UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
For the quarterly period ended |
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:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer |
Identification No.) | |
(Zip code) | |
(Address of principal executive offices) |
(
(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 | ||
|
| The | ||
Preferred Stock Purchase Rights | 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.
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).
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 | ◻ | ☒ | |
Non-accelerated filer | ◻ | Smaller reporting company | |
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
As of August 5, 2020, there were
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, the risk that the conditions to the closing of the merger with Metuchen Pharmaceuticals LLC contemplated by the merger agreement are not satisfied, including the failure to obtain stockholder approval for the transactions in a timely manner or at all, uncertainties as to the timing of the consummation of the mergers and the spin-off of Neurotrope's wholly-owned subsidiary, Neurotrope Bioscience, Inc., and our ability to consummate the transactions, 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, 2019, 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”).
2
TABLE OF CONTENTS
3
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
Neurotrope, Inc and Subsidiary
Condensed Consolidated Balance Sheets
(Unaudited)
June 30, | December 31, | |||||
| 2020 |
| 2019 | |||
CURRENT ASSETS | ||||||
Cash and cash equivalents |
| $ | |
| $ | |
Prepaid expenses | |
| | |||
|
|
| ||||
TOTAL CURRENT ASSETS | |
| | |||
|
|
| ||||
Fixed assets, net of accumulated depreciation | |
| | |||
|
|
| ||||
TOTAL ASSETS |
| $ | |
| $ | |
|
|
| ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
| |||
|
|
| ||||
CURRENT LIABILITIES |
|
|
| |||
Accounts payable |
| $ | |
| $ | |
Accrued expenses | |
| | |||
|
| |||||
TOTAL CURRENT LIABILITIES | |
| | |||
|
|
| ||||
Commitments and contingencies |
|
|
| |||
|
|
| ||||
SHAREHOLDERS’ EQUITY |
|
|
| |||
Convertible preferred stock - | | | ||||
Common stock - | |
| | |||
Additional paid-in capital | |
| | |||
Accumulated deficit | ( |
| ( | |||
|
|
| ||||
TOTAL SHAREHOLDERS’ EQUITY | |
| | |||
|
|
| ||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
| $ | |
| $ | |
See accompanying notes to condensed consolidated financial statements.
4
Neurotrope, Inc. and Subsidiary
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended | Three Months Ended | Six Months Ended | Six Months Ended |
| |||||||||
June 30, | June 30, | June 30, | June 30, |
| |||||||||
| 2020 |
| 2019 |
| 2020 |
| 2019 |
| |||||
| |||||||||||||
OPERATING EXPENSES: |
|
|
| ||||||||||
Research and development | $ | |
| $ | | $ | |
| $ | |
| ||
General and administrative - related party |
| |
|
| |
| |
|
| |
| ||
General and administrative |
| |
|
| |
| |
|
| |
| ||
Stock-based compensation - related party |
| |
|
| |
| |
|
| |
| ||
Stock-based compensation |
| |
|
| |
| |
|
| |
| ||
|
|
| |||||||||||
TOTAL OPERATING EXPENSES |
| |
|
| |
| |
|
| |
| ||
|
|
| |||||||||||
OTHER INCOME (EXPENSE): |
|
|
| ||||||||||
Interest income |
| |
|
| |
| |
|
| |
| ||
|
|
| |||||||||||
Net loss before income taxes |
| |
|
| |
| |
|
| |
| ||
|
|
| |||||||||||
Provision for income taxes |
| |
|
| |
| |
|
| |
| ||
|
|
| |||||||||||
Net loss | $ | | $ | | $ | | $ | |
| ||||
|
|
| |||||||||||
PER SHARE DATA: |
|
|
| ||||||||||
|
|
| |||||||||||
Basic and diluted loss per common share | $ | | $ | | $ | | $ | |
| ||||
|
|
| |||||||||||
Basic and diluted weighted average common shares outstanding |
| |
|
| |
| |
|
| |
|
See accompanying notes to condensed consolidated financial statements.
