TAOX 10-Q
TAO Synergies Inc. (TAOX)
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 | (I.R.S. Employer |
organization) | Identification No.) |
(Address of principal executive offices) | (Zip code) |
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(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:
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| Name of each exchange on |
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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 | ☐ | 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
As of May 10, 2023, 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 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 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. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. You 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 Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission (the “SEC”) on March 21, 2023. We advise you to carefully review the reports and documents we file from time to time with the SEC including our current reports on Form 8-K. Except for our ongoing obligations to disclose material information under 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.
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TABLE OF CONTENTS
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PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
Synaptogenix, Inc.
Condensed Balance Sheets
(Unaudited)
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CURRENT ASSETS | ||||||
Cash and cash equivalents | $ | | $ | | ||
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Prepaid expenses and other current assets |
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TOTAL CURRENT ASSETS |
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Fixed assets, net of accumulated depreciation |
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TOTAL ASSETS | $ | | $ | | ||
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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CURRENT LIABILITIES |
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Accounts payable | $ | | $ | | ||
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Series B Convertible redeemable preferred stock, $ | | | ||||
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Common stock - | |
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Accumulated deficit | ( | ( | ||||
TOTAL STOCKHOLDERS’ EQUITY |
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | | $ | | ||
See accompanying notes to condensed financial statements.
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Synaptogenix, Inc.
Condensed Statements of Operations
(Unaudited)
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OPERATING EXPENSES: | ||||||
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General and administrative |
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OTHER INCOME (EXPENSE): |
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Change in fair value of warrant liability | | — | ||||
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TOTAL OTHER INCOME (EXPENSE) |
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Net loss before income taxes |
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Provision for income taxes |
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Net loss | | | ||||
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Net loss attributable to common stockholders | $ | | $ | | ||
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PER SHARE DATA: |
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Basic and diluted loss per common share | $ | | $ | | ||
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Basic and diluted weighted average common shares outstanding |
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See accompanying notes to condensed financial statements.
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Synaptogenix, Inc.
Condensed Statements of Changes in Stockholders’ Equity
(Unaudited)
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Balance January 1, 2022 |
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Stock based compensation |
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Issuance of warrants for consulting fees |
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Issuance of common stock for consulting fees |
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Net loss |
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Balance March 31, 2022 | $ | | $ | | | $ | | $ | | $ | ( | $ | | ||||||||
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Balance January 1, 2023 |
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Issuance of common stock for consulting fees | | | | | | | | |||||||||||||
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Net loss |
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Balance March 31, 2023 |
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See accompanying notes to condensed financial statements.
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Synaptogenix, Inc.
Condensed Statements of Cash Flows
(Unaudited)
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CASH FLOW USED IN OPERATING ACTIVITIES | ||||||
Net loss | $ | ( | $ | ( | ||
Adjustments to reconcile net loss to net cash used by operating activities | ||||||
Stock based compensation | | | ||||
Change in fair value of warrant liability | ( | — | ||||
Change in fair value of derivative liability | ( | — | ||||
Consulting services paid by issuance of common stock |
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Consulting services paid by issuance of common stock warrants | — | | ||||
Depreciation expense |
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Change in assets and liabilities: | ||||||
Decrease in prepaid expenses |
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Decrease in accounts payable |
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Increase (decrease) in accrued expenses |
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Total adjustments |
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Net Cash Used in Operating Activities |
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CASH FLOWS USED IN INVESTING ACTIVITIES | ||||||
Purchase of fixed assets | ( | — | ||||
Net Cash Used in Investing Activities | ( | — | ||||
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CASH FLOWS FROM FINANCING ACTIVITIES |
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Proceeds from exercise of investor warrants | — | | ||||
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Net Cash Provided by Financing Activities |
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NET DECREASE IN CASH AND EQUIVALENTS |
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CASH AND EQUIVALENTS AT BEGINNING OF PERIOD |
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CASH AND EQUIVALENTS AT END OF PERIOD | $ | | $ | | ||
DISCLOSURES OF NON-CASH FINANCING ACTIVITIES: | ||||||
Accrual of Series B Convertible Preferred Stock Dividend | $ | | $ | — | ||
See accompanying notes to condensed financial statements.
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SYNAPTOGENIX, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Unless the context otherwise indicates, references in these Notes to the accompanying financial statements to “we,” “us,” “our” and “the Company” refer to Synaptogenix, Inc. (formerly known as Neurotrope Bioscience, Inc.), a Delaware corporation. References to “Neurotrope”, “Parent Company” or “Parent” refer to Neurotrope, Inc., a Nevada corporation.
Note 1 – Organization, Business, Risks and Uncertainties:
Organization and Business
On May 17, 2020, Neurotrope, Inc. (“Neurotrope” or “the Parent”) announced plans for the complete legal and structural separation of its wholly owned subsidiary, Neurotrope Bioscience, Inc., from Neurotrope (the “Spin-Off”). Under the Separation and Distribution Agreement, Neurotrope planned to distribute all of its equity interest in this wholly owned subsidiary to Neurotrope’s stockholders. Following the Spin-Off, Neurotrope does not own any equity interest in the Company, and the Company operates independently from Neurotrope. On December 7, 2020, the Company became an independent company, Synaptogenix, Inc., a Delaware corporation (formerly known as Neurotrope Bioscience, Inc.) (the “Company” or “Synaptogenix”) when the Company filed an amended and restated certificate of incorporation which, among other things, changed its name to Synaptogenix, Inc. The Company’s shares of common stock, par value $
Neurotrope Bioscience, Inc. was incorporated in Delaware on October 31, 2012 to advance new therapeutic and diagnostic technologies in the field of neurodegenerative disease, primarily Alzheimer’s disease (“AD”). The Company is collaborating with Cognitive Research Enterprises, Inc. (formerly known as the Blanchette Rockefeller Neurosciences Institute, or BRNI) (“CRE”), a related party, in this process. The exclusive rights to certain technology were licensed by CRE to the Company on February 28, 2013 (see Note 4 - Related Party Transactions).
In connection with the separation from Neurotrope, the Company entered into a Separation and Distribution Agreement and several other ancillary agreements. These agreements govern the relationship between the parties after the separation and allocate between the parties’ various assets, liabilities, rights and obligations following the separation, including employee benefits, intellectual property, information technology, insurance and tax-related liabilities.
On December 16, 2022, the Company issued a press release announcing that an extended confirmatory Phase 2 study of Bryostatin-1 in moderate to severe AD (Study #204) did not achieve statistical significance on the primary endpoint, which was changed from baseline to Week 13 in the Severe Impairment Battery (“SIB”) total score assessment obtained after completion of the second seven-dose course of treatment (week 28 of trial). On March 7, 2023, the Company announced results of its analysis of secondary endpoints and post hoc analysis from our Phase 2 study of Bryostatin-1. In the secondary endpoint analysis, changes from baseline at Weeks 9, 20, 24, 30, and 42 in the SIB (Severe Impairment Battery) total score were not statistically significant in the total patient population, and no pre-specified secondary endpoints were met with statistical significance in the low-to-moderately severe AD patient stratum. However, nearly all pre-specified secondary endpoints in the most advanced and severe AD (Mini Mental State Exam 2 (“MMSE”) (baseline scores: 10-14) patient population, with baseline MMSE-2 (Mini-Mental State Examination, 2nd Edition) scores of 10-14, were achieved with statistical significance (p = <0.05, 2-tailed). Data also showed statistical significance in exploratory secondary endpoints for the MMSE-2 10-14 stratum, and post hoc analysis was positive.
Liquidity Uncertainties
As of March 31, 2023, the Company had approximately $
The Company expects to need additional capital in order to initiate and pursue potential additional development projects, including the continuing development beyond the ongoing Phase 2 trial of Bryostatin-1. Any additional equity financing, if available,
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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 likely have a materially adverse effect on our business, financial condition and results of operations.
Other 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 and regulatory. 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, and the ability to raise capital to achieve strategic objectives.
