UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM 10-K
☒ ANNUAL
REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934:
For
the fiscal year ended June 30, 2015
☐ TRANSITION
REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT OF 1934
Commission
file number: 333-128226
INTELLECT
NEUROSCIENCES, INC.
(Exact
name of registrant as specified in its charter)
Delaware |
|
|
(State or other jurisdiction of |
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20-8329066 |
incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
|
|
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550
Sylvan Ave. |
|
|
Englewood
Cliffs, NJ |
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07632 |
(Address of principal executive offices) |
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(Zip Code) |
(201)
608 5101
(Registrant’s
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act: None
Securities
registered pursuant to Section 12(g) of the Act: Common Stock
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act:
Yes ☐ No
☒
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
☐ No ☒
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 past 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted 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 and post such
files). Yes ☒. No ☐.
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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. ☒
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company.
Large accelerated filer ☐ |
|
Accelerated filer ☐ |
Non-accelerated filer ☐ |
|
Smaller reporting company ☒ |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐▪No
☒
As of
December 31, 2014, the last business day of the registrant’s most recently completed second quarter, the aggregate market
value of the shares of common stock held by non-affiliates of the registrant was $810,436 based on the closing price of the registrant’s
common stock on that date.
As of
October 9, 2015, there were 5,567,037 shares of common stock issued and outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE: None.
This
Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933,
as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include our plans, goals, strategies,
intent, beliefs or current expectations. These statements are expressed in good faith and based upon a reasonable basis when made,
but there can be no assurance that these expectations will be achieved or accomplished. These forward looking statements can be
identified by the use of terms and phrases such as “believe,” “plan,” “intend,” “anticipate,”
“target,” “estimate,” “expect,” and the like, and/or future-tense or conditional constructions
(“will,” “may,” “could,” “should,” etc.). Items contemplating or making assumptions
about actual or potential future sales, market size, collaborations, or operating results also constitute such forward-looking
statements.
Although
forward-looking statements in this report reflect the good faith judgment of management, forward-looking statements are inherently
subject to known and unknown risks, business, economic and other risks and uncertainties that may cause actual results to be materially
different from those discussed in these forward-looking statements. Readers are urged not to place undue reliance on these forward-looking
statements, which speak only as of the date of this report. We assume no obligation to update any forward-looking statements in
order to reflect any event or circumstance that may arise after the date of this report, other than as may be required by applicable
law or regulation.
PART
I
Item
1. Business
Company
Overview
We
are a biopharmaceutical company engaged in the discovery and development of disease-modifying therapeutic agents for the treatment
and prevention of neurodegenerative conditions, especially proteinopathies. Our internal drug discovery programs are focused on
the therapeutic applications of monoclonal antibodies.
We
have granted licenses to global pharmaceutical companies covering part of our patent estate, and we have an effective license
agreement with Shire plc (“Shire”) covering a small molecule drug candidate under development by Shire for the treatment
of Friedrich’s Ataxia. Based on our own scientific research, published data relating to our drug candidates, peer-reviewed
research articles by leading academic scientists, pre-clinical and clinical studies that we have completed and that other pharmaceutical
companies have conducted, we believe that the scientific approach underlying our internal programs and licensed technology can
lead to the development of safe and efficacious disease-modifying products to delay, arrest and ultimately prevent the onset of
various neurodegenerative diseases.
ANTISENILIN®
is a trademark that we own. The trademark, trade name or service mark of any other company appearing in this annual report
on Form 10-K belongs to its respective holder.
History-
Reverse Merger
Intellect
Neurosciences, Inc. (“Intellect,” the “Company, “we”, “us”, “our”) was incorporated
in Delaware on April 25, 2005 under the name Eidetic Biosciences, Inc. and changed its name to Mindset Neurosciences, Inc. on
April 28, 2005, to Lucid Neurosciences, Inc. on May 17, 2005 and to Intellect Neurosciences, Inc. on May 20, 2005.
On
January 25, 2007, GlobePan Resources, Inc. (“GlobePan”) entered into an agreement and plan of merger with Intellect
and INS Acquisition, Inc. (“Acquisition Sub”) a newly formed, wholly-owned Delaware subsidiary of GlobePan. Pursuant
to this agreement and plan of merger, on January 25, 2007, Acquisition Sub merged with and into Intellect, Acquisition Sub ceased
to exist and Intellect survived the merger and became the wholly-owned subsidiary of GlobePan. Intellect, the surviving entity
in the merger, then changed its name to Intellect USA, Inc. and GlobePan changed its name to our current name, Intellect Neurosciences,
Inc. Our wholly-owned subsidiary is Intellect USA, Inc. (“Intellect USA”).
Business
Strategy
Our
core business strategy is to build a portfolio of compounds with the potential to treat or prevent neurodegenerative diseases,
develop each compound to pre-determined milestones, and license the compounds to pharmaceutical companies for advanced development
and commercialization. We intend to obtain revenues from licensing fees, milestone payments, development fees, royalties and/or
sales related to the use of our drug candidates or intellectual property for specific therapeutic indications or applications.
As an example, we developed OX1, a small molecule multi-modal antioxidant, completed preclinical and human safety trials, and
then licensed the program to ViroPharma, which subsequently merged into Shire, for development of a drug to treat Friedreich’s
Ataxia and other neurodegenerative diseases. Pursuant to the terms of the Licensing Agreement by and between Intellect and Shire
discussed hereafter in “OX-1 License Agreement”, we could receive up to $120 million in milestone payments
from Shire and significant royalties from sales if the resulting drug product is approved for sale by the U.S. Food and Drug Administration
(“FDA”). There can be no assurance that we will receive such milestone payments or royalties.
OUT-LICENSED
PROGRAMS:
OX-1
License Agreement - Shire
OX1
is an orally-administered, brain-penetrating, naturally-occurring copper-binding small molecule, which has the potential to treat
various neurodegenerative diseases such as Friedreich’s Ataxia. OX1 was tested in human Phase I safety clinical trials involving
90 healthy elderly volunteers and was found to be well tolerated, even at high pharmacological doses.
Our
rights in the intellectual property underlying OX1 are licensed from New York University (“NYU”) and the University
of South Alabama Medical Science Foundation (“SAMSF”). Under the agreements with these institutions, we have an exclusive,
worldwide, royalty-bearing license, with the right to grant sublicenses relating to OX1. NYU and SAMSF reserve the right to use
and practice the licensed patents and know-how for their own non-commercial, educational or research purposes and to distribute
certain research materials to third parties for non-commercial uses. Under the agreements, we have the first right to enforce
the underlying intellectual property against unauthorized third parties. OX1 sales are subject to royalties due to NYU and SAMSF,
and to a royalty obligation arising from the use of test animals licensed to Mindset Biopharmaceuticals, Inc. (“Mindset”),
in drug discovery under a non-exclusive royalty bearing license from the Mayo Foundation for Medical Education and Research (“Mayo”).
In
September 2011, we granted an exclusive license to ViroPharma regarding certain of our licensed patents and patent applications
related to OX1. In January 2014, ViroPharma merged with Shire. Shire is developing OX1 as a treatment for Friedreich’s Ataxia
and possibly other diseases for which OX1 may qualify for orphan drug designation.
Friedreich’s
Ataxia (also called FA) is a rare, inherited disease affecting 1 in 50,000 individuals of European descent. The disease is caused
by gene mutations that limit the production of frataxin, a protein essential for proper functioning of mitochondria, the energy
pumps of the cell. Without sufficient frataxin, iron builds up in the cytoplasm and causes free radical damage to nerve tissue
in the spinal cord and to nerves that control muscle movement in the arms and legs.
FA
causes progressive damage to the nervous system, resulting in symptoms ranging from difficulty in walking to slowness and slurring
of speech, followed by hearing and vision loss. Various forms of heart disease often accompany FA, which result in symptoms such
as chest pain, shortness of breath and heart palpitations. About 20 percent of people with FA develop carbohydrate intolerance
and 10 percent develop diabetes. The disease may cause premature death.
The
rate of progression varies from person to person. Generally, within 10 to 20 years after the appearance of the first symptoms,
the person is confined to a wheelchair, and in later stages of the disease, individuals may become completely incapacitated. Currently,
there is no cure or effective treatment for FA.
Description
of OX1
Reactive
oxygen species (ROS) are chemically reactive molecules containing oxygen. ROS play essential roles in human physiology. However,
under certain adverse circumstances, ROS levels may increase to an extent that they overwhelm the body’s normal ability to regulate
them, a condition known as “oxidative stress”. An overabundance of ROS causes significant damage to cell structures,
adversely altering fats, proteins and DNA, and triggering diseases such as cancer, cardiovascular disease, atherosclerosis, hypertension,
ischemia, diabetes, rheumatoid arthritis and neurodegenerative diseases.
Indole
3 propionic acid (named by Intellect as “OX1”) is an endogenous substance produced by bacteria in the intestine.
Scientists at the University of South Alabama and New York University discovered that OX1 has potent radical scavenger
properties that protect nerve cells in the brain from ROS and other harmful neurotoxins, such as beta amyloid. Later it was
independently reported that OX1 may reduce the harm caused by an overabundance of ROS by binding metal ions, which are
producers of ROS.
In
August 1998, Mindset entered into license agreements with each of SAMSF
and NYU to acquire global development and commercialization rights to OX1 for certain uses.
Those license agreements, which remain in full force and effect, were transferred by Mindset to Intellect in 2005 pursuant to
an Asset Transfer Agreement between the parties. Worldwide patents covering the use of OX1 for the treatment of Alzheimer’s disease
and other neurodegenerative diseases, originally filed in 1998, expire in 2019.
The
following table summarizes the actions taken by Intellect related to the development of OX1:
|
2005: |
Licenses, Know-How and materials transferred to Intellect by Mindset |
|
2006: |
Completed Phase 1a single ascending dose study in 54 healthy elderly volunteers |
|
2006: |
Completed Phase 1b multiple ascending dose study in 36 elderly healthy volunteers |
|
2007: |
Completed 3 month toxicology studies in rats and monkeys |
|
2011: |
Sublicensed the OX1 program to ViroPharma, Inc. |
OX1,
FA and “Orphan Drugs”
In
2011, we redirected the focus of the OX1 program from Alzheimer’s disease to FA. Research suggests that the symptoms associated
with FA are the result of oxidative stress caused by the abnormal accumulation of iron1,2. We recognized
that OX1’s ability to neutralize ROS could be an effective agent to reduce oxidative stress in FA, thereby eliminating the symptoms
of FA and increasing both quality of life and longevity in affected individuals.
1
Schmucker and Puccio, (2010) Human Molecular Genetics 19: R103-R110.
2
Santos et al., (2010) Antioxidants & Redox Signaling 13: 651-690.
The
Orphan Drug Act provides for granting special status to a drug or biological product to treat a rare disease or condition upon
request of a sponsor and satisfaction of certain mandated criteria. In the United States, the Rare Diseases Act of 2002 defines
rare disease according to prevalence, specifically “any disease or condition that affects less than 200,000 people in the
United States” or about 1 in 1,500 people. Generally, orphan status allows for reduced hurdles and time to regulatory approval,
tax credits during development, market exclusivity even after patent expiration (10 years in U.S. and 7 years in Europe) and premium
drug prices. We believe it is likely that the FDA would designate FA as an orphan disease and OX1 as an “orphan drug”
that could qualify for beneficial treatment, including exclusivity beyond expiration of the OX1 patents in 2019.
In
February 2013, ViroPharma filed an investigational new drug application (“IND”) to permit initiation of a single ascending
dose Phase 1 study to evaluate the safety, tolerability and PK/PD of OX1 (renamed by ViroPharma as “VP 20629” and subsequently
by Shire as “ SHP622) in subjects with FA. The study commenced in the United States in August 2013 and was completed in
July 2015. Details of the study, entitled “A Phase 1, Randomized, Double-blind, Placebo-controlled, Multicenter, Single
and Multiple Ascending Dose Study to Evaluate the Safety, Tolerability, Pharmacokinetics, and Pharmacodynamics of Oral VP 20629
in Adult Subjects with Friedreich’s Ataxia” may be found at: www.clinicaltrials.gov; identifier NCT01898884.
As
of July 2015, the final cohort of the Phase 1 study was completed and enrollment was closed. It is likely that results
from this study will be shared later in 2015. Although there can be no assurance, we anticipate that Shire will continue the
development of SHP622 and seek Orphan Drug designation for the pharmaceutical product. We have no ability to control
Shire’s decision as to whether to continue development or seek such designation.
INTERNAL
PIPELINE
Our
therapeutic approach to proteinopathies aims to use antibodies or antibody drug conjugates to prevent the accumulation and neurotoxicity
of aberrantly folded proteins that cause damage through oxidative stress and neuroinflammation.
Our
current focus on tau protein arises from increased understanding obtained during the past decade regarding the role of a certain
abnormal form of this protein, known as TauC3. Tau is the main component of the neurofibrillary tangles of Alzheimer disease,
the pathological lesion that seems most directly related to disruption of neural systems. Several groups have observed that amyloid
beta accumulation and tau itself, under certain circumstances, can activate enzymes known as “caspases” and that caspase-cleaved
tau (TauC3, aka delta tau) may have biological properties that could compromise neurons3,4,5,6,7.
For example, various scientists have demonstrated that TauC3 is a likely precursor for neurofibrillary tangles. More recently,
it was suggested that tau (or potentially a misfolded or post-translationally modified tau) can be released from neurons, be taken
up by other neurons, and act as a nidus for a new tangle – i.e. leading to “propagation” of tau species across
neuronal pathways8,9,10 Tau C3, along with hyperphosphorylated forms, appears to be preferentially
secreted and to enhance misfolding and aggregation. Because misfolding and secretion are two prerequisites for uptake and propagation,
we hypothesize that TauC3 may be a very potent agent in terms of propagation of tau pathology from one neuron to the next.
In
2012, we licensed a TauC3 antibody from Northwestern University, acquiring exclusive global rights to develop and commercialize
the antibody. In January 2014, we announced top line data showing initial proof of concept in a preclinical Alzheimer’s model
indicating the antibody’s potential to be disease modifying. The study was conducted in collaboration with University of
California, Irvine’s Dr. Frank LaFerla, Chancellor’s Professor and Chair, Neurobiology and Behavior School of Biological Sciences,
Director, Institute for Memory Impairments and Neurological Disorders as well as Dr. Kim Green and his team. The data showed that
the TauC3 monoclonal antibody effectively engaged the target and reduced certain phosphorylated pathological forms of Tau indicating
that the treatment with the peripherally administered antibody had an effect in the brain and is able to be potentially disease
modifying. Earlier this year, we announced the initiation of a sponsored research collaboration with one of the foremost Alzheimer’s
disease research centers in the United States. The sponsored research collaboration is under the direction of Professor Bradley
T. Hyman MD, PhD, Director, Massachusetts Alzheimer’s Disease Research Center & Co-Director, Massachusetts General Hospital
Memory Disorders Unit & John B. Penney Jr. Professor of Neurology, Harvard Medical School. The research is designed to examine
the detailed molecular mechanism affecting propagation of tau pathology aimed at developing a novel treatment for Alzheimer’s
disease and other tauopathies. The research, which is ongoing, has yielded important data regarding target engagement. We are
preparing a new patent application encompassing this data, which will strengthen our proprietary position in the TauC3 antibody.
3
Cotman et al., J. Neuropath. Exp. Neurol. (2005) 64(2): 104-109.
4
Gamblin et al., Proc. Natl. Acad. Sci. (2003) 100(17): 10032–10037.
5
Binder at al., Biochim. et Biophys, Acta (2005) 1739: 216 – 223
6
Guillozet-Bongaarts et al., Neurobiol. Aging (2005) 26(7):1015-22.
7
de Calignon et al., Nature (2010) 464(7292):1201-4.
8
de Calignon et al., Neuron. (2012) 73(4):685-97
9
Plouffe et al., PloS one. (2012) 7(5):e36873. doi: 10.1371/journal.pone.0036873.
10
Lee et al., International J. Alzh. Dis. (2012) 731063.
Recently,
our Board of Directors has decided to focus the Company’s research efforts on the identification of new orphan drugs. Accordingly,
we are planning to test our TauC3 monoclonal antibody in several orphan disease preclinical models.
| · | CONJUMAB-A
- Age Related Macular Degeneration (AMD) |
AMD
is a leading cause of blindness and visual disability in patients aged 60 years or more. There are two types of AMD: wet AMD is
characterized by new blood vessel formation in the retina; non-neovascular or dry AMD is a precursor to the wet form of the condition.
Approximately 1.5 million people in the U.S. have wet AMD, and this number has been projected to nearly double by 2020. Approximately
80 percent of patients with AMD have the dry form, characterized by drusen and atrophic loss of the retinal pigment epithelium.
Central loss of the macula and underlying retinal pigment epithelium, termed GA, is considered the most severe form of dry AMD
and is responsible for over 20 percent of all cases of legal blindness in North America.
Although
the relatively recent introduction of anti-vascular endothelial growth factor (VEGF) agents, such as intravitreal bevacizumab
and ranibizumab, appear to have improved the prognosis for some patients with wet AMD, 70% of patients are reported not to benefit
from visual improvement, while preclinical studies have raised a potential red flag on anti-VEGF therapies, suggesting increasingly
aggressive use in eye disease could trigger side-effects and even cause long-term damage. Moreover, no effective treatment is
available for dry AMD, which is a significantly larger population than wet AMD. Recent progress in understanding the pathogenesis
of Age Related Macular Degeneration has developed as the result of several studies over the past decade that point to important
similarities between AMD pathology and Alzheimer’s disease (reviewed by Ohno-Matsui (2011)11. An important
characteristic common to both diseases is the presence of amyloid beta, which accumulates in the senile plaques in Alzheimer’s
brains and similarly in the drusen of AMD patients, causing oxidative stress and inflammation. Moreover, changes in the concentrations
of amyloid beta and tau in the vitreal fluid of the eye mirror changes in the cerebral spinal fluid (CSF) of Alzheimer’s
patients where amyloid beta reduction is accompanied by a concomitant increase in tau protein. Amyloid beta is thought to be a
key mediator of the progression from drusen to wet AMD, causing an imbalance of angiogenesis-related factors in the retinal pigment
epithelial (RPE) cells. Evidence from preclinical studies on retinal degeneration have demonstrated that combining treatments
targeting different components of the Aβ formation and aggregation pathway is more effective than monotherapy12.
However, regulators are averse to the idea of combining two independent investigational drugs before testing each one singly in
human clinical trials and demonstrating clinical benefit.
We
are considering the use of antibody drug conjugates (ADCs), in which two different molecules - an antibody and a small molecule
- are combined chemically into a single entity. The antibody has a chaperone–like role in clearing the amyloid peptide while
the small molecule reduces the neurotoxicity caused by the peptide. This approach, which we refer to as “CONJUMAB”
has broad application for the treatment of amyloidosis and other types of proteinopathies. Traditionally, ADCs have been used
deliver a cytotoxic payload to kill cancer cells where specialized linkers are required to ensure delivery and release of the
toxin, such as the recently approved brentuximab vedotin (Seattle Genetics) for treatment of CD-30 positive malignancies; the
late-stage compounds inotuzumab ozogamicin (Pfizer) for CD22-positive B-cell positive malignancies; and trastuzumab emstansine
(Roche/Genentech/ImunoGen) for human epidermal growth factor receptor 2 (HER- 2) positive breast cancer. We anticipate that drugs
based on CONJUMAB will be comprised of antibodies targeting amyloidogenic polypeptides that are linked chemically to a small molecule
that is non-toxic and confers cytoprotective properties, such as an antioxidant or anti-inflammatory molecule.
CONJUMAB-A
aims to combine a monoclonal antibody (IN-N01) targeting amyloid beta in the eye by chemically conjugating the antibody to a derivative
of melatonin and thereby combining the amyloid clearing properties of the antibody with a potent antioxidant molecule. We purchased
the original monoclonal antibody generated in mice from Immuno- Biological Laboratories (IBL) in Japan and collaborated with London-based
Medical Research Council Technology (MRCT) to create a humanized form, IN-N01, which has the same properties as the original antibody.