5
Neurotrope, Inc. and Subsidiary
Condensed Consolidated Statement of Changes in Shareholders’ Equity
(Unaudited)
Three Months Ended June 30, 2019 | ||||||||||||||||||||
| Additional | |||||||||||||||||||
| Common Stock |
| Preferred Stock | Paid-In | Accumulated | |||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Total | |||||||
Balance April 1, 2019 | | $ | | $ | | $ | | $ | | $ | ( |
| $ | | ||||||
Issuance of common stock for consulting fees | | | | | | | | |||||||||||||
Issuance of warrants for consulting fees | | | | | | | | |||||||||||||
Exercise of common stock warrants | | | | | | | | |||||||||||||
Stock based compensation | | | | | | | | |||||||||||||
Net loss | | | | | | ( | ( | |||||||||||||
Balance June 30, 2019 | | $ | | | $ | | $ | | $ | ( |
| $ | 21,224,050 |
Six Months Ended June 30, 2019 | ||||||||||||||||||||
| Additional | |||||||||||||||||||
| Common Stock |
|
| Preferred Stock | Paid-In | Accumulated | ||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Total | |||||||
Balance January 1, 2019 | | $ | | $ | — | $ | — | $ | | $ | ( |
| $ | | ||||||
Issuance of common stock for consulting fees | | | | | | | | |||||||||||||
Issuance of warrants for consulting fees | | | | | | | | |||||||||||||
Exercise of common stock warrants | | | — | — | | — | | |||||||||||||
Stock based compensation | — | — | — | — | | — | | |||||||||||||
Net loss | — | — | — | — | — | ( | ( | |||||||||||||
Balance June 30, 2019 | | $ | | — | $ | — | $ | | $ | ( |
| $ | 21,224,055 |
6
Three Months Ended June 30, 2020 | ||||||||||||||||||||
Additional | ||||||||||||||||||||
| Common Stock |
|
| Preferred Stock | Paid-In | Accumulated | ||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Total | |||||||
Balance April 1, 2020 | | $ | | $ | | $ | |
| $ | | $ | ( | $ | | ||||||
Stock based compensation | | | | | | | | |||||||||||||
Issuance of warrants for consulting fees | | | | | | | | |||||||||||||
Sale of preferred stock and warrants | | | | | | | | |||||||||||||
Conversion of preferred stock to common stock | | | ( | | ( | | ( | |||||||||||||
Net loss | | | | | | ( | ( | |||||||||||||
Balance June 30, 2020 | | $ | | | $ | |
| $ | | $ | ( | $ | |
Six Months Ended June 30, 2020 | ||||||||||||||||||||
Additional | ||||||||||||||||||||
| Common Stock |
|
| Preferred Stock | Paid-In | Accumulated | ||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Total | |||||||
Balance January 1, 2020 | | $ | | | $ | | $ | | $ | ( |
| $ | | |||||||
Stock based compensation | | | | | | | $ | | ||||||||||||
Issuance of warrants for consulting fees | | | | | | | | |||||||||||||
Sale of preferred stock and warrants | | | | | | | | |||||||||||||
Conversion of preferred stock to common stock | | | ( | ( | ( | | | |||||||||||||
Net loss | | | | | | ( | ( | |||||||||||||
Balance June 30, 2020 | | $ | | | $ | | $ | | $ | ( |
| $ | |
See accompanying notes to condensed consolidated financial statements.
