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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2020

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

Graphic

Neurotrope, Inc.

(Exact name of registrant as specified in its charter)

Nevada

46-3522381

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer

1185 Avenue of the Americas, 3rd Floor

Identification No.)

New York, New York

(Zip code)

(Address of principal executive offices)

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

 

NTRP

 

The Nasdaq Stock Market

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. Yes   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   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

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 23,777,539 shares of the registrant’s common stock, $0.0001 par value per share, issued and outstanding.

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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

TABLE OF CONTENTS

    

Page

Part I – FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

4

Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019

4

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2020 and 2019

5

Condensed Consolidated Statement of Changes in Shareholders’ Equity for the three and six months ended June 30, 2020 and 2019

6

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019

8

Notes to Condensed Consolidated Financial Statements

9

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

21

Item 3. Quantitative and Qualitative Disclosures about Market Risk

29

Item 4. Controls and Procedures

29

Part II – OTHER INFORMATION

Item 1. Legal Proceedings

30

Item 1A. Risk Factors

30

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

31

Item 3. Defaults upon Senior Securities

31

Item 4. Mine Safety Disclosures

31

Item 5. Other Information

31

Item 6. Exhibits

32

Signatures

34

3

Table of Contents

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

 

$

30,251,180

 

$

17,382,038

Prepaid expenses

589,559

 

494,112

 

TOTAL CURRENT ASSETS

30,840,739

 

17,876,150

 

Fixed assets, net of accumulated depreciation

24,677

 

21,671

 

TOTAL ASSETS

 

$

30,865,416

 

$

17,897,821

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

CURRENT LIABILITIES

 

Accounts payable

 

$

967,632

 

$

413,081

Accrued expenses

99,946

 

65,975

 

TOTAL CURRENT LIABILITIES

1,067,578

 

479,056

 

Commitments and contingencies

 

 

SHAREHOLDERS’ EQUITY

 

Convertible preferred stock - 100,000 shares authorized, $0.0001 par value; 500 shares issued and outstanding as of June 30, 2020, 0 shares issued and outstanding as of December 31, 2019 Liquidation preference of $500,000 and $0 as of June 30, 2020 and December 31, 2019, respectively.

1

Common stock - 150,000,000 shares authorized, $0.0001 par value; 23,674,089 shares issued and outstanding as of June 30,2020; 13,068,023 shares issued and outstanding as of December 31, 2019;

2,368

 

1,307

Additional paid-in capital

124,081,782

 

106,234,301

Accumulated deficit

(94,286,313)

 

(88,816,843)

 

TOTAL SHAREHOLDERS’ EQUITY

29,797,838

 

17,418,765

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$

30,865,416

 

$

17,897,821

See accompanying notes to condensed consolidated financial statements.

4

Table of Contents

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

$

438,423

  

$

1,566,441

$

594,470

  

$

3,427,734

  

General and administrative - related party

 

  

 

12,500

 

7,361

  

 

25,000

  

General and administrative

 

2,165,064

  

 

1,705,391

 

3,953,051

  

 

3,033,891

  

Stock-based compensation - related party

 

  

 

47,177

 

21,001

  

 

125,466

  

Stock-based compensation

 

404,280

  

 

780,519

 

1,040,095

  

 

2,295,994

  

  

  

  

TOTAL OPERATING EXPENSES

 

3,007,767

  

 

4,112,028

 

5,615,978

  

 

8,908,085

  

  

  

  

OTHER INCOME (EXPENSE):

  

  

  

Interest income

 

75,641

  

 

104,562

 

146,508

  

 

211,461

  

  

  

  

Net loss before income taxes

 

2,932,126

  

 

4,007,466

 

5,469,470

  

 

8,696,624

  

  

  

  

Provision for income taxes

 

  

 

 

  

 

  

  

  

  

Net loss

$

2,932,126

$

4,007,466

$

5,469,470

$

8,696,624

  

  

  

  

PER SHARE DATA:

  

  

  

  

  

  

Basic and diluted loss per common share

$

0.13

$

0.31

$

0.27

$

0.67

  

  

  

  

Basic and diluted weighted average common shares outstanding

 

22,095,600

  

 

12,940,100

 

20,155,900

  

 

12,931,200

  

See accompanying notes to condensed consolidated financial statements.

