NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
Note 1 – Organization, Nature of
Business, and Liquidity
:
Business
Neurotrope BioScience
was incorporated in Delaware on October 31, 2012. Neurotrope BioScience was formed to advance new therapeutic and diagnostic technologies
in the field of neurodegenerative disease, primarily Alzheimer’s disease (“AD”). Neurotrope BioScience is collaborating
with Cognitive Research Enterprises, Inc. (formerly known as the Blanchette Rockefeller Neurosciences Institute, or BRNI) (“CRE”),
a related party, in this process. The exclusive rights to certain technology were licensed by CRE to the Company on February 28,
2013 (see Note 4).
Liquidity
The Company
raised approximately $20.5 million in net cash proceeds in December 2018. As of May 7, 2019, the Company had approximately $23.5
million in cash and cash equivalents. The Company expects that its existing capital resources will be sufficient to support its
projected operating requirements over at least the next approximately 24 to 36 months, including the continuing development of
bryostatin, our novel drug targeting the activation of PKC epsilon, through our ongoing follow-on clinical study (estimated revised
total cost of $7.3 million - see Note 3), conduct other non-clinical studies, plus the plan to conduct additional studies in AD
and potentially other diseases that might benefit from using bryostatin. The balance of the funds will be used for general corporate
and working capital purposes.
We expect
to require additional capital in order to initiate and pursue additional development projects in addition to our current confirmatory
AD clinical trial. Additional funding may not be available to us on acceptable terms, or at all. If we are unable to access additional
funds when needed, we may not be able to pursue development of such other product candidates. If so, we could be required to delay,
scale back or eliminate some or all of our existing or additional contemplated development programs and operations. Any additional
equity financing, if available, may not be available on favorable terms, would most likely be significantly dilutive to our current
stockholders and debt financing, if available, may involve restrictive covenants. If we are able to access funds through collaborative
or licensing arrangements, we may be required to relinquish rights to some of our technologies or product candidates that we would
otherwise seek to develop or commercialize on our own, on terms that are not favorable to us. Our ability to access capital when
needed is not assured and, if not achieved on a timely basis, will materially harm our business, financial condition and results
of operations.
Basis of Presentation
The accompanying
unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted
in the United States (“GAAP”) for interim financial reporting and with the instructions to Form 10-Q and Article 10
of Regulation S-X. The results for the three months ended March 31, 2019 are not necessarily indicative of the results that the
Company will have for any subsequent period. These unaudited condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and the notes to those statements for the year ended December 31,
2018 included in our Annual Report on Form 10-K.
Note 2 – Summary of Significant
Accounting Policies
:
Use of Estimates:
The preparation
of financial statements in conformity with accounting principles generally accepted in the United States requires management to
make significant estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Cash and Cash Equivalents and
Concentration of Credit Risk:
The Company considers
all highly liquid temporary cash investments with an original maturity of three months or less when purchased to be cash equivalents.
At March 31, 2019, the Company’s cash balances that exceed the current insured amounts under the Federal Deposit Insurance
Corporation (“FDIC”) were approximately $7.7 million. In addition, approximately $16.3 million included in cash and
cash equivalents were invested in a money market fund, which is not insured under the FDIC. Cash and cash equivalents are held
in banks or in custodial accounts with banks. Cash equivalents are defined as all liquid investments and money market funds with
maturity from date of purchase of 90 days orless that are readily convertible into cash.
Property and Equipment:
Lease Accounting.
The new accounting standard for leases, Accounting Standard Codification (“ASC”) 842, Leases, was adopted for the
fiscal year beginning on January 1, 2019. Per the new standard, all leases with a lease term greater than 12 months, regardless
of lease type classification, are recorded as an obligation on the balance sheet with a corresponding right-of-use asset. The Company
does not have any leases greater than 12 months in duration. As a result, there is no material impact to the financial statements.
Property and
equipment is capitalized and depreciated on a straight line basis over the estimated useful life of the asset, which is deemed
to be between three and ten years.
