10-Q 1 tm1919563d1_10q.htm FORM 10-Q

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2019

 

or

 

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________________ to __________________

 

Commission File Number: 001-38045

 

 

 

Neurotrope, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada 46-3522381
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

 

1185 Avenue of the Americas, 3rd Floor

New York, New York 10036

(973) 242-0005

(Registrant’s telephone number, including area code)

 

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)  

Name of each exchange on which

registered

Common Stock, par value $0.0001 per share

Preferred Stock Purchase Rights

   NTRP  

The Nasdaq Stock Market

The Nasdaq Stock Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ¨ Accelerated filer ¨
Non-accelerated filer x Smaller reporting company x
  Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ¨ No x

 

As of November 8, 2019, there were 13,068,023 shares of the registrant’s common stock, $0.0001 par value per share, issued and outstanding.

 

 

 

 

 

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

 

Certain statements in this report contain or may contain forward-looking statements. These statements, identified by words such as “plan,” “anticipate,” “believe,” “estimate,” “should,” “expect” and similar expressions, include our expectations and objectives regarding our future financial position, operating results and business strategy. These statements are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, our inability to obtain adequate financing, the significant length of time associated with drug development and related insufficient cash flows and resulting illiquidity, our patent portfolio, our inability to expand our business, significant government regulation of pharmaceuticals and the healthcare industry, lack of product diversification, availability of our raw materials, existing or increased competition, stock volatility and illiquidity, and the our failure to implement our business plans or strategies. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Readers should carefully review this report in its entirety, including but not limited to our financial statements and the notes thereto and the risks described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the Securities and Exchange Commission (the “SEC”). We advise you to carefully review the reports and documents we file from time to time with the SEC, particularly our quarterly reports on Form 10-Q and our current reports on Form 8-K. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to publicly release any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.

 

OTHER INFORMATION

 

When used in this report, the terms, “we,” the “Company,” “our,” and “us” refer to Neurotrope, Inc., a Nevada corporation (formerly BlueFlash Communications, Inc., a Florida corporation) and its consolidated subsidiary Neurotrope BioScience, Inc. (“Neurotrope BioScience”).

  

i

 

 

TABLE OF CONTENTS

 

 

Page

    

Part I – FINANCIAL INFORMATION

   
    
Item 1. Financial Statements (Unaudited)  1
    
Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018  1
    
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018  2
    
Condensed Consolidated Statement of Changes in Shareholders’ Equity for the three and nine months ended September 30, 2019 and 2018  3
    
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018  4
    
Notes to Condensed Consolidated Financial Statements  5
    
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations  14
    
Item 3. Quantitative and Qualitative Disclosures about Market Risk  23
    
Item 4. Controls and Procedures  23
    
Part II – OTHER INFORMATION   
    
Item 1. Legal Proceedings  24
    
Item 1A. Risk Factors  24
    
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds  25
    
Item 3. Defaults upon Senior Securities  25
    
Item 4. Mine Safety Disclosures  25
    
Item 5. Other Information  25
    
Item 6. Exhibits  25
    
Signatures  26
    

ii

 

 

PART I

FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

Neurotrope, Inc and Subsidiary

Condensed Consolidated Balance Sheets

 

(Unaudited)

 

        
         
   September 30,   December 31, 
   2019   2018 
ASSETS          
           
CURRENT ASSETS          
Cash and cash equivalents  $18,901,710   $28,854,218 
Prepaid expenses   983,947    603,324 
           
TOTAL CURRENT ASSETS   19,885,657    29,457,542 
           
Fixed assets, net of accumulated depreciation   22,767    20,842 
           
TOTAL ASSETS  $19,908,424   $29,478,384 
           
           
LIABILITIES AND SHAREHOLDERS' EQUITY          
           
CURRENT LIABILITIES          
Accounts payable  $725,770   $2,898,583 
Accrued expenses   58,863    58,492 
           
TOTAL CURRENT LIABILITIES   784,633    2,957,075 
           
Commitments and contingencies          
           
SHAREHOLDERS' EQUITY          
Preferred stock - 100,000 shares authorized, $0.0001 par value; 0 shares issued and outstanding as of September 30, 2019 and December 31, 2018   -    - 
Common stock - 150,000,000 shares authorized, $0.0001 par value; 13,068,023 shares issued and outstanding as of September 30, 2019; 12,922,370 shares issued and outstanding as of December 31, 2018   1,307    1,292 
Additional paid-in capital   105,325,764    100,202,110 
Accumulated deficit   (86,203,280)   (73,682,093)
           
TOTAL SHAREHOLDERS' EQUITY   19,123,791    26,521,309 
           
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY  $19,908,424   $29,478,384 

 

See accompanying notes to condensed consolidated financial statements.

 

 1 

 

 

Neurotrope, Inc. and Subsidiary

Condensed Consolidated Statements of Operations

 

(Unaudited)

 

   Three Months Ended   Three Months Ended   Nine Months Ended   Nine Months Ended 
   September 30,   September 30,   September 30,   September 30, 
   2019   2018   2019   2018 
OPERATING EXPENSES:                    
Research and development - related party  $-   $62,900   $-   $225,793 
Research and development   845,797    1,674,387    4,273,531    2,450,566 

General and administrative - related party

   12,500    12,500    37,500    37,500 
General and administrative   2,131,205    904,729    5,165,096    2,980,105 
Stock-based compensation - related party   47,695    60,498    173,161    235,434 
Stock-based compensation   877,525    487,738    3,173,519    1,439,939 
                     
TOTAL OPERATING EXPENSES   3,914,722    3,202,752    12,822,807    7,369,337 
                     
OTHER INCOME (EXPENSE):                    
Interest income   90,159    33,398    301,620    88,795 
                     
Net loss before income taxes   3,824,563    3,169,354    12,521,187    7,280,542 
                     
Provision for income taxes   -    -    -    - 
                     
Net loss  $3,824,563   $3,169,354   $12,521,187   $7,280,542 
                     
PER SHARE DATA:                    
                     
Basic and diluted loss per common share  $(0.29)  $(0.40)  $(0.97)  $(0.92)
                     
Basic and diluted weighted average common shares outstanding   13,039,000    7,909,600    12,967,500    7,906,800 

 

 

See accompanying notes to condensed consolidated financial statements.

 

 2 

 

 

Neurotrope, Inc. and Subsidiary

Condensed Consolidated Statement of Changes in Shareholders’ Equity

 

(Unaudited)

 

   Three Months Ended September 30, 2018 
       Additional         
   Common Stock   Paid-In   Accumulated     
   Shares   Amount   Capital   Deficit   Total 
                     
Balance July 1, 2018   7,909,693   $791   $78,676,539   $(66,770,995)  $11,906,335 
                          
Stock based compensation   -    -    548,236    -    548,236 
                          
Net loss   -    -    -    (3,169,354)   (3,169,354)
                          
Balance September 30, 2018   7,909,693   $791   $79,224,775   $(69,940,349)  $9,285,217 

 

   Nine Months Ended September 30, 2018 
       Additional         
   Common Stock   Paid-In   Accumulated     
   Shares   Amount   Capital   Deficit   Total 
                     
Balance January 1, 2018   7,895,859   $790   $77,544,976   $(62,659,807)  $14,885,959 
                          
Exercise of common stock warrants   13,834    1    4,426    -    4,427 
                          
Stock based compensation   -    -    1,675,373    -    1,675,373 
                          
Net loss   -    -    -    (7,280,542)   (7,280,542)
                          
Balance September 30, 2018   7,909,693   $791   $79,224,775   $(69,940,349)  $9,285,217 

 

   Three Months Ended September 30, 2019 
       Additional         
   Common Stock   Paid-In   Accumulated     
   Shares   Amount   Capital   Deficit   Total 
                     
Balance July 1, 2019   12,982,949   $1,298   $103,601,474   $(82,378,717)  $21,224,055 
                          
Issuance of warrants for consulting fees   -    -    427,306    -    427,306 
                          
Exercise of common stock warrants   85,074    9    371,764         371,773 
                          
Stock based compensation   -    -    925,220    -    925,220 
                          
Net loss   -    -    -    (3,824,563)   (3,824,563)
                          
Balance September 30, 2019   13,068,023   $1,307   $105,325,764   $(86,203,280)  $19,123,791 

 

   Nine Months Ended September 30, 2019 
       Additional         
   Common Stock   Paid-In   Accumulated     
   Shares   Amount   Capital   Deficit   Total 
                     
Balance January 1, 2019   12,922,370   $1,292   $100,202,110   $(73,682,093)  $26,521,309 
                          
Issuance of common stock for consulting fees   49,579    5    352,743    -    352,748 
                          
Issuance of warrants for consulting fees   -    -    1,004,398    -    1,004,398 
                          
Exercise of common stock warrants   96,074    10    419,833    -    419,843 
                          
Stock based compensation   -    -    3,346,680    -    3,346,680 
                          
Net loss   -    -    -    (12,521,187)   (12,521,187)
                          
Balance September 30, 2019   13,068,023   $1,307   $105,325,764   $(86,203,280)  $19,123,791 

 

See accompanying notes to condensed consolidated financial statements.

 

 3 

 

 

Neurotrope, Inc. and Subsidiary

Condensed Consolidated Statements of Cash Flows

 

(Unaudited)

 

   Nine Months Ended   Nine Months Ended 
   September 30, 2019   September 30, 2018 
CASH FLOW USED IN OPERATING ACTIVITIES          
Net loss  $(12,521,187)  $(7,280,542)
Adjustments to reconcile net loss to net cash used by operating activities          
Stock based compensation   3,346,680    1,675,373 
Consulting services paid by issuance of common stock   352,748    - 
Consulting services paid by issuance of common stock warrants   1,004,398      
Depreciation expense   3,289    2,516 
Change in assets and liabilities          
Increase in prepaid expenses   (380,623)   (921,469)
(Decrease) increase in accounts payable   (2,172,813)   244,457 
Increase in accounts payable - related party   -    112,900 
Increase (Decrease) in accrued expenses   371    (179,249)
Decrease in accrued expenses - related party   -    (25,000)
Total adjustments   2,154,050    909,528 
           
Net Cash Used in Operating Activities   (10,367,137)   (6,371,014)
           
CASH FLOWS USED IN INVESTING ACTIVITIES          
Purchase of fixed assets   (5,214)   (3,186)
           
Net Cash Used in Investing Activities   (5,214)   (3,186)
           
CASH FLOWS FROM FINANCING ACTIVITIES          
Net proceeds from exercise of common stock warrants   419,843    4,427 
           
Net Cash Provided by Financing Activities   419,843    4,427 
           
NET DECREASE IN CASH   (9,952,508)   (6,369,773)
           
CASH AT BEGINNING OF PERIOD   28,854,218    16,113,150 
           
CASH AT END OF PERIOD  $18,901,710   $9,743,377 

 

See accompanying notes to condensed consolidated financial statements.

