losses to continue for the foreseeable future as it continues its product development efforts, and when it undertakes marketing and sales activities. The Company’s ability to achieve profitability is dependent upon its ability to obtain governmental approvals, manufacture, and market and sell its new drug candidates. There can be no assurance that the Company will be able to commercialize its technology successfully or that profitability will ever be achieved. The Company expects that its operating results will fluctuate significantly in the future and will depend on a number of factors, many of which are outside the Company’s control.

The Company’s ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, financial markets in the U.S. and worldwide resulting from the COVID-19 pandemic, the Russian invasion of Ukraine and the unrest in the Middle East. The Company continues to monitor its operating activities in light of these events, and it is possible that these events could result in a variety of risks to the business. The specific impact, if any, is not readily determinable as of the date of these consolidated Financial Statements.

The Company has based its estimates on assumptions that may prove to be wrong. The Company may need to obtain additional funds sooner or in greater amounts than it currently anticipates. Potential sources of financing include strategic relationships, public or private sales of the Company’s shares or debt, the sale of the Company’s New Jersey NOLs and other sources. If the Company raises funds by selling additional shares of common stock or other securities convertible into common stock, the ownership interest of existing stockholders may be diluted.

The actual amount of funds the Company will need to operate is subject to many factors, some of which are beyond the Company’s control. These factors include the progress of research activities; the number and scope of research programs; the progress of preclinical and clinical development activities; the progress of the development efforts of parties with whom the Company has entered into research and development agreements; the costs associated with additional clinical trials of drug candidates; the ability to maintain current research and development licensing arrangements and to establish new research and development and licensing arrangements; the ability to achieve milestones under licensing arrangements; the costs involved in prosecuting and enforcing patent claims and other intellectual property rights; and the costs and timing of regulatory approvals.

The consolidated financial statements have been prepared on the going concern basis. In making this assessment, management conducted a comprehensive review of the Company’s business plan including, but not limited to:

As a result of the uncertainties involved in our business, we are unable to estimate the duration and completion costs of our research and development projects or when, if ever, and to what extent we will receive cash inflows from the commercialization and sale of a product. Our inability to complete our research and development projects in a timely manner or our failure to enter into collaborative agreements, when appropriate, could significantly increase our capital requirements and could adversely impact our liquidity. These uncertainties could force us to seek additional, external sources of financing from time to time in order to continue with our business strategy. Our inability to raise additional capital, or to do so on terms reasonably acceptable to us, would jeopardize the future success of our business. Our estimated future capital requirements are uncertain and could change materially as a result of many factors, including the progress of our research, development, clinical, manufacturing, and commercialization activities.

Management has determined the Company has suffered recurring losses from operations and has an accumulated deficit that raises substantial doubt about our ability to continue as a going concern for the next twelve months from the issuance date of this Annual Report on Form 10-K. 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. The financial statements do not include any adjustments that might result from the outcome of the uncertainty.

A fundamental component of the ability to continue as a going concern is the Company’s ability to raise capital as required, as to which no assurances can be provided. To address the additional funding requirements of the Company, management has undertaken the following initiatives:

Our ability to continue as a going concern may depend on our ability to raise additional capital, attain further operating efficiencies, reduce expenditures, and, ultimately, to generate revenue. There are no assurances that these future funding and operating efforts will be successful. If management is unsuccessful in these efforts, our current capital is not expected to be sufficient to fund our operations for the next twelve months.

3. INVESTMENTS IN DEBT SECURITIES AVAILABLE FOR SALE

Investments in debt securities available for sale with a fair value of $9,857,087 and $21,254,485 as of December 31, 2023 and 2022, respectively, consisted of U.S. Treasury securities and corporate debt securities. These investments are valued at estimated fair value, with unrealized gains and losses reported as a separate component of stockholders’ equity in accumulated other comprehensive loss.

The Company reviews its debt securities classified as short-term investments on a regular basis for impairment. For debt securities in unrealized loss positions, the Company determines whether any portion of the decline in fair value below the amortized cost basis is due to credit-related factors if it neither intends to sell nor anticipates that it is more likely than not that it will be required to sell prior to recovery of the amortized cost basis. The Company considers factors such as the extent to which the market value has been less than the cost, any noted failure of the issuer to make scheduled payments, changes to the rating of the security and other relevant credit-related factors in determining whether or not a credit loss exists. During fiscal 2023 and 2022, the Company did not recognize an allowance for credit-related losses on any of our investments.

