Company Quick10K Filing
Quick10K
Neurotrope
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$5.64 13 $73
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2018-12-21 Enter Agreement, Sale of Shares, Exhibits
8-K 2018-12-13 Enter Agreement, Sale of Shares, Officers, Exhibits
8-K 2018-12-12 Shareholder Vote
8-K 2018-11-29 Enter Agreement, Exhibits
8-K 2018-09-05 Other Events
8-K 2018-06-19 Officers
8-K 2018-05-04 Enter Agreement, Exhibits
8-K 2018-01-08 Regulation FD, Exhibits
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LW Lamb Weston Holdings 10,190
ADNT Adient 2,290
DDD 3D Systems 1,290
DWSN Dawson Geophysical 68
DXYN Dixie Group 14
OMVS On The Move Systems 0
EHIC EHI Car Services 0
SURG Surge Holdings 0
HYAC Haymaker Acquisition 0
NTRP 2018-12-31
Part I
Item 1.Business.
Item 1A. Risk Factors.
Item 2. Properties.
Item 3.Legal Proceedings.
Item 4. Mine Safety Disclosures.
Part II
Item 5.Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6.Selected Financial Data.
Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 7A.Quantitative and Qualitative Disclosures About Market Risk.
Item 8.Financial Statements and Supplementary Data.
Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Item 9A.Controls and Procedures.
Item 9B.Other Information.
Part III
Item 10.Directors, Executive Officers and Corporate Governance.
Item 11.Executive Compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters.
Item 13.Certain Relationships and Related Transactions, and Director Independence.
Item 14. Principal Accountant Fees and Services.
Part IV
Item 15. Exhibits and Financial Statements Schedules.
Note 1 - Organization, Nature of Business, and Liquidity:
Note 2 - Summary of Significant Accounting Policies:
Note 3 - Collaborative Agreements:
Note 4 - Related Party Transactions and Licensing / Research Agreements:
Note 5 - Common Stock:
Note 6 - Stock Options:
Note 7 - Common Stock Warrants:
Note 8 - Commitments and Contingencies
Note 9 - Subsequent Events
EX-23.1 tv515407_ex23-1.htm
EX-31.1 tv515407_ex31-1.htm
EX-31.2 tv515407_ex31-2.htm
EX-32.1 tv515407_ex32-1.htm

Neurotrope Earnings 2018-12-31

NTRP 10K Annual Report

Balance SheetIncome StatementCash Flow

10-K 1 tv515407_10k.htm FORM 10-K

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-K

 

x ANNUAL REPORT UNDER SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2018

 

OR

 

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE TRANSITION PERIOD FROM ______ TO ______

 

COMMISSION FILE NUMBER001-38045

 

 

 

Neurotrope, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada  
(State or Other Jurisdiction of 46-3522381
Incorporation or Organization) (I.R.S. Employer Identification No.)
   
1185 Avenue of the Americas, 3rd Floor  
New York, New York 10036
(Address of Principal Executive Offices) (Zip Code)
   
973-242-0005  
(Registrant’s Telephone Number, including area code)  

 

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

 

Title of each class Name of each exchange on which registered
   
Common Stock, $0.0001 Par Value Per Share The Nasdaq Stock Market LLC

 

Securities registered pursuant to Section 12(g) of the Exchange Act: None.

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ¨  No x

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

Yes ¨ No x

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes x  No ¨

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.        x

 

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

 

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

 

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

Yes ¨ No x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

 

The aggregate market value of the registrant’s voting and non-voting common stock held by non-affiliates of the registrant (without admitting that any person whose shares are not included in such calculation is an affiliate) computed by reference to the price at which the common stock was last sold, as of the last business day of the registrant’s most recently completed second fiscal quarter was $73,488,239.

 

As of February 28, 2019, the registrant had 12,922,370 shares of common stock outstanding.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

None.

 

 

 

 

 

 

TABLE OF CONTENTS

  

Item Number and Caption   Page
Cautionary Note Regarding Forward-Looking Information   1
     
PART I     2
       
Item 1. Business   2
Item 1A. Risk Factors   27
Item 2. Properties.   40
Item 3. Legal Proceedings   40
Item 4. Mine Safety Disclosures   40
       
PART II     41
       
Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities   41
Item 6. Selected Financial Data   41
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations   42
Item 7A. Quantitative and Qualitative Disclosures About Market Risk   49
Item 8. Financial Statements and Supplementary Data   49
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure   49
Item 9A. Controls and Procedures   50
Item 9B. Other Information   51
       
PART III     52
       
Item 10. Directors, Executive Officers and Corporate Governance   52
Item 11. Executive Compensation   59
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters   64
Item 13. Certain Relationships and Related Transactions, and Director Independence   68
Item 14. Principal Accountant Fees and Services   70
       
PART IV     72
       
Item 15. Exhibits and Financial Statements Schedules   72

 

 

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION

 

This report contains forward-looking statements, including, without limitation, in the sections captioned “Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere. Any and all statements contained in this report that are not statements of historical fact may be deemed forward-looking statements. Terms such as “may,” “might,” “would,” “should,” “could,” “project,” “estimate,” “pro-forma,” “predict,” “potential,” “strategy,” “anticipate,” “attempt,” “develop,” “plan,” “help,” “believe,” “continue,” “intend,” “expect,” “future,” and terms of similar import (including the negative of any of the foregoing) may be intended to identify forward-looking statements. However, not all forward-looking statements may contain one or more of these identifying terms. Forward-looking statements in this report may include, without limitation, statements regarding (i) the plans and objectives of management for future operations, including plans or objectives relating to the development of commercially viable pharmaceuticals, (ii) a projection of income (including income/loss), earnings (including earnings/loss) per share, capital expenditures, dividends, capital structure or other financial items, (iii) our future financial performance, including any such statement contained in a discussion and analysis of financial condition by management or in the results of operations included pursuant to the rules and regulations of the SEC, and (iv) the assumptions underlying or relating to any statement described in points (i), (ii) or (iii) above.

 

The forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may not be realized because they are based upon our current projections, plans, objectives, beliefs, expectations, estimates and assumptions and are subject to a number of risks and uncertainties and other influences, many of which we have no control over. Actual results and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements as a result of these risks and uncertainties. Factors that may influence or contribute to the inaccuracy of the forward-looking statements or cause actual results to differ materially from expected or desired results may include, without limitation, our inability to obtain adequate financing, the significant length of time associated with drug development and related insufficient cash flows and resulting illiquidity, our inability to expand our business, significant government regulation of pharmaceuticals and the healthcare industry, lack of product diversification, volatility in the price of our raw materials, existing or increased competition, results of arbitration and litigation, stock volatility and illiquidity, and our failure to implement our business plans or strategies. A description of some of the risks and uncertainties that could cause our actual results to differ materially from those described by the forward-looking statements in this report appears in the section captioned “Risk Factors” and elsewhere in this report.

 

Readers are cautioned not to place undue reliance on forward-looking statements because of the risks and uncertainties related to them and to the risk factors. We disclaim any obligation to update the forward-looking statements contained in this report to reflect any new information or future events or circumstances or otherwise.

 

1

 

 

PART I

 

Item 1.Business.

 

When used in this report, the terms, “we,” the “Company,” “our,” and “us” refers to Neurotrope, Inc., a Nevada corporation (“Neurotrope”), and its subsidiary Neurotrope BioScience, Inc., a Delaware corporation (“Neurotrope BioScience”).

 

Overview

 

We are a biopharmaceutical company with product candidates in pre-clinical and clinical development. Neurotrope BioScience began operations in October 2012. We are principally focused on developing a product platform based upon a drug candidate called bryostatin for the treatment of Alzheimer’s disease (“AD”), which is in the clinical testing stage. We are also evaluating potential therapeutic applications of bryostatin for other neurodegenerative or cognitive diseases and dysfunctions, such as Fragile X syndrome, Multiple Sclerosis, and Niemann-Pick Type C disease, which have undergone pre-clinical testing. In addition, we are also in the early stages of testing bryostatin activity which may lead to applications in Leukemia and Lymphoma. Neurotrope has been a party to a technology license and services agreement with the original Blanchette Rockefeller Neurosciences Institute (“BRNI”) (which has been known as Cognitive Research Enterprises, Inc. (“CRE”) since October 2016), and its affiliate NRV II, LLC, which we collectively refer to herein as “CRE,” pursuant to which we now have an exclusive non-transferable license to certain patents and technologies required to develop our proposed products. Neurotrope BioScience was formed for the primary purpose of commercializing the technologies initially developed by BRNI for therapeutic applications for AD or other cognitive dysfunctions. These technologies have been under development by BRNI since 1999 and, until March 2013, had been financed through funding from a variety of non-investor sources (which include not-for-profit foundations, the National Institutes of Health, which is part of the U.S. Department of Health and Human Services, and individual philanthropists). From March 2013 forward, development of the licensed technology has been funded principally through the Company in collaboration with CRE. Licensing agreements have been culminated with Stanford University for the exclusive use of synthetic bryostatin and for the potential use of bryostatin-like compounds, called Bryologs, for certain therapeutic indications.

 

Results of Phase 2 Clinical Trial

 

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

 

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

 

2

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

  

3

 

 

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

 

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

 

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

 

Ongoing Confirmatory Phase 2 Clinical Trial

 

On May 4, 2018, we announced a confirmatory, 100 patient, double-blinded clinical trial for the safe, effective 20 μg dose protocol for advanced AD patients not taking memantine as background therapy to evaluate improvements in SIB scores with an increased number of patients. We engaged Worldwide Clinical Trials, Inc. (WCT), in conjunction with consultants and investigators at leading academic institutions, to collaborate on the design and conduct of the trial, which began in April 2018. During July 2018, the first patient was enrolled in this study.

 

As of February 28, 2019, we have signed up 29 clinical sites and have completed patient screening totaling 215. Of the total screened patients, 45 have been randomized and continue to be dosed and 55 have completed dosing. We believe we will have trial data completed in the second half of 2019.

 

Other Development Projects

 

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

 

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

 

Recent Financing

 

On December 17, 2018, we entered into a securities purchase agreement with certain investors pursuant to which we agreed to sell to the purchasers in a registered direct offering an aggregate of 5,012,677 shares of our common stock and Series G warrants to purchase up to an aggregate of 5,012,677 shares of our common stock at a combined purchase price of $4.495 per share and accompanying warrant. The warrants are exercisable at a price of $4.37 per share beginning six months following the date of issuance and will expire five years from the initial exercise date. The net proceeds to us from the offering were approximately $20.5 million, after deducting placement agent fees, financial advisory fees and estimated offering expenses. The offering closed on December 19, 2018, subject to customary closing conditions.

 

4

 

 

In connection with the registered direct offering, we entered into a placement agent agreement and advisory consulting agreements with agents in connection with the issuance and sale of the shares and warrants. We paid the placement agent (i) a cash fee equal to 8% of the aggregate gross proceeds raised from purchasers first contacted by the placement agent in connection with the offering and (ii) warrants to purchase the number of shares of common stock equal to 2.0% of the aggregate number of shares sold to purchasers first contacted by the placement agent in connection with the offering. We also agreed to reimburse the placement agent an additional $25,000 for its legal expenses. Pursuant to separate advisory consulting agreements for the offering, we engaged two consultants, pursuant to which we agreed to pay the consultants an aggregate total of $1.36 million and warrants to purchase an aggregate of 75,657 shares of common stock, at an exercise price of $6.25 per share. We also reimbursed the consultants an additional $50,000 for legal expenses.

 

Corporate Information

 

Neurotrope, Inc. is a Nevada corporation with its principal business office at 1185 Avenue of the Americas, 3rd Floor, New York, New York 10036. Our website can be found at www.neurotrope.com. Information contained on, or that can be accessed through, our website is not and shall not be deemed to be a part of this annual report on Form 10-K. 

 

AD and the Potential Market for our Products

 

The Epidemic of AD

 

According to the Alzheimer’s Association, it has been estimated that 44 million people worldwide had AD, or other forms of dementia, in 2018. The prevalence of AD is independent of race, ethnicity, geography, lifestyle and, to a large extent, genetics. The most common cause of developing AD is living a long life. In developing countries where the median age of death is less than 65 years old, AD is rarely recognized or diagnosed. In the United States in 2018, 5.5 million people are estimated to have AD, and approximately 96% of these people are older than 65 years of age.

 

Researchers continue to explore a wide range of drug mechanisms in hopes of developing drugs to combat this disease. Figure 1 illustrates the range of mechanisms under consideration. Our approach, which involves the activation of the enzyme PKCε, represents a novel mechanism in the armamentarium of potential AD drug therapies.

 

5

 

 

Figure 1. Different Pharmacologic Targets being pursued for the Treatment of AD 1

 

 

 

It has been shown that, during several years preceding the diagnosis of dementia associated with AD, there can be gradual cognition decline, which at first may have rather benign characteristics. At this stage, known as mild cognitive impairment (“MCI”), 60% of these patients will convert to early AD. In MCI, there can already be significant loss of synapses (the junctions between nerve cells) and compromised release of the chemical messengers onto their post-synaptic targets1. MCI, therefore, can transition into mild, moderate and, finally, severe stages of Alzheimer’s disease that are characterized by greater systemic loss of neurons and synapses in the brain tissue. Multiple failures in acetylcholine and glutamate neurotransmitter systems (neurotransmitters) may cause some of the symptoms of early AD, and thus these systems have become targets for pharmacologic intervention.

   

In MCI and early AD, the amyloid load in the brain may or may not increase while the symptoms of early AD begin to occur. Loss of neurons and synaptic networks can be accompanied by abnormal processing of β amyloid (“Aβ”) peptide, causing elevation of the soluble Aβ oligomers, eventually leading to the formation of Aβ plaques (protein deposits) in the brain.

     

The conventional amyloid cascade hypothesis holds that amyloid pathology leads to hyperphosphorylated tau proteins (a protein found in nerve cells) being deposited within neurons in the form of insoluble tangles, excitotoxicity (overstimulation of nerve cells by neurotransmitters), inflammation and finally synaptic depletion and neuronal death. Other hypotheses suggest that AD begins earlier with dysfunctional tau metabolism – independent of amyloid levels. However, the majority of drug development efforts during the past two decades have focused on stopping the production of Aβ or its fragments, and the elimination of these peptides from either intracellular or extracellular locations has represented the preponderance of drug design efforts to halt the progression of AD. However, these efforts have been largely unsuccessful.

 

We believe the current failures of therapies clearing formed amyloid plaques come from an incomplete view of the process. In our view, amyloid plaques and the tau-based neurofibrillary tangles are pathologic hallmarks of AD, but cognitive deficits and synaptic loss can often occur in AD patients in the absence of amyloid plaques. We believe the appearance of these plaques and tangles is not necessarily linked to the death of neurons or synapses, and that the elimination of the plaques does not restore cognitive function as already demonstrated in extensive clinical testing with pathologic correlates. However, we believe that the soluble amyloid pre-plaque oligomers, through their toxicity to synapses and neurons, are important in the progression of the disease.

 

In animal studies, the scientific team led by our Chief Scientific Officer, Dr. Alkon, at the Blanchette Rockefeller Neurosciences Institute, or BRNI (now known as CRE) found that PKCε activation in neurons targets the loss of synapses in the brains of animals with AD, and can delay or temporarily arrest other elements of the disease, e.g., the elevation of the toxic Aβ peptide, the loss of neurons, the appearance of plaques and tangles, and the loss of cognitive function. In pre-clinical testing, Dr. Alkon and his teams also demonstrated that Bryostatin prevents the death of neurons (anti-apoptosis) and induces synaptogenesis by mobilizing synaptic growth factors such as BDNF, NGF, and IGF. At the same time, Bryostatin appeared to prevent the formation of A Beta oligomers, prevent the deposition of amyloid plaques (extra-neuronal), prevent the formation of neurofibrillary tangles (intra-neuronal), and may restore cognitive function. These neuro-restorative benefits may result from the multi-modal molecular cascades activated by the Bryostatin – PKCε efficacies.

 

 

 1  Business Insights: Reference Code B100040-005, Publication Date May 2011, “Advances in AD Drug Discovery”

 

6

 

 

Potential Market for Our Products

 

According to an article titled “Progress in AD” published in The Journal of Neurology in 2012, there has been a dearth of new product introductions in the last 20 years either for the treatment of AD symptoms or its definitive diagnosis in patients who begin exhibiting the memory and cognitive disorders associated with the disease. According to the Alzheimer’s Association, all of the products introduced to date for the treatment of AD have yielded negative or marginal results with no long-term effect on the progression of AD and no improvement in the memory or cognitive performance of the patients receiving these therapies. With 44 million people worldwide estimated to have had AD in 2018, there is significant commercial potential for a new therapeutic that is effective in delaying the progression of the disease.

 

We believe the markets for drugs or therapies to treat the underlying pathology of AD exist largely, but not exclusively, in the developed world and principally comprise the North American, European and Japanese markets. The aggregate AD market is subdivided into four distinct segments, which are shown in Figure 2, as are the compounded annual growth rates (“CAGRs”) for these segments over the 2013-2023 timeframe.

  

Sales of the major drug therapies available only by prescription are reported and projected in Figure 2. These drugs are approved for the symptomatic treatment of the cognitive aspects of AD, but have no meaningful effect on disease progression, causing only temporary improvement in cognitive decline. Despite their limited efficacy, this group of drugs had collective worldwide sales in 2013 in excess of approximately $5 billion, according to GlobalData, Pharma eTrack.

 

Figure 2. Global Market for AD Therapeutics ($, billions): 2013-20232

 

Region  2013   2023   10 Year CAGR%
2013-23
 
US   2.4    7.6    12.2 
European Union   0.6    1.1    6.3 
Japan   1.2    2.1    5.7 
China and India   0.9    1.3    3.7 
Total   5.1    12.1    9.2 

  

The “Therapeutics for Treatment of Symptoms” category cited in Figure 2 represents drugs from other classes that are being used to temporarily treat some of the symptoms of AD.2

 

Neurotrope’s Proposed Products

 

Challenges in Treating AD

 

One of the challenges in treating AD is that its symptoms become manifest only years after the disease process can be definitely diagnosed. Treatment strategies attempting to intervene once symptoms become more apparent are focused on stimulating the neurotransmitter activity of still healthy neurons, or removing the amyloid plaque deposited in the brain. Many drug development efforts to date that have targeted the removal of beta-amyloid or tau protein as their therapeutic mechanism of action have failed, and drugs approved for stimulating neurotransmitter activity offer short-lived, palliative results for AD patients. As such, these strategies have yielded negative or marginal results with no effect on the progression of AD and no improvement in the memory or cognitive performance of the patients receiving these therapies.

 

 

2 GlobalData, Pharma eTrack [Accessed October 25, 2014]

 

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Dying neurons and synapses have, to date, not been therapeutic targets for restoration, and many in the AD field currently believe that stemming the progression of the disease may only be possible with very early stage intervention. The FDA is encouraging the pharmaceutical industry to increase efforts to investigate such early stage interventional treatments by recommending that modified clinical endpoints, both functional and cognitive, be established to monitor the efficacy of drug prototypes being tested in early stage AD patients, according to an article published in The New England Journal of Medicine.3

 

In contrast, we believe that our data from various preclinical animal models and compassionate use trials support that activation of PKCε in central nervous system neurons may improve neuronal vitality and function in areas of the brain damaged by AD, potentially resulting in the improvement of memory and cognition.

  

Synaptogenesis

 

Studies of autopsy brains of AD vs. Control patients showed that deficient activity or low concentrations of PKCε in aging subjects is one of the main causes of the neurodegeneration seen in AD. These deficiencies result in the loss of BDNF, an important synaptic growth factor as demonstrated by other clinical research. The schematic in Figure 3 illustrates only a portion of the changes mediated by PKCε, and how it may help reverse the neuronal damage and loss central to the pathogenic process in AD.

 

Figure 3. PKCε Activation Involves 5 Different Mechanisms to Stop the Progression of AD

 

 

 

Activation of PKCε has been achieved with drug prototypes that mimic the activity of diacylglycerol and phosphatidylserine, which are the natural binding targets for this enzyme. In addition, a variety of in vitro and in vivo animal models have demonstrated that these drug prototypes may be effective in restoring the structure and function of neuronal synapses. Our first clinical application of the PKCε activators is focused on the treatment of AD, but a number of other neurodegenerative diseases may be amenable to similar treatment. A list of these potential future drug targets is shown in Figure 4.

  

 

3 NEJM.org: The New England Journal of Medicine, March 15, 2013, page 1: Drug Development of Early AD, N. Kozauer, M.D., and Russell Katz, M.D.

 

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Figure 4. Therapeutic targets for neuroregeneration through PKCε activation

 

 

Treatment of AD by Stimulating Synaptic Regeneration and Prevention of Neuronal Death

 

Dr. Alkon’s team at BRNI (now known as CRE) conducted research in synaptic regeneration and the prevention of neuronal death, outside the conventional wisdom that has dominated research efforts in the industry. The pathology of AD likely has multiple layers in its development, in addition to the presence of tau phosphorylated tangles and Aβ oligomers. However, once this process presents clinical manifestations of AD, restoring synaptic function thus far has not been effectively achieved by removing Aβ plaques with experimental drug interventions. Once neurons undergo toxic changes with soluble Aβ oligomers, the loss of function to the patient has been irreversible.

 

CRE’s and Neurotrope’s approach has been to restore general viability and hence synaptic function in still-functioning neurons by stimulating the regeneration and growth of the dendritic branches, spines, and pre-synaptic terminals on these neurons. (Dendrites are the branched projections of a neuron that act to propagate the electrochemical stimulation received from other neural cells.) This process can be visualized with serial sections using an electron microscope in the brains of rats whose neurons and synapses have been damaged by ischemic shock (depriving oxygen) or traumatic injury to the brain. The morphology of the damaged neurons in these animal models looks strikingly different after they are treated with experimental drugs that activate PKCε. The new growth of dendritic trees on the damaged neurons creates a multiplicity of new synaptic connections, basically re-wiring the damaged neurons and restoring their function. Earlier therapeutic intervention with a PKCε activator produces markedly improved outcomes in tests measuring restored animal cognitive function.

 

PKCε Activation Stimulates the Formation of New Synaptic Connections

 

The new synaptic connections formed from the damaged neurons revitalized by PKCε in rats can be demonstrated in various behavioral models for the animals that are used to measure memory functions. Treatment with bryostatin, for 12 weeks in genetically modified rodents pre-disposed to develop an AD-type of pathology showed that bryostatin promoted the growth of new synapses and preserved the existing synapses. In addition, this drug also reversed the decrease of PKCε and the reciprocal increase of soluble amyloid.4

 

 

4 Journal of Neuroscience 2011, 31 (2), 630, D. Alkon et al.

 

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In cell tissue cultures, there is a difference in morphology between neurons damaged by the application of ASPD (soluble oligomers of Aβ) as compared to synapses rejuvenated by the application of bryostatin. Treatment with bryostatin, through PKCε activation, stimulates the revitalization of neurons and the formation of new synaptic connections. 

  

The Central Role of PKCε in Maintaining Neuron Structure and Function

 

Upon activation, PKCε migrates from the intraneuronal cytoplasm to the cell membrane, where it activates signal-regulating enzymes (specifically the m-RNA stabilizing protein, HUD, and downstream growth factors such as BDNF, NGF, IGF, etc.; MAP kinases Erk1/2; the BCl-2 apoptosis cascade; and NF-κβ), causing a series of changes leading to increased DNA transcription, synaptic maturation, a consequent increase in levels of growth factor proteins (such as nerve growth factor and brain-derived neurotrophic factor), an inhibition of programmed cell-death and a reduction of β amyloid, and hyperphosphorylated tau.

 

This myriad of events is orchestrated by PKCε, and prompts a number of secondary events occurring in both the pre- and post-synaptic portions of the neuron. Cellular visualization of this effect shows an increase in the number of pre-synaptic vesicles in the neurons, an increase in pre-synaptic levels of PKCε and an increase in the number of mushroom spines associated with individual synaptic boutons (knoblike enlargements at the end of a nerve fiber, where it forms a synapse). Their genesis in these neurons is responsible for the formation of new synapses during associative learning and memory, and for regeneration of synaptic networks in pre-clinical models of Alzheimer’s disease, stroke, traumatic brain injury, and Fragile X syndrome.

 

The central role of PKCε activation in these dynamic events expands the amyloid and tau hypotheses for AD by including pathways to restore the synaptic networks lost during neurodegeneration and to prevent further loss. This mechanistic framework offers new targets for therapeutic intervention which not only prevent the formation of tangles and plaque, but also prevents neuronal death, and promotes the induction of new, mature synaptic networks.

 

Decreased amyloid formation from PKCε activation results from an increase in the rate of Aβ degradation by ECE (endothelin converting enzyme) and induction of α-secretase cleavage of amyloid precursor protein (the precursor molecule to Aβ) through phosphorylation of an enzyme known as Erk. In rodent models genetically predisposed to forming large amounts of amyloid deposits in their brains, PKCε activation was found to interrupt the ongoing formation of amyloid, suggesting that this approach may delay the progression of AD.

 

The key to CRE’s innovation in this area has been in identifying highly potent drug prototypes that at low concentrations cause the specific and transient activation of PKCε, without interacting with the other isozyme variants of PKC whose inactivation would negate the synaptogenic properties of the e isoform.

 

Testing PKCε Activation in Humans

 

The basic drug mechanism invoking PKCε activation for neuronal rejuvenation and synaptic regeneration has never been evaluated in humans for any drug class or therapeutic application. We believe that the pre-clinical and clinical research in this field as described above is an ideal platform for testing this approach in human subjects.

 

We have licensed a body of biomedical research from CRE, formerly known as the Blanchette Rockefeller Neurosciences Institute, or BRNI, that is comprised of new methods and drug prototypes designed to stimulate neuronal regeneration. For additional information, see “Business – Intellectual Property – Technology License and Services Agreement.” We believe the commercial application of this technology has potential to impact AD as well as traumatic brain injury, ischemic stroke, post-traumatic stress syndrome and learning disorders.

 

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Drug Prototypes That Treat AD through Regeneration

 

CRE has developed a new chemical family of polyunsaturated fatty acid (“PUFA”) analogs, which appear to be effective in the activation of PKCε. Representative structures of bryostatin and a PUFA analog are shown in Figure 5

 

Figure 5. Structures of Bryostatin 1 and a PUFA Analog Effective in the Activation of PKCε5

 

 

 

Ki values = effective concentration of the drug in achieving 50% activation of PKCε

 

These molecules activate PKCε by binding to two different and distinct active sites on the enzyme. The natural ligands that bind to these sites are diacylglycerol and phosphatidylserine. Bryostatin acts as a mimetic (mimic) for diacylglycerol by binding to the diacylglycerol site and, similarly, the PUFA analogs act as mimetics for phosphatidylserine by binding to the phosphatidylserine site.

 

Collaborative Agreements

 

Stanford License Agreements

 

On May 12, 2014, the Company entered into a license agreement (the “Stanford Agreement”) with The Board of Trustees of The Leland Stanford Junior University (“Stanford”), pursuant to which Stanford has granted to the Company a revenue-bearing, world-wide right and exclusive license, with the right to grant sublicenses (on certain conditions), under certain patent rights and related technology for the use of bryostatin structural derivatives, known as “bryologs,” for use in the treatment of central nervous system disorders, lysosomal storage diseases, stroke, cardio protection and traumatic brain injury, for the life of the licensed patents. We are required by the Stanford Agreement to use commercially reasonable efforts to develop, manufacture and sell products (“Licensed Products”) in the Licensed Field of Use (as defined in the Stanford Agreement) during the term of the licensing agreement. The Company paid Stanford $70,000 upon executing the license and is obligated to pay an additional $10,000 annually as a license maintenance fee. In addition, we must meet specific diligence milestones, and upon meeting such milestones, make specific milestone payments to Stanford. We will also pay Stanford royalties of 3% on net sales, if any, of Licensed Products (as defined in the Stanford Agreement) and milestone payments of up to $3.7 million dependent upon stage of product development. To-date, no royalties nor milestone payments have been made. 

 

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 $70,000 upon executing the license and is obligated to pay an additional $10,000 annually as a license maintenance fee. In addition, based upon certain milestones which include product development and commercialization, the Company will be obligated to pay up to an additional $2.1 million and between 1.5% and 4.5% royalty payments on certain revenues generated by the Company relating to the licensed technology. The Company has made all required annual maintenance payments.

 

 

5 Trends in Biochemical Sciences V. 34, #3, p.136. T.J. Nelson et al, “Neuroprotective versus Tumorigenic protein kinase C activators.”

 

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Mt. Sinai License Agreement

 

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

   

Clinical Trial Services Agreements

 

On May 4, 2018, Neurotrope BioScience executed a new Services Agreement (the “New Services Agreement”) with Worldwide Clinical Trials (“WCT”). The New Services Agreement relates to services for Neurotrope BioScience’s Phase 2 confirmatory clinical study assessing the safety, tolerability and efficacy of bryostatin in the treatment of moderately severe to severe AD (the “Study”). Pursuant to the terms of the Services Agreement, WCT is providing services to target enrollment of approximately one hundred (100) Study subjects. The total estimated budget for the services, including pass-through costs, drug supply and other statistical analyses, is approximately $7.3 million based upon the progress of the Study.

 

Bryostatin

 

Our lead product candidate is bryostatin. Bryostatin is a natural product isolated from a marine invertebrate organism, a bryozoan called Bugula neritina. Several total syntheses of this complex molecule have been achieved in recent years in various academic chemistry laboratories, and these approaches represent a possible alternative source of this drug. Importantly, we have an exclusive license for neurologic disorders to a new, accelerated synthesis of bryostatin-1 recently developed at Stanford University by Dr. Paul Wender and his team. Bryostatin is a PKCα and e activator that was originally developed as a potential anticancer drug. According to Clinical Cancer Research, this drug candidate was previously evaluated in 63 clinical studies involving more than 1,400 patients at the National Cancer Institute (“NCI”) for the treatment of various forms of cancer. While having failed these studies as an experimental anti-cancer therapy, much useful information on the safety, pharmacodynamics and toxicity of the drug was obtained from these in-human trials. In general, bryostatin-1 was considered to be “well-tolerated” in these anti-cancer trials.