5

Table of Contents

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

12,922,370

$

1,292

$

$

$

101,795,874

$

(78,371,251)

 

$

23,425,915

Issuance of common stock for consulting fees

49,579

5

352,743

352,743

Issuance of warrants for consulting fees

577,092

577,092

Exercise of common stock warrants

11,000

1

48,069

48,070

Stock based compensation

827,696

827,696

Net loss

(4,007,466)

(4,007,466)

Balance June 30, 2019

12,982,949

$

1,298

$

$

103,601,474

$

(82,378,717)

 

$

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

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

577,092

577,092

Exercise of common stock warrants

11,000

1

48,069

48,070

Stock based compensation

2,421,460

2,421,460

Net loss

(8,696,624)

(8,696,624)

Balance June 30, 2019

12,982,949

$

1,298

$

$

103,601,474

$

(82,378,717)

 

$

21,224,055

6

Table of Contents

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

20,948,330

$

2,096

$

4,998

$

1

 

$

123,527,245

$

(91,354,187)

$

32,175,155

Stock based compensation

404,280

404,280

Issuance of warrants for consulting fees

150,529

150,529

Sale of preferred stock and warrants

Conversion of preferred stock to common stock

2,725,759

272

(4,498)

(272)

(0)

Net loss

(2,932,126)

(2,932,126)

Balance June 30, 2020

23,674,089

$

2,368

500

$

1

 

$

124,081,782

$

(94,286,313)

$

29,797,838

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

13,068,023

$

1,307

$

$

106,234,301

$

(88,816,843)

 

$

17,418,765

Stock based compensation

1,061,096

$

1,061,096

Issuance of warrants for consulting fees

267,459

267,459

Sale of preferred stock and warrants

18,000

2

16,519,986

16,519,988

Conversion of preferred stock to common stock

10,606,066

1,061

(17,500)

(1)

(1,060)

Net loss

(5,469,470)

(5,469,470)

Balance June 30, 2020

23,674,089

$

2,368

500

$

1

$

124,081,782

$

(94,286,313)

 

$

29,797,838

See accompanying notes to condensed consolidated financial statements.

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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

$

(5,469,470)

$

(8,696,624)

Adjustments to reconcile net loss to net cash used by operating activities

  

Stock based compensation

 

1,061,096

  

 

2,421,460

Consulting services paid by issuance of common stock

352,748

Consulting services paid by issuance of common stock warrants

267,459

577,092

Depreciation expense

 

2,407

  

 

1,793

Change in assets and liabilities

  

Decrease in prepaid expenses

 

(95,447)

  

 

(193,210)

Increase (decrease) in accounts payable

 

554,551

  

 

(2,102,817)

Increase (decrease) in accrued expenses

 

33,971

  

 

(1,999)

Total adjustments

 

1,824,037

  

 

1,055,067

  

Net Cash Used in Operating Activities

 

(3,645,433)

  

 

(7,641,557)

  

CASH FLOWS USED IN INVESTING ACTIVITIES

  

Purchase of fixed assets

 

(5,413)

  

 

(5,214)

  

Net Cash Used in Investing Activities

 

(5,413)

  

 

(5,214)

  

CASH FLOWS FROM FINANCING ACTIVITIES

  

Net proceeds from exercise of common stock warrants

 

  

 

48,070

Net proceeds from issuance of preferred stock and warrants

 

16,519,988

  

 

  

Net Cash Provided by Financing Activities

 

16,519,988

  

 

48,070

  

NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS

 

12,869,142

  

 

(7,598,701)

  

CASH AND EQUIVALENTS AT BEGINNING OF PERIOD

 

17,382,038

  

 

28,854,218

  

CASH AND EQUIVALENTS AT END OF PERIOD

$

30,251,180

$

21,255,517

See accompanying notes to condensed consolidated financial statements.

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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”).