 

 4 

 

 

NEUROTROPE, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

(UNAUDITED)

 

Note 1 – Organization, Nature of Business, and Liquidity:

 

Business

 

Neurotrope BioScience was incorporated in Delaware on October 31, 2012. Neurotrope BioScience was formed to advance new therapeutic and diagnostic technologies in the field of neurodegenerative disease, primarily Alzheimer’s disease (“AD”). Neurotrope BioScience is collaborating with Cognitive Research Enterprises, Inc. (formerly known as the Blanchette Rockefeller Neurosciences Institute, or BRNI) (“CRE”), a related party, in this process. The exclusive rights to certain technology were licensed by CRE to the Company on February 28, 2013 (see Note 4).

 

On September 9, 2019, the Company issued a press release announcing that the confirmatory Phase 2 study of bryostatin-1 in moderate to severe AD did not achieve statistical significance on the primary endpoint, which was change from baseline to Week 13 in the SIB total score. An average increase in SIB total score of 1.3 points and 2.1 points was observed for the bryostatin-1 and placebo groups, respectively, at Week 13. There were multiple secondary outcome measures in this trial, including the changes from baseline at Weeks 5, 9 and 15 in the SIB total score. No statistically significant difference was observed in the change from baseline in SIB total score between the bryostatin -1 and placebo treatment groups.

 

On October 8, 2019, following the Company’s announcement of top-line results from its Phase 2 study of bryostatin-1 in moderate to severe AD (as described above), the Company announced its plans to explore strategic alternatives to maximize shareholder value. The Company’s Board of Directors (the “Board”) has formed a strategic alternatives committee to aid in evaluating its alternatives. The Company is continuing to determine how to proceed with respect to its current development programs for bryostatin-1 in its effort to maximize shareholder value.

 

Liquidity

 

The Company raised approximately $20.5 million in net cash proceeds in December 2018. As of November 8, 2019, the Company had approximately $18.5 million in cash and cash equivalents. The Company expects that its existing capital resources will be sufficient to support its projected operating requirements over at least the next 24 months, which may include the continuing development of bryostatin, our novel drug targeting the activation of PKC epsilon, through potential studies that may include a follow-on clinical study, other non-clinical studies and additional studies in AD and other diseases that might benefit from using bryostatin. The balance of the funds will be used for general corporate and working capital purposes. The Company is in the process of determining how to proceed with respect to the Company’s current development programs for bryostatin. Our forecasted cash runway is based upon our current business plan, however, if an alternative plan is enacted, this runway could vary materially.

 

The Company expects to require additional capital in order to initiate and pursue potential additional development projects. The future course of the Company’s product research and development activities will be contingent upon the further analysis of results from its recently completed trial mentioned herein, in addition to the Company’s concurrent plans to explore strategic alternatives to maximize shareholder value. Any additional equity financing, if available, may not be available on favorable terms, would most likely be significantly dilutive to the Company’s current stockholders and debt financing, if available, and may involve restrictive covenants. If the Company is able to access funds through collaborative or licensing arrangements, it may be required to relinquish rights to some of its technologies or product candidates that the Company would otherwise seek to develop or commercialize on its own, on terms that are not favorable to the Company. The Company’s ability to access capital when needed is not assured and, if not achieved on a timely basis, will materially harm its business, financial condition and results of operations.

 

 5 

 

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The results for the nine months ended September 30, 2019 are not necessarily indicative of the results that the Company will have for any subsequent period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes to those statements for the year ended December 31, 2018 included in our Annual Report on Form 10-K.

 

Note 2 – Summary of Significant Accounting Policies:

 

Use of Estimates:

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make significant estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Cash and Cash Equivalents and Concentration of Credit Risk:

 

The Company considers all highly liquid cash investments with an original maturity of three months or less when purchased to be cash equivalents. At September 30, 2019, the Company’s cash balances that exceed the current insured amounts under the Federal Deposit Insurance Corporation (“FDIC”) were approximately $2.4 million. In addition, approximately $16.5 million included in cash and cash equivalents were invested in a money market fund, which is not insured under the FDIC. Cash and cash equivalents are held in banks or in custodial accounts with banks. Cash equivalents are defined as all liquid investments and money market funds with maturity from date of purchase of 90 days or less that are readily convertible into cash.

 

Fixed Assets:

 

Lease Accounting. The new accounting standard for leases, Accounting Standard Codification (“ASC”) 842, Leases, was adopted for the fiscal year beginning on January 1, 2019. Per the new standard, all leases with a lease term greater than 12 months, regardless of lease type classification, are recorded as an obligation on the balance sheet with a corresponding right-of-use asset. The Company does not have any leases greater than 12 months in duration. As a result, there is no material impact to the financial statements.

 

Fixed assets are stated at cost less accumulated depreciation. Depreciation is computed on a straight line basis over the estimated useful life of the asset, which is deemed to be between three and ten years.

 

Research and Development Costs:

 

All research and development costs, including costs to maintain or expand the Company’s patent portfolio licensed from CRE that do not meet the criteria for capitalization are expensed when incurred. FASB ASC Topic 730 requires companies involved in research and development activities to capitalize non-refundable advance payments for such services pursuant to contractual arrangements because the right to receive those services represents an economic benefit. Such capitalized advances will be expensed when the services occur and the economic benefit is realized. There were no capitalized research and development services at September 30, 2019 and December 31, 2018.

 

 6 

 

 

Loss Per Share:

 

Basic loss per common share amounts are computed by dividing net loss by the weighted average number of common shares outstanding. In periods where there is net income, the Company applies the two-class method to calculate basic and diluted net income (loss) per share of common stock, as the Company’s preferred stock is a participating security. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that otherwise would have been available to common stockholders. In periods where there is a net loss, the two-class method of computing earnings per share does not apply as the Company’s preferred stock does not contractually participate in its losses.

 

Diluted loss per share amounts are based on the weighted average number of common shares outstanding, plus the incremental shares that would have been outstanding upon the assumed exercise of all potentially dilutive stock options and warrants subject to anti-dilution limitations. All such potentially dilutive instruments were anti-dilutive as of September 30, 2019 and 2018, which were approximately 12.5 million shares and 6.5 million shares, respectively.

 

Income Taxes:

 

The Company had federal and state net operating loss carryforwards for income tax purposes of approximately $60.7 million for the period from October 31, 2012 (inception) through September 30, 2019. The net operating loss carryforwards resulted in a deferred tax asset of approximately $15.0 million at September 30, 2019. Income tax effects of share-based payments are recognized in the financial statements for those awards that will normally result in tax deductions under existing tax law. The deferred tax asset is offset by the valuation allowance.

 

The Company accounts for income taxes using the asset and liability approach which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and amounts reportable for income tax purposes. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized.

 

The Company applies the provisions of FASB ASC 740-10, Accounting for Uncertain Tax Positions, which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The standard also provides guidance on de-recognition, classification, interest and penalties, and accounting in interim periods, disclosure and transitions.

 

The Company has concluded that there are no significant uncertain tax positions requiring recognition in the accompanying financial statements. The tax period that is subject to examination by major tax jurisdictions is generally three years from the date of filing.

 

Under Section 382 of the Internal Revenue Code of 1986, as amended, changes in the Company’s ownership may limit the amount of its net operating loss carryforwards that could be utilized annually to offset future taxable income, if any. This limitation would generally apply in the event of a cumulative change in ownership of the Company of more than 50% within a three-year period. The Company has not performed a study to assess whether an ownership change for purposes of Section 382 has occurred, or whether there have been multiple ownership changes since the Company’s inception, due to the significant costs and complexities associated with such study.

 

Risks and Uncertainties:

 

The Company operates in an industry that is subject to rapid technological change, intense competition and significant government regulation. The Company’s operations are subject to significant risk and uncertainties including financial, operational, technological, regulatory and other risk. Such factors include, but are not necessarily limited to, the results of clinical testing and trial activities, the ability to obtain regulatory approval, the ability to obtain favorable licensing, manufacturing or other agreements for its product candidates and the ability to raise capital to achieve strategic objectives.

 

 7 

 

 

Stock Compensation:

 

The Company accounts for stock-based awards to employees in accordance with applicable accounting principles, which requires compensation expense related to share-based transactions, including employee stock options, to be measured and recognized in the financial statements based on a determination of the fair value of the stock options. The grant date fair value is determined using the Black-Scholes-Merton (“Black-Scholes”) pricing model. Employee stock option expense is recognized over the employee’s requisite service period (generally the vesting period of the equity grant). The Company’s option pricing model requires the input of highly subjective assumptions, including the volatility and expected term. Any changes in these highly subjective assumptions significantly impact stock-based compensation expense.

 

Recent Accounting Pronouncements

 

In July 2017, the FASB issued new guidance, ASU-2017-11, Distinguishing Liabilities from Equity (Topic 480), which changes the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features and re-characterizes the indefinite deferral of certain provisions within the guidance for distinguishing liabilities from equity. The guidance is effective for the Company beginning in the first quarter of fiscal year 2019 and has been adopted. In August 2018, the SEC issued a final rule Release No. 33-10532, “Disclosure Update and Simplification,” to amend certain disclosure requirements now seen as redundant, duplicative, overlapping, outdated or superseded in wake of recent accounting pronouncements. The amended rules became effective November 5, 2018. The Company analyzed the release in preparation of this Form 10-Q, which resulted in the additional disclosure of changes to stockholders’ equity during interim periods, as presented within this Form 10-Q within the condensed consolidated statements of stockholders’ equity. Many of the amended requirements under this Release are not applicable to the Company.