A summary of the cost, fair value and maturities of the Company’s short-term investments is as follows:

The following table shows the Company’s investment in debt securities available for sale gross unrealized gains (losses) and fair value by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2023 and 2022. The Company has reviewed individual securities to determine whether a decline in fair value below the amortizable cost basis is other than temporary.

Investment income, which includes net realized losses on sales of available for sale securities and investment income interest and dividends, is summarized as follows:

4. RESTRICTED CASH

As a condition of the SVB Loan Facility entered into on June 18, 2021, as further discussed in Note 9, the Company was required at all times to maintain on deposit with SVB as cash collateral in a segregated money market bank account in the name of the Company, unrestricted and unencumbered cash (other than a lien in favor of SVB) in an amount of at least 100% of the aggregate outstanding amount of the SVB loan facility. SVB could restrict withdrawals or transfers by or on behalf of the Company that would violate this requirement. The loan was repaid in full during the quarter ended June 30, 2023, thus removing this requirement. The required reserve totaled $6.0 million as of December 31, 2022. This amount is presented in part as restricted cash in current and other non-current assets on the accompanying consolidated balance sheets.

The following table reconciles cash and cash equivalents and restricted cash per the consolidated balance sheets to the consolidated statements of cash flows:

5. FAIR VALUES OF FINANCIAL INSTRUMENTS

FASB ASC Section 820,Fair Value Measurements and Disclosures, establishes a three-level hierarchy for fair value measurements which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value are as follows:

Level 1: Quoted prices (unadjusted) or identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date;

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data; and

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions that market participants would use in pricing an asset or liability.

Cash and cash equivalents and accounts payable are reflected in the consolidated balance sheets at their approximate estimated fair values primarily due to their short-term nature. The fair values of securities available for sale are determined by relying on the securities’ relationship to other benchmark quoted securities and classified its investments as Level 2 items in both 2023 and 2022. There were no transfers of assets or liabilities between Level 1 and Level 2 and no transfers in or out of Level 3 during the years ended December 31, 2023 and 2022. The changes in Level 3 liabilities were the result of changes in the fair value of the earn-out milestone liability included in earnings and in-process R&D. The earnout milestone liability is valued using a risk-adjusted assessment of the probability of payment of each milestone, discounted to present value using an estimated time to achieve the milestone (see Note 13).

Assets and liabilities measured at fair value are summarized below:

6. INTANGIBLE ASSETS

In June 2014, the Company completed the acquisition of substantially all of the assets of EGEN, Inc., an Alabama corporation (“EGEN”), which changed its company name to EGWU, Inc. after the closing of the acquisition (the “EGEN Acquisition”). The Company acquired all of EGEN’s right, title and interest in and to substantially all of the assets of EGEN, including cash and cash equivalents, patents, trademarks and other intellectual property rights, clinical data, certain contracts, licenses and permits, equipment, furniture, office equipment, furnishings, supplies and other tangible personal property. In addition, CLSN Laboratories assumed certain specified liabilities of EGEN, including the liabilities arising out of the acquired contracts and other assets relating to periods after the closing date.

Acquired In-process Research and Development.

Acquired in-process research and development (“IPR&D”) consists of EGEN’s drug technology platforms: TheraPlas and TheraSilence. The fair value of the IPR&D drug technology platforms was estimated to be $24.2 million as of the acquisition date. As of the closing of the acquisition, the IPR&D was considered indefinite lived intangible assets and will not be amortized. IPR&D was reviewed for impairment at least annually as of the third quarter ended September 30, and whenever events or changes in circumstances indicate that the carrying value of the assets might not be recoverable. The Company’s IPR&D consisted of three core elements, its RNA delivery system, its glioblastoma multiforme cancer (“GBM”) drug candidate and its ovarian cancer indication.