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. Therefore, CRE or the Company would 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 were unable to secure such additional agreements, or if the NCI otherwise discontinues the supply, the Company would have to either secure another source of bryostatin or discontinue its efforts to develop and commercialize Bryostatin-1 for the treatment of AD. In June 2020, the Company entered into a supply agreement (the “Supply Agreement”) with BryoLogyx Inc. (“BryoLogyx”), pursuant to which BryoLogyx agreed to be the Company’s exclusive supplier of synthetic bryostatin. Pursuant to the terms of the Supply Agreement, the Company received its initial order of one gram synthetic bryostatin. See Note 3.
The Company also faces the ongoing risk that the coronavirus pandemic may slow, for an unforeseeable period, the conduct of the Company’s trial. In order to prioritize patient health and that of the investigators at clinical trial sites, we will monitor enrollment of new patients in our current Phase 2 clinical trial. In addition, some patients may be unwilling to enroll in our trials or be unable to comply with clinical trial protocols if quarantines or travel restrictions impede patient movement or interrupt healthcare services. These and other factors outside of our control could delay our ability to conduct clinical trials or release clinical trial results. In addition, the effects of a pandemic resurgence may also increase non-trial costs such as insurance premiums, increase the demand for and cost of capital, increase loss of work time from key personnel, and negatively impact our key clinical trial vendors and suppliers.
Note 2 – Summary of Significant Accounting Policies:
Basis of Presentation:
The accompanying unaudited condensed 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 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 three months ended March 31, 2023 may not be indicative of results for the full year. These unaudited condensed financial statements should be read in conjunction with the audited financial statements and the notes to those statements for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 21, 2023.
Use of Estimates:
The preparation of financial statements in conformity with GAAP 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 expenses during the reporting period. Management evaluates its estimates on an ongoing basis using historical experience and other factors, including the general economic environment and actions it may take in the future. The Company adjusts such estimates when facts and circumstances dictate. However, these estimates may involve significant uncertainties and judgments and
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cannot be determined with precision. In addition, these estimates are based on management’s best judgment at a point in time and as such these estimates may ultimately differ from actual results.
Comprehensive Income (Loss)
The Company follows FASB ASC 220 in reporting comprehensive income (loss). Comprehensive income (loss) is a more inclusive financial reporting methodology that includes disclosure of certain financial information that historically has not been recognized in the calculation of net income (loss). Since the Company has no items of other comprehensive income (loss), comprehensive loss is equal to net loss for all periods presented.
Net Earnings or Loss per Share:
Net earnings or loss per share is computed by dividing net income or loss by the weighted-average number of shares of common stock outstanding during the period, excluding shares subject to redemption or forfeiture. The Company presents basic and diluted net earnings or loss per share. Diluted net earnings or loss per share reflect the actual weighted average of shares of common stock issued and outstanding during the period, adjusted for potentially dilutive securities outstanding. Potentially dilutive securities are excluded from the computation of the diluted net earnings or loss per share if their inclusion would be anti-dilutive.
As all potentially dilutive securities are anti-dilutive as of March 31, 2023 and 2022, diluted net loss per share is the same as basic net loss per share for the three months ended March 31, 2023 and 2022.
The dilutive securities that have been excluded from the calculation of diluted net loss per share for the three months ended March 31, 2023 and 2022 respectively, because to do so would be anti-dilutive (in Common Stock equivalents), are as follows:
| March 31, 2023 |
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Total |
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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 March 31, 2023, the Company’s cash balances that exceed the current insured amounts under the Federal Deposit Insurance Corporation (“FDIC”) were approximately $
Fair Value of Financial Instruments:
The carrying amounts reflected in the balance sheets for payables approximate fair value due to the short maturities of these instruments. The carrying amounts for warrant liability and derivative liability approximate fair value based on level 3 of the fair value hierarchy.
Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy:
Level 1 — Quoted prices in active markets for identical assets or liabilities.
Level 2 — Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable markets.
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Level 3 — Unobservable inputs which are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.
Fixed Assets and Leases:
The Company has two leases, one of which has a term of
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 and
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. Non-refundable advance payments for research and development are capitalized 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
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 under the “Separate return method.” Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized.
The Company applies the provisions for 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 Company has determined 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.
The Company had federal and state net operating loss carryforwards for income tax purposes of approximately $
The Company may be subject to significant U.S. federal income tax-related liabilities with respect to the Spin-Off if there is a determination that the Spin-Off is taxable for U.S. federal income tax purposes. In connection with the Spin-Off, the Company believes that, among other things, the Spin-Off should qualify as a tax-free transaction for U.S. federal income tax purposes under Section 355 and Section 368(a)(1)(D) of the Internal Revenue Code of 1986 (the “Code”). If the conclusions of the tax opinions are not correct, or if the Spin-Off is otherwise ultimately determined to be a taxable transaction, the Company would be liable for U.S. federal income tax related liabilities. Pursuant to the Separation and Distribution Agreement and the Tax Matters Agreement, Neurotrope agreed to indemnify Synaptogenix for certain liabilities, and Synaptogenix agreed to indemnify Neurotrope for certain liabilities, in each case for uncapped amounts. Indemnities that Synaptogenix may be required to provide Neurotrope are not subject to any cap, may be significant and could negatively impact Synaptogenix’s business, particularly with respect to indemnities provided in the Tax Matters Agreement. Third parties could also seek to hold Synaptogenix responsible for any of the liabilities that Neurotrope has agreed to retain. Further, the indemnity from Neurotrope may not be sufficient to protect Synaptogenix against the full amount of such liabilities, and Neurotrope may not be able to fully satisfy its indemnification obligations. Moreover, even if Synaptogenix ultimately succeeds in recovering from Neurotrope any amounts for which Synaptogenix is held liable, Synaptogenix may be temporarily required to bear these losses. At March 31, 2023 and as of the date of financial statement issuance date, the Company does not have any indemnification liabilities.
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Under Section 382 of the Code, 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. In addition, the significant historical operating losses incurred by the Company may limit the amount of its net operating loss carryforwards that could be utilized annually to offset future taxable income, if any. The Company believes that operating loss carryforwards are limited under Section 382 limitations although Section 382 studies have not been conducted to determine the actual limitations.
Expense Reimbursement for Grant Award:
The Company reduces its research and development expenses by funding received or receivable from an NIH grant during the period that the expenses are incurred. The Company recognized grant related expense reductions during the three months ended March 31, 2023 of $
Of the total $
Recent Accounting Pronouncements:
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, which reduces the number of accounting models for convertible instruments, amends diluted earnings per share calculations for convertible instruments and allows more contracts to qualify for equity classification. ASU 2020-06 will be effective for interim and annual periods beginning after December 15, 2021. The Company has adopted ASU 2020-06 as of January 1, 2022.
In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This standard establishes an impairment model (known as the current expected credit loss (“CECL”) model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses, which is intended to result in a timelier recognition of losses. Under the CECL model, entities will estimate credit losses over the entire contractual term of the instrument (considering estimated prepayments, but not expected extensions or modifications) from the date of initial recognition of the financial instrument. Measurement of expected credit losses are to be based on relevant forecasts that affect collectability. The scope of financial assets within the CECL methodology is broad and includes trade receivables from certain revenue transactions and certain off-balance sheet credit exposures. Different components of the guidance require modified retrospective or prospective adoption.
In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments-Credit Losses. ASU 2018-19 clarifies that receivables arising from operating leases are not within the scope of the credit losses standard. Instead, entities would need to apply other U.S. GAAP, namely Topic 842 (Leases), to account for changes in the collectability assessment for operating leases. Other than operating lease receivables, Partnership trade receivables include receivables from finance leases and equipment sales. Under Topic 606 (Revenue from Contracts with Customers), revenue is recognized when, among other criteria, it is probable that the entity will collect the consideration to which it is entitled for goods or services transferred to a customer. At the point that finance lease receivables are recorded, they become subject to the CECL model and estimates of expected credit losses over their contractual life will be required to be recorded at inception based on historical information, current conditions, and reasonable and supportable forecasts. Trade receivables derived from equipment sales are of short duration and there is not a material difference between incurred losses and expected losses.