 

In November 2018, the FASB issued ASU-2018-18, Collaborative Arrangements (Topic 808). In November 2018, the FASB issued new guidance to clarify the interaction between the authoritative guidance for collaborative arrangements and revenue from contracts with customers. The new guidance clarifies that, when the collaborative arrangement participant is a customer in the context of a unit-of-account, revenue from contracts with customers guidance should be applied, adds unit-of-account guidance to collaborative arrangements guidance, and requires, that in a transaction with a collaborative arrangement participant who is not a customer, presenting the transaction together with revenue recognized under contracts with customers is precluded. The guidance is effective for the Company beginning in the first quarter of fiscal year 2020. Early adoption is permitted. The Company will assess the impact of the adoption of this guidance on its consolidated financial statements once the Company begins to generate revenue.

 

Accounting Pronouncements Adopted During the Period:

 

In February 2016, the FASB issued new guidance related to how an entity should account for lease assets and lease liabilities. The guidance specifies that an entity who is a lessee under lease agreements should recognize lease assets and lease liabilities for those leases classified as operating leases under previous FASB guidance. Accounting for leases by lessors is largely unchanged under the new guidance. The guidance is effective for the Company beginning in the first quarter of 2019. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The adoption of this standard did not have a material impact to its financial statements based upon the de minimis amount of short-term lease commitments.

 

Note 3 – Collaborative Agreements:

 

Stanford License Agreements

 

On May 12, 2014, the Company entered into a license agreement (the “Stanford Agreement”) with The Board of Trustees of The Leland Stanford Junior University (“Stanford”), pursuant to which Stanford has granted to the Company a revenue-bearing, world-wide right and exclusive license, with the right to grant sublicenses (on certain conditions), under certain patent rights and related technology for the use of bryostatin structural derivatives, known as “bryologs,” for use in the treatment of central nervous system disorders, lysosomal storage diseases, stroke, cardio protection and traumatic brain injury, for the life of the licensed patents. The Company is required by the Stanford Agreement to use commercially reasonable efforts to develop, manufacture and sell products (“Licensed Products”) in the Licensed Field of Use (as defined in the Stanford Agreement) during the term of the licensing agreement which expires upon the termination of the last valid claim of any licensed patent under this agreement. In addition, the Company must meet specific diligence milestones, and upon meeting such milestones, make specific milestone payments to Stanford. The Company also pay Stanford royalties of 3% on net sales, if any, of Licensed Products (as defined in the Stanford Agreement) and milestone payments of up to $3.7 million dependent upon stage of product development. To-date, no royalties nor milestone payments have been made.

 

 8 

 

 

On January 19, 2017, the Company entered into an additional, second license agreement with Stanford, pursuant to which Stanford has granted to the Company a revenue-bearing, world-wide right and exclusive license, with the right to grant sublicenses (on certain conditions), under certain patent rights and related technology for the use of “Bryostatin Compounds and Methods of Preparing the Same,” or synthesized bryostatin, for use in the treatment of neurological diseases, cognitive dysfunction and psychiatric disorders, for the life of the licensed patents. The Company paid Stanford $70,000 upon executing the license and is obligated to pay an additional $10,000 annually as a license maintenance fee. In addition, based upon certain milestones which include product development and commercialization, the Company will be obligated to pay up to an additional $2.1 million and between 1.5% and 4.5% royalty payments on certain revenues generated by the Company relating to the licensed technology. The Company has made all required annual maintenance payments.

 

Mt. Sinai License Agreement

 

On July 14, 2014, Neurotrope BioScience entered into an Exclusive License Agreement (the “Mount Sinai Agreement”) with the Icahn School of Medicine at Mount Sinai (“Mount Sinai”). Pursuant to the Mount Sinai Agreement, Mount Sinai granted Neurotrope BioScience (a) a revenue-bearing, world-wide right and exclusive license, with the right to grant sublicenses (on certain conditions), under Mount Sinai’s interest in certain joint patents held by the Company and Mount Sinai (the “Joint Patents”) as well as in certain results and data (the “Data Package”) and (b) a non-exclusive license, with the right to grant sublicenses on certain conditions, to certain technical information, both relating to the diagnostic, prophylactic or therapeutic use for treating diseases or disorders in humans relying on activation of Protein Kinase C Epsilon (“PKCε”), which includes Niemann-Pick Disease (the “Mount Sinai Field of Use”). The Mount Sinai Agreement allows Neurotrope BioScience to research, discover, develop, make, have made, use, have used, import, lease, sell, have sold and offer certain products, processes or methods that are covered by valid claims of Mount Sinai’s interest in the Joint Patents or an Orphan Drug Designation Application covering the Data Package (“Mount Sinai Licensed Products”) in the Mount Sinai Field of Use (as such terms are defined in the Mount Sinai Agreement).

 

Clinical Trial Services Agreements

 

On May 4, 2018, Neurotrope BioScience executed a new Services Agreement (the “New Services Agreement”) with Worldwide Clinical Trials (“WCT”). The New Services Agreement relates to services for Neurotrope BioScience’s Phase 2 confirmatory clinical study assessing the safety, tolerability and efficacy of bryostatin in the treatment of moderately severe to severe AD (the “Study”). Pursuant to the terms of the Services Agreement, WCT is providing services to target enrollment of approximately one hundred (100) Study subjects. The total estimated budget for the services, including pass-through costs, drug supply and other statistical analyses, is approximately $7.8 million. Of the total estimated Study costs, as of September 30, 2019, the Company has incurred approximately $7.2 million in expenses of which WCT has represented a total of approximately $6.8 million and approximately $400,000 of expenses have been incurred to other trial-related vendors and consultants. Of the approximately $6.8 million of expenses incurred with WCT, approximately $6.5 million has been paid with the remaining $0.3 million payable as of September 30, 2019. In addition, the Company paid $1.2 million to WCT as prepaid deposits of which the Company has utilized the entire amount as of September 30, 2019.

 

Note 4 – Related Party Transactions and Licensing / Research Agreements:

 

James Gottlieb, a director of the Company, serves as a director of CRE, and Shana Phares, also a director of the Company, serves as President and Chief Executive Officer of CRE. CRE is a stockholder of a corporation, Neuroscience Research Ventures, Inc. (“NRV, Inc.”), which owned approximately 2.2% of the Company’s outstanding common stock as of September 30, 2019.

 

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Effective October 31, 2012, Neurotrope BioScience executed a Technology License and Services Agreement (the “TLSA”) with CRE, a related party, and NRV II, LLC (“NRV II”), another affiliate of CRE, which was amended by Amendment No. 1 to the TLSA as of August 21, 2013. As of February 4, 2015, the parties entered into an Amended and Restated Technology License and Services Agreement (the “CRE License Agreement”). The CRE License Agreement provides research services and has granted Neurotrope BioScience the exclusive and nontransferable world-wide, royalty-bearing right, with a right to sublicense (in accordance with the terms and conditions described below), under CRE’s and NRV II’s respective right, title and interest in and to certain patents and technology owned by CRE or licensed to NRV II by CRE as of or subsequent to October 31, 2012, to develop, use, manufacture, market, offer for sale, sell, distribute, import and export certain products or services for therapeutic applications for AD and other cognitive dysfunctions in humans or animals (the “Field of Use”). Additionally, the TLSA specifies that all patents that issue from a certain patent application shall constitute licensed patents and all trade secrets, know-how and other confidential information claimed by such patents constitute licensed technology under the CRE License. The CRE License Agreement terminates on the later of the date (a) the last of the licensed patent expires, is abandoned, or is declared unenforceable or invalid or (b) the last of the intellectual property enters the public domain. After the initial Series A Stock financing, the CRE License Agreement required Neurotrope BioScience to enter into scope of work agreements with CRE as the preferred service provider for any research and development services or other related scientific assistance and support services.

 

In addition, the CRE License Agreement requires the Company to pay CRE a “Fixed Research Fee” of $1 million per year for five years, commencing on the date that the Company completes a Series B Preferred Stock financing resulting in proceeds of at least $25,000,000 (the “Series B Financing”). This Fixed Research Fee is not yet due. The CRE License Agreement also requires the payment of royalties ranging between 2% and 5% of the Company’s revenues generated from the licensed patents and other intellectual property, dependent upon the percentage ownership that NRV, Inc. holds in the Company. Under the CRE License Agreement, the Company was required to prepay royalty fees at a rate of 5% of all investor funds raised in the Series A or Series B Stock financings or any subsequent rounds of financing prior to a public offering, less commissions.

 

On November 12, 2015, Neurotrope BioScience, CRE, and NRV II entered into an amendment (the “Amendment”) to the TLSA pursuant to which CRE granted rights in certain technology to Neurotrope BioScience. Under the Amendment, the “Advances on Future Royalties” section of the TLSA was amended and restated to (i) eliminate the requirement that Neurotrope BioScience pay CRE prepaid royalties equal to five percent (5%) of financing proceeds received by Neurotrope BioScience in any financing prior to a public offering, and (ii) provide that Neurotrope BioScience will deliver to CRE, following each closing pursuant to a certain securities purchase agreement, an amount equal to 2.5% of the Post-PA Fees Proceeds received at such closing. In addition, the Amendment provides that on or prior to December 31, 2016, Neurotrope Bioscience shall deliver to CRE an amount equal to 2.5% of the aggregate Post-PA Fee Proceeds received at the closings. Each payment would constitute an advance royalty payment to CRE and will be offset (with no interest) against the amount of future royalty obligations payable until such time that the amount of such future royalty obligations equals in full the amount of the advance royalty payments made. “Post-PA Fee Proceeds” means the gross proceeds received, less all amounts paid to the placement agent(s), in relation to such gross proceeds. No other expenses of Neurotrope Bioscience shall be subtracted from the gross proceeds to determine the “Post-PA Fee Proceeds.” As of September 30, 2019, the Company has paid its entire obligation of $1,166,666 resulting from this Amendment.