As of December 31, 2022, the Company assessed whether there were indicators of impairment for the Company’s IPR&D and determined that the IPR&D asset was impaired during that period. Due to the continuing deterioration of public capital markets in the biotech industry in 2022 and 2021 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 following is a summary of the net fair value of the assets acquired in the EGEN Acquisition for the year ended December 31, 2022:

7. PROPERTY AND EQUIPMENT

Property and equipment at December 31, 2023 and 2022 consist of the following:

8. OTHER ACCRUED LIABILITIES

Other accrued liabilities at December 31, 2023 and 2022 include the following:

9. NOTES PAYABLE

The SVB Loan Facility

On June 18, 2021, the Company entered into a $10 million loan facility (the “SVB Loan Facility”) with Silicon Valley Bank (“SVB”). Imunon immediately drew down $6 million from the SVB Loan Facility and used the funds to retire all outstanding indebtedness with Horizon Technology Finance Corporation pursuant to a loan agreement entered into on June 27, 2018, under which the Company had drawn down $10 million and repaid $5 million in August 2020. Concurrently with this transaction, the Company used $6.0 million of other available funds to establish a restricted cash account which served as security for the SVB Loan Facility.

The SVB Loan Facility was in the form of money market secured indebtedness bearing interest at a calculated WSJ Prime-based variable rate. A final payment equal to 3% of the total $10 million commitment amount was due upon maturity or prepayment of the SVB Loan Facility. There was no facility commitment fee, and no stock or warrants were issued to SVB. Payments under the loan agreement were interest only for the first 24 months after loan closing, followed by a 24-month amortization period of principal and interest through the scheduled maturity date.

In connection with the SVB Loan Facility, the Company incurred financing fees and expenses totaling $243,370 which was recorded and classified as debt discount and was amortized as interest expense using the effective interest method over the life of the loan. Also, in connection with the SVB Loan Facility, the Company was required to pay an end-of-term fee equal to 3.0% of the original loan amount at time of maturity. Therefore, these amounts totaling $300,000 were amortized as interest expense using the effective interest method over the life of the loan. During the years ended December 31, 2023 and 2022, the Company incurred interest expense of $197,080 and $295,792 and amortized $329,158 and $181,259, respectively, as interest expense for debt discounts and end-of-term fee in connection with the SVB Loan Facility.

On April 21, 2023, the Company repaid the outstanding principal balance, an early termination fee and the end-of-term charges in full satisfaction of the SVB Loan Facility. The following is a schedule of the amounts paid to SVB on April 21, 2023:

During the year ended December 31, 2023, the Company recorded a loss of $329,158 on the early termination of the SVB Loan Facility which represented the early termination fee and the end of the term fees, net of previously amortized interest expense totaling $334,212 on the date of its payoff.

10. INCOME TAXES

The income tax benefit for the years ended December 31, 2023 and 2022 consists of the following:

A reconciliation of the Company’s statutory tax rate to the effective rate for the years ended December 31, 2023 and 2022 is as follows:

The components of the Company’s deferred tax asset as of December 31, 2023 and 2022 are as follows:

The evaluation of the realizability of such deferred tax assets in future periods is made based upon a variety of factors that affect the Company’s ability to generate future taxable income, such as intent and ability to sell assets and historical and projected operating performance. The Company has established a valuation reserve for its deferred income tax assets other than those related to its New Jersey NOLs. At December 31, 2023, after its evaluation of its New Jersey NOLs as discussed more fully below, the Company reduced the valuation reserve and recognized $1.3 million as a deferred income tax asset. Such tax assets are available to be recognized and benefit future periods.

As of December 31, 2023, the Company had federal net operating loss carryforwards of approximately $307 million, net of net operating losses utilized in prior years of which $218 million, if unused, will expire starting in 2024 through 2037. The federal NOLs generated for the years ended after 2017 of approximately $78 million can be carried forward indefinitely. As of December 31, 2023, the Company had state net operating loss carryforwards of approximately $44 million, net of net operating losses utilized in prior years, and, if unused, will expire starting in 2029 through 2042.