7
Neurotrope, Inc. and Subsidiary
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended | Six Months Ended | |||||
| June 30, 2020 |
| June 30, 2019 | |||
CASH FLOW USED IN OPERATING ACTIVITIES |
| |||||
Net loss | $ | ( | $ | ( | ||
Adjustments to reconcile net loss to net cash used by operating activities |
| |||||
Stock based compensation |
| |
|
| | |
Consulting services paid by issuance of common stock | | | ||||
Consulting services paid by issuance of common stock warrants | | | ||||
Depreciation expense |
| |
|
| | |
Change in assets and liabilities |
| |||||
Decrease in prepaid expenses |
| ( |
|
| ( | |
Increase (decrease) in accounts payable |
| |
|
| ( | |
Increase (decrease) in accrued expenses |
| |
|
| ( | |
Total adjustments |
| |
|
| | |
| ||||||
Net Cash Used in Operating Activities |
| ( |
|
| ( | |
|
|
| ||||
CASH FLOWS USED IN INVESTING ACTIVITIES |
| |||||
Purchase of fixed assets |
| ( |
|
| ( | |
| ||||||
Net Cash Used in Investing Activities |
| ( |
|
| ( | |
| ||||||
CASH FLOWS FROM FINANCING ACTIVITIES |
| |||||
Net proceeds from exercise of common stock warrants |
| |
|
| | |
Net proceeds from issuance of preferred stock and warrants |
| |
|
| | |
| ||||||
Net Cash Provided by Financing Activities |
| |
|
| | |
| ||||||
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS |
| |
|
| ( | |
| ||||||
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD |
| |
|
| | |
| ||||||
CASH AND EQUIVALENTS AT END OF PERIOD | $ | | $ | |
See accompanying notes to condensed consolidated financial statements.
8
NEUROTROPE, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 – Organization, Nature of Business, and Liquidity:
Organization & 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 Neurotrope Bioscience on February 28, 2013 (see Note 4, “Related Party Transactions and Licensing / Research Agreements”).
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 patients did not achieve statistical significance on the primary endpoint, which was change from baseline to Week 13 in the Severe Impairment Battery (“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 January 22, 2020, the Company announced the completion of an additional analysis in connection with the confirmatory Phase 2 study, which examined moderately severe to severe AD patients treated with Byrostatin-1 in the absence of memantine. To adjust for the baseline imbalance observed in the study, a post-hoc analysis was conducted using paired data for individual patients, with each patient as his/her own control. For the pre-specified moderate stratum (i.e., MMSE-2 baseline scores 10-15), the baseline value and the week 13 value were used, resulting in pairs of observations for each patient. The changes from baseline for each patient were calculated and a paired t-test was used to compare the mean change from baseline to week 13 for each patient. A total of 65 patients had both baseline and week 13 values, from which there were 32 patients in the Bryostatin-1 treatment group and 33 patients in the placebo group. There was a statistically significant improvement over baseline (4.8 points) in the mean SIB at week 13 for subjects in the Bryostatin-1 treatment group (32 subjects), paired t-test p < 0.0076, 2-tailed. In the placebo group (33 subjects), there was also a statistically significant increase from baseline in the mean SIB at week 13, for paired t-test p < 0.0144, consistent with the placebo effect seen in the overall 203 study. Although there was a signal of Bryostatin-1’s benefit for the moderately severe stratum, the difference between the Bryostatin-1 and placebo treatment groups was not statistically significant (p=0.2727). The Company, while proceeding with its next Phase 2 clinical trial, is determining how to proceed with respect to its development programs for Bryostatin-1.
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, the Company announced its plans to explore strategic alternatives to maximize shareholder value. The Company’s Board of Directors (the “Board”) formed a strategic alternatives committee to evaluate its alternatives, including, but not necessarily limited to, collaborations or merger and acquisition transactions (see below- “Planned Merger and Spin-Off”.)
Planned Merger and Spin-Off
On May 17, 2020, the Company, Petros Pharmaceuticals, Inc., a Delaware corporation formed for the purposes of effecting transactions contemplated by the Merger Agreements (as defined below) (“Petros”), PM Merger Sub 1, LLC, a Delaware limited liability company and a wholly-owned subsidiary of Petros (“Merger Sub 1”), PN Merger Sub 2, Inc., a Delaware corporation and a wholly-owned subsidiary of Petros (“Merger Sub 2”), and Metuchen Pharmaceuticals LLC, a Delaware limited liability company (“Metuchen”), entered into an Agreement and Plan of Merger (the “Original Merger Agreement”), as amended by the First Amendment to the Original Merger Agreement (the “Merger Agreement Amendment” and, together with the Original Merger Agreement, the “Merger Agreement”) dated as of July 23, 2020, which provides for (1) the merger of Merger Sub 1 with and into Metuchen, with Metuchen surviving as a wholly-owned subsidiary of Petros (the “Metuchen Merger”) and (2) the merger of Merger Sub 2 with and into the Company, with the Company surviving as a wholly-owned subsidiary of Petros (the “Neurotrope Merger” and together with the Metuchen Merger, the “Mergers”).