 

It was discovered that at doses at lower levels than those used in these anticancer trials, bryostatin is a potent activator of PKCε and may have efficacy in treating AD. As described above, activation of PKCε has been shown to partially restore synaptic function in neurons damaged by AD in in vitro and in vivo animal models.

 

The NCI has entered into a material transfer agreement with CRE to provide the bryostatin required for pre-clinical research as well as the Phase 2 clinical trials planned by the Company. Our license agreement with CRE (see “Business – Intellectual Property – Technology License and Services Agreement”) permits our access to new bryostatin clinical trial data and information held by the NCI, as well as past clinical, safety and toxicity data compiled by the NCI during the time this drug was being evaluated for its anticancer properties. See Item 1A, “Risk Factors—We are partly dependent upon the NCI to supply bryostatin for our clinical trials.”

 

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CRE previously conducted an exploratory evaluation of bryostatin on a compassionate use basis in AD patients who have an inherited form of AD, frequently called familial AD, under an FDA-approved study protocol. Familial AD results from one of four major mutations in the genome, and this mutation is passed on from generation to generation within a family that carries the defective gene. The tragic consequence of familial AD is that it strikes its victims at an early age, often while they are in their twenties. The aggressive progression of familial AD can render these patients in the terminal stages of AD in their late 30s and early 40s.

 

Bryologs

 

On May 12, 2014, we entered into a license agreement (the “Stanford License”) with The Board of Trustees of the Leland Stanford Junior University (“Stanford”) pursuant to which Stanford has granted to us a revenue-bearing, world-wide right and exclusive license, with the right to grant sublicenses (on certain conditions), under three issued U.S. patents and one pending U.S. patent 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, cardioprotection and traumatic brain injury, collectively referred to as the Licensed Field of Use, for the life of the licensed patents. As mentioned above, in January 2017, we entered into an additional license agreement with Stanford relating to an accelerated synthesis of bryostatin-1.

  

Also as mentioned above, our initial drug candidate, bryostatin, is a natural product isolated from a marine invertebrate organism, a bryozoan called Bugula neritina. However, it takes large quantities of biomass harvested from the oceans to produce even small quantities of bryostatin, and supply is limited.

 

Stanford researchers have synthesized a large family of bryologs over a number of years as part of a research program to define the essential molecular features critical to bryostatin’s biological activity. The bryologs are easier to produce than bryostatin due to their less complex chemical structures. They represent a collection of potential drug candidates, some of which we may evaluate for the potential treatment of several diseases such as ischemic stroke, Fragile X syndrome, traumatic brain injury and AD, although there can be no assurance that we will identify any potential candidates or if identified, will be successful in developing a potential treatment.

 

We are required under the Stanford License to use commercially reasonable efforts to develop, manufacture, and sell products (“Licensed Products”) in the Licensed Field of Use (as defined in the Stanford License). In addition, we must meet specific diligence milestones, and upon meeting such milestones, make specified milestone payments to Stanford. We will also pay Stanford royalties on net sales, if any, of Licensed Products (as defined in the Stanford License).

 

Stanford retains the right, on behalf of itself and all other non-profit research institutions, to practice the licensed patents and use the licensed technology for any non-profit purpose, including sponsored research and collaborations. The license is also subject to Title 35, Sections 200-204, of the United States Code, which governs patent rights in inventions made with U.S. government assistance. Among other things, these provisions provide the United States government with nonexclusive rights in the licensed patents. They also impose the obligation that products based on the licensed patents sold or produced in the United States be “manufactured substantially in the United States.”

 

PUFA Analogs

 

Several other drug prototypes termed the PUFA analogs have been synthesized at CRE and evaluated for their PKCε activating properties in models of AD. The PUFA analogs are not structurally related to bryostatin and activate PKCε at a different site. We believe the PUFA analogs may represent a potential source for follow-on drug candidates. PKCε activators from the PUFA family of drug prototypes have demonstrated neuroregeneration efficacy roughly equivalent to and, in some cases, potentially superior to that of bryostatin. If the PUFA analogs show adequate potency in preclinical models of AD, we may advance a drug prototype from this chemical family.

 

Other Potential Products

 

We may acquire, by license or otherwise, other development stage products that are consistent with our product portfolio objectives and commercialization strategy. 

 

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WCT Services Agreements

 

On October 9, 2015, Neurotrope BioScience, our wholly-owned subsidiary, executed a Services Agreement (the “2015 Services Agreement”) with Worldwide Clinical Trials, Inc. (“WCT”), effective as of August 31, 2015. The 2015 Services Agreement related to services for Neurotrope BioScience’s Phase 2 clinical study assessing the safety, tolerability and efficacy of bryostatin in the treatment of moderately severe to severe AD. Pursuant to the terms of the 2015 Services Agreement, WCT agreed to provide services to enroll approximately 150 study subjects at approximately 30 sites across the United States. We began enrollment at the initial sites at the end of 2015, completed enrollment in November 2016 and announced top-line results in May 2017 as described in this report.

 

On May 4, 2018, Neurotrope BioScience executed a new Services Agreement (the “Services Agreement”) with WCT. The Services Agreement relates to services for Neurotrope BioScience’s confirmatory Phase 2 clinical study assessing the safety, tolerability and efficacy of bryostatin in the treatment of moderately severe to severe Alzheimer’s disease.

 

Pursuant to the terms of the Services Agreement, WCT will provide services to enroll approximately one hundred (100) study subjects. The total estimated budget for the services, including pass-through costs, is currently approximately $7.3 million. Neurotrope BioScience may terminate the Services Agreement without cause upon sixty (60) days prior written notice. Unless earlier terminated under the provisions of the Services Agreement, the Services Agreement will expire upon WCT’s completed performance of the services thereunder (including delivery of all the deliverables) and WCT’s receipt of all payments from Neurotrope BioScience that are due under the Agreement. In addition to Neurotrope BioScience’s termination right described above, Neurotrope BioScience may terminate the Agreement immediately due to patient safety. Further, under the Agreement, either Neurotrope BioScience or WCT may terminate the Agreement if the other party materially breaches the Agreement and fails to cure such breach. Additionally, either Neurotrope BioScience or WCT may terminate the Agreement upon notice to the other party if the other party is adjudicated insolvent or petitions for relief under any insolvency, re-organization, receivership, liquidation, compromise, or any moratorium statute.  As of December 31, 2018, the trial’s data safety monitoring board determined that the drug did not have safety issues pursuant to their review.

 

Intellectual Property

 

Technology License and Services Agreement

 

On February 4, 2015, Neurotrope BioScience, CRE and NRV II, LLC entered into an Amended and Restated Technology License and Services Agreement (the “CRE License”), which further amended and restated the Technology License and Services Agreement dated as of October 31, 2012, as amended by Amendment No. 1 dated as of August 21, 2013.

  

Pursuant to the CRE License, Neurotrope BioScience maintained its exclusive (except as described below), non-transferable (except pursuant to the CRE License’s assignment provision), 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, LLC 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 specifies that all patents that issue from a certain patent application, shall constitute licensed patents and all trade secrets, know-how and other confidential information claimed by such patents constitute licensed technology under the CRE License. Furthermore, on July 10, 2015, under the terms of the Statement of Work and Account Satisfaction Agreement dated February 4, 2015, Neurotrope BioScience’s rights relating to an in vitro diagnostic test system reverted back to CRE and, accordingly, Neurotrope BioScience no longer has any rights under the CRE License for diagnostic applications using the CRE patent portfolio or technology.

 

Notwithstanding the above license terms, CRE and its affiliates retain rights to use the licensed intellectual property in the Field of Use to engage in research and development and other non-commercial activities and to provide services to Neurotrope BioScience or to perform other activities in connection with the CRE License.

 

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Under the CRE License, CRE and Neurotrope BioScience may not enter into sublicense agreements with third parties except with CRE’s prior written consent, which consent shall not be commercially unreasonably withheld. Furthermore, the CRE License dated February 4, 2015 revises the agreement that was entered into as of October 31, 2012 and amended on August 21, 2013, in that it provides that any intellectual property developed, conceived or created in connection with a sublicense agreement that Neurotrope BioScience entered into with a third party pursuant to the terms of the CRE License will be licensed to CRE and its affiliates for any and all non-commercial purposes, on a worldwide, perpetual, non-exclusive, irrevocable, non-terminable, fully paid-up, royalty-free, transferable basis, with the right to freely sublicense such intellectual property. Previously, the agreement had provided that such intellectual property would be assigned to CRE.

 

Pursuant to the terms of the November 12, 2015 amendment to the CRE License, we paid an aggregate of approximately $348,000 to CRE following the closings of the Series B private placement, which constituted an advance royalty payment to CRE and will be offset (with no interest) against the amount of future royalty obligations payable until such time that the amount of such future royalty obligations equals in full the amount of the advance royalty payments made. Neurotrope Bioscience shall be subtracted from the gross proceeds to determine the “Post-PA Fee Proceeds.”

 

Under the CRE License, CRE and Neurotrope BioScience will jointly own data, reports and information that is generated on or after February 28, 2013, pursuant to the license agreement dated October 31, 2012 and amended on August 21, 2013, by Neurotrope BioScience, on behalf of Neurotrope BioScience by a third party or by CRE pursuant to a statement of work that the parties enter into pursuant to the CRE License, in each case to the extent not constituting or containing any data, reports or information generated prior to such date or by CRE not pursuant to a statement of work (the “Jointly Owned Data”). CRE has agreed not to use the Jointly Owned Data inside or outside the Field of Use for any commercial purpose during the term of the CRE License or following any expiration of the CRE License other than an expiration that is the result of a breach by Neurotrope BioScience of the CRE License that caused any licensed patent to expire, become abandoned or be declared unenforceable or invalid or caused any licensed technology to enter the public domain (a “Natural Expiration”) provided, however, CRE may use the Jointly Owned Data inside or outside the Field of Use for any commercial purpose following any termination of the CRE License. Also, CRE granted Neurotrope BioScience a license during the term and following any Natural Expiration, to use certain CRE data in the Field of Use for any commercial purposes falling within the scope of the license granted to Neurotrope BioScience under the CRE License.

 

The CRE License further requires us to pay CRE (i) a fixed research fee equal to a pro rata amount of $1 million in the year during which we close on a Series B Preferred Stock financing resulting in proceeds of at least $25 million, (ii) a fixed research fee of $1 million per year for each of the five calendar years following the completion of such financing and (iii) an annual fixed research fee in an amount to be negotiated and agreed upon no later than 90 days prior to the end of the fifth calendar year following the completion of such financing to be paid with respect to each remaining calendar year during the term of the CRE License. This fixed research fee is not yet due. The CRE License Agreement also requires the payment by us of royalties ranging between 2% and 5% of our revenues generated from the licensed patents and other intellectual property, dependent upon the percentage ownership that Neuroscience Research Ventures, Inc. (“NRV, Inc.”) holds in our company, which currently would be a royalty rate of 5% based on NRV, Inc.’s current ownership in us.

 

On November 29, 2018, we entered into a Second Amendment to the CRE License, pursuant to which (i) we agreed to pay all outstanding invoices and accrued expenses associated with the licensed intellectual property and (ii) the parties agreed that CRE would no longer have the right, and we would have the sole and exclusive right, to apply for, file, prosecute, and maintain patents and applications for the licensed intellectual property.

  

Our Licensed Intellectual Property

 

We have licensed from CRE an extensive intellectual property portfolio that includes issued patents, pending patent applications and provisional patent applications, in the U.S. and elsewhere, which, we believe, together cover these key pharmaceutical markets. A method of use patent has been issued to CRE that covers the use of the PUFA family of molecules for the same therapeutic applications.

 

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We believe the CRE License provides us rights to the patents and technologies required to develop our proposed products. The patents and technologies licensed to us pursuant to the CRE License include, without limitation, the following:

 

·therapies based on bryostatin and PUFA chemical families; and

 

·methods for treating AD.

  

A number of CRE’s patent applications for treatment of neurological disorders have been under active prosecution for many years and have been the subject of multiple rejections for anticipation and/or obviousness based on prior art. There are no guarantees that CRE’s pending patent applications will issue into commercially meaningful patents. If these patent applications are not approved or successfully prosecuted, then we will attempt to seek other means of protecting its proprietary position including, but not limited to, trade secrets, proprietary formulations and methods, etc.

 

A substantial amount of in-human data exists that was generated by the NCI that involves the earlier evaluation of bryostatin as an anticancer agent. The NCI also holds the existing inventory of the bryostatin drug product which is suitable for use in man. Our use of the substantial data package generated by the NCI on bryostatin, as well as access to the clinical supply of this substance, is permitted under a material transfer agreements entered into and between the NCI and CRE.

 

There are no known patent conflicts or freedom to operate issues at this time which could encumber our ability to commercialize the PKCε activators for the treatment of cognition and memory disorders. However, we cannot provide any assurance that such conflicts will not arise in the future. See the Risk Factors captioned “Our commercial success will depend, in part, on our ability, and the ability of our licensors, to obtain and maintain patent protection. Our licensors’ failure to obtain and maintain patent protection for our products may have a material adverse effect on our business.” and “Our licensed patented technologies may infringe on other patents, which may expose us to costly litigation.” under “Risk Factors.”

 

We also have the right to re-license certain patents and patent applications in certain jurisdictions that we had licensed under the CRE License but had previously elected to relinquish. In the event that we decide to re-license any of such patents and/or patent applications, then we are required to reimburse CRE for all of the attorneys’ fees, translation costs, filing fees, maintenance fees, and other costs and expenses related to such patents and/or patent applications that have been incurred since we elected to relinquish them under the CRE License.

 

Additional Intellectual Property

 

In addition, we have also filed, and own, multiple patent families directed to methods of treatment and formulations with PKC activators, including bryostatin. We are, or will, seek patent protection for these inventions in numerous countries and regions including, among others, Europe, Canada, Mexico, and Japan.

 

While we seek broad coverage under our existing patent applications, there is always a risk that an alteration to the product or process may provide sufficient basis for a competitor to avoid infringement claims. In addition, the coverage claimed in a patent application can be significantly reduced before a patent is issued and courts can reinterpret patent scope after issuance. Moreover, many jurisdictions including the United States permit third parties to challenge issued patents in administrative proceedings, which may result in further narrowing or even cancellation of patent claims. Moreover, we cannot provide any assurance that any patents will be issued from our pending or any future applications or that any potentially issued patents will adequately protect our intellectual property.

 

Individual patents extend for varying periods depending on the date of filing of the patent application or the date of patent issuance and the legal term of patents in the countries in which they are obtained. Generally, utility patents issued for applications filed in the United States are granted a term of 20 years from the earliest effective filing date of a non-provisional patent application. In addition, in certain instances, a patent term can be extended to recapture a portion of the U.S. Patent and Trademark Office, or the USPTO, delay in issuing the patent as well as a portion of the term effectively lost as a result of the FDA regulatory review period. However, as to the FDA component, the restoration period cannot be longer than five years and the total patent term including the restoration period must not exceed 14 years following FDA approval. The duration of foreign patents varies in accordance with provisions of applicable local law, but typically is also 20 years from the earliest effective filing date. The actual protection afforded by a patent may vary on a product by product basis, from country to country and can depend upon many factors, including the type of patent, the scope of its coverage, the availability of regulatory-related extensions, the availability of legal remedies in a particular country and the validity and enforceability of the patent.

 

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We also rely on trademarks, trade secrets, copyright protection, know-how, continuing technological innovation and potential in-licensing opportunities to develop and maintain our proprietary position. For example, we rely upon trade secrets and know-how and continuing technological innovation to develop and maintain our competitive position. We seek to protect our proprietary information, in part, using confidentiality agreements or invention assignment agreements with our employees, contract research organizations, consultants, and any potential commercial partners. These agreements are designed to protect our proprietary information and, in the case of the invention assignment agreements, to grant us ownership of technologies that are developed.

 

Governmental Regulation and Product Approval  

 

The manufacturing and marketing of our potential products and our ongoing research and development activities are subject to extensive regulation by the FDA and comparable regulatory agencies in state and local jurisdictions and in foreign countries.

  

United States Regulation of Drugs

 

In the United States, the FDA approves and regulates drugs under the Federal Food, Drug, and Cosmetic Act, or the FDCA, and implementing regulations. Before any drug product can be marketed in the United States, it must receive approval from the FDA. To receive this approval, any drug we develop must undergo rigorous preclinical testing and clinical trials that demonstrate the product candidate’s safety and effectiveness for each indicated use. The FDA’s extensive regulatory process controls, among other things, the development, testing, manufacture, safety, efficacy, record keeping, labeling, storage, approval, advertising, promotion, sale, and distribution of pharmaceutical products. The failure to comply with requirements under the FDCA and other applicable laws at any time during the product development process, approval process or after approval may subject an applicant and/or sponsor to a variety of administrative or judicial sanctions, including refusal by the FDA to approve pending applications, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters and other types of enforcement letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement of profits or civil or criminal investigations and penalties brought by the FDA and the Department of Justice or other governmental entities.

 

In general, before any new pharmaceutical product can be marketed in the United States, the process typically required by the FDA includes:

 

·preclinical laboratory and animal tests in compliance with the FDA’s good laboratory practice, or GLP, regulations;

 

·submission of an IND, which must become effective before human clinical trials may begin;

 

·approval by an independent institutional review board, or IRB, representing each clinical site before each clinical trial may be initiated;

 

·adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed drug for its intended use, conducted in accordance with good clinical practices, or GCP;

 

·satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the product, or components thereof, are produced to assess compliance with current Good Manufacturing Practices, or cGMP, requirements and to assure that the facilities, methods and controls are adequate to preserve the product’s identity, strength, quality and purity;

 

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·preparation and submission to the FDA of a new drug application, or NDA, requesting marketing for one or more proposed indications;

 

·review by an FDA advisory committee, where appropriate or if applicable;

 

·payment of user fees and securing FDA approval of an NDA or an NDA supplement (for subsequent indications or other modifications, including a change in location of the manufacturing facility); and

 

·compliance with any post-approval requirements, including the potential requirement to implement a Risk Evaluation and Mitigation Strategy, or REMS, and the potential requirement to conduct post-approval studies.

  

Preclinical Testing

 

In the United States, drug candidates are tested in animals until adequate proof of safety and efficacy is established. These preclinical studies generally evaluate the mechanism of action and pharmacology of the product and assess the potential safety and efficacy of the product. Tested compounds must be produced according to applicable cGMP requirements and preclinical safety tests must be conducted in compliance with FDA and international regulations regarding good laboratory practices. The results of the preclinical tests, together with manufacturing information and analytical data, are generally submitted to the FDA as part of an IND, which must become effective before human clinical trials may commence. The IND will automatically become effective 30 days after receipt by the FDA, unless before that time the FDA requests an extension or raises concerns about the conduct of the clinical trials as outlined in the application. If the FDA has any concerns, the sponsor of the IND and the FDA must resolve the concerns before clinical trials can begin. Regulatory authorities may require additional preclinical data before allowing the clinical studies to commence or proceed from one phase to another, and could demand that the studies be discontinued or suspended at any time if there are significant safety issues. Some long-term preclinical testing, such as animal tests of reproductive adverse events and carcinogenicity, may continue after the IND is submitted.

 

Furthermore, an independent IRB for each medical center proposing to participate in the conduct of the clinical trial must review and approve the clinical protocol and patient informed consent form before commencement of the study at the respective medical center. An IRB must operate in compliance with FDA regulations.

 

Clinical Trials

 

Human clinical trials are typically conducted in four sequential phases, which may overlap or be combined:

 

·Phase 1. The drug is initially introduced into healthy human subjects or, in certain indications such as cancer, patients with the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness and to determine optimal dosage.

 

·Phase 2. The drug is administered to a limited patient population to identify possible adverse effects and safety risks, to evaluate preliminarily the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.

 

·Phase 3. The drug is administered to an expanded patient population, generally at geographically dispersed clinical trial sites, in well-controlled clinical trials to generate enough data to evaluate statistically the efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product and to provide adequate information for the labeling of the product.

 

·Phase 4. Post-approval studies may be conducted after initial marketing approval. These studies are used to gain additional experience from the treatment of patients in the intended therapeutic indication.

  

During all clinical trials, physicians will monitor patients to determine effectiveness of the drug candidate and to observe and report any reactions or safety risks that may result from use of the drug candidate. The FDA, the trial site’s IRB or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health risk.

  

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Information about certain clinical trials must be submitted within specific timeframes to the National Institutes of Health for public dissemination on their ClinicalTrials.gov website.

 

Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse events occur. In addition, IND safety reports must be submitted to the FDA for any of the following: serious and unexpected suspected adverse reactions; findings from other studies or animal or in vitro testing that suggest a significant risk in humans exposed to the drug; and any clinically important increase in the case of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. The FDA, the sponsor or the data monitoring committee may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution, or an institution it represents, if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients. The FDA will typically inspect one or more clinical sites to assure compliance with GCP and the integrity of the clinical data submitted.

 

Review of the NDA by FDA

 

The data from the clinical trials, together with preclinical data and other supporting information that establishes a drug candidate’s profile, are submitted to the FDA in the form of an NDA or NDA supplement (for approval of a new indication if the product candidate is already approved for another indication). Under federal law, the submission of most NDAs is additionally subject to an application user fee, currently exceeding $2.3 million, and the sponsor of an approved NDA is subject to annual product and establishment user fees, currently exceeding $114,000 per product and $585,000 per establishment. These fees typically increase annually. Certain exceptions and waivers are available for some of these fees, such as an exception from the application fee for drugs with orphan designation and a waiver for certain small businesses.

 

Under applicable laws and FDA regulations, each NDA submitted for FDA approval is usually given an internal administrative review within 45 to 60 days following submission of the NDA. If deemed complete, the FDA will “file” the NDA, thereby triggering substantive review of the application. The FDA can refuse to file any NDA that it deems incomplete or not properly reviewable. The FDA has established internal substantive review goals of six months for priority NDAs (for drugs addressing serious or life threatening conditions for which there is an unmet medical need) and ten months for regular NDAs. The FDA, however, is not legally required to complete its review within these periods, and these performance goals may change over time. Moreover, the outcome of the review, even if generally favorable, is not typically an actual approval, but an “action letter” that describes additional work that must be done before the NDA can be approved. The FDA’s review of an NDA may involve review and recommendations by an independent FDA advisory committee. The FDA may deny approval of an NDA or an NDA supplement if the applicable regulatory criteria are not satisfied, or it may require additional clinical data and/or an additional pivotal phase 3 clinical trial. Even if such data are submitted, the FDA may ultimately decide that the NDA or NDA supplement does not satisfy the criteria for approval.

 

Before approving an NDA, the FDA typically will inspect the facility or facilities where the product is or will be manufactured. These pre-approval inspections may cover all facilities associated with an NDA submission, including drug component manufacturing (e.g., active pharmaceutical ingredients), finished drug product manufacturing and control testing laboratories. The FDA will not approve an application unless it determines that the manufacturing processes and facilities comply with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP.

 

In addition, as a condition of approval, the FDA may require an applicant to develop a REMS. REMS use risk minimization strategies beyond the professional labeling to ensure that the benefits of the product outweigh the potential risks. To determine whether a REMS is needed, the FDA will consider the size of the population likely to use the product, seriousness of the disease, expected benefit of the product, expected duration of treatment, seriousness of known or potential adverse events and whether the product is a new molecular entity. REMS can include medication guides, physician communication plans for healthcare professionals and elements to assure safe use, or ETASU. ETASU may include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring and using of patient registries. The FDA may require a REMS before approval or post-approval if it becomes aware of a serious risk associated with use of the product. The requirement for a REMS can materially affect the potential market and profitability of a product.

 

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The FDA is required to refer an application for a novel drug to an advisory committee or explain why such referral was not made. Typically, an advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.

 

Data Review and Approval

 

Substantial financial resources are necessary to fund the research, clinical trials and related activities necessary to satisfy FDA requirements or similar requirements of state, local and foreign regulatory agencies. It normally takes many years to satisfy these various regulatory requirements, assuming they are satisfied. Information generated in this process is susceptible to varying interpretations that could delay, limit, or prevent regulatory approval at any stage of the process. Accordingly, the actual time and expense required to bring a product to market may vary substantially. We cannot assure you that we will submit applications for required authorizations to manufacture and/or market potential products or that any such application will be reviewed and approved by the appropriate regulatory authorities in a timely manner, if at all. Data obtained from clinical activities is not always conclusive and may be susceptible to varying interpretations, which could delay, limit or prevent regulatory approval. Success in early stage clinical trials does not ensure success in later stage clinical trials. Even if a product candidate receives regulatory approval, the approval may be significantly limited to specific disease states, patient populations and dosages, or have conditions placed on them that restrict the commercial applications, advertising, promotion or distribution of these products. 

 

Orphan Drug Designation and Exclusivity

 

Under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States. Orphan drug designation must be requested before submitting an NDA. After the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in or shorten the duration of the regulatory review and approval process. If a product that has orphan drug designation subsequently receives FDA approval for the disease for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to market the same drug for the same disease, except in very limited circumstances, for seven years. These very limited circumstances are (i) an inability to supply the drug in sufficient quantities or (ii) a situation in which a new formulation of the drug has shown superior safety or efficacy. This exclusivity, however, also could block the approval of our product for seven years if a competitor obtains earlier approval of the same drug for the same indication.

 

Fast Track, Breakthrough Therapy and Priority Review Designations

 

The FDA is authorized to designate certain products for expedited review if the product is intended to address an unmet medical need in the treatment of a serious or life-threatening disease or condition. These programs are fast track designation, breakthrough therapy designation and priority review designation.

 

Specifically, the FDA may designate a product for fast track review if the product is intended, whether alone or in combination with one or more other products, for the treatment of a serious or life-threatening disease or condition, and it demonstrates the potential to address unmet medical needs for such a disease or condition. For fast track products, sponsors may have greater interactions with the FDA and the FDA may initiate review of sections of a fast track product’s application before the application is complete. This rolling review may be available if the FDA determines, after preliminary evaluation of clinical data submitted by the sponsor, that a fast track product may be effective. The sponsor must also provide, and the FDA must approve, a schedule for the submission of the remaining information and the sponsor must pay applicable user fees. However, the FDA’s time period goal for reviewing a fast track application does not begin until the last section of the application is submitted. In addition, the FDA may withdraw the fast track designation if the FDA believes that the designation is no longer supported by data emerging in the clinical trial process.

 

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Second, in 2012, Congress enacted the Food and Drug Administration Safety and Innovation Act, or FDASIA. This law established a new regulatory scheme allowing for expedited review of products designated as “breakthrough therapies.” A product may be designated as a breakthrough therapy if it is intended, either alone or in combination with one or more other products, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The FDA may take certain actions with respect to breakthrough therapies, including holding meetings with the sponsor throughout the development process; providing timely advice to the product sponsor regarding development and approval; involving more senior staff in the review process; assigning a cross-disciplinary project lead for the review team; and taking other steps to design the clinical trials in an efficient manner.

 

Third, the FDA may designate a product for priority review if it is a product designed to treat a serious condition and, if approved, would provide a significant improvement in safety or effectiveness. The FDA determines, on a case-by-case basis, whether the proposed product represents a significant improvement when compared with other available therapies. Significant improvement may be illustrated by evidence of increased effectiveness in the treatment of a condition, elimination or substantial reduction of a treatment-limiting product reaction, documented enhancement of patient compliance that may lead to improvement in serious outcomes and evidence of safety and effectiveness in a new subpopulation. A priority review designation is intended to direct overall attention and resources to the evaluation of such applications, and to shorten the FDA’s goal for taking action on a marketing application from ten months to six months.

 

Accelerated Approval Pathway

 

The FDA may grant accelerated approval to a product for a serious or life-threatening condition that provides meaningful therapeutic advantage to patients over existing treatments based upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit. The FDA may also grant accelerated approval for such a condition when the product has an effect on an intermediate clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality, or IMM, and that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity or prevalence of the condition and the availability or lack of alternative treatments. Products granted accelerated approval must meet the same statutory standards for safety and effectiveness as those granted traditional approval.

 

For the purposes of accelerated approval, a surrogate endpoint is a marker, such as a laboratory measurement, radiographic image, physical sign or other measure that is thought to predict clinical benefit, but is not itself a measure of clinical benefit. Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints. An intermediate clinical endpoint is a measurement of a therapeutic effect that is considered reasonably likely to predict the clinical benefit of a product, such as an effect on IMM. The FDA has limited experience with accelerated approvals based on intermediate clinical endpoints, but has indicated that such endpoints generally may support accelerated approval where the therapeutic effect measured by the endpoint is not itself a clinical benefit and basis for traditional approval, if there is a basis for concluding that the therapeutic effect is reasonably likely to predict the ultimate clinical benefit of a product.

 

The accelerated approval pathway is most often used in settings in which the course of a disease is long and an extended period of time is required to measure the intended clinical benefit of a product, even if the effect on the surrogate or intermediate clinical endpoint occurs rapidly. Thus, accelerated approval has been used extensively in the development and approval of products for treatment of a variety of cancers in which the goal of therapy is generally to improve survival or decrease morbidity and the duration of the typical disease course requires lengthy and sometimes large trials to demonstrate a clinical or survival benefit.

 

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The accelerated approval pathway is usually contingent on a sponsor’s agreement to conduct, in a diligent manner, additional post-approval confirmatory studies to verify and describe the product’s clinical benefit. As a result, a product candidate approved on this basis is subject to rigorous post-marketing compliance requirements, including the completion of Phase 4 or post-approval clinical trials to confirm the effect on the clinical endpoint. Failure to conduct required post-approval studies, or confirm a clinical benefit during post-marketing studies, would allow the FDA to withdraw the product from the market on an expedited basis. All promotional materials for product candidates approved under accelerated regulations are subject to prior review by the FDA.

 

The FDA’s Decision on an NDA

 

Based on the FDA’s evaluation of an NDA and accompanying information, including the results of the inspection of the manufacturing facilities, the FDA may issue an approval letter or a complete response letter. An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. A complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing or information in order for the FDA to reconsider the application. If and when those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of an NDA, the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included. Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.