Effective for tax years beginning after December 31, 2021, taxpayers are required to capitalize any expenses incurred that are considered incidental to research and experimentation (“R&E”) activities under IRC Section 174. While taxpayers historically had the option of deducting these expenses under IRC Section 174, the December 2017 Tax Cuts and Jobs Act mandates capitalization and amortization of R&E expenses for tax years beginning after December 31, 2021. Expenses incurred in connection with R&E activities in the US must be amortized over a 5-year period if incurred, and R&E expenses incurred outside the US must be amortized over a 15-year period. R&E activities are broader in scope than qualified research activities considered under IRC Section 41 (relating to the research tax credit). For the year ended December 31, 2023, the Company performed an analysis based on available guidance and determined that it will continue to be in a loss position even after the required capitalization and amortization of its R&E expenses. The Company will continue to monitor this issue for future developments, but it does not expect R&E capitalization and amortization to require it to pay cash taxes now or in the near future.The Company’s income tax returns for 2019 to 2022 are still open and subject to audit. In addition, net operating losses arising from prior years are also subject to examination at the time they are utilized in future years.

ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. As of December 31, 2023, and 2022, there were no unrecognized tax benefits. The Company recognizes accrued interest and penalties as income tax expense. No amounts were accrued for the payment of interest and penalties at December 31, 2023 and 2022. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position in the next year.

Sections 382 and 383 of the Internal Revenue Code provide for a limitation on the annual use of NOL and tax credit carryforwards following certain ownership changes that could limit the Company’s ability to utilize these carryforwards. The Company has completed an analysis to determine if such ownership changes have occurred and concluded it was more likely than not that there were changes in ownership. Due to the existence of full valuation allowance, limitations under Section 382 and 383 will not impact the Company’s effective tax rate. Further analyses will be performed prior to recognizing the benefits of any losses or credits in the financial statements.

Sale of New Jersey Net Operating Losses

Since 2018, the Company has annually submitted applications to sell a portion of the Company’s New Jersey NOLs as part of the Technology Business Tax Certificate Program sponsored by The New Jersey Economic Development Authority. Under the program, emerging biotechnology companies with unused NOLs and unused research and development credits are allowed to sell these benefits to other New Jersey-based companies. As part of the Technology Business Tax Certificate Program, the Company sold $1.3 million and $1.6 million of its New Jersey NOLs in 2023 and 2022, respectively. The sale of these net operating losses resulted in net proceeds to the Company of approximately $1.3 million in 2023 and $1.6 million in 2022. 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 funding program in future years for up to an additional $0.3 million in net operating losses under this maximum lifetime benefit.

11. STOCKHOLDERS’ EQUITY

On March 19, 2021, the Company filed with the SEC a shelf registration statement on Form S-3 (the “2021 Registration Statement”) that allows the Company to issue any combination of common stock, preferred stock or warrants to purchase common stock or preferred stock in an amount up to $100 million. The 2021 Registration Statement was declared effective on March 30, 2021. The 2021 Registration Statement was intended to provide the Company with flexibility to raise capital in the future for general corporate purposes. However, as of the date of these financial statements and so long as the Company’s public float remains below $75 million, it is subject to limitations with respect to the use of the 2021 Registration Statement and any other shelf registration statement that it files with the SEC pursuant to General Instruction I.B.6 of Form S-3 (the “Baby Shelf Limitation”), which limits the amount that the Company can offer to up to one-third of its public float during any trailing 12-month period. The Company would be no longer subject to the Baby Shelf Limitation if its public float exceeds $75 million.

On September 19, 2022, the Company announced a corporate name change to Imunon, Inc. The Company’s common stock will continue to trade on the Nasdaq Stock Market under the new ticker symbol “IMNN” effective as of the opening of trading on September 21, 2022, and its CUSIP number (15117N602) remained unchanged. The Company filed an amendment to its Articles of Incorporation to effect the new corporate name.

Reverse Stock Split

On February 28, 2022, the Company effected a 15-for-1 reverse stock split of its common stock which was made effective for trading purposes as of the commencement of trading on March 31, 2022. As of that date, each 15 shares of issued and outstanding common stock and equivalents was consolidated into one share of common stock. All shares have been restated to reflect the effects of the 15-for-1 reverse stock split. In addition, at the market open on March 1, 2022, the Company’s common stock started trading under a new CUSIP number 15117N602 although the Company’s ticker symbol, CLSN, remained unchanged.