In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, which amends and clarifies several provisions of Topic 326. In May 2019, the FASB issued ASU 2019-05, Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief, which amends Topic 326 to allow the fair value option to be elected for certain financial instruments upon adoption. ASU 2019-10 extended the effective date of ASU 2016-13 until December 15, 2022. The Company adopted this new guidance, including the subsequent updates to Topic 326, on January 1, 2023 and the adoption did not have a material impact on the Company’s financial statements and related disclosures
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Note 3– Collaborative Agreements and Commitments:
Stanford License Agreements
On May 12, 2014, the Company entered into a license agreement (the “Stanford Agreement”) with The Board of Trustees of The Leland Stanford Junior University (“Stanford”), pursuant to which Stanford has granted to the Company a revenue-bearing, world-wide right and exclusive license, with the right to grant sublicenses (on certain conditions), under certain patent rights and related technology for the use of bryostatin structural derivatives, known as “bryologs,” for use in the treatment of central nervous system disorders, lysosomal storage diseases, stroke, cardio protection and traumatic brain injury, for the life of the licensed patents. The Company is required 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 product development milestones, and upon meeting such milestones, make specific milestone payments to Stanford. The Company must also pay Stanford royalties of
On January 19, 2017, the Company entered into a second license agreement with Stanford, pursuant to which Stanford has granted to the Company a revenue-bearing, world-wide right and exclusive license, with the right to grant sublicenses (on certain conditions), under certain patent rights and related technology for the use of “Bryostatin Compounds and Methods of Preparing the Same,” or synthesized bryostatin, for use in the treatment of neurological diseases, cognitive dysfunction and psychiatric disorders, for the life of the licensed patents. The Company paid Stanford $
The Company has advanced the development of synthetic bryostatin by demonstrating the equivalence of the synthetic to the natural bryostatin product. The estimated cost to initiate and produce sufficient quantities of the synthetic bryostatin drug product is approximately $
Mt. Sinai License Agreement
On July 14, 2014, the Company 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 the Company (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 (“PKC ε”), which includes Niemann-Pick Disease (the “Mount Sinai Field of Use”). The Mount Sinai Agreement allows the Company 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 is required to pay Mt. Sinai milestone payments of $
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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. Pursuant to the terms of the Supply Agreement, the Company placed an initial order and subsequently received one gram of current good manufacturing practice (“cGMP”) synthetic bryostatin as an active pharmaceutical ingredient to be used in a drug product (“API”). 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. The Company is not currently using synthetic bryostatin for its current Phase 2 clinical trial and will determine when to incorporate the synthetic into the clinical trial process.
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. Pursuant to guidance provided by NCI, the Company 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
Nemours Agreement
On September 5, 2018, we announced a collaboration with Nemours A.I. DuPont Hospital (“Nemours”), a premier U.S. children’s hospital, to initiate a clinical trial in children with Fragile X syndrome, a genetic disorder. In addition to the primary objective of safety and tolerability, measurements will be made of working memory, language and other functional aspects such as anxiety, repetitive behavior, executive functioning, and social behavior. On August 5, 2021, the Company announced its memorandum of understanding with Nemours to initiate a clinical trial using Bryostatin-1, under Orphan Drug Status, to treat Fragile X. The Company intends to provide the Bryostatin-1 and obtain the IND, and Nemours intends to provide the clinical site and attendant support for the trial. The Company and Nemours, jointly, will develop the trial protocol. The Company estimates its total trial and IND cost to be approximately $
The Company has filed an IND with the FDA. The FDA has placed the development of the IND on clinical hold pending completion of further analytics relating to drug pharmacokinetics and pharmacodynamics. The Company is currently evaluating its plans to advance Fragile X development.
Cleveland Clinic
On February 23, 2022, the Company announced its collaboration with the Cleveland Clinic to pursue possible treatments for Multiple Sclerosis. The collaboration entails filing an IND and conducting initial clinical trials using Bryostatin-1. Future development work will be conducted pursuant to statements of work to be determined.
Cognitive Research Enterprises, Inc. (“CRE”)
Effective October 31, 2012, the Company 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 amended and restated on February 4, 2015 (the “CRE License Agreement”). Pursuant to the CRE License Agreement, CRE and NRV II provide research services and have granted the Company 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 CRE License Agreement 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
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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 Neurotrope’s initial Series A Stock financing, the CRE License Agreement required the Company 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
In addition, on November 10, 2018, the Company 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 the Company. Under the Second Amendment, the Company 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 the Company, and pay all fees, costs and expenses related to the licensed intellectual property.
Note 4- Related Party Transactions:
On August 4, 2016, Neurotrope 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”). 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
Note 5 – Other Commitments:
Clinical Trial Services Agreements
On July 23, 2020, the Company entered into the 2020 Services Agreement with WCT. The 2020 Services Agreement relates to services for the current Phase 2 clinical trial assessing the safety, tolerability and long-term efficacy of Bryostatin-1 in the treatment of moderately severe AD subjects not receiving memantine treatment (the “2020 Study”).On January 22, 2022, the Company executed a change order with WCT to accelerate trial subject recruitment totaling approximately $
The Company was awarded a $
On May 12, 2022, the Company entered into a services agreement with WCT (the “2022 Services Agreement”). The 2022 Services Agreement related to services for a Phase 2 “open label,” dose ranging study, clinical trial assessing the safety, tolerability and efficacy of Bryostatin-1 administered via infusion in the treatment of moderately severe to severe AD subjects not receiving memantine treatment (the “2022 Study”).
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Pursuant to the terms of the 2022 Services Agreement, WCT provided services to enroll approximately
The Company incurred approximately $
Other Consulting Agreements
Effective as of January 1, 2021, the Company entered into an amended consulting agreement with Katalyst Securities LLC (“Katalyst”) reducing the cash payment to $
Effective as of January 1, 2021, the Company entered into an amended consulting agreement with GP Nurmenkari, Inc. (“GPN”) (the “GPN Agreement”) reducing the cash payment to $
Employment Agreements
On December 7, 2020, the Company entered into an offer letter (the “Offer Letter”) with Alan J. Tuchman, M.D., pursuant to which Dr. Tuchman agreed to serve as the Company’s Chief Executive Officer, commencing on December 7, 2020. In addition, in connection with his appointment as the Company’s Chief Executive Officer, Dr. Tuchman was appointed to the board of directors of the Company. Dr. Tuchman receives an annual base salary of $
The term of Dr. Tuchman’s employment pursuant to the Offer Letter is
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Other Commitments and Agreements
See Notes 3 and 4 for Collaboration and License Agreement related commitments.
Contingencies
Pursuant to the Separation Agreement and Tax Matters Agreement with Neurotrope, Neurotrope agreed to indemnify Synaptogenix for certain liabilities, and Synaptogenix agreed to indemnify Neurotrope for certain liabilities, in each case for uncapped amounts. Indemnities that Synaptogenix may be required to provide Neurotrope are not subject to any cap, may be significant and could negatively impact Synaptogenix’s business, particularly with respect to indemnities provided in the Tax Matters Agreement. Third parties could also seek to hold Synaptogenix responsible for any of the liabilities that Neurotrope has agreed to retain. Further, the indemnity from Neurotrope may not be sufficient to protect Synaptogenix against the full amount of such liabilities, and Neurotrope may not be able to fully satisfy its indemnification obligations. Moreover, even if Synaptogenix ultimately succeeds in recovering from Neurotrope any amounts for which Synaptogenix is held liable, Synaptogenix may be temporarily required to bear these losses ourselves. As of the reporting date, there are no claims relating to the indemnification agreement.