 

In addition, on November 10, 2018, Neurotrope BioScience and CRE entered into a second amendment (the “Second Amendment”) to the TLSA to which CRE granted certain patent prosecution and maintenance rights to Neurotrope BioScience. Under the Second Amendment, Neurotrope BioScience will have the sole and exclusive right and the obligation, to apply for, file, prosecute and maintain patents and applications for the intellectual property licensed to Neurotrope BioScience, and pay all fees, costs and expenses related to the licensed intellectual property. Neurotrope BioScience paid CRE $10,000 in consideration of this Second Amendment.

 

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Note 5 – Common Stock:

 

Adoption of a Shareholder Rights Plan

 

Overview

 

On September 9, 2019, the Company announced that its Board had adopted a shareholder rights plan (the “Rights Plan”). The Rights Plan is intended to protect the interests of the Company’s stockholders and enable them realize the full potential value of their investment by reducing the likelihood that any person or group gains control of the Company through open market accumulation or other tactics without appropriately compensating all stockholders. Pursuant to the Rights Plan, the Company issued, by means of a dividend, one preferred share purchase right for each outstanding share of the Company’s common stock to shareholders of record on the close of business on September 19, 2019. Initially, these Rights (as defined below) will trade with, and be represented by, the shares of the Company’s common stock. The Rights will generally become exercisable only if any person (or any persons acting as a group) acquires 15% or more of the Company’s outstanding common stock (the “Acquiring Person”) in a transaction not approved by the Board, subject to certain exceptions, as explained below.

 

If the Rights become exercisable, all holders of Rights, other than the Acquiring Person, will be entitled to acquire shares of the Company’s common stock at a 50% discount or the Company may exchange each Right held by such holders for one share of its common stock. In such situation, Rights held by the Acquiring Person would become void and will not be exercisable. If any person at the time of the first public announcement of the Rights Plan owned more than the triggering percentage then that stockholder’s existing ownership percentage will be grandfathered, although, with certain exceptions, the Rights will become exercisable if at any time after the announcement of the Rights Plan such stockholder increases its ownership of the Company’s common stock.

 

Unless earlier redeemed, terminated or exchanged pursuant to the terms of the Rights Plan, the Rights will expire at the close of business on September 8, 2021. The Board may terminate the Rights Plan before that date if the Board determines that there is no longer a threat to shareholder value.

 

Key Features

 

On September 9, 2019, the Board declared a dividend of one preferred share purchase right (a “Right”), payable on September 19, 2019, for each share of common stock, par value $0.0001 per share, of the Company outstanding on September 19, 2019, to the stockholders of record on that date. In connection with the distribution of the Rights, the Company entered into a Rights Agreement (the “Rights Agreement”), dated as of September 9, 2019, between the Company and Philadelphia Stock Transfer, Inc., as rights agent. Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series C Preferred Stock, par value $0.0001 per share (the “Preferred Shares”), of the Company at a price of $20 per one one-thousandth of a Preferred Share represented by a Right, subject to adjustment. Each one one-thousandth of a Preferred Share entitles the holder thereof to receive (i) the same dividends and liquidation rights as if the holder held one share of common stock and will be treated the same as one share of common stock in the event of a merger, consolidation or other share exchange and (ii) one vote on all matters submitted to a vote of the Company’s stockholders, in each case subject to adjustment as described in the Certificate of Designations, Preferences and Rights of Series C Preferred Stock of Neurotrope, Inc. Until a right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company, including, without limitation, the right to vote or to receive dividends.

 

December 2018 Offering

 

On December 17, 2018, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with certain investors (the “Purchasers”). Pursuant to the terms of the Purchase Agreement, the Company agreed to sell to the Purchasers in a registered direct offering an aggregate of 5,012,677 shares of its common stock and Series G warrants to purchase up to an aggregate of 5,012,677 shares of common stock at a combined purchase price of $4.495 per share and accompanying warrant. The warrants are exercisable at a price of $4.37 per share beginning six months following the date of issuance and expire five years from the exercise date. The net proceeds to the Company from the offering were approximately $20.5 million, after deducting placement agent fees, financial advisory fees and estimated offering expenses.

 

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Note 6 – Stock Options:

 

Option Grants

 

The following is a summary of stock option activity under the stock option plans for the nine months ended September 30, 2019:

 

  

Number
of

Shares

  

Weighted-

Average

Exercise

Price

  

Weighted-

Average

Remaining

Contractual

Term

(Years)

  

Aggregate

Intrinsic

Value

(in
millions)

 
Options outstanding at January 1, 2019   1,520,246   $18.07    8.2           
Options granted   775,000   $4.17           
Less options forfeited   -   $-           
Less options expired/cancelled   -   $-           
Less options exercised   -   $-           
Options outstanding at September 30, 2019   2,295,246   $13.37    8.1   $- 
Options exercisable at September 30, 2019   1,589,599   $15.86    7.8   $- 

 

In January 2019, the Company granted stock options to purchase an aggregate of 595,000 shares of the Company’s common stock to eight members of the Board, three Company officers and two Company employees. The stock options have an exercise price of $3.93 per share and an expiration date that is ten years from the date of issuance. All of the options vest 50% at time of issuance and 50% quarterly over the subsequent two year period after the issuance date. Options to purchase an aggregate of 29,923 shares could not be exercised until, and were initially subject to, stockholder approval of an increase in shares under the Company’s 2017 Equity Incentive Plan, which approval was obtained on July 23, 2019. Pursuant to the Company’s non-employee director compensation plan, in March 2019, the Company granted stock options to purchase an aggregate of 80,000 shares of the Company’s common stock to eight members of the Board. The stock options have an exercise price of $4.06 per share and an expiration date that is ten years from the date of issuance. All of these options vest upon the first anniversary of the issuance date. Such options could not be exercised until, and were initially subject to, stockholder approval of an increase in shares under the Company’s 2017 Equity Incentive Plan, which approval was obtained on July 23, 2019 as the shareholders approved an additional 850,000 plan shares. On April 15, 2019, the Company granted its General Counsel and Chief Operating Officer options to purchase 100,000 shares of common stock. In connection with the termination of such officer’s employment effective October 31, 2019, the 56,250 shares that had not vested as of such date were forfeited and cancelled. The 43,750 stock options that had vested have an exercise price of $5.67 per share and an expiration date that is ten years from the date of issuance. Including the additional 850,000 options approved by shareholders on July 23, 2019, 740,077 options are issuable in the future.

 

As of September 30, 2019, there was approximately $3.3 million of total unrecognized compensation costs related to unvested stock options. These costs are expected to be recognized over a weighted average period of 1.5 years.

 

The Company used the Black-Scholes valuation model to calculate the fair value of stock options. The fair value of stock options issued for the nine months ended September 30, 2019 was estimated at the grant date using the following weighted average assumptions: Dividend yield 0%; Expected term 10 years; Volatility 92.2%; and Risk-free interest rate 2.70%. The weighted average grant date fair value of options granted for the nine months ended September 30, 2019 is $3.83 per option.

 

Note 7 – Common Stock Warrants:

 

The following is a summary of common stock warrant activity for the nine months ended September 30, 2019:

 

  

Number

of shares

 
Warrants outstanding January 1, 2019   10,236,232 
Warrants issued   228,000 
Warrants exercised   (96,074)
Warrants outstanding September 30, 2019   10,368,158 

 

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The Company used the Black-Scholes valuation model to calculate the fair value of warrants. The fair value of the 228,000 warrants issued for the nine months ended September 30, 2019 was estimated at the grant date using the following weighted average assumptions: Dividend yield 0%; Expected term five years; Volatility 91.9%; and Risk-free interest rate 1.65%. The weighted average grant date fair value of warrants granted for the nine months ended September 30, 2019 is $4.4053 per warrant.

 

As of September 30, 2019, the Company’s warrants by exercise price were as follows: 147,606 warrants exercisable at $0.32, 4,916,603 warrants exercisable at $4.37, 114,000 warrants exercisable at $5.31, 100,240 warrants exercisable at $6.25, 382,887 warrants exercisable at $6.40, 24,000 warrants exercisable at $7.12, 90,000 warrants exercisable at $7.13, 3,772,908 warrants exercisable at $12.80 and 819,914 warrants exercisable at $32.00.

 

Note 8 – Subsequent Events

 

Review of Strategic Alternatives

 

On October 8, 2019, the Company announced its plans to explore strategic alternatives to maximize shareholder value. The Company is continuing to determine how to proceed with respect to the Company’s current development programs for bryostatin-1 in its effort to maximize shareholder value.

 

Resignation of General Counsel and Chief Operating Officer

 

On October 23, 2019, the Company entered into a separation agreement (the “Separation Agreement”) with Michael F. Ciraolo, J.D., Ph.D., pursuant to which Dr. Ciraolo resigned from his positions as General Counsel and Chief Operating Officer of the Company. Dr. Ciraolo’s resignation was effective as of October 31, 2019 (the “Effective Date”). Under the terms of the Separation Agreement, Dr. Ciraolo will receive severance (the “Severance”) equal to (i) $83,750, which represents three month’s base salary, (ii) a pro-rated bonus in the amount of $58,625 and (iii) $3,435.90 for accrued but unused vacation time. The Severance will be paid in substantially equal installments pursuant to the Company’s regular payroll schedule over a period of two months commencing on the Company’s first practicable payroll date following the Effective Date. The Separation Agreement contains certain customary provisions regarding confidentiality and non-disparagement and provides for the release of certain claims between the parties.