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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 $0.0001 per share (the “Petros Common Stock”) equal to the quotient resulting from the formula of (i) 82,587,877 divided by (ii) the number of fully-diluted units of Metuchen outstanding immediately prior to the effective time of the Mergers, subject to adjustment. In addition, each securityholder of Metuchen prior to the Mergers will receive a right to receive such securityholder’s pro rata share of an aggregate of 13,320,624 shares of Petros Common Stock potentially issuable upon the achievement of certain milestones set forth in the Merger Agreement.  As a result of the Neurotrope Merger, each outstanding share of Neurotrope common stock, par value $0.0001 per share (the “Neurotrope Common Stock”) will be exchanged for one (1) share of Petros Common Stock and each outstanding share of Neurotrope preferred stock, par value $0.0001 per share (the “Neurotrope Preferred Stock”) will be exchanged for one (1) share of Petros preferred stock (the “Petros Preferred Stock”). Following the Mergers, the Petros Preferred Stock will have substantially the same conversion rights (proportionally adjusted to give effect to the Mergers), powers, rights and privileges as the Neurotrope Preferred Stock prior to the Mergers. In addition, each outstanding option to purchase Neurotrope Common Stock or outstanding warrant to purchase common stock that has not previously been exercised prior to the closing of the Mergers (the “Closing”) will be converted into equivalent options and warrants to purchase shares of Petros Common Stock and will be adjusted to give effect to the exchange ratios set forth in the Merger Agreement.

Upon the Closing, it is anticipated that current Neurotrope stockholders will own approximately 22.5% of Petros and current Metuchen securityholders will own approximately 77.5% of Petros.  The Board of Directors of Petros is expected to consist of nine members, five of whom will be designated by Metuchen and four of whom will be designated by the Company. Upon closing, Metuchen will be the accounting acquirer in the Mergers, but not the legal acquirer. As such, the Mergers are deemed a reverse recapitalization under the guidance of ASC 805 and, upon consummation, the historical financial statements of Metuchen will become the historical financial statements of the combined company.

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 $20,000,000, subject to adjustment as provided for in the Merger Agreement, and all of the operating assets and liabilities of the Company not retained by the Company in connection with the Mergers will be contributed to a wholly-owned subsidiary of the Company (“Neurotrope SpinCo”) and (ii) holders of record of Neurotrope Common Stock and certain warrants will receive a pro rata distribution of one share of Neurotrope SpinCo’s common stock for each share of Neurotrope Common Stock held or underlying certain warrants, contingent upon the consummation of the Mergers.  The record date for the Spin-Off, the ratio of the Spin-Off shares distributed to the Company shareholders held as of the record date and the extent to which other stakeholders of the Company may be entitled to participate in the Spin-Off have not yet been determined.

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 $1.0 million plus third party expenses incurred by the terminating party.

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 $30.3 million in cash and cash equivalents as compared to $17.4 million at December 31, 2019. The increase in cash is attributable to the Company’s issuance of preferred stock and warrants pursuant to a registered direct offering in January 2020 (see Note 6, “Common Stock”) partially offset by cash used for operating activities during the 2020 period. The Company expects that its current cash and cash equivalents will be sufficient to support its projected operating requirements over at least the next 12 months from the Form 10-Q filing date, which would include the continuing development of bryostatin, our novel drug targeting the activation of PKC epsilon, but  do not take into account the potential impact of  the planned merger and  spin-off disclosed above.

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”.

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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 $2.7 million. In addition, approximately $27.6 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:

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 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 June 30, 2020 and December 31, 2019.

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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 24.1 million shares and 12.5 million shares, respectively.

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 $66.9 million for the period from October 31, 2012 (inception) through June 30, 2020. The net operating loss carryforwards resulted in a deferred tax asset of approximately $16.7 million at June 30, 2020. 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 a full valuation allowance.

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 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.

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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 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.