Note 6 – Stockholders’ Equity:
The Company’s certificate of incorporation authorizes it to issue
The holders of Common Stock are entitled to receive dividends out of assets or funds legally available for the payment of dividends at such times and in such amounts as the Board from time to time may determine. To date, the Company has not paid dividends on its Common Stock. Holders of Common Stock are entitled to
November 2022 Private Placement
On November 17, 2022, the Company entered into a Securities Purchase Agreement (as amended on May 11, 2023, the “November Purchase Agreement”) with certain accredited investors (the “November Investors”), pursuant to which it agreed to sell to the November Investors (i) an aggregate of
The terms of the Series B Preferred Stock are as set forth in the Certificate of Designations for the Series B Preferred Stock (as amended on March 17, 2023 and May 12, 2023, the “Certificate of Designations”). The Series B Preferred Stock will be convertible into Series B Preferred Shares at the election of the holder at any time at an initial conversion price of $
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or (B) the lower of $
The holders of the Series B Preferred Stock will be entitled to dividends of
Notwithstanding the foregoing, the Company’s ability to settle conversions and make amortization payments using shares of Common Stock is subject to certain limitations set forth in the Certificate of Designations, including a limit on the number of shares that may be issued until the time, if any, that the Company’s stockholders have approved the issuance of more than 19.9% of the Company’s outstanding shares of Common Stock in accordance with Nasdaq listing standards (the “Nasdaq Stockholder Approval”). The Company agreed to seek stockholder approval of these matters at a meeting to be held no later than June 1, 2023, and such approval was obtained at the Company’s special meeting of stockholders held on April 14, 2023. Further, the Certificate of Designations contains a certain beneficial ownership limitation after giving effect to the issuance of shares of Common Stock issuable upon conversion of, or as part of any amortization payment under, the Certificate of Designations or November Warrants.
The Certificate of Designations includes certain Triggering Events (as defined in the Certificate of Designations), including, among other things, the failure to file and maintain an effective registration statement covering the sale of the holder’s securities registrable pursuant to the November Registration Rights Agreement (defined below) and the Company’s failure to pay any amounts due to the holders of the Series B Preferred Stock when due. In connection with a Triggering Event, each holder of Series B Preferred Stock will be able to require the Company to redeem in cash any or all of the holder’s Series B Preferred Stock at a premium set forth in the Certificate of Designations.
The Company will be subject to certain affirmative and negative covenants regarding the incurrence of indebtedness, acquisition and investment transactions, the existence of liens, the repayment of indebtedness, the payment of cash in respect of dividends (other than dividends pursuant to the Certificate of Designations), distributions or redemptions, and the transfer of assets, among other matters.
The November Warrants are exercisable for Warrant Shares immediately at an exercise price of $
In connection with the November Purchase Agreement, the Company and the November Investors entered into a Registration Rights Agreement (the “November Registration Rights Agreement”) on November 17, 2022. Under the terms of the November Registration Rights Agreement, the Company agreed to register
In connection with the November Private Placement, pursuant to an Engagement Letter, between the Company and Katalyst Securities LLC (the “November Placement Agent”), the Company paid the November Placement Agent (i) a cash fee equal to
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Accounting Treatment of November Private Placement
Series B Preferred Shares
The Series B Preferred Shares were determined to be more akin to a debt-like host than an equity-like host. The Company identified the following embedded features that are not clearly and closely related to the debt host instrument: 1) make-whole interest upon a contingent redemption event, 2) make-whole interest upon a conversion event, 3) an installment redemption upon an Equity Conditions Failure (as defined in the Certificate of Designation), and 4) variable share-settled installment conversion. These features were bundled together, assigned probabilities of being affected and measured at fair value. Subsequent changes in fair value of these features are recognized in the Consolidated Statement of Operations. The Company estimated the $
The discount to the fair value is included as a reduction to the carrying value of the Series B Preferred Shares. During 2022, the Company recorded a total discount of approximately $
During the three months ended March 31, 2023 and 2022, the Company recorded a gain of $
Common Stock Warrants
Pursuant to the Private Placement, the Company issued to investors Warrants and, pursuant to its advisory agreements, the Company issued to its advisor additional Warrants with the same terms. The Broker Warrants are within the scope of ASC 718 pursuant to ASC 718-10-20 but are subject to liability classification as they would be required to be classified as liabilities in accordance with ASC 480.
The Warrants were determined to be within the scope of ASC 480-10 as they are puttable to the Company at Holders’ election upon the occurrence of a Fundamental Transaction (as defined in the agreements). As such, the Company recorded the Warrants as a liability at fair value with subsequent changes in fair value recognized in earnings. The Company utilized the Black Scholes Model to calculate the value of these warrants issued during the year ended December 31, 2022. The fair value of the Warrants of approximately $
Transaction costs incurred attributable to the issuance of the Warrants of $
During the three months ended March 31, 2023 and 2022, the Company recorded a gain of $
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Adoption of a Stockholder Rights Plan
On January 13, 2021, the Company adopted a stockholder rights plan (the “Rights Plan”). The Rights Plan is intended to protect the interests of the Company’s stockholders and enable them to 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 will issue, 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 Common Stock at a
On January 13, 2021, the board of directors of the Company (the “Board”) declared a dividend of one Right, payable on January 25, 2021, for each share of Common Stock outstanding on January 25, 2021 (the “Record Date”) 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 January 19, 2021, between the Company and Philadelphia Stock Transfer, Inc., as rights agent. Each Right entitles the registered holder to purchase from the Company
The Rights expired at the close of business on January 13, 2023.
Note 7 – Stock Based Compensation:
2020 Equity Incentive Plan
Upon completion of the Spin-Off, the Company’s 2020 Equity Incentive Plan (the “2020 Plan”) became effective on December 7, 2020. The total number of securities available for grant under the 2020 Plan was
The Compensation Committee of the Company’s board of directors (the “Committee”) administers the 2020 Plan and has full power to grant stock options and Common Stock, construe and interpret the 2020 Plan, establish rules and regulations and perform all other acts, including the delegation of administrative responsibilities, as it believes reasonable and proper. The Committee, in its absolute discretion, may award Common Stock to employees, consultants, and directors of the Company, and such other persons as the Committee may select, and permit holders of options to exercise such options prior to full vesting.
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Stock and Option Grants
The following is a summary of stock option activity under the stock option plans for the three months ended March 31, 2023:
|
|
| Weighted- |
| ||||||
Average | Aggregate | |||||||||
Weighted- | Remaining | Intrinsic | ||||||||
Number | Average | Contractual | Value | |||||||
of | Exercise | Term | (in | |||||||
Shares | Price | (Years) | millions) | |||||||
Options outstanding at January 1, 2023 |
| | $ | |
| $ | | |||
Options granted |
| | $ | |
|
| — | |||
Less options forfeited |
| — | $ | — |
| — |
| — | ||
Less options expired/cancelled |
| — | $ | — |
| — |
| — | ||
Less options exercised |
| — | $ | — |
| — |
| — | ||
Options outstanding at March 31, 2023 |
| | $ | |
| $ | | |||
Options exercisable at March 31, 2023 |
| | $ | |
| $ | | |||
The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the closing stock price of $
As of March 31, 2023, the Company had unrecognized stock option expense of approximately $
On February 16, 2022, pursuant to its 2020 Plan, the Company granted stock options to purchase an aggregate of
On November 15, 2022, pursuant to its 2020 Plan, the Company granted stock options to
On March 29, 2023, Synaptogenix granted stock options to
Director’s Compensation Policy
On March 29, 2023, Synaptogenix adopted an amended and restated non-employee director compensation policy (the “Director Compensation Policy”). The Director Compensation Policy provides for the annual automatic grant of nonqualified stock options to purchase up to
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The Company recorded total expense relating to the outstanding stock options of $
Restricted Stock Unit Grants
On July 13, 2021, the Company granted a total of
As of December 31, 2022,
Restricted Stock Issuances
On February 15, 2022, the Company granted
On October 8, 2022, the Company issued
On January 5, 2023, the Company issued
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Stock Compensation Expense
Total stock-based compensation for the three months ended March 31, 2023 and 2022 was $
The Company currently estimates, beginning at the closing date of the November Private Placement, implied volatility factor for all options and warrants based upon a blend of the Parent Company’s and Company’s historical volatility. Up until November 21, 2022, the Company computed implied volatility based upon a blend of the Parent Company’s and Company’s historical volatility along with the volatility of selected comparable publicly traded companies as, at that time, the Company lacked sufficient historical stock trading activity. It incorporated the historical volatility of the Parent Company as the Parent Company’s historical volatility provides a good estimation of the Company’s volatility since its operations were identical to the Company’s prior to the spin-out.