 

If the FDA approves a product, it may limit the approved indications for use for the product, require that contraindications, warnings or precautions be included in the product labeling, require that post-approval studies, including Phase 4 clinical trials, be conducted to further assess the drug’s safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution restrictions or other risk management mechanisms, including REMS, which can materially affect the potential market and profitability of the product. The FDA may prevent or limit further marketing of a product based on the results of post-market studies or surveillance programs. After approval, many types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review and approval.

 

Post-Approval Requirements

 

Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting of adverse experiences with the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review and approval. There also are continuing, annual user fee requirements for any marketed products and the establishments at which such products are manufactured, as well as new application fees for supplemental applications with clinical data.

 

In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and state agencies, and are subject to periodic unannounced inspections by the FDA and these state agencies for compliance with cGMP requirements. Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain cGMP compliance.

 

Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS program. Other potential consequences include, among other things:

 

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·restrictions on the marketing or manufacturing of the product, suspension of the approval, or complete withdrawal of the product from the market or product recalls;

 

·fines, warning letters or holds on post-approval clinical trials;

 

·refusal of the FDA to approve pending NDAs or supplements to approved NDAs;

 

·product seizure or detention, or refusal to permit the import or export of products; or

 

·injunctions or the imposition of civil or criminal penalties.

 

The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company found to have improperly promoted off-label uses may be subject to significant liability.

 

In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act, or PDMA, and its implementing regulations, as well as the Drug Supply Chain Security Act, or DSCA, which regulate the distribution and tracing of prescription drugs and prescription drug samples at the federal level, and set minimum standards for the regulation of drug distributors by the states. The PDMA, its implementing regulations and state laws limit the distribution of prescription pharmaceutical product samples, and the DSCA imposes requirements to ensure accountability in distribution and to identify and remove counterfeit and other illegitimate products from the market.

 

Patent Term Restoration and Extension

 

A patent claiming a new drug product may be eligible for a limited patent term extension, also known as patent term restoration, under the Hatch-Waxman Act, which permits a patent restoration of up to five years for patent term lost during product development and the FDA regulatory review. Patent term extension is generally available only for drug products whose active ingredient has not previously been approved by the FDA. The restoration period granted is typically one-half the time between the effective date of an IND and the submission date of an NDA, plus the time between the submission date of an NDA and the ultimate approval date. Patent term extension cannot be used to extend the remaining term of a patent past a total of 14 years from the product’s approval date. Only one patent applicable to an approved drug product is eligible for the extension, and the application for the extension must be submitted prior to the expiration of the patent in question. A patent that covers multiple drugs for which approval is sought can only be extended in connection with one of the approvals. The United States PTO reviews and approves the application for any patent term extension in consultation with the FDA.

 

Foreign Regulation

 

In addition to regulations in the United States, we will be subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of our products in foreign countries. Whether or not we obtain FDA approval for a product, we must obtain approval of a product by the comparable regulatory authorities of foreign countries before we can commence clinical trials or marketing of the product in those countries. The approval process varies from country to country, and the time may be longer or shorter than that required for FDA approval. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.

 

Under European Union regulatory systems, we may submit marketing authorization applications either under a centralized or decentralized procedure. The centralized procedure, which is available for medicines produced by biotechnology or which are highly innovative, provides for the grant of a single marketing authorization that is valid for all EU member states. This authorization is a marketing authorization application. The decentralized procedure provides for mutual recognition of national approval decisions. Under this procedure, the holder of a national marketing authorization may submit an application to the remaining member states. Within 90 days of receiving the applications and assessment report, each member state must decide whether to recognize approval. This procedure is referred to as the mutual recognition procedure.

 

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The policies of the FDA and foreign regulatory authorities may change and additional government regulations may be enacted which could prevent or delay regulatory approval of our products and could also increase the cost of regulatory compliance. We cannot predict the likelihood, nature or extent of adverse governmental regulation that might arise from future legislative or administrative action, either in the United States or abroad.

 

Other Government Regulation

 

Our research and development activities use biological and hazardous materials that are dangerous to human health and safety or the environment. We are subject to a variety of federal, state and local laws and regulations governing the use, generation, manufacture, storage, handling and disposal of these materials and wastes resulting from these materials. We are also subject to regulation by the Occupational Safety and Health Administration and federal and state environmental protection agencies and to regulation under the Toxic Substances Control Act.

 

In addition, once our products are marketed commercially, we will have to comply with the various laws relating to the Medicare, Medicaid and other federal healthcare programs. These federal laws include, by way of example, the following:

 

·The anti-kickback statute (Section 1128B(b) of the Social Security Act) prohibits certain business practices and relationships that might affect the provision and cost of healthcare services reimbursable under Medicare, Medicaid and other federal healthcare programs, including, among other things, the payment or receipt of remuneration for the referral of patients whose care or services will be paid by Medicare or other governmental programs;

 

·The physician self-referral prohibition (Ethics in Patient Referral Act of 1989, as amended, commonly referred to as the Stark Law, Section 1877 of the Social Security Act), which prohibits referrals by physicians of Medicare or Medicaid patients to providers of a broad range of designated healthcare services in which the physicians (or their immediate family members) have ownership interests or with which they have certain other financial arrangements;

 

·The anti-inducement law (Section 1128A(a)(5) of the Social Security Act), which prohibits providers from offering anything of value to a Medicare or Medicaid beneficiary to induce that beneficiary to use items or services covered by either program;

 

·The False Claims Act (31 U.S.C. § 3729 et seq.), which prohibits any person from knowingly presenting or causing to be presented false or fraudulent claims for payment to the federal government (including the Medicare and Medicaid programs);

 

·HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and their respective implementing regulations, including the Final Omnibus Rule published in January 2013, which impose obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;

 

·The Civil Monetary Penalties Law (Section 1128A of the Social Security Act), which authorizes the United States Department of Health and Human Services to impose civil penalties administratively for various fraudulent or abusive acts;

 

·The Physician Payment Sunshine Act (Section 1128G of the Social Security Act), which requires manufacturers of drugs, medical devices and biologicals that participate in U.S. federal health care programs to report certain payments and items of value given to physicians and teaching hospitals; and

 

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·Analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to healthcare items or services that are reimbursed by non-governmental third-party payors, including private insurers.

  

Sanctions for violating these federal laws include criminal and civil penalties that range from punitive sanctions, damage assessments, money penalties, imprisonment, denial of Medicare and Medicaid payments, or exclusion from the Medicare and Medicaid programs, or both. These laws also impose an affirmative duty on those receiving Medicare or Medicaid funding to ensure that they do not employ or contract with persons excluded from the Medicare and other government programs. Additionally, many states have laws and regulations that contain prohibitions that are similar to, and in many cases broader than, these federal laws and once our products are marketed commercially, we will have to comply with these various state laws as well.

 

Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related to payments to physicians and other health care providers or marketing expenditures. State and foreign laws also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

 

Scientific Advisory Board

 

The Company has established a Scientific Advisory Board (“SAB”) comprised of experts in the fields of AD and other neurological diseases.

 

Scientific Advisory Board Chairperson & Members

 

Martin R. Farlow (Chairperson), MD, Professor Emeritus in the Department of Neurology at Indiana University and co-director of the Alzheimer's Disease Center at Indiana University. Dr. Farlow received his medical degree from Indiana University School of Medicine. Following graduation, he completed an internship in Internal Medicine and a residency in Neurology. Dr. Farlow’s research focuses on clinical trials of investigational drugs for the treatment of AD and related dementias and has been the lead investigator for several major studies including tacrine, donepezil and rivastigmine.

 

Paul Coleman, PhD, has been an Associate at the University of Arizona (UA) McKnight Brain Institute since 2010 and a Research Professor at the UA Biodesign Institute since 2015. In 2007, Dr. Coleman was appointed Professor Emeritus at the University of Rochester Medical Center. Since 1988, Dr. Coleman has served as Editor-in-Chief for the journal Neurobiology of Aging and is currently Editor Emeritus and an Advisory Editor. Dr. Coleman received an AB in Psychology (magna cum laude) from Tufts University and a PhD in Physiology and Psychology from the University of Rochester. Following his PhD, Dr. Coleman was supported by the National Institute of Neurological Disorders and Stroke as a Special Fellow at Johns Hopkins School of Medicine. Dr. Coleman has been a pioneering investigator of the pathologic basis of AD.

 

Daniel F. Hanley Jr., MD, has been a Professor of Neurology, Neurosurgery and Anesthesia and Critical Medicine at Johns Hopkins Medicine since 1996. He is a graduate of Williams College and received his medical degree from Cornell University Medical College. Dr. Hanley has board certification in internal medicine, neurology and psychiatry. Dr. Hanley is a leading expert on brain injury and has received more than 20 basic research grants, predominantly from the National Institute of Health.

 

Marwan Sabbagh, MD, is the new director of the Cleveland Clinic Lou Ruvo Center for Brain Health and he has dedicated his entire career to finding a cure for Alzheimer’s and other age-related neurodegenerative diseases.  Dr. Sabbagh earned his undergraduate degree from the University of California-Berkeley and his medical degree from the University of Arizona in Tucson. Dr. Sabbagh received his residency training in neurology at Baylor College of Medicine and completed his fellowship training in geriatric neurology and dementia under renowned AD experts, Leon Thal, M.D., and Robert Katzman, M.D., at the University of California, San Diego School of Medicine. Dr. Sabbagh is a board-certified neurologist and geriatric neurologist. Dr. Sabbagh is a leading investigator for many prominent national Alzheimer’s prevention and treatment trials, including Alzheimer immunotherapy studies.

 

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Lee Jen Wei, PhD, is a tenured Professor of Biostatistics at Harvard University since 1991. He was the co-director of the Bioinformatics Core at the Harvard School of Public Health. Dr. Wei obtained his B.S in mathematics from Fu-Jen University (Taiwan) and his PhD in statistics from the University of Wisconsin–Madison.  Dr. Wei has published many papers on monitoring drug and device safety and related topics.  The resulting procedures have been utilized for various drug and device regulatory evaluations involving safety issues. His extensive experience in quantitative science for making inferences about the drug and device safety is readily applicable to the general industry product safety issues.

 

Competition

 

We compete with many companies, research institutes, hospitals, governments and universities that are working to develop products and processes to treat AD. Many of these entities have substantially greater financial, technical, manufacturing, marketing, distribution and other resources than we do. However, there has been a dearth of new product introductions in the last 20 years for the treatment of AD symptoms in patients who begin exhibiting the memory and cognitive disorders associated with the disease. All of the products introduced to date for the treatment of AD have yielded negative or marginal results with little effect on the progression of AD and no improvement in the memory or cognitive performance of the patients receiving these therapies. We believe we are the only company currently pursuing PKCε activation (with consequent prevention of neuronal death and induction synaptic network growth) as a mechanism to treat AD and neurodegenerative disease. Although we believe that we have no direct competitors working in this same field at the present time, we cannot provide assurance that our competitors will not discover compounds or processes that may be competitive with our products and introduce such products or processes before us.

 

Employees

 

As of the date of this Annual Report on Form 10-K, we have six full-time personnel and two part-time personnel.

 

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Item 1A. Risk Factors.

 

An investment in shares of our common stock is highly speculative and involves a high degree of risk. We face a variety of risks that may affect our operations and financial results and many of those risks are driven by factors that we cannot control or predict. Before investing in our common stock you should carefully consider the following risks, together with the financial and other information contained in this report. If any of the following risks actually occurs, our business, prospects, financial condition and results of operations could be materially adversely affected. In that case, the trading price of our common stock would likely decline and you may lose all or a part of your investment. Only those investors who can bear the risk of loss of their entire investment should invest in our common stock.

 

Risks Related to Our Business and Financial Condition

 

We will need additional financing to fund our operations in the future. If we are unable to obtain additional financing on acceptable terms, we will need to curtail or cease our development plans and operations.

 

As of December 31, 2018, we had approximately $28.8 million of available cash and cash equivalents. While we anticipate our current cash resources on hand will be sufficient to sustain operations and a follow-on clinical trial for the next approximately 24 to 36 months, we do not have sufficient capital to complete all necessary clinical trials in order to have a product approvable for commercial sale. As a result, we will need to raise additional capital and/or obtain a strategic partner to facilitate bringing a product to market. We raised approximately $24.5 million of gross proceeds in the November 2016 private placement and approximately $22.5 million of gross proceeds in our December 2018 registered direct offering. We are currently reviewing our current operating plans, and we will require additional capital in the future. Additional funds may be raised through the issuance of equity securities and/or debt financing, there being no assurance that any type of financing on terms acceptable to us will be available or otherwise occur. Debt financing must be repaid regardless of whether we generate revenues or cash flows from operations and may be secured by substantially all of our assets. Any equity financing or debt financing that requires the issuance of warrants or other equity securities to the lender would cause the percentage ownership by our current stockholders to be diluted, which dilution may be substantial. Also, any additional equity securities issued may have rights, preferences or privileges senior to those of existing stockholders. If such financing is not available when required or is not available on acceptable terms, we may be required to reduce or eliminate certain product candidates and development activities, including those related to bryostatin, the “bryologs” or polyunsaturated fatty acid analogs, and it may ultimately require us to suspend or cease operations, which could cause investors to lose the entire amount of their investment.

  

Our ongoing viability as a company depends on our ability to successfully develop and commercialize our licensed technology.

 

We are principally focused on developing a drug, bryostatin, for the treatment of AD and other diseases, which is still in the clinical testing stage and has not yet been fully developed. Our potential success is highly uncertain since our principal product candidate (bryostatin to treat AD) is in Phase 2 of development. Our other product candidates (use of bryostatin to treat Niemann Pick Type-C and Fragile X syndrome) are even earlier in their development cycles. Bryostatin is also subject to regulatory approval. Our potential success depends upon our ability to raise more capital, complete development of and successfully commercialize bryostatin in a timely manner for the treatment of AD or other diseases. We must develop bryostatin, successfully test it for safety and efficacy in the targeted patient population, and manufacture the finished dosage form on a commercial scale to meet regulatory standards and receive regulatory approvals. The development and commercialization process is both time-consuming and costly, and involves a high degree of business risk. Bryostatin is still at an early stage in its product development cycle, and any follow-on product candidates are still at the concept stage. The results of pre-clinical and clinical testing of our product candidates are uncertain and we cannot assure anybody that we will be able to obtain regulatory approvals of our product candidates. If obtained, regulatory approval may take longer or be more expensive than anticipated. Furthermore, even if regulatory approvals are obtained, our products may not perform as we expect and we may not be able to successfully and profitably produce and market any products. Delays in any part of the process or our inability to obtain regulatory approval of our products could adversely affect our future operating results by restricting (or even prohibiting) the introduction and sale of our products.

 

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If the CRE License were terminated, we may be required to cease operations.

 

Our rights to develop, commercialize and sell certain of our proposed products, including bryostatin, is, in part, dependent upon the CRE License. CRE has the right to terminate this agreement after 30 days prior notice in certain circumstances, including if we were to materially breach any provisions of the agreement after a 60-day cure period for breaches that are capable of being cured, in the event of certain bankruptcy or insolvency proceedings. Additionally, the CRE License provides that the license may not be assigned, including by means of a change of control of the Company, or sublicensed without the consent of CRE. For additional information regarding the CRE License, see “Business – Intellectual Property – Technology License and Services Agreement.” If the CRE License were terminated, we would lose rights to a substantial portion of the intellectual property currently being developed by us and no longer have the rights to develop, commercialize and sell some of our proposed products. As a result, we may be required to cease operations under such circumstance.

 

We rely on independent third-party contract research organizations to perform clinical and non-clinical studies of our drug candidate and to perform other research and development services.

 

The CRE License requires us to use CRE to provide research and development services and other scientific assistance and support services, including clinical trials, under certain conditions. The CRE License limits our ability to make certain decisions, including those relating to our drug candidate, without CRE’s consent. See “Business – Intellectual Property – Technology License and Services Agreement.” Under certain conditions, we may, however, also rely on independent third-party contract research organizations (“CROs”), to perform clinical and non-clinical studies of our drug candidate. We have previously entered into services agreements with Worldwide Clinical Trials, Inc. (“WCT”), relating to our clinical trials of bryostatin. Many important aspects of the services that may be performed for us by CROs are out of our direct control. If there were to be any dispute or disruption in our relationship with such CROs, including WCT, the development of our drug candidate may be delayed. Moreover, in our regulatory submissions, we would expect to rely on the quality and validity of the clinical work performed by our CROs. If any of our CROs’ processes, methodologies or results were determined to be invalid or inadequate, our own clinical data and results and related regulatory approvals could be materially adversely impacted.

 

We have relied on the representations and materials provided by CRE, including scientific, peer-reviewed and non-peer reviewed publications, abstracts, slides, internal documents, verbal communications, patents and related patent filings, with respect to the results of its research related to our proposed products.

 

BRNI (now known as CRE) began the development of the intellectual property that forms the basis for our proposed products in 1999. We have relied on the quality and validity of the research results obtained by CRE with respect to this intellectual property, and we have conducted limited verification of the raw preclinical and clinical data produced by CRE. No independent third-party has verified any such data. If any of CRE’s basic processes, methodologies or results were determined to be invalid or inadequate, our own clinical data and results and related regulatory approvals, could be materially adversely impacted.

   

We have a limited operating history upon which investors can evaluate our future prospects.

 

Our drug product, bryostatin, is in an early development stage and we are subject to all of the risks inherent in the establishment of a new business enterprise. While development of our product candidates was started in 1999 by BRNI (now known as CRE), Neurotrope BioScience was incorporated on October 31, 2012 and on that same date entered into the Technology License and Services Agreement with CRE and NRV II, LLC for the continuing development and commercialization of our product candidates, and, therefore, we have a limited operating history. Our proposed products are currently in the research and development stage and we have not generated any revenues, nor do we expect our products to generate revenues for the near term, if ever. As a result, any investment in our securities must be evaluated in light of the potential problems, delays, uncertainties and complications encountered in connection with a newly established pharmaceutical development business. The risks include, but are not limited to, the possibilities that any or all of our potential products will be found to be unsafe, ineffective or, that the products once developed, although effective, are not economical to market; that our competitors hold proprietary rights that preclude us from marketing such products; that our competitors market a superior or equivalent product; or the failure to receive necessary regulatory clearances for our proposed products. To achieve profitable operations, we must successfully develop, obtain regulatory approval for, introduce and successfully market, sell or license at a profit product candidates that are currently in the research and development phase. We only have one product candidate in clinical development, i.e., bryostatin to treat AD. Much of the clinical development work and testing for our product candidates remains to be completed. No assurance can be given that our research and development efforts will be successful, that required regulatory approvals will be obtained, that any of our candidates will be safe and effective, that any products, if developed and introduced, will be successfully marketed, sold or licensed or achieve market acceptance or that products will be marketed at prices necessary to generate profits. Failure to successfully develop, obtain regulatory approvals for, or introduce and market, sell or license our products would have material adverse effects on our business prospects, financial condition and results of operations.

 

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If we do not obtain the necessary regulatory approvals in the United States and/or other countries, we will not be able to sell our drug candidates.

 

We cannot assure you that we will receive the approvals necessary to commercialize bryostatin, or any other potential drug candidates we acquire or attempt to develop in the future. We will need approval from the FDA to commercialize our drug candidates in the U.S. and approvals from similar regulatory authorities in foreign jurisdictions to commercialize our drug candidates in those jurisdictions. In order to obtain FDA approval of bryostatin or any other drug candidate for the treatment of AD, we must submit first an Investigational New Drug (“IND”) application and then a New Drug Application (“NDA”) to the FDA, demonstrating that the drug candidate is safe, pure and potent, and effective for its intended use. This demonstration requires significant research including completion of clinical trials. Satisfaction of the FDA’s regulatory requirements typically takes many years, depending upon the type, complexity and novelty of the drug candidate and requires substantial resources for research, development and testing. We cannot predict whether our clinical trials will demonstrate the safety and efficacy of our drug candidates or if the results of any clinical trials will be sufficient to advance to the next phase of development or for approval from the FDA. We also cannot predict whether our research and clinical approaches will result in drugs or therapeutics that the FDA considers safe and effective for the proposed indications. The FDA has substantial discretion in the drug approval process. The approval process may be delayed by changes in government regulation, future legislation or administrative action or changes in FDA policy that occur prior to or during our regulatory review. Delays in obtaining regulatory approvals may prevent or delay commercialization of, and our ability to derive revenues from, our drug candidates and diminish any competitive advantages that we may otherwise believe that we hold. Even if we comply with all FDA requests, the FDA may ultimately reject one or more of our applications. We may never obtain regulatory clearance for any of our drug candidates. Failure to obtain FDA approval of our drug candidates will leave us without a saleable product and therefore without any source of revenues. In addition, the FDA may require us to conduct additional clinical testing or to perform post-marketing studies, as a condition to granting marketing approval of a drug product or permit continued marketing, if previously approved. If conditional marketing approval is obtained, the results generated after approval could result in loss of marketing approval, changes in product labeling, and/or new or increased concerns about the side effects or efficacy of a product. The FDA has significant post-market authority, including the explicit authority to require post-market studies and clinical trials, labeling changes based on new safety information and compliance with FDA-approved risk evaluation and mitigation strategies. The FDA’s exercise of its authority has in some cases resulted, and in the future could result, in delays or increased costs during product development, clinical trials and regulatory review, increased costs to comply with additional post-approval regulatory requirements and potential restrictions on sales of approved drugs. In foreign jurisdictions, the regulatory approval processes generally include the same or similar risks as those associated with the FDA approval procedures described above. We cannot assure you that we will receive the approvals necessary to commercialize our drug candidates for sale either within or outside the United States.

 

The commencement and completion of clinical trials can be delayed or prevented for a number of reasons.

 

We initiated a confirmatory Phase 2 clinical trial of bryostatin in the May 2018 and believe we will have trial data completed in the second half of 2019. Drug development is a long, expensive and uncertain process, and delay or failure can occur at any stage of any of our clinical trials. Clinical trials can be delayed or prevented for a number of reasons, including:

 

·difficulties obtaining regulatory approval to commence a clinical trial or complying with conditions imposed by a regulatory authority regarding the scope or term of a clinical trial;

 

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·delays in reaching or failing to reach agreement on acceptable terms with prospective contract research organizations, contract manufacturing organizations, and trial sites, the terms of which can be subject to extensive negotiation and may vary significantly;

 

·failure of our third-party contractors, such as contract research organizations and contract manufacturing organizations, or our investigators to comply with regulatory requirements or otherwise meet their contractual obligations in a timely manner;

 

·insufficient or inadequate supply or quality of a product candidate or other materials necessary to conduct our clinical trials;

 

·difficulties obtaining institutional review board, or IRB, or ethics committee approval to conduct a clinical trial at a prospective site;

 

·the FDA, EMA or other regulatory authority requiring alterations to any of our study designs, our pre-clinical strategy or our manufacturing plans;

 

·various challenges recruiting and enrolling subjects to participate in clinical trials, including size and nature of subject population, proximity of subjects to clinical sites, eligibility criteria for the trial, budgetary limitations, nature of trial protocol, change in the readiness of subjects to volunteer for a trial, the availability of approved effective treatments for the relevant disease and competition from other clinical trial programs for similar indications;

 

·difficulties in maintaining contact with subjects after treatment, which results in incomplete data;

 

·governmental or regulatory delays and changes in regulatory requirements, policy and guidelines; and

 

·varying interpretations of data by the FDA and foreign regulatory agencies.

 

Changes in regulatory requirements and guidance may also occur and we may need to significantly amend clinical trial protocols or submit new clinical trial protocols with appropriate regulatory authorities to reflect these changes. Amendments may require us to renegotiate terms with contract research organizations, or CROs, or resubmit clinical trial protocols to IRBs or ethics committees for re-examination, which may impact the costs, timing or successful completion of a clinical trial. Our clinical trials may be suspended or terminated at any time by the FDA, other regulatory authorities, the IRB or ethics committee overseeing the clinical trial at issue, any of our clinical trial sites with respect to that site, or us, due to a number of factors, including:

 

·failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols;

 

·inspection of the clinical trial operations or trial sites by the FDA or other regulatory authorities;

 

·unforeseen issues, including serious adverse events associated with a product candidate, or lack of effectiveness or any determination that a clinical trial presents unacceptable health risks;

 

·lack of adequate funding to continue the clinical trial due to unforeseen costs or other business decisions; and

 

·upon a breach or pursuant to the terms of any agreement with, or for any other reason by, current or future collaborators that have responsibility for the clinical development of any of our product candidates.

 

Moreover, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive compensation in connection with such services. Under certain circumstances, we may be required to report some of these relationships to the FDA. The FDA may conclude that a financial relationship between us and a principal investigator has created a conflict of interest or otherwise affected interpretation of the trial. FDA may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized. This could result in a delay in approval, or rejection, of our marketing applications by the FDA and may ultimately lead to the denial of marketing approval of one or more of our product candidates.

 

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If we do not succeed in conducting and managing our preclinical development activities or clinical trials, or in obtaining regulatory approvals, we might not be able to commercialize our product candidates, or might be significantly delayed in doing so, which could have a material adverse effect on our business, prospects, financial condition and results of operations.

 

Even if regulatory approvals are obtained for our product candidates, we will be subject to ongoing government regulation. If we fail to comply with applicable current and future laws and government regulations, it could delay or prevent the promotion, marketing or sale of our products.

 

Even if marketing approval is obtained, a regulatory authority may still impose significant restrictions on a product’s indications, conditions for use, distribution or marketing or impose ongoing requirements for potentially costly post-market surveillance, post-approval studies or clinical trials, all of which may result in significant expense and limit our ability to commercialize our products. Our products will also be subject to ongoing requirements governing the labeling, packaging, storage, advertising, distribution, promotion, recordkeeping and submission of safety and other post-market information, including adverse events, and any changes to the approved product, product labeling or manufacturing process. In addition, manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with current good manufacturing practice, or cGMP, requirements and other regulations.

 

If we, our drug products or the manufacturing facilities for our drug products fail to comply with applicable regulatory requirements, a regulatory agency may:

 

·issue warning letters or untitled letters;

 

·seek an injunction or impose civil or criminal penalties or monetary fines;

 

·suspend or withdraw marketing approval;

 

·suspend any ongoing clinical trials;

 

·refuse to approve pending applications or supplements to applications;

 

·suspend or impose restrictions on operations, including costly new manufacturing requirements;

 

·seize or detain products, refuse to permit the import or export of products or request that we initiate a product recall; or

 

·refuse to allow us to enter into supply contracts, including government contracts.

 

We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad, and compliance with such regulation may be expensive and consume substantial financial and management resources. If we or any future marketing collaborators or contract manufacturers are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies or are not able to maintain regulatory compliance, it could delay or prevent the promotion, marketing or sale of our products, which would adversely affect our business and results of operations.

 

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Data from our bryostatin-1 Phase 2 clinical trial may be subject to differing interpretations, and regulatory agencies, medical and scientific experts and others may not share the Company's views of the Phase 2 data.

 

On May 1, 2017, we reported topline results from our Phase 2 clinical trial of bryostatin for the treatment of moderate to severe AD. In January 2018, we reported the secondary analysis of data from the Phase 2 clinical trial.  Further analyses of the Phase 2 data may lead to different interpretations of the data than the analyses conducted to date and/or may identify important implications of the Phase 2 data that are not currently known.  Clinical trial data are subject to differing interpretations, and regulatory agencies, medical and scientific experts and others may not share our views of the Phase 2 data.  There can be no assurance that the clinical program for bryostatin-1 will be successful in demonstrating safety and/or efficacy, that we will not encounter problems or delays in clinical development, or that bryostatin-1 will ever receive regulatory approval or be successfully commercialized. 

 

We have not generated any revenues since our inception and we do not expect to generate revenue for the foreseeable future. If we do not generate revenues and achieve profitability, we will likely need to curtail or cease our development plans and operations.

 

Our ability to generate revenues depends upon many factors, including our ability to complete our currently planned clinical study and development of our proposed products, our ability to obtain necessary regulatory approvals for our proposed products and our ability to successfully commercialize market and sell our products. We have not generated any revenues since we began operations on October 31, 2012. We expect to incur significant operating losses over the next several years. If we do not generate revenues, do not achieve profitability and do not have other sources of financing for our business, we will likely need to curtail or cease our development plans and operations, which could cause investors to lose the entire amount of their investment.

 

Our commercial success will depend, in part, on our ability, and the ability of our licensors, to obtain and maintain patent protection. Our licensors’ failure to obtain and maintain patent protection for our products may have a material adverse effect on our business.

 

Pursuant to the CRE License, we have obtained rights to certain patents owned by CRE or licensed to NRV II, LLC by CRE as of or subsequent to October 31, 2012. For additional information regarding the CRE License, see “Business – Intellectual Property – Technology License and Services Agreement.” In the future, we may seek rights from third parties to other patents or patent applications. Our success will depend, in part, on our ability and the ability of our licensors to maintain and/or obtain and enforce patent protection for our proposed products and to preserve our trade secrets, and to operate without infringing upon the proprietary rights of third parties. Patent positions in the field of biotechnology and pharmaceuticals are generally highly uncertain and involve complex legal and scientific questions. We cannot be certain that we or our licensors were the first inventors of inventions covered by our licensed patents or that we or they were the first to file. Accordingly, the patents licensed to us may not be valid or afford us protection against competitors with similar technology. The failure to maintain and/or obtain patent protection on the technologies underlying our proposed products may have material adverse effects on our competitive position and business prospects.

 

Changes in our ownership could limit our ability to utilize net operating loss carryforwards.

 

As of December 31, 2018, we had aggregate federal and state net operating loss carryforwards of approximately $51 million, which begin to expire in fiscal 2032. Under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, changes in our ownership may limit the amount of our net operating loss carryforwards that could be utilized annually to offset our future taxable income, if any. This limitation would generally apply in the event of a cumulative change in ownership of our company of more than 50% within a three-year period. Any such limitation may significantly reduce our ability to utilize our net operating loss carryforwards and tax credit carryforwards before they expire. Any such limitation, whether as the result of historical transactions, future offerings, prior private placements, sales of our common stock by our existing stockholders or additional sales of our common stock by us in the future (through the conversion of preferred stock, the exercise of outstanding warrants, or otherwise), could have a material adverse effect on our results of operations in future years. We have not completed a study to assess whether an ownership change for purposes of Section 382 has occurred, or whether there have been multiple ownership changes since our inception, due to the significant costs and complexities associated with such study.

