confession: mymd

The unaudited math of hiding the shell from the MyMd quarterly confession.  That over $200 million in accumulated losses for a merger of two companies without a product or revenue is worth $42 million with $10 million in goodwill strains balance sheet credulity and tends to irritate shareholders who may or may not have filed the right suit, with the right claim in the right place. But there was a corporate jet, a generous line of credit, and nepotism at a Board composed of Taglich Brothers and alumni. 

The trailer for coming attractions is the sequel: Cystron Lives

Valuation Analysis
Total Consideration		$	42,477,346
Cash and Cash Equivalents			1,380,852
Marketable Securities			29,480,524
Other Receivables			3,026,137
Prepaid Expenses			192,314
Investment in Oravax, Inc.			1,500,000
Trade and Other Payables			(3,601,020	)
Net Tangible Assets Acquired		$	31,978,807
Excess of Purchase Price Over Net Assets Acquired to be Allocated to Goodwill		$	10,498,539

Between January 22, 2021 and March 18, 2021, nine alleged MyMD Pharmaceuticals, Inc. (p/k/a Akers Biosciences, Inc.) stockholders filed separate actions in the state and federal courts of New York, New Jersey, and Pennsylvania against MyMD Pharmaceuticals, Inc. (p/k/a Akers Biosciences, Inc.) and the members of its board of directors, respectively captioned as follows: (i) Douglas McClain v. MyMD Pharmaceuticals, Inc. (p/k/a Akers Biosciences, Inc.), et al., No. 650497/2021 (Sup. Ct., N.Y. Cty.); (ii) Owen Murphy v. MyMD Pharmaceuticals, Inc. (p/k/a Akers Biosciences, Inc.), et al., No. 650545/2021 (Sup. Ct., N.Y. Cty.); (iii) Sue Gee Cheng v. MyMD Pharmaceuticals, Inc. (p/k/a Akers Biosciences, Inc.), et al., No. 1:21-cv-01110 (S.D.N.Y.); (iv) Danny Lui v. MyMD Pharmaceuticals, Inc. (p/k/a Akers Biosciences, Inc.), et al., No. GLO-C-000006-21 (N.J. Super. Ct., Ch. Div.); (v) Alan Misenheimer v. MyMD Pharmaceuticals, Inc. (p/k/a Akers Biosciences, Inc.), et al., No. 1:21-cv-02310 (D.N.J.); (vi) Robert Wilhelm v. MyMD Pharmaceuticals, Inc. (p/k/a Akers Biosciences, Inc.), et al., No. 1:21-cv-04616 (D.N.J.); (vii) Adam Franchi v. MyMD Pharmaceuticals, Inc. (p/k/a Akers Biosciences, Inc.), et al., No. 1:21-cv-04696 (D.N.J.); (viii) Cody McBeath v. MyMD Pharmaceuticals, Inc. (p/k/a Akers Biosciences, Inc.), et al., No. 2:21-cv-01151 (E.D. Pa.); and (ix) Ray Craven v. MyMD Pharmaceuticals, Inc. (p/k/a Akers Biosciences, Inc.), et al., No. 1:21-cv-05762 (D.N.J.) (collectively, the “MYMD Merger Complaints”). 

Note 10 – Related Parties

 

Taglich Brothers, Inc.

 

On November 23, 2020, the Company retained Taglich Brothers, Inc. (“Taglich Brothers”) on a non-exclusive basis as a consultant to render consulting services, assist with review, and analysis of, financial planning and budgeting matters of the Company for a term of 12 months. Pursuant to the Consulting Agreement with Taglich Brothers, the Company agreed to pay Taglich Brothers $10,000 per month. The Company recorded $20,000 for these services during the three and six months ended June 30, 2021, which is included in administrative expenses on the Condensed Consolidated Statement of Comprehensive Loss. There were no amounts owing to Taglich Brothers as of June 30, 2021 and December 31, 2020.

 

The Secretary of the Company is the managing director of capital markets at Taglich Brothers, and a member of the board of directors is the vice president of investment banking at Taglich Brothers.

 

Mr. Jonnie Williams, Sr.

 

The Company recorded an obligation to Mr. Williams, a shareholder, for various expenses incurred on behalf of the Company between 2016 and 2019. The balance due totaled $0 and $14,577 as of June 30, 2021 and December 31, 2020. This debt was paid on April 28, 2021.

 

Supera Aviation I, LLC

 

In October 2018, the Company entered a three-year leasing agreement with Supera Aviation I, LLC, a company owned by a shareholder, for a Gulfstream IV-SP aircraft with an annual leasing fee of $600,000. As of June 30, 2021 and December 31, 2020, the Company had a balance due of $0 and $477,042. The Company incurred expenses totaling $0 and $150,000 for the three and six months ended June 30, 2021 and $150,000 and $300,000 for the three and six months ended June 30, 2020.

 

On April 28, 2021, the Company reached a negotiated settlement with Supera Aviation I, LLC to retire the $627,042 debt due under the leasing agreement for $517,384. The balance of $109,658 was forgiven and is recorded as a gain on debt forgiveness on the Condensed Consolidated Statement of Comprehensive Loss for the three and six months ended June 30, 2021.