9
As a result of the Metuchen Merger, each outstanding common unit or preferred unit of Metuchen will be exchanged for a number of shares of Petros common stock, par value $
Upon the Closing, it is anticipated that current Neurotrope stockholders will own approximately
In addition, as a condition to the consummation of the Mergers, Neurotrope is required to approve a spin-off transaction (the “Spin-Off”) whereby (i) any cash in excess of $
Consummation of the Mergers is subject to certain closing conditions, including, among other things, approval by the common stockholders of the Company and Metuchen and the listing of the Petros common stock on the Nasdaq Stock Market after the Mergers. The Company has not yet set a date for its shareholder meeting. The Merger Agreement contains certain termination rights for both the Company and Metuchen, and further provides that, upon termination of the Merger Agreement under specified circumstances, either party may be required to pay the other party a termination fee of $
On July 23, 2020, the Company, Petros, Merger Sub 1, Merger Sub 2 and Metuchen entered into the Merger Agreement Amendment. See Note 9, “Subsequent Events”.
Liquidity
As of June 30, 2020, the Company had approximately $
The future course of the Company’s operations and research and development activities will include a continuing Phase 2, 100 patient clinical trial which is planned to commence during the third quarter 2020 (see Note 5 below) and will be contingent upon the Company’s current plans regarding the strategic alternative disclosed above under "Planned Merger and Spin-Off”.
10
Any additional equity financing, if available, may not be on favorable terms and would likely be significantly dilutive to the Company’s current stockholders and debt financing, if available, 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.
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. In the opinion of management, the unaudited condensed consolidated financial statements included herein contain all adjustments necessary to present fairly the Company's financial position and the results of its operations and cash flows for the interim periods presented. Such adjustments are of a normal recurring nature. The results of operations for the six months ended June 30, 2020 may not be indicative of results for the full year. 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, 2019 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 June 30, 2020, the Company’s cash balances that exceed the current insured amounts under the Federal Deposit Insurance Corporation (“FDIC”) were approximately $
Fixed Assets:
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
Research and Development Costs:
All research and development costs, including costs to maintain or expand the Company’s patent portfolio licensed from CRE 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
11
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 June 30, 2020 and 2019, which were approximately
Income Taxes:
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 had federal and state net operating loss carryforwards for income tax purposes of approximately $
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
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 limited supply of raw materials, the ability to obtain favorable licensing, manufacturing or other agreements, including risk associated with our CRE licensing agreement, for its product candidates and the ability to raise capital to achieve strategic objectives.
12
CRE has entered into a material transfer agreement with the National Cancer Institute of the National Institutes of Health (“NCI”), pursuant to which the NCI has agreed to supply bryostatin required for the Company’s pre-clinical research and clinical trials. This agreement does not provide for a sufficient amount of bryostatin to support the completion of all of the clinical trials that the Company is required to conduct in order to seek U.S. Food and Drug Administration (“FDA”) approval of bryostatin for the treatment of AD. Therefore, CRE or the Company will have to enter into one or more subsequent agreements with the NCI for the supply of additional amounts of bryostatin. If CRE or the Company are unable to secure such additional agreements, or if the NCI otherwise discontinues for any reason supplying the Company with bryostatin, then the Company would have to either secure another source of bryostatin or discontinue its efforts to develop and commercialize bryostatin for the treatment of AD. In the interest of mitigating this risk, on June 9, 2020, the Company entered into a supply agreement (the "Supply Agreement") with BryoLogyx Inc. ("BryoLogyx"), pursuant to which BryoLogyx agreed to serve as the Company's exclusive supplier of synthetic Bryostatin-1. Pursuant to the terms of the Supply Agreement, the Company has agreed to place an initial order of
Stock Compensation:
The Company accounts for stock-based awards to employees and consultants in accordance with applicable accounting principles, which requires compensation expense related to share-based transactions, including employee stock options and consultant warrants, to be measured and recognized in the financial statements based on a determination of the fair value of the stock options or warrants. The grant date fair value is determined using the Black-Scholes-Merton (“Black-Scholes”) pricing model. Employee stock option and consulting expenses are recognized over the employee’s or consultant’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 can significantly impact stock-based compensation expense.