 

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Our licensed patented technologies may infringe on other patents, which may expose us to costly litigation.

 

It is possible that our licensed patented technologies may infringe on patents or other rights owned by others. We may have to alter our products or processes, pay additional licensing fees, pay to defend an infringement action or challenge the validity of the patents in court or cease activities altogether because of patent rights of third parties, thereby causing additional unexpected costs and delays to us. Patent litigation is costly and time consuming, and we may not have sufficient resources to pay for such litigation. Pursuant to the CRE License, CRE has the exclusive right (but not the obligation) to apply for, file, prosecute or maintain patents and patent applications for our licensed technologies. However, in order to maintain our rights to use our licensed technologies, we must reimburse CRE for all of the attorney’s fees and other costs and expenses related to any of the foregoing. For additional information regarding the CRE License, see “Business – Intellectual Property – Technology License and Services Agreement.” If the patents licensed to us are determined to infringe a patent owned by a third party and we do not obtain a license under such third-party patents, or if we are found liable for infringement or are not able to have such third-party patents declared invalid, we may be liable for significant money damages, we may encounter significant delays in bringing products to market or we may be precluded from participating in the manufacture, use or sale of products or methods of treatment requiring such licenses.

 

We are dependent on Charles S. Ryan, our Chief Executive Officer, for the successful execution of our business plan. The loss of Dr. Ryan or other key members of our management team could have a material adverse effect on our business prospects.

 

We are highly dependent on Charles S. Ryan, J.D., Ph.D., our Chief Executive Officer. We are dependent on Dr. Ryan’s and our directors’ networks of contacts and experience to recruit key talent to the Company. We do not have key-man insurance on any of our officers. Loss of the services of Dr. Ryan or other key members of our management team, or of our Board of Directors’ ability to identify and hire key talent, could have a material adverse effect on our business prospects, financial condition and results of operations.

 

We may not be able to protect our trade secrets and other unpatented proprietary technologies, which could give our competitors an advantage over us.

 

In addition to our reliance on patents and pending patents owned by CRE, we rely upon trade secrets and other unpatented proprietary technologies. We may not be able to adequately protect our rights with regard to such unpatented proprietary technologies or competitors may independently develop substantially equivalent technologies. We seek to protect trade secrets and proprietary knowledge, in part through confidentiality agreements with our employees, consultants, advisors and collaborators. Nevertheless, these agreements may not effectively prevent disclosure of our confidential information and may not provide us with an adequate remedy in the event of unauthorized disclosure of such information and, as a result, our competitors could gain a competitive advantage over us.

 

If we are unable to hire additional qualified personnel, our business prospects may suffer.

 

Our success and achievement of our business plans depend upon our ability to recruit, hire, train and retain other highly qualified technical and managerial personnel. Competition for qualified employees among pharmaceutical and biotechnology companies is intense, and the loss of any of such persons, or an inability to attract, retain and motivate any additional highly skilled employees required for the implementation of our business plans and activities could have a material adverse effect on us. Our inability to attract and retain the necessary technical and managerial personnel and consultants and scientific and/or regulatory consultants and advisors could have a material adverse effect on our business prospects, financial condition and results of operations.

 

We may not be able to in-license or acquire new development-stage products or technologies.

 

Our product commercialization strategy relies, to some extent, on our ability to in-license or acquire product formulation techniques, new chemical entities, or related know-how that has proprietary protection. If resources permit, we may also seek to acquire, by license or otherwise, other development stage products that are consistent with our product portfolio objectives and commercialization strategy. The acquisition of products requires the identification of appropriate candidates, negotiation of terms of acquisition, and financing for the acquisition and integration of the candidates into our portfolio. Failure to accomplish any of these tasks may diminish our growth rate and adversely alter our competitive position.

 

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We are partly dependent upon the NCI to supply bryostatin for our clinical trials.

 

CRE has entered into a material transfer agreement with the NCI, pursuant to which the NCI has agreed to supply bryostatin required for our pre-clinical research and clinical trials. This agreement does not provide for a sufficient amount of bryostatin to support the completion of our clinical trials that we are required to conduct in order to seek FDA approval of bryostatin for the treatment of AD. Therefore, CRE or we will have to enter into one or more subsequent agreements with the NCI for the supply of additional amounts of bryostatin. If CRE or we are unable to secure such additional agreements or if the NCI otherwise discontinues for any reason supplying us with bryostatin, then we would have to either secure another source of bryostatin or discontinue our efforts to develop and commercialize bryostatin for the treatment of AD. We have entered into license agreements with Stanford for the development of bryostatin structural derivatives known as “bryologs” and an accelerated synthesis of bryostatin-1 as alternative potential sources of bryostatin. There can be no assurance that we will be able to secure future bryostatin supplies from any source on commercially reasonable terms, if at all.

 

We expect to rely on third parties to manufacture our proposed products and, as a result, we may not be able to control our product development or commercialization.

 

We currently do not have an FDA approved manufacturing facility. We expect to rely on contract manufacturers to produce quantities of products and substances necessary for product commercialization. See also the risk factor above captioned “We are partly dependent upon the NCI to supply bryostatin for our clinical trials.” Contract manufacturers that we use must adhere to cGMP enforced by the FDA through its facilities inspection program. If the facilities of such manufacturers cannot pass a pre-approval plant inspection, the FDA pre-market approval of our products will not be granted. As a result:

 

·there are a limited number of manufacturers that could produce the products for us and we may not be able to identify and enter into acceptable agreements with any manufacturers;

 

·the products may not be produced at costs or in quantities necessary to make them commercially viable;

 

·the quality of the products may not be acceptable to us and/or regulatory authorities;

 

·our manufacturing partners may go out of business or file for bankruptcy;

 

·our manufacturing partners may decide not to manufacture our products for us;

 

·our manufacturing partners could fail to manufacture to our specifications;

 

·there could be delays in the delivery of quantities needed;

 

·we could be unable to fulfill our commercial needs in the event we obtain regulatory approvals and there is strong market demand; or

 

·ongoing inspections by the FDA or other regulatory authorities may result in suspensions, seizures, recalls, fines, injunctions, revocations and/or criminal prosecutions.

 

If we are unable to engage contract manufacturers or suppliers to manufacture or package our products, or if we are unable to contract for a sufficient supply of required products and substances on acceptable terms, or if we encounter delays or difficulties in our relationships with these manufacturers, or with a regulatory agency, then the submission of products for regulatory approval and subsequent sales of such products would be delayed. Any such delay may have a material adverse effect on our business prospects, financial condition and results of operations.

 

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We may rely on third parties for marketing and sales and our revenue prospects may depend on their efforts.

 

We currently have no experience in sales, marketing or distribution. We do not anticipate having the resources in the foreseeable future to allocate to the sales and marketing of our proposed products. As a result, if our product development is successful, our future success will likely depend, in part, on our ability to enter into and maintain collaborative relationships with one or more third parties for sales, marketing or distribution, on the collaborator’s strategic interest in the products we have under development and on such collaborator’s ability to successfully market and sell any such products. We intend to pursue collaborative arrangements regarding the sales and marketing of our products as appropriate. However, we may not be able to establish or maintain such collaborative arrangements or, if we are able to do so, they may not have effective sales forces. To the extent that we decide not to, or are unable to, enter into collaborative arrangements with respect to the sales and marketing of our proposed products, significant capital expenditures, management resources and time will be required to establish and develop an in-house marketing and sales force with technical expertise. To the extent that we depend on third parties for marketing and distribution, any revenues received by us will depend upon the efforts of such third parties, which may not be successful.

 

If our products are not accepted by patients, the medical community or health insurance companies, our business prospects will suffer.

 

Commercial sales of any products we successfully develop will substantially depend upon the products’ efficacy and on their acceptance by patients, the medical community, providers of comprehensive healthcare insurance, healthcare benefit plan managers, the Centers for Medicare and Medicaid Services (“CMS”) (which is the U.S. federal agency which administers Medicare, Medicaid and the State Children’s Health Insurance Program), and other organizations. Widespread acceptance of our products will require educating patients, the medical community and third-party payors of medical treatments as to the benefits and reliability of the products. Our proposed products may not be accepted, and, even if they are accepted, we are unable to estimate the length of time it would take to gain such acceptance.

 

The branded prescription segment of the pharmaceutical industry in which we operate is competitive, and we are particularly subject to the risks of such competition.

 

The branded prescription segment of the pharmaceutical industry in which we operate is competitive, in part, because the products that are sold require extensive sales and marketing resources invested in their commercialization. The increasing cost of prescription pharmaceuticals has caused providers of comprehensive healthcare insurance, healthcare benefit plan managers, CMS, as well as other organizations, collectively known as third-party payors, to tightly control and dictate their drug formulary plans to control the costs associated with the use of prescription pharmaceutical products by enrollees in these plans. Our ability to gain formulary access to drug plans supported by these third-party payors is substantially dependent on the differentiated patient benefit that our proposed products can provide, compared closely to similar products claiming the same benefits or advantages. We may not be able to differentiate our proposed products from those of our competitors, successfully develop or introduce new products that are less costly or offer better performance than those of our competitors, or offer purchasers of our proposed products payment and other commercial terms as favorable as those offered by our competitors. We expect that some of our proposed products, even if successfully developed and commercialized, will eventually face competition from a significant number of biotechnology or large pharmaceutical companies. Because most of our competitors have substantially greater financial and other resources than we have, we are particularly subject to the risks inherent in competing with them. The effects of this competition could materially adversely affect our business prospects, financial condition and results of operations.

 

We compete with many companies, research institutes, hospitals, governments and universities that are working to develop products and processes to treat or diagnose AD. We believe that others are doing research on Fragile X syndrome and Niemann Pick disease. Many of these entities have substantially greater financial, technical, manufacturing, marketing, distribution and other resources than we do. However, there has been a dearth of new product introductions in the last 20 years for the treatment of AD symptoms in patients who begin exhibiting the memory and cognitive disorders associated with the disease. All of the products introduced to date for the treatment of AD have yielded negative or marginal results with little effect on the progression of AD and no improvement in the memory or cognitive performance of the patients receiving these therapies. The absolute determination of AD in patients is currently achieved only upon autopsy. We believe we are the only company currently pursuing PKCε activation as a mechanism to treat AD and neurodegenerative diseases. Although we believe that we have no direct competitors working in this same field on product candidates using the same mechanism of action, we cannot provide assurance that our competitors will not discover compounds or processes that may be competitive with our products and introduce such products or processes before us.

 

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We are developing our product candidates to address unmet medical needs in the treatment of AD and other neurodegenerative diseases. Our competition will be determined in part by the potential indications for which drugs are developed and ultimately approved by regulatory authorities. Additionally, the timing of market introduction of some of our potential products or of competitors’ products may be an important competitive factor. Accordingly, the relative speed with which we can develop our product candidates, complete preclinical testing, clinical trials and approval processes and supply commercial quantities to market are expected to be important competitive factors. We expect that competition among products approved for sale will be based on various factors, including product efficacy, safety, reliability, availability, price and patent position.

 

Our business will expose us to potential product liability risks, which could result in significant product liability exposure.

 

Our business will expose us to potential product liability risks that are inherent in the testing, designing, manufacturing and marketing of human therapeutic products. Product liability insurance in the pharmaceutical industry is generally expensive, and we may not be able to obtain or maintain product liability insurance in the future on acceptable terms or with adequate coverage against potential liabilities, if at all. A successful products liability claim brought against us could have a material adverse effect on our business prospects, financial condition and results of operations.

 

A successful clinical trial liability claim against us could have a material adverse effect on our financial condition even with such insurance coverage.

 

Our business will expose us to potential liability that results from risks associated with conducting clinical trials of our product candidates. Although we have procured clinical trial product liability insurance coverage for our bryostatin product candidate with coverages and deductibles we believe are adequate, there is no guarantee that our coverage will be adequate to satisfy any liability we may incur. We do not currently have insurance with respect to any other drug product. A successful clinical trial liability claim brought against us could have a material adverse effect on our business prospects, financial condition and results of operations even if we successfully obtain clinical trial insurance.

 

A successful liability claim against us could have a material adverse effect on our financial condition.

 

Our business and actions can expose us to potential liability risks that are inherent in business, generally, and in the pharmaceutical industry, specifically. While we maintain commercial general liability insurance with coverages and deductibles we believe are adequate, there is no guarantee that our coverage will be adequate to satisfy any liability we may incur. A successful liability claim brought against us could have a material adverse effect on our business prospects, financial condition and results of operations.

 

Reforms in the health care industry and the uncertainty associated with pharmaceutical and laboratory test pricing, reimbursement and related matters could adversely affect the marketing, pricing and demand for our products.

 

Public and private entities are seeking ways to reduce or contain increasing health care costs. All generic pharmaceutical manufacturers whose products are covered by the Medicaid program are required to rebate to each state a percentage of their “average manufacturer price” for the products in question. The extension of prescription drug coverage to all Medicare recipients was approved by Congress several years ago. Numerous other proposals to curb rising pharmaceutical prices have also been introduced or proposed in Congress and in some state legislatures. We cannot predict the nature of the measures that may be adopted or their effect on our competitive position. Our ability to market our products depends, in part, on reimbursement levels for them and related treatment established by health care providers, private health insurers and other organizations, including health maintenance organizations and managed care organizations. In the event that governmental authorities enact additional legislation or adopt regulations that affect third party coverage and reimbursement, demand for our products may be reduced, which may materially adversely affect our business prospects, financial condition and results of operations.

 

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Disruptions in federal government operations or extended government shutdowns may negatively impact our business.

 

Any disruption in federal government operations could have a material adverse effect on our business, results of operations and financial condition. An extended federal government shutdown resulting from failure to pass budget appropriations, to adopt continuing funding resolutions or to raise the debt ceiling, for example, or any other budgetary decisions limiting or delaying federal government spending, could negatively impact our business. In particular, disruptions in federal government operations may negatively impact regulatory approvals and guidance that are important to our operations, and create uncertainty about the pace of upcoming healthcare regulatory developments.

 

Our business and operations would suffer in the event of computer system failures.

 

Despite the implementation of security measures, our internal computer systems and those of our CROs and other third parties on which we rely, are vulnerable to damage from computer viruses, unauthorized access, natural disasters, fire, terrorism, war and telecommunication and electrical failures. Like other companies, we may from time to time experience threats to our data and systems, including malware and computer virus attacks, unauthorized access, systems failures and disruptions. In addition, our systems safeguard important confidential personal data regarding our subjects. If a disruption event were to occur and cause interruptions in our operations, it could result in a material disruption of our drug development programs. For example, the loss of clinical trial data from completed, ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development of bryostatin could be delayed

 

Consolidation in the pharmaceutical industry could materially affect our ability to operate as an independent entity.

 

The pressure to grow revenues while containing the escalating costs of basic research and development has resulted in an increase in mergers and acquisitions in our industry. More consolidation in the pharmaceutical industry is expected over the next five years. We could become an acquisition target by a larger competitor and, as a consequence, suffer serious disruptions to our business model or even lose control of our ability to operate as an independent entity. Such events could have a material adverse effect on our product development efforts or the commercialization of our proposed products.

 

Risks Related to Our Common Stock

 

There currently is a limited public market for our common stock. Failure to develop or maintain an active trading market could negatively affect the value of our common stock and make it difficult or impossible for you to sell your shares.

 

There is currently a limited public market for shares of our common stock, and an active trading market may not continue to develop or be maintained. Our common stock has been listed on The Nasdaq Capital Market since March 29, 2017 and was quoted on the OTC Market prior to such time. The average daily trading volume in our common stock was approximately 35,000 shares during the 90-day period ended February 28, 2019. If an active market for our common stock does not continue to develop or is not sustained, it may be difficult for investors to sell shares without depressing the market price for the shares, or at all.

 

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Volatility in the price of our common stock could lead to losses by investors and costly securities litigation.

 

The trading price of our common stock is likely to be highly volatile and could fluctuate in response to factors such as:

 

·additions or departures of key personnel;

 

·actual or anticipated variations in our operating results;

 

·announcements of developments by us or our competitors;

 

·announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;

 

·adoption of new accounting standards affecting our industry;

 

·sales of our common stock or other securities in the open market or in any publicized transaction;

 

·changes in our industry;

 

·regulatory and economic developments, including our ability to obtain working capital financing;

 

·shares of our common stock are saleable under Rule 144 of the Securities Act of 1933, as amended, or the Securities Act, and as a result, potential and actual sales of our common stock by our present stockholders may have a depressive effect on the price of our common stock in the marketplace;

 

·potential and actual sales of our common stock by our present stockholders pursuant to registration statements may have a depressive effect on the price of our common stock in the marketplace;

 

·our ability to execute our business plan;

 

·other events or factors, many of which are beyond our control; and

 

·announcement of clinical trial results.

 

The stock market is subject to significant price and volume fluctuations. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been initiated against the public company. Litigation initiated against us, whether or not successful, could result in substantial costs and diversion of our management’s attention and resources, which could harm our business and financial condition. In connection with any lawsuits that may be initiated against us, we could incur substantial costs and such costs and any related settlements or judgments may not be covered in full by insurance.

 

We do not anticipate dividends to be paid on our common stock, and investors may lose the entire amount of their investment.

 

Cash dividends have never been declared or paid on our common stock, and we do not anticipate such a declaration or payment for the foreseeable future. We expect to use future earnings, if any, to fund business growth. Therefore, stockholders will not likely receive any funds absent a sale of their shares. If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur if our stock price appreciates. We cannot assure stockholders of a positive return on their investment when they sell their shares, nor can we assure that stockholders will not lose the entire amount of their investment.

 

If securities analysts do not initiate coverage or continue to cover our common stock or if they publish unfavorable research or reports about our business, there could be a negative impact on the market price of our common stock.

 

The trading market for our common stock may depend, in part, on the research and reports that securities analysts publish about our business and the Company. We do not have any control over securities analysts. There is no guarantee that securities analysts will cover our common stock. If securities analysts do not cover our common stock, the lack of research coverage may adversely affect its market price. If we are covered by securities analysts, and our stock is the subject of an unfavorable report, our stock price and trading volume would likely decline. If one or more of these analysts ceases to cover the Company or fails to publish regular reports on the Company, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.

  

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You may experience dilution of your ownership interests because of the future issuance of additional shares of our common stock.

 

Any future issuance of our equity or equity-backed securities will dilute then-current stockholders’ ownership percentages and could also result in a decrease in the fair market value of our equity securities, because our assets would be owned by a larger pool of outstanding equity. As described above, we will need additional financing to continue our operations and may raise additional capital through public or private offerings of our common or preferred stock or other securities that are convertible into or exercisable for our common or preferred stock. We may also issue such securities in connection with hiring or retaining employees and consultants (including stock options and other equity compensation issued under our equity incentive plans), as payment to providers of goods and services, in connection with future acquisitions or for other business purposes. Our Board of Directors (the “Board”) may at any time authorize the issuance of additional common or preferred stock without common stockholder approval, subject only to the total number of authorized common and preferred shares set forth in our Articles of Incorporation. The terms of equity securities issued by us in future transactions may be more favorable to new investors, and may include dividend and/or liquidation preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect. Also, the future issuance of any such additional shares of our common or preferred stock or other securities may create downward pressure on the trading price of our common stock. There can be no assurance that any such future issuances will not be at a price (or exercise prices) below the price at which shares of our common stock are then traded.

 

We may obtain additional capital through the issuance of preferred stock, which may limit your rights as a holder of our common stock.

 

Without any stockholder vote or action, our Board may designate and approve for issuance shares of our preferred stock. The terms of any preferred stock may include priority claims to assets and dividends and special voting rights which could limit the rights of the holders of our common stock. The designation and issuance of preferred stock favorable to current management or stockholders could make any possible takeover of us or the removal of our management more difficult.

 

Being a public company is expensive and administratively burdensome.

 

Public reporting companies are subject to the information and reporting requirements of the Securities Act, the Securities Exchange Act of 1934, as amended, or the Exchange Act, and other federal securities laws, rules and regulations related thereto, including compliance with the Sarbanes-Oxley Act. Complying with these laws and regulations requires the time and attention of our Board and management, and increases our expenses. Among other things, public reporting companies must:

 

·maintain and evaluate a system of internal controls over financial reporting in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act (“Section 404”) and the related rules and regulations of the SEC and the Public Company Accounting Oversight Board;

 

·maintain policies relating to disclosure controls and procedures;

 

·prepare and distribute periodic reports in compliance with our obligations under federal securities laws;

 

·institute a more comprehensive compliance function, including with respect to corporate governance; and

 

·involve, to a greater degree, our outside legal counsel and accountants in the above activities.

  

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The costs of preparing and filing annual and quarterly reports, proxy statements and other information with the SEC and furnishing audited reports to stockholders is expensive and much greater than that of a privately-held company, and compliance with these rules and regulations may require us to hire additional financial reporting, internal controls and other finance personnel, and will involve a material increase in regulatory, legal and accounting expenses and the attention of management. We currently do not comply with all of these regulations. See below Risk Factor entitled “Any failure to maintain effective internal control over our financial reporting could materially adversely affect us.” There can be no assurance that we will be able to comply with the applicable regulations in a timely manner, if at all. In addition, being a public company has made it more expensive for us to obtain director and officer liability insurance. In the future, we may be required to accept reduced coverage or incur substantially higher costs to obtain this coverage. These factors could also make it more difficult for us to attract and retain qualified executives and members of our Board, particularly directors willing to serve on the audit and compensation committees.

 

Any failure to maintain effective internal control over our financial reporting could materially adversely affect us.

 

Section 404 of the Sarbanes-Oxley Act (“Section 404”) requires us to include in our annual reports on Form 10-K an assessment by management of the effectiveness of our internal control over financial reporting. In addition, at such time, if any, as we are no longer a “smaller reporting company,” our independent auditors will have to attest to and report on management’s assessment of the effectiveness of such internal control over financial reporting. We have limited experience operating as a public reporting company under the level of internal control over financial reporting required by the Sarbanes-Oxley Act. We performed an evaluation under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, our principal executive officer and principal financial officer, respectively, of the effectiveness of our disclosure controls and procedures and internal controls over financial reporting. Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures and internal controls over financial reporting are not effective due to the material weakness resulting from a limited segregation of duties among our employees with respect to our control activities. This deficiency is the result of our limited number of employees. This deficiency may affect management’s ability to determine if errors or inappropriate actions have taken place. Management is required to apply its judgment in evaluating the cost-benefit relationship of possible changes in our disclosure controls and procedures.

 

Even in the event that our management concludes that our internal control over financial reporting becomes effective, if our independent auditors are not satisfied with the adequacy of our internal control over financial reporting, or if the independent auditors interpret the requirements, rules or regulations differently than we do, then (to the extent we are no longer a “smaller reporting company”) they may decline to attest to management’s assessment or may issue a report that is qualified. Any of these events could result in a loss of investor confidence in the reliability of our financial statements, which in turn could negatively impact the price of our common stock.

 

We must perform system and process evaluation and testing of our internal control over financial reporting to allow management and (if required in the future) our independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting, as required by Section 404. Our compliance with Section 404 may require that we incur substantial accounting expense and expend significant management efforts. We currently do not have an internal audit group, and we will need to retain the services of additional accounting and financial staff or consultants with appropriate public company experience and technical accounting knowledge to satisfy the ongoing requirements of Section 404.

 

Item 2. Properties.

 

Our principal executive offices are currently located at 1185 Avenue of the Americas, 3rd Floor, New York, New York 10036, where we lease approximately 300 square feet of general office space for a total cost of approximately $5,000 per month. The lease for this office space expires on June 30, 2019 and is renewable for successive one year terms. In addition, the Company leases approximately 800 square feet of additional general office space in Princeton, New Jersey for a total cost of approximately $2,100 per month. The lease for this office space expires on March 31, 2019. We believe that our facilities are suitable and adequate for our needs for the foreseeable future.

 

Item 3.Legal Proceedings.

 

None. 

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

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PART II 

 

Item 5.Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

Market Information and Holders

 

Our common stock has traded on The Nasdaq Capital Market under the symbol “NTRP” since March 29, 2017. Prior to that time, our common stock traded on the OTC Market under the symbol “NTRP.” On February 28, 2019, the last reported sale price for our common stock was $4.94 per share.

 

As of February 28, 2019, we had 12,922,370 shares of our common stock issued and outstanding held by approximately 250 stockholders of record. To date, we have not paid dividends on our common stock.

 

As of February 28, 2019, we also had the following securities outstanding:

 

·Series A Warrants to purchase 49,449 shares of our common stock at an exercise price of $0.32 per share, with an expiration date five years from the date of issuance.

 

·Series C Warrants to purchase 78,616 shares of our common stock at an exercise price of $0.32 per share, with an expiration date of five years from the date of issuance.

 

·Series E Warrants, which are contingent upon the exercise of the Series C Warrants, to purchase 819,914 shares of our common stock at an exercise price of $32.00 per share, with an expiration date that is five years from the date of the initial exercise of the Series C Warrants.

 

·Series F Warrants to purchase 3,751,033 shares of our common stock at an exercise price of $12.80 per share, with an expiration date five years from the date of issuance.

 

·Series G Warrants to purchase 5,012,677 shares of our common stock at an exercise price of $4.37 per share, with an expiration date five years from the initial exercise date.

 

·Placement agent warrants to purchase 19,541 shares of our common stock at an exercise price of $0.32 per share.

 

·Placement agent warrants to purchase 382,887 shares of our common stock at an exercise price of $6.40 per share.

 

·Placement agent and consultant warrants to purchase 100,240 shares of our common stock at an exercise price of $6.25 per share.

 

Unregistered Sales of Securities

 

None.

 

Issuer Purchases of Equity Securities

 

None.

 

Item 6.Selected Financial Data.

 

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act, and are not required to provide the information required under this item.

 

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Item 7.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.  

 

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 audited 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 audited financial statements for the fiscal years and quarters ended December 31, 2018 and 2017 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 annual report. 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. Neurotrope BioScience began operations in October 2012. We are principally focused on developing a product platform based upon a drug candidate called bryostatin for the treatment of Alzheimer’s disease (“AD”), which is in the clinical testing stage. We are also evaluating bryostatin for other neurodegenerative or cognitive diseases and dysfunctions, such as Fragile X syndrome, Multiple Sclerosis, and Niemann-Pick Type C disease, which have undergone pre-clinical testing. In addition, we are also in the early stages of testing bryostatin activity which may lead to applications in Leukemia and Lymphoma. Neurotrope has been a party to a technology license and services agreement with the original Blanchette Rockefeller Neurosciences Institute (“BRNI”) (which has been known as Cognitive Research Enterprises, Inc. (“CRE”) since October 2016), and its affiliate NRV II, LLC, which we collectively refer to herein as “CRE,” pursuant to which we now have an exclusive non-transferable license to certain patents and technologies required to develop our proposed products. Neurotrope BioScience was formed for the primary purpose of commercializing the technologies initially developed by BRNI for therapeutic applications for AD or other cognitive dysfunctions. These technologies have been under development by BRNI since 1999 and, until March 2013, had been financed through funding from a variety of non-investor sources (which include not-for-profit foundations, the National Institutes of Health, which is part of the U.S. Department of Health and Human Services, and individual philanthropists). From March 2013 forward, development of the licensed technology has been funded principally through the Company in collaboration with CRE.

 

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

 

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Results of Phase 2 Clinical Trial

 

On May 1, 2017, we reported certain relevant top-line results from our Phase 2 exploratory clinical trial based on a preliminary analysis of a limited portion of the complete data set generated. A comprehensive analysis of these data from the Phase 2 exploratory trial evaluating Bryostatin-1 as a treatment of cognitive deficits in moderate to severe Alzheimer’s disease were recently published online in the Journal of Alzheimer's Disease.  A total of 147 patients were enrolled into the study; 135 patients in the mITT population (as defined below) and 113 in the Completer population (as defined below). This study was the first repeat dose study of bryostatin-1 in patients with late stage AD (defined as a Mini Mental State Exam 2 (“MMSE-2”) of 4-15), in which two dose levels of bryostatin-1 were compared with placebo to assess safety and preliminary efficacy (p < 0.1, one-tailed) after 12 weeks of treatment. The pre-specified primary endpoint, the Severe Impairment Battery (the “SIB”) (used to evaluate cognition in severe dementia), compared each dose of bryostatin-1 with placebo at Week 13 in two sets of patients: (1) the modified intent-to-treat (the “mITT”) population, consisting of all patients who received study drug and had at least one efficacy/safety evaluation, and (2) the Completer population, consisting of those patients within the mITT population who completed the 13-week dosing protocol and cognitive assessments.

 

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

 

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

 

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

 

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

 

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

 

On January 5, 2018, we announced that a secondary analysis of the comprehensive data set from our recent Phase 2 trial in patients with advanced AD found evidence of sustained improvement in cognition in patients receiving the 20 μg bryostatin regimen. In addition, patients who did not receive memantine, an approved AD treatment, as baseline therapy showed greater SIB improvement. These findings suggested that this investigational drug could potentially treat Alzheimer’s disease itself and help reduce and/or reverse the progression of AD, in addition to alleviating its symptoms.

 

Comprehensive follow-on analyses found that patients in the 20 μg treatment arm showed a sustained improvement

 

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Ongoing Confirmatory Phase 2 Clinical Trial

 

On May 4, 2018, we announced a confirmatory, 100 patient, double-blinded clinical trial for the safe, effective 20 μg dose protocol for advanced AD patients not taking memantine as background therapy to evaluate improvements in SIB scores with an increased number of patients. We engaged WCT, in conjunction with consultants and investigators at leading academic institutions, to collaborate on the design and conduct of the trial, which began in April 2018. During July 2018, the first patient was enrolled in this study.

 

As of February 28, 2019, we have signed up 29 clinical sites and have completed patient screening totaling 215. Of the total screened patients, 45 have been randomized and continue to be dosed and 55 have completed dosing. We believe we will have trial data completed in the second half of 2019.