The reverse stock split was previously approved by the Company’s stockholders at the 2022 Special Meeting held on February 24, 2022, and the Company subsequently filed a Certificate of Amendment to its Certificate of Incorporation to effect the stock consolidation. The primary reasons for the reverse stock split and the amendment were:

Immediately prior to the reverse stock split, the Company had 86,557,736 shares of common stock outstanding which consolidated into 5,770,516 shares of the Company’s common stock. No fractional shares were issued in connection with the reverse stock split. Holders of fractional shares have been paid out in cash for the fractional portion with the Company’s overall exposure for such payouts consisting of a nominal amount. The amount of the Company’s outstanding convertible preferred stock were not affected by the reverse stock split. The number of outstanding options, stock awards and warrants were adjusted accordingly, with outstanding options and stock awards being reduced from approximately 6.6 million to approximately 0.4 million and outstanding warrants being reduced from approximately 2.5 million to approximately 0.2 million.

At the Market Offering Agreement

On May 25, 2022, the Company entered into an At the Market Offering Agreement with H.C. Wainwright & Co., LLC, as sales agent (“Wainwright”), pursuant to which the Company may offer and sell, from time to time, through Wainwright, shares of the Company’s common stock having an aggregate offering price of up to $7,500,000. During 2022 the Company sold 336,075 shares of stock for net proceeds of $503,798. The Company intends to use the net proceeds from the offering, if any, for general corporate purposes, including research and development activities, capital expenditures and working capital. In 2023, the Company has sold 1,904,142 shares of stock for net proceeds of $2,781,438.

Series A and Series B Convertible Redeemable Preferred Stock Offering

On January 10, 2022, the Company entered into a Securities Purchase Agreement (the “Preferred Stock Purchase Agreement”) with several institutional investors, pursuant to which the Company agreed to issue and sell, in concurrent registered direct offerings (the “Preferred Offerings”), (i)50,000 shares of the Company’s Series A Convertible Redeemable Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”), and (ii)50,000 shares of the Company’s Series B Convertible Redeemable Preferred Stock, par value $0.01 per share (the “Series B Preferred Stock” and together with the Series A Preferred Stock, the “Preferred Stock”), in each case at an offering price of $285 per share, representing a 5% original issue discount to the stated value of $300 per share, for gross proceeds of each Preferred Offering of $14.25 million, or approximately $28.50 million in the aggregate for the Preferred Offerings, before the deduction of the Placement Agent’s (as defined below) fee and offering expenses. The shares of Series A Preferred Stock have a stated value of $300 per share and are convertible, at a conversion price of $13.65 per share, into 1,098,901 shares of common stock (subject in certain circumstances to adjustments). The shares of Series B Preferred Stock have a stated value of $300 per share and are convertible, at a conversion price of $15.00 per share, into 1,000,000 shares of common stock (subject in certain circumstances to adjustments). The closing of the Preferred Offerings occurred on January 13, 2022.

On March 3, 2022, the Company redeemed for cash at a price equal to 105% of the $300 stated value per share all of its 50,000 outstanding shares of Series A Preferred Stock and its 50,000 Series B Preferred Stock. As a result, all shares of the Preferred Stock have been retired and are no longer outstanding and Imunon’s only class of outstanding stock is its common.

In connection with the Preferred Offerings, the Company entered into a placement agent agreement (the “Placement Agent Agreement”) with AGP pursuant to which the Company agreed to pay AGP an aggregate cash fee equal to $1,000,000 and reimburse the AGP for certain of their expenses in an amount not to exceed $110,000.

April 2022 Registered Direct Offering

On April 6, 2022, the Company entered into a Securities Purchase Agreement (the “April 2022 Purchase Agreement”) with several institutional investors, pursuant to which the Company agreed to issue and sell, in a registered direct offering (the “April 2022 Offering”), an aggregate of 1,328,274 shares of the Company’s common stock at an offering price of $5.27 per share for gross proceeds of $7.0 million before the deduction of the April 2022 Placement Agent (as defined below) fees and offering expenses. The closing of the April 2022 Offering occurred on April 8, 2022.