Note 8 – Common Stock Warrants:
As of March 31, 2023, the Company had warrants outstanding consisting of the following:
|
| Number |
| of shares | |
Warrants outstanding January 1, 2022 |
| |
Warrants issued |
| |
Warrants exercised |
| ( |
Warrants expired | ( | |
Warrants outstanding and exercisable December 31, 2022 and March 31, 2023 |
| |
On January 3, 2022, pursuant to its advisory agreements, the Company issued warrants to purchase
On November 22, 2022, pursuant to the November Private Placement (See Note 6 above), the Company issued warrants to purchase
As of March 31, 2023, the weighted average exercise price and the weighted average remaining life of the total warrants were $
During the three months ended March 31, 2022,
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Note 9 - Fair Value Measurements
Fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management as of and during the three months ended March 31, 2023 and 2022. The carrying amounts of cash equivalents, accounts receivable, other current assets, other assets, accounts payable, and accrued expenses approximated their fair values as of March 31, 2023 and December 31, 2022 due to their short-term nature. The fair value of the bifurcated embedded derivative related to the convertible preferred stock was estimated using a Monte Carlo simulation model, which uses as inputs the fair value of our Common stock and estimates for the equity volatility and traded volume volatility of our Common stock, the time to maturity of the convertible preferred stock, the risk-free interest rate for a period that approximates the time to maturity, dividend rate, a penalty dividend rate, and our probability of default. The fair value of the warrant liability was estimated using the Black Scholes Model which uses as inputs the following weighted average assumptions, as noted above: dividend yield, expected term in years, equity volatility, and risk-free interest rate.
Fair Value on a Recurring Basis
The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually. The estimated fair value of the warrant liability and bifurcated embedded derivatives represent Level 3 measurements. The following table presents information about the Company’s liabilities that are measured at fair value on a recurring basis at March 31, 2023 and December 31, 2022, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
March 31 | December 31 | |||||||
Description |
| Level |
| 2023 |
| 2022 | ||
Liabilities: |
|
|
|
|
|
| ||
Warrant liability (Note 6) |
| 3 | $ | | $ | | ||
Bifurcated embedded derivative liability (Note 6) |
| 3 | $ | | $ | | ||
The following table sets forth a summary of the change in the fair value of the warrant liability that is measured at fair value on a recurring basis:
| December 31, 2022 | ||
Balance on December 31, 2021 | $ | — | |
Issuance of warrants |
| | |
Change in fair value of warrant liability |
| ( | |
Balance on December 31, 2022 | $ | | |
Change in fair value of warrant liability |
| ( | |
Balance on March 31, 2023 | $ | | |
The following table sets forth a summary of the change in the fair value of the bifurcated embedded derivative liability that is measured at fair value on a recurring basis:
| December 31, 2022 | ||
Balance on December 31, 2021 | $ | — | |
Issuance of convertible preferred stock with bifurcated embedded derivative |
| | |
Change in fair value of bifurcated embedded derivative |
| ( | |
Balance on December 31, 2022 | $ | | |
Change in fair value of warrant liability |
| ( | |
Balance on March 31, 2023 | $ | | |
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Note 10 – Subsequent Events
See Note 6 above.
On April 24, 2023, the Company received a written notice from the Listing Qualifications Department of the Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that for the preceding 30 consecutive business days, the Company’s common stock did not maintain a minimum closing bid price of $1.00 per share as required by Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has a grace period of 180 calendar days, or until October 23, 2023, to regain compliance with Nasdaq Listing Rule 5550(a)(2). Compliance can be achieved automatically and without further action if the closing bid price of the Company’s stock is at or above $1.00 for a minimum of 10 consecutive business days at any time during the 180-day compliance period, in which case Nasdaq will notify the Company of its compliance and the matter will be closed. If, however, the Company does not achieve compliance with the Minimum Bid Price Requirement by October 23, 2023, the Company may be eligible for additional time to comply.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes appearing elsewhere in this report. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included elsewhere in this report and our annual report on Form 10-K for the year ended December 31, 2022.
The following discussion highlights our results of operations and the principal factors that have affected our financial condition as well as our liquidity and capital resources for the periods described, and provides information that management believes is relevant for an assessment and understanding of the statements of financial condition and results of operations presented herein. The following discussion and analysis are based on the unaudited financial statements contained in this report, which we have prepared in accordance with United States generally accepted accounting principles. You should read the discussion and analysis together with such financial statements and the related notes thereto.
Basis of Presentation
The unaudited financial statements for the three months ended March 31, 2023 and 2022 include a summary of our significant accounting policies and should be read in conjunction with the discussion below and our financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. In the opinion of management, all material adjustments necessary to present fairly the results of operations for such periods have been included in the financial statements. All such adjustments are of a normal recurring nature.
Overview
We are a biopharmaceutical company with product candidates in pre-clinical and clinical development. We began operations in October 2012. We are principally focused on developing a product platform based upon a drug candidate called Bryostatin-1 for the treatment of Alzheimer’s disease, which is in the clinical testing stage. We are also evaluating Bryostatin-1 for other neurodegenerative or cognitive diseases and dysfunctions, such as Fragile X syndrome, Multiple Sclerosis, and Niemann-Pick Type C disease, which have undergone pre-clinical testing.
Neurotrope, our predecessor company, had been a party to a technology license and services agreement with the original Blanchette Rockefeller Neurosciences Institute (which has been known as Cognitive Research Enterprises, Inc. since October 2016), and its affiliate NRV II, LLC, which we collectively refer to herein as “CRE,” pursuant to which we now have an exclusive non-transferable license to certain patents and technologies required to develop our proposed products. We were formed for the primary purpose of commercializing the technologies initially developed by BRNI for therapeutic applications for AD or other cognitive dysfunctions. These technologies have been under development by BRNI since 1999 and, until March 2013, had been financed through funding from a variety of non-investor sources (which include not-for-profit foundations, the NIH, which is part of the U.S. Department of Health and Human Services, and individual philanthropists). From March 2013 forward, development of the licensed technology has been funded principally through us in collaboration with CRE.
November 2022 Private Placement
On November 17, 2022, we entered into the November Purchase Agreement with the November Investors, pursuant to which we agreed to sell to the November Investors (i) an aggregate of 15,000 shares of Series B Preferred Stock and (ii) November Warrants to acquire up to an aggregate of 1,935,485 shares of Common Stock. We received total gross proceeds of approximately $15 million from the November Private Placement.
The terms of the Series B Preferred Stock are as set forth in the Certificate of Designations. The Series B Preferred Stock will be convertible into Series B Preferred Shares at the election of the holder at any time at the Conversion Price. The Conversion Price is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like, and subject to price-based adjustment in the event of any issuances of Common Stock, or securities convertible, exercisable or exchangeable for Common Stock, at a price below the then-applicable Conversion Price (subject to certain exceptions). We will be required to redeem the Series B Preferred Stock in 15 equal monthly installments, commencing on June 1, 2023. The amortization payments due upon such redemption are payable, at
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our election, in cash, or subject to certain limitations, in shares of Common Stock valued at the lower of (i) the Conversion Price then in effect and (ii) the greater of (A) a 15% discount to the average of the three lowest closing prices of the Common Stock during the thirty trading day period immediately prior to the date the amortization payment is due or (B) the lower of $1.25 and $0.172, which is equal to 20% of the Minimum Price (as defined in Rule 5635 of the Rule of the Nasdaq Stock Market) on April 14, 2023, the date of receipt of Nasdaq Stockholder Approval (as defined below); provided that if the amount set forth in clause B is the lowest effective price, we will be required to pay the amortization payment in cash. We may require holders to convert their Series B Preferred Stock into Series B Preferred Shares if the closing price of the Common Stock exceeds $11.625 per share for 20 consecutive trading days and the daily trading volume of the Common Stock exceeds 100,000 shares per day during the same period and certain equity conditions described in the Certificate of Designations are satisfied.