MATERIAL
AGREEMENTS
Mindset
Asset Transfer Agreement. Several of Intellect’s assets were acquired in 2005 from Mindset Biopharmaceuticals, Inc.
(“Mindset”).
Shire
License Agreement. On and effective as of September 29, 2011, we entered into an Exclusive License Agreement (the “License
Agreement”) with ViroPharma, pursuant to which, among other things we granted an exclusive license to ViroPharma regarding
certain of our licensed patents and patent applications related to OX1. In January 2014, ViroPharma merged with Shire Plc. Shire
is developing OX1 as a treatment for Friedreich’s Ataxia and possibly other diseases for which OX1 may qualify for orphan drug
designation.
Under
the terms of the License Agreement, we transferred to ViroPharma all of our intellectual property rights, data and know-how related
to our OX1 research and development program in exchange for payment by ViroPharma of a $6.5 million up-front licensing fee and
additional regulatory milestone payments to be paid by Shire based upon defined events in the United States and the European Union.
The aggregate maximum of these milestone payments assuming successful advancement of the product to market could amount to $120
million. In addition, Shire would pay us a tiered royalty. NYU and SAMSF,
which own certain patents in relation to OX1, are entitled to a portion of the royalties and revenues received by us from any
sale or license of OX1 pursuant to the RLAs described below.
11
Ohno-Matsui (2011) Progress in Retinal and Eye Research 30: 217-238
12
Guo et al., (2007) Proc. Natl. Acad. Sci. 104: 13444–13449.
The
term of the License Agreement will continue in effect on a licensed product-by-licensed product and country-by-country basis until
the expiration of the last royalty obligation with respect to a licensed product in such country. Once the royalty obligation
has terminated in a particular country, the license will become non-exclusive and fully paid-up with respect to licensed products
in that country.
Either
party may terminate the License Agreement upon an uncured material breach of the other party. In addition, if Shire determines
that it is not feasible or desirable to develop or commercialize licensed products, it may terminate the License Agreement in
whole or on a product-by-product basis at any time upon ninety (90) days prior written notice to us. In the event of a termination
of the License Agreement, other than Shire’s termination of the License Agreement for our uncured material breach, we will
have an exclusive, perpetual, irrevocable, worldwide, royalty-bearing license to exploit the licensed products.
Research
and License Agreements with South Alabama Medical Science Foundation (“SAMS”) and New York University (“NYU”).
Effective August 1998, and as amended, Mindset entered into Research and License Agreements (“RLAs”) with SAMS
and NYU. In June 2005, SAMS and NYU consented to Mindset’s assignment of the RLAs to us. Under the RLAs, we have an exclusive,
worldwide, royalty-bearing license, with the right to grant sublicenses, under certain patents and know-how relating to the use
of indole-3-propionic acid among other things, to prevent Alzheimer’s disease (“AD”). We are obligated to make
future payments to SAMS and NYU totaling approximately $3,000,000 upon achievement of certain milestones based on phases of clinical
development and approval of the FDA (or foreign equivalent) and also to pay SAMS and NYU royalties on net sales (as defined) attributable
to each product utilizing the licensed technology. Additionally, we are obligated to pay a percentage of all sublicense fees received
by the Company. In September 2011, we granted a sublicense of the RLAs to ViroPharma. Pursuant to the terms of the RLAs as amended,
we have paid each of SAMS and NYU $650,000 of the up-front licensing fee and are required to pay a portion of future payments
we may receive from ViroPharma. (See ViroPharma License Agreement below.)
License
Agreement with Northwestern University (“NWU”). Effective May 2012, we entered into a License Agreement (“License”)
with NWU pursuant to which we obtained an exclusive, worldwide, royalty-bearing license, with the right to grant sublicenses,
under certain patents and know-how relating to the use of monoclonal antibody Tau C3 and TOC-1 for the prophylaxis, mitigation,
diagnosis and/or treatment of AD and other tauopathies. We are obligated to make future payments to NWU totaling approximately
$700,000 upon achievement of certain milestones based on phases of clinical development and also to pay NWU royalties on net sales
(as defined) attributable to each product utilizing the licensed technology.
Beta-Amyloid
Specific, Humanized Monoclonal Antibody Purchase and Sale Agreement. In December 2006, we entered into a Beta-Amyloid
Specific, Humanized Monoclonal Antibody Purchase and Sale Agreement (the “IBL Agreement”) with Immuno-Biological
Laboratories Co., Ltd. (“IBL”). Pursuant to the IBL Agreement, we acquired two beta amyloid specific monoclonal
antibodies ready for humanization, and the IBL patents or applications relating to them. In consideration, we agreed to pay
IBL a total of $2,125,000 upon the achievement of certain milestones plus a specified royalty based on sales of any
pharmaceutical product derived from the antibodies. Also, we granted to IBL a worldwide, exclusive, paid-up license under
certain of our granted patents and pending applications in Japan. The IBL Agreement expires upon the last to expire of the
relevant Intellect patents, unless earlier terminated as the result of a material breach by or certain bankruptcy related
events of either party to the agreement.
ANTISENILIN
Option and License Agreement. In October 2008, we entered into an Option and License Agreement with a global pharmaceutical
company (“Licensee”) regarding an option to obtain a license under certain of our patents and patent applications
(the “Subject Patents”) related to antibodies and methods of treatment for Alzheimer’s Disease and to make,
have made, use, sell, offer to sell and import certain Licensed Products, as defined in this agreement. In December 2008, the
Licensee exercised the option and paid us an adjusted Exercise Fee of $1,550,000 in exchange for the License. The terms of the
License provide that we are entitled to receive an additional $2,000,000 upon the grant in the United States of a Licensed Patent
with at least one Valid Claim that covers a Licensed Product in the Territory in the Field (as such terms are defined in this
agreement).
On
December 31, 2014, we executed a Settlement Agreement (the “Settlement Agreement”) with the Licensee to resolve previous
litigation in connection with In the matter of Intellect Neurosciences, Inc. v. Pfizer Inc. and Rinat Neuroscience Corp., Supreme
Court for the State of New York, County of New York, Index No. 653320/2012 (the “Action”). Pursuant to the terms of
the Settlement Agreement, the Licensee paid us $1.2 million to settle the Action and to withdraw the IPR petition with respect
to the associated Intellect patent filed by the Licensee with the USPTO on November 24, 2014. The Settlement Agreement constitutes
a settlement of the disputed claims and is not in any way an admission of liability as to any claim, contention or cause of action.
The License Agreement remains in effect.
GSK
Option and License Agreement. In April 2009, we entered into an Option Agreement with Glaxo Group Limited (“GSK”)
regarding an option to purchase a license under certain of our patents and patent applications (the “GSK Patents”)
related to antibodies and methods of treatment for AD. We granted GSK an irrevocable option to acquire a non-exclusive, royalty
bearing license under the GSK Patents with the right to grant sublicenses, to develop, have developed, make, have made, use, offer
to sell, sell and import any Licensed Products.
Upon
exercise of the option, GSK will pay us $2,000,000 and, upon the later to occur of the exercise of the option by GSK and grant
to us in the United States of a Licensed Patent with at least one Valid Claim that covers a Licensed Product incorporating a GSK
Compound, GSK will pay us an additional payment of $2,000,000. An additional milestone payment will be made to us should GSK achieve
certain thresholds of annual net sales. This agreement also provides that we will be eligible to receive certain royalty payments
from GSK in connection with net sales.
Élan
Pharma International Limited and Wyeth License Agreement. In May 2008, we entered into a License Agreement with
AHP Manufacturing BV, acting through its Wyeth Medica Ireland Branch and Elan Pharma International Limited to provide Wyeth and
Elan (collectively, the “Licensees”) with certain license rights under certain of our patents and patent applications
(the “Licensed Patents”) relating to certain antibodies that may serve as potential therapeutic products for the treatment
for Alzheimer’s Disease (the “Licensed Products”). We granted the Licensees a non-exclusive license under the
Licensed Patents to research, develop, manufacture and commercialize Licensed Products. We are eligible to receive certain milestones
and royalties based on the sale of Licensed Products.
Research
and Development Costs
We
have devoted substantially all of our efforts and resources to advancing our intellectual property estate and scientific research
and drug development. Generally, research and development expenditures are allocated to specific research projects. Due to various
uncertainties and risks, it is not possible to accurately predict future spending or time to completion by project or project
category. Research and Development costs, which excludes patent related expenses, were $78,854 for the year ended June 30, 2015
and $82,620 for the year ended June 30, 2014. Research and Development costs from inception through June 30, 2015 were $15,081,126.
Competition
Alzheimer’s
disease therapies under development can largely be divided into two categories: those demonstrating a symptomatic benefit therapy
and those demonstrating a disease-modifying benefit. Although a symptomatic benefit can improve the quality of life of the patient
by reducing depression, agitation and anxiety and even delay hospitalization by a few months, the effects are typically transient
and do not have the disease-modifying effects that will slow the progression of Alzheimer’s disease, prolong life expectancy
and possibly even cure this devastating illness. To date, the FDA has approved five drugs to treat people who have been diagnosed
with Alzheimer’s disease. All are drugs that provide symptomatic benefits. Multiple pharmaceutical companies are testing
small molecules and antibodies in clinical trials aiming to demonstrate disease modification including several compounds in advanced
clinical trials. Increasingly, companies that started developing various therapies for AD are now testing the same drug candidates
in other related indications such as Age Related Macular Degeneration and various tauopathies
Government
Regulation and Required Approvals
The
process required by the FDA under the drug provisions of the United States Food, Drug and Cosmetic Act for any of our drug products
to be marketed in the United States generally involves preclinical laboratory and animal tests; submission of an Investigational
New Drug Application (“IND”), which must become effective before human clinical trials may begin; adequate and well-controlled
human clinical trials to establish the safety and efficacy of the product candidate for its intended use; submission to the FDA
of a New Drug Application (“NDA”); and FDA review and approval of a NDA. The testing and approval process requires
substantial time, effort and financial resources, and we cannot be certain that any approval will be granted to us or to our licensees
on a timely basis, if at all.
Preclinical
tests include laboratory evaluation of the product candidate, its chemistry, formulation and stability, as well as in-vitro and
animal studies, to assess the potential safety and efficacy of the product candidate. Certain preclinical tests must be conducted
in compliance with Good Manufacturing Practice (“GMP”) regulations and Good Laboratory Practice guidelines. Violations
of these regulations or guidelines can lead to invalidation of studies, requiring, in some cases, such studies to be replicated.
In some instances, long-term preclinical studies are conducted while clinical studies are ongoing.
Results
of preclinical tests, together with manufacturing information and analytical data, are submitted to the FDA as part of an IND
before human clinical trials may begin. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA,
within the 30-day time period, raises concerns or questions about the conduct of the trials as outlined in the IND and imposes
a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before clinical trials may
begin. All clinical trials must be conducted under the supervision of a qualified investigator in accordance with Good Clinical
Practice (“GCP”) regulations. These regulations include the requirement that all subjects provide informed consent.
Further, an independent institutional review board (“IRB”) at each medical center proposing to conduct the clinical
trials must review and approve any clinical study. The IRB monitors the study and is informed of the study’s progress, particularly
as to adverse events and changes in the research. 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.
Human
clinical trials typically are conducted in three sequential phases that may overlap:
| · | Phase
One (I): The drug is typically initially introduced into healthy human subjects or patients
and tested for safety, dosage tolerance, absorption, metabolism, distribution and excretion.
In some instances, the first introduction into humans will be to patients rather than
healthy subject, such as in some drugs developed for various cancer indications. |
| · | Phase
Two (II): The drug is studied in a limited patient population to identify possible adverse
effects and safety risks, to obtain initial information regarding the efficacy of the
product for specific targeted diseases and to determine dosage tolerance and optimal
dosage. |
| · | Phase
Three (III): Generally large trials undertaken to further evaluate dosage and clinical
efficacy and safety in an expanded patient population, often at geographically dispersed
clinical study sites. |
With
the exception of OX1, which has successfully completed Phase I, we cannot be certain that we will successfully complete Phase
I, Phase II or Phase III testing of our product candidates within any specific time period, if at all.
Concurrent
with clinical trials and preclinical studies, information about the chemistry and physical characteristics of the drug product
must be developed and a process for its manufacture in accordance with GMP requirements must be finalized. The manufacturing process
must be capable of consistently producing quality batches of the product, and we must develop methods for testing the quality,
purity and potency of initial, intermediate and final products. Additionally, appropriate packaging must be selected and tested
and chemistry stability studies must be conducted to demonstrate that the product does not undergo unacceptable deterioration
over its shelf life.
The
results of product development, preclinical studies and clinical studies are submitted to the FDA as part of a NDA for approval
of the marketing and commercial shipment of the product. The FDA reviews each NDA submitted and may request additional information,
rather than accepting the NDA for filing. In this event, the application must be resubmitted with the additional information.
The resubmitted application is subject to review before the FDA accepts it for filing. Once the FDA accepts the NDA for filing,
the agency begins an in-depth review of the NDA. The FDA has substantial discretion in the approval process and may disagree with
interpretations of the data submitted in the NDA. The review process may be significantly extended should the FDA request additional
information or clarification regarding information already provided. Also, as part of this review, the FDA may refer the application
to an appropriate advisory committee, typically a panel of clinicians, for review, evaluation and a recommendation. The FDA is
not bound by the recommendation of an advisory committee. Manufacturing establishments often are subject to inspections prior
to NDA approval to assure compliance with GMP standards and with manufacturing commitments made in the relevant marketing application.
Satisfaction
of FDA requirements or requirements of state, local and foreign regulatory agencies typically takes several years and the actual
time required may vary substantially based upon the type, complexity and novelty of the pharmaceutical product. Government regulation
may delay or prevent marketing of potential products for a considerable period of time and impose costly procedures upon our activities.
We cannot be certain that the FDA or any other regulatory agency will grant approval for any of our product candidates on a timely
basis, if at all. Success in preclinical or early-stage clinical trials does not assure success in later-stage clinical trials.
Data obtained from preclinical and clinical activities are not always conclusive and may be susceptible to varying interpretations
that could delay, limit or prevent regulatory approval. Even if a product receives regulatory approval, the approval may be significantly
limited to specific indications or uses. Further, even after regulatory approval is obtained, later discovery of previously unknown
problems with a product may result in restrictions on the product or even complete withdrawal of the product from the market.
Delays in obtaining, or failures to obtain regulatory approvals would have a material adverse effect on our business.
The
FDA’s policies may change and additional government regulations may be enacted that could prevent or delay regulatory approval
of our potential products. Moreover, increased attention to the containment of health care costs in the United States and in foreign
markets could result in new government regulations that could have a material adverse effect on our business. 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.
We
cannot assure you that any portion of the regulatory framework under which we currently operate will remain consistent and that
any change or new regulations will not have a material adverse effect on our current and anticipated operations. Currently we
are in compliance with all applicable regulations.
Employees
As
of June 30, 2015, Mr. Elliot Maza, our Chief Executive Officer and CFO, is our sole employee. In May 2013, Dr. Daniel Chain resigned
from his employment with the Company and as a Director. Currently, Dr. Chain is engaged by the Company as a strategic consultant
on a part time basis.
Outsourcing
We
outsource our research and development activities. We believe that this outsourcing strategy is the optimal method for developing
our drug candidates given our current and anticipated financial resources.
Marketing
We
do not have an organization for the sales, marketing and distribution of our product candidates. Our core business strategy is
to leverage our intellectual property estate through licensing or other arrangements and to enter into collaboration agreements
with major pharmaceutical companies to develop our proprietary compounds. We expect future partners to complete product development,
seek regulatory approvals and commercialize the resulting drug products. We do not intend to manufacture or market any products
and do not anticipate a need for any manufacturing, sales, marketing or distribution capabilities.
Insurance
Coverage
We
maintain General Liability Insurance.
Corporate
Information
We
are located at 550 Sylvan Ave, Suite 101, Englewood Cliffs, New Jersey, 07632 and our corporate telephone number is (201) 608-5101.
Additional information can be found on our website: www.intellectns.com. Our Internet website and the information contained therein
or connected thereto are not a part or incorporated into this Annual Report on Form 10-K.
We are a smaller reporting
company, Accordingly, we are not required to provide the information required by this Item.
ITEM
1B. |
UNRESOLVED
STAFF COMMENTS |
None
We
lease approximately 900 square feet of office space at 550 Sylvan Ave., Suite 101, Englewood Cliffs, New Jersey, 07632. The lease
is yearly at a monthly rental of $1,625.
ITEM
3. |
LEGAL
PROCEEDINGS
None
|
ITEM
4. MINE SAFETY DISCLOSURES
Not Applicable
PART
II
ITEM
5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market
Information
Our
common stock is quoted on the Over-The-Counter QB Venture Marketplace (OTCQB) under the symbol “ILNS” and is not listed
on any exchange. The following table sets forth the range of high and low bid prices as reported for each period indicated.
|
| |
High |
|
|
Low |
|
|
| Fiscal year ended June 30, 2015 | | |
| | | |
| | |
|
| | | |
| | | |
| | |
|
| September 30, 2014 | | |
$ | 0.58 | | |
$ | 0.53 | |
|
| December 31, 2014 | | |
| 0.35 | | |
| 0.30 | |
|
| March 31, 2015 | | |
| 0.48 | | |
| 0.39 | |
|
| June 30, 2015 | | |
| 0.34 | | |
| 0.30 | |
|
| | | |
| | | |
| | |
|
| Fiscal year ended June 30, 2014 | | |
| | | |
| | |
|
| | | |
| | | |
| | |
|
| September 30, 2013 | | |
$ | 2.25 | | |
$ | 2.00 | |
|
| December 31, 2013 | | |
| 1.40 | | |
| 1.25 | |
|
| March 31, 2014 | | |
| 1.50 | | |
| 1.38 | |
|
| June 30, 2014 | | |
| 2.40 | | |
| 2.18 | |
The
foregoing quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual
transactions.
Holders
As
of October 9, 2015, the Company had 202 common stock holders of record.
Dividends
We
have never paid cash dividends on our capital stock. There are no restrictions that would limit us from paying dividends; however
we do not anticipate paying any cash dividends for the foreseeable future.
Securities
Authorized for Issuance under Equity Compensation Plans
The
following table provides information as of June 30, 2015 regarding the common stock that may be issued upon the exercise of options
granted to employees, consultants or members of our Board of Directors under all of our existing equity compensation plans.
|
|
|
|
|
|
|
|
Plan
Category |
|
Number
of securities
issuable 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 issuances under
equity compensation
plans |
|
|
|
|
|
|
|
|
|
Equity compensation plans
approved by security holders |
|
|
12,000 |
|
$ |
0.22 |
|
|
228,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans not approved
by security holders |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
12,000 |
|
$ |
0.22 |
|
|
228,000 |
|
ITEM
6. |
SELECTED
FINANCIAL DATA |
Not
applicable to smaller reporting companies
ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following discussion and analysis should be read in conjunction with the Consolidated Financial Statements included elsewhere
in this report and “Special Note Regarding Forward Looking Statements” above.
General
We
are a biopharmaceutical company engaged in the discovery and development of disease-modifying therapeutic agents for the treatment
and prevention of neurodegenerative conditions, collectively known as proteinopathies. We have an internal pipeline and have granted
licenses related to our patent estate to major pharmaceutical companies.
Since
our inception in 2005, we have devoted substantially all of our efforts and resources to advancing our intellectual property portfolio
and research and development activities. We have entered into license and other agreements with large pharmaceutical
companies related to our patent estate, however, neither we nor any of our licensees have obtained regulatory approval for sales
of any product candidates covered by our patents. We operate under a single segment. Our fiscal year end is June 30.
Our
core business strategy is to build a portfolio of compounds with the potential to treat or prevent neurodegenerative diseases,
develop each compound to pre-determined milestones, and license the compounds to pharmaceutical companies for advanced development
and commercialization. We intend to obtain revenues from licensing fees, milestone payments, development fees, royalties and/or
sales related to the use of our drug candidates or intellectual property for specific therapeutic indications or applications.