 

Other Development Projects

 

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

 

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

 

Nemours Agreement

 

On September 5, 2018, the Company announced a collaboration with The Nemours / Alfred I. duPont Hospital for Children (“Nemours”), a premier U.S. children’s hospital, to initiate a clinical trial in children with Fragile X syndrome (“Fragile X”). 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. The total estimated cost of this proposed trial to the Company is approximately $100,000.

 

Recent Developments

 

December 2018 Offering

 

On December 17, 2018, we entered into a securities purchase agreement with certain investors pursuant to which we agreed to sell to the purchasers in a registered offering an aggregate of 5,012,677 shares of our common stock and Series G warrants to purchase up to an aggregate of 5,012,677 shares of our common stock at a combined purchase price of $4.495 per share and accompanying warrant. The warrants are exercisable at a price of $4.37 per share beginning six months following the date of issuance and will expire five years from the initial exercise date. The net proceeds to us from the offering were approximately $20.5 million, after deducting placement agent fees, financial advisory fees and estimated offering expenses of approximately $2.1 million. The offering closed on December 19, 2018, subject to customary closing conditions.

 

In connection with the registered direct offering, we entered into a placement agent agreement and advisory consulting agreements with agents in connection with the issuance and sale of the shares and warrants. We paid the placement agent (i) a cash fee equal to 8% of the aggregate gross proceeds raised from purchasers first contacted by the placement agent in connection with the offering and (ii) warrants to purchase the number of shares of common stock equal to 2.0% of the aggregate number of shares sold to purchasers first contacted by the placement agent in connection with the offering. We also agreed to reimburse the placement agent an additional $25,000 for its legal expenses. Pursuant to separate advisory consulting agreements for the offering, we engaged two consultants, pursuant to which we agreed to pay the consultants an aggregate total of $1.36 million and warrants to purchase an aggregate of 75,657 shares of common stock, at an exercise price of $6.25 per share. We also reimbursed the consultants an additional $50,000 for legal expenses.

 

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Critical Accounting Policies, Estimates, and Judgments

 

Our financial statements are prepared in accordance with accounting principles that are generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. We continually evaluate our estimates and judgments, the most critical of which are those related to accounting for equity compensation, research and development accruals, and our commitments to strategic alliance partners and the timing of the achievement of collaboration milestones. Materially different results can occur as circumstances change and additional information becomes known. Besides the estimates identified above that are considered critical, we make many other accounting estimates in preparing our financial statements and related disclosures. All estimates, whether or not deemed critical, affect reported amounts of assets, liabilities, revenues and expenses, as well as disclosures of contingent assets and liabilities. These estimates and judgments are also based on historical experience and other factors that are believed to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known, even for estimates and judgments that are not deemed critical.

 

Recent Accounting Pronouncements

 

In December 2018, the FASB issued ASU-2018-20, Leases (Topic 842). In February 2016, the FASB issued new guidance related to how an entity should account for lease assets and lease liabilities.  The guidance specifies that an entity who is a lessee under lease agreements should recognize lease assets and lease liabilities for those leases classified as operating leases under previous FASB guidance.  Accounting for leases by lessors is largely unchanged under the new guidance.  The guidance is effective for the Company beginning in the first quarter of 2019.  Early adoption is permitted.  In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach.  The Company has determined that this standard is not expected to have a material impact to its financial statements based upon the de minimis amount of short-term lease commitments.

 

In July 2017, the FASB issued new guidance, ASU-2017-11, Distinguishing Liabilities from Equity (Topic 480), which changes the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features and re-characterizes the indefinite deferral of certain provisions within the guidance for distinguishing liabilities from equity.  The guidance is effective for the Company beginning in the first quarter of fiscal year 2019.  Early adoption is permitted.  The Company is evaluating the impact of adopting this guidance on its consolidated financial statements.

 

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

 

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Accounting Pronouncements Adopted During the Period

 

In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. This ASU simplifies the accounting for nonemployee share-based payment transactions. Under the new guidance, equity-classified share-based payment awards issued to nonemployees will now be measured on the grant date, instead of the previous requirement to re-measure the awards through performance completion date. Awards that include performance conditions will recognize compensation cost when the achievement of the performance condition is probable, rather than upon achievement of the performance condition. Finally, the current requirement to reassess the classification (equity or liability) for nonemployee awards upon vesting will be eliminated, except for awards in the form of convertible instruments. The ASU is effective for annual periods beginning after December 15, 2018 and interim periods within those annual periods. Early adoption is permitted, including interim periods, but no earlier than the adoption of ASC 606. Effective June 20, 2018, we adopted this standard. As a result of the adoption of this new guidance, certain non-employee equity awards were measured on the grant date. There was no cumulative effect of the change on retained earnings as of January 1, 2018 since we had no unvested non-employee awards outstanding as of that date.

 

Comparison of the years ended December 31, 2018 and December 31, 2017

 

The following table summarizes our results of operations for the years ended December 31, 2018 and 2017:

 

   Years ended
December 31,
   Dollar     
   2018   2017   Change   % Change 
Revenue  $-   $-   $-    0%
Operating Expenses:                    
Research and development expenses – Related Party  $262,012   $214,619   $47,393    22.1%
Research and development expenses – Other  $4,623,551   $4,548,835   $74,716    1.6%
General and administrative expenses – Related party  $50,000   $39,417   $10,583    26.8%
General and administrative expenses – Other  $3,997,222   $5,455,683   $(1,458,461)   (26.7)%
Stock based compensation expenses – Related Party  $291,577   $155,320   $136,257    87.7%
Stock based compensation expenses - Other  $1,925,034   $2,288,123   $(363,089)   (15.9)%
Other income, net  $127,110   $86,927   $40,183    46.2%
Net loss  $11,022,286   $12,615,070   $(1,592,784)   (12.6)%

 

Revenues

 

We did not generate any revenues for the years ended December 31, 2018 and 2017.

 

Operating Expenses

 

Overview

 

Total operating expenses for the year ended December 31, 2018 were $11,149,396 as compared to $12,701,997 for the year ended December 31, 2017, a decrease of approximately 12%. The decrease in total operating expenses is due primarily to a decrease in our general and administrative expenses, offset by the a small increase in research and development expenses associated primarily with completing our Phase 2 clinical trial in AD offset by the initiation of our confirmatory Phase 2 trial and an increase in related party research and development expenses. 

 

Research and Development Expenses

 

For the year ended December 31, 2018, we incurred $262,012 of research and development expenses with a related party as compared to $214,619 for the year ended December 31, 2017. The total amounts incurred during the year ended December 31, 2018 were for patent maintenance expenses versus the total amounts incurred during the year ended December 31, 2017 which consisted of patent expenses and lab testing of drug materials.

 

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For the year ended December 31, 2018, we incurred $4,623,551 in research and development expenses with non-related parties as compared to $4,548,835 for the year ended December 31, 2017. These expenses were incurred pursuant to developing the potential AD therapeutic product, specifically expenses relating to the later stages of the Phase 2 clinical trial for AD, the earlier stages of the Company’s Phase 2 confirmatory trial, and products relating to orphan drug indications. Of these expenses, for the year ended December 31, 2018, a credit of $163,400 was reflected related to closing out our AD Phase 2 clinical trial, which was substantially completed in 2017, plus $4,786,951 incurred principally relating to our current confirmatory clinical trial, and related storage of drug product, $290,176 for clinical consulting services, $36,194 of amortization of prepaid licensing fees relating to the Stanford and Mount Sinai license agreements and $26,554 for development of alternative drug supply with Stanford University as compared to, for the year ended December 31, 2017, $5,364,217 related to conducting our AD Phase 2 clinical trials and related storage of drug product, $140,383 for clinical consulting services, $21,989 of licensing payment amortization relating to the Stanford and Mount Sinai license agreements, $53,400 for orphan drug development costs and $24,000 for development of alternative drug supply with Stanford University. We expect our research and development expenses to increase, as our resources permit, in order to advance our potential products specifically relating to conducting our Phase 2 confirmatory clinical trial.

 

General and Administrative Expenses

 

We incurred related party general and administrative expenses totaling $50,000 for the year ended December 31, 2018 as compared to $39,417 for the year ended December 31, 2017. The amounts for both years are attributable to director fees paid to certain members of the Board of Directors that are affiliates of CRE.

 

We incurred $3,997,222 and $5,455,683 of other general and administrative expenses for the years ended December 31, 2018 and 2017, respectively, a decrease of approximately 27%. Of the amounts for the year ended December 31, 2018, as compared to the comparable 2017 period: $1,657,700 was incurred primarily for wages, vacation pay, severance, taxes and insurance, versus $2,020,589 for the 2017 comparable period principally based upon a lump sum severance payments to our former Chief Executive Officer in 2017 and the elimination of our internal investor relations and certain regulatory personnel in 2018; $536,168 was incurred for ongoing legal expenses associated with ongoing obligations, regulatory compliance and litigation, versus $1,533,899 for the 2017 comparable period as the Company incurred additional expenses relating to regulatory matters and class action defense costs, $481,525 was incurred for outside operations consulting services, as we paid certain consulting fees of $160,375 to recruiting consultants for our recent CEO executive search, versus $463,325 for the 2017 comparable period; $190,753 was incurred for travel expenses, versus $165,925 for the 2017 comparable period; $356,075 was incurred for investor relations services versus $498,570 for the 2017 comparable period which included expenses relating to announcing top-line results of our Phase 2 clinical trial; $141,217 was incurred for professional fees associated with auditing, financial, accounting and tax advisory services, versus $153,105 for the 2017 comparable period; $430,217 was incurred for insurance, versus $408,924 for the 2017 comparable period; and $203,566 was incurred for utilities, supplies, license fees, filing costs, rent, advertising and other versus $211,326 for the 2017 comparable period. 

 

Stock Based Compensation Expenses

 

We incurred related party non-cash expenses totaling $291,577 and $155,320 for the years ended December 31, 2018 and 2017, respectively. The increase is primarily attributable to newly issued stock options in late 2017.

 

We incurred $1,925,034 and $2,288,123 of non-related party non-cash expenses for the years ended December 31, 2018 and 2017, respectively. The decrease for the comparable period is primarily attributable to several options that became fully vested during 2017 and early 2018, front-loaded vesting of certain options in 2017, partially offset by newly issued stock options in 2018.

 

Other Income, net

 

We earned $127,110 of interest income for the year ended December 31, 2018 as compared to $67,602 for the year ended December 31, 2017 on funds deposited in interest bearing money market accounts.  In addition, during the year ended December 31, 2017, we incurred a loss of $34,274 from abandonment of furniture and fixtures relating to the closing of our Newark, New Jersey office and a gain of $53,599 upon settlement of our Newark, New Jersey lease obligation.

 

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Net loss and loss per share

 

We incurred losses of $11,022,286 and $12,615,070 for the years ended December 31, 2018 and 2017, respectively. The decreased loss was primarily attributable to our increase in expenses associated with our current Phase 2 clinical trial, the decrease in our general and administrative expenses and stock-based compensation expense, offset by our related party research and development activities. Earnings (losses) per common share were ($1.37) and ($1.64) for the years ended December 31, 2018 and 2017, respectively. The decrease in loss per share is primarily attributable to the increased weighted average common shares outstanding and the decrease in net loss.

 

The computation of diluted loss per share for the year ended December 31, 2018 excludes 10,214,357 warrants and options to purchase 1,520,246 shares of our common stock as they are anti-dilutive due to our net loss. For the year ended December 31, 2017, the computation excludes 5,115,274 warrants and options to purchase 1,345,835 shares of our common stock, as they are anti-dilutive due to our net loss.

 

Financial Condition, Liquidity and Capital Resources

 

Cash and Working Capital

 

Since inception, we have incurred negative cash flows from operations. As of December 31, 2018, we had an accumulated deficit of $73,682,093 and had working capital of $26,500,467 as compared to working capital of $14,865,304 as of December 31, 2017. The $11,635,163 increase in working capital was primarily attributable to our December 2018 capital raise which provided net proceeds of approximately $20.4 million and expenditures relating to development of a potential therapeutic product and general and administrative expenses, which resulted in a net loss, excluding non-cash stock compensation expense, of $8,805,675 for the year ended December 31, 2018, partially offset by net proceeds from the exercise of warrants totaling $4,427.

   

Sources and Uses of Liquidity

 

Since inception, we have satisfied our operating cash requirements from the private placement of equity securities sold principally to outside investors. We expect to continue to incur expenses, resulting in losses and negative cash flows from operations, over at least the next several years as we continue to develop AD and other therapeutic products. We anticipate that this development will include continuing our current confirmatory clinical trial as well as new clinical trials and additional research and development expenditures.

  

   Years ended
December 31,
 
   2018   2017 
Cash used in operating activities  $(7,696,771)  $(10,988,063)
Cash used in investing activities   (3,186)   (3,585)
Cash provided by financing activities   20,441,025    1,331,265 

  

Net Cash Used in Operating Activities

 

Cash used in operating activities was $7,696,771 for the year ended December 31, 2018, compared to $10,988,063 for the year ended December 31, 2017. The $3,291,292 decrease primarily resulted from the decreased net loss, the funding of prepaid expenses and decrease in accrued expenses, offset by an increase in accounts payable, for the year ended December 31, 2018.

 

Net Cash Used in Investing Activities

 

Net cash used in investing activities was $3,186 for the year ended December 31, 2018 compared to $3,585 for the year ended December 31, 2017. The cash used in investing activities was for capital expenditures.

 

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Net Cash Provided by Financing Activities

 

Net cash provided by financing activities was $20,441,025 for the year ended December 31, 2018 compared to $1,331,265 for the year ended December 31, 2017. The cash provided by financing activities during the year ended December 31, 2018 was primarily the result of funds raised through sales of our equity securities and warrants to purchase common stock to investors. Net cash provided for the year ended December 31, 2017 was primarily the result of funds raised through exercise of warrants to purchase common stock from investors in our historical private placements.

 

As of February 28, 2019, we had approximately $25.5 million in cash, cash equivalents and marketable investment securities. We expect that our existing capital resources will be sufficient to support our projected operating requirements over the next 24 to 36 months, including the continuing development of bryostatin, our novel drug targeting the activation of PKC epsilon. Funds are anticipated to be used to complete the current Phase 2 confirmatory study treating moderate to severe Alzheimer's patients, evaluate and potentially support an open label study in Fragile X syndrome and conduct other non-clinical and research activities for our existing and other potential therapeutic products. The balance of the funds will be used for general corporate and working capital purposes. 

 

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

 

Off-Balance Sheet Arrangements

 

We did not engage in any “off-balance sheet arrangements” (as that term is defined in Item 303(a)(4)(ii) of Regulation S-K) as of December 31, 2018.

 

Item 7A.Quantitative and Qualitative Disclosures About Market Risk.

 

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act, and are not required to provide the information required under this item.

 

Item 8.Financial Statements and Supplementary Data.

 

Our audited consolidated financial statements as of, and for the years ended December 31, 2018, and December 31, 2017 are included beginning on Page F-1 immediately following the signature page to this report. See Item 15 for a list of the financial statements included herein.

 

Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

 

Not applicable.

 

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Item 9A.Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2018. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this report, because of certain weaknesses in internal control over financial reporting discussed below under “Management’s Report on Internal Control over Financial Reporting,” our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed by us under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

 

Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.

 

Management’s Annual Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:

 

·Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;

 

·Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

 

·Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

 

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As of December 31, 2018, our management, including our Chairman of the Board, principal executive officer and principal financial 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 this report, such internal controls and procedures were not effective to detect the inappropriate application of US generally accepted accounting principles as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses. The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were:

 

1.inadequate segregation of duties consistent with control objectives; and

 

2.ineffective controls over period end financial disclosure and reporting processes.

 

Management believes that the material weaknesses set forth above did not have an effect on our financial results.

 

Management’s Remediation Initiatives

 

In an effort to remediate identified material weaknesses and other deficiencies and enhance our internal controls, we effected certain measures including additional cash controls, dual-authorization procedures, and other review and approval processes by our management team. We will implement hiring additional personnel to allow for segregation of duties, when resources permit.

 

Changes in Internal Control Over Financial Reporting

 

There has been no change in our internal control over financial reporting identified in connection with the evaluation referred to above that occurred during our last completed fiscal quarter that has materially negatively affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

Attestation Report of our Registered Public Accounting Firm

 

Since we are neither an accelerated filer nor a large accelerated filer (as defined in Exchange Act Rule 12b-2), we are not required to provide an attestation report of our registered public accounting firm’s on our internal control over financial reporting.

 

Item 9B.Other Information.

 

None.

 

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PART III

 

Item 10.Directors, Executive Officers and Corporate Governance.

 

Directors and Executive Officers

 

The size of our Board is set at eight directors. Executive officers are appointed by the Board and serve at its pleasure. Below are the names of and certain information regarding our current executive officers and directors:

 

Name   Age   Position   Date Named to Board of Directors or as
Executive Officer
             
Joshua N. Silverman   48   Chairman of the Board of Directors   August 4, 2016
             
Charles S. Ryan, J.D., PhD   54   Director, Chief Executive Officer   December 14, 2017 (as Director) February 15, 2018 (as Chief Executive Officer)
             
Robert Weinstein   59   Chief Financial Officer, Treasurer, Secretary and Executive Vice President   August 23, 2013
             
Daniel L. Alkon, MD   76   President, Chief Scientific Officer   September 19, 2016
             
William S. Singer   77   Director; Vice-Chairman of the Board   August 23, 2013
             
James R. Gottlieb   71   Director   December 10, 2013
             
Shana Kay Phares   51   Director   August 12, 2016
             
Bruce T. Bernstein   55   Director   November 14, 2016
             
George Perry, Ph.D.   65   Director   December 12, 2017

 

Jonathan Schechter

 

 

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Director

 

 

December 13, 2018

 

Ivan Gergel

 

 

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Director

 

 

December 13, 2018

 

Directors are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified. Directors are elected by a plurality of the votes cast at the annual meeting of stockholders and hold office until the expiration of the term for which he or she was elected and until a successor has been elected and qualified.

 

On November 12, 2015, the Company and NRV entered into a letter agreement (the “Letter Agreement”) pursuant to which the Company agreed to take such reasonable actions within its control so that two (2) representatives designated by NRV (the “NRV Designees”) are nominated for election to the Board at each annual meeting of stockholders until such time as the CRE License is no longer in effect. Furthermore, the Company will use its best efforts to ensure that (i) each NRV Designee is included in the Board’s slate of nominees to the stockholders for each election of directors, and (ii) each NRV Designee is included in the proxy statement for every meeting of the stockholders of the Company called with respect to the election of members of the Board. Subject to applicable law and stock exchange rules, no NRV Designee shall be removed from the Board unless such removal is for cause or requested in writing by NRV. In the event that any NRV Designee shall cease to serve for any reason, NRV shall be entitled to designate such person’s successor and the Board will promptly fill the vacancy with such successor nominee and such designee will serve the remainder of the term of the director whom such designee replaces. Under the Letter Agreement, if an NRV Designee is not appointed or elected to the Board because of such person’s death, disability, disqualification, withdrawal as a nominee or for other reason is unavailable or unable to serve on the Board, NRV is entitled to designate another nominee for such Board seat.

 

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On December 14, 2017, Dr. Susanne Wilke resigned as a member of the Board and as the Company’s Chief Executive Officer. The Company nominated Dr. Ryan to fill the vacancy on the Board effective December 14, 2017. Dr. Ryan began serving as the Company’s Chief Executive Officer effective February 15, 2018.

 

On June 19, 2018, Andrew Perlman resigned as a member of the Board. On December 13, 2018, the Board appointed Jonathan Schechter and Ivan Gergel to the Board.

 

Pursuant to the above, our Board is currently comprised of nine members: Mr. Gottlieb and Ms. Phares, who are the NRV Designees; and Mr. Silverman, Dr. Ryan, Mr. Singer, Mr. Bernstein, Dr. Perry, Mr. Schechter and Dr. Gergel, who are nominated by the Board. Executive officers are appointed by the Board and serve at its pleasure.

 

The principal occupation and business experience during the past five years for our executive officers and directors is as follows:

 

Joshua N. Silverman – Director, Chairman of the Board.  Mr. Silverman joined the Company as a Director and Chairman of the Board in August 2016. He is currently the Co-Founder and Managing Member of Parkfield Funding LLC, and is a former Principal and Managing Partner of Iroquois Capital Management, LLC (“Iroquois”). Mr. Silverman served as Co-Chief Investment Officer of Iroquois from 2003 until July 2016. From 2000 to 2003, Mr. Silverman served as Co-Chief Investment Officer of Vertical Ventures, LLC, a merchant bank. Prior to forming Iroquois, Mr. Silverman was a Director of Joele Frank, a boutique consulting firm specializing in mergers and acquisitions. Previously, Mr. Silverman served as Assistant Press Secretary to The President of The United States. Mr. Silverman received his B.A. from Lehigh University in 1992. In the past five years, Mr. Silverman has served on the boards of directors of MGT Capital Investments Inc., National Holdings Corporation, Alanco Technologies Inc., Protagenic Therapeutics, Inc., TapImmune, Inc. and WPCS International Incorporated.

 

Charles S. Ryan, J.D., PhD – Director, Chief Executive Officer. Dr. Ryan joined the Company as a Director on December 14, 2017 and as Chief Executive Officer on February 15, 2018. Dr. Ryan is an experienced executive with an extensive background in pharmaceuticals and biotechnology. Since October 2016, he has served as President and Chief Executive Officer for the Orthobond Corporation, a private company focused on creating proprietary surface modifications for the medical device, biotechnology and pharmaceutical industries to enhance the function of a device or pharmaceutical. He was responsible for providing strategic leadership for the company and managing all internal and external corporate affairs. From March 2015 through May 2016, Dr. Ryan was Vice President and General Counsel at Cold Spring Harbor Laboratory, a preeminent non-profit institution focused in neuroscience, bioinformatics, cancer, genomics and plant biology. In this position, he provided guidance to the organization on business, legal and public policy issues. From 2003 until the acquisition by Actavis plc in 2014, Dr. Ryan was Senior Vice President & Chief Intellectual Property Counsel for Forest Laboratories, a specialty pharmaceutical company in New York. At Forest Laboratories, Dr. Ryan led hundreds of due diligence teams, managed all aspects of patent and trademark litigations, developed cross- functional teams to establish a global strategy for hundreds of products, built and managed the company’s IP team, and recruited, developed and trained executive leaders. Two of the company’s most significant drugs were Lexapro (for major depressive disorders) and Namenda (for moderate to severe Alzheimer’s disease). He began his career in biotechnology with The Collaborative Group, Ltd., a bioscience company providing development, research and manufacturing services to the pharmaceutical and skin care industries, where he was the Vice President, General Counsel from 1998 to 2002. Dr. Ryan also has experience in private law practice, holding positions with Darby & Darby, P.C. and Scully, Scott, Murphy & Presser. He serves on the Board of Directors of Applied DNA Sciences, Inc. and BioRestorative Therapies as well as a Director on the Board of Trustees for The College of Wooster. He previously held board seats with ABS Materials, Inc., Lab21, Inc., GlycoMira Therapeutics, Inc., Forest Laboratory Holdings, Ltd., New York Biotechnology Association, Stony Brook University Medical Center Development Council (Chair), and Western New England University Board of Trustees. Dr. Ryan earned his B.A. in Chemistry from The College of Wooster in 1986, a Ph.D. in Oral Biology and Pathology from Stony Brook University in 1990 and his law degree from Western New England University in 1993.

 

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Robert Weinstein – Chief Financial Officer, Executive Vice President, Treasurer and Secretary. Mr. Weinstein joined the Company in June 2013 as its acting Chief Financial Officer. The Company is party to an employment agreement dated as of October 1, 2013, with Mr. Weinstein, pursuant to which he serves as the Company’s Chief Financial Officer and Executive Vice President. He has extensive accounting and finance experience, spanning more than 30 years, as a public accountant, investment banker, healthcare private equity fund principal and chief financial officer. From September 2011 to the present, Mr. Weinstein has been an independent consultant for several healthcare companies in the pharmaceutical and biotechnology industries. From March 2010 to August 2011, he was the Chief Financial Officer of Green Energy Management Services Holdings, Inc., a publicly-traded energy consulting company. From August 2007 to February 2010, Mr. Weinstein served as Chief Financial Officer of Xcorporeal, Inc., a publicly-traded, development-stage medical device company which was sold in March 2010 to Fresenius Medical USA, the largest provider of dialysis equipment and services worldwide. Mr. Weinstein received his MBA degree in finance and international business from the University of Chicago Graduate School of Business, is a Certified Public Accountant (inactive), and received his BS degree in accounting from the State University of New York at Albany.

 

Daniel L. Alkon, MD – President and Chief Scientific Officer. Dr. Alkon was appointed as our President on September 16, 2016. Dr. Alkon served as the founding Scientific Director of the original Blanchette Rockefeller Neurosciences Institute (now known as CRE) from 1999 until September 23, 2016. He received his undergraduate degree in chemistry in 1965 at the University of Pennsylvania. After earning his M.D. at Cornell University and finishing an internship in medicine at the Mount Sinai Hospital in New York, he joined the staff of the National Institutes of Health where during his 30 year career he became a Medical Director in the U.S. Public Health Service at the National Institute for Neurological Disorders and Strokes and Chief of the Laboratory of Adaptive Systems. From June 2006 to September 23, 2016, Dr. Alkon was the Toyota Chair for Neurodegenerative Disease Research at BRNI. In this position, he and his team conducted multidisciplinary research on the molecular and biophysical mechanisms of memory and memory dysfunction in psychiatric and neurological disorders, particularly AD. From October 2000 to September 28, 2016, Dr. Alkon was also a Professor at CRE and a Professor of Neurology at West Virginia University.

 

William S. Singer – Director and Vice-Chairman of the Board of Directors. Mr. Singer served as President of CRE until April 26, 2016 and served on its board of directors. He was a partner in the Chicago office of the law firm of Kirkland & Ellis LLP from 1980 until 2006 and has been of counsel to that firm since that time, concentrating his practice on corporate, real estate, and legislative matters. Since 2006, he also has been the sole proprietor of Singer Consulting LLC, which advises clients on federal legislation. He has been listed in Crain’s Who’s Who in Chicago Business in the 2000, 2001, 2002, 2003, and 2004 editions .Mr. Singer has been prominently active in Chicago public service, serving as an Alderman for several years and as a candidate for Mayoral office.

 

James R. Gottlieb – Director. From 2010 through present, Mr. Gottlieb serves as a partner with Capitol Counsel LLC, and has served as of counsel since that time, where he leads the commerce team. His clients include entities representing a broad range of industries, including healthcare, aviation, telecommunications, e-commerce, oversight and investigations and mergers & acquisitions. Prior to joining Capitol Counsel LLC and based upon his in-depth experience in legislation, oversight and investigations (including with the FDA) and political roles on Capitol Hill, and foundation management, consulting and strategic advisory roles outside of government, Mr. Gottlieb formed Gottlieb Strategic Consulting, a government affairs firm.

 

In 1977, Mr. Gottlieb served as the chief of staff for Representative Ted Weiss (D-NY) and later the Subcommittee on Human Resources & Government Relations of the House Committee on Government Operations (now Committee on Oversight & Government Reform) from 1983 to 1992, where he directed a wide range of oversight investigation and legislation in health, education, and veterans’ matters. Mr. Gottlieb served as Senator John D. Rockefeller’s chief counsel and staff director for the Senate Committee on Veterans Affairs from 1992 – 2003. He also served as Senator Rockefeller’s Chief-of-Staff and was responsible for the Senator’s legislative community, economic development and political operations.

 

Mr. Gottlieb then served as chief management consultant to CRE as a strategic policy and advocacy advisor and managed the restructuring of this multi-million dollar medical research facility for the study of brain disorders and continued to serve as legal counsel and policy advisor to Senator Rockefeller, CRE’s Honorary Chairman, from 2003 to 2005. He continues to serve as a Board of Directors member of CRE.

 

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Mr. Gottlieb received a B.A. in Business Administration from Michigan State University in 1969, a Master of Education from New York University in 1970 and a law degree from New York Law School in 1974.

 

Shana Kay Phares – Director. Ms. Phares serves as President and Chief Executive Officer at CRE. Previously, Ms. Phares served as the President and Chief Executive Officer of the Blanchette Rockefeller Neurosciences Institute from 2010 to 2016, where she led vision, strategy and execution for all facets of operations at this private non-profit research institute with academic and translational laboratories in multiple locations. Ms. Phares also previously served in West Virginia state government as the Deputy Secretary of the Department of Health and Human Resources, where she provided leadership over a team of five Commissioners, the General Counsel and the Inspector General at this government agency dedicated to providing health and human services to 1.8 million West Virginians, with over 5,800 employees and a budget of $3.4 billion. In addition, Ms. Phares was the Acting Pharmaceutical Advocate for the Governor of West Virginia from 2005 to 2009. During her tenure in this position, she demonstrated expertise in executive communications, program development and implementation and fund sourcing at the office of the Governor, with a focus on creating strategies to streamline the purchase of pharmaceuticals by state agencies and providing uninsured West Virginians access to federal drug pricing schedules at 50% off retail pricing. Ms. Phares holds a B.A. in English and American Literature and Language from Harvard University and an M.B.A. from West Virginia University.

 

Bruce T. Bernstein – Director. Mr. Bernstein has over thirty years of experience in the securities industry, primarily as senior portfolio manager for two alternative finance funds as well as in trading and structuring of arbitrage strategies. Mr. Bernstein has served as President of Rockmore Capital, LLC since 2006, the manager of a direct investment and lending fund with peak assets under management of $140 million. Previously, he served as Co-President of Omicron Capital, LP, an investment firm based in New York, which he joined in 2001. Omicron Capital focused on direct investing and lending to public small cap companies and had peak assets under management of $260 million. Prior to joining Omicron Capital, Mr. Bernstein was with Fortis Investments Inc., where he was Senior Vice President in the bank’s Global Securities Arbitrage business unit, specializing in equity structured products and equity arbitrage and then President in charge of the bank’s proprietary investment business in the United States. Prior to Fortis, Mr. Bernstein was Director in the Equity Derivatives Group at Nomura Securities International specializing in cross-border tax arbitrage, domestic equity arbitrage and structured equity swaps. Mr. Bernstein started his career at Kidder Peabody, where he rose to the level of Assistant Treasurer. Mr. Bernstein also serves as a member of the Board of Directors of XpresSpa Holdings, the leading airport spa company in the world, based in New York. Mr. Bernstein is also a member of the board of Summit Digital Health, a laser based blood glucose monitor distributor, based in New Jersey. Mr. Bernstein holds a B.B.A. from City University of New York (Baruch).