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 $1,061,096, of which $398,840 was classified as research and development expense and $662,256 was classified as general and administrative expense, versus total stock-based compensation for the six months ended June 30, 2019 of $2,421,460, of which $695,406 was classified as research and development expense and $1,726,054 was classified as general and administrative expense. For the three months ended June 30, 2020, total stock-based compensation was $404,280, of which $161,642 was classified as research and development expense and $242,638 was classified as general and administrative expense, versus total stock-based compensation for the three months ended June 30, 2019 totaling $827,696, of which $137,658 was classified as research and development expense and $690,038 was classified as general and administrative expense.

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 3% of 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. As of June 30, 2020, no royalties nor milestone payments have been required.

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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 $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, Neurotrope Bioscience 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 Neurotrope Bioscience relating to the licensed technology. The Company has made all required annual maintenance payments. As of June 30, 2020, no royalties nor milestone payments have been required.

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 $2 million upon approval of a new drug approval (“NDA”) in the United States and an additional $1.5 million for an NDA approval in the European Union or Japan. In addition, the Company would be obligated to pay Mt. Sinai royalties on net sales of licensed product of 2.0% for up to $250 million of net sales and 3.0% of net sales over $250 million. Since inception, the Company has paid Mt. Sinai approximately $150,000 consisting of licensing fees of $75,000 plus development costs and patent fees of approximately $75,000. As of June 30, 2020, no royalties nor milestone payments have been required.

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 2% of the gross revenue received in connection with the sale of bryostatin products, up to an aggregate payment amount of $1 million. No such revenues have been earned as of June 30, 2020.

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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 1.2% of the Company’s outstanding common stock as of June 30, 2020.

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 $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 “) which shall also include the proceeds from the exercise of any Series A warrants, Series B warrants, and Series E warrants. This Fixed Research Fee has not been triggered. 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.

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 $10,000 in consideration of this Second Amendment.

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 (100) 2018 Study subjects. The total estimated budget for the services, including pass-through costs, drug supply and other statistical analyses, was approximately $7.8 million. The Company has incurred all of the expenses associated with the 2018 Services Agreement as of June 30, 2020.

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

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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 (100) 2020 Study subjects. The Company and Neurotrope Bioscience expect that the first 2020 Study site will be initiated during the third quarter of 2020. The total estimated budget for the services, including pass-through costs, is approximately $9.8 million. As previously disclosed on January 22, 2020, the Company was awarded a $2.7 million grant from the National Institutes of Health (“NIH”), which award will be used to support the 2020 Study, resulting in an estimated net budgeted cost of the 2020 Study to the Company of $7.1 million. In connection with their entry into the 2020 Services Agreement, the parties agreed that WCT would invoice Neurotrope Bioscience for the following advance payments: (i) services fees of approximately $490,000; (ii) pass-through expenses of approximately $140,000; and (iii) investigator/institute fees of approximately $310,000, which in each case will be due within ten (10) days of Neurotrope Bioscience’s receipt of such invoice. Remaining amounts due to WCT will be paid as services and related expenses are incurred. Neurotrope Bioscience may terminate the 2020 Services Agreement without cause upon sixty (60) days prior written notice.

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 $0.6 million as an advance in order to fund the initial commitment and certain upfront costs of third party vendors. As of June 30, 2020, approximately $200,000 of expenses have been incurred in connection with the 2020 Services Agreement, which was applied against the advance paid to WCT.  (See Note 9, “Subsequent Events”).

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 one-year period, subject to annual review thereafter. SMCM’s annual consulting fee is $120,000, payable by the Company in monthly installments of $10,000. In addition, SMCM shall be reimbursed for (i) all pre-approved travel in connection with the consulting services to the Company, (ii) upon submission to the Company of appropriate vouchers and receipts, for all other out-of-pocket expenses reasonably incurred by SMCM in furtherance of the Company’s business.

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 30 days’ advance notice. As consideration for its services under the Katalyst Agreement, the Company agreed to pay to Katalyst $25,000 per month, plus five-year warrants to purchase 90,000 shares of the Company’s common stock on the effective date of the Katalyst Agreement and on each of the three month anniversaries following the effective date. The warrants have an exercise price equal to the closing price of the Company’s stock price on the date of issuance. Katalyst’s cash and stock-based compensation is included as general and administrative expenses in the Company’s statement of operations.