As an example, we developed OX1, a small molecule multi-modal antioxidant, completed preclinical and human safety trials, and
then licensed the program to ViroPharma, which subsequently merged into Shire, for development of a drug to treat Friedreich’s
Ataxia and other neurodegenerative diseases. Pursuant to the terms of the Licensing Agreement by and between Intellect and Shire,
we could receive up to $120 million in milestone payments from Shire and significant royalties from sales if the resulting drug
product is approved for sale by the U.S. Food and Drug Administration (“FDA”). There can be no assurance that we will
receive such milestone payments or royalties.
Our
current business is focused on granting licenses to our patent estate to large pharmaceutical companies and on research and development
of proprietary therapies for the treatment of proteinopathies through outsourcing and other arrangements with third parties. Our
research and development activity is subject to change as we develop a better understanding of our projects and their prospects.
Research and Development costs, which excludes patent related expenses, were $78,854 for the year ended June 30, 2015 and $82,620
for the year ended June 30, 2014. Research and Development costs from inception through June 30, 2015 were $15,081,126.
Results
of Operations
Year
Ended June 30, 2015 Compared to the Year Ended June 30, 2014:
| |
| |
| |
|
| |
Year Ended June 30, |
|
| |
| |
| |
|
| |
| 2015 | | |
| 2014 | | |
| Change | |
Revenue | |
| 1,200,000 | | |
| — | | |
| 1,200,000 | |
Research and Development Costs | |
| (78,854 | ) | |
| (82,620 | ) | |
| 3,766 | |
General and Administrative | |
| (2,011,708 | ) | |
| (1,054,620 | ) | |
| (957,088 | ) |
| |
| | | |
| | | |
| | |
Income (loss) from operations | |
$ | (890,562 | ) | |
$ | (1,137,240 | ) | |
$ | 246,678 | |
| |
| | | |
| | | |
| | |
| |
| Year Ended June 30, | |
| |
| | | |
| | | |
| | |
| |
| 2015 | | |
| 2014 | | |
| Change | |
Interest expense, net of interest income | |
| (5,231,163 | ) | |
| (13,168,563 | ) | |
| 7,937,400 | |
Change in value of derivative instruments | |
| 4,594,134 | | |
| (745,741 | ) | |
| 5,339,875 | |
Gain on extinguishment of interest payable | |
| 7,232,864 | | |
| — | | |
| 7,232,864 | |
| |
| | | |
| | | |
| | |
Total other income/(expense) | |
$ | 6,595,835 | | |
$ | (13,914,304 | ) | |
$ | 20,510,139 | |
Revenue increased by $1,200,000 as a result of a one-time payment of $1.2 million that we received from
a licensee to settle a dispute regarding the milestone fee payable with respect to the License Agreement. On December 31, 2014,
we executed a Settlement Agreement (the “Settlement Agreement”) with the licensee to resolve previous litigation, which
concerned the milestone fee due under the License and certain other matters.
Research
and Development costs decreased by $3,766 to $78,854 for the year ended June 30, 2015 from $82,620 for the year ended June 30,
2014 primarily due to a reduction in pre-clinical study costs.
General
and Administrative Expenses increased by $957,088 to $2,011,708 for the year ended June 30, 2015 from $1,054,620 for the
year ended June 30, 2014 primarily due to the following: an increase in professional fees of approximately $700,000 paid with
respect to settlement of the dispute regarding the milestone payment due from the licensee, general corporate and
patent matters; an increase in corporate and shareholder fees of approximately $200,000 paid with respect to shareholder
proxy preparation, shareholder meetings and related matters; and an increase in travel and employee benefit expenses
of approximately $50,000.
As
a result of the foregoing, our loss from operations decreased by $246,678 to a loss of $890,562 for the year ended June
30, 2015 from a loss of $1,137,240 for the year ended June 30, 2014.
Interest
expense decreased by $7,937,400 to $5,231,163 for the year ended June 30, 2015 from $13,168,563 for the year ended June 30,
2014. This decrease primarily is due to a decrease in the total number of shares of outstanding preferred stock and total
outstanding principal amount of convertible promissory notes and associated interest as a result of conversions of preferred
stock into common stock, note repayments and the surrender by one of our shareholders of Series C Preferred stock carrying
accrued dividends of $7,232,864.
The
Change in fair value of our derivative liabilities decreased by $5,339,875 to a gain of $4,594,134 for the year ending June
30, 2015 as compared to a loss of $745,741 for the year ending June 30, 2014. The gain results from a change in the fair
market value of our derivative instruments based on our quoted stock price on the relevant measurement dates.
During
the fiscal year ended June 30, 2015, we recognized a gain on extinguishment of interest payable of $7,232,864 resulting from
the surrender by one of our significant shareholders of Series C Preferred Stock. The surrender was in connection with the
financing that occurred on July 25, 2014 whereby we issued to the investors in the financing an aggregate of 1,200 shares of
Series F Convertible Preferred Stock and warrants to purchase an aggregate of 9.6 million shares of common stock. In
connection with the financing, we satisfied by cash payment $300,000 of principal and accrued interest on outstanding
promissory notes of this investor and extinguished Series C Preferred Stock carrying accrued interest of
$7,232,864.
As
a result of the foregoing, other income/expense decreased by $20,510,139 to income of $6,595,835 for the year ended June 30, 2015
compared to $13,914,304 of expense for the year ended June 30, 2014.
We
have recorded a 100% valuation allowance against the deferred tax asset consisting of available net operating loss carry forwards
and accordingly no income tax benefit was provided.
As
a result of the foregoing, our net income / (loss) allocable to common shareholders changed by $20,756,817, to net income of $5,705,273
for the year ended June 30, 2015 compared to a net loss of $15,051,544 for the year ended June 30, 2014.
Impact
of Inflation
The
impact of inflation upon our revenue and income / (loss) from continuing operations during each of the past two fiscal years has
not been material to our financial position or results of operations for those years.
Liquidity
and Capital Resources
Since
our inception in 2005, we have mainly generated losses from operations and we anticipate that we will continue to generate significant
losses from operations for the foreseeable future. As of June 30, 2015, our accumulated deficit was $93,238,237. Our loss from
operations for the years ended June 30, 2015 and 2014 was $(890,562) and $(1,137,240), respectively. Our cash used
in operations was $838,641 and $632,638 for the years ended June 30, 2015 and 2014, respectively. Our capital deficiency was $21,089,989
and $28,160,791 as of June 30, 2015 and 2014, respectively.
We have limited capital resources and operations since inception have been funded with the proceeds from
equity and debt financings and license fee arrangements. As of June 30, 2015, we had $23,858 of cash or cash equivalents.
On July 1, 2015, we entered into a stock purchase agreement with certain accredited investors whereby
we issued to the Investors (i) an aggregate of 3,490 shares of Series G Convertible Preferred Stock; (ii) an aggregate of 1,117
shares of Series H Preferred Stock; and (iii) warrants to purchase an aggregate of 15,000,000 shares of our common stock. We received
gross cash proceeds of $750,000 and the Financing resulted in the cancellation of an aggregate of $7,232,864 of accrued dividends
due with respect to our Series C Preferred Stock. The private placement was conducted pursuant to Section 4(a)(2) of the Securities
Act of 1933, as amended, and Rule 506 of Regulation D promulgated thereunder.
We
anticipate that our existing capital resources, taking into account the Series G financing described in the preceding paragraph,
will enable us to continue operations for the next four months. If we fail to raise additional capital or obtain substantial
cash inflows from existing or potential partners within the next few months, we may be forced to cease operations.
The
audit report prepared by our independent registered public accounting firm relating to our consolidated financial statements for
the year ended June 30, 2015 includes an explanatory paragraph expressing substantial doubt about our ability to continue as a
going concern.
Off
–Balance Sheet Arrangements
As
of June 30, 2015, we had no material off-balance sheet arrangements other than obligations under various agreements as follows:
Under
the RLAs with NYU and SAMSF, we are obligated to make future payments totaling approximately $1.5 million to each of NYU
and SAMSF upon achievement of certain milestones based on phases of clinical development and approval of the FDA (or
foreign equivalent) and also to pay each of NYU and SAMSF a royalty based on product sales by Intellect or royalty payments
received by Intellect. In September 2011, we granted a sublicense of the RLAs to ViroPharma. Pursuant to the terms of
the RLAs, we paid SAMSF and NYU an aggregate of $650,000 of the up-front licensing fee and are obligated to pay a portion of
future payments we may receive from ViroPharma.
Mindset
acquired from Mayo Foundation for Medical Education and Research (“Mayo”) a non-exclusive license to use certain transgenic
mice as models for AD and is obligated to pay Mayo a royalty of 2.5% of any net revenue that Mindset receives from the sale or
licensing of a drug product for AD in which the Mayo transgenic mice were used for research purposes. The Mayo transgenic mice
were used by SAMSF to conduct research with respect to OX1. Pursuant to an Assignment Agreement dated as of June 23, 2005, which
we executed with SAMSF, we agreed to assume Mindset’s obligations to pay royalties to Mayo. We have not received any net
revenue that would trigger a payment obligation to Mayo.
Pursuant
to a Letter Agreement with the Institute for the Study of Aging dated as of December 29, 2006, we are obligated to pay a total
of $225,500 of milestone payments contingent upon future clinical development of OX1.
Under
a Research Agreement with MRCT dated as of September 16, 2012, we are obligated to make future research milestone payments totaling
approximately $560,000 to MRCT related to the development of the 82E1 humanized antibody and to pay additional milestones related
to the commercialization, and a royalty based on sales, of the resulting drug products.
Under
the terms of the IBL Agreement with Immuno-Biological Laboratories Co., Ltd. dated as of December 26, 2006, we agreed to pay IBL
a total of $2,125,000 upon the achievement of certain milestones plus a specified royalty based on sales of any pharmaceutical
product derived from the 82E1or 1A10 antibodies.
Under
a License Agreement with NWU dated as of May 3, 2012, we are obligated to make future payments totaling approximately $700,000
to NWU upon achievement of certain milestones based on phases of clinical development and also to pay NWU a royalty based on product
sales.
In
the ordinary course of business, we enter into agreements with third parties that include indemnification provisions which, in
our judgment, are normal and customary for companies in our industry sector. These agreements are typically with business partners,
clinical sites, and suppliers. Pursuant to these agreements, we generally agree to indemnify, hold harmless, and reimburse indemnified
parties for losses suffered or incurred by the indemnified parties with respect to our product candidates, use of such product
candidates, or other actions taken or omitted by us. The maximum potential amount of future payments we could be required to make
under these indemnification provisions is unlimited. We have not incurred material costs to defend lawsuits or settle claims related
to these indemnification provisions. As a result, the estimated fair value of liabilities relating to these provisions is minimal.
Accordingly, we have no liabilities recorded for these provisions as of June 30, 2014 or 2013.
In
the normal course of business, we may be confronted with issues or events that may result in a contingent liability. These generally
relate to lawsuits, claims, environmental actions or the actions of various regulatory agencies. We consult with counsel and other
appropriate experts to assess the claim. If, in our opinion, we have incurred a probable loss as set forth by accounting principles
generally accepted in the United States, an estimate is made of the loss and the appropriate accounting entries are reflected
in our consolidated financial statements. After consultation with legal counsel, we do not anticipate that liabilities arising
out of currently pending or threatened lawsuits and claims will have a material adverse effect on our consolidated financial position,
results of operations or cash flows.
Critical
Accounting Estimates and New Accounting Pronouncements
Critical
Accounting Estimates
The
preparation of financial statements in accordance with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect reported amounts and related disclosures in the financial statements.
Management considers an accounting estimate to be critical if it requires assumptions to be made that were uncertain at the time
the estimate was made, and changes in the estimate or different estimates that could have been selected could have a material
impact on our consolidated results of operations or financial condition.
Convertible
Instruments We evaluate and account for conversion options embedded in convertible instruments in accordance with ASC
815 “Derivatives and Hedging Activities”. Applicable GAAP requires companies to bifurcate conversion options from
their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The
criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument
are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument
that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP
with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded
derivative instrument would be considered a derivative instrument.
We
account for convertible instruments (when we have determined that the embedded conversion options should not be bifurcated from
their host instruments) as follows: We record when necessary, discounts to convertible notes for the intrinsic value of conversion
options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment
date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements
are amortized over the term of the related debt to their stated date of redemption. We also record when necessary, deemed dividends
for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of
the underlying common stock at the commitment date of the transaction and the effective conversion price embedded in the preferred
shares.
Common
Stock Purchase Warrants We classify as equity any contracts that require physical settlement or net-share settlement
or provide us a choice of net-cash settlement or settlement in our own shares (physical settlement or net-share settlement) provided
that such contracts are indexed to our own stock as defined in ASC 815-40 (“Contracts in Entity’s Own Equity”). We classify
as assets or liabilities any contracts that require net-cash settlement (including a requirement to net cash settle the contract
if an event occurs and if that event is outside our control) or give the counterparty a choice of net-cash settlement or settlement
in shares (physical settlement or net-share settlement). We assess classification of our common stock purchase warrants and other
free standing derivatives at each reporting date to determine whether a change in classification between assets and liabilities
is required.
Preferred
Stock. We apply the guidance enumerated in ASC 480 “Distinguishing Liabilities from Equity” when determining
the classification and measurement of preferred stock. Preferred shares subject to mandatory redemption (if any) are classified
as liability instruments and are measured at fair value. We classify conditionally redeemable preferred shares (if any), which
includes preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption
upon the occurrence of uncertain events not solely within our control, as temporary equity. At all other times, we classified
our preferred shares in stockholders’ equity.
Derivative
Instruments. Our derivative financial instruments consist of embedded derivatives related to the convertible debt, warrants
and beneficial conversion features embedded within our convertible debt. The accounting treatment of derivative financial
instruments requires that we record the derivatives and related warrants at their fair values as of the inception date of the
debt agreements and at fair value as of each subsequent balance sheet date. Any change in fair value was recorded as
non-operating, non-cash income or expense at each balance sheet date. If the fair value of the derivatives was higher
at the subsequent balance sheet date, we recorded a non-operating, non-cash charge. If the fair value of the derivatives
was lower at the subsequent balance sheet date, we recorded non-operating, non-cash income.
Research
and Development Costs and Clinical Trial Expenses. Research and development costs include costs directly attributable
to the conduct of research and development programs, including the cost of salaries, payroll taxes, employee benefits, materials,
supplies, maintenance of research equipment, costs related to research collaboration and licensing agreements, the cost of services
provided by outside contractors, including services related to our clinical trials, clinical trial expenses, the full cost of
manufacturing drugs for use in research, preclinical development, and clinical trials. All costs associated with research and
development are expensed as incurred.
Income taxes.
We use the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.”
Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and
(ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial
statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date.
A valuation allowance is provided to reduce the deferred tax assets reported if, based on the weight of the available positive
and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized. Tax returns
for the years ended June 30, 2011, 2012 and 2013 are subject to audit by the taxing authorities.
ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s
financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on de-recognition,
classification, interest and penalties, accounting in interim periods, disclosure, and transition. We have no material uncertain
tax positions for any of the reporting periods presented.
Revenue
Recognition. We recognize revenue in accordance with authoritative accounting guidance, which provides that non-refundable
upfront and research and development milestone payments and payments for services are recognized as revenue as the related services
are performed over the term of the collaboration. For the year ended June 30, 2015, all revenue was received from one licensee.
New
Accounting Pronouncements
In August 2014, the FASB issued authoritative guidance that requires an entity’s management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern and requires additional disclosures if certain criteria are met. This guidance is effective for fiscal periods ending after December 15, 2016, with early adoption permitted. This accounting standard update is not expected to have any impact on the Company’s financial statements.
In June 2014, the FASB issued ASU No. 2014-10, Development Stage Entities (Topic 915): Elimination of
Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation.
We have elected to adopt early application of Accounting Standards Update No. 2014-10; accordingly we no longer present or disclose
inception-to-date information and other remaining disclosure requirements of Topic 915.
In May 2014, the FASB
issued ASU No. 2014-09, “Revenue from Contracts with Customers”, which supersedes the revenue recognition requirements
in ASC 605, “Revenue Recognition”. The core principle of this updated guidance is that an entity should recognize revenue
to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. The new rule also requires additional disclosure about the nature,
amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes
in judgments and assets recognized from costs incurred to obtain or fulfill a contract. This guidance is effective, after the recent
FASB deferral, for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting
period. Companies are permitted to adopt this new rule following either a full or modified retrospective approach. Early adoption
is not permitted. Adoption of this ASU is not expected to have any impact on the Company’s financial statements or disclosures.
Management does not
believe that any other recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect
on the accompanying financial statements.
ITEM 7A - QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK.
Not applicable to smaller reporting companies
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATE
|
Paritz |
&
Company, P.A |
15
Warren Street, Suite 25
Hackensack,
New Jersey 07601
(201)
342-7753
Fax:
(201) 342-7598
www.paritz.com
|
|
|
|
|
|
Certified Public Accountants |
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Intellect Neurosciences, Inc.
We have audited the accompanying consolidated balance sheets
of Intellect Neurosciences, Inc. and subsidiary (the “Company”) as of June 30, 2015 and 2014 and the related consolidated
statements of operations, changes in capital deficiency and cash flows for the years then ended. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with standards of the
Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not
engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration
of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances,
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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of Intellect Neurosciences, Inc. and subsidiary as of
June 30, 2015 and 2014 and the results of its operations and its cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.
The accompanying consolidated financial statements
have been prepared assuming that the Company will continue as a going concern. As disclosed in Note 3 to
the consolidated financial statements, since inception in 2005, the Company has generated losses from operations. As of June
30, 2015, the Company had negative working capital of $20,753,109 and an accumulated deficit of $93,238,237. The
Company had a capital deficiency of $21,089,989 as of June 30, 2015. The Compny had a loss from operations of $890,562 for
the year ended June 30, 2015 and $1,137,240 for the year ended June 30, 2014. Cash used in operations was $838,641
and $632,638 for the years ended June 30, 2015 and 2014, respectively. These factors, among others, raise substantial doubt
about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any
adjustments that might result from this uncertainty.