 

Lines of credit payable

 

In November 2018, Supera entered into a revolving credit facility that allows for borrowings of up to $1,000,000 with a shareholder. The facility had an initial term of 38 months, which was extended to December 31, 2022 at which time all outstanding borrowings and accrued interest, if any, are due in full. Borrowings accrue interest at a rate of 5% per annum. As of June 30, 2021 and December 31, 2020, the principal balance totaled $0 and $599,747.

 

In May 2019, the pre-Merger MyMD entered into a revolving credit facility that allows for borrowings of up to $5,000,000 with a shareholder. The facility had an initial term of 18 months, which was extended to July 31, 2021 and further extended to December 31, 2022, at which time all outstanding borrowings and accrued interest, if any, are due in full. Borrowings accrue interest at a rate of 5% per annum. Pursuant to the terms of the agreement, the Company must issue a number of common stock options to the lender based on the total borrowings under the facility, with each dollar borrowed requiring the issuance of one common stock option. Upon issuance, each common stock option will immediately vest at an exercise price of $2.59. As of June 30, 2021 and December 31, 2020, the unamortized debt discount totaled $0 and $1,457,882 and the principal balance totaled $0 and $3,192,119. The Company recorded amortization of the debt discount totaling $0 and $608,460 during the three and six months ended June 30, 2021 and $139,342 and $278,685 during the three and six months ended June 30, 2020.

 

On April 28, 2021, in accordance with the Merger, the Company paid $3,208,426, inclusive of interest and net of the debt discount, to retire the amounts due to the shareholder under the two lines of credit as of April 28, 2021.

Acquisition and Disposition of Cystron

 

The Company acquired 100% of the membership interests of Cystron pursuant to a Membership Interest Purchase Agreement, dated March 23, 2020 (as amended by Amendment No. 1 on May 14, 2020, the “MIPA”) from certain selling parties (the “Cystron Sellers”). The acquisition of Cystron was accounted for as a purchase of an asset. Cystron is a party to a License and Development Agreement (as amended and restated on March 19, 2020, in connection with our entry into the MIPA, the “License Agreement”) with Premas Biotech PVT Ltd. (“Premas”) whereby Premas granted Cystron, amongst other things, an exclusive license with respect to Premas’ vaccine platform for the development of a vaccine against COVID-19 and other coronavirus infections. Cystron was incorporated on March 10, 2020. Since its formation and through the date of its acquisition by the Company, Cystron did not have any employees and its sole asset consisted of the exclusive license from Premas,

 

On March 18, 2021, the Company and the Cystron Sellers, which are also shareholders of Oravax, entered into a Termination and Release Agreement terminating the MIPA effective upon consummation of the Contribution Agreement. In addition, the Cystron Sellers agreed to waive any change of control payment triggered under the MIPA as a result of the Merger.

 

On April 16, 2021, pursuant to the Contribution and Assignment Agreement, dated March 18, 2021 (the “Contribution Agreement”) by and among the Company, Cystron, Oravax Medical, Inc. (“Oravax”) and, for the limited purpose set forth therein, Premas, the parties consummated the transactions contemplated therein. Pursuant to the Contribution Agreement, among other things, the Company caused Cystron to contribute substantially all of the assets associated with its business of developing and manufacturing Cystron’s COVID-19 vaccine candidate to Oravax (the “Contribution Transaction”).

 

15

On April 16, 2021, the parties consummated the Contribution Transaction. Pursuant to the Contribution Agreement, effective upon the closing of the Merger, the Company agreed (i) to contribute an amount in cash equal to $1,500,000 to Oravax and (ii) cause Cystron to contribute substantially all of the assets associated with its business or developing and manufacturing Cystron’s COVID-19 vaccine candidate to Oravax. In consideration for the Company’s commitment to consummate the Contribution Transaction, Oravax issued to the Company 390,000 shares of its capital stock (equivalent to 13% of Oravax’s outstanding capital stock on a fully diluted basis) and assumed all of the obligations or liabilities in respect of the assets of Cystron (excluding certain amounts due to Premas), including the obligations under the license agreement with Premas. In addition, Oravax agreed to pay future royalties to the Company equal to 2.5% of all net sales of products (or combination products) manufactured, tested, distributed and/or marketed by Oravax or its subsidiaries. The investment in Oravax is accounted for under the cost method. The Company’s obligation to Oravax of $1,500,000 was included in Trade and Other Payables on the Condensed Consolidated Balance Sheet as of June 30, 2021 and was paid on July 1, 2021 (Note 5).

 

As of June 30, 2021, $300,000 is included in Trade and Other Payables on the Condensed Consolidated Balance Sheet for amounts due to Premas under the Contribution Agreement and deferred to a future date to be determined by Premas. (Note: Pursuant to the Contribution Agreement, a total of $1,500,000 was owed to Premas, of which $1,200,000 was paid by pre-merger Akers Biosciences, Inc.)