 

Nasdaq Notice of Deficiency

 

On October 23, 2019, the Company received a notification letter from The Nasdaq Stock Market (“Nasdaq”) informing the Company that for the last 30 consecutive business days, the bid price of the Company’s securities had closed below $1.00 per share, which is the minimum required closing bid price for continued listing on The Nasdaq Capital Market pursuant to Listing Rule 5550(a)(2). This notice has no immediate effect on the Company’s Nasdaq listing; the Company has 180 calendar days, or until April 20, 2020, to regain compliance. To regain compliance, the closing bid price of the Company’s securities must be at least $1.00 per share for a minimum of ten consecutive business days. If the Company does not regain compliance by April 20, 2020, the Company may be eligible for additional time to regain compliance or if the Company is otherwise not eligible, the Company may request a hearing before a Hearings Panel.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes appearing elsewhere in this report. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included elsewhere in this report and our annual report on Form 10-K for the year end December 31, 2018.

 

The following discussion highlights our results of operations and the principal factors that have affected our financial condition as well as our liquidity and capital resources for the periods described, and provides information that management believes is relevant for an assessment and understanding of the statements of financial condition and results of operations presented herein. The following discussion and analysis are based on the unaudited financial statements contained in this report, which we have prepared in accordance with United States generally accepted accounting principles. You should read the discussion and analysis together with such financial statements and the related notes thereto.

 

Overview

 

We are a biopharmaceutical company with product candidates in pre-clinical and clinical development. We are principally focused on developing a product platform based upon a drug candidate called bryostatin for the treatment of Alzheimer’s disease (“AD”), which is in the clinical testing stage. We are also evaluating bryostatin for other neurodegenerative or cognitive diseases and dysfunctions, such as Fragile X syndrome, Multiple Sclerosis, and Niemann-Pick Type C disease, which have undergone pre-clinical testing. In addition, we are also in the early stages of testing bryostatin activity which may lead to applications in Leukemia and Lymphoma. Neurotrope has been a party to a technology license and services agreement with the original Blanchette Rockefeller Neurosciences Institute (“BRNI”) (which has been known as Cognitive Research Enterprises, Inc. (“CRE”) since October 2016), and its affiliate NRV II, LLC, which we collectively refer to herein as “CRE,” pursuant to which we now have an exclusive non-transferable license to certain patents and technologies required to develop our proposed products. Neurotrope BioScience was formed for the primary purpose of commercializing the technologies initially developed by BRNI for therapeutic applications for AD or other cognitive dysfunctions. These technologies have been under development by BRNI since 1999 and, until March 2013, had been financed through funding from a variety of non-investor sources (which include not-for-profit foundations, the National Institutes of Health, which is part of the U.S. Department of Health and Human Services, and individual philanthropists). From March 2013 forward, development of the licensed technology has been funded principally through the Company in collaboration with CRE. We have entered into licensing agreements with Stanford University for the exclusive use of synthetic bryostatin and for the use of bryostatin-like compounds, called Bryologs, for certain therapeutic indications.

 

Pursuant to the CRE License and as amended, Neurotrope BioScience maintains its exclusive, non-transferable (except pursuant to the CRE License’s assignment provision), world-wide, royalty-bearing right, with a right to sublicense, title and interest in and to certain patents and technology owned by CRE or its affiliates to develop, use, manufacture, market, offer for sale, sell, distribute, import and export certain products or services for therapeutic applications for AD and other cognitive dysfunctions in humans or animals (the “Field of Use”). Additionally, the CRE License specifies that all patents that issue from a certain patent application shall constitute licensed patents and all trade secrets, know-how and other confidential information claimed by such patents constitute licensed technology under the CRE License.

 

On August 23, 2013, our wholly-owned subsidiary, Neurotrope Acquisition, Inc., a corporation formed in the State of Nevada on August 15, 2013 merged with and into Neurotrope BioScience. Neurotrope BioScience was the surviving corporation in the reverse merger and became Neurotrope, Inc.’s wholly-owned subsidiary. As the result of the reverse merger, the Company’s business changed from engaging in the business of providing software solutions to deliver geo-location targeted coupon advertising to mobile internet devices, to the biotechnology business, including the development of a drug candidate called bryostatin for the treatment of AD.

 

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Review of Strategic Alternatives

 

On October 8, 2019, following our announcement of top-line results from our Phase 2 study of bryostatin-1 in moderate to severe AD (as described below), we announced our plans to explore strategic alternatives to maximize shareholder value. Our Board has formed a strategic alternatives committee to aid in evaluating our alternatives. There can be no assurance that our formal strategic review of alternatives will result in any successful transaction or other outcome. We are continuing to determine how to proceed with respect to our current development programs for bryostatin-1 in our effort to maximize shareholder value.

 

Results of Phase 2 Clinical Trial

 

On May 1, 2017, we reported certain relevant top-line results from our Phase 2 exploratory clinical trial based on a preliminary analysis of a limited portion of the complete data set generated. A comprehensive analysis of these data from the Phase 2 exploratory trial evaluating bryostatin-1 as a treatment of cognitive deficits in moderate to severe AD were recently published in the Journal of Alzheimer's Disease, vol. 67, no. 2, pp. 555-570, 2019.  A total of 147 patients were enrolled into the study; 135 patients in the mITT population (as defined below) and 113 in the Completer population (as defined below). This study was the first repeat dose study of bryostatin-1 in patients with late stage AD (defined as a Mini Mental State Exam 2 (“MMSE-2”) of 4-15), in which two dose levels of bryostatin-1 were compared with placebo to assess safety and preliminary efficacy (p < 0.1, one-tailed) after 12 weeks of treatment. The pre-specified primary endpoint, the Severe Impairment Battery (the “SIB”) (used to evaluate cognition in severe dementia), compared each dose of bryostatin-1 with placebo at Week 13 in two sets of patients: (1) the modified intent-to-treat (the “mITT”) population, consisting of all patients who received study drug and had at least one efficacy/safety evaluation, and (2) the Completer population, consisting of those patients within the mITT population who completed the 13-week dosing protocol and cognitive assessments.

 

These announced top-line results indicated that the 20 µg dose, administered after two weekly 20 µg doses during the first two weeks and every other week thereafter, met the pre-specified primary endpoint in the Completer population, but not in the mITT population. Among the patients who completed the protocol (n = 113), the patients on the 20 µg dose at 13 weeks showed a mean increase on the SIB of 1.5 vs. a decrease in the placebo group of -1.1 (net improvement of 2.6, p < 0.07), whereas, in the mITT population, the 20 µg group had a mean increase on the SIB of 1.2 vs. a decrease in the placebo group of -0.8 (net improvement of 2.0, p < 0.134). At the pre-specified 5 week secondary endpoint, the Completer patients in the 20 µg group showed a net improvement of 4.0 SIB (p < .016), and the mITT population showed a net improvement of 3.0 (p < .056). Unlike the 20 µg dose, there was no therapeutic signal observed with the 40 µg dose.

 

The Alzheimer Disease Cooperative Study Activities of Daily Living Inventory Severe Impairment version (the “ADCS-ADL-SIV”) was another pre-specified secondary endpoint. The p values for the comparisons between 20 µg and placebo for the ADCS-ADL endpoint at 13 weeks were 0.082 for the Completers and 0.104 for the mITT population.

 

Together, these initial results after preliminary analysis of this exploratory trial, provided signals that bryostatin-1, at the 20 µg dose, caused sustained improvement in important functions that are impaired in patients with moderate to severe AD, i.e., cognition and the ability to care for oneself. Since many of the patients in this study were already taking donepezil and/or memantine, the efficacy of bryostatin-1 was evaluated in the Top Line results over and above the standard of care therapeutics.

 

The safety profile of bryostatin-1 20 µg was minimally different from the placebo group except for a higher incidence of diarrhea and infusion reactions (11% versus 2% for diarrhea and 17% versus 6% for infusion reactions). Fewer adverse events were reported in patients in the 20 µg group, compared to the 40 µg group. Patients dosed with 20 µg had a dropout rate less than or identical to placebo, while patients dosed at 40 µg experienced poorer safety and tolerability, and had a higher dropout rate. Treatment emergent adverse events (“TEAEs”) were mostly mild or moderate in severity. TEAEs, including serious adverse events, were more common in the 40 µg group, as compared to the 20 µg and placebo groups. The mean age of patients in the study was 72 years and similar across all three treatment groups.

 

Following presentation of the top line results in July 2017 at the Alzheimer’s Association International Conference in London, a much more extensive analysis of a complete set of the Phase 2 trial data was conducted.

 

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On January 5, 2018, we announced that a pre-specified exploratory analysis of the comprehensive data set from our recent Phase 2 trial in patients with advanced AD found evidence of sustained improvement in cognition in patients receiving the 20 μg bryostatin regimen. As specified in the Statistical Analysis Plan (“SAP”), analysis of patients who did not receive memantine, an approved AD treatment, as baseline therapy showed greater SIB improvement. These findings suggested that this investigational drug could potentially treat AD itself and help reduce and/or reverse the progression of AD, in addition to alleviating its symptoms.

 

Comprehensive follow-on analyses found that patients in the 20 μg treatment arm showed a sustained improvement in cognition over baseline compared to the placebo group at an exploratory endpoint week 15 (30 days after last dose at week 11). These data were observed in the study population as a whole as well as in the Completers study group.

 

This follow-on analysis of the data evaluated SIB scores of patients at 15 weeks, 30 days after all dosing had been completed – a pre-specified exploratory endpoint. For the 20 μg group, patients in the mITT population (n=34) showed an overall improvement compared to controls (n=33) of 3.59 (p=0.0503) and in the Completers population (n=34) showed an overall improvement compared to controls (n=33) of 4.09 (p=0.0293). In summary, patients on the 20 μg dose showed a persistent SIB improvement 30 days after all dosing had been completed. These p-values and those below are one-tailed.

 

Additional analyses compared 20 µg dose patients who were on baseline therapy of Aricept vs. patients off Aricept. No significant differences were observed. Another analysis compared the 20 µg dose patients who were on or off baseline therapy of memantine. The secondary analysis comparing SIB scores in non-memantine versus memantine patients found the following:

 

·At week 15, non-memantine patients in the mITT Group treated with 20 μg (n=14) showed an SIB improvement of 5.88, while the placebo patients (n=11) showed a decline in their SIB scores of -0.05 for an overall treatment Δ of 5.93 from baseline (p=0.0576).