  

George Perry, Ph.D. – Director. Dr. Perry has served as dean of the College of Sciences and professor of biology at The University of Texas at San Antonio since 2006. He additionally holds the position of Semmes Foundation Distinguished University Chair in Neurobiology. Dr. Perry has served as acting Chief Scientific Officer for Neurotez, Inc., a private company focused on Alzheimer’s disease since 2010 and as a director of Neurotez, Inc. since 2008. Dr. Perry is recognized in the field of Alzheimer’s research, where he has studied amyloidosis, oxidative stress, cytoskeleton, metal homeostasis, cell cycle reentry, and mitochondria. He currently serves as the editor for numerous journals and as editor-in-chief for the Journal of Alzheimer’s Disease. He is a fellow of the American Association for the Advancement of Science, Texas Academy of Science, the Microscopy Society of America, past president of the American Association of Neuropathologists and the Southwestern and Rocky Mountain Division of the American Association for the Advancement of Science, a member of the Dana Alliance for Brain Initiatives, and a Fulbright Senior Specialist. Dr. Perry holds a B.A. in Zoology from the University of California, Santa Barbara and a Ph.D. in Marine Biology from Scripps Institution of Oceanography, University of California at San Diego. He completed his postdoctoral fellowship in the Department of Cell Biology at Baylor College of Medicine.

 

Jonathan Schechter – Director. Mr. Schechter has served as the Director of Investment Banking at Chardan Capital Markets, a full service investment bank, since February 2008. He previously served as a director of DropCar, Inc. Mr. Schechter has worked with public companies for over two decades, including ten years of legal experience and eleven years of investment banking experience. He has received formal education in finance and accounting and has extensive experience analyzing and evaluating the financial statements of public companies. Mr. Schechter holds an A.B. in Public Policy/Political Science from Duke University and a J.D. from Fordham University School of Law.

 

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Ivan Gergel – Director. Dr. Gergel has served as Managing Partner and Chief Medical Officer of New Rhein Healthcare Investors LLC, a pharmaceutical investment company, since March 2018. Prior to that time, from May 2014 through December 2017, Dr. Gergel served as Chief Medical Officer of Nektar Therapeutics, Inc. Dr. Gergel has worked in pharmaceutical development for over thirty years. He currently serves on the boards of directors of Corium International, Inc., Realm Therapeutics, Inc. and Neuraptive Therapeutics, Inc. Dr. Gergel holds an MBBS (MD) from the Royal Free Hospital School of Medicine in London and an MBA from the Wharton School of Business at the University of Pennsylvania.

  

Board of Directors

 

Our Board of Directors is authorized to consist of nine members and currently consists of nine members.

 

Management has been delegated the responsibility for meeting defined corporate objectives, implementing approved strategic and operating plans, carrying on the Company’s business in the ordinary course, managing cash flow, evaluating new business opportunities, recruiting staff and complying with applicable regulatory requirements. The Board exercises its supervision over management by reviewing and approving long-term strategic, business and capital plans, material contracts and business transactions, and all debt and equity financing transactions and stock issuances.

 

Director Independence

 

Our Board of Directors has reviewed the materiality of any relationship that each of our directors and director nominees has with Neurotrope, either directly or indirectly. Based upon this review, our Board has determined that the following members of the Board and director nominees are “independent directors” as defined by The Nasdaq Stock Market:

 

Joshua N. Silverman

William S. Singer

James R. Gottlieb

Bruce T. Bernstein

George Perry, Ph.D.

Jonathan L. Schechter

Ivan Gergel

 

Board Committees

 

Our Board of Directors has established three committees, each of which is composed solely of independent directors:

 

·The Audit Committee consists of Mr. Bernstein, as Chairman, Mr. Singer and Mr. Schechter. Mr. Perlman resigned from the Board and as a member of the Audit Committee on June 19, 2018.

 

·The Compensation Committee consists of Mr. Silverman as Chairman, Mr. Bernstein and Mr. Singer. Mr. Perlman resigned from the Board and as a member of the Compensation Committee on June 19, 2018.

 

·The Nominating and Corporate Governance Committee consists of Mr. Singer, as Chairman, Mr. Bernstein and Mr. Silverman.

  

Each of the Committees has a written charter adopted by the Board of Directors; a current copy of each such charter is available to security holders on our website, http://www.neurotropebioscience.com.

 

Audit Committee

 

The Audit Committee (a) assists the Board of Directors in fulfilling its oversight of: (i) the quality and integrity of the Company’s financial statements; (ii) the Company’s compliance with legal and regulatory requirements relating to the Company’s financial statements and related disclosures; (iii) the qualifications and independence of the Company’s independent auditors; and (iv) the performance of the Company’s independent auditors; and (b) prepares any reports that the rules of the SEC require be included in the Company’s annual proxy statement.

 

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The Audit Committee was established on December 11, 2013, and held five meetings in 2018. The Board has determined that each member of the Audit Committee is an independent director in accordance with the rules of The Nasdaq Stock Market and applicable federal securities laws and regulations. In addition, the Board has determined that each of Mr. Bernstein and Mr. Schechter is an “audit committee financial expert” within the meaning of Item 407(d)(5) of Regulation S-K and has designated each of them to fill that role. See “Directors, Executive Officers and Corporate Governance – Directors and Executive Officers” above for descriptions of the relevant education and experience of each member of the Audit Committee.

 

At no time since the commencement of the Company’s most recently completed fiscal year was a recommendation of the Audit Committee to nominate or compensate an external auditor not adopted by the Board of Directors.

 

The Audit Committee is responsible for the oversight of the Company’s financial reporting process on behalf of the Board of Directors and such other matters as specified in the Committee’s charter or as directed by the Board. Our Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of any registered public accounting firm engaged by us for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for us (or to nominate the independent registered public accounting firm for stockholder approval), and each such registered public accounting firm must report directly to the Audit Committee. Our Audit Committee must approve in advance all audit, review and attest services and all non-audit services (including, in each case, the engagement and terms thereof) to be performed by our independent auditors, in accordance with applicable laws, rules and regulations.

 

Compensation Committee

 

The Compensation Committee (i) assists the Board of Directors in discharging its responsibilities with respect to compensation of the Company’s executive officers and directors, (ii) evaluates the performance of the executive officers of the Company, and (iii) administers the Company’s stock and incentive compensation plans and recommends changes in such plans to the Board as needed.

 

The Compensation Committee was established on December 11, 2013, and held four meetings in 2018. The Board of Directors has determined that each member of the Compensation Committee is an independent director in accordance with the rules of The Nasdaq Stock Market and applicable federal securities laws and regulations.

 

Nominating and Corporate Governance Committee

 

The Nominating and Corporate Governance Committee assists the Board in (i) identifying qualified individuals to become directors, (ii) determining the composition of the Board and its committees, (iii) developing succession plans for executive officers, (iv) monitoring a process to assess Board effectiveness, and (v) developing and implementing the Company’s corporate governance procedures and policies.

 

The Nominating and Corporate Governance Committee was established on December 11, 2013, and held four meetings in 2018. The Board has determined that each member of the Nominating and Corporate Governance Committee is an independent director in accordance with the rules of The Nasdaq Stock Market and applicable federal securities laws and regulations.

 

The Nominating and Corporate Governance Committee considers any timely submitted and qualified director candidates recommended by any security holder entitled to vote in an election of Directors. To date no security holders have made any such recommendations.

 

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Pursuant to our by-laws, nominations of persons for election to the Board of Directors at an annual meeting or at any special meeting of stockholders for the purpose of electing directors may be made by or at the direction of the Board of Directors, by any nominating committee or person appointed for such purpose by the Board of Directors, or by any stockholder of record entitled to vote for the election of directors at the meeting who complies with the following notice procedures. Such nominations, other than those made by, or at the direction of, or under the authority of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the Company by a stockholder of record at such time. To be timely, a stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the Company (a) in the case of an annual meeting, not less than 90 nor more than 120 days prior to the one-year anniversary of the date of the annual meeting of the previous year; provided, however, that if the annual meeting is called for a date that is not within 30 days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not earlier than 120 days prior to such annual meeting and not later than the close of business on the tenth day following the day on which notice of the date of the annual meeting was mailed or public disclosure of the date of the annual meeting was made, whichever first occurs; and (b) in the case of a special meeting of stockholders for the purpose of electing directors, not earlier than 120 days prior to such special meeting and not later than the close of business on the tenth day following the day on which notice of the date of the special meeting was mailed or public disclosure of the date of the special meeting was made, whichever first occurs. Such stockholder’s notice to the Secretary must set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of capital stock of the Company, if any, which are beneficially owned by the person and (iv) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to Regulation 14A under the Exchange Act or other applicable law; and (b) as to the stockholder giving the notice (i) the name and record address of the stockholder and (ii) the class and number of shares of capital stock of the Company which are beneficially owned by the stockholder. The chairman of the meeting may, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedures, and the defective nomination will be disregarded. See “Director Nominations” below for more information.

 

Code of Conduct and Ethics

 

We have adopted a Code of Ethics and Business Conduct (“Code of Ethics”) applicable to all of our employees, officers and directors (including our principal executive officer, principal financial officer and principal accounting officer) that complies with SEC regulations. The Code of Ethics is available free of charge on our website at http://www.neurotropebioscience.com and is attached as Exhibit 14.1 hereto and incorporated by reference herein.

 

We intend to timely disclose any amendments to, or waivers from, our code of ethics and business conduct that are required to be publicly disclosed pursuant to rules of the SEC and any securities exchange on which our shares may be listed by filing such amendment or waiver with the SEC.

 

Involvement in Certain Legal Proceedings

 

None of our directors or executive officers has been involved in any of the following events during the past ten years:

 

·any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

 

·any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences);

 

·being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; or

 

·being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

 

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Compensation Committee Interlocks and Insider Participation

 

The Compensation Committee consists of Mr. Silverman as Chairman, Mr. Singer and Mr. Bernstein. No member of the Compensation Committee has been an officer or employee of the Company. None of our executive officers serves on the board of directors or compensation committee of a company that has an executive officer that serves on our Board of Directors or Compensation Committee.

 

Family Relationships

 

There are no family relationships among our directors or executive officers.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Exchange Act requires our directors and executive officers and each person who owns more than ten percent of a registered class of our equity securities (collectively, “Reporting Persons”) to file with the SEC initial reports of ownership and reports of changes in ownership of our Common Stock and our other equity securities. Reporting Persons are required by SEC regulation to furnish us with copies of all Section 16(a) forms that they file. Based solely on the Company’s review of the copies of the forms received by it during the fiscal year ended December 31, 2018 and written representations that no other reports were required, the Company believes that each person who, at any time during such fiscal year, was a director, officer or beneficial owner of more than ten percent of the Company’s common stock complied with all Section 16(a) filing requirements during such fiscal year.

 

Item 11.Executive Compensation.

 

The following table sets forth information concerning the total compensation paid or accrued by us during the last two fiscal years ended December 31, 2018, to (i) all individuals that served as our principal executive officer or acted in a similar capacity for us at any time during the fiscal year ended December 31, 2018; (ii) the two most highly compensated executive officers other than the principal executive officer who were serving as executive officers at December 31, 2018; and (iii) up to two additional individuals for whom disclosure would have been required pursuant to clause (ii) above but for the fact that the individual was not serving as an executive officer at December 31, 2018 (collectively, the “named executive officers”).

 

The Compensation Committee of the Board is responsible for determining executive compensation.

 

Name &
Principal
Position
  Fiscal
Year
Ended
December 31
   Salary
($)
   Bonus
($)
   Stock
Awards
($)
  

Option

Awards

($)(1)

  

Non–
Equity
Incentive
Plan
Compensation

($)

  

Non–
Qualified

Deferred

Compensation

Earnings
($)

  

All Other

Compensation

($)(2)

   Total ($) 
Charles Ryan, JD, PhD,   2018    371,875    -    -    302,727    -    -    22,583    697,185 
CEO (3)   2017    -    -    -    1,029,535    -    -    -    1,029,535 
Robert Weinstein,   

2018

    

286,433

    -    -    

0

    -    -    

43,214

    

329,647

 
CFO, Secretary and Executive   2017    280,260    -    -    97,271    -    -    35,642    413,173 
Vice President                                             
Daniel L. Alkon,   

2018

    

300,000

    -    -    

0

    -    -    -    

300,000

 
MD, President and CSO   2017    300,000    -    -    857,440    -    -    -    1,157,440 

 

1.Option awards represent the grant date fair value of awards computed in accordance with FASB ASC Topic 718. Grant date fair value is based on the Black-Scholes option pricing model on the date of grant. For additional discussion on the valuation assumptions used in determining the grant date fair value, see Note 9 to the audited consolidated financial statements included in this Annual Report on Form 10-K.

 

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2.Mr. Weinstein and Dr. Ryan’s 2017 and 2018 amounts reflect healthcare payments and insurance premiums paid on their behalf.

 

3.Dr. Ryan became our Chief Executive Officer on February 15, 2018 and joined our Board of Directors on December 14, 2017.

 

Outstanding Equity Awards at 2018 Fiscal Year-End

 

We have two compensation plans approved by our stockholders, the Neurotrope, Inc. 2013 Equity Incentive Plan (as amended, the “2013 Plan”) and the Neurotrope, Inc. 2017 Equity Incentive Plan (as amended, the “2017 Plan”). The following table provides information regarding 2013 Plan and 2017 Plan awards for each named executive officer outstanding as of December 31, 2018.

 

   Option awards      Stock awards    
Name  Number of
securities
underlying
unexercised
options (#)
exercisable
   Number of
securities
underlying
unexercised
options (#)
unexercisable
   Equity
incentive
plan
awards:
Number of
securities
underlying
unexercised
unearned
options
(#)
   Option
exercise
price
($)
   Option
expiration
date
      Number
of
shares
or units
of stock
that
have
not
vested
(#)
   Market
value
of
shares
of
units
of
stock
that
have
not
vested
  

Equity
incentive

plan
awards:
Number
of
unearned
shares,
units or

other
rights
that have
not
vested

  Equity
incentive
plan
awards:
Market
or
payout
value of
unearned
shares,
units or
other
rights
that have
not vested
($)
 
(a)  (b)   (c)   (d)   (e)   (f)      (g)   (h)   (i)  (j) 
Dr. Charles S. Ryan   99,618    58,300       7.55    12 /14/2027   (1)            
    1,228    77,869       4.10    12 /14/2028  (2)           
                                            
Robert Weinstein   20,313    0       32.00    10/01/2023  (3)            
    3,125    0       25.60    11/19/2025  (4)            
    5,930    1,838       10.56    11/22/2026  (5)            
    9,473    9,472       19.62    04/11/2027  (6)            
                                            
Daniel L. Alkon, MD   5,469    0       56.00    8/23/2023  (7)            
    94,865    29,409       10.56    11/22/2026  (5)            
    83,500    83,500       19.62    04/11/2027  (6)            

 

1.50% of these options vested on the date of grant, with the remaining 50% vesting in equal daily installments over a four year period.

 

2.The options vest in equal daily installments over a three-year period from the date of grant.

 

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3.25% of these options vested on each of the first four anniversaries of the date of grant (October 2, 2013).

 

4.The options vest at a rate of 25% per year, with the initial 25% vested as of the date of grant.

 

5.The options vested 50% on grant date with the remaining vesting over four years.

 

6.The options vest in equal quarterly installments over a three-year period.

 

7.The options vested as of the date of grant.

 

We have no plans in place and have never maintained any plans that provide for the payment of retirement benefits or benefits that will be paid primarily following retirement including, but not limited to, tax qualified deferred benefit plans, supplemental executive retirement plans, tax-qualified deferred contribution plans and nonqualified deferred contribution plans.

 

Except as indicated below, we have no contracts, agreements, plans or arrangements, whether written or unwritten, that provide for payments to the named executive officers listed above.

 

Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table

 

Charles S. Ryan, JD, PhD. We are a party to an employment agreement dated as of December 14, 2017, with Charles Ryan, JD, PhD, pursuant to which Dr. Ryan serves as our Chief Executive Officer. Dr. Ryan became Chief Executive Officer effective February 15, 2018, following the departure of Susanne Wilke, PhD, as the Company’s Chief Executive Officer on December 14, 2017. Under the terms of Dr. Ryan’s employment agreement, we agreed to pay Dr. Ryan an initial annual base salary of $425,000 with a target annual bonus equal to 50% of his base salary as then in effect. Dr. Ryan also received, pursuant to the Company’s 2017 Equity Incentive Plan, (i) an initial equity grant of options to purchase 157,918 shares of the Company’s common stock with an exercise price of $7.55 per share, half of which vested upon the date of grant and the remainder of which vest in equal daily installments over a four-year period and (ii) an additional equity grant of options to purchase the number of shares equal to 1% of the Company’s outstanding equity on the first anniversary of the date of the agreement, which grant vests in equal daily installments over a three-year period. Dr. Ryan received such option grant to purchase 79,097 shares of our common stock with an exercise price of $4.10 per share on December 14, 2018. Pursuant to the terms of his employment agreement, Dr. Ryan is also entitled to receive an additional equity grant of options to purchase the number of shares equal to 1% of the Company’s outstanding equity on the grant date, to be made on or as soon as practicable after the second anniversary of the effective date of his employment agreement, such grant to vest in equal daily installments over a two-year period.

 

If the Company terminates Dr. Ryan’s employment without cause or if Dr. Ryan terminates his employment with the Company for good reason, Dr. Ryan is entitled to receive (i) a severance payment in an amount equal to twelve months of his salary as then in effect, (ii) a bonus payment based on his actual achievement of performance criteria for that year and (iii) continued coverage under the Company’s group health plan for a period of twelve months. In the event such termination without cause or for good reason occurs within the three months preceding or twelve months following a change of control, then in addition to the benefits outlined above, Dr. Ryan’s initial option grant and additional option grants described in the previous paragraph shall vest in full.

 

Robert Weinstein. The Company is party to an employment agreement dated as of October 1, 2013, with Robert Weinstein, pursuant to which he serves as the Company’s Chief Financial Officer and Executive Vice President. Mr. Weinstein’s current gross salary is $291,900. The Company agreed to pay Mr. Weinstein a discretionary annual bonus of up to 50% of his annual base salary for all years beginning January 1, 2015, to be earned and payable based upon attainment of annual performance goals as determined by the Board or a committee thereof. Mr. Weinstein was not paid a bonus in 2017 or in 2018. Mr. Weinstein’s annual bonus opportunity may be periodically reviewed and increased at the discretion of the Board or a committee thereof. Mr. Weinstein is also eligible to participate in all Company benefits generally available to the Company’s officers in accordance with the terms of those benefit plans and all retirement, life, disability, medical and dental plan benefits generally available to the Company’s officers in accordance with the terms of those plans.

 

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If Mr. Weinstein’s employment is terminated by the Company for a reason other than cause or by him for good reason, and subject to his compliance with other terms of Mr. Weinstein’s employment agreement, and certain other conditions, then the Company will pay him a severance amount equal to his annual base salary, payable in a single lump sum. In addition, if he elects health care continuation coverage under COBRA, the Company will pay for such health insurance coverage for a period of 18 months following the termination of his employment, as the same rate as it pays for health insurance coverage for its active employees (with Mr. Weinstein required to pay for any employee-paid portion of such coverage). If Mr. Weinstein’s employment is terminated by non-renewal or due to his death or disability, he will be entitled to any unpaid prorated annual bonus for the year in which his employment terminates. Subject to earlier termination by Mr. Weinstein’s death or disability, or by the Company for Cause, the term of Mr. Weinstein’s employment agreement is four years and will be extended automatically for successive one-year periods, unless either party gives written notice of termination to the other party at least 90 days prior to the end of the then-current term.

 

Pursuant to his employment agreement, the Company’s Board granted an incentive stock option to Mr. Weinstein under the 2013 Plan to purchase 20,313 shares of the Company’s common stock. The option vested with respect to 5,078 shares on each of the first, second, third and fourth anniversaries of October 1, 2013.

 

On April 11, 2017, Mr. Weinstein received a grant of options to purchase 18,945 shares of common stock, at an exercise price of $19.62 per share, to vest in equal quarterly installments over a three-year period.

 

Daniel L. Alkon, M.D. Effective September 23, 2016, the Company appointed Dr. Daniel Alkon, M.D., as President of the Company. Dr. Alkon continues to serve as the Company’s Chief Scientific Officer. On January 4, 2017, the Company agreed to compensate Dr. Alkon with a salary of $25,000 per month until May 31, 2017. Since that time, Dr. Alkon has received an annual salary of $300,000.

 

In November 2016, upon the closing of the November 2016 Private Placement, Dr. Alkon received an option to purchase up to 124,274 shares of the Company’s common stock at an exercise price of $10.56 per share, which vested with respect to 62,137 shares as of the date of grant, with the balance vesting at a rate of approximately 42.6 shares per day.

 

On April 11, 2017, Dr. Alkon received a grant of options to purchase 167,000 shares of common stock, at an exercise price of $19.62 per share, to vest in equal quarterly installments over a three-year period.

 

Pension Benefits

 

We do not have any qualified or non-qualified defined benefit plans.

 

Nonqualified Deferred Compensation

 

We do not have any nonqualified defined contribution plans or other deferred compensation plan.

 

Potential Payments upon Termination or Change-In-Control

 

The Company is party to an employment agreement dated as of December 14, 2017, with Charles Ryan, JD, PhD, pursuant to which Dr. Ryan serves as the Company’s Chief Executive Officer. If the Company terminates Dr. Ryan’s employment without cause or if Dr. Ryan terminates his employment with the Company for good reason, Dr. Ryan is entitled to receive (i) a severance payment in an amount equal to twelve months of his salary as then in effect, (ii) a bonus payment based on his actual achievement of performance criteria for that year and (iii) continued coverage under the Company’s group health plan for a period of twelve months. In the event such termination without cause or for good reason occurs within the three months preceding or twelve months following a change of control, then in addition to the benefits outlined above, the stock option grants made to Dr. Ryan pursuant to his employment agreement shall vest in full.

 

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The Company is also party to an employment agreement dated as of October 1, 2013, with Robert Weinstein, pursuant to which he serves as the Company’s Chief Financial Officer and Executive Vice President. If Mr. Weinstein’s employment is terminated by the Company for a reason other than cause or by him for good reason, and subject to his compliance with other terms of Mr. Weinstein’s employment agreement, and certain other conditions, then the Company will pay him a severance amount equal to his annual base salary, payable in a single lump sum. In addition, if he elects health care continuation coverage under COBRA, the Company will pay for such health insurance coverage for a period of 18 months following the termination of his employment, as the same rate as it pays for health insurance coverage for its active employees (with Mr. Weinstein required to pay for any employee-paid portion of such coverage). If Mr. Weinstein’s employment is terminated by non-renewal or due to his death or disability, he will be entitled to any unpaid prorated annual bonus for the year in which his employment terminates.

 

Director Compensation

 

The Company reimburses all of its directors for all reasonable out-of-pocket expenses incurred in connection with their attendance at meetings of the Board. On March 9, 2017, the Company adopted a new nonemployee 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 10,000 shares of the Company’s common stock to each of the Company’s nonemployee directors. Such grants shall occur annually on the fifth business day after the filing of the Company’s Annual Report on Form 10-K and shall vest on the one year anniversary from the date of grant subject to the director’s continued service on the Board on the vesting date. The Director Compensation Policy also provides for the automatic grant of nonqualified stock options to purchase up to 7,813 shares of the Company’s common stock, plus options to purchase an additional 1,562 shares for service on a committee of the Board, to each newly appointed director following the date of his or her appointment. Such options shall vest in equal daily installments over three years from the date of grant, subject to the director’s continued service on the Board on the applicable vesting dates. Each nonemployee director will also receive an annual retainer, in the amount of $120,000 for the Chairman of the Board and $25,000 for each other nonemployee Board member. In addition, the Chairman of each of the Audit, Compensation, and Nominating and Governance Committees will receive an additional $15,000 retainer.

 

In addition to the compensation described above, on January 22, 2019, the Board approved of additional stock option grants to purchase shares of the Company’s common stock to its directors and officers. The grants were made pursuant to the Company’s 2017 Plan. The stock options vest according to the following schedule: 50% vested on the date of the grant, with the remaining 50% vesting in equal quarterly installments over a two-year period.

 

The following table provides information concerning the compensation of our directors for the year ended December 31, 2018.

 

   Fees            Nonqualified     

 

 
   earned         Non-equity   deferred        
  or paid   Stock   Option   incentive plan   compensation   All other     
   in cash   awards   awards   compensation   earnings   Compensation     
Name (a)  ($)(b)   ($)(c)   ($)(d)   ($)(e)   ($)(f)   ($)(g)   Total ($)(h)  
Joshua Silverman (2)   120,000    -     77,112    -    -    120,000    317,112 
Charles S. Ryan, Ph.D. (3)   -     -    302,727                   302,727 
William S. Singer   40,000    -    77,112                   117,112 
James R. Gottlieb   25,000    -    77,112    -    -    -    102,112 
Shana K. Phares   25,000    -    77,112    -    -    -    102,112 
Bruce T. Bernstein   40,000    -    77,112                   117,112 
George Perry, Ph.D.   25,000    -    77,112                   102,112 
Jonathan L. Schechter (4)   462    -    36,461    -    -         36,923 
Dr. Ivan Gergel (5)   1,155        30,386                   31,541 

 

1.These amounts represent the aggregate grant date fair value of options granted to each director in 2017 computed in accordance with FASB ASC Topic 718.

 

2.Fees represent payments for consulting services provided by Mr. Silverman and Chairman of the Board fees.

 

3.Option awards reflect compensation paid to Dr. Ryan in connection with his employment agreement pursuant to which he agreed to be appointed as our Chief Executive Officer effective February 15, 2018.

 

4.Mr. Schechter was appointed to our Board on December 13, 2018.

 

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5.Dr. Gergel was appointed to our Board on December 13, 2018.

 

Item 12.       Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters.

 

Equity Compensation Plan Information

 

On August 22, 2013, our Board adopted, and on August 22, 2013, our stockholders approved, the Neurotrope, Inc. 2013 Equity Incentive Plan (as amended, the “2013 Plan”), which reserved a total of 218,750 shares of our common stock for issuance pursuant to awards granted under the plan. On July 23, 2014, our Board and stockholders approved an amendment to the 2013 Plan to increase the number of shares of common stock issuable thereunder by an additional 93,750 shares, so that the Company’s officers, key employees, consultants and directors can be granted stock options and other equity incentive awards with respect to an aggregate of 312,500 shares of our common stock. On November 23, 2016, our Board approved an amendment to the 2013 Plan to increase the number of shares of common stock issuable thereunder to 685,322 shares.

 

On March 9, 2017, our Board adopted, and on December 12, 2017, our stockholders approved, the Neurotrope, Inc. 2017 Equity Incentive Plan (the “2017 Plan”), which reserved a total of 800,000 new shares of our common stock for issuance, plus up to 200,000 additional shares that may be issued if awards under the 2013 Plan are cancelled or expire. On October 9, 2018, our Board adopted, and on December 12, 2018, our stockholders approved an amendment to the 2017 Plan to increase the number of shares of common stock issuable thereunder by an additional 600,000 shares.

 

The following table provides information as of December 31, 2018, with respect to the shares of our common stock that may be issued under our existing equity compensation plans:

  

Plan category  Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
   Weighted-average
exercise price of
outstanding options,
warrants and rights
   Number of securities
remaining available for
future issuance under
equity
compensation plans
(excluding securities
reflected in column (a))
 
   (a)   (b)   (c) 
Equity compensation plans approved by security holders (1)    1,167,055   $20.34    565,077 
Equity compensation plans not approved by security holders (2)   353,191    10.56    0 
Totals   1,520,246   $18.07    565,077 

 

  (1) The 2013 Plan and 2017 Plan.

 

  (2) Includes the increase in the number of shares available for issuance under the 2013 Plan that became effective on November 21, 2016, which increased the number of available shares by 372,825 and which did not receive approval by our stockholders. On November 21, 2016, the Company issued options to purchase an aggregate of 372,825 shares of common stock, which options feature an exercise price of $10.56 per share. Subsequent to issuance, 19,634 options were canceled.

 

As described below, incentive awards authorized under the 2013 Plan and 2017 Plan include, but are not limited to, incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, the Code. If an award granted under the 2013 Plan or 2017 expires, terminates, is unexercised or is forfeited, or if any shares are surrendered to us in connection with the exercise of an incentive award, the shares subject to such award and the surrendered shares will become available for further awards under the 2017 Plan.

 

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The number of shares of our common stock subject to the 2013 Plan and 2017 Plan or any number of shares subject to (a) any numerical limit in the 2013 Plan and 2017 Plan, (b) to the terms of any incentive award or (c) to any combination of the foregoing, is expected to be adjusted in the event of any change in our outstanding common stock by reason of any stock dividend, spin-off, split-up, stock split, reverse stock split, recapitalization, reclassification, merger, consolidation, liquidation, business combination or exchange of shares or similar transaction.

 

Administration

 

The Compensation Committee of our Board or our Board administers the 2013 Plan and the 2017 Plan. Subject to the terms of the 2013 Plan and the 2017 Plan, the Compensation Committee or our Board has complete authority and discretion to determine the terms of awards under the 2013 Plan and the 2017 Plan, as applicable.

 

Grants

 

The 2013 Plan and 2017 Plan authorize the grant to participants of nonqualified stock options, incentive stock options, restricted stock awards, restricted stock units, performance grants intended to comply with Section 162(m) of the Code and stock appreciation rights, as described below:

 

·Options granted under the 2013 Plan and 2017 Plan entitle the grantee, upon exercise, to purchase a specified number of shares from us at a specified exercise price per share. The exercise price for shares of our common stock covered by an option generally cannot be less than the fair market value of our common stock on the date of grant unless agreed to otherwise at the time of the grant. In addition, in the case of an incentive stock option granted to an employee who, at the time the incentive stock option is granted, owns stock representing more than 10% of the voting power of all classes of stock of the Company or any parent or subsidiary, the per share exercise price will be no less than 110% of the fair market value of our common stock on the date of grant.