/s/ Paritz & Company,
P.A. |
|
|
|
|
|
Hackensack, New Jersey |
|
|
October 12, 2015 |
|
|
Intellect
Neurosciences Inc. and Subsidiary
Consolidated
Balance Sheets
| |
| | |
| |
| |
June 30, 2015 | | |
June 30, 2014 | |
ASSETS | |
| | |
| |
Current assets: | |
| | |
| |
Cash and cash equivalents | |
$ | 23,858 | | |
$ | — | |
Total current assets | |
| 23,858 | | |
| — | |
| |
| | | |
| | |
Security deposits | |
| 2,250 | | |
| 2,250 | |
Total Assets | |
$ | 26,108 | | |
$ | 2,250 | |
| |
| | | |
| | |
LIABILITIES AND CAPITAL DEFICIENCY | |
| | | |
| | |
| |
| | | |
| | |
Current Liabilities: | |
| | | |
| | |
Accounts payable and accrued expenses | |
$ | 2,599,706 | | |
$ | 2,682,272 | |
Accrued interest - convertible promissory notes | |
| 1,447,601 | | |
| 1,047,383 | |
Derivative instruments | |
| 2,682,541 | | |
| 7,209,188 | |
Preferred stock dividend payable | |
| 11,880,647 | | |
| 15,032,543 | |
Convertible promissory notes - current, net of debt discount of $153,528 and $167,408, respectively | |
| 2,166,472 | | |
| 1,464,452 | |
Total Current liabilities | |
$ | 20,776,967 | | |
$ | 27,435,838 | |
| |
| | | |
| | |
Long Term Debt | |
| | | |
| | |
Convertible promissory notes - long term, net of debt discount of $298,370 and $936,297, respectively | |
$ | 339,130 | | |
| 727,203 | |
| |
| | | |
| | |
Total Liabilities | |
$ | 21,116,097 | | |
$ | 28,163,041 | |
| |
| | | |
| | |
Capital deficiency: | |
| | | |
| | |
| |
| | | |
| | |
Series B Convertible Preferred Stock, $.001 par value - 459,309 shares designated and 76,887 shares issued and outstanding at June 30, 2015 and June 30, 2014 (liquidation preference $1,345,516) | |
| 77 | | |
| 77 | |
| |
| | | |
| | |
Series C Convertible Preferred Stock, $.001 par value - 25,000 shares designated and 16,636 and 20,977 shares issued and outstanding at June 30, 2015 and June 30, 2014, respectively (liquidation preference $16,635,500 and $20,977,000, respectively) | |
| 16 | | |
| 21 | |
| |
| | | |
| | |
Series D Convertible Preferred stock, $.001 par value - 25,000 shares designated and 2,729 shares issued and outstanding at June 30, 2015 and June 30, 2014 (liquidation preference $2,729,036) | |
| 3 | | |
| 3 | |
| |
| | | |
| | |
Series E Convertible Preferred stock, $.001 par value - 25,000 shares designated and 19,233 shares issued and outstanding at June 30, 2015 and June 30, 2014 (liquidation preference $19,232,800) | |
| 19 | | |
| 19 | |
| |
| | | |
| | |
Series F Convertible Preferred stock, $.001 par value - 25,000 shares designated and 1,200 issued and outstanding at June 30, 2015 (liquidation preference $1,200,000) | |
| 1 | | |
| | |
| |
| | | |
| | |
Common stock, par value $0.001 per share, 2,000,000,000 shares authorized; 3,550,336 and 1,728,915 issued and outstanding at March 31, 2015 and June 30, 2014, respectively | |
| 3,550 | | |
| 1,729 | |
| |
| | | |
| | |
Additional paid in capital | |
| 72,144,582 | | |
| 70,780,870 | |
| |
| | | |
| | |
Accumulated Deficit | |
| (93,238,237 | ) | |
| (98,943,510 | ) |
| |
| | | |
| | |
Total Capital Deficiency | |
$ | (21,089,989 | ) | |
$ | (28,160,791 | ) |
| |
| | | |
| | |
Total Liabilities and Capital Deficiency | |
$ | 26,108 | | |
$ | 2,250 | |
See
notes to consolidated financial statements
Intellect
Neurosciences Inc. and Subsidiary
Consolidated
Statements of Operations
| |
| | |
| |
| |
Year Ended | |
| |
June 30, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
Revenues: | |
| | | |
| | |
License fee | |
$ | 1,200,000 | | |
$ | — | |
Total revenue | |
$ | 1,200,000 | | |
$ | — | |
| |
| | | |
| | |
Costs and Expenses: | |
| | | |
| | |
Research and development | |
| 78,854 | | |
| 82,620 | |
General and administrative | |
| 2,011,708 | | |
| 1,054,620 | |
Total cost and expenses | |
| 2,090,562 | | |
| 1,137,240 | |
| |
| | | |
| | |
Loss from operations | |
$ | (890,562 | ) | |
$ | (1,137,240 | ) |
| |
| | | |
| | |
Other income/(expenses): | |
| | | |
| | |
| |
| | | |
| | |
Interest expense | |
| (5,231,163 | ) | |
| (13,168,563 | ) |
Changes in fair value of derivative instruments | |
| 4,594,134 | | |
| (745,741 | ) |
| |
| | | |
| | |
Gain on extinguishment of interest payable | |
| 7,232,864 | | |
| — | |
| |
| | | |
| | |
Total other income/(expense): | |
| 6,595,835 | | |
| (13,914,304 | ) |
| |
| | | |
| | |
Income / (loss) before provision for taxes | |
$ | 5,705,273 | | |
$ | (15,051,544 | ) |
Income tax provision | |
| | | |
| | |
Net income / (loss) allocable to | |
| | | |
| | |
common shareholders | |
$ | 5,705,273 | | |
$ | (15,051,544 | ) |
| |
| | | |
| | |
Income / (loss) per share | |
| | | |
| | |
Basic | |
$ | 2.26 | | |
$ | (11.77 | ) |
Diluted | |
$ | 0.05 | | |
$ | (11.77 | ) |
| |
| | | |
| | |
Weighted average number of shares outstanding: | |
| | | |
| | |
Basic | |
| 2,528,108 | | |
| 1,279,007 | |
Diluted | |
| 64,398,335 | | |
| 1,279,007 | |
See
notes to consolidated financial statements
Consolidated
Statement of Changes in Capital Deficiency
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
|
| |
Common Stock |
| |
Series B Preferred Stock |
| |
Series C Preferred Stock |
| |
Series D Preferred Stock |
| |
Series E Preferred Stock | |
Series F Preferred Stock |
| |
| |
| |
|
| |
Number of Shares |
| |
Amount |
| |
Number of Shares |
| |
Amount |
| |
Number of Shares |
| |
Amount |
| |
Number of Shares |
| |
Amount |
| |
Number of Shares |
| |
Amount | |
Number of Shares |
| |
Amount |
| |
Additional paid in capital |
| |
Accumulated Deficit |
| |
Total |
|
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
|
Balance as of June 30, 2013 | |
| 926,935 | | |
$ | 927 | | |
| — | | |
$ | — | | |
| 23,525 | | |
$ | 24 | | |
| 3,208 | | |
$ | 3 | | |
| 19,233 | | $ |
19 | |
| | | |
| | | |
$ | 70,342,567 | | |
$ | (83,891,966 | ) | |
$ | (13,548,426 | ) |
Stock based compensation | |
| 156,000 | | |
| 156 | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| |
| | | |
| | | |
| 307,094 | | |
| | | |
| 307,250 | |
Conversion of promissory notes and interest into common stock | |
| 52,732 | | |
| 53 | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| |
| | | |
| | | |
| 131,876 | | |
| | | |
| 131,929 | |
Reclassification of Series B Preferred | |
| | | |
| | | |
| 76,887 | | |
| 77 | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| |
| | | |
| | | |
| (77 | ) | |
| | | |
| — | |
Conversion of preferred stock and interest into common stock | |
| 593,248 | | |
| 593 | | |
| | | |
| | | |
| (2,548 | ) | |
| (3 | ) | |
| (675 | ) | |
| — | | |
| | | |
| |
| | | |
| | | |
| (590 | ) | |
| | | |
| — | |
Net loss for the period | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| |
| | | |
| | | |
| | | |
| (15,051,544 | ) | |
| (15,051,544 | ) |
Balance as of June 30, 2014 | |
| 1,728,915 | | |
$ | 1,729 | | |
| 76,887 | | |
$ | 77 | | |
| 20,977 | | |
$ | 21 | | |
| 2,533 | | |
$ | 3 | | |
| 19,233 | | $ |
19 | |
| — | | |
| — | | |
$ | 70,780,870 | | |
$ | (98,943,510 | ) | |
$ | (28,160,791 | ) |
Stock based compensation | |
| 200,000 | | |
| 200 | | |
| | | |
| | | |
| 250 | | |
| — | | |
| | | |
| | | |
| | | |
| |
| | | |
| | | |
| 141,800 | | |
| | | |
| 142,000 | |
Issuance of Series F Preferred | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| |
| 1,200 | | |
| 1 | | |
| 1,199,999 | | |
| | | |
| 1,200,000 | |
Conversion of preferred stock and interest into common stock | |
| 1,621,421 | | |
| 1,621 | | |
| | | |
| | | |
| (4,591 | ) | |
| (5 | ) | |
| | | |
| | | |
| | | |
| |
| (100 | ) | |
| — | | |
| 21,913 | | |
| | | |
| 23,529 | |
Net income for the period | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| |
| | | |
| | | |
| | | |
| 5,705,273 | | |
| 5,705,273 | |
Balance as of June 30, 2015 | |
| 3,550,336 | | |
$ | 3,550 | | |
| 76,887 | | |
$ | 77 | | |
| 16,636 | | |
$ | 16 | | |
| 2,533 | | |
$ | 3 | | |
| 19,233 | | $ |
19 | |
| 1,100 | | |
$ | 1 | | |
$ | 72,144,582 | | |
$ | (93,238,237 | ) | |
$ | (21,089,989 | ) |
See
notes to consolidated financial statements
Intellect
Neurosciences Inc. and Subsidiary
Consolidated
Statements of Cash Flows
| |
Year Ended | |
| |
June 30, | |
| |
2015 | | |
2014 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | |
| | | |
| | |
Net income / (loss) | |
$ | 5,705,273 | | |
$ | (15,051,544 | ) |
| |
| | | |
| | |
Adjustments to reconcile net income / (loss) | |
| | | |
| | |
to net cash used in operating activities: | |
| | | |
| | |
Change in fair value of derivative instruments | |
| (4,594,134 | ) | |
| 745,741 | |
Stock and warrant based compensation | |
| 142,000 | | |
| 307,250 | |
Non-cash interest expense | |
| 5,223,648 | | |
| 13,168,588 | |
Gain on extinguishment of interest payable | |
| (7,232,864 | ) | |
| | |
| |
| | | |
| | |
Change in assets and liabilities | |
| | | |
| | |
Security deposits | |
| | | |
| 2,465 | |
Accounts payable and accrued expenses | |
| (82,565 | ) | |
| 194,862 | |
| |
| | | |
| | |
Net cash used in operating activities | |
| (838,642 | ) | |
| (632,638 | ) |
| |
| | | |
| | |
CASH FLOWS FROM FINANCING ACTIVITIES: | |
| | | |
| | |
Proceeds from issuance of convertible notes | |
| 15,000 | | |
| 637,500 | |
Proceeds from issuance of preferred stock | |
| 1,200,000 | | |
| | |
Repayments of convertible notes | |
| (352,500 | ) | |
| (10,000 | ) |
| |
| | | |
| | |
Net cash provided by financing activities | |
| 862,500 | | |
| 627,500 | |
| |
| | | |
| | |
NET INCREASE (DECREASE) IN CASH | |
| 23,858 | | |
| (5,138 | ) |
| |
| | | |
| | |
CASH - BEGINNING OF YEAR | |
| — | | |
| 5,138 | |
| |
| | | |
| | |
CASH - END OF YEAR | |
$ | 23,858 | | |
$ | — | |
| |
| | | |
| | |
SUPPLEMENTAL CASH FLOW INFORMATION: | |
| | | |
| | |
Cash paid during the period for: | |
| | | |
| | |
Interest | |
| | | |
| | |
Taxes | |
| | | |
| | |
| |
| | | |
| | |
Non-cash financing activities | |
| | | |
| | |
Conversion of convertible notes and interest to common stock | |
$ | 23,529 | | |
$ | 131,929 | |
Debt discount recognized as derivative liabiltiy | |
$ | 15,000 | | |
$ | 637,500 | |
See
notes to consolidated financial statements
NOTE
1. Business Description
Intellect
Neurosciences, Inc., a Delaware corporation, (“Intellect”, “our”, “us”, “we” or
the “Company” refer to Intellect Neurosciences, Inc. and its subsidiary) is a biopharmaceutical company, which together
with its subsidiary, Intellect Neurosciences, USA, Inc. (“Intellect USA”), is engaged in the discovery and development
of disease-modifying therapeutic agents for the treatment and prevention of neurodegenerative conditions, collectively known as
proteinopathies, which include Alzheimer’s (“AD”), Parkinson’s and Huntington disease. Since our inception
in 2005, we have devoted substantially all of our efforts and resources to research and development activities and advancing our
patent estate. We operate under a single segment. We have had no product sales from inception through June 30, 2015
but we have received $ 11,716,667in license fees from inception through June 30, 2015. Our losses from operations have been funded
primarily with the proceeds of equity and debt financings and fees from license arrangements.
Our core business strategy
is to build a portfolio of compounds with the potential to treat or prevent neurodegenerative diseases, develop each to pre-determined
milestones, and license them to pharmaceutical companies for advanced development and commercialization. To supplement our own
work, we intend to license promising novel technologies and early stage compounds from academia and other biotechnology companies.
We intend to obtain revenues from licensing fees, milestone payments, development fees, royalties and/or sales related to the use
of our drug candidates or intellectual property for specific therapeutic indications or applications.
As of June 30, 2015,
we had no self-developed or licensed products approved for sale by the U.S. Food and Drug Administration (“FDA”). There
can be no assurance that our research and development efforts will be successful, that any products developed by any of our licensees
will obtain necessary government regulatory approval or that any approved products will be commercially viable. In addition, we
operate in an environment of rapid change in technology and are dependent upon the continued services of our current employees,
consultants and subcontractors.
NOTE
2. Summary of Significant Accounting Policies
Principles
of Consolidation. The consolidated financial statements include the accounts of our wholly owned subsidiary, Intellect USA.
Use
of Estimates. The preparation of consolidated financial statements in accordance with accounting principles generally
accepted in the United States involves the use of estimates and assumptions that affect the recorded amounts of assets and liabilities
as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant
estimates include the fair value of derivative instruments, including stock options and warrants to purchase our common stock,
recognition of clinical trial costs, certain consulting expenses and deferred taxes. Actual results may differ substantially
from these estimates.
Stock-Based
Compensation. We recognize compensation expense for stock-based compensation in accordance with ASC Topic 718. For employee
stock-based awards, we calculate the fair value of the award on the date of grant using the Black-Scholes method for stock options
and the quoted price of our common stock for unrestricted shares; the expense is recognized over the service period for awards
expected to vest. For non-employee stock-based awards, we calculate the fair value of the award on the date of grant in the same
manner as employee awards, however, the awards are revalued at the end of each reporting period and the pro rata compensation
expense is adjusted accordingly until such time the nonemployee award is fully vested, at which time the total compensation recognized
to date equals the fair value of the stock-based award as calculated on the measurement date, which is the date at which the award
recipient’s performance is complete. The estimation of stock-based awards that will ultimately vest requires judgment, and
to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment
in the period estimates are revised. We consider many factors when estimating expected forfeitures, including types of awards,
employee class, and historical experience.
Research
and Development Costs and Clinical Trial Expenses. Research and development costs include costs directly attributable
to the conduct of research and development programs, including the cost of salaries, payroll taxes, employee benefits, materials,
supplies, maintenance of research equipment, costs related to research collaboration and licensing agreements, the cost of services
provided by outside contractors, including services related to our clinical trials, clinical trial expenses, the full cost of
manufacturing drugs for use in research, preclinical development, and clinical trials. All costs associated with research and
development are expensed as incurred.
Revenue
Recognition. We recognize revenue in accordance with authoritative accounting guidance, which provides that non-refundable
upfront and research and development milestone payments and payments for services are recognized as revenue as the related services
are performed over the term of the collaboration. For the year ended June 30, 2015, all revenue was received from one licensee.
Convertible
Instruments We evaluate and account for conversion options embedded in convertible instruments in accordance with ASC
815 “Derivatives and Hedging Activities”. Applicable GAAP requires companies to bifurcate conversion options from
their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The
criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument
are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument
that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP
with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded
derivative instrument would be considered a derivative instrument.
We
account for convertible instruments (when we have determined that the embedded conversion options should not be bifurcated from
their host instruments) as follows: We record when necessary, discounts to convertible notes for the intrinsic value of conversion
options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment
date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements
are amortized over the term of the related debt to their stated date of redemption. We also record when necessary, deemed dividends
for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of
the underlying common stock at the commitment date of the transaction and the effective conversion price embedded in the preferred
shares.
Common
Stock Purchase Warrants We classify as equity any contracts that require physical settlement or net-share settlement
or provide us a choice of net-cash settlement or settlement in our own shares (physical settlement or net-share settlement) provided
that such contracts are indexed to our own stock as defined in ASC 815-40 (“Contracts in Entity’s Own Equity”). We classify
as assets or liabilities any contracts that require net-cash settlement (including a requirement to net cash settle the contract
if an event occurs and if that event is outside our control) or give the counterparty a choice of net-cash settlement or settlement
in shares (physical settlement or net-share settlement). We assess classification of our common stock purchase warrants and other
free standing derivatives at each reporting date to determine whether a change in classification between assets and liabilities
is required.
Preferred
Stock. We apply the guidance enumerated in ASC 480 “Distinguishing Liabilities from Equity” when determining
the classification and measurement of preferred stock. Preferred shares subject to mandatory redemption (if any) are classified
as liability instruments and are measured at fair value. We classify conditionally redeemable preferred shares (if any), which
includes preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption
upon the occurrence of uncertain events not solely within our control, as temporary equity. At all other times, we classified
our preferred shares in stockholders’ equity.
Derivative
Instruments. Our derivative financial instruments consist of embedded derivatives related to the convertible debt, warrants
and beneficial conversion features embedded within our convertible debt. The accounting treatment of derivative financial
instruments requires that we record the derivatives and related warrants at their fair values as of the inception date of the
debt agreements and at fair value as of each subsequent balance sheet date. Any change in fair value was recorded as
non-operating, non-cash income or expense at each balance sheet date. If the fair value of the derivatives was higher
at the subsequent balance sheet date, we recorded a non-operating, non-cash charge. If the fair value of the derivatives
was lower at the subsequent balance sheet date, we recorded non-operating, non-cash income.
During the years ended June 30, 2015 and 2014, we recognized other income (expense) of $4,594,134 and
($745,741), respectively, relating to recording the derivative instruments fair value. At June 30, 2015 and 2014,
there were approximately $2.7 million and $7.2 million of derivative liabilities outstanding, respectively.
Our
derivative instruments were valued using the Black-Scholes option pricing model, using the following assumptions during the year
ended June 30, 2015 and 2014:
| |
Year Ended | |
| |
June 30, 2015 | | |
June 30, 2014 | |
| |
| | |
| |
Estimated dividends | |
| None | | |
| None | |
Expected volatility | |
| 188 | % | |
| 188 | % |
Risk-free interest rate | |
| 0.28% - 0.64 | % | |
| 1.73 | % |
Expected term (years) | |
| 1 - 5 years | | |
| 1 - 5 years | |
Fair
value of financial instruments. We adopted the provisions of ASC Topic 820, “Fair Value Measurements and
Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework
for measuring fair value and expands disclosure of fair value measurements.
The
estimated fair value of certain financial instruments, including cash and cash equivalents, accounts payable and accrued expenses
are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.
The carrying amounts of our credit obligations approximate fair value because the effective yields on these obligations, which
include contractual interest rates taken together with other features such as concurrent issuances of warrants and/or embedded
conversion options, are comparable to rates of returns for instruments of similar credit risk.
ASC
820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price)
in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants
on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may
be used to measure fair value:
Level
1 — quoted prices in active markets for identical assets or liabilities
Level
2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level
3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions)
We
measure derivative liabilities at fair value using the Black-Scholes option pricing model with assumptions that include the fair
value of the stock underlying the derivative instrument, the exercise or conversion price of the derivative instrument, the risk
free interest rate for a term comparable to the term of the derivative instrument and the volatility rate and dividend yield for
our common stock. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The Company has
not paid dividends to date and does not expect to pay dividends in the foreseeable future due to its substantial accumulated deficit.
Accordingly, expected dividends yields are currently zero. Expected volatility is based principally on an analysis of historical
volatilities of similarly situated companies in the marketplace for a number of periods that is at least equal to the contractual
term or estimated life of the applicable financial instrument.
We
also considered the use of the lattice or binomial models with respect to valuing derivative financial instruments that feature
anti-dilution price protection; however, the differences in the results are insignificant due to the low probability of triggering
price adjustments in such financial instruments.
We
measure the fair value of all of our derivative liabilities based on Level 3 inputs.
The
following table provides a summary of the changes in fair value of all financial liabilities measured at fair value on a recurring
basis using significant unobservable inputs during the year ended June 30, 2015.
Balance – July 1, 2013 | |
$ | 3,833,457 | |
Issuances during the year | |
| 2,629,990 | |
Changes in fair value included in earnings | |
| 745,741 | |
Balance - June 30, 2014 | |
$ | 7,209,188 | |
| |
| | |
Issuances during the year | |
| 67,487 | |
Changes in fair value included in earnings | |
| (4,594,134 | ) |
Balance – June 30, 2015 | |
$ | 2,682,541 | |
Income
taxes. We use the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income
Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current
year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s
financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the
enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if, based on the weight of the available
positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.
Tax returns for the years ended June 30, 2012, 2013 and 2014 are subject to audit by the taxing authorities.
ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s
financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on de-recognition,
classification, interest and penalties, accounting in interim periods, disclosure, and transition. We have no material uncertain
tax positions for any of the reporting periods presented.
Net
Loss per Share. Basic net income or basic net loss per common share is computed by dividing net income available to
common shareholders by the weighted average number of common shares outstanding during the periods. Diluted earnings per share
give effect to dilutive options, warrants, convertible debt and other potential common stock outstanding during the period.