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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 30 days’ advance notice. As consideration for its services under the GPN Agreement, the Company agreed to pay to GPN $8,000 per month, plus five-year warrants to purchase 24,000 shares of the Company’s common stock on the effective date and on each of the three month anniversaries following the effective date. The warrants have an exercise price equal to the closing price of the Company’s stock price on the date of issuance. On February 1, 2020, the Company amended the GPN Agreement, increasing the cash compensation to $17,500 per month and increasing the number of warrants issued each three-month period from 24,000 to 50,000.  GPN’s cash and stock-based compensation is included as general and administrative expenses in the Company’s statement of operations.

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, 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. As of June 30, 2020, there is no Series C Preferred Stock outstanding.

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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 18,000 shares of Series D Convertible Preferred Stock, par value $0.0001 per share (the “Series D Preferred Stock”) (which are convertible into a total of 10,909,100 shares of common stock) and Series H warrants to purchase up to an aggregate of 10,909,100 shares of common stock for an aggregate gross purchase price of approximately $18 million. The warrants are exercisable at a price of $1.65 per share immediately upon issuance. They feature a five-year term and a right by the Company, in certain circumstances, to call for the cancellation of up to 50% of the shares of common stock underlying such warrants for consideration equal to $0.0001 per share of underlying common stock in the event the value weighted average price of the Company’s common stock exceeds $5.00 for each of 10 consecutive trading days in a 30-day calendar period. The Series D Preferred Stock and the Series H warrants are immediately separable and were issued separately. The net proceeds to the Company from the offering were approximately $16.4 million, after deducting financial advisory fees and offering expenses paid by the Company.

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 18,000 shares of Series D Preferred Stock. Pursuant to the Series D Certificate of Designation, the holders of the Series D Preferred Stock are entitled, among other things, to the right to participate in any dividends and distributions paid to common stockholders on an as-converted basis. The Series D Preferred Stock has no voting rights except as required by law. The Series D Preferred Stock is convertible at any time and from time to time without the payment of additional consideration into shares of the Company’s common stock at a conversion price of $1.65 per share, subject to certain adjustments and has a stated value of $1,000 per share of Series D Preferred Stock. In the event of any liquidation or dissolution of the Company, the Series D Preferred Stock will rank junior to the Company’s Series C Preferred Stock under the Rights Agreement, if applicable, and any other class of preferred stock of senior rank to the Series D Preferred Stock, senior to any other class of preferred stock and to the Company’s common stock in the distribution of assets, to the extent legally available for distribution.

During the six months ended June 30, 2020, 17,500 shares of Series D Preferred Stock were converted into an aggregate of 10,606,066 shares of common stock. The remaining 500 shares of Series D Preferred Stock are convertible into an aggregate of 303,030 shares of common stock.

“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 $100,000,000 in common stock, preferred stock, debt securities, warrants and rights, either individually or in units. The registration statement was declared effective by the SEC on April 24, 2020.

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

 

2,366,519

  

$

12.86

7.5

49.3

Options granted

 

60,000

  

$

0.82

  

20.4

Less options forfeited

 

(27,282)

  

$

5.30

  

Less options expired/cancelled

 

(127,664)

  

$

10.76

  

Less options exercised

 

  

$

  

Options outstanding at June 30, 2020

 

2,271,573

  

$

12.75

7.1

$

69.7

Options exercisable at June 30, 2020

 

1,789,278

  

$

14.69

7.1

$

13.4

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Pursuant to the Company’s non-employee director compensation plan, in March 2020, the Company granted stock options to purchase an aggregate of 60,000 shares of the Company’s common stock to six members of the Board. The stock options have an exercise price of $0.82 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.

As of June 30, 2020, there was approximately $1.3 million of total unrecognized compensation costs related to unvested stock options. These costs are expected to be recognized over a weighted average period of 1.1 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 six months ended June 30, 2020 was estimated at the grant date using the following weighted average assumptions: Dividend yield 0%; Expected term