Research and Development
Costs:
All research
and development costs, including costs to maintain or expand the Company’s patent portfolio licensed from CRE that do not
meet the criteria for capitalization are expensed when incurred. FASB ASC Topic 730 requires companies involved in research and
development activities to capitalize non-refundable advance payments for such services pursuant to contractual arrangements because
the right to receive those services represents an economic benefit. Such capitalized advances will be expensed when the services
occur and the economic benefit is realized. There were no capitalized research and development services at March 31, 2019 and December
31, 2018.
Loss Per Share:
Basic loss
per common share amounts are based on the weighted average number of common shares outstanding. Diluted loss per share amounts
are based on the weighted average number of common shares outstanding, plus the incremental shares that would have been outstanding
upon the assumed exercise of all potentially dilutive stock options and warrants subject to anti-dilution limitations. All such
potentially dilutive instruments were anti-dilutive as of March 31, 2019 and 2018, which were approximately 12.4 million shares
and 6.4 million shares, respectively.
Income Taxes:
The Company had federal and state
net operating loss carryforwards for income tax purposes of approximately $54.6 million for the period from October 31, 2012 (inception)
through March 31, 2019. The net operating loss carryforwards resulted in a deferred tax asset of approximately $13.4 million at
March 31, 2019. Income tax effects of share-based payments are recognized in the financial statements for those awards that will
normally result in tax deductions under existing tax law.
The Company accounts
for income taxes using the asset and liability approach which requires the recognition of deferred tax assets and liabilities for
the expected future tax consequences of temporary differences between the carrying amount of assets and liabilities for financial
reporting purposes and amounts reportable for income tax purposes. Deferred tax assets are reduced by a valuation allowance when,
in the opinion of management, it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized.
The Company applies
the provisions of FASB ASC 740-10,
Accounting for Uncertain Tax Positions
, which clarifies the accounting for uncertainty
in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement
process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The
standard also provides guidance on de-recognition, classification, interest and penalties, and accounting in interim periods, disclosure
and transitions.
The Company has
concluded that there are no significant uncertain tax positions requiring recognition in the accompanying financial statements.
The tax period that is subject to examination by major tax jurisdictions is generally three years from the date of filing.
Under Section
382 of the Internal Revenue Code of 1986, as amended, changes in the Company's ownership may limit the amount of its net operating
loss carryforwards that could be utilized annually to offset future taxable income, if any. This limitation would generally apply
in the event of a cumulative change in ownership of the Company of more than 50% within a three-year period. The Company has not
performed a study to assess whether an ownership change for purposes of Section 382 has occurred, or whether there have been multiple
ownership changes since the Company's inception, due to the significant costs and complexities associated with such study.
Risks and Uncertainties:
The Company operates
in an industry that is subject to rapid technological change, intense competition and significant government regulation. The Company’s
operations are subject to significant risk and uncertainties including financial, operational, technological, regulatory and other
risk. Such factors include, but are not necessarily limited to, the results of clinical testing and trial activities, the ability
to obtain regulatory approval, the ability to obtain favorable licensing, manufacturing or other agreements for its product candidates
and the ability to raise capital to achieve strategic objectives.
Stock Compensation:
The Company accounts
for stock-based awards to employees in accordance with applicable accounting principles, which requires compensation expense related
to share-based transactions, including employee stock options, to be measured and recognized in the financial statements based
on a determination of the fair value of the stock options. The grant date fair value is determined using the Black-Scholes-Merton
(“Black-Scholes”) pricing model. Employee stock option expense is recognized over the employee’s requisite service
period (generally the vesting period of the equity grant). The Company’s option pricing model requires the input of highly
subjective assumptions, including the volatility and expected term. Any changes in these highly subjective assumptions significantly
impact stock-based compensation expense.
Recent Accounting
Pronouncements
In July 2017,
the FASB issued new guidance, ASU-2017-11,
Distinguishing Liabilities from Equity (Topic 480),
which changes the classification
analysis of certain equity-linked financial instruments (or embedded features) with down round features and re-characterizes the
indefinite deferral of certain provisions within the guidance for distinguishing liabilities from equity. The guidance is
effective for the Company beginning in the first quarter of fiscal year 2019. Early adoption is permitted. The Company
is evaluating the impact of adopting this guidance on its consolidated financial statements.
In August 2018,
the SEC issued a final rule Release No. 33-10532, “Disclosure Update and implification,” to amend certain disclosure
requirements now seen