The holders of the Series B Preferred Stock are entitled to dividends of 7% per annum, compounded monthly, which are payable in cash or shares of Common Stock at our option, in accordance with the terms of the Certificate of Designations. Upon the occurrence and during the continuance of a Triggering Event (as defined in the Certificate of Designations), the Series B Preferred Stock will accrue dividends at the rate of 15% per annum. The holders of Series B Preferred Stock have no voting rights on account of the Series B Preferred Stock, other than with respect to certain matters affecting the rights of the Series B Preferred Stock.
Notwithstanding the foregoing, our ability to settle conversions and make amortization payments using shares of Common Stock is subject to certain limitations set forth in the Certificate of Designations, including a limit on the number of shares that may be issued until the time, if any, that our stockholders have approved the issuance of more than 19.9% of our outstanding shares of Common Stock in accordance with Nasdaq listing standards (the “Nasdaq Stockholder Approval”). We agreed to seek stockholder approval of these matters at a meeting to be held no later than June 1, 2023, and such approval was obtained at the Company’s special meeting of stockholders held on April 14, 2023. Further, the Certificate of Designations contains a certain beneficial ownership limitation after giving effect to the issuance of shares of Common Stock issuable upon conversion of, or as part of any amortization payment under, the Certificate of Designations or November Warrants.
The Certificate of Designations includes certain Triggering Events (as defined in the Certificate of Designations), including, among other things, the failure to file and maintain an effective registration statement covering the sale of the holder’s securities registrable pursuant to the November Registration Rights Agreement (defined below) and our failure to pay any amounts due to the holders of the Series B Preferred Stock when due. In connection with a Triggering Event, each holder of Series B Preferred Stock will be able to require us to redeem in cash any or all of the holder’s Series B Preferred Stock at a premium set forth in the Certificate of Designations.
We are subject to certain affirmative and negative covenants regarding the incurrence of indebtedness, acquisition and investment transactions, the existence of liens, the repayment of indebtedness, the payment of cash in respect of dividends (other than dividends pursuant to the Certificate of Designations), distributions or redemptions, and the transfer of assets, among other matters.
The November Warrants are exercisable for Warrant Shares immediately at an exercise price of $7.75 per share (the “Exercise Price”) and expire five years from the date of issuance. The Exercise Price is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like, and subject to price-based adjustment, on a “full ratchet” basis, in the event of any issuances of Common Stock, or securities convertible, exercisable or exchangeable for Common Stock, at a price below the then-applicable Exercise Price (subject to certain exceptions).
In connection with the November Purchase Agreement, we and the November Investors entered into a Registration Rights Agreement (the “November Registration Rights Agreement”) on November 17, 2022. Under the terms of the November Registration Rights Agreement, we agreed to register 200% of the Series B Preferred Shares, the Warrant Shares and the shares of Common stock issuable as amortization payments as well as any shares of Common stock paid as dividends. We filed a registration statement for the resale of such securities on December 16, 2022. We also agreed to other customary obligations regarding registration, including indemnification and maintenance of the effectiveness of the registration statement.
In connection with the November Private Placement, pursuant to an Engagement Letter, between the Company and Katalyst Securities LLC (the “November Placement Agent”), the Company paid the November Placement Agent (i) a cash fee equal to 7% of the gross proceeds from any sale of securities in the November Private Placement and (ii) warrants to purchase shares of Common Stock equal to 3% of the number of shares of Common stock that the Series B Preferred Shares are initially convertible into, with an exercise price of $7.75 per share and a five-year term.
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Results of Most Recent Extended Confirmatory Phase 2 Clinical Trial
On July 23, 2020, we entered into the 2020 Services Agreement with WCT. The 2020 Services Agreement relates to services for our Phase 2 clinical study assessing the safety, tolerability and long-term efficacy of Bryostatin-1 in the treatment of moderately severe AD subjects not receiving memantine treatment. On January 22, 2022, the Company executed a change order with WCT to accelerate trial subject recruitment totaling approximately $1.4 million. The updated total estimated budget for the services, including pass-through costs, is approximately $11.0 million. As previously disclosed, on January 22, 2020, we were granted a $2.7 million award from the NIH, which award is being used to support the 2020 Study, resulting in a current estimated net budgeted cost of the 2020 Study to us of $8.3 million. Of the $2.7 million grant, virtually all has been received as of February 22, 2022.
As of March 31, 2023, we incurred cumulative expenses of approximately $10.4 million associated with services provided by WCT and certain pass-through expenses incurred by WCT, which was offset by NIH reimbursements recognized of $2.7 million and, for the three months ended March 31, 2023, we incurred expenses of approximately $300,000 associated with services provided by WCT and certain pass-through expenses incurred by WCT.
On December 16, 2022, we issued a press release announcing that an extended confirmatory Phase 2 study of Bryostatin-1 in moderate to severe AD (Study #204) did not achieve statistical significance on the primary endpoint, which was change from baseline to Week 13 in the SIB total score assessment obtained after completion of the second seven-dose course of treatment (week 28 of trial). On March 7, 2023, we announced results of our analysis of secondary endpoints and post hoc analysis from our Phase 2 study of Bryostatin-1. In the secondary endpoint analysis, changes from baseline at Weeks 9, 20, 24, 30, and 42 in the SIB (Severe Impairment Battery) total score were not statistically significant in the total patient population, and no pre-specified secondary endpoints were met with statistical significance in the low-to-moderately severe AD patient stratum. However, nearly all pre-specified secondary endpoints in the most advanced and severe AD (MMSE: 10-14) patient population, with baseline MMSE-2 (Mini-Mental State Examination, 2nd Edition) scores of 10-14, were achieved with statistical significance (p = <0.05, 2-tailed). Data also showed statistical significance in exploratory secondary endpoints for the MMSE-2 10-14 stratum, and post hoc analysis was positive.
Open Label Dose Ranging Clinical Trial
On May 12, 2022, the Company entered into a services agreement with WCT (the “2022 Services Agreement”). The 2022 Services Agreement relates to services for a Phase 2 “open label,” dose ranging study, clinical trial assessing the safety, tolerability and efficacy of Bryostatin-1 administered via infusion in the treatment of moderately severe to severe AD subjects not receiving memantine treatment (the “2022 Study”).
Pursuant to the terms of the 2022 Services Agreement, WCT provided services to enroll approximately 12 2022 Study subjects. The first 2022 Study site was initiated during the third quarter of 2022. The total estimated budget for the services, including pass-through costs, is currently approximately $1.5 million. Either party may terminate the 2022 Services Agreement without cause upon 90 days prior written notice. Furthermore, in the event of a material breach by the other party, which breach is not cured by the breaching party, the other party may terminate the agreement upon 30 days’ prior written notice. The Company terminated the 2022 Services Agreement in December 2022.
The Company incurred approximately $1.5 million of cumulative expenses associated with the 2022 Study as of March 31, 2023, of which $124,000 and $0 of expenses are reflected in the statement of operations for the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023, $0 of WCT 2022 Study prepayments is included as a prepaid expense and other current assets in the Company’s balance sheet. In addition, approximately $45,000 is included in accounts payable and accrued expenses.
Other Development Projects
To the extent resources permit, we may pursue development of selected technology platforms with indications related to the treatment of various disorders, including neurodegenerative disorders such as AD, based on our currently licensed technology and/or technologies available from third party licensors or collaborators.