Total stock-based compensation for the six months ended June 30, 2020 was $
Recent Accounting Pronouncements
Accounting Pronouncements Adopted During the Period:
In August 2018 the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. This standard modifies certain disclosure requirements on fair value measurements. This standard became effective for the Company on January 1, 2020. The adoption of this standard did not have a material impact on the Company’s financial statements.
Note 3 – Collaborative Agreements:
Stanford License Agreements
On May 12, 2014, Neurotrope Bioscience 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 Neurotrope Bioscience 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. Neurotrope Bioscience 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. Neurotrope Bioscience must also pay Stanford royalties of
13
On January 19, 2017, Neurotrope Bioscience entered into an additional, second license agreement with Stanford, pursuant to which Stanford has granted to Neurotrope Bioscience 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 $
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).
The Company will pay Mt. Sinai milestone payments of $
Agreements with BryoLogyx
On June 9, 2020, the Company entered into a supply agreement (the “Supply Agreement”) with BryoLogyx Inc. (“BryoLogyx”), pursuant to which BryoLogyx agreed to serve as the Company’s exclusive supplier of synthetic Bryostatin-1. Pursuant to the terms of the Supply Agreement, the Company has agreed to place an initial order of one gram of current good manufacturing practice (“cGMP”) synthetic Bryostatin-1 as an active pharmaceutical ingredient to be used in a drug product (“API”), to be shipped by BryoLogyx within 60 days after the date upon which BryoLogyx obtains cGMP certification for production of API, which certification shall be obtained no later than March 31, 2021. The Company may place additional orders for API beyond the initial order by making a written request to BryoLogyx no later than six months prior to the requested delivery date.
In connection with the Supply Agreement, on June 9, 2020, the Company entered into a transfer agreement (the “Transfer Agreement”) with BryoLogyx. Pursuant to the terms of the Transfer Agreement, the Company agreed to assign and transfer to BryoLogyx all of the Company’s right, title and interest in and to that certain Cooperative Research and Development Agreement, dated as of January 29, 2019 (the “CRADA”), by and between the Company and the U.S. Department of Health and Human Services, as represented by the NCI, under which Bryostatin-1’s ability to modulate CD22 in patients with relapsed/refractory CD22+ disease has been evaluated to date. The transfer is subject to the receipt of NCI’s consent. Pursuant to guidance provided by NCI, Neurotrope’s CRADA has been cancelled and BryoLogyx has initiated a request for a new CRADA in its name. BryoLogyx will be filing its own investigational new drug application (“IND”) for CD22 with the FDA. As consideration for the transfer of rights to the CRADA, BryoLogyx has agreed to pay to the Company
14
Note 4 – Related Party Transactions and Licensing / Research Agreements:
Cognitive Research Enterprises, Inc. (“CRE”)
James Gottlieb, who resigned as a director of the Company on February 21, 2020, serves as a director of CRE, and Shana Phares, who resigned as a director of the Company on February 25, 2020, served as President and Chief Executive Officer of CRE. CRE is a stockholder of a corporation, Neuroscience Research Ventures, Inc. (“NRV, Inc.”), which owned approximately
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. There were no such statements of work agreements required to be entered into during the six months ended June 30, 2020 or fiscal year 2019.