Therefore, in the case of a net loss the impact of the potential common stock resulting from warrants, outstanding stock options,
convertible debt, and convertible preferred stock are not included in the computation of diluted loss per share, as the effect
would be anti-dilutive. In the case of net income the impact of the potential common stock resulting from these instruments that
have intrinsic value are included in the diluted earnings per share. The table sets forth the number of potential shares of common
stock that have been excluded from diluted net loss per share.
New Accounting
Pronouncements
In
August 2014, the FASB issued authoritative guidance that requires an entity’s management to evaluate whether there are conditions
or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern
and requires additional disclosures if certain criteria are met. This guidance is effective for fiscal periods ending after December
15, 2016, with early adoption permitted. This accounting standard update is not expected to have any impact on the Company’s
financial statements.
In
June 2014, the FASB issued ASU No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting
Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation. We have elected to adopt
early application of Accounting Standards Update No. 2014-10; accordingly we no longer present or disclose inception-to-date information
and other remaining disclosure requirements of Topic 915.
In
May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers”, which supersedes the revenue recognition
requirements in ASC 605, “Revenue Recognition”. The core principle of this updated guidance is that an entity should
recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange for those goods or services. The new rule also requires additional disclosure
about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant
judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. This guidance is
effective, after the recent FASB deferral, for annual reporting periods beginning after December 15, 2017, including interim periods
within that reporting period. Companies are permitted to adopt this new rule following either a full or modified retrospective
approach. Early adoption is not permitted. Adoption of this ASU is not expected to have any impact on the Company’s financial
statements or disclosures.
Management
does not believe that any other recently issued, but not yet effective accounting pronouncements, when adopted, will have a material
effect on the accompanying financial statements.
Note
3. Going Concern
These
consolidated financial statements are presented on the basis that we will continue as a going concern. The going concern
concept contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Since
our inception in 2005, we have generated losses from operations and we anticipate that we will continue to generate significant
losses from operations for the foreseeable future. As of June 30, 2015, we had negative working capital of $(20,753,109) and our
accumulated deficit was $(93,238,237). We had a loss from operations of $(890,562) for the year ended June 30, 2015 and $(1,137,240)
for the year ended June 30, 2014. Our cash used in operations was $838,642 and $632,638 for the years ended June 30,
2015 and 2014, respectively. Our capital deficiency was $(21,089,989) as of June 30, 2015. These factors, among others, raise
substantial doubt about the ability of the Company to continue as a going concern.
We
have limited capital resources and operations since inception have been funded with the proceeds from equity and debt financings
and license fee arrangements. As of June 30, 2015, we had $23,858 in cash or cash equivalents.
On
July 1, 2015, we entered into a stock purchase agreement with certain accredited investors whereby we issued to the Investors
(i) an aggregate of 3,490 shares of Series G Convertible Preferred Stock; (ii) an aggregate of 1,117 shares of Series H Preferred
Stock; and (iii) warrants to purchase an aggregate of 15,000,000 shares of our common stock. We received gross cash proceeds of
$750,000.
We
anticipate that our existing capital resources, taking into account the Series G Financing described in the preceding
paragraph, will enable us to continue operations for the next four months. If we fail to raise additional capital or obtain
substantial cash inflows from existing or potential partners within the next few months, we may be forced to cease
operations. We cannot assure you that financing will be available in a timely manner, on favorable terms or at
all.
Note
4. Convertible Notes Payable
The
following table presents the components of Convertible Notes Payable at year end June 30, 2015 and June 30, 2014:
| | | |
| |
| June
30, 2015 | | |
| June
30, 2014 | |
| | | |
Convertible Notes issued during fiscal year ended June 30, 2010 | |
$ | 17,500 | | |
$ | 80,000 | |
| | | |
Convertible Notes issued during fiscal year ended June 30, 2011 | |
| 850,000 | | |
| 1,150,000 | |
| | | |
Convertible Notes issued during fiscal year ended June 30, 2012 | |
| 301,500 | | |
| 301,500 | |
| | | |
Convertible Notes issued during fiscal year ended June 30, 2013 | |
| 1,116,000 | | |
| 1,141,000 | |
| | | |
Convertible Notes issued during fiscal year ended June 30, 2014 | |
| 657,500 | | |
| 622,500 | |
| | | |
Convertible Notes issued during fiscal year ended June 30, 2015 | |
| 15,000 | | |
| | |
| | | |
Balance at End of Period | |
$ | 2,957,500 | | |
$ | 3,295,000 | |
| | | |
Less debt discount: | |
| 451,898 | | |
| 1,103,345 | |
| | | |
Convertible Notes Payable, Net | |
$ | 2,505,602 | | |
$ | 2,191,655 | |
| | | |
| |
| | | |
| | |
| | | |
Classified as follows on the accompanying consolidated balance sheets: | |
| | | |
| | |
| | | |
Current portion of Convertible Notes Payable | |
$ | 2,166,472 | | |
$ | 1,464,452 | |
| | | |
Long term portion of Convertible Notes Payable | |
| 339,130 | | |
| 727,203 | |
| | | |
| |
$ | 2,505,602 | | |
$ | 2,191,655 | |
| | | |
| |
| | | |
| | |
| | | |
All of the foregoing convertible notes carry interest at 14% annually, mature three years from the issue date and are convertible into the Company’s common shares at a conversion price of $1.25 per share except for notes with an aggregate principal amount of $420,000 and $500,000, whch are convertible into the Company’s common shares at a conversion price of $0.08 and $0.14 per share, respectively. | |
| | | |
| |
| | | |
As of June 30, 2015, convertible
notes with an aggregate face amount of $1,169,000 are in default. | |
| | | |
| |
| | | |
| | |
| | | |
Convertibe Notes Payable are payable as follows: | |
| | | |
| | |
| | | |
Past Due | |
| | | |
$ | 1,169,000 | |
| | | |
Fiscal year ended June 30, 2016 | |
| | | |
| 1,116,000 | |
| | | |
Fiscal year ended June 30, 2017 | |
| | | |
| 657,500 | |
| | | |
Fiscal year ended June 30, 2018 | |
| | | |
| 15,000 | |
| | | |
Total | |
| | | |
$ | 2,957,500 | |
Note
5. Convertible Preferred Stock
Series
B Convertible Preferred Stock
The
Series B Convertible Preferred Stock carries a cumulative dividend of 6% per annum and a stated value of $17.50 per share. . Each
share is convertible into 0.05 common shares based on the current conversion price of $375.Series C Convertible Preferred Stock
The
Series C Convertible Preferred Stock carries a cumulative dividend of 14% per annum and a stated value of $1,000 per share. Each
share is convertible into 800 common shares based on the current conversion price of $1.25. During the years ended June 30, 2015
and 2014, 1,013 and 543 shares of Series C Preferred Stock were converted into 810,000 and 216,858 common shares, respectively.
In addition, during the year ended June 30, 2015, one of our significant shareholders surrendered shares of Series C Preferred
Stock carrying accrued dividends of $7,232,864.
Series
D Convertible Preferred Stock
The
Series D Convertible Preferred Stock carries a cumulative dividend of 8% per annum and a stated value of $1,000 per share. Each
share is convertible into 800 common shares based on the current conversion price of $1.25. During the years ended June 30, 2015
and 2014, zero and 841 shares of Series D Preferred Stock were converted into zero and 336,394 common shares, respectively.
Series
E Convertible Preferred Shares
The
Series E Convertible Preferred Stock carries a cumulative dividend of 8% per annum and a stated value of $1,000 per share. Each
share is convertible into 400 common shares based on the current conversion price of $02.50. There were no conversions of Series
E Preferred Stock during the last two fiscal years.
Series
F Convertible Preferred Shares
The
Series F Convertible Preferred Stock carries a cumulative dividend of 8% per annum and a stated value of $1,000 per share. Each
share is convertible into 4,000 common shares based on the current conversion price of $0.25. There were no conversions of Series
F Preferred Stock during the year ended June 30, 2015.
On July 25, 2014, we entered into a stock
purchase agreement with certain accredited investors whereby we issued 1,200 shares of Series F Convertible Preferred Stock and
warrants to purchase 9,600,000 shares of common stock (the “Financing”).
Each share of Series F Preferred Stock has
a stated value and liquidation preference of $1,000, and accrues a dividend of 8% of the Stated Value per annum, and is convertible
at any time into 4,000 common shares. The Series F Preferred holders vote together with holders of Common Stock on an as converted
basis. The Warrants are exercisable for a period of five (5) years from the date of issuance and are exercisable into shares of
Common Stock at an exercise price of $.25 per share.
In connection with the Financing, the Company
filed a (i) Certificate of Amendment to the Certificate of Designations, Preferences and Rights of Series B Convertible Preferred
Stock, (ii) Certificate of Amendment to the Certificate of Designations, Preferences and Rights of Series C Convertible Preferred
Stock, (iii) Certificate of Amendment to the Certificate of Designations, Preferences and Rights of Series D Convertible Preferred
Stock and (iv) Certificate of Amendment to the Certificate of Designations, Preferences and Rights of Series E Convertible Preferred
Stock.
In connection with the Financing, the Company
and a majority of each Series B, Series C, Series D and Series E Preferred Stock, by written consent, agreed to the amendment of
each respective series as follows:
|
· |
Series B Preferred Stock · Eliminate the ratchet provision for subsequent issuances of securities. |
|
|
|
|
· |
Series C Preferred Stock · The conversion price per share of Common Stock will be $0.005; and eliminate the ratchet provision for subsequent issuances of securities. |
|
|
|
|
· |
Series D Preferred Stock · The conversion price per share of Common Stock will be $0.005; and eliminate the ratchet provision for subsequent issuances of securities. |
|
|
|
|
· |
Series E Preferred Stock · Eliminate the ratchet provision for subsequent issuances of securities. |
|
|
|
|
· |
Series B, Series C, Series D and Series E Preferred Stock · Waive the covenant of the Company to refrain from issuing any shares of capital stock senior to or on parity with each series of preferred stock, and to reserve and keep available unissued shares of Common Stock for the purpose of effecting the conversion of the shares of each series of preferred stock for a period of six (6) months from the Closing Date. |
In connection with the Financing,
pursuant to consents and waivers obtained from holders of the Company’s outstanding convertible promissory notes (the “Promissory
Notes”) their respective Promissory Notes were amended as follows, effective upon the issuance of one or more shares of Series
F Preferred Stock: (i) eliminate the ratchet provision for subsequent issuances of securities going forward, (ii) waive the covenant
of the Company to reserve and keep available unissued shares of Common Stock for the purpose of effecting the conversion of the
Promissory Notes and (iii) provide that the conversion price will be $1.25 but for two of the holders holding an aggregate of $920,000
principal amount of Promissory Notes, the conversion price is equal to $0.08 per share of Common Stock and $0.14 per share of Common
Stock, respectively.
In connection with the Financing,
the holders of the Company’s outstanding warrants, exclusive of the Warrants issued as part of the Financing, agreed as follows,
effective upon the issuance of one or more Series F Preferred Stock: (i) eliminate the ratchet provision for subsequent issuances
of securities going forward, (ii) waive the covenant of the Company to reserve and keep available unissued shares of Common Stock
for the purpose of effecting the conversion of the Warrants for a period of six months from the Closing Date and (iii) provide
that the exercise price of the Warrants be the effective price per share, upon cashless exercise, shall be 50% of the fair market
value of the Common Stock on the date of exercise.
In connection with the Financing,
the Company repaid $300,000 of principal on outstanding promissory notes of a certain investor and purchased from such investor
convertible preferred stock, and dividends accrued thereon, having an aggregate stated value of $16,750,000 for the total consideration
of $100.
Based on authoritative guidance, the
entire proceeds from the Financing were credited to preferred stock and additional paid in capital.
During the year ended June 30, 2015,
100 shares of Series F Preferred Stock were converted into 400,000 common shares.
Note
6. Outstanding Warrants
The
following table presents the number of Warrants outstanding at year end June 30, 2015 and June 30, 2014. All Warrants have a 5
year term, an exercise price of $1.25 per common share, except for 44,800 warrants that have an exercise price of $15.625 per
share, and are exercisable at June 30, 2015.
Warrants outstanding at June 30, 2013 | | |
| 1,595,327 | |
Issued | | |
| 1,275,000 | |
Exercised | | |
| — | |
Expired | | |
| — | |
Warrants outstanding at June 30, 2014 | | |
| 2,870,327 | |
Issued | | |
| 9,630,000 | |
Exercised | | |
| — | |
Expired | | |
| — | |
Warrants outstanding at June 30, 2015 | | |
| 12,500,327 | |
On
July 1, 2015, we issued 15 million warrants to investors in connection with the series & Convertible Preferred Stock
Financing. See Note 12 - subsequent Events.
Note
7. Income Taxes
The
reconciliation of income tax benefit at the U.S. statutory rate of 34% for the years ended June 30, 2015 and 2014 to the Company’s
effective tax rate is as follows:
| |
Years Ended | |
| |
June 30, 2015 | | |
June 30, 2014 | |
| |
| | |
| |
U.S. federal statutory rate | |
| -34 | % | |
| -34 | % |
State income tax, net of federal benefit | |
| -6 | % | |
| -6 | % |
Change in valuation allowance | |
| 40 | % | |
| 40 | % |
Income Tax provision (benefit) | |
| 0 | % | |
| 0 | % |
The
tax effects of temporary differences that give rise to the Company’s net deferred tax asset as of June 30, 2015 and 2014
are as follows:
| |
Years Ended | |
| |
June 30, 2015 | | |
June 30, 2014 | |
Deferred Tax Assets | |
| | | |
| | |
Net operating losses | |
$ | 9,200,000 | | |
$ | 8,500,000 | |
Derivative liability | |
| 1,072,000 | | |
| 2,883,700 | |
| |
$ | 10,272,000 | | |
$ | 11,383,700 | |
Less: Valuation allowance | |
| (9,200,000 | ) | |
| (8,500,000 | ) |
Net Deferred Tax Assets | |
$ | 1,072,000 | | |
$ | 2,883,700 | |
| |
| | | |
| | |
Deferred Tax Liabilities | |
| | | |
| | |
Derivative liability | |
$ | (1,072,000 | ) | |
$ | (2,883,700 | ) |
Total Deferred Tax Liabilities | |
$ | (1,072,000 | ) | |
$ | (2,883,700 | ) |
Net Deferred Taxes | |
$ | — | | |
$ | — | |
As
of June 30, 2015, the Company had approximately $23,000,000 of Federal and state net operating loss carryovers (“NOLs”)
which begin to expire in 2025. Utilization of the NOLs may be subject to limitation under Internal Revenue Code Section 382 should
there be a greater than 50% ownership change as determined under regulations.
In
assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or
all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation
of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled
reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based
on the assessment, management has established a full valuation allowance against all of the deferred tax asset because it is more
likely than not that all of the deferred tax asset will not be realized.
The
Company files U.S. federal and states of New York and New Jersey tax returns that are subject to audit by tax authorities beginning
with the year ended June 30, 2012. The Company is not currently under audit for any tax returns
Note
8. Capital Deficiency
Common
stock
On
August 12, 2014, the board of directors approved an amendment to the Company’s Certificate of Incorporation, as amended,
to effect a 1-for-250 reverse stock split on the issued and outstanding common shares. All relevant information relating to numbers
of shares and warrants and per share information have been retrospectively adjusted to reflect the reverse stock split for all
periods presented. The reverse split was effected on February 11, 2015.
During
the fiscal year ended June 30, 2015, we issued 810,000 shares of our common stock to holders of Convertible Preferred Stock upon
their exercise of the conversion feature contained in those securities.
During
the fiscal year ended June 30, 2015, we issued 200,000 shares of our common stock in consideration for services rendered to the
Company.
During
the fiscal year ended June 30, 2014, we issued 593,248 shares of our common stock to holders of Convertible Preferred Stock upon
their exercise of the conversion feature contained in those securities.
During
the fiscal year ended June 30, 2014, we issued 138,000 shares of our common stock in consideration for services rendered to the
Company.
During
the fiscal year ended June 30, 2014, we issued 18,000 shares of our common stock to charitable organizations as charitable donations.
Note
9. Commitments and Contingencies.
In
the ordinary course of business, we enter into agreements with third parties that include indemnification provisions which, in
our judgment, are normal and customary for companies in our industry sector. These agreements are typically with business partners,
clinical sites, and suppliers. Pursuant to these agreements, we generally agree to indemnify, hold harmless, and reimburse indemnified
parties for losses suffered or incurred by the indemnified parties with respect to our product candidates, use of such product
candidates, or other actions taken or omitted by us. The maximum potential amount of future payments we could be required to make
under these indemnification provisions is unlimited. We have not incurred material costs to defend lawsuits or settle claims related
to these indemnification provisions. As a result, the estimated fair value of liabilities relating to these provisions is minimal.
Accordingly, we have no liabilities recorded for these provisions as of June 30, 2015 and 2014.
In
the normal course of business, we may be confronted with issues or events that may result in a contingent liability. These generally
relate to lawsuits, claims, environmental actions or the action of various regulatory agencies. If necessary, management consults
with counsel and other appropriate experts to assess any matters that arise. If, in management’s opinion, we have incurred
a probable loss as set forth by accounting principles generally accepted in the United States, an estimate is made of the loss,
and the appropriate accounting entries are reflected in our financial statements. We do not anticipate that liabilities arising
out of currently pending or threatened lawsuits and claims will have a material adverse effect on our financial position, results
of operations or cash flows.
Note
10. Stock-Based Compensation Plans-
In
December 2006, our stockholders approved the adoption of the “2006 Employee, Director and Consultant Stock Plan” (the
“2006 Stock Plan”), under which 240,000 shares of our common stock are available for issuance under the Plan. The
2006 Stock Plan provides for the grant of either ISOs or non-qualified stock options, which do not qualify as ISOs. The exercise
price of all the stock options granted under the 2006 Stock Plan was the closing price of the stock on the day of the grant. As
of June 30, 2015 and 2014, there are 228,000 stock options available for grant under the 2006 Stock Plan in each year.
A
summary of the 2006 Stock Plan is as follows:
| |
| | | |
| Weighted Average Exercise Price | | |
| Instrinisic value | | |
| Weighted Average Remaining Contractual Life | |
| |
| | | |
| | | |
| | | |
| | |
Options outstanding at June 30, 2013 | |
| 213,243 | | |
$ | 34.87 | | |
$ | — | | |
| 3.35 | |
Expired | |
| (201,243 | ) | |
$ | 34.87 | | |
| | | |
| 3.35 | |
Balance at June 30, 2014 | |
| 12,000 | | |
$ | 0.22 | | |
| — | | |
| 2.00 | |
Expired | |
| — | | |
| | | |
| | | |
| | |
Balance at June 30, 2015 | |
| 12,000 | | |
$ | 0.22 | | |
| — | | |
| 1.00 | |
| |
| | | |
| | | |
| | | |
| | |
Options vested or expected to vest | |
| 12,000 | | |
$ | 0.22 | | |
| — | | |
| 1.00 | |
Total
compensation expense recorded during the year ended June 30, 2015 and 2014 for share-based payment awards was $0.