 

·At week 15, non-memantine patients in the Completers Group treated with 20 μg (n=14) showed an SIB improvement of 6.24, while the placebo patients (n=11) showed a decline in their SIB scores of -0.12 for an overall treatment Δ of 6.36 from baseline (p=0.0488).

 

·Patients taking memantine as background therapy in the 20 μg (n=20) and control (n=22) groups showed no improvement in SIB scores.

 

Memantine, an NMDA receptor antagonist, is marketed under the brand names Namenda®, Namenda® XR, and Namzaric® (a combination of memantine and donepezil) for the treatment of dementia in patients with moderate-to-severe AD. It has been shown to delay cognitive decline and help reduce disease symptoms.

 

Further follow-on analyses used trend analyses (testing the dependence of treatment effect on repeated doses).

 

In the trend analyses, we found that the SIB values did not increase over time for the placebo patients resulting in slopes that were non-significantly different from zero (e.g., ‘zero-slopes’). In contrast, the SIB slopes for the 20 μg bryostatin patients who did not receive baseline memantine were found to be statistically significant (p<.001), giving a slope (95% CI) = 0.38 (0.18, 0.57) SIB points per week in the random intercept model, and a slope (95% CI) = 0.38 (0.18, 0.59) points per week in the random intercept and slope model. These results provided evidence that SIB improvement (drug benefit) increased as the number of successive bryostatin doses increased for the 20 μg patient cohort.

 

Confirmatory Phase 2 Clinical Trial

 

On May 4, 2018, we announced a confirmatory, 100 patient, double-blinded clinical trial for the safe, effective 20 μg dose protocol for advanced AD patients not taking memantine as background therapy to evaluate improvements in SIB scores with an increased number of patients. We engaged Worldwide Clinical Trials, Inc. (“WCT”), in conjunction with consultants and investigators at leading academic institutions, to collaborate on the design and conduct of the trial, which began in April 2018. During July 2018, the first patient was enrolled in this study. Pursuant to a new Services Agreement (the “New Services Agreement”) with WCT dated as of May 4, 2018, WCT provided services relating to the trial. The total estimated budget for the services, including pass-through costs, drug supply and other statistical analyses, was approximately $7.8 million. Of the total estimated study costs, as of September 30, 2019, we have incurred approximately $7.2 million in expenses of which WCT has represented a total of approximately $6.8 million and approximately $400,000 of expenses have been incurred to other trial-related vendors and consultants. In addition, we paid $1.2 million to WCT as prepaid deposits of which we have utilized the entire amount.

 

 16 

 

 

On September 9, 2019, the Company issued a press release announcing that the confirmatory Phase 2 study of bryostatin-1 in moderate to severe AD did not achieve statistical significance on the primary endpoint, which was changed from baseline to Week 13 in the SIB total score.

 

An average increase in SIB total score of 1.3 points and 2.1 points was observed for the bryostatin-1 and placebo groups, respectively, at Week 13. There were multiple secondary outcome measures in this trial, including the changes from baseline at Weeks 5, 9 and 15 in the SIB total score. No statistically significant difference was observed in the change from baseline in SIB total score between the bryostatin -1 and placebo treatment groups.

 

The confirmatory Phase 2 multicenter trial was designed to assess the safety and efficacy of bryostatin-1 as a treatment for cognitive deficits in patients with moderate to severe AD — defined as a Mini Mental State Exam 2 score of 4-15 – who are not currently taking memantine. Patients were randomized 1:1 to be treated with either bryostatin -1 20μg or placebo, receiving 7 doses over 12 weeks. Patients on memantine, an NMDA receptor antagonist, were excluded unless they had been discontinued from memantine treatment for a 30-day washout period prior to study enrollment. The primary efficacy endpoint was the change in the SIB score between the baseline and week 13. Secondary endpoints included repeated SIB changes from baseline SIB at weeks 5, 9, 13 and 15.

 

Further analyses of this confirmatory trial are expected be completed during the fourth quarter of 2019. We are continuing to determine how to proceed with respect to our current development programs for bryostatin-1.

 

Other Development Projects

 

To the extent resources permit, we may pursue development of selected technology platforms with indications related to the treatment of various disorders, including neurodegenerative disorders such as AD, based on our currently licensed technology and/or technologies available from third party licensors or collaborators.

 

For example, we have entered into a Cooperative Research and Development Agreement (“CRADA”) with the National Cancer Institute (“NCI”) for the research and clinical development of bryostatin-1. Under the CRADA, Neurotrope will collaborate with the NCI’s Center for Cancer Research, Pediatric Oncology Branch (“POB”) to develop a Phase I clinical trial testing the safety and toxicity of bryostatin-1 in children and young adults with CD22 + leukemia and B-cell lymphoma. In the growing era of highly effective immunotherapies targeting cell-surface antigens (e.g., CAR-T cell therapy), and the recognition that antigen modulation plays a critical role in evasion of response to immunotherapy, the ability for bryostatin-1 to upregulate CD22 may serve a synergistic role in enhancing the response to a host of CD22 targeted therapies. Under the CRADA, bryostatin-1 is expected to be tested in the clinic to evaluate its ability to modulate CD22 in patients with relapsed/refractory CD22+ disease, while evaluating safety, toxicity and overall response.

 

Comparison of the nine months ended September 30, 2019 and September 30, 2018

 

The following table summarizes our results of operations for the nine months ended September 30, 2019 and 2018:

 

   Nine Months ended
September 30,		   Dollar     
   2019   2018   Change   % Change 
Revenue  $-   $-   $-    0%
Operating Expenses:                    
Research and development expenses – Related Party  $-   $225,793   $(225,793)   NA 
Research and development expenses – Other  $4,273,531   $2,450,566   $1,822,965    74.4%
General and administrative expenses – Related party  $37,500   $37,500   $-    -%
General and administrative expenses – Other  $5,165,096   $2,980,105   $2,184,991    73.3%
Stock based compensation expenses – Related Party  $173,161   $235,434   $(62,273)   (26.5)%
Stock based compensation expenses - Other  $3,173,519   $1,439,939   $1,733,580    120.4%
Interest income, net  $301,620   $88,795   $212,825    239.7%
Net loss  $12,521,187   $7,280,542   $5,240,645    72.0%

 

 17 

 

 

Revenues

 

We did not generate any revenues for the nine months ended September 30, 2019 and 2018.

 

Operating Expenses

 

Overview

 

Total operating expenses for the nine months ended September 30, 2019 were $12,822,807 as compared to $7,369,337 for the nine months ended September 30, 2018, an increase of approximately 74%. The increase in total operating expenses is due primarily to an increase in our research and development principally from our recently concluded confirmatory Phase 2 clinical trial, general and administrative and stock-based, non-cash, compensation expenses.

 

Research and Development Expenses

 

For the nine months ended September 30, 2019, we incurred $0 of research and development expenses with a related party as compared to $225,793 for the nine months ended September 30, 2018. The total amounts incurred for the nine months ended September 30, 2018 consisted of patent expenses and lab testing of drug materials. We have discontinued utilizing our licensing partner CRE for patent expense and lab testing assistance.

 

For the nine months ended September 30, 2019, we incurred $4,273,531 in research and development expenses with non-related parties as compared to $2,450,566 for the nine months ended September 30, 2018. These expenses were incurred pursuant to developing the potential AD therapeutic product, specifically expenses relating to the recently concluded confirmatory Phase 2 clinical trial for AD. Of these expenses, for the nine months ended September 30, 2019, $3,647,450 was incurred principally relating to our confirmatory clinical trial and related storage of drug product, $584,745 for clinical consulting services, $20,729 of amortization of prepaid licensing fees relating to the Stanford and Mount Sinai license agreements and $20,607 for development of alternative drug supply with Stanford University as compared to, for the nine months ended September 30, 2018, a credit of $163,400 was reflected related to closing out our AD Phase 2 clinical trial, which was substantially completed in 2017, plus $2,407,936 incurred relating to our recently concluded confirmatory clinical trial, and related storage of drug product, $156,962 for clinical consulting services, $28,652 of amortization of prepaid licensing fees relating to the Stanford and Mount Sinai license agreements and $20,416 for development of alternative drug supply with Stanford University. We expect our research and development expenses to decrease, in the short term, as our confirmatory Phase 2 clinical trial was recently concluded. Other development might increase, as our resources permit, in order to advance our potential products. We are continuing to determine how to proceed with respect to our current development programs for bryostatin-1.

 

General and Administrative Expenses

 

We incurred related party general and administrative expenses totaling $37,500 for the nine months ended September 30, 2019 and 2018. The amounts for both years are attributable to director fees paid to certain members of the Board that are affiliates of CRE.

 

 18 

 

 

We incurred $5,165,096 and $2,980,105 of general and administrative expenses for the nine months ended September 30, 2019 and 2018, respectively, an increase of approximately 73%. Of the amounts for the nine months ended September 30, 2019, as compared to the comparable 2018 period: $1,625,174 was incurred primarily for wages, bonuses, vacation pay, severance, taxes and insurance, versus $1,265,331 for the 2018 comparable period. The increase for the nine months ending September 30, 2019 is principally based upon contractual bonus payments made to certain officers of $210,000 and the hiring of a new Chief Operating Officer; $573,018 was incurred for ongoing legal expenses associated with ongoing obligations, regulatory compliance and litigation versus $399,484 for the 2018 comparable period; $1,188,685 was incurred for outside operations consulting services, versus $394,524 for the 2018 comparable period as we incurred additional cash and non-cash expenses for banking consulting; $160,078 was incurred for travel expenses, versus $120,096 for the 2018 comparable period; $972,577 was incurred for investor relations services which included adding outside service providers to replace our internal investor relations staff person paid both in cash and non-cash compensation, versus $228,876 for the 2018 comparable period; $109,555 was incurred for professional fees associated with auditing, financial, accounting and tax advisory services, versus $105,992 for the 2018 comparable period; $361,494 was incurred for insurance, versus $321,970 for the 2018 comparable period; and $174,515 was incurred for utilities, supplies, license fees, filing costs, rent, advertising and other versus $143,832 for the 2018 comparable period.