Nemours Agreement
On September 5, 2018, we announced a collaboration with Nemours, a premier U.S. children’s hospital, to initiate a clinical trial in children with Fragile X. In addition to the primary objective of safety and tolerability, measurements will be made of working
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memory, language and other functional aspects such as anxiety, repetitive behavior, executive functioning, and social behavior. On August 5, 2021, the Company announced its memorandum of understanding with Nemours A.I. DuPont Hospital (“Nemours”) to initiate a clinical trial using Bryostatin-1, under Orphan Drug Status, to treat Fragile X. We intend to provide the Bryostatin-1 drug product candidate and obtain the investigational new drug documentation (“IND”) and Nemours intends to provide the clinical site and attendant support for the trial. We and Nemours, jointly, will develop the trial protocol. We currently estimate our total trial and IND cost to be approximately $2 million. As of the end of the period covered by this Quarterly Report on Form 10-Q, we have incurred cumulative expenses associated with this agreement of approximately $100,000.
We have filed for an IND with the FDA. The FDA has placed the development of the IND on clinical hold pending completion of further analytics relating to drug pharmacokinetics and pharmacodynamics. We are currently evaluating its plans to advance Fragile X development.
Cleveland Clinic
On February 23, 2022, we announced our collaboration with the Cleveland Clinic to pursue possible treatments for Multiple Sclerosis. The collaboration entails filing an IND and conducting initial clinical trials using Bryostatin-1. Future development work will be conducted pursuant to statements of work to be determined.
Impact of COVID-19
We face the ongoing risk that the coronavirus pandemic may slow the conduct of our current trials. In order to prioritize patient health and that of the investigators at clinical trial sites, we will monitor enrollment of new patients in our Phase 2 clinical trials of Bryostatin-1 for the treatment of patients with Alzheimer’s disease. In addition, some patients may be unwilling to enroll in our trials or be unable to comply with clinical trial protocols if quarantines or travel restrictions impede patient movement or interrupt healthcare services. These and other factors outside of our control could delay our ability to conduct clinical trials or release clinical trial results. In addition, the effects of the ongoing coronavirus pandemic may also increase non-trial costs such as insurance premiums, increase the demand for and cost of capital, increase loss of work time from key personnel, and negatively impact our key clinical trial vendors and supplier of API.
In light of the COVID-19 outbreak, the FDA has issued a number of new guidance documents. Specifically, as a result of the potential effect of the COVID-19 outbreak on many clinical trial programs in the US and globally, the FDA issued guidance concerning potential impacts on clinical trial programs, changes that may be necessary to such programs if they proceed, considerations regarding trial suspensions and discontinuations, the potential need to consult with or make submissions to relevant ethics committees, Institutional Review Board (“IRBs”), and the FDA, the use of alternative drug delivery methods, and considerations with respect the outbreak’s impacts on endpoints, data collection, study procedures, and analysis. Such developments may result in delays in our development of Bryostatin-1.
Results of Operations
Comparison of the three months ended March 31, 2023 and 2022
The following table summarizes our results of operations for the three months ended March 31, 2023 and 2022:
Three Months ended |
| |||||||||||
March 31, | Dollar |
| ||||||||||
| 2023 |
| 2022 |
| Change |
| % Change |
| ||||
Operating Expenses: |
|
|
|
|
|
|
|
| ||||
Research and development expenses | $ | 877,717 | $ | 1,486,074 | $ | (608,357) |
| (40.9) | % | |||
General and administrative expenses | $ | 2,044,224 | $ | 1,796,458 | $ | 247,766 |
| 13.8 | % | |||
Other income, net | $ | 1,210,157 | $ | 4,610 | $ | 1,205,547 |
| 8,497.8 | % | |||
Net loss | $ | 1,711,784 | $ | 3,277,922 | $ | (1,566,138) |
| (47.8) | % | |||
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Operating Expenses
Overview
Total operating expenses for the three months ended March 31, 2023 were $2,921,941 as compared to $3,282,532 for the three months ended March 31, 2022, a decrease of approximately 11%. The decrease in total operating expenses is due to the decrease in research and development activities partially offset by an increase in general and administrative expenses.
Research and Development Expenses
For the three months ended March 31, 2023, we incurred $877,717 in research and development expenses as compared to $1,486,074 for the three months ended March 31, 2022, a decrease of approximately 41%. These expenses were incurred primarily pursuant to developing the potential AD therapeutic product, specifically expenses relating to our ongoing Phase 2 clinical trial for AD. Of these expenses, for the three months ended March 31, 2023, $675,262 was incurred principally relating to our current confirmatory clinical trial and our Phase 2 dose ranging study and related storage of drug product, $81,746 for clinical consulting services, $5,261 of amortization of prepaid licensing fees relating to the Stanford License Agreement and Mount Sinai Agreement, $15,722 for development of alternative drug supply with Stanford University and $99,726 of non-cash stock options compensation expense; comparatively, for the three months ended March 31, 2022, $1,262,483 was incurred principally relating to our confirmatory clinical trial and related storage of drug product, $79,546 for clinical consulting services, $7,452 of amortization of prepaid licensing fees relating to the Stanford License Agreement and Mount Sinai Agreement, $15,543 for development of alternative drug supply with Stanford University and $121,050 of non-cash stock options compensation expense.
Our research and development expenses are leveling off as our current Phase 2 clinical trial for AD was materially concluded by the end of 2022 and our Phase 2 dose ranging study was discontinued. Other development expenses might increase, as our resources permit, in order to advance our potential products. We are continuing to determine how to proceed with respect to our other current development programs for Bryostatin-1.
General and Administrative Expenses
We incurred $2,044,224 and $1,796,458 of general and administrative expenses for the three months ended March 31, 2023 and 2022, respectively, an increase of approximately 14%. During the three months ended March 31, 2023, $319,762 was incurred primarily for wages, bonuses, vacation pay, severance, taxes and insurance, versus $293,904 for the three months ended March 31, 2022; $281,681 was incurred for legal expenses versus $129,216 for the 2022 comparable period. The increase in legal fees for 2023 is based upon the prior year’s increased fees for special stockholder vote requirements and for regulatory compliance; $250,300 was incurred for outside operations consulting services during the three months ended March 31, 2023, versus $396,204 for the comparable period in 2022. The decrease for the 2023 period is based upon a decrease in non-cash compensation paid; $22,897 was incurred for travel expenses during the three months ended March 31, 2023, versus $14,652 for the comparable period in 2022 as post-COVID travel has increased; $184,661 was incurred for investor relations services during the three months ended March 31, 2023, versus $72,214 for the comparable period in 2022, with the increase for the current period based upon engaging additional consultants to assist with Company communications; $121,324 was incurred for professional fees associated with auditing, financial, accounting and tax advisory services during the three months ended March 31, 2023, versus $22,048 for the comparable period in 2022. The increase for the current period is primary attributable to additional audit work for the November Private Placement and auditor change; $193,723 was incurred for insurance during the three months ended March 31, 2023, versus $184,308 for the comparable period in 2022; $124,821 was incurred for utilities, supplies, license fees, filing costs, rent, advertising and other during the three months ended March 31, 2023, versus $93,404 for the comparable period in 2022, with the increase for 2023 primary attributable to recognizing Delaware franchise tax quarterly; and $545,055 was recorded as non-cash stock options compensation expense during the three months ended March 31, 2023, versus $590,508 for the comparable period in 2022.
Other Income / Expense
We recognized total other income of $1,210,157 for the three months ended March 31, 2023 as compared to $4,610 for the three months ended March 31, 2022, which consisted, for 2023, of interest income on funds deposited in interest bearing money market accounts and changes in fair value of warrant liability and derivative liability versus interest income only for 2022. The increase in interest income of $391,747 is primarily attributable to the increase in money market interest income rates. The remainder of the increase is attributable to the change in fair value of warrant liability of $588,000 and change in fair value of derivative liability of $225,800.
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Net loss
We incurred losses of $1,711,784 and $3,277,922 for the three months ended March 31, 2023 and 2022, respectively. The decreased loss was primarily attributable to the decrease in net research and development expenses associated with our current Phase 2 confirmatory clinical trial partially offset by an increase in general and administrative expenses and other income.