Note
11. Per Share Data
The
following table sets forth the information needed to compute basic and diluted earnings per share:
| |
Year Ended | |
| |
| | |
| |
| |
| June 30 | | |
| June 30 | |
| |
| 2015 | | |
| 2014 | |
Basic EPS | |
| | | |
| | |
| |
| | | |
| | |
Net income (loss) attributable to common stockholders, basic | |
$ | 5,705,273 | | |
$ | (15,051,544 | ) |
| |
| | | |
| | |
Weighted average shares outstanding | |
| 2,528,108 | | |
| 1,279,007 | |
| |
| | | |
| | |
Basic income earnings per share | |
$ | 2.26 | | |
$ | (11.77 | ) |
| |
| | | |
| | |
Diluted EPS | |
| | | |
| | |
| |
| | | |
| | |
Net income (loss) attributable to common stockholders, basic | |
$ | 5,705,273 | | |
| | |
| |
| | | |
| | |
Preferred stock interest expense | |
| 4,104,496 | | |
| | |
| |
| | | |
| | |
Interest on convertible notes | |
| 1,126,667 | | |
| | |
| |
| | | |
| | |
Change in fair value of derivative liability related to convertible notes | |
| (581,974 | ) | |
| | |
| |
| | | |
| | |
Gain on extinguishment of interest payable | |
| (7,232,864 | ) | |
| | |
| |
| | | |
| | |
Net income (loss) attributable to common stockholders, diluted | |
$ | 3,121,598 | | |
| | |
| |
| | | |
| | |
Weighted average shares outstanding | |
| 2,528,108 | | |
| | |
| |
| | | |
| | |
Dilutive effect of stock options | |
| — | | |
| | |
| |
| | | |
| | |
Dilutive effect of warrants | |
| 9,600,000 | | |
| | |
| |
| | | |
| | |
Dilutive effect of convertible preferred shares | |
| 35,543,821 | | |
| | |
| |
| | | |
| | |
Dilutive effect of convertible notes | |
| 16,726,406 | | |
| | |
| |
| | | |
| | |
Diluted weighted average shares outstanding | |
| 64,398,335 | | |
| | |
| |
| | | |
| | |
Diluted earnings (loss) earnings per share | |
$ | 0.05 | | |
$ | (11.77 | ) |
Note
12. Subsequent Events
In
accordance with authoritative guidance, we have evaluated any events or transactions occurring after June 30, 2013, the balance
sheet date, through the date of filing of this report and note that there have been no such events or transactions that would
require recognition or disclosure in the consolidated financial statements as of and for the year ended June 30, 2015, except
as disclosed below.
Series
G Financing
On
July 1, 2015, (the “Closing Date”) we entered into a stock purchase agreement (the “Purchase Agreement”)
with certain accredited investors (the “Investors”) whereby we issued to the Investors (i) an aggregate of 3,490 shares
of Series G Convertible Preferred Stock; (ii) an aggregate of 1,117 shares of Series H Preferred Stock; and (iii) warrants (the
“Warrants”) to purchase an aggregate of 15,000,000 shares of common stock, par value $0.001 per share (the “Common
Stock”) of the Company (the “Financing”)..
In
connection with the Financing, the Board of Directors (the “Board”) of the Company approved the filing of a Certificate
of Designations, Preferences and Rights of Series G Convertible Preferred Stock (the “Series G Certificate of Designation”)
which was filed with and accepted by the Secretary of State of the State of Delaware on June 30, 2015. Pursuant to the Series
G Certificate of Designation, we established a new series of 10,000 shares, par value $0.001 per share, of Series G Convertible
Preferred Stock (the “Series G Preferred Stock”).
The
Series G Preferred Stock has a right to a liquidation preference of $2,000 per share and is convertible at any time into shares
of our Common Stock at a conversion price of $.10 per share, subject to adjustment. Each share of Series G Preferred Stock has
a stated value of $1,000 (the “Stated Value”) and accrues a dividend of 8% of the Stated Value per annum, which is
payable annually on June 30th in cash or, at the holder’s option, in Common Stock, or a combination thereof. The Series
G Preferred Stock has no voting rights and holders thereof shall vote together with holders of Common Stock on an as converted
basis. The Warrants are exercisable for a period of five (5) years from the date of issuance and are exercisable into shares of
Common Stock of the Company at an exercise price of $.10 per share, subject to adjustment.
Pursuant
to the Purchase Agreement, we granted holders of previously issued Series C and Series D Preferred Stock the right to exchange
their shares of Series C and Series D Preferred Stock for shares of Series G Preferred Stock and holders of previously issued
Series B Preferred Stock the right to exchange their shares of Series B Preferred Stock for Series H shares. The stated value
of each share of exchanged Series B, Series C and Series D Preferred Stock, plus accrued dividends, shall be treated as the cash
value of such shares for purposes of determining the number of shares of Series G and H Preferred Stock to be issued in connection
with such exchange.
Pursuant
to the Series H Certificate of Designations, Preferences and Rights of Series H Convertible Preferred Stock (the “Series
H Certificate of Designation”) which was filed on June 30, 2015, we established a new series of 2,000 shares of Series H
Preferred Stock. The Series H Preferred Stock has a right to a liquidation preference of $2,000 per share and is convertible into
common stock of the Company at a conversion price equal to eight (8) times the Fair Market Value of the underlying Common Stock
into which the Series H Preferred Stock are convertible. “Fair Market Value” shall mean the average of the closing
price of the Common Stock for the five (5) trading days preceding the exchange date of the Series B Preferred Stock for the Series
H Preferred Stock (the “Conversion Price”). The Series H Preferred Stock has no voting rights and holders thereof
shall vote together with holders of Common Stock on an as converted basis.
In
connection with the Financing, we filed a (i) Certificate of Amendment to the Certificate of Designations, Preferences and Rights
of Series F Convertible Preferred Stock (the “Series F Certificate of Designation”).
The
Company and a majority of the Series F Preferred Stock holders, whose agreements contained a “Most Favored Nations”
Provision, by written consent, agreed to the amendment of the series as follows, effective as of the Closing Date: Increase the
liquidation value to $2.000 per share and amend the Conversion Price to $.10 per share.
As
part of the Financing, we reduced the exercise price of an aggregate of 9,600,000 warrants previously issued with the Series F
Preferred Stock in the July 2014 financing to $.10 per share.
We
granted the Investors certain piggyback registration rights with respect to the shares of Common Stock underlying the Warrants
and issuable upon conversion of the Series G and Series H Preferred Stock.
Conversions
of preferred stock into common stock
During
the period beginning on July 1, 2015 and ending on the date of the filing of this Form 10-K, we issued 1,416,700 and 600,000 shares
of our common stock to holders of Series C Convertible Preferred Stock and Series F Convertible Preferred Stock, respectively,
upon conversion of their preferred shares into common stock.
Employment contract
In October 2015, the Company entered into an employment
agreement with Elliot Maza, the Company’s Chairman, CEO and CFO. The Agreement is for a period of three (3) years
unless terminated prior to expiration. The Agreement provides for an annual base salary of $250,000 with eligibility for
certain bonuses. In the event of a Change of Control, as defined in the Agreement, Mr. Maza will receive a cash bonus equal
to three times his last annual base salary plus his annual bonus. In addition, in such event he will receive common stock equal
to 5% of the Company on a fully diluted basis. Such Change of Control compensation is contingent on the Company being valued
at least at $20.0 million in the transaction. The Agreement contains standard non-compete provisions.
ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM
9A. CONTROLS AND PROCEDURES
Evaluation
of Disclosure Controls and Procedures
(a)
Disclosure Controls and Procedures
Our
principal executive officer and principal financial officer has evaluated the effectiveness of our disclosure controls and procedures,
as defined in Rules 13a – 15(e) and 15d – 15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), as of the end of the period covered by this annual report. He has concluded that, based on such evaluation, our
disclosure controls and procedures were not effective due to the material weaknesses in our internal control over financial reporting
as of June 30, 2014, as further described below.
(b)
Management’s Annual Report on Internal Control over Financial Reporting
Overview
Internal
control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) refers to the process designed by, or under the supervision
of, our principal executive officer and principal financial officer, 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 generally accepted accounting principles. Management is responsible for establishing
and maintaining adequate internal control over financial reporting.
Internal
control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its
inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and
is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also
can be circumvented by collusion or improper management override. Because of such limitations, 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.
Management
has used the framework set forth in the report entitled “Internal Control — Integrated Framework” published
by the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission to evaluate the effectiveness of
our internal control over financial reporting. As a result of the material weaknesses described below, management has concluded
that the Company’s internal control over financial reporting was not effective as of June 30, 2014.
Management’s
Assessment
Management
has determined that, as of the June 30, 2015 measurement date, there were material weaknesses in both the design and
effectiveness of our internal control over financial reporting. Management has assessed these deficiencies and has determined
that there were four general categories of material weaknesses in internal control over financial reporting. As a result of
our assessment that material weaknesses in our internal control over financial reporting existed as of June 30, 2014,
management has concluded that our internal control over financial reporting was not effective as of June 30, 2014. A material
weakness in internal controls is a deficiency in internal control, or combination of control deficiencies, that adversely
affects the our ability to initiate, authorize, record, process, or report external financial data reliably in accordance
with accounting principles generally accepted in the United States of America such that there is more than a remote
likelihood that a material misstatement of our annual or interim financial statements that is more than inconsequential will
not be prevented or detected. In the course of making our assessment of the effectiveness of internal controls over financial
reporting, we identified at least two material weaknesses in our internal control over financial
reporting. Specifically, (1) we lack a sufficient number of employees to properly segregate duties and provide
adequate review of the preparation of the financial statements and (2) we lack sufficient independent directors on our Board
of Directors to maintain Audit and other committees consistent with proper corporate governance standards. We have limited
financial resources and only one employee. The lack of personnel is a weakness because it could lead to improper
classification of items and other failures to make the entries and adjustments necessary to comply with U.S. GAAP.
Accordingly, management’s assessment is that the Company’s internal controls over financial reporting were not
effective as of June 30, 2014.
This
Annual Report does not include an attestation report of the Company’s registered accounting firm regarding internal control
over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting
firm pursuant to rules of the Securities and Exchange Commission.
Changes
in Internal Control Over Financial Reporting
No
changes in the Company’s internal control over financial reporting have come to management’s attention during the
Company’s last fiscal quarter that have materially affected, or are likely to materially affect, the Company’s internal
control over financial reporting.
ITEM
9B. OTHER INFORMATION
None.
PART
III
ITEM
10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE
GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Directors
and Executive Officers
The
following table sets forth the name, age and position of our directors, executive officers and significant employees as of the
filing date of this report on Form 10-K. All of our directors hold office until they resign or are removed from office
in accordance with out bylaws.
Name |
|
Age |
|
Title |
|
|
|
|
|
Elliot M. Maza, J.D., C.P.A. |
|
61 |
|
Director |
|
|
|
|
|
Isaac Onn |
|
62 |
|
Director |
|
|
|
|
|
Elliot
M. Maza, J.D., C.P.A., (Inactive). Mr. Maza has served as our Chairman of the Board of Directors, Chief Executive Officer
and Chief Financial Officer since July 2014. Mr. Maza joined the Company in May 2006 as Chief Financial Officer and was promoted
to President and Chief Financial Officer in March 2007. Mr. Maza resigned his position as President of the Company on October
17, 2011 and his position as Chief Financial Officer on October 2012 and was engaged by the Company from that time until July
2014 as our consulting CFO and principal accounting officer on a part time basis. From December 2003 to May 2006 Mr. Maza
was Chief Financial Officer of Emisphere Technologies, Inc., a publicly held biopharmaceutical company specializing in oral drug
delivery. He was a partner at Ernst and Young LLP from March 1999 to December 2003 and served as a Vice President at Goldman Sachs,
Inc., JP Morgan Securities, Inc. and Bankers Trust Securities, Inc. at various times during March 1991 to March 1999. Mr. Maza
was an investment banking associate at Goldman Sachs, Inc. from April 1989 to March 1991. Mr. Maza practiced law at Sullivan and
Cromwell in New York from September 1985 to April 1989. Mr. Maza is qualified to serve as a director of the Company based on his
experience as a senior executive in several biotech and biopharma companies and his positions as chief executive officer of the
Company.
Isaac
Onn. Mr. Onn serves as director on the Board of a number of private and public companies across diverse industry sectors.
He previously served as a director of Diversified Senior Services, Inc., a developer and manager of low and moderate income senior
housing and assisted living facilities. Also, Mr. Onn served as the CEO and a partner of Erez Tal Bar - Fueling Services Ltd.,
an Israeli company that builds and manages fuel stations. Mr. Onn received his degree in business administration and marketing
from the Tel-Aviv College of Management and his LLB, Bachelor of Law degree from Ono Academic College Law School in Israel. Mr.
Onn is qualified to serve as a director of the Company based on prior employment experience and as a director of public and private
companies.
Conflicts
of Interest
Certain
potential conflicts of interest are inherent in the relationships between the Company’s officers and directors and the Company.
From
time to time, one or more of the Company’s affiliates may form or hold an ownership interest in and/or manage other businesses
both related and unrelated to the type of business that the Company own and operate. These persons expect to continue to form,
hold an ownership interest in and/or manage additional other businesses which may compete with the Company’s business with
respect to operations, including financing and marketing, management time and services and potential customers. These activities
may give rise to conflicts between or among the interests of us and other businesses with which the Company’s affiliates
are associated. The Company’s affiliates are in no way prohibited from undertaking such activities, and neither the Company
nor the Company’s shareholders will have any right to require participation in such other activities.
Further,
because we intend to transact business with some of the Company’s officers, directors and affiliates, as well as with firms
in which some of the Company’s officers, directors or affiliates have a material interest, potential conflicts may arise
between the respective interests of us and these related persons or entities. The Company believes that such transactions will
be effected on terms at least as favorable to us as those available from unrelated third parties.
With
respect to transactions involving real or apparent conflicts of interest, we have adopted policies and procedures which require
that: (i) the fact of the relationship or interest giving rise to the potential conflict be disclosed or known to the directors
who authorize or approve the transaction prior to such authorization or approval, (ii) the transaction be approved by a majority
of our disinterested outside directors, and (iii) the transaction be fair and reasonable to us at the time it is authorized or
approved by our directors.
Our
policies and procedures regarding transactions involving potential conflicts of interest are not in writing. We understand
that it will be difficult to enforce our policies and procedures and will rely and trust our officers and directors to follow
our policies and procedures. We will implement our policies and procedures by requiring the officer or director who
is not in compliance with our policies and procedures to remove himself and the other officers and directors will decide how to
implement the policies and procedures, accordingly.
Involvement
in Certain Legal Proceedings
To
the Company’s knowledge, during the past ten (10) years, none of the Company’s directors, executive officers, promoters,
control persons, or nominees has been:
|
■ |
the subject of 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; |
|
■ |
convicted in a criminal proceeding
or is subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); |
|
■ |
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 involvement in any type of business, securities or banking activities;
or |
|
■ |
found by a court of competent jurisdiction
(in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities
or commodities law |
Director
Independence
Our
Board of Directors has determined that currently Isaac Onn qualifies as “independent” as the term is used in Item
407 of Regulation S-K as promulgated by the SEC and in the listing standards of The Nasdaq Stock Market, Inc. – Marketplace
Rule 4200.
Meetings
and Committees of the Board of Directors
Our
Board of Directors held no formal meetings during the most recently completed fiscal year. All proceedings of the Board of Directors
were conducted by resolutions that were consented to in writing by all the directors and filed with the minutes of the proceedings
of the directors. Such resolutions consented to in writing by the directors entitled to vote on that resolution at a meeting of
the directors are, according to the General Corporation Law of the State of Delaware and our bylaws, as valid and effective as
if they had been passed at a meeting of the Board of Directors duly called and held.
Committees
Our
business, property and affairs are managed by or under the direction of the Board of Directors. Members of the Board of Directors
are kept informed of our business through discussion with the chief executive and financial officers and other officers, by reviewing
materials provided to them and by participating at meetings of the board and its committees. We presently do not have any committees
of our Board of Directors; however, our Board of Directors intends to establish various committees at some point in the near future.
Compliance
with Section 16(a) of the Exchange Act
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and executive officers and persons who beneficially
own more than ten percent of a registered class of our equity securities to file with the SEC initial reports of ownership and
reports of change in ownership of common stock and other equity securities of our company. Officers, directors and greater than
ten percent stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.
Based
solely upon a review of Forms 3 and 4 and amendments thereto furnished to us under Rule 16a-3(e) during the fiscal year ended
June 30, 2014, and Forms 5 and amendments thereto furnished to us with respect to the fiscal year ended June 30, 2014, we believe
that during the year ended June 30, 2014, our executive officers, directors and all persons who own more than ten percent of a
registered class of our equity securities have complied with all Section 16(a) filing requirements.
Director
Compensation
All
of our directors hold office until they resign or are removed from office in accordance with our bylaws.
Our
non-employee directors are entitled to receive a directors’ fee of $2,000 per month, in addition to reimbursement for any
expenses incurred by them in attending Board meetings. We have entered into indemnification agreements with each of our directors,
which provides, among other things that we will indemnify each director, under certain circumstances, for defense expenses, damages,
judgments, fines and settlements incurred by the director in connection with actions or proceedings to which he or she may be
a party as a result of his or her position as a member of our Board, and otherwise to the full extent permitted under our bylaws
and state law. During the fiscal year ended June 30, 2014, Isaac Onn, our sole independent director, earned fees of zero.
Code
of Ethics
Our
Board has adopted a Code of Ethics that applies to our Chief Executive Officer and our Chief Financial Officer as well as to our
other senior management and senior financial staff. Our Code of Ethics complies with the requirements imposed by the Sarbanes-Oxley
Act of 2002, as amended, and the rules and regulations issued thereunder for codes of ethics applicable to such officers. Our
Code of Ethics is available, and is incorporated herein by reference, on our website, located at http://www.intellectns.com
Item
11. Executive Compensation.
Summary
Compensation Table
The
following table sets forth certain information about the compensation paid or accrued to the persons who served as our Chief Executive
Officer and all other executive officers during the last two completed fiscal years whose total compensation exceeded $100,000
for that year (the “named executive officers”).
Summary Compensation Table - 2015 |
| |
| |
| |
| |
| |
| |
| |
| |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| Non-Qualified | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| Non-Equity | | |
| Deferred | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| Stock | | |
| Incentive Plan | | |
| Compensation | | |
| All Other | | |
| | |
| |
| | | |
| Salary | | |
| Bonus | | |
| Awards | | |
| Compensation | | |
| Earnings | | |
| Compensation | | |
| Total | |
Name
and Principal Position | |
| Year | | |
| ($) | | |
| ($) | | |
| ($) | | |
| ($) | | |
| ($) | | |
| ($) | | |
| ($) | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Elliot Maza | |
| 2015 | | |
| 350,000 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 350,000 | |
Chief Executive Officer, Chief Financial Officer, Director | |
| 2014 | | |
| 55,000 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 55,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Item
12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The
following table sets forth certain information as of October 9, 2015, regarding the beneficial ownership of shares of our common
stock by each person known to us to be the beneficial owner of more than 5% of our common stock, each of our named executive officers,
each member of our board of directors, and all members of our board of directors and executive officers as a group.
Beneficial
ownership is determined in accordance with rules promulgated under the Exchange Act and generally includes voting and/or investment
power with respect to securities. In computing the number of shares beneficially owned by a person and the percentage ownership
of that person, shares of common stock issuable upon the exercise of stock options, warrants or the conversion of other securities
held by that person that are currently exercisable or convertible, or are exercisable or convertible within 60 days, are deemed
to be issued and outstanding.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
and Address of Beneficial
Holder (1) |
|
Amount
and
Nature of
Beneficial
Ownership |
|
Percent
of Class |
|
|
|
|
|
|
|
|
Elliot Maza |
|
640,000 |
|
15.27 |
% |
|
|
|
|
|
|
|
|
Isaac Onn |
|
120 |
|
0.0034 |
% |
|
|
|
|
|
|
|
|
Directors and executive
officers as a group (2 persons) |
|
640,120 |
|
15.2766 |
% |
|
|
|
|
|
|
|
|
Item
13. Certain Relationships and Related Transactions, and Director Independence.
We
describe below any transactions, arrangements or relationships of which we are aware, as of the date of filing of this current
report, which occurred since the beginning of the last fiscal year or are currently proposed to which we are or will
be a participant (as defined in Item 404 of Regulation S-K); in which the amount involved exceeded or will exceed $120,000; and
in which any related person (as defined in Item 404 of Regulation S-K) has or will have a direct or indirect material interest.
We include in the description below transactions involving certain of our founders and control persons.
None
Item
14. Principal Accountant Fees and Services.
Audit
Fees
The
aggregate fees billed by our principal accountant for the audit of our annual financial statements, review of financial statements
included in the quarterly reports and other fees that are normally provided by the accountant in connection with statutory and
regulatory filings or engagements for the fiscal year ended June 30, 2015 and June 30, 2014 was $38,000 for each year.
Audit-Related
Fees
The
aggregate fees billed by our principal accountant for assurance and advisory services that were related to the performance of
the audit or review of our financial statements for the fiscal year ended June 30, 2015 and June 30, 2014 was $0.00 each year.