In addition, the CRE License Agreement requires the Company to pay CRE a “Fixed Research Fee” of $
In addition, on November 10, 2018, Neurotrope Bioscience and CRE entered into a second amendment (the “Second Amendment”) to the TLSA pursuant 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 $
Note 5 – Commitments:
Clinical Trial Services Agreements
On May 4, 2018, Neurotrope Bioscience executed a Services Agreement (the “2018 Services Agreement”) with Worldwide Clinical Trials, Inc. (“WCT”). The 2018 Services Agreement related 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 “2018 Study”). Pursuant to the terms of the 2018 Services Agreement, WCT provided services to target enrollment of approximately one hundred (
On July 23, 2020, Neurotrope Bioscience entered into an additional services agreement (the “2020 Services Agreement”) with WCT. The 2020 Services Agreement relates to services for the Company’s Phase 2 clinical study assessing the safety, tolerability and
15
long-term efficacy of bryostatin in the treatment of moderately severe AD subjects not receiving memantine treatment (the “2020 Study”).
Pursuant to the terms of the 2020 Services Agreement, WCT will provide services to enroll approximately one hundred (
Pursuant to the terms of a letter of intent between Neurotrope Bioscience and WCT, dated May 28, 2020, which anticipated the entry into the 2020 Services Agreement, Neurotrope Bioscience paid to WCT a cash fee of approximately $
Consulting Agreements
On August 4, 2016, the Company entered into a consulting agreement with SM Capital Management, LLC (“SMCM”), a limited liability company owned and controlled by the Company’s Chairman of the Board, Mr. Joshua N. Silverman (the “Consulting Agreement”). Mr. Silverman was appointed to the Board on August 4, 2016. Pursuant to the Consulting Agreement, SMCM shall provide consulting services which shall include, but not be limited to, providing business development, financial communications and management transition services, for a
Effective as of June 1, 2019, the Company entered into a consulting agreement with Katalyst Securities LLC (“Katalyst”), pursuant to which Katalyst agreed to provide investment banking consulting services to the Company (the “Katalyst Agreement”). The term of the agreement continues until the second anniversary from the effective date and may be canceled by either Katalyst or the Company with
16
Effective as of June 5, 2019, the Company entered into a consulting agreement with GP Nurmenkari, Inc. (“GPN”) (the “GPN Agreement”), pursuant to which GPN agreed to provide investment banking consulting services to the Company. The term of the agreement continues until the second anniversary from the effective date and may be canceled by either GPN or the Company with
Note 6 – Common and Preferred 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,
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
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 $
17
January 2020 Offering
On January 22, 2020, the Company entered into a securities purchase agreement with certain institutional investors and certain pre-existing high net worth individual investors. Pursuant to the terms of the purchase agreement, the Company issued to the purchasers in a registered offering an aggregate of
In connection with the offering, on January 22, 2020, the Company filed with the Secretary of State of the State of Nevada a Certificate of Designation of Preferences, Rights and Limitations of Series D Convertible Preferred Stock (the “Series D Certificate of Designation”) establishing and designating the rights, powers and preferences of the Series D Preferred Stock. The Company designated
During the six months ended June 30, 2020,
“Universal Shelf” Registration Statement
On April 17, 2020, the Company filed a “universal shelf” registration statement on Form S-3 with the Securities and Exchange Commission (the “SEC”), which provides for the issuance by the Company of up to $
Note 7 – Stock Options:
Option Grants
The following is a summary of stock option activity under the stock option plans for the six months ended June 30, 2020:
| Weighted- | |||||||||
| Average | |||||||||
| Weighted- | Remaining | Aggregate | |||||||
| Average | Contractual | Intrinsic | |||||||
| Number of | Exercise | Term | Value | ||||||
|
| Shares |
| Price |
| (Years) |
| ($ in thousands) | ||
Options outstanding at January 1, 2020 |
| |
| $ | | | ||||
Options granted |
| |
| $ | |
| | |||
Less options forfeited |
| ( |
| $ | |
| ||||
Less options expired/cancelled |
| ( |
| $ | |
| ||||
Less options exercised |
| |
| $ | |
| ||||
Options outstanding at June 30, 2020 |
| |
| $ | | $ | | |||
Options exercisable at June 30, 2020 |
| |
| $ | | $ | |
18
Pursuant to the Company’s non-employee director compensation plan, in March 2020, the Company granted stock options to purchase an aggregate of
As of June 30, 2020, there was approximately $
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 six months ended June 30, 2020 was estimated at the grant date using the following weighted average assumptions: Dividend yield