 

·Restricted stock awards and restricted stock units may be awarded on terms and conditions established by the Compensation Committee or Board, which may include performance conditions for restricted stock awards and the lapse of restrictions on the achievement of one or more performance goals for restricted stock units.

 

·The Compensation Committee or Board may make performance grants, each of which will contain performance goals for the award, including the performance criteria, the target and maximum amounts payable, and other terms and conditions.

 

·The 2013 Plan and 2017 Plan authorize the granting of stock awards. The Compensation Committee or Board will establish the number of shares of our common stock to be awarded and the terms applicable to each award, including performance restrictions.

 

·Stock appreciation rights entitle the participant to receive a distribution in an amount not to exceed the number of shares of our common stock subject to the portion of the stock appreciation rights exercised multiplied by the difference between the market price of a share of our common stock on the date of exercise of the stock appreciation rights and the market price of a share of our common stock on the date of grant of the stock appreciation rights

 

The maximum aggregate number of shares of common stock that may be awarded and sold under the 2013 Plan is 685,329 and under the 2017 Plan is 1,400,000 new shares of common stock, plus up to 200,000 additional shares that may be issued if awards outstanding under the 2013 Plan are cancelled or expire.

 

Duration, Amendment, and Termination

 

The Board has the power to amend, suspend or terminate the 2013 Plan and the 2017 Plan without stockholder approval or ratification at any time or from time to time. No change may be made that increases the total number of shares of our common stock reserved for issuance pursuant to incentive awards or reduces the minimum exercise price for options or exchange of options for other incentive awards, unless such change is authorized by our stockholders within one year. Unless sooner terminated, the 2013 Plan and the 2017 Plan will each terminate ten years after their respective dates of adoption.

 

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Security Ownership of Certain Beneficial Owners

 

The following table sets forth information with respect to the beneficial ownership of our common stock as of February 28, 2019, by (i) each stockholder known by us to be the beneficial owner of more than 5% of our common stock (our only class of voting securities), (ii) each of our directors and executive officers, and (iii) all of our directors and executive officers as a group. To the best of our knowledge, except as otherwise indicated, each of the persons named in the table has sole voting and investment power with respect to the shares of our common stock beneficially owned by such person, except to the extent such power may be shared with a spouse. To our knowledge, none of the shares listed below are held under a voting trust or similar agreement, except as noted.

 

Unless otherwise indicated in the following table, the address for each person named in the table is c/o Neurotrope, Inc., 1185 Avenue of the Americas, 3rd Floor, New York, NY 10036.

 

Address
of Beneficial 
Owner
  Common
Stock
Beneficially
Owned
  

Percent of

Common

Stock

Beneficially

Owned(1)

 
JEPAP LLC(2)   703,126    5.3%
McGregor, Clyde S. & LeAnn P. Pope, JTWROS(3)   1,766,215    9.99%
E. Jeffrey Peierls(4)
73 South Holman Way 
Golden, CO 80401
   1,119,574    8.4%

Iroquois Capital Management, LLC(5)

205 East 42nd Street, 20th Floor

New York, NY 10017

   992,658    7.5%
Daniel L. Alkon, MD(6)    330,795    2.5%
Bruce T. Bernstein(7)   51,945    * 
 Ivan Gergel(8)   6,212    * 
James R. Gottlieb(9)    37,346    * 
George Perry(10)   17,770    *  
Shana Kay Phares(11)   29,863    * 
Charles S. Ryan, JD, PhD(12)   200,253    1.5%
Jonathan L. Schechter(13)   6,329    * 
Joshua N. Silverman(14)   320,765    2.4%
William S. Singer(15)   59,055    * 
Robert Weinstein(16)   61,633    * 
All directors and executive officers as a group (11 persons)   1,121,966    8.5%

 

*Represents beneficial ownership of less than 1% of the outstanding shares.

 

1.Applicable percentage ownership is based on 12,922,370 shares of our common stock outstanding, together with securities exercisable or convertible into shares of our common stock within 60 days of February 28, 2019 for each stockholder. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. The shares issuable pursuant to the exercise or conversion of such securities are deemed outstanding for the purpose of computing the percentage of ownership of the security holder, but are not treated as outstanding for the purpose of computing the percentage of ownership of any other person.

 

2.Philip Proujansky is a Member of JEPAP LLC and has voting and investment power over the shares owned thereby. Includes (1) 351,563 shares of common stock and (2) 351,563 shares of common stock issuable upon exercise of the Series F Warrants.  The warrants are held by Warrants Allocation Vehicle LLC.

 

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3.Includes (1) 1,021,797 shares of common stock, (2) 104,167 shares of common stock underlying Series E Warrants issued in the Company’s November 2015 private placement, (3) 195,313 shares of common stock issuable upon exercise of the Series F Warrant and (4) 444,938 shares of common stock underlying Series G warrants issued in the Company’s December 2018 registered direct offering.  The shares included in the table report the number of shares that would be issuable upon exercise of the warrants, without giving effect to the 9.99% blocker included in such securities.

 

4.This information is based on a Schedule 13G/A filed by E. Jeffrey Peierls and Brian Eliot Peierls on February 11, 2019, which reported ownership as of December 31, 2018.  Includes an aggregate of (1) 706,369 shares of common stock and (2) 413,201 shares of common stock underlying warrants to purchase common stock.  The shares included in the table report the number of shares that would be issuable upon exercise of the warrants, without giving effect to the 9.99% blocker included in such securities.   Certain shares of common stock and warrants to purchase common stock are subject to shared voting and dispositive power with various Trusts and the Peierls Foundation, Inc., of which the reporting persons are fiduciaries. The address of E. Jeffrey Peierls and The Peierls Foundation, Inc. is 73 South Holman Way, Golden, Colorado 80401.  The address of Brian Eliot Peierls is 3017 McCurdy St., Austin, TX 78723.

 

5.This information is based on a Schedule 13G filed by Iroquois Capital Management, LLC (“Iroquois Capital”), Richard Abbe and Kimberly Page on February 14, 2019, which reported ownership as of December 31, 2018.  The shares included in the table report the number of shares that would be issuable upon exercise of the warrants without giving effect to the 9.99% blocker included in such warrants.  Includes an aggregate of (1) 235,504 shares of common stock and warrants to purchase 156,250 shares of common stock (which are subject to a 9.99% blocker) held by Iroquois Master Fund Ltd. (“Iroquois Master Fund”) and (2) 449,862 shares of common stock and warrants to purchase 145,833 shares of common stock (which are subject to a 9.99% blocker) held by Iroquois Capital Investment Group LLC (“ICIG”). Mr. Richard Abbe holds warrants to purchase 5,209 shares of common stock (which are subject to a 9.99% blocker) which are held by Kensington Investment Partners LLC.

 

6.Includes (1) 29,688 shares of common stock and (2) 301,107 shares underlying stock options held by Dr. Alkon that are all vested as of February 28, 2019 or will vest within 60 days thereafter.

 

7.Includes (1) 1,563 shares of common stock and (2) 50,382 shares underlying stock options held by Mr. Bernstein that are vested as of February 28, 2019 or will vest within 60 days thereafter.

 

8.Includes 6,212 shares underlying stock options held by Dr. Gergel that are vested as of February 28, 2019 or will vest within 60 days thereafter.

 

9.Includes 37,346 shares underlying stock options held by Mr. Gottlieb that are vested as of February 28, 2019 or will vest within 60 days thereafter.

 

10.Includes 17,770 shares underlying stock options held by Dr. Perry that are vested as of February 28, 2019 or will vest within 60 days thereafter.

 

11.Includes 29,863 shares underlying stock options held by Ms. Phares that are vested as of February 28, 2019 or will vest within 60 days thereafter.  Does not include shares held by Neurosciences Research Ventures, Inc.  Ms. Phares is the President and Chief Executive Officer of Cognitive Research Enterprises, Inc.  Ms. Phares disclaims beneficial ownership of the shares held by Neurosciences Research Ventures, Inc.

 

12.Includes 200,253 shares underlying stock options held by Dr. Ryan that are vested as of February 28, 2019 or will vest within 60 days thereafter.

 

13.Includes 6,329 shares underlying stock options held by Mr. Schechter that are vested as of February 28, 2019 or will vest within 60 days thereafter.

 

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14.Includes 320,765 shares underlying stock options held by Mr. Silverman that are vested as of February 28, 2019 or will vest within 60 days thereafter.

 

15.Includes 59,055 shares underlying stock options held by Mr. Singer that are vested as of February 28, 2019 or will vest within 60 days thereafter.

 

16.Includes (1) 3,953 shares of common stock, (2) 1,303 shares of common stock underlying Series E Warrants issued in the Company’s November 2015 private placement and (3) 56,377 shares underlying stock options held by Mr. Weinstein that are vested as of February 28, 2019 or will vest within 60 days thereafter.

 

Item 13.Certain Relationships and Related Transactions, and Director Independence.

 

SEC rules require us to disclose any transaction or currently proposed transaction in which we are a participant and in which any related person has or will have a direct or indirect material interest involving an amount that exceeds the lesser of $120,000 or one percent (1%) of the average of the Company’s total assets as of the end of last two completed fiscal years. A related person is any executive officer, director, nominee for director, or holder of 5% or more of the Company’s common stock, or an immediate family member of any of those persons.

 

Consulting Agreement

 

On August 4, 2016, the Company entered into a consulting agreement with SM Capital Management, LLC (“SMCM”), a limited liability company owned and controlled by Mr. Joshua N. Silverman (the “Consulting Agreement”). Mr. Silverman was appointed to the Board on August 4, 2016. Pursuant to the Consulting Agreement, SMCM shall provide consulting services which shall include, but not be limited to, providing business development, financial communications and management transition services, for a one-year period, subject to annual review thereafter. SMCM’s annual consulting fee is $120,000, payable by the Company in monthly installments of $10,000. In addition, SMCM shall be reimbursed for (i) all pre-approved travel in connection with the consulting services to the Company, (ii) upon submission to the Company of appropriate vouchers and receipts, for all other out-of-pocket expenses reasonably incurred by SMCM in furtherance of the Company’s business and (iii) SMCM’s out-of-pocket legal and advisory fees in connection with SMCM’s recent involvement with the Company, including, but not limited to, expenses incurred in connection with the proposed consent solicitation and the Consulting Agreement, which reimbursement shall not exceed $50,000. In addition, the Consulting Agreement provides that effective immediately, Mr. Silverman shall be appointed as a member of the Board and that Mr. Silverman shall continue to be a member of the Board throughout the consulting term. The Consulting Agreement further provides that the Board and all applicable committees of the Board shall take all necessary actions to appoint Mr. Silverman as Chairman of the Board and as Chairman of the Audit Committee of the Board and that Mr. Silverman shall continue to serve as Chairman of the Board and Chairman of the Audit Committee throughout the consulting term. In addition, the Consulting Agreement provides that the Company shall take all actions within its control, including the recommendation of such director nominee by the Nominating and Governance Committee of the Board, to nominate and appoint one (1) additional member to the Board designated by Josh Silverman during the initial consulting term. The Company agreed to indemnify Mr. Silverman to the fullest and same extent as the Company provides indemnification to its directors from time to time under the Company’s Certificate of Incorporation, By-Laws and applicable law, and under the Company’s policies of Directors and Officers Liability Insurance. In addition, the Company agreed to provide compensation to Mr. Silverman in the same amounts as the Company provides to its non-employee directors for service in the capacity of a director of the Company.

 

On August 4, 2016, the Company and Charles S. Ramat, the Company’s President and Chief Executive Officer, entered into a Separation Agreement (the “Ramat Separation Agreement”). Pursuant to the Ramat Separation Agreement which was mutually agreed upon by the Company and Mr. Ramat, Mr. Ramat agreed to resign as President and Chief Executive Officer and as a member of the Board (the “Termination Date”) and the parties agreed that Mr. Ramat is being terminated without cause. Mr. Ramat’s resignation from the Board and all other positions occurred on September 1, 2016. Mr. Ramat continued to receive his current salary and benefits through the Termination Date except that his salary was reduced by $10,000 per month. On the Termination Date, Mr. Ramat received a lump sum severance payment in the amount of $200,000, which was equal to the amount of severance he was entitled to receive if he was terminated by the Company for a reason other than cause or by him for good reason pursuant to his employment agreement with the Company. The Ramat Separation Agreement further provided that (a) the Consulting Agreement between Ramat Consulting Group and the Company, effective February 28, 2013, shall automatically be restored and become fully effective and reinstated on the same terms and conditions for the balance of its five year term, which expired on February 28, 2018, and pursuant to which consulting fees are to be paid at the rate of $50,000 per annum, payable monthly, and (b) on the Termination Date, Mr. Ramat’s (i) outstanding unvested stock options shall immediately vest, notwithstanding that Mr. Ramat, on the previously scheduled vesting dates, will no longer be an employee, director, or service provider to the Company, and (ii) vested options (including those whose vesting occurs pursuant the preceding clause) shall continue to be exercisable for a period of ten (10) years following the respective dates of grant of such options. The Ramat Separation Agreement also extends the non-competition provision contained in Mr. Ramat’s employment agreement notwithstanding the termination of Mr. Ramat’s employment without cause, except that he is permitted to participate in a business that is engaged in the development and/or sale of products using bryologs only for the indication of AIDS. The Ramat Separation Agreement also included a mutual general release of claims and a requirement to obtain similar release agreements from Iroquois Master Fund Ltd. and certain other investors.

 

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During the year ended December 31, 2017, we paid an aggregate of $141,770 to the consulting company of former director Dr. Kenneth J. Gorelick for fees in connection with consulting services provided to the Company in connection with the Company’s clinical trial.

 

CRE License

 

On February 4, 2015, Neurotrope BioScience, CRE and NRV II, LLC entered into an Amended and Restated Technology License and Services Agreement (the “CRE License”), which further amended and restated the Technology License and Services Agreement dated as of October 31, 2012, as amended by Amendment No. 1 dated as of August 21, 2013.

 

Pursuant to the CRE License, Neurotrope BioScience maintained its exclusive (except as described below), non-transferable (except pursuant to the CRE License’s assignment provision), 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, LLC 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 specifies that all patents that issue from a certain patent application, shall constitute licensed patents and all trade secrets, know-how and other confidential information claimed by such patents constitute licensed technology under the CRE License. Furthermore, on July 10, 2015, under the terms of the Statement of Work and Account Satisfaction Agreement dated February 4, 2015, Neurotrope BioScience’s rights relating to an in vitro diagnostic test system reverted back to CRE and, accordingly, Neurotrope BioScience no longer has any rights under the CRE License for diagnostic applications using the CRE patent portfolio or technology.

 

Notwithstanding the above license terms, CRE and its affiliates retain rights to use the licensed intellectual property in the Field of Use to engage in research and development and other non-commercial activities and to provide services to Neurotrope BioScience or to perform other activities in connection with the CRE License.

 

Under the CRE License, Neurotrope BioScience may not enter into sublicense agreements with third parties except with CRE’s prior written consent, which consent shall not be commercially unreasonably withheld. Furthermore, the CRE License dated February 4, 2015 revises the agreement that was entered into as of October 31, 2012 and amended on August 21, 2013, in that it provides that any intellectual property developed, conceived or created in connection with a sublicense agreement that Neurotrope BioScience entered into with a third party pursuant to the terms of the CRE License will be licensed to CRE and its affiliates for any and all non-commercial purposes, on a worldwide, perpetual, non-exclusive, irrevocable, non-terminable, fully paid-up, royalty-free, transferable basis, with the right to freely sublicense such intellectual property. Previously, the agreement had provided that such intellectual property would be assigned to CRE.

 

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Pursuant to the terms of the November 12, 2015 amendment to the CRE License, we paid an aggregate of approximately $348,000 to CRE following the closings of the Series B private placement, which constituted an advance royalty payment to CRE and will be offset (with no interest) against the amount of future royalty obligations payable until such time that the amount of such future royalty obligations equals in full the amount of the advance royalty payments made. Neurotrope Bioscience shall be subtracted from the gross proceeds to determine the “Post-PA Fee Proceeds.”

 

Under the CRE License, CRE and Neurotrope BioScience will jointly own data, reports and information that is generated on or after February 28, 2013, pursuant to the license agreement dated October 31, 2012 and amended on August 21, 2013, by Neurotrope BioScience, on behalf of Neurotrope BioScience by a third party or by CRE pursuant to a statement of work that the parties enter into pursuant to the CRE License, in each case to the extent not constituting or containing any data, reports or information generated prior to such date or by CRE not pursuant to a statement of work (the “Jointly Owned Data”). CRE has agreed not to use the Jointly Owned Data inside or outside the Field of Use for any commercial purpose during the term of the CRE License or following any expiration of the CRE License other than an expiration that is the result of a breach by Neurotrope BioScience of the CRE License that caused any licensed patent to expire, become abandoned or be declared unenforceable or invalid or caused any licensed technology to enter the public domain (a “Natural Expiration”) provided, however, CRE may use the Jointly Owned Data inside or outside the Field of Use for any commercial purpose following any termination of the CRE License. Also, CRE granted Neurotrope BioScience a license during the term and following any Natural Expiration, to use certain CRE data in the Field of Use for any commercial purposes falling within the scope of the license granted to Neurotrope BioScience under the CRE License.

 

The CRE License further requires us to pay CRE (i) a fixed research fee equal to a pro rata amount of $1 million in the year during which we close on a Series B Preferred Stock financing resulting in proceeds of at least $25 million, (ii) a fixed research fee of $1 million per year for each of the five calendar years following the completion of such financing and (iii) an annual fixed research fee in an amount to be negotiated and agreed upon no later than 90 days prior to the end of the fifth calendar year following the completion of such financing to be paid with respect to each remaining calendar year during the term of the CRE License. This fixed research fee is not yet due.

 

On November 29, 2018 we entered into a Second Amendment to the CRE License, pursuant to which (i) we agreed to pay all outstanding invoices and accrued expenses associated with the licensed intellectual property and (ii) the parties agreed that CRE would no longer have the right, and we would have the sole and exclusive right, to apply for, file, prosecute, and maintain patents and applications for the licensed intellectual property. The Company paid $10,000 to CRE for administrative expenses relating to this amendment.

 

For the year ending December 31, 2017, the Company paid CRE a total of $214,619 for maintenance of CRE’s patent portfolio relating to technologies licensed to the Company by CRE. For the year ending December 31, 2018, the Company paid CRE a total of $262,012 for maintenance of CRE’s patent portfolio and administrative expenses for license amendment.

 

Shana Kay Phares, a member of our Board, is the President and Chief Executive Officer of CRE.

 

Director Independence

 

See “Directors, Executive Officers and Corporate Governance – Director Independence” and “Directors, Executive Officers and Corporate Governance – Board Committees” above.

 

  Item 14. Principal Accountant Fees and Services.

 

The Company has engaged Friedman LLP as its independent auditors since August 23, 2013. The following table presents fees for professional audit services rendered by Friedman LLP for the audit of the Company’s annual financial statements for the years ended December 31, 2018, and December 31, 2017, and fees billed for other services rendered by Friedman LLP during those periods.

 

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   2018   2017 
Audit fees:(1)  $84,833   $80,340 
Audit related fees:(2)   0    28,387 
Tax fees:   0    0 
All other fees:   0    0 
Total  $84,833   $108,727 

 

1.Audit fees were for professional services for the audit of the consolidated financial statements and other fees for services that only our independent registered public accounting firm can perform, such as the review of our interim consolidated financial statements included in our Form 10-Q filings.

 

2.Audit related fees consisted principally of work relating to the filing of Company quarterly and annual reports and work relating to the filing of Company registration statements.

  

The percentage of services set forth above in the category audit related fees, that were approved by the Audit Committee pursuant to Rule 2-01(c)(7)(i)(C) (relating to the approval of a de minimus amount of non-audit services after the fact but before completion of the audit), was 100%.

 

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-audit Services of Independent Public Accountant

 

Consistent with SEC policies regarding auditor independence, the Audit Committee has responsibility for appointing, setting compensation and overseeing the work of our independent registered public accounting firm. In recognition of this responsibility, the Audit Committee has established a policy to pre-approve all audit and permissible non-audit services provided by our independent registered public accounting firm.

 

Prior to engagement of an independent registered public accounting firm for the next year’s audit, management will submit an aggregate of services expected to be rendered during that year for each of four categories of services to the Audit Committee for approval.

 

1.Audit services include audit work performed in the preparation of financial statements, as well as work that generally only an independent registered public accounting firm can reasonably be expected to provide, including comfort letters, statutory audits, and attest services and consultation regarding financial accounting and/or reporting standards.

 

2.Audit-Related services are for assurance and related services that are traditionally performed by an independent registered public accounting firm, including due diligence related to mergers and acquisitions, employee benefit plan audits, and special procedures required to meet certain regulatory requirements.

 

3.Tax services include all services performed by an independent registered public accounting firm’s tax personnel except those services specifically related to the audit of the financial statements, and includes fees in the areas of tax compliance, tax planning, and tax advice.

 

4.Other Fees are those associated with services not captured in the other categories. The Company generally does not request such services from our independent registered public accounting firm

 

Prior to engagement, the Audit Committee pre-approves these services by category of service. The fees are budgeted and the Audit Committee requires our independent registered public accounting firm and management to report actual fees versus the budget periodically throughout the year by category of service. During the year, circumstances may arise when it may become necessary to engage our independent registered public accounting firm for additional services not contemplated in the original pre-approval. In those instances, the Audit Committee requires specific pre-approval before engaging our independent registered public accounting firm.

 

The Audit Committee may delegate pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting.

 

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PART IV

 

Item 15. Exhibits and Financial Statements Schedules.

 

(a). The following documents are filed as part of this annual report on Form 10-K:

 

(a)(1) and (2). See “Index to Consolidated Financial Statements and Financial Statement Schedules” at Item 8 to this Annual Report on Form 10-K. Other financial statement schedules have not been included because they are not applicable or the information is included in the financial statements or notes thereto.

 

(a)(3) Exhibits

 

The following is a list of exhibits filed as part of this Annual Report on Form 10-K.

 

Exhibit    
Number   Description
     
2.1   Agreement and Plan of Merger, dated June 20, 2013, between BlueFlash Communications, Inc. and Neurotrope, Inc. (incorporated by reference from Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on August 8, 2013)
     
2.2   Amendment to Agreement and Plan of Merger, dated July 10, 2013, between BlueFlash Communications, Inc. and Neurotrope, Inc. (incorporated by reference from Exhibit 2.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on August 8, 2013)
     
2.3   Agreement and Plan of Merger and Reorganization, dated as of August 23, 2013, by and among the Registrant, Acquisition Sub and Neurotrope BioScience, Inc. (incorporated by reference from Exhibit 2.3 to the Company’s Current Report on Form 8-K filed with the SEC on August 29, 2013)
     
3.1   Articles of Incorporation, as amended, of the Registrant. (incorporated by reference from Exhibit 3.1 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 10, 2017)
     
3.2   Florida Articles of Merger of BlueFlash Communications, Inc. with and into Neurotrope, Inc., filed August 5, 2013 (incorporated by reference from Exhibit 3.3 to the Registrant’s Current Report on Form 8-K filed with the SEC on August 8, 2013)
     
3.3   Nevada Articles of Merger of BlueFlash Communications, Inc. with and into Neurotrope, Inc., filed August 5, 2013 (incorporated by reference from Exhibit 3.4 to the Registrant’s Current Report on Form 8-K filed with the SEC on August 8, 2013)
     
3.4   Certificate of Merger of Neurotrope BioScience, Inc., with and into Neurotrope Acquisition, Inc., filed August 23, 2013 (incorporated by reference from Exhibit 3.4 to Company’s Current Report on Form 8-K filed with the SEC on August 29, 2013)
     
3.5   Amended and Restated By-Laws of the Registrant (incorporated by reference from Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the SEC on August 8, 2013)
     
4.1   Form of Series A Warrant (incorporated by reference from Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on November 19, 2015)
     
4.2   Form of Series B Warrant (incorporated by reference from Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on November 19, 2015)
     
4.3   Form of Series C Warrant (incorporated by reference from Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on November 19, 2015)

 

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4.4   Form of Series D Warrant (incorporated by reference from Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the SEC on November 19, 2015)
     
4.5   Form of Series E Warrant (incorporated by reference from Exhibit 10.6 the Company’s Current Report on Form 8-K filed with the SEC on November 19, 2015)
     
4.6   Penny Broker Warrant (incorporated by reference from Exhibit 10.8 to the Company’s Current Report on Form 8-K filed with the SEC on November 19, 2015)
     
4.7   IV Broker Warrant (incorporated by reference from Exhibit 10.9 to the Company’s Current Report on Form 8-K filed with the SEC on November 19, 2015)
     
4.8   Institutional Broker Warrant (incorporated by reference from Exhibit 10.10 to the Company’s Current Report on Form 8-K filed with the SEC on November 19, 2015)
     
4.9   Form of Series F Warrant (incorporated by reference from Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 18, 2016)
     
4.10   Form of Series A Warrant Amendment (incorporated by reference from Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the SEC on November 18, 2016)
     
4.11   Form of Series C Warrant Amendment (incorporated by reference from Exhibit 4.3 to the Company’s Current Report on Form 8-K filed with the SEC on November 18, 2016)
     
4.12   Form of Series E Warrant Amendment (incorporated by reference from Exhibit 4.4 to the Company’s Current Report on Form 8-K filed with the SEC on November 18, 2016)
     
4.13   Form of Broker Warrant (incorporated by reference from Exhibit 4.5 to the Company’s Current Report on Form 8-K filed with the SEC on November 18, 2016)

 

4.14   Form of Series G Warrant (incorporated by reference from Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 17, 2018)
     
10.1†   The Registrant’s 2013 Equity Incentive Plan (incorporated by reference from Exhibit 10.11 filed with the Company’s Current Report on Form 8-K to the SEC on August 29, 2013)
     
10.2†   Form of Option Agreement under 2013 Equity Incentive Plan (incorporated by reference from Exhibit 10.12 filed with the Company’s Current Report on Form 8-K to the SEC on August 29, 2013)
     
10.3   Voting Agreement dated as of August 23, 2013, among the Registrant and the stockholders party thereto (incorporated by reference from Exhibit 10.17 to the Company’s Current Report on Form 8-K filed with the SEC on August 29, 2013)
     
10.4†   Employment Agreement dated as of October 1, 2013, between Neurotrope, Inc., and Robert Weinstein (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on October 9, 2013)
     
10.5†   Amendment No. 1 to the Neurotrope, Inc. 2013 Equity Incentive Plan, dated as of July 23, 2014 (incorporated by reference from Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 14, 2014)
     
10.6   Amended and Restated Technology License and Services Agreement among Neurotrope BioScience, Inc., Blanchette Rockefeller Neurosciences Institute and NRV II, LLC, made as of February 4, 2015 (incorporated by reference from Exhibit 10.1 to Neurotrope Inc.’s Current Report on Form 8-K filed with the SEC on February 10, 2015)

 

73

 

 

10.7   Statement of Work Agreement dated February 4, 2015, and effective as of October 1, 2014, between Neurotrope BioScience and BRNI (incorporated by reference from Exhibit 10.2 to Neurotrope Inc.’s Current Report on Form 8-K filed with the SEC on February 10, 2015)
     
10.8   Form of Common Stock Purchase Warrant, dated February 9, 2015 (incorporated by reference from Exhibit 10.4 to Neurotrope, Inc.’s Current Report on Form 8-K filed with the SEC on February 10, 2015)
     
10.9†   Consulting Agreement between Neurotrope BioScience, Inc. and Ramat Consulting Corp., as amended on December 18, 2013 and February 2, 2015 (incorporated by reference from Exhibit 10.29 to Neurotrope Inc.’s Annual on Form 10-K filed with the SEC on March 26, 2015)
     
10.10   Services Agreement between Neurotrope BioScience, Inc. and Worldwide Clinical Trials, Inc., dated October 9, 2015 (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on October 15, 2015)
     
10.11   Amendment to Amended and Restated Technology License and Services Agreement among Neurotrope BioScience, Inc., Blanchette Rockefeller Neurosciences Institute and NRV II, LLC, dated November 12, 2015 (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 13, 2015)
     
10.12   Letter Agreement between the Neurotrope, Inc. and Neurosciences Research Ventures, Inc. regarding NRV Director Nominees, dated November 12, 2015 (incorporated by reference from Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on November 13, 2015)
     
10.13   Statement of Work Agreement between Neurotrope BioScience, Inc. and Blanchette Rockefeller Neurosciences Institute, dated November 12, 2015 (incorporated by reference from Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on November 13, 2015)
     
10.14   Separation Agreement among the Registrant, Neurotrope Bioscience, Inc. and Charles S. Ramat, dated August 4, 2016 (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on August 5, 2016)
     
10.15   Consulting Agreement between the Registrant and SM Capital Management, LLC, dated August 4, 2016 (incorporated by reference from Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on August 5, 2016)
     
10.16†   Amendment to the Registrant’s 2013 Equity Incentive Plan, dated November 21, 2016 (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 23, 2016)
     
10.17†   Form of Director Indemnification Agreement (incorporated by reference from Exhibit 10.33 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 10, 2017)
     
10.18†   Nonemployee Director Compensation Policy (incorporated by reference from Exhibit 10.34 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 10, 2017)
     
10.19†   Neurotrope, Inc. 2017 Equity Incentive Plan, as amended (incorporated by reference from Appendix A to the Registrant’s Definitive Proxy Statement filed with the SEC on October 24, 2018)
     
10.20†   Form of Stock Option Agreement under the Neurotrope, Inc. 2017 Equity Incentive Plan (incorporated by reference from Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on April 14, 2017)
     
10.21†   Employment Agreement by and between the Company and Charles Ryan, dated December 14, 2017 (incorporated by reference from Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 18, 2017)

 

74

 

 

10.22††   Services Agreement by and between the Company and Worldwide Clinical Trials, Inc., dated as of May 4, 2018 (incorporated by reference from Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on May 10, 2018)
     
10.23   Second Amendment to the Amended and Restated Technology License by and between Neurotrope BioScience, Inc. and Cognitive Research Enterprises, Inc., dated November 29, 2018 (incorporated by reference from Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 4, 2018)
     
10.24   Securities Purchase Agreement by and between the Company and each purchaser identified on the signature pages thereto, dated as of December 17, 2018 (incorporated by reference from Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 17, 2018)
     
10.25   Form of Advisory Consulting Agreement by and between the Company and the consultants party thereto, dated December 12, 2018 (incorporated by reference from Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 17, 2018)
     
10.26   Amendment No. 1 to Advisory Consulting Agreement by and between the Company and Maxim Group LLC, dated as of December 31, 2018  (incorporated by reference from Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 31, 2018)
     
10.27   Amendment No. 1 to Advisory Consulting Agreement by and between the Company and Katalyst Securities LLC, dated as of December 31, 2018  (incorporated by reference from Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 31, 2018)
     
10.28   Placement Agency Agreement, by and between the Company and GP Nurmenkari Inc., dated as of December 17, 2018 (incorporated by reference from Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 17, 2018)
     

10.29

 

Amendment No. 1 to Placement Agency Agreement by and between the Company and GP Nurmenkari Inc., dated as of December 20, 2018 (incorporated by reference from Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 31, 2018)

     
14.1   Registrant’s Code of Business Conduct and Ethics (incorporated by reference from Exhibit 14.1 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 10, 2017)
     
21.1   Subsidiaries of the Registrant (incorporated by reference from Exhibit 21.1 to Neurotrope Inc.’s Annual on Form 10-K filed with the SEC on March 26, 2015)
     
23.1*   Consent of Independent Registered Public Accounting Firm
     
31.1*   Rule 13(a)-14(a)/15(d)-14(a) Certification of Principal Executive Officer
     
31.2*   Rule 13(a)-14(a)/15(d)-14(a) Certification of Principal Financial And Accounting Officer
     
32.1*   Section 1350 Certification of Principal Executive Officer and Principal Financial Officer (This certification is being furnished and shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.)
     