Tax
Fees
The
aggregate fees billed for professional services rendered by our principal accountant for tax compliance, tax advice and tax planning
for the fiscal years ended June 30, 2015 and June 30, 2014 was $2,500 each year. These fees related to the preparation of
federal income and state franchise tax returns.
All
Other Fees
The
aggregate fees billed for products and services provided by someone other than our principal accountant for the fiscal year ended
June 30, 2015 and June 30, 2014 was $0.00 each year.
Policy
on Audit
We
do not currently have an Audit Committee. The policy of our Board of Directors, which acts as our Audit Committee,
is to pre-approve all audit and permissible non-audit services provided by the independent auditors. These services may include
audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year
and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget.
The independent auditors and management are required to periodically report to our Board of Directors regarding the extent of
services provided by the independent auditors in accordance with this pre-approval, and the fees for the services performed to
date. The Board of Directors may also pre-approve particular services on a case-by-case basis.
Item
15. Exhibits and Financial Statement Schedules.
The
exhibits filed or furnished with this Form 10-K are shown on the Exhibit List that follows the signatures hereto, which list is
incorporated herein by reference.
EXHIBIT
INDEX
2.1 |
Agreement and Plan of Merger,
dated as of January 25, 2007, by and among GlobePan Resources, Inc., INS Acquisition, Inc., and Intellect Neurosciences, Inc.
(Incorporated by reference to our Current Report on Form 8-K, filed with the Securities and Exchange Commission on January
31, 2007.) |
2.2 |
Sale, Assignment, Assumption and Indemnification
Agreement, dated January 25, 2007, by and between GlobePan Resources, Inc. and Russell Field (Incorporated by reference to
our Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 31, 2007.) |
3.1 |
Plan of Conversion of GlobePan Resources,
Inc. (Nevada), dated January 24, 2007 (Incorporated by reference to our Current Report on Form 8-K, filed with the Securities
and Exchange Commission on January 30, 2007) |
3.2 |
Articles of Conversion for GlobePan
Resources, Inc. (Nevada), dated January 24, 2007 (Incorporated by reference to our Current Report on Form 8-K, filed with
the Securities and Exchange Commission on January 30, 2007) |
3.3 |
Certificate of Conversion for GlobePan
Resources, Inc. (Nevada), dated January 24, 2007 (Incorporated by reference to our Current Report on Form 8-K, filed with the
Securities and Exchange Commission on January 30, 2007) |
3.4 |
Certificate of Incorporation of GlobePan
Resources, Inc. (Delaware), dated January 24, 2007 (Incorporated by reference to our Current Report on Form 8-K, filed with
the Securities and Exchange Commission on January 30, 2007) |
3.5 |
Certificate of Merger of INS Acquisition,
Inc. with and into Intellect Neurosciences, Inc., dated January 25, 2007 (Incorporated by reference to our Current Report
on Form 8-K, filed with the Securities and Exchange Commission on January 31, 2007.) |
3.6 |
Bylaws of GlobePan Resources, Inc.,
dated January 25, 2007 (Incorporated by reference to our Current Report on Form 8-K, filed with the Securities and Exchange
Commission on January 30, 2007) |
3.7 |
Certificate of Amendment to Certificate
of Incorporation of GlobePan Resources, Inc., dated January 26, 2007 (Incorporated by reference to our Current Report on Form
8-K, filed with the Securities and Exchange Commission on January 31, 2007.) |
3.8 |
Certificate of Designation of Series
B Convertible Preferred Stock of the Company (Incorporated by reference to our Current Report on Form 8-K, filed with the
Securities and Exchange Commission on July 16, 2007) |
3.9 |
Certificate of Amendment to Certificate
of Incorporation (Incorporated by reference to the Company’s Form 8-K filed with the SEC on February 25, 2010) |
3.10 |
Certificate of Amendment to Certificate
of Incorporation (Incorporated by reference to the Company’s Form 8-K filed with the SEC on May 10, 2010 |
3.11 |
Certificate of Amendment to Certificate
of Designations, Preferences, and Rights of Series B Convertible Preferred Stock (Incorporated by reference to the Company’s
Form 8-K filed with the SEC on July 31, 2014) |
3.12 |
Certificate of Amendment to Certificate
of Designations, Preferences, and Rights of Series C Convertible Preferred Stock (Incorporated by reference to the Company’s
Form 8-K filed with the SEC on July 31, 2014) |
3.13 |
Certificate of Amendment to Certificate
of Designations, Preferences, and Rights of Series D Convertible Preferred Stock (Incorporated by reference to the Company’s
Form 8-K filed with the SEC on July 31, 2014) |
3.14 |
Certificate of Amendment to Certificate
of Designations, Preferences, and Rights of Series E Convertible Preferred Stock (Incorporated by reference to the Company’s
Form 8-K filed with the SEC on July 31, 2014) |
3.15 |
Certificate of Designations, Preferences,
and Rights of Series F Convertible Preferred Stock (Incorporated by reference to the Company’s Form 8-K filed with the
SEC on July 31, 2014) |
3.16 |
Certificate of Amendment to Certificate
of Incorporation (Incorporated by reference to the Company’s Form 8-K filed with the SEC on August 15, 2014) |
4.1 |
Form of Employee Incentive and Nonqualified
Stock Option Agreement under the 2005 Stock Option Plan (Incorporated by reference to our Current Report on Form 8-K, filed
with the Securities and Exchange Commission on January 31, 2007.) |
4.2 |
Form of Director Stock Option Agreement
under the 2005 Stock Option Plan (Incorporated by reference to our Current Report on Form 8-K, filed with the Securities and
Exchange Commission on January 31, 2007.) |
4.3 |
Form of Notice of Stock Option Award
under 2006 Equity Incentive Plan (Incorporated by reference to our Current Report on Form 8-K, filed with the Securities and
Exchange Commission on January 31, 2007.) |
4.4 |
Form of Convertible Note Warrant (Incorporated
by reference to our Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 31, 2007.) |
4.5 |
Form of Convertible Note Warrant (Incorporated
by reference to our Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 31, 2007.) |
4.6 |
Form of Series B Warrant (Incorporated
by reference to our Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 31, 2007.) |
4.7 |
Form of Extension Warrant (Incorporated
by reference to our Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 31, 2007.) |
4.8 |
Form of Exchange Agreement by and between
the Company and certain holders of common stock of the Company (Incorporated by reference to our Current Report on Form 8-K,
filed with the Securities and Exchange Commission on July 16, 2007) |
4.9 |
Form of Convertible Promissory Note
(Incorporated by reference to our Current Report on Form 8-K, filed with the Securities and Exchange Commission on July 3,
2007) |
4.10 |
Form of Warrant (Incorporated by reference
to our Current Report on Form 8-K, filed with the Securities and Exchange Commission on July 3, 2007) |
4.11 |
Form of Promissory Note (Incorporated
by reference to the Company’s Form 8-K filed with the SEC on August 18, 2009) |
4.12 |
Form of Warrant (Incorporated by reference
to the Company’s Form 8-K filed with the SEC on August 18, 2009) |
4.13 |
Convertible Promissory Note (Incorporated
by reference to the Company’s Form 8-K filed with the SEC on February 25, 2010) |
4.14 |
Convertible Promissory Note (Incorporated
by reference to the Company’s Form 8-K filed with the SEC on April 29, 2010) |
4.15 |
Common Stock Purchase Warrant (Incorporated
by reference to the Company’s Form 8-K filed with the SEC on April 29, 2010) |
4.16 |
Common Stock Purchase Warrant (Incorporated
by reference to the Company’s Form 8-K filed with the SEC on April 29, 2010) |
4.17 |
Common Stock Purchase Warrant (Incorporated
by reference to the Company’s Form 8-K filed with the SEC on April 29, 2010) |
4.18 |
Form of Common Stock Purchase Warrant
(Incorporated by reference to the Company’s Form 8-K filed with the SEC on July 31, 2014) |
10.1 |
Form of Indemnification Agreement by
and between Intellect Neurosciences and each of: Kelvin Davies, William P. Keane, Harvey L. Kellman, Elliot Maza, Kathleen
P. Mullinix, Eliezer Sandberg and David Woo (Incorporated by reference to our Current Report on Form 8-K, filed with the Securities
and Exchange Commission on January 31, 2007.) |
10.2 |
2005 Employee, Director and Consultant
Stock Option Plan (Incorporated by reference to our Current Report on Form 8-K, filed with the Securities and Exchange Commission
on January 31, 2007.) |
10.3 |
2006 Equity Incentive Plan (Incorporated
by reference to our Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 31, 2007.) |
10.4 |
Amendment No. 1 to the 2006 Equity
Incentive Plan (Incorporated by reference to our Current Report on Form 8-K, filed with the Securities and Exchange Commission
on July 16, 2007) |
10.5 |
Asset Transfer Agreement, dated as
of June 23, 2005, by and between Intellect Neurosciences, Inc. and Mindset Biopharmaceuticals (USA), Inc. (Incorporated by
reference to our Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 31, 2007.) |
10.6 |
License Agreement by and between New
York University and Mindset Limited, effective as of August 10, 1998; Amendment to the 1998 Agreement, effective as of September
2002 (Incorporated by reference to our Current Report on Form 8-K, filed with the Securities and Exchange Commission on January
31, 2007 and our Annual Report on Form 10-K SB, filed with the Securities and Exchange Commission on October 15, 2007) ** |
10.7 |
Research and License Agreement by and
between the South Alabama Medical Science Foundation and Mindset Limited, effective as of August 10, 1998 (the “1998
Agreement”); Amendment I to the 1998 Agreement, effective as of September 11, 2000 (the “Amendment I”);
and Amendment II to the 1998 Agreement, effective as of September 1, 2002 (Incorporated by reference to our Current Report
on Form 8-K, filed with the Securities and Exchange Commission on January 31, 2007 and our Annual Report on Form 10-K SB,
filed with the Securities and Exchange Commission on October 15, 2007) ** |
10.8 |
Transgenic Animal Non-Exclusive License
and Sponsored Research Agreement, dated as of October 24, 1997, by and between Intellect Neurosciences, Inc. and Mayo Foundation
for Medical Education and Research (Incorporated by reference to our Current Report on Form 8-K, filed with the Securities
and Exchange Commission on January 31, 2007.) |
10.9 |
Assignment Agreement, dated as of June
6, 2000, by and between Mindset Biopharmaceuticals (USA), Inc. and Dr. Benjamin Chain (Incorporated by reference to our Current
Report on Form 8-K, filed with the Securities and Exchange Commission on January 31, 2007.) |
10.10 |
Research and License Agreement by and
between New York University and Intellect Neurosciences, Inc., effective as of April 1, 2006 (Incorporated by reference to
our Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 31, 2007 and our Annual Report
on Form 10-K SB, filed with the Securities and Exchange Commission on October 15, 2007) ** |
10.11 |
Beta-Amyloid Specific, Humanized Monoclonal
Antibody Purchase and Sale Agreement effective as of December 26, 2006 by and between the Company and Immuno-Biological Laboratories
Co., Ltd. (Incorporated by reference to our Annual Report on Form 10-K SB, filed with the Securities and Exchange Commission
on October 15, 2007) ** |
10.12 |
Lease Agreement, dated as of July 11,
2005, by and between Intellect Neurosciences, Inc. and Scandia Realty Partnership Limited (Incorporated by reference to our
Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 31, 2007.) |
10.13 |
English Summary of Israel Lease Agreement
in Hebrew Language by and between Intellect Neurosciences (Israel) Ltd. and Africa Israel Nechasim Ltd. (Incorporated by reference
to our Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 31, 2007.) |
10.14 |
Amended and Restated Employment Agreement,
dated as of January 15, 2007, by and between Intellect Neurosciences, Inc. and Daniel Chain (Incorporated by reference to
our Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 31, 2007.) |
10.15 |
Amended and Restated Employment Agreement,
dated as of January 15, 2007, by and between Intellect Neurosciences, Inc. and Elliot Maza (Incorporated by reference to our
Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 31, 2007.) |
10.16 |
Employment Agreement, dated as of June
25, 2005, by and between Intellect Neurosciences, Inc. and Vivi Ziv (Incorporated by reference to our Current Report on Form
8-K, filed with the Securities and Exchange Commission on January 31, 2007.) |
10.17 |
Consulting Agreement, dated as of January
3, 2007, by and between Intellect Neurosciences, Inc. and Mark Germain (Incorporated by reference to our Current Report on
Form 8-K, filed with the Securities and Exchange Commission on January 31, 2007.) |
10.18 |
Consulting Agreement, dated as of July
1, 2005, by and between Intellect Neurosciences, Inc. and Harvey Kellman (Incorporated by reference to our Current Report
on Form 8-K, filed with the Securities and Exchange Commission on January 31, 2007.) |
10.19 |
Consulting Agreement, dated as of December
1, 2005, by and between Intellect Neurosciences, Inc. and Kelvin Davies (Incorporated by reference to our Current Report on
Form 8-K, filed with the Securities and Exchange Commission on January 31, 2007.) |
10.20 |
License Agreement by and among Intellect
Neurosciences, Inc. and AHP Manufacturing BV acting through its Wyeth Medica Ireland Branch and Elan Pharma International
Limited, as of May 13, 2008 (Incorporated by reference to our Annual Report on Form 10-K SB, filed with the Securities and
Exchange Commission on November 6, 2008) ** |
10.21 |
Research and Collaboration Agreement
by and between Medical Research Council Technology and Intellect Neurosciences, Inc., as of August 6, 2007 (Incorporated by
reference to our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on November 19, 2008) ** |
10.22 |
Amendment to Collaborative Research
Agreement between Medical Research Council Technology and Intellect Neurosciences, Inc., as of June 19, 2008 (Incorporated
by reference to our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on November 19, 2008)
** |
10.23 |
Option & License Agreement by and
among Intellect Neurosciences, Inc. and [**], as of October 3, 2008 (Incorporated by reference to our Quarterly Report on
Form 10-Q, filed with the Securities and Exchange Commission on February 17, 2009) ** |
10.24 |
Option & License Agreement by and
between Intellect Neurosciences, Inc. and Glaxo Group Limited, dated as of April 29, 2009 (Incorporated by reference to our
Annual Report on Form 10-KSB, filed with the Securities and Exchange Commission on October 13, 2009) ** |
10.25 |
Employment Agreement between the Company
and Dr. Daniel Chain (Incorporated by reference to the Company’s Form 10-K filed with the SEC on October 15, 2013) |
10.26 |
Employment Agreement between the Company
and Elliot Maza (Incorporated by reference to the Company’s Form 10-K filed with the SEC on October 15, 2013) |
10.27 |
Securities Purchase Agreement by and
between Intellect Neurosciences, Inc. and Purchasers Set Forth Therein, dated July 25, 2014 (Incorporated by reference to
the Company’s Form 8-K filed with the SEC on July 31, 2014) |
10.28 |
Registration Rights Agreement by and
between Intellect Neurosciences, Inc. and Purchasers Set Forth Therein, dated July 25, 2014 (Incorporated by reference to
the Company’s Form 8-K filed with the SEC on July 31, 2014) |
10.29 |
Employment Agreement between the
Company and Elliot Maza |
14.1 |
Code of Ethics and Business Conduct
(Incorporated by reference to our Current Report on Form 8-K, filed with the Securities and Exchange Commission on January
31, 2007.) |
21.1 |
List of Subsidiaries (Incorporated
by reference to our Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 31, 2007.) |
31.1 |
Certification pursuant to Rule 13a-14(a)
and 15d-14(a) as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith) |
31.2 |
Certification pursuant to Rule 13a-14(a)
and 15d-14(a) as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith) |
32.1 |
Certification pursuant to Rule 18 U.S.C
Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley act of 2002 (filed herewith) |
32.2 |
Certification pursuant to Rule 18 U.S.C
Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley act of 2002 (filed herewith) |
101 INS |
XBRL Instance Document |
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101 SCH |
XBRL Taxonomy Extension Schema Document |
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101 CAL |
XBRL Taxonomy Calculation Linkbase Document |
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101 LAB |
XBRL Taxonomy Labels Linkbase Document |
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101 PRE |
XBRL Taxonomy Presentation Linkbase Document |
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101 DEF |
XBRL Taxonomy Extension Definition Linkbase Document |
** |
Confidential treatment has been granted for the redacted portions of this agreement. A complete copy of this agreement, including the redacted portions, has been filed separately with the Securities and Exchange Commission. |
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
In
accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
Dated: October 13, 2015 |
INTELLECT NEUROSCIENCES, INC. |
|
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/s/ Elliot Maza |
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Elliot Maza |
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Chief Executive Officer & CFO |
SIGNATURES |
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TITLE |
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DATE |
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/s/ Elliot Maza |
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Elliot Maza |
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Chief Executive Officer & CFO and Director |
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October 13, 2015 |
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/s/ Isaac Onn |
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Isaac Onn |
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Director |
|
October 13, 2015 |
Exhibit 10.29
EMPLOYMENT
AGREEMENT
Employment
Agreement (“Agreement”) made and entered into as of October 12, 2015 by and between Intellect Neurosciences, Inc., a
Delaware corporation with offices at 550 Sylvan Avenue, Suite 101, Englewood Cliffs, NJ 07632 (the “Company”), and Elliot
Maza, an individual residing at 60 West 66th Street, Apt 32G, New York, NY 10023 (the “Executive”).
The
Executive is being employed by the Company as Chairman of the Board of Directors, Chief Executive Officer and Chief Financial
Officer. The parties desire to enter into an employment agreement and to set forth herein the terms and conditions of the Executive’s
continued employment by the Company and its subsidiaries.
NOW,
THEREFORE, in consideration of the mutual covenants and agreements set forth herein and the mutual benefits to be derived here
from, the Company and the Executive agree as follows:
1. Employment.
(a) Duties.
The Company shall employ the Executive, on the terms set forth in this Agreement, as its Chairman of the Board of Directors, Chief
Executive Officer and Chief Financial Officer. The Executive accepts such employment with the Company and shall perform and fulfill
such duties as are assigned to him hereunder consistent with his status as a senior executive of the Company devoting his best
efforts and a substantial portion of his time and attention to the performance and fulfillment of his duties and to the advancement
of the interests of the Company, subject only to the direction, approvals, control and directives of the Company’s Board of Directors
(the “Board”). Nothing contained herein shall be construed, however, to prevent the Executive from trading in or managing,
for his own account and benefit, in stocks, bonds, securities, real estate, commodities or other forms of investments (subject
to law and Company policy with respect to trading in Company securities). The Company further acknowledges and agrees that Executive
may devote reasonable periods to other business activities and join community and civic boards so long as such activities and
service do not, individually or in the aggregate, materially interfere with his duties to the Company, violate Section 8 below
or pose a conflict of interest to his role as an Executive of this Company. Unless otherwise indicated by the context, the term
“Company” shall include the Company and all its subsidiaries.
(b) Place
of Performance. In connection with his employment by the Company, the Executive shall be based at the Company’s principal
place of business in New Jersey, except when required for travel on Company business.
2. Term.
The Executive’s employment under this Agreement shall commence as of August, 2015 (the “Commencement Date”) and
shall, unless sooner terminated in accordance with the provisions hereof, continue uninterrupted until September, 2018 (“Term”).
As used herein “Year” shall refer to a twelve month period ending December 31.
3. Compensation.
(a) Cash
Compensation. Executive shall receive an annual “Base Salary” during the Term. The Base Salary shall be at the rate
of $250,000 per annum with increases subject to a semi-annual review by the Board of Directors.
(b) Restricted
Stock Award. As soon as practicable following execution of this Agreement, the Company shall grant to Executive restricted
common stock or otherwise make available to Executive convertible preferred stock in an amount equal to five (5) percent of the
Company’s total outstanding shares, taking into account only common shares currently outstanding. Executive shall be entitled
to an additional grant of restricted stock each year during the Employment Term to the extent necessary for him to maintain a
five (5) percent ownership interest in the Company after taking into account any transfers or sales of equity by Executive during
each year.
(c) Annual
Bonus. Executive shall be eligible to receive an annual cash bonus based upon the performance of the Company, in the sole
discretion of the Board (the “Annual Bonus”).