In connection with the April 2022 Offering, the Company entered into a placement agent agreement with A.G.P./Alliance Global Partners (the “April 2022 Placement Agent”) pursuant to which the Company agreed to pay the April 2022 Placement Agent a cash fee equal to 6.5% of the aggregate gross proceeds raised from the sale of the securities sold in the April 2022 Offering and reimburse the April 2022 Placement Agent for certain of their expenses in an amount not to exceed $50,000.

12. STOCK-BASED COMPENSATION

The Company has long-term compensation plans that permit the granting of equity-based awards in the form of stock options, restricted stock, restricted stock units, stock appreciation rights, other stock awards, and performance awards.

At the 2018 Annual Stockholders Meeting of the Company held on May 15, 2018, stockholders approved the Imunon, Inc. 2018 Stock Incentive Plan (the “2018 Plan”). The 2018 Plan, as adopted, permits the granting of 180,000 shares of Imunon common stock as equity awards in the form of incentive stock options, nonqualified stock options, restricted stock, restricted stock units, stock appreciation rights, other stock awards, performance awards, or in any combination of the foregoing. At the 2019 Annual Stockholders Meeting of the Company held on May 14, 2019, stockholders approved an amendment to the 2018 Plan whereby the Company increased the number of common stock shares available by 80,000 to a total of 260,000 under the 2018 Plan, as amended. At the 2020 Annual Stockholders Meeting of the Company held on June 15, 2020, stockholders approved an amendment to the 2018 Plan, as previously amended, whereby the Company increased the number of shares of common stock available by 166,667 to a total of 426,667 under the 2018 Plan, as amended. At the 2021 Annual Stockholders Meeting of the Company held on June 10, 2021, stockholders approved an amendment to the 2018 Plan, as previously amended, whereby the Company increased the number of shares of common stock available by 513,333 to a total of 940,000 under the 2018 Plan, as amended. At the 2023 Annual Stockholders Meeting of the Company held on June 14, 2023, stockholders approved an amendment to the 2018 Plan, as previously amended, whereby the Company increased the number of shares of common stock available by 1,030,000 to a total of 1,970,000 under the 2018 Plan, as amended.

The Company has issued stock awards to employees and directors in the form of stock options and restricted stock. Options are generally granted with strike prices equal to the fair market value of a share of Imunon common stock on the date of grant. Incentive stock options may be granted to purchase shares of common stock at a price not less than 100% of the fair market value of the underlying shares on the date of grant, provided that the exercise price of any incentive stock option granted to an eligible employee owning more than 10% of the outstanding stock of Imunon must be at least 110% of such fair market value on the date of grant. Only officers and key employees may receive incentive stock options.

Option and restricted stock awards vest upon terms determined by the Compensation Committee of the Board of Directors and are subject to accelerated vesting in the event of a change of control or certain terminations of employment. The Company issues new shares to satisfy its obligations from the exercise of options or the grant of restricted stock awards.

As of December 31, 2023, the Compensation Committee of the Board of Directors approved the grant of (i) inducement stock options (the “Inducement Option Grants”) to purchase a total of 294,751 shares of Imunon common stock and (ii) inducement restricted stock awards (the “Inducement Stock Grants”) totaling 91,350 shares of Imunon common stock. Each award has a grant date of the date of grant. Each Inducement Option Grant has a weighted exercise price of $1.59 per share. Each Inducement Option Grant vests over three years, with one-third vesting on the one-year anniversary of the employee’s first day of employment with the Company and one-third vesting on the second and third anniversaries thereafter, subject to the new employee’s continued service relationship with the Company on each such date. Each Inducement Option Grant has a ten-year term and is subject to the terms and conditions of the applicable stock option agreement. Each of Inducement Stock Grant vested on the one-year anniversary of the employee’s first day of employment with the Company is subject to the new employee’s continued service relationship with the Company through such date and is subject to the terms and conditions of the applicable restricted stock agreement.

As of December 31, 2023, there were a total of 1,975,073 shares of Imunon common stock reserved for issuance under the 2018 Plan, which were comprised of 768,731 shares of Imunon common stock subject to equity awards previously granted under the 2018 Plan and 2007 Plan and 1,206,342 shares of Imunon common stock available for future issuance under the 2018 Plan. As of December 31, 2023, there are a total of 294,751 shares of Imunon common stock subject to outstanding inducement awards.