Financial Condition, Liquidity and Capital Resources
Cash and Working Capital
Since inception, we have incurred negative cash flows from operations. As of March 31, 2023, we had working capital of $35,230,126 as compared to working capital of $37,272,851 as of December 31, 2022. The $2,042,725 decrease in working capital was primarily attributable to approximately $2.9 million of operating expenses and preferred stock dividends of approximately $270,000 partially offset by non-cash expenses of approximately $751,000 and interest income of approximately $400,000.
We expect that our current cash and cash equivalents of approximately $35 million will be sufficient to support our projected operating requirements for at least the next 12 months from the date of this Quarterly Report on Form 10-Q, which would include the continuing development and current Phase 2 clinical trial, of Bryostatin-1, our novel drug candidate targeting the activation of PKC epsilon.
We expect to require additional capital in order to initiate, pursue and complete all potential AD clinical trials and obtain regulatory approval of one or more therapeutic candidates. However, additional future funding may not be available to us on acceptable terms, or at all. If we are unable to access additional funds when needed, we may not be able to initiate, pursue and complete all planned clinical trials or continue the development of our product candidates or we could be required to delay, scale back or eliminate some or all of our development programs and operations. Any additional equity financing, if available, may not be available on favorable terms, would most likely be significantly dilutive to our current stockholders and debt financing, if available, and may involve restrictive covenants. If we are able to access funds through collaborative or licensing arrangements, we may be required to relinquish rights to some of our technologies or product candidates that we would otherwise seek to develop or commercialize on our own, on terms that are not favorable to us. Our ability to access capital when needed is not assured and, if not achieved on a timely basis, would likely materially harm our business and financial condition.
Sources and Uses of Liquidity
We expect to continue to incur expenses, resulting in losses and negative cash flows from operations, over at least the next several years as we continue to develop AD and other therapeutic products. We anticipate that this development may include clinical trials in addition to our current ongoing clinical trial and additional research and development expenditures.
Three Months Ended March 31, | ||||||
| 2023 |
| 2022 | |||
Cash used in operating activities | $ | 1,695,812 | $ | 3,485,406 | ||
Cash used in investing activities | 2,038 | — | ||||
Cash provided by financing activities |
| — |
| 553,150 | ||
Net Cash Used in Operating Activities
Cash used in operating activities was $1,695,812 for the three months ended March 31, 2023, compared to $3,485,406 for the three months ended March 31, 2022. The $1,789,594 decrease primarily resulted from the decrease in net loss of approximately $1.6 million, the decrease in accounts payable and accrued expenses of approximately $1.0 million and the decrease in prepaid expenses of approximately $140,000 partially offset by changes in fair value of non-cash warrant and derivative liabilities totaling approximately $880,000 and an increase in non-cash stock-based compensation of approximately $130,000.
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Net Cash Used in Investing Activities
Net cash used in investing activities was $2,038 for the three months ended March 31, 2023 compared to $0 for the three months ended March 31, 2022. The cash used in investing activities for the three months ended March 31, 2023 was for capital expenditures.
Net Cash Provided by Financing Activities
Net cash provided by financing activities was $0 for the three months ended March 31, 2023 compared to cash provided by financing activities of $553,150 for the three months ended March 31, 2022. The net cash provided by financing activities for 2022 resulted from the exercise of investor warrants issued in 2021.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable to a smaller reporting company.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
An evaluation was performed under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, our principal executive officer and principal financial and accounting officer, respectively, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are not effective due to: inadequate segregation of duties consistent with control objectives in the areas over certain payroll and banking systems and user access controls; ineffective processes over period end financial disclosure and reporting including documentation of GAAP disclosure and reporting reviews supporting the financial reporting process and changes to chart of accounts; and ineffective information technology (IT) general computing controls including lack of risk and design assessments supporting IT security policies and procedures, user access, and IT controls within third party contracts. These weaknesses may affect management’s ability to determine if errors or inappropriate actions have taken place. Management is required to apply its judgment in evaluating the cost-benefit relationship of possible changes in our disclosure controls and procedures.
We previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, that our management, including our Chairman of the Board, principal executive officer and principal financial and accounting officer, assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in the 2013 Internal Control— Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by the Annual Report on Form 10-K for the fiscal year ended December 31, 2022, such internal controls and procedures were not effective to detect the inappropriate application of US generally accepted accounting principles.
Based on management’s review, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were ineffective as of March 31, 2023. Notwithstanding the material weaknesses described above, our management, including the Chief Executive Officer and Chief Financial Officer, has concluded that financial statements, and other financial information included in this Quarterly Report on Form 10-Q, fairly present in all material respects our financial condition, results of operations, and cash flows as of and for the periods presented in this Quarterly Report on Form 10-Q.
Changes in Internal Controls over Financial Reporting
There was no change in our internal controls over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
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PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
You should carefully review and consider the information regarding certain factors that could materially affect our business, consolidated financial condition or results of operations set forth under Item 1A. Risk Factors in our 2022 Annual Report on Form 10-K. There have been no material changes from the risk factors disclosed in our 2022 Annual Report on Form 10-K. We may disclose changes to risk factors from time to time in our future filings with the SEC.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On January 5, 2023, we issued 88,339 shares of Common Stock to IRTH Communications, LLC in exchange for investor relations services. On March 22, 2023, we issued 4,500 shares of Common Stock to Neil Cataldi in exchange for investor relations services.
The foregoing transactions did not involve any underwriters or any public offering. The sales of the above securities were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act (and Regulation D promulgated thereunder) or Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer not involving any public offering. The recipients of the securities in the transaction represented their intentions to acquire the securities for investment only and not with a view to, or for sale in connection with, any distribution thereof, and appropriate legends were affixed to the securities issued in these transactions. All recipients received or had, through their relationships with us, adequate access to information about us.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
On May 12, 2023, we filed an amendment to the Certificate of Designations for the Series B Preferred Stock (the “CoD Amendment”) with the Secretary of State for the State of Delaware, pursuant to which we amended the terms of the Series B Preferred Stock by removing all references to the “Make-Whole Amount”. In connection with the CoD Amendment, on May 11, 2023, we entered into an amendment to the Securities Purchase Agreement dated as of November 17, 2022, by and among us and the investors party thereto (the “SPA Amendment”) pursuant to which we agreed to extend the investors’ right of participation in a subsequent financing until the one year anniversary following the later of (x) such time that the Preferred Shares are no longer outstanding and (y) the maturity date of the Series B Preferred Stock.
The foregoing descriptions of the CoD Amendment and the SPA Amendment do not purport to be complete and are qualified in their entirety by reference to the full text of the CoD Amendment and the SPA Amendment, which are filed as Exhibit 3.2 and Exhibit 10.2, respectively, to this Quarterly Report on Form 10-Q and incorporated herein by reference.
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Item 6. Exhibits.
Exhibit |
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3.1 | ||
3.2** | ||
10.1** | Amended and Restated Non-Employee Director Compensation Policy. | |
10.2** | ||
31.1** |
| |
31.2** |
| |
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| |
32.1* |
| |
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32.2* |
| |
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|
101 |
| The following financial information from this Quarterly Report on Form 10-Q for the period ended March 31, 2023, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) the Condensed Statements of Operations; (ii) the Condensed Balance Sheets; (iii) the Condensed Statements of Cash Flows; and (iv) the Notes to Financial Statements, tagged as blocks of text. |
104 | Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit) |
* The certifications attached as Exhibit 32.1 and Exhibit 32.2 that accompany this Quarterly Report on Form 10-Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Synaptogenix, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of such Form 10-Q), irrespective of any general incorporation language contained in such filing.
**Filed herewith
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Synaptogenix, Inc. | |
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| |
Date: May 15, 2023 | By: | /s/ Alan J. Tuchman, M.D. |
|
| Alan J. Tuchman, M.D. |
|
| Chief Executive Officer |
|
| (principal executive officer) |
|
| |
Date: May 15, 2023 | By: | /s/ Robert Weinstein |
|
| Robert Weinstein |
|
| Chief Financial Officer, Executive Vice President, Secretary and Treasurer |
|
| (principal financial officer) |
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