(d) Sale
Bonus. In consideration of Executive’s prior service to the Company and the service to be provided hereunder, in the
event the Company consummates a Change in Control Transaction (defined below) during the Term, Executive shall receive a cash
bonus in an amount equal to three (3) times the sum of Executive’s last annual Base Salary plus Annual Bonus (the “Sale
Bonus”). In addition, immediately prior to a Change in Control Transaction, Executive shall be entitled to an additional
grant of restricted stock to the extent necessary for him to obtain a five percent (5%) ownership interest in the Company on a
fully diluted basis after taking into account any transfers or sales of equity by Executive during the year.
“Change
in Control Transaction” means the consummation by the Company (whether directly involving the Company or indirectly
involving the Company through one or more intermediaries) of (A) a merger, consolidation, reorganization, or business combination
or (B) a sale or other disposition of all or substantially all of the Company’s assets in any single transaction or series
of related transactions; in a transaction in which the pre-transaction value of the Company on a fully diluted basis is not less
than $20 million.
4. Insurance.
(a) Health
Insurance and Other Benefits. During the Term, the Executive shall be entitled to all employee benefits generally offered
by the Company to its executive officers and key management employees, including, without limitation, all pensions, profit sharing,
retirement, stock option, salary continuation, deferred compensation, disability insurance, hospitalization insurance, major medical
insurance, medical reimbursement, survivor income, life insurance or any other benefit plan or arrangement established and maintained
by the Company, subject to the rules and regulations then in effect regarding participation therein.
(b) Keyman
Insurance. The Company may obtain keyman life insurance upon the life of the Executive in amounts to be determined from time
to time by the Company.
5. Expenses.
(a) Reimbursement
of Expenses. The Executive shall be reimbursed for all items of travel, entertainment and miscellaneous expenses that the
Executive reasonably incurs in connection with the performance of his duties hereunder, provided the Executive submits to the
Company such statements and other evidence supporting said expenses as the Company may reasonably require.
(b) Automobile
Allowance. The Executive shall be reimbursed for the expenses of owning or leasing an automobile suitable for his position
and consistent with Company practices, including the expenses of operating, insuring and parking such automobile, provided the
Executive submits to the Company such statements and other evidence supporting such expenses as the Company may require.
6. Vacation.
The Executive shall be entitled to not less than four (4) weeks of vacation in any calendar year. Any unused vacation time
in a year shall be accumulated and increase the amount of vacation time in subsequent years.
7. Termination
of Employment.
(a) Death
or Total Disability. In the event of the death of the Executive during the Term, this Agreement shall terminate as of the
date of the Executive’s death. In the event of the Total Disability (as that term is defined below) of the Executive for sixty
(60) days in the aggregate during any consecutive nine (9) month period during the Term, the Company shall have the right to terminate
this Agreement by giving the Executive thirty (30) days’ prior written notice thereof, and upon the expiration of such thirty
(30) day period, the Executive’s employment under this Agreement shall terminate. If the Executive shall resume his duties within
thirty (30) days after receipt of such a notice of termination and continue to perform such duties for four (4) consecutive weeks
thereafter, this Agreement shall continue in full force and effect, without any reduction in Base Salary and other benefits, and
the notice of termination shall be considered null and void and of no effect. Upon termination of this Agreement under this Paragraph
7(a), the Company shall have no further obligations or liabilities under this Agreement, except to pay to the Executive’s estate
or the Executive, as the case may be, (i) the portion, if any, that remains unpaid of the Base Salary for the Year in which termination
occurred, but in no event less than six (6) months’ Base Salary; and (ii) the amount of any expenses reimbursable in accordance
with Paragraph 4 above, and any automobile allowance due under Paragraph 5 above; and (iii) any amounts due under any Company
benefit, welfare or pension plan. Except as otherwise provided by their terms, any stock options not vested at the time of the
termination of this Agreement under this Paragraph 7(a) shall immediately become fully vested.
The
term “Total Disability” as used herein, shall mean a mental or physical condition which in the reasonable opinion of
an independent medical doctor selected by the Company renders the Executive unable or incompetent to carry out the material duties
and responsibilities of the Executive under this Agreement at the time the disabling condition was incurred. In the event the
Executive disagrees with such opinion, the Executive may, at his sole expense, select an independent medical doctor and, in the
event that doctor disagrees with the opinion of the doctor selected by the Company, they shall select a third independent medical
doctor, and the three doctors shall, by majority vote, determine whether the employee has suffered Total Disability. The expense
of the third doctor shall be shared equally by the Company and the Executive. Notwithstanding the foregoing, if the Executive
is covered under any policy of disability insurance under Paragraph 3(c) above, under no circumstances shall the definition of
Total Disability be different from the definition of that term in such policy.
(b) Discharge
for Cause. The Company may discharge the Executive for “Cause” upon notice and thereby immediately terminate his
employment under this Agreement. For purposes of this Agreement, the Company shall have “Cause” to terminate the Executive’s
employment if the Executive, in the reasonable judgment of the Company, (i) materially breaches any of his agreements, duties
or obligations under this Agreement and has not cured such breach or commenced in good faith to correct such breach within thirty
(30) days after notice; (ii) embezzles or converts to his own use any funds of the Company or any client or customer of the Company;
(iii) converts to his own use or unreasonably destroys, intentionally, any property of the Company, without the Company’s consent;
(iv) is convicted of a crime; (v) is adjudicated an incompetent; or (vi) is habitually intoxicated or is diagnosed by an independent
medical doctor to be addicted to a controlled substance (any disagreement of Executive shall be resolved using the procedure provided
in Paragraph 7(a) above).
(c) Termination
by Executive. Executive may terminate this Agreement for the failure by the Company to comply with the material provisions
of this Agreement which failure is not cured within thirty (30) days after notice (“Good Reason”).
(d) Severance
upon Involuntary Termination or Voluntary Resignation with Good Reason. If Executive’s employment is terminated or Executive
resigns for Good Reason, Executive shall be entitled to receive the additional benefits provided below:
(i) Executive
shall be entitled to receive severance pay in an amount equal to the sum of Executive’s Base Salary for the last 12 month period,
at the annualized rate in effect on the termination date plus last Annual Bonus;
(ii) any
outstanding stock options or shares of restricted stock that are unvested shall vest and Executive shall have the right to exercise
any vested stock options for the remainder of the exercise period; and
(iii) continued
participation in all medical, health and life insurance plans at the same benefit level at which he was participating on the date
of the termination of his employment until the earlier of the end of six (6) months or the date, or dates, he receives equivalent
coverage and benefits under the plans and programs of a subsequent employer (such coverage and benefits to be determined on a
coverage-by-coverage, or benefit-by-benefit, basis).
Executive
shall not be entitled to receive the Severance payment described in this paragraph if he is paid a Sale Bonus.
(e) No
Mitigation. The Executive shall not be required to mitigate the amount of any payment or benefit provided for in this Agreement
by seeking other employment or otherwise, not shall the amount of any payment provided for in this Agreement be reduced by any
compensation earned by the Executive as the result of his employment by another employer.
8. Restrictive
Covenant.
(a) Competition.
As used herein “Company Business” shall mean any business which the Company is actively pursuing or actively considering
while the executive was employed by the Company provided that upon termination or execution of this agreement the term “Company
Business” shall refer to any arrangement or contract or relation of the Company or any subsidiary existing or actually pursued
at the time of termination or expiration of the Agreement. The Executive undertakes and agrees that during the term of this Agreement
and for a period of one year after the date of termination or expiration of this Agreement he will not compete, directly or indirectly,
with respect to a Company Business or participate as a director, officer, employee, agent, consultant, representative or otherwise,
or as a stockholder, partner or member of a joint venture, or have any direct or indirect financial interest, including, without
limitation, the interest of a creditor, in any business competing with respect to a Company Business. Executive acknowledges that
such prospects represent a corporate opportunity or are the property of the Company and Executive should have no rights with respect
to such properties on projects. Executive further undertakes and agrees that during the term of the Agreement and for a period
of one year after the date of termination or expiration of this Agreement he will not, directly or indirectly employ, cause to
be employed, or solicit for employment any of Company’s or its subsidiaries’ employees. Notwithstanding the foregoing, the provisions
of the Paragraph 7(a) shall not apply to termination by the Executive pursuant to Section 7(c) or by the Company without cause.
(b) Scope
of Covenant. Should the duration, geographical area or range or proscribed activities contained in Paragraph 8(a) above be
held unreasonable by any court of competent jurisdiction, then such duration, geographical area or range of proscribed activities
shall be modified to such degree as to make it or them reasonable and enforceable.
(c) Non-Disclosure
of Information.
(i) The
Executive shall (i) never, directly or indirectly, disclose to any person or entity for any reason, or use for his own personal
benefit, any “Confidential Information” (as hereinafter defined) either during his employment with the Company or following
termination of that employment for any reason (ii) at all times take all precautions necessary to protect from loss or disclosure
by him of any and all documents or other information containing, referring or relating to such Confidential Information, and (iii)
upon termination of his employment with the Company for any reason, the Executive shall promptly return to the Company any and
all documents or other tangible property containing, referring or relating to such Confidential Information, whether prepared
by him or others.
(ii) Notwithstanding
any provision to the contrary in this Paragraph 8(c), this paragraph shall not apply to information which the Executive is called
upon by legal process regular on its face (including, without limitation, by subpoena or discovery requirement) to disclose or
to information which has become part of the public domain or is otherwise publicly disclosed through no fault or action of the
Executive.
(iii) For purposes of this Agreement, “Confidential Information” means any information relating in any way to the business
of the Company disclosed to or known to the Executive as a consequence of, result of, or through the Executive’s employment by
the Company which consists of technical and nontechnical information about the Company’s products, processes, computer programs,
concepts, forms, business methods, data, any and all financial and accounting data, marketing, customers, customer lists, and
services and information corresponding thereto acquired by the Executive during the term of the Executive’s employment by the
Company. Confidential Information shall not include any of such items which are published or are otherwise part of the public
domain, or freely available from trade sources or otherwise.
(iv) Upon termination of this Agreement for any reason, the Executive shall turn over to the Company all tangible
property then in the Executive’s possession or custody which belongs or relates to the Company. The Executive shall not retain
any copies or reproductions of computer programs, correspondence, memoranda, reports, notebooks, drawings, photographs, or other
documents which constitute Confidential Information.
9. Arbitration.
(a) Any
and all other disputes, controversies and claims arising out of or relating to this Agreement, or with respect to the interpretation
of this Agreement, or the rights or obligations of the parties and their successors and permitted assigns, whether by operation
of law or otherwise, shall be settled and determined by arbitration in New York City, New York pursuant to the then existing rules
of the American Arbitration Association (“AAA”) for commercial arbitration.
(b) In
the event that the Executive disputes a determination that Cause exists for terminating his employment hereunder pursuant to Paragraph
7(b), or the Company disputes the determination that Good Reason exists for the Executive’s termination of this Agreement pursuant
to Paragraph 7(c), either party disputing this determination shall serve the other with written notice of such dispute (“Dispute
Notice”) within thirty (30) days after the date the Executive is terminated for Cause or the date the Executive terminates
this Agreement for Good Reason. Within fifteen (15) days thereafter, the Executive or the Company, as the case may be, shall,
in accordance with the Rules of the AAA, file a petition with the AAA for arbitration of the dispute, the costs thereof to be
shared equally by the Executive and the Company unless an order of the AAA provides otherwise. If the Executive serves a Dispute
Notice upon the Company, an amount equal to the portion of the Base Salary Executive would be entitled to receive hereunder shall
be placed by the Company in an interest-bearing escrow account mutually agreeable to the parties or the Company shall deliver
an irrevocable letter of credit for such amount plus interest containing terms mutually agreeable to the parties. If the AAA determines
that Cause existed for the termination, the escrowed funds and accrued interest shall be paid to the Company. However, in the
event the AAA determines that the Executive was terminated without Cause or that Executive resigned for Good Reason, the escrowed
funds and accrued interest shall be paid to the Executive.
(c) Any
proceeding referred to in Paragraph 9(a) or (b) shall also determine Executive’s entitlement to legal fees as well as all other
disputes between the parties relating to Executive’s employment.
(d) The
parties covenant and agree that the decision of the AAA shall be final and binding and hereby waive their right to appeal therefrom.
10. Indemnity.
The Company shall indemnify and hold Executive harmless from all liability to the full extent permitted by the laws of its
state of incorporation.
11.
Code Section 409A.
(a) The
provisions of Section 7 of this Agreement are not intended to provide for any deferral of compensation subject to Section 409A
of the Internal Revenue Code, as amended (the “Code”) and, accordingly, the severance payments payable under Sections
7(d)(i) shall be paid in accordance with such provisions, but in no event later than the later of: (A) the fifteenth (15th) day
of the third month following Executive’s first taxable year in which such severance benefit is no longer subject to a substantial
risk of forfeiture, and (B) the fifteenth (15th) day of the third month following first taxable year of the Company in which such
severance benefit is no longer subject to substantial risk of forfeiture, as determined in accordance with Code Section 409A and
any Treasury Regulations and other guidance issued thereunder. To the extent applicable, this Agreement shall be interpreted in
accordance with Code Section 409A and Department of Treasury regulations and other interpretive guidance issued thereunder.
(b) If
the Executive is a “specified employee” (as defined in Section 409A of the Code), as determined by the Company in
accordance with Section 409A of the Code, on the date of the Executive’s Separation from Service, to the extent that the
payments or benefits under this Agreement are subject to Section 409A of the Code and the delayed payment or distribution of all
or any portion of such amounts to which Executive is entitled under this Agreement is required in order to avoid a prohibited
distribution under Section 409A(a)(2)(B)(i) of the Code, then such portion deferred pursuant to this Section 11(b) shall be paid
or distributed to Executive in a lump sum on the earlier of (A) the date that is six (6) months following Executive’s Separation
from Service, (B) the date of Executive’s death or (C) the earliest date as is permitted under Section 409A of the Code.
Any remaining payments due under the Agreement shall be paid as otherwise provided herein.
(c) To
the extent applicable, this Agreement shall be interpreted in accordance with the applicable exemptions from Section 409A of the
Code. If Executive and the Company determine that any payments or benefits payable under this Agreement intended to comply with
Sections 409A(a)(2), (3) and (4) of the Code do not comply with Section 409A of the Code, Executive and the Company agree to amend
this Agreement, or take such other actions as Executive and the Company deem reasonably necessary or appropriate, to comply with
the requirements of Section 409A of the Code and the Treasury Regulations thereunder (and any applicable transition relief) while
preserving the economic agreement of the parties. To the extent that any provision in this Agreement is ambiguous as to its compliance
with Section 409A of the Code, the provision shall be read in such a manner that no payments payable under this Agreement shall
be subject to an “additional tax” as defined in Section 409A(a)(1)(B) of the Code.
(d) Any
reimbursement of expenses or in-kind benefits payable under this Agreement shall be made in accordance with Treasury Regulation
Section 1.409A-3(i)(1)(iv) and shall be paid on or before the last day of Executive’s taxable year following the taxable
year in which Executive incurred the expenses. The amount of expenses reimbursed or in-kind benefits payable in one year shall
not affect the amount eligible for reimbursement or in-kind benefits payable in any other taxable year of Executive’s, and
Executive’s right to reimbursement for such amounts shall not be subject to liquidation or exchange for any other benefit.
(e) In
the event that the amounts payable under Sections 7(d)(1) are subject to Section 409A of the Code and the timing of the delivery
of Executive’s release could cause such amounts to be paid in one or another taxable year, then notwithstanding the payment
timing set forth in such sections, such amounts shall not be payable until the later of (A) the payment date specified in such
Section or (B) the first business day of the taxable year following Executive’s Separation from Service.
11. Miscellaneous.
(a) Notices.
Any notice, demand or communication required or permitted under this Agreement shall be in writing and shall either be hand-delivered
to the other party or mailed to the addresses set forth below by registered or certified mail, return receipt requested or sent
by overnight express mail or courier or facsimile to such address, if a party has a facsimile machine. Notice shall be deemed
to have been given and received when so hand-delivered or after three (3) business days when so deposited in the U.S. Mail, or
when transmitted and received by facsimile or sent by express mail properly addressed to the other party. The addresses are:
To
the Company:
Intellect
Neurosciences, Inc.
550
Sylvan Avenue, Suite 101,
Englewood
Cliffs, NJ 07632
Attention:
Chief Executive Officer
To
the Executive:
Elliot
Maza,
60
West 66th Street, Apt 32G
New
York, NY 10023
The
foregoing addresses may be changed at any time by notice given in the manner herein provided.
(b) Integration;
Modification. This Agreement constitutes the entire understanding and agreement between the Company and the Executive regarding
its subject matter and supersedes all prior negotiations and agreements, whether oral or written, between them with respect to
its subject matter. This Agreement may not be modified except by a written agreement signed by the Executive and a duly authorized
officer of the Company.
(c) Enforceability.
If any provision of this Agreement shall be invalid or unenforceable, in whole or in part, such provision shall be deemed to be
modified or restricted to the extent and in the manner necessary to render the same valid and enforceable, or shall be deemed
excised from this Agreement, as the case may require, and this Agreement shall be construed and enforced to the maximum extent
permitted by law as if such provision had been originally incorporated herein as so modified or restricted, or as if such provision
had not been originally incorporated herein, as the case may be.
(d) Binding
Effect. This Agreement shall be binding upon and inure to the benefit of the parties, including and their respective heirs,
executors, successors and assigns, except that this Agreement may not be assigned by the Executive.
(e) Waiver
of Breach. No waiver by either party of any condition or of the breach by the other of any term or covenant contained in this
Agreement, whether by conduct or otherwise, in any one (1) or more instances shall be deemed or construed as a further or continuing
waiver of any such condition or breach or a waiver of any other condition, or the breach of any other term or covenant set forth
in this Agreement. Moreover, the failure of either party to exercise any right hereunder shall not bar the later exercise thereof
with respect to other future breaches.
(f) Governing
Laws. This Agreement shall be governed by the internal laws of the State of New York.
(g) Headings.
The headings of the various sections and paragraphs have been included herein for convenience only and shall not be considered
in interpreting this Agreement.
(h) Counterparts.
This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together
will constitute one and the same instrument.
(i) Due
Authorization. The Company represents that all corporate action required to authorize the execution, delivery and performance
of this Agreement has been duly taken.
IN
WITNESS WHEREOF, this Agreement has been executed by the Executive and, on behalf of the Company, by its duly authorized officer
on the day and year first above written.
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INTELLECT NEUROSCIENCES, INC |
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By: |
/s/ Isaac Onn |
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Name: |
Isaac Onn |
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Title: |
Director |
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EXECUTIVE |
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/s/ ELLIOT MAZA |
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Name: |
Elliot Maza |
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Title: |
Chief Executive Officer |
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EXHIBIT
31.2
CERTIFICATION
OF PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER
PURSUANT
TO SECTION 302 OF THE
SARBANES-OXLEY
ACT OF 2002
I, Elliot
M. Maza, certify that:
1. |
have reviewed this annual report on Form 10-K of Intellect Neurosciences,
Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this annual report; |
3. |
Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented in this annual report; |
4. |
The registrant’s other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant
and have: |
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a) |
designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which this annual report is being prepared; |
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b) |
designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principals; |
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c) |
evaluated the effectiveness of the registrant’s disclosure controls
and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the period covered by this report based on such evaluation; |
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d) |
disclosed in this report any change in the registrant’s internal
control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected,
or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; |
5. |
The registrant’s other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors
(or persons performing the equivalent function): |
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a) |
all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and
have identified for the registrant’s auditors any material weaknesses in internal controls; and |
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b) |
any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant’s internal controls over financial reporting. |
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Dated: October 13, 2015 |
By: |
/s/ Elliot
M. Maza |
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Elliot M. Maza |
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Chief Executive Officer & CFO |
EXHIBIT
32.2
CERTIFICATION
PURSUANT TO
18
U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In connection
with the Annual Report of Intellect Neurosciences, Inc. (the “Company”) on Form 10-K for the period ended June 30, 2012,
as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Elliot M. Maza, President
and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company.
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Dated: October 13, 2015 |
By: |
/s/ Elliot
M. Maza |
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Elliot M. Maza |
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Chief Executive Officer & CFO |