101*   Interactive Data Files of Financial Statements and Notes.
     
101.ins*   XBRL Instant Document
     
101.sch*   XBRL Taxonomy Schema Document

 

75

 

 

101.cal*   XBRL Taxonomy Calculation Linkbase Document
     
101.def*   XBRL Taxonomy Definition Linkbase Document
     
101.lab*   XBRL Taxonomy Label Linkbase Document
     
101.pre*   XBRL Taxonomy Presentation Linkbase Document

 

* Filed herewith.

 

† Management contract or compensatory plan or arrangement.


†† Certain portions of this exhibit were omitted based upon a request for confidential treatment, and the omitted portions were filed separately with the SEC on a confidential basis.

 

76

 

 

SIGNATURE

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized, thereunto duly authorized in the City of New York, New York, on March 8, 2019.

 

  NEUROTROPE, INC.
   
  By: /s/ Charles S. Ryan, JD, PhD
  Name: Charles S. Ryan, JD, PhD
  Title:

Chief Executive Officer

(principal executive officer)

 

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Charles S. Ryan, JD, PhD and Robert Weinstein (with full power to act alone), as his true and lawful attorneys-in-fact and agents, with full powers of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, lawfully do or cause to be done by virtue hereof.

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

 

Signature   Title   Date
         
/s/ Joshua N. Silverman   Director and Chairman of the Board   March 8, 2019
Joshua N. Silverman        
         
/s/ Charles S. Ryan, JD, PhD   Director and Chief Executive Officer   March 8, 2019
Charles S. Ryan, JD, PhD        
         
/s/ James R. Gottlieb   Director   March 8, 2019
James R. Gottlieb        
         
/s/ William S. Singer   Director   March 8, 2019
William S. Singer        
         
/s/ George Perry, Ph.D.   Director   March 8, 2019
George Perry, Ph.D.        
         
/s/ Shana Kay Phares   Director   March 8, 2019
Shana Kay Phares        
         
/s/ Bruce T. Bernstein   Director   March 8, 2019
Bruce T. Bernstein        
         
/s/ Robert Weinstein   Chief Financial Officer, Executive Vice   March 8, 2019
Robert Weinstein   President, Treasurer and Secretary (principal financial officer and principal accounting officer)    
         
/s/ Jonathan Schechter   Director   March 8, 2019
Jonathan Schechter        
         
/s/ Ivan Gergel   Director   March 8, 2019
Ivan Gergel        

 

77

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and
Stockholders of Neurotrope, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of Neurotrope, Inc. (the “Company”) as of December 31, 2018 and 2017, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2018, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2018 and 2017, and the consolidated results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

/s/ Friedman LLP  
   
We have served as the Company’s auditor since 2013.  
   
Philadelphia, PA  
March 8, 2019  

 

 

 

 

NEUROTROPE, INC. AND SUBSIDIARY

 CONSOLIDATED BALANCE SHEETS

 

   December 31,   December 31, 
   2018   2017 
ASSETS          
CURRENT ASSETS          
Cash and cash equivalents  $28,854,218   $16,113,150 
Prepaid expenses   603,324    310,437 
           
TOTAL CURRENT ASSETS   29,457,542    16,423,587 
           
Fixed assets, net of accumulated depreciation   20,842    20,655 
           
TOTAL ASSETS  $29,478,384   $16,444,242 
           
           
LIABILITIES AND SHAREHOLDERS' EQUITY          
           
CURRENT LIABILITIES          
Accounts payable  $2,898,583   $1,240,033 
Accrued expenses   58,492    268,250 
Accrued expenses - related party   -    50,000 
           
TOTAL CURRENT LIABILITIES   2,957,075    1,558,283 
           
Commitments and contingencies          
           
SHAREHOLDERS' EQUITY          
Common stock - 150,000,000 shares authorized, $.0001 par value; 12,922,370 shares issued and outstanding at December 31, 2018; 7,895,859 shares issued and outstanding at December 31, 2017   1,292    790 
Additional paid-in capital   100,202,110    77,544,976 
Accumulated deficit   (73,682,093)   (62,659,807)
           
TOTAL SHAREHOLDERS' EQUITY   26,521,309    14,885,959 
           
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY  $29,478,384   $16,444,242 

 

 See accompanying notes to consolidated financial statements.

 

 

 

 

 NEUROTROPE, INC. AND SUBSIDIARY

 CONSOLIDATED STATEMENTS OF OPERATIONS

 

   Year Ended   Year Ended 
   December 31,   December 31, 
   2018   2017 
         
OPERATING EXPENSES:          
Research and development - related party  $262,012   $214,619 
Research and development   4,623,551    4,548,835 
General and administrative - related party   50,000    39,417 
General and administrative   3,997,222    5,455,683 
Stock-based compensation - related party   291,577    155,320 
Stock-based compensation   1,925,034    2,288,123 
           
TOTAL OPERATING EXPENSES   11,149,396    12,701,997 
           
OTHER INCOME (EXPENSE):          
Loss on abandonment of fixed assets   -    (34,274)
Gain on settlement of lease obligation   -    53,599 
Interest income   127,110    67,602 
           
Net loss before income taxes   (11,022,286)   (12,615,070)
           
Provision for income taxes   -    - 
           
Net loss  $(11,022,286)  $(12,615,070)
           
PER SHARE DATA:          
           
Basic and diluted loss per common share  $(1.37)  $(1.64)
           
Basic and diluted weighted average common shares outstanding   8,050,700    7,709,400 

 

See accompanying notes to consolidated financial statements.

 

 

 

 

 NEUROTROPE, INC. AND SUBSIDIARY

 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

 

       Additional         
   Common Stock   Paid-In   Accumulated     
   Shares   Amount   Capital   Deficit   Total 
                     
Balance January 1, 2017   6,754,547   $676   $73,648,737   $(50,044,737)  $23,604,676 
                          
Issuance of common stock for consulting fees   12,189    1    121,644    -    121,645 
                          
Exercise of common stock warrants   1,129,092    113    1,331,152    -    1,331,265 
                          
Stock based compensation   -    -    2,443,443    -    2,443,443 
                          
Shares issued for reverse stock split rounding   31    -    -    -    - 
                          
Net loss   -    -    -    (12,615,070)   (12,615,070)
                          
Balance January 1, 2018   7,895,859   $790   $77,544,976   $(62,659,807)  $14,885,959 
                          
Sale of common stock and warrants   5,012,677    501    20,436,097         20,436,598 
                          
Exercise of common stock warrants   13,834    1    4,426    -    4,427 
                          
Stock based compensation   -    -    2,216,611    -    2,216,611 
                          
Net loss   -    -    -    (11,022,286)   (11,022,286)
                          
Balance December 31, 2018   12,922,370   $1,292   $100,202,110   $(73,682,093)  $26,521,309 

 

 See accompanying notes to consolidated financial statements.

 

 

 

 

 NEUROTROPE, INC. AND SUBSIDIARY

 CONSOLIDATED STATEMENTS OF CASH FLOWS

 

   Year Ended   Year Ended 
   December 31, 2018   December 31, 2017 
CASH FLOWS FROM OPERATING ACTIVITIES          
Net loss  $(11,022,286)  $(12,615,070)
Adjustments to reconcile net loss to net cash used by operating activities          
Stock based compensation   2,216,611    2,443,443 
Consulting services paid by issuance of common stock   -    121,645 
Depreciation expense   2,999    3,854 
Loss on abandonment of fixed assets   -    34,274 
Change in assets and liabilities          
Increase in prepaid expenses   (292,887)   (171,726)
Increase (decrease) in accounts payable   1,658,550    (927,380)
(Decrease) increase in accrued expenses   (209,758)   77,506 
(Decrease) increase in accrued expenses - related party   (50,000)   45,391 
Total adjustments   3,325,515    1,627,007 
           
Net Cash Used in Operating Activities   (7,696,771)   (10,988,063)
           
CASH FLOWS FROM INVESTING ACTIVITIES          
Purchase of property and equipment   (3,186)   (3,585)
           
CASH FLOWS FROM FINANCING ACTIVITIES          
Net proceeds from issuance of common stock and warrants   20,436,598    - 
Net proceeds from exercise of common stock warrants   4,427    1,331,265 
           
Net Cash Provided by Financing Activities   20,441,025    1,331,265 
           
NET INCREASE (DECREASE) IN CASH   12,741,068    (9,660,383)
           
CASH AT BEGINNING OF YEAR   16,113,150    25,773,533 
           
CASH AT END OF YEAR  $28,854,218   $16,113,150 

 

See accompanying notes to consolidated financial statements.

 

 

 

 

NEUROTROPE, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

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

 

Business

 

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

 

Liquidity

 

As of February 28, 2019, the Company had approximately $25.5 million in cash and cash equivalents. The Company expects that its existing capital resources will be sufficient to support its projected operating requirements over at least the next approximately 24 to 36 months, including the continuing development of bryostatin, our novel drug targeting the activation of PKC epsilon, through our ongoing follow-on clinical study (estimated revised total cost of $7.3 million - see Note 3), conduct other non-clinical studies, plus the plan to conduct additional studies in AD and potentially other diseases that might benefit from using bryostatin. The balance of the funds will be used for general corporate and working capital purposes.

 

We expect to require additional capital in order to initiate and pursue additional development projects in addition to our current confirmatory AD clinical trial. Additional funding may not be available to us on acceptable terms, or at all. If we are unable to access additional funds when needed, we may not be able to pursue development of such other product candidates. If so, we could be required to delay, scale back or eliminate some or all of our existing or additional contemplated 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, may involve restrictive covenants. If we are able to access funds through collaborative or licensing arrangements, we may be required to relinquish rights to some of our technologies or product candidates that we would otherwise seek to develop or commercialize on our own, on terms that are not favorable to us. Our ability to access capital when needed is not assured and, if not achieved on a timely basis, will materially harm our business, financial condition and results of operations.

 

To alleviate its going concern qualification, in December 2018, the Company raised approximately $20.5 million in net cash proceeds. These proceeds will enable the Company to continue operations for next approximately 24 to 36 months.

  

Note 2 – Summary of Significant Accounting Policies:

 

Use of Estimates:

 

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

  

Cash and Cash Equivalents and Concentration of Credit Risk:

 

The Company considers all highly liquid temporary cash investments with an original maturity of three months or less when purchased to be cash equivalents. At December 31, 2018, the Company’s cash balances that exceed the current insured amounts under the Federal Deposit Insurance Corporation (“FDIC”) were approximately $12.3 million. In addition, approximately $16.2 million included in cash and cash equivalents were invested in a money market fund, which is not insured under the FDIC.

 

 

 

 

Property and Equipment:

 

Property and equipment is capitalized and depreciated on a straight line basis over the estimated useful life of the asset, which is deemed to be between three and ten years.  

  

Research and Development Costs:

 

All research and development costs, including costs to maintain or expand the Company’s patent portfolio licensed from CRE that do not meet the criteria for capitalization are expensed when incurred. FASB ASC Topic 730 requires companies involved in research and development activities to capitalize non-refundable advance payments for such services pursuant to contractual arrangements because the right to receive those services represents an economic benefit. Such capitalized advances will be expensed when the services occur and the economic benefit is realized. There were no capitalized research and development services at December 31, 2018 and 2017.

 

Loss Per Share:

 

Basic loss per common share amounts are based on the weighted average number of common shares outstanding. Diluted loss per share amounts are based on the weighted average number of common shares outstanding, plus the incremental shares that would have been outstanding upon the assumed exercise of all potentially dilutive stock options and warrants subject to anti-dilution limitations. All such potentially dilutive instruments were anti-dilutive as of December 31, 2018 and 2017, which were approximately 11.7 million shares and 5.8 million shares, respectively.

  

Income Taxes:

 

The Company had federal and state net operating losses for income tax purposes of approximately $51.5 million for the period from October 31, 2012 (inception) through December 31, 2018. The net operating loss carryforwards resulted in a deferred tax asset of approximately $10.8 million at December 31, 2018. Income tax effects of share-based payments are recognized in the financial statements for those awards that will normally result in tax deductions under existing tax law. Under current U.S. federal tax law, the Company would receive a compensation expense deduction related to non-qualified stock options only when those options are exercised. Accordingly, the financial statement recognition of compensation cost for non-qualified stock options creates a deductible temporary difference. The Company does not recognize a tax benefit for compensation expense related to incentive stock options (“ISOs”) unless the underlying shares are disposed of in a disqualifying disposition. Accordingly, compensation expense related to ISOs is treated as a permanent difference for income tax purposes. These deferred tax assets are reduced to zero by an offsetting valuation allowance. As a result, there is no provision for income taxes.

 

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in results of operations in the period that includes the enactment date. The Tax Cuts and Jobs Act (the Act) was enacted on December 22, 2017.  The Act reduces the US federal corporate tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings.  As of December 31, 2018 the Company did not have any repatriation of foreign income therefore we recognized a provisional amount of $0.

 

In connection with the Act, we re-measured certain deferred tax assets and liabilities based on the rates at which they are anticipated to reverse in the future, which is generally 21%.  The provisional amount recorded related to the re-measurement of our deferred tax balance was a tax expense of $6.7 million which was fully offset with a valuation allowance against our deferred taxes.

 

 

 

 

Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due and deferred taxes. Deferred taxes are recognized for differences between the basis of assets and liabilities for financial statement and income tax purposes and the tax effects of net operating loss and other carryforwards. The deferred tax assets and liabilities represent the future tax consequences of those differences and carryforwards, which will either be taxable or deductible when the related assets, liabilities or carryforwards are recovered or settled. Deferred tax assets are reduced by a valuation allowance when, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

  

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

 

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

  

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

  

Risks and Uncertainties:

 

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

 

Stock Compensation:

 

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

   

 

Recent Accounting Pronouncements

 

In December 2018, the FASB issued ASU-2018-20, Leases (Topic 842). In February 2016, the FASB issued new guidance related to how an entity should account for lease assets and lease liabilities.  The guidance specifies that an entity who is a lessee under lease agreements should recognize lease assets and lease liabilities for those leases classified as operating leases under previous FASB guidance.  Accounting for leases by lessors is largely unchanged under the new guidance.  The guidance is effective for the Company beginning in the first quarter of 2019.  Early adoption is permitted.  In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach.  The Company has determined that this standard is not expected to have a material impact to its financial statements based upon the de minimis amount of short-term lease commitments.

 

 

 

 

In July 2017, the FASB issued new guidance, ASU-2017-11, Distinguishing Liabilities from Equity (Topic 480), which changes the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features and re-characterizes the indefinite deferral of certain provisions within the guidance for distinguishing liabilities from equity.  The guidance is effective for the Company beginning in the first quarter of fiscal year 2019.  Early adoption is permitted.  The Company is evaluating the impact of adopting this guidance on its consolidated financial statements.

 

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

 

Accounting Pronouncements Adopted During the Period:

 

In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. This ASU simplifies the accounting for nonemployee share-based payment transactions. Under the new guidance, equity-classified share-based payment awards issued to nonemployees will now be measured on the grant date, instead of the previous requirement to re-measure the awards through performance completion date. Awards that include performance conditions will recognize compensation cost when the achievement of the performance condition is probable, rather than upon achievement of the performance condition. Finally, the current requirement to reassess the classification (equity or liability) for nonemployee awards upon vesting will be eliminated, except for awards in the form of convertible instruments. The ASU is effective for annual periods beginning after December 15, 2018 and interim periods within those annual periods. Early adoption is permitted, including interim periods, but no earlier than the adoption of ASC 606. Effective June 20, 2018, we adopted this standard. As a result of the adoption of this new guidance, certain non-employee equity awards were measured on the grant date. There was no cumulative effect of the change on retained earnings as of January 1, 2018 since we had no unvested non-employee awards outstanding as of that date.

       

Note 3 – Collaborative Agreements:

 

Stanford License Agreements

 

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

 

 

 

 

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

  

Mt. Sinai License Agreement

 

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

   

Clinical Trial Services Agreements

  

On May 4, 2018, Neurotrope BioScience executed a new Services Agreement (the “New Services Agreement”) with Worldwide Clinical Trials (“WCT”). The New Services Agreement relates to services for Neurotrope BioScience’s Phase 2 confirmatory clinical study assessing the safety, tolerability and efficacy of bryostatin in the treatment of moderately severe to severe AD (the “Study”). Pursuant to the terms of the Services Agreement, WCT is providing services to target enrollment of approximately one hundred (100) Study subjects. The total estimated budget for the services, including pass-through costs, drug supply and other statistical analyses, is approximately $7.3 million based upon the progress of the Study. Of the total estimated Study costs, as of December 31, 2018, the Company has incurred approximately $3.9 million in expenses of which WCT has represented a total of approximately $3.7 million and approximately $200,000 of expenses have been incurred to other trial-related vendors and consultants. In addition, the Company paid $1.2 million to WCT as prepaid deposits of which the Company has utilized approximately $900,000, leaving a balance included in prepaid expenses of approximately $300,000. 

 

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

 

James Gottlieb, a director of the Company, serves as a director of CRE, and Shana Phares, also a director of the Company, serves as President and Chief Executive Officer of CRE. CRE is a stockholder of a corporation, Neuroscience Research Ventures, Inc. (“NRV, Inc.”), which owned 2.2% of the Company's outstanding common stock as of December 31, 2018.

 

 

 

 

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

     

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

 

On November 12, 2015, Neurotrope BioScience, CRE, and NRV II entered into an amendment (the “Amendment”) to the TLSA pursuant to which CRE granted rights in certain technology to Neurotrope BioScience. Under the Amendment, the “Advances on Future Royalties” section of the TLSA was amended and restated to (i) eliminate the requirement that Neurotrope BioScience pay CRE prepaid royalties equal to five percent (5%) of financing proceeds received by Neurotrope BioScience in any financing prior to a public offering, and (ii) provide that Neurotrope BioScience will deliver to CRE, following each closing pursuant to a certain securities purchase agreement, an amount equal to 2.5% of the Post-PA Fees Proceeds received at such closing. In addition, the Amendment provides that on or prior to December 31, 2016, Neurotrope Bioscience shall deliver to CRE an amount equal to 2.5% of the aggregate Post-PA Fee Proceeds received at the closings. Each payment would constitute an advance royalty payment to CRE and will be offset (with no interest) against the amount of future royalty obligations payable until such time that the amount of such future royalty obligations equals in full the amount of the advance royalty payments made. “Post-PA Fee Proceeds” means the gross proceeds received, less all amounts paid to the placement agent(s), in relation to such gross proceeds. No other expenses of Neurotrope Bioscience shall be subtracted from the gross proceeds to determine the “Post-PA Fee Proceeds.” As of December 31, 2018, the Company has paid its entire obligation of $1,166,666 resulting from this Amendment.

 

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

 

 

 

 

Note 5 – Common Stock:

 

December 2018 Offering

 

On December 17, 2018, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with certain investors (the “Purchasers”). Pursuant to the terms of the Purchase Agreement, the Company agreed to sell to the Purchasers in a registered direct offering an aggregate of 5,012,677 shares of its common stock and Series G warrants to purchase up to an aggregate of 5,012,677 shares of common stock at a combined purchase price of $4.495 per share and accompanying warrant. The warrants were not deemed to be derivative securities. As a result, the value of the warrants were accounted for as offsetting entries in the stockholders’ equity section of the balance sheet. The warrants will be exercisable at a price of $4.37 per share beginning six months following the date of issuance and will expire five years from the exercise date. The net proceeds to the Company from the offering were approximately $20.5 million, after deducting placement agent fees, financial advisory fees and estimated offering expenses payable by the Company of approximately $2.1 million.

 

Pursuant to a placement agent agreement, dated December 17, 2018 (the “Placement Agent Agreement”), the Company paid (i) a cash fee of $442,000 (8.0% of the aggregate gross proceeds raised from Purchasers first contacted by the placement agent in connection with the offering) and (ii) warrants to purchase 24,583 shares of common stock (represents the number of shares of common stock equal to 2.0% of the aggregate number of shares sold to Purchasers first contacted by the placement agent in connection with the offering). The Company also agreed to reimburse the placement agent an additional $25,000 for its legal expenses.

 

The placement agent warrants have substantially the same terms as the warrants issued to the investors in the offering, except that the placement agent warrants have an exercise price equal to $6.25 and a term of five years from the effective date of the offering.

 

Pursuant to separate advisory consulting agreements (as amended, the “Consulting Agreements”), the Company engaged advisory financial consultants in connection with the offering. The Company agreed to pay total consulting fees of approximately $1.6 million, plus reimbursement of up to $50,000 of their legal expenses. In addition, the financial consultants received a total of warrants to purchase 75,657 shares of common stock. Such warrants issued to the advisory financial consultants have the same terms and be in the same form as the placement agent warrants described above. 

 

Note 6 – Stock Options:

  

Option Grants

   

On March 9, 2017, the Company’s Board of Directors approved the Neurotrope, Inc. 2017 Equity Incentive Plan (the “2017 Plan”), which provides for the issuance of incentive awards of up to 800,000 shares of Common Stock to officers, key employees, consultants and directors.  The 2017 Plan was approved by stockholders in December 2017.  In October 2018, the Company’s Board approved an increase in the total number of shares available under the 2017 Plan by 600,000 to 1.4 million shares. The increase was subsequently approved by stockholders in December 2018.

 

The following is a summary of stock option activity under the stock option plans for the year ended December 31, 2018:

 

           Weighted-     
           Average     
       Weighted-   Remaining   Aggregate 
       Average   Contractual   Intrinsic 
   Number of   Exercise   Term   Value 
   Shares   Price   (Years)   (in thousands) 
Options outstanding at January 1, 2018   1,345,835   $20.10    8.8      
Options granted   276,285   $7.77           
Less options forfeited   (16,873)  $18.03           
Less options expired/cancelled   (85,001)  $11.71           
Less options exercised   -   $-           
Options outstanding at December 31, 2018   1,520,246   $18.07    8.2   $0 
Options exercisable at December 31, 2018   914,964   $21.98    7.7   $0 

  

 

 

 

Pursuant to the Company’s Board of Directors compensation plan, in March 2018, the Company granted stock options to purchase an aggregate of 70,000 shares of the Company’s common stock to seven members of the Company’s Board of Directors. The stock options have an exercise price of $8.9125 per share and an expiration date that is ten years from the date of issuance. All of the options vest on the first anniversary of the issuance date.

 

During July 2018, the Company granted stock options to purchase an aggregate of 110,000 shares of the Company’s common stock to the five members of the Company’s newly-formed Scientific Advisory Board. The stock options have exercise prices of $10.19 and $10.23 per share and an expiration date that is ten years from the date of issuance. Options to purchase 90,000 shares of common stock vest in equal installments on the first, second and third anniversary of the date of issuance; options to purchase the remaining 20,000 shares of common stock vest quarterly over a three-year period.

 

During December 2018, the Company granted stock options to purchase an aggregate of 96,285 shares of the Company’s common stock to the Chief Executive Officer, pursuant to his employment contract and to two new members of the Company’s Board of Directors. The stock options have exercises prices ranging from $4.10 to $4.44 per share and an expiration date that is ten years from the date of issuance. All of the options vest daily over a three-year period.

 

The following is a summary of stock options outstanding under the plans as of December 31, 2018:

 

               Stock Options 
   Stock Options Outstanding       Exercisable 
      

Remaining

Weighted Avg.

   Weighted Avg.       Weighted Avg. 
Range of  Number of   Contractual Life   Exercise   Number of   Exercise 
Exercise Prices  Shares   (years)   Price   Shares   Price 
$ 0.32 - $15.77   785,208    8.78   $8.96    389,502   $9.75 
$19.10 - $22.72   492,697    8.23   $19.48    283,841   $19.44 
$25.60 - $32.00   95,694    6.80   $29.83    95,693   $29.83 
$35.52 - $49.60   35,003    6.31   $42.11    34,753   $42.15 
$52.48 - $71.04   111,644    5.20   $58.22    111,175   $58.23 
    1,520,246    8.16   $18.07    914,964   $21.98 

 

As of December 31, 2018, there was approximately $3.4 million of total unrecognized compensation costs related to unvested stock options. These costs are expected to be recognized over a weighted average period of 2.2 years.

  

The Company used the Black-Scholes valuation model to calculate the fair value of stock options. The fair value of stock options issued for the year ended December 31, 2018 was estimated at the grant date using the following weighted average assumptions: Dividend yield 0%; Expected term 10 years; Volatility 91.5%; and Risk-free interest rate 2.88%. The weighted average grant date fair value of options granted for the year ended December 31, 2018 is $6.80 per share.

  

The total stock option-based compensation recorded as operating expense was $2,216,609 and $2,443,444 for the years ended December 31, 2018 and 2017, respectively.

 

 

 

 

Note 7 – Common Stock Warrants:

 

The following is a summary of common stock warrant activity for the year ended December 31, 2018: 

 

   Number
of shares
 
Warrants outstanding January 1, 2018   5,115,274 
Warrants issued   5,112,917 
Warrants exercised   (13,834)
Warrants outstanding December 31, 2018   10,214,357 

 

As of December 31, 2018, the Company’s warrants by exercise price were as follows: 147,606 warrants exercisable at $0.32, 5,012,677 warrants exercisable at $4.37, 100,240 warrants exercisable at $6.25, 382,887 warrants exercisable at $6.40, 3,751,033 warrants exercisable at $12.80 and 819,914 warrants exercisable at $32.00.

  

Note 8 – Commitments and Contingencies

 

The Company is a party to various contractual commitments pursuant to its normal course of business. The Company maintains two offices for which it pays approximately $80,000 per year. In addition, the Company has a contractual relationship with WCT. Further, the Company maintains strategic agreements with certain academic institutions for product development opportunities in various therapeutic categories and for potential drug product supply (See Footnote 3 above for additional details.)

 

Since May 17, 2017, two purported class action lawsuits were commenced in the United States District Court for the Southern District of New York (the “NY Litigation”).  On August 10, 2017, the lawsuits were consolidated and Plaintiffs filed their Amended Consolidated Complaint on October 9, 2017.  The Amended Consolidated Complaint named as defendants the Company, its former Chief Executive Officer and its co-founder and President/Chief Scientific Officer.  The lawsuit alleged violations of the Securities Exchange Act of 1934, as amended, in connection with allegedly false and misleading statements made by the Company in certain press releases and in its Annual Report on Form 10-K relating to the results stemming from our Phase 2 clinical trial for bryostatin.  Plaintiffs sought, among other things, damages for purchasers of the Company’s securities between January 7, 2016 and July 18, 2017.

  

On November 21, 2017, the Company and the other named defendants filed a motion to dismiss all of the claims (the “Motion”).  On June 4, 2018 the Court granted the Motion and dismissed with prejudice the NY Litigation.  Plaintiffs’ time to appeal the Court’s decision expired on July 5, 2018. 

 

Additionally, on August 3, 2017 a derivative action was filed against the Company and all members of the Board of Directors at that time.  The lawsuit alleged that the Board of Directors breached its fiduciary duty by making misleading statements and omitting information pertaining to the results of the Company’s Phase 2 clinical trials for bryostatin.  The Company and the Board of Directors reached an agreement with counsel for the Plaintiff to stay this action pending a decision by the Court in the NY Litigation.  On July 24, 2018, after reviewing the decision in the NY Litigation, Plaintiff voluntarily dismissed the derivative action. 

 

Note 9 – Subsequent Events

 

On January 22, 2019, the Company granted stock options to purchase an aggregate of 595,000 shares of the Company’s common stock to nine members of the Company’s Board of Directors, the Chief Scientific Officer, the Chief Financial Officer and two Company employees. The stock options have an exercise price of $3.93 per share and an expiration date that is ten years from the date of issuance. 50% of the options vest immediately with the remaining 50% vesting quarterly over a two-year period.

 

On February 4, 2019, the Company announced its entry into a Cooperative Research and Development Agreement (“CRADA”) with the National Cancer Institute (“NCI”) for the research and clinical development of Bryostatin-1. Under the CRADA, the Company will collaborate with the NCI's Center for Cancer Research, Pediatric Oncology Branch to develop a Phase I clinical trial testing the safety and toxicity of Bryostatin-1 in children and young adults with CD22 + leukemia and B-cell lymphoma.  The Company also announced the completion of the first safety evaluation of its confirmatory Phase 2 trial evaluating Bryostatin-1 in moderate to severe AD patients not on memantine. Bryostatin continues to be safe.