Total compensation cost related to stock options and restricted stock awards was approximately $0.8 million and $2.7 million during 2023 and 2022, respectively. Of these amounts, $0.2 million and $0.9 million were charged to research and development expenses during 2023 and 2022, respectively, and $0.6 million and $1.8 million were charged to general and administrative expenses during 2023 and 2022, respectively.

A summary of stock option awards as of December 31, 2023 and changes during the two-year period ended December 31, 2023 is presented below:

A summary of the status of the Company’s non-vested restricted stock awards as of December 31, 2023 and changes during the two-year period ended December 31, 2023, is presented below:

A summary of stock options outstanding at December 31, 2023 by price range is as follows:

The fair values of stock options granted were estimated at the date of grant using the Black-Scholes option pricing model. The Black-Scholes model was originally developed for use in estimating the fair value of traded options, which have different characteristics from Imunon’s stock options. The model is also sensitive to changes in assumptions, which can materially affect the fair value estimate. The Company used the following assumptions for determining the fair value of options granted under the Black-Scholes option pricing model:

Expected volatilities utilized in the model are based on historical volatility of the Company’s stock price. As of December 31, 2023, there was $0.4 million of total unrecognized compensation cost related to non-vested stock-based compensation arrangements. That cost is expected to be recognized over a weighted-average period of 1.8 years.

13. EARN-OUT MILESTONE LIABILITY

The total aggregate purchase price for the EGEN Acquisition 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 ofeach milestone (10% to 67%) and utilizing a discount rate based on the estimated time to achieve the milestone (1.5 to 2.5 years). The earn-out milestone liability is fair valued at the end of each quarter and any change in their value will be recognized in the Financial Statements.

On March 28, 2019, the Company and EGWU, Inc., entered into the Amended Asset Purchase Agreement. 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 had the option to make the payment upon achievement of the milestones 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 is zero at December 31, 2023.

The following is a summary of the changes in the earn-out milestone liability for 2022:

14. WARRANTS

Following is a summary of all warrant activity for the two years ended December 31, 2023:

15. IMUNON EMPLOYEE BENEFIT PLANS

Imunon maintains a defined-contribution plan under Section 401(k) of the Code. The plan covers substantially all employees over the age of twenty-one. Participating employees may defer a portion of their pretax earnings, up to the IRS annual contribution limit. The Company makes a matching contribution up to a maximum of 3% of an employee’s annual salary. The Company’s total matching contributions for the year ended December 31, 2023 and 2022 were $142,000 and $117,000, respectively.

16. LEASES

Lawrenceville, New Jersey Lease

In August 2023, the Company renewed its Lawrenceville office lease for a 24-month agreement for 9,850 square feet with monthly rent payments of approximately $22,983 to $23,394.

Huntsville, Alabama Lease

In January 2023, the Company renewed its Huntsville facility lease for a 60-month lease agreement for 11,420 square feet with monthly rent payments of approximately $28,550 to $30,903.

The following is a table of the lease payments and maturity of the Company’s operating lease liabilities as of December 31, 2023:

For 2023, operating lease expense was $646,633 and cash paid for operating leases included in operating cash flows was $644,593. For 2022, operating lease expense was $587,744 and cash paid for operating leases included in operating cash flows was $601,495. Amortization expense was approximately $472,000 and $535,000 for the years ended December 31, 2023 and 2022, respectively.

**17. COMMITMENTS AND CONTINGENCIES **

On October 29, 2020, a putative securities class action was filed against the Company and certain of its officers and directors (the “Spar Individual Defendants”) in the U.S. District Court for the District of New Jersey, captionedSpar v. Celsion Corporation, et al., Case No. 1:20-cv-15228. The plaintiff alleged that the Company and Spar Individual Defendants made false and misleading statements regarding one of the Company’s drug candidates, ThermoDox®, and brought claims for damages under Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 10b-5 promulgated thereunder against all defendants, and under Section 20(a) of the Exchange Act against the Spar Individual Defendants. On February 6, 2023, the U.S. District Court granted a Motion to Dismiss filed by the Company and Spar Individual Defendants and granted the plaintiff leave to file an amended complaint within 30 days. The plaintiff did not file an amended complaint within the 30-day deadline. In September 2023, the U.S. District Court issued an Order for Dismissal without prejudice.