 

Stock Based Compensation Expenses

 

We incurred related party non-cash expenses totaling $173,161 and $235,434 for the nine months ended September 30, 2019 and 2018, respectively. The decrease is primarily attributable to fully expensing certain options in 2018.

 

We incurred $3,173,519 and $1,439,939 of non-related party non-cash expenses for the nine months ended September 30, 2019 and 2018, respectively. The increase for the comparable period is primarily attributable to newly issued stock options during the first three months of 2019 which included awards with accelerated vesting terms and shareholder approval of certain options issued during the first three months of 2019 expensed during the third quarter of 2019.

 

Other Income, net

 

We earned $301,620 of interest income for the nine months ended September 30, 2019 as compared to $88,795 for the nine months ended September 30, 2018 on funds deposited in interest bearing money market accounts which were received from our December 2018 capital raise.

 

Net loss and loss per share

 

We incurred losses of $12,521,187 and $7,280,542 for the nine months ended September 30, 2019 and 2018, respectively. The increased loss was primarily attributable to our increase in expenses associated with our recently concluded confirmatory Phase 2 clinical trial, the increase in our general and administrative expenses and stock-based compensation expense, offset by discontinuing our related party research and development activities. Earnings (losses) per common share were ($0.97) and ($0.92) for the nine months ended September 30, 2019 and 2018, respectively. The increase in loss per share is primarily attributable to the increase in our net loss partially offset by an increase in weighted average common shares outstanding.

 

The computation of diluted loss per share for the nine months ended September 30, 2019 excludes 10,368,158 warrants and options to purchase 2,295,246 shares of our common stock as they are anti-dilutive due to our net loss. For the nine months ended September 30, 2018, the computation excludes 5,101,440 warrants and options to purchase 1,423,961 shares of our common stock, as they are anti-dilutive due to our net loss.

 

 19 

 

 

Comparison of the three months ended September 30, 2019 and September 30, 2018

 

The following table summarizes our results of operations for the three months ended September 30, 2019 and 2018:

 

   Three Months ended
September 30,		   Dollar     
   2019   2018   Change   % Change 
Revenue  $-   $-   $-    0%
Operating Expenses:                    
Research and development expenses – Related Party  $-   $62,900   $(62,900)   NA 
Research and development expenses – Other  $845,797   $1,674,387   $(828,590)   (49.5)%
General and administrative expenses – Related party  $12,500   $12,500   $-    -%
General and administrative expenses – Other  $2,131,205   $904,729   $1,226,476    135.6%
Stock based compensation expenses – Related Party  $47,695   $60,498   $(12,803)   (21.2)%
Stock based compensation expenses - Other  $877,525   $487,738   $389,787    79.9%
Interest income, net  $90,159   $33,398   $56,761    170.0%
Net loss  $3,824,563   $3,169,354   $655,209    20.7%

 

Revenues

 

We did not generate any revenues for the three months ended September 30, 2019 and 2018.

 

Operating Expenses

 

Overview

 

Total operating expenses for the three months ended September 30, 2019 were $3,914,722 as compared to $3,202,752 for the three months ended September 30, 2018, an increase of approximately 22%. The increase in total operating expenses is due primarily to an increase in our general and administrative and stock-based, non-cash, compensation expenses offset by a decrease in our research and development expenses principally as our confirmatory Phase 2 clinical trial was winding down.

 

Research and Development Expenses

 

For the three months ended September 30, 2019, we incurred $0 of research and development expenses with a related party as compared to $62,900 for the three months ended September 30, 2018. The total amounts incurred during the three months ended September 30, 2018 consisted of patent expenses and lab testing of drug materials. We have discontinued utilizing our licensing partner CRE for patent expense and lab testing assistance.

 

For the three months ended September 30, 2019, we incurred $845,797 in research and development expenses with non-related parties as compared to $1,674,387 for the three months ended September 30, 2018. These expenses were incurred pursuant to developing the potential AD therapeutic product, specifically expenses relating to the recently concluded confirmatory Phase 2 clinical trial for AD. Of these expenses, for the three months ended September 30, 2019, $664,677 was incurred principally relating to our recently concluded confirmatory clinical trial and related storage of drug product, $165,033 for clinical consulting services, $7,480 of amortization of prepaid licensing fees relating to the Stanford and Mount Sinai license agreements and $8,607 for development of alternative drug supply with Stanford University as compared to, for the three months ended September 30, 2018, we incurred $1,575,925 relating to our recently concluded confirmatory Phase 2 clinical trial, and related storage of drug product, $84,590 for clinical consulting services, $7,917 of amortization of prepaid licensing fees relating to the Stanford and Mount Sinai license agreements and $5,955 for development of alternative drug supply with Stanford University. We expect our research and development expenses to decrease, in the short term, as our confirmatory Phase 2 clinical trial was recently concluded. Other development might increase, as our resources permit, in order to advance our potential products. 

 

General and Administrative Expenses

 

We incurred related party general and administrative expenses totaling $12,500 for the three months ended September 30, 2019 and 2018. The amounts for both years are attributable to director fees paid to certain members of the Board that are affiliates of CRE.

 

We incurred $2,131,205 and $904,729 of other general and administrative expenses for the three months ended September 30, 2019 and 2018, respectively, an increase of approximately 136%. Of the amounts for the three months ended September 30, 2019, as compared to the comparable 2018 period: $447,695 was incurred primarily for wages, bonuses, vacation pay, severance, taxes and insurance, versus $430,158 for the 2018 comparable period. The increase for the three months ending September 30, 2019 is principally based upon the hiring of our new Chief Operating Officer; $288,161 was incurred for ongoing legal expenses associated with ongoing obligations, regulatory compliance and litigation versus $120,307 for the 2018 comparable period as we incurred additional expenses relating to patent filings and maintenance costs incurred during the 2019 period; $764,747 was incurred for outside operations consulting services as we incurred additional cash and non-cash expenses for banking consulting, versus $86,250 for the 2018 comparable period; $48,769 was incurred for travel expenses, versus $29,966 for the 2018 comparable period; $350,654 was incurred for investor relations services which included adding outside service providers to replace our internal investor relations staff person paid both in cash and non-cash compensation, versus $60,690 for the 2018 comparable period; $24,768 was incurred for professional fees associated with auditing, financial, accounting and tax advisory services, versus $21,440 for the 2018 comparable period; $146,243 was incurred for insurance, versus $107,761 for the 2018 comparable period; and $60,168 was incurred for utilities, supplies, license fees, filing costs, rent, advertising and other versus $48,157 for the 2018 comparable period.

 

20

 

 

Stock Based Compensation Expenses

 

We incurred related party non-cash expenses totaling $47,695 and $60,498 for the three months ended September 30, 2019 and 2018, respectively. The decrease is primarily attributable to fully expensing certain options in 2018.

 

We incurred $877,525 and $487,738 of non-related party non-cash expenses for the three months ended September 30, 2019 and 2018, respectively. The increase for the comparable period is primarily attributable to newly issued stock options during the first three months of 2019 which included awards with accelerated vesting terms and shareholder approval of certain options issued during the first three months of 2019 expensed during the third quarter of 2019.

  

Other Income, net

 

We earned $90,159 of interest income for the three months ended September 30, 2019 as compared to $33,398 for the three months ended September 30, 2018 on funds deposited in interest bearing money market accounts which were received from our December 2018 capital raise.

 

Net loss and loss per share

 

We incurred losses of $3,824,563 and $3,169,354 for the three months ended September 30, 2019 and 2018, respectively. The increased loss was primarily attributable to our increase in general and administrative expenses and stock-based compensation expense, offset by our decrease in expenses associated with our confirmatory Phase 2 clinical trial as it was winding down and discontinuing our related party research and development activities. Earnings (losses) per common share were ($0.29) and ($0.40) for the three months ended September 30, 2019 and 2018, respectively. The decrease in loss per share is primarily attributable to the increase in our net loss partially offset by an increase in weighted average common shares outstanding.

 

The computation of diluted loss per share for the three months ended September 30, 2019 excludes 10,368,158 warrants and options to purchase 2,295,246 shares of our common stock as they are anti-dilutive due to our net loss. For the three months ended September 30, 2018, the computation excludes 5,101,440 warrants and options to purchase 1,423,961 shares of our common stock, as they are anti-dilutive due to our net loss.

 

Financial Condition, Liquidity and Capital Resources

 

Cash and Working Capital

 

Since inception, we have incurred negative cash flows from operations. As of September 30, 2019, we had an accumulated deficit of $86,203,280 and had working capital of $19,101,024 as compared to working capital of $26,500,467 as of December 31, 2018. The $7,399,443 decrease in working capital was primarily attributable to our net loss, excluding non-cash compensation and consulting expenses, of $7,817,361 plus capital expenditures of $5,214 offset by proceeds received from exercise of warrants, by outside investors, to purchase shares of common stock totaling $419,843.

 

21

 

 

Sources and Uses of Liquidity

 

Since inception, we have satisfied our operating cash requirements from the private placement of equity securities sold principally to outside investors. We expect to continue to incur expenses, resulting in losses and negative cash flows from operations, over at least the next several years as we may continue to develop AD and other therapeutic products. We anticipate that this development may include new clinical trials and additional research and development expenditures. We are continuing to determine how to proceed with respect to our current development programs for bryostatin-1.

  

   Nine Months ended September 30, 
   2019   2018 
Cash used in operating activities  $(10,367,137)  $(6,371,014)
Cash used in investing activities   (5,214)   (3,186)
Cash provided by financing activities   419,843    4,427 

 

Net Cash Used in Operating Activities

 

Cash used in operating activities was $10,367,137 for the nine months ended September 30, 2019, compared to $6,371,014 for the nine months ended September 30, 2018. The $3,996,123 increase primarily resulted from the increased net loss of approximately $5.2 million and decrease in payable of approximately $2.2 million, offset by the increase in non-cash stock-based compensation expenses of approximately $3.0 million offset by a utilization of prepaid expenses and other of approximately $540,000, for the nine months ended September 30, 2019.