In February 2021, a derivative shareholder lawsuit was filed against the Company, as the nominal defendant, and certain of its directors and officers as defendants in the U.S. District Court for the District of New Jersey, captionedFidler v. Michael H. Tardugno, et al., Case No. 3:21-cv-02662. The plaintiff alleged breach of fiduciary duty and other claims arising out of alleged statements made by certain of the Company’s directors and/or officers regarding ThermoDox®. The Company believes it has meritorious defenses to these claims and intends to vigorously contest this suit. At this stage of the case, neither the likelihood that a loss, if any, will be realized, nor an estimate of possible loss or range of loss, if any, can be determined.

18. TECHNOLOGY DEVELOPMENT AND LICENSING AGREEMENTS

On May 7, 2012, the Company entered into a long-term commercial supply agreement with Zhejiang Hisun Pharmaceutical Co. Ltd. (“Hisun”) for the production of ThermoDox® in mainland China, Hong Kong and Macau (the “China territory”). In accordance with the terms of the agreement, Hisun is responsible for providing all of the technical and regulatory support services, including the costs of all technical transfer, registration and bioequivalence studies, technical transfer costs, Imunon consultative support costs and the purchase of any necessary equipment and additional facility costs necessary to support capacity requirements for the manufacture of ThermoDox®. Imunon is obligated to repay Hisun for the aggregate amount of these development costs and fees commencing on the successful completion of three registration batches of ThermoDox®. Hisun is also obligated to meet certain performance requirements under the agreement. The agreement was initially limited to a percentage of the production requirements of ThermoDox®in the China territory with Hisun retaining an option for additional global supply after local regulatory approval in the China territory. In addition, the agreement provided that Hisun would collaborate with Imunon around the regulatory approval activities for ThermoDox®with the China State Food and Drug Administration.

On January 18, 2013, the Company entered into a technology development contract with Hisun, pursuant to which Hisun paid Imunon a non-refundable research and development fee of $5 million to support development of ThermoDox® in the China territory. Following the Company’s announcement on January 31, 2013 that the HEAT study failed to meet its primary endpoint, Imunon and Hisun agreed that the Technology Development Contract entered into on January 18, 2013 would remain in effect while the parties continued to collaborate and evaluate the next steps in relation to ThermoDox®, which include the sub-group analysis of patients in the Phase III HEAT Study for the HCC clinical indication and other activities to further the development of ThermoDox® for the Greater China market. The $5.0 million received as a non-refundable payment from Hisun in the first quarter 2013 was recorded to deferred revenue and was amortized over the 10-year term of the agreement, until such time as the parties would find a mutually acceptable path forward on the development of ThermoDox®based on findings of the ongoing post-study analysis of the HEAT study data. The Hisun agreement has expired.

19. RELATED PARTY TRANSACTION

On November 16, 2022 the Company entered into a convertible note purchase agreement with Transomic Technologies, Inc. (“Transomic”) whereby the Company purchased $375,000 of convertible notes secured by certain assets held by Transomic and warrants. Imunon purchased product from Transomic for research and development purposes – primarily delivery vectors for its vaccine program. As a result of this investment in Transomic, Imunon’s executive chairman, Mr. Michael Tardugno, was appointed to the Board of Directors of Transomic. The Company disclosed the notes receivable as a related party transaction. In December 2023, Transomic filed a formal certificate of dissolution of the company resulting in a complete write off of the convertible note and related warrants.

20. SUBSEQUENT EVENTS

On March 6, 2024, Dr. Corinne Le Goff, Pharm.D., informed the Board of Directors of her resignation from her position as President and Chief Executive Officer of the Company and from the Board, effective as of March 15, 2024. Dr. Le Goff’s resignation was not the result of any disagreement with the Company on any matter relating to its operations, policies or practices.

The Company is conducting a search for Dr. Le Goff’s successor as Chief Executive Officer. Michael H. Tardugno, the Company’s Executive Chairman, and Chief Executive Officer prior to Dr. Le Goff, has assumed day-to-day leadership of the Company until such successor is named and will continue in his role directing Company strategy.