  

Net Cash Used in Investing Activities

 

Net cash used in investing activities was $5,214 for the nine months ended September 30, 2019 compared to $3,186 for the nine months ended September 30, 2018. The cash used in investing activities for both periods was for capital expenditures.

 

Net Cash Provided by Financing Activities

 

Net cash provided by financing activities was $419,843 for the nine months ended September 30, 2019 compared to $4,427 for the nine months ended September 30, 2018. Net cash provided for the nine months ended September 30, 2019 and 2018 was the result of funds raised through exercise of warrants by investors in our historical private placements.

 

As of November 8, 2019, we had approximately $18.5 million in cash, cash equivalents and marketable investment securities. The Company expects that its existing capital resources will be sufficient to support our projected operating requirements over at least the next 24 months, including the potential continued development of bryostatin, our novel drug targeting the activation of PKC epsilon. We are continuing to determine how to proceed with respect to our current development programs for bryostatin-1, which will affect how our financial resources are deployed. Currently, our funds are anticipated to be used to make final payments relating to our recently concluded Phase 2 confirmatory study treating moderate to severe Alzheimer's patients, and to potentially conduct other non-clinical and research activities for our existing and other potential therapeutic products. We currently expect that the balance of the funds will be used for general corporate and working capital purposes, but that is subject to change based on how we determine to proceed with respect to our current development programs for bryostatin-1 and if we pursue any strategic alternatives. Our forecasted cash runway is based upon our current business plan, however if an alternative plan is enacted, this runway could vary materially.

 

We expect to require additional capital in order to initiate, pursue and complete all potential AD clinical trials, including the development of bryostatin for other potential product applications, or in connection with any strategic alternatives that we may pursue. Additional funding may not be available to us on acceptable terms, or at all. If we are unable to access additional funds when needed, we may not be able to initiate, pursue and complete all planned clinical trials or continue the development of our product candidates or we could be required to delay, scale back or eliminate some or all of our development programs and operations. Any additional equity financing, if available, may not be available on favorable terms, would most likely be significantly dilutive to our current stockholders and debt financing, if available, and may involve restrictive covenants. If we are able to access funds through collaborative or licensing arrangements, we may be required to relinquish rights to some of our technologies or product candidates that we would otherwise seek to develop or commercialize on our own, on terms that are not favorable to us. Our ability to access capital when needed is not assured and, if not achieved on a timely basis, will materially harm our business, financial condition and results of operations.

 

22

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

Not applicable to a smaller reporting company.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

An evaluation was performed under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, our principal executive officer and principal financial officer, respectively, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are not effective due to the material weakness resulting from a limited segregation of duties among our employees with respect to our control activities. This deficiency is the result of our limited number of employees. This deficiency may affect management’s ability to determine if errors or inappropriate actions have taken place. Management is required to apply its judgment in evaluating the cost-benefit relationship of possible changes in our disclosure controls and procedures.

 

Management has implemented certain measures including additional cash controls, dual-signature procedures, and other review and approval processes by the Company’s management team. The Company intends to hire additional personnel to allow for improved financial reporting controls and segregation of duties when the Company’s operations and revenues have grown to the point of warranting such controls.

 

Changes in Internal Controls over Financial Reporting

 

There was no change in our internal controls over financial reporting that occurred during the period covered by this report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

 

23

 

 

PART II

OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

None.

 

Item 1A. Risk Factors.

 

Except as set forth below, there have been no material changes to our risk factors contained in our Annual Report on Form 10-K for the period ended December 31, 2018. For a further discussion of our Risk Factors, refer to the “Risk Factors” discussion contained in our Annual Report on Form 10-K.

 

We are reviewing strategic alternatives and there can be no assurance that we will be successful in identifying or completing any strategic transaction, that any such strategic transaction will result in additional value for our stockholders or that the process will not have an adverse impact on our business. 

 

We have announced that our board of directors is conducting a review of strategic alternatives and our board of directors has formed a strategic alternatives committee to aid in evaluating our alternatives. These alternatives could include, but are not limited to, merger or acquisition transactions, issuing or transferring shares of our common stock, or the license, purchase or sale of specific assets, in addition to other potential actions aimed at increasing stockholder value. There can be no assurance that the review of strategic alternatives will result in the identification or consummation of any transaction. Our board of directors may also determine that our most effective strategy is to continue to execute on our current development strategy or to cease our current drug development activities altogether. The process of reviewing strategic alternatives may be time consuming and disruptive to our business operations and, if we are unable to effectively manage the process, our business, financial condition and results of operations could be adversely affected. We could incur substantial expenses associated with identifying, evaluating and negotiating potential strategic alternatives. There can be no assurance that any potential transaction or other strategic alternative, if consummated, will provide greater value to our stockholders than that reflected in the current price of our common stock. Until the review process is concluded, perceived uncertainties related to our future may result in the loss of potential business opportunities and volatility in the market price of our common stock and may make it more difficult for us to attract and retain qualified personnel and business partners.

 

Provisions in our certificate of incorporation, our bylaws or Nevada law might discourage, delay or prevent a change in control of our company or changes in our management and, therefore, depress the trading price of our common stock.

 

Provisions of our articles of incorporation, bylaws, shareholder rights plan or Nevada law may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which our stockholders might otherwise receive a premium for their shares. These provisions may also prevent or frustrate attempts by our stockholders to change the composition of our board of directors or to replace or remove our management. These provisions include:

 

•limitations on the removal of directors;

 

•advance notice requirements for stockholder proposals and nominations;

 

•limitations on the ability of stockholders to call and bring business before special meetings and to take action by written consent in lieu of a meeting;

 

•limitations on the liability of, and the provision of indemnification to, our director and officers; and

 

•the ability of our board of directors to authorize the issuance of blank check preferred stock, which could be issued with voting, liquidation, dividend and other rights superior to our common stock.

 

24

 

 

In addition, we are subject to Section 78.438 of the Nevada Revised Statutes, which prohibits a Nevada corporation from engaging in a business combination with an interested stockholder, generally a person which together with its affiliates owns, or within the last two years has owned, 10% of our voting stock, for a period of two years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner.

 

The existence of the foregoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of our company, thereby reducing the likelihood that investors could receive a premium for their shares of our common stock in an acquisition.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

Other than as set forth below, there have been no other unregistered sales of equity securities during the three months ended September 30, 2019.

 

On September 1, 2019, we issued warrants to purchase 90,000 shares of common stock to Katalyst Securities LLC as compensation for financial advisory services.

 

On September 1, 2019, we issued warrants to purchase 24,000 shares of common stock to GP Nurmenkari Inc. as compensation for investor relations services.

 

Item 3. Defaults upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

Not applicable.

 

Item 6. Exhibits.

 

Exhibit
Number		   
    
3.1  Certificate of Designations, Preferences and Rights of Series C Preferred Stock of Neurotrope, Inc., as filed with the Secretary of State of the State of Nevada on September 9, 2019 (incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on September 9, 2019).
    
3.2  Amendment to By-laws of the Company, effective as of September 9, 2019 (incorporated by reference to Exhibit 3.2 of the Registrant’s Current Report on Form 8-K filed with the SEC on September 9, 2019).
    
4.1  Rights Agreement, dated as of September 9, 2019, between Neurotrope, Inc. and Philadelphia Stock Transfer, Inc., as rights agent (incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on September 9, 2019).
    
10.1  Separation Agreement, dated as of October 23, 2019, by and between Neurotrope, Inc., Neurotrope Bioscience, Inc. and Michael F. Ciraolo, J.D., Ph.D. (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on October 25, 2019).
    
31.1*  Certification of the President and Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
    
31.2*  Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
    
32.1*  Certification of the President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
    
32.2*  Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
    
101*  The following financial information from this Quarterly Report on Form 10-Q for the period ended September 30, 2019, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Statements of Operations; (ii) the Condensed Consolidated Balance Sheets; (iii) the Condensed Consolidated Statements of Cash Flows; and (iv) the Notes to Consolidated Financial Statements, tagged as blocks of text.
    
   * Filed herewith.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Neurotrope, Inc. 
     
Date: November 12, 2019 By: /s/ Charles S. Ryan, JD, Ph.D.
  Charles S. Ryan, JD, Ph.D. 
  Chief Executive Officer (principal executive officer) 
     
Date: November 12, 2019 By: /s/ Robert Weinstein
  Robert Weinstein 
  Chief Financial Officer, Executive Vice President, 
  Secretary and Treasurer (principal financial officer) 

 

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Exhibit Index

 

Exhibit

Number

  Description
    
3.1  Certificate of Designations, Preferences and Rights of Series C Preferred Stock of Neurotrope, Inc., as filed with the Secretary of State of the State of Nevada on September 9, 2019 (incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on September 9, 2019).
    
3.2  Amendment to By-laws of the Company, effective as of September 9, 2019 (incorporated by reference to Exhibit 3.2 of the Registrant’s Current Report on Form 8-K filed with the SEC on September 9, 2019).
    
4.1  Rights Agreement, dated as of September 9, 2019, between Neurotrope, Inc. and Philadelphia Stock Transfer, Inc., as rights agent (incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on September 9, 2019).
    
10.1  Separation Agreement, dated as of October 23, 2019, by and between Neurotrope, Inc., Neurotrope Bioscience, Inc. and Michael F. Ciraolo, J.D., Ph.D. (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on October 25, 2019).
    
31.1*  Certification of the President and Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
    
31.2*  Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
    
32.1*  Certification of the President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
    
32.2*  Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
    
 101*  The following financial information from this Quarterly Report on Form 10-Q for the period ended September 30, 2019, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Statements of Operations; (ii) the Condensed Consolidated Balance Sheets; (iii) the Condensed Consolidated Statements of Cash Flows; and (iv) the Notes to Consolidated Financial Statements, tagged as blocks of text.

 

* Filed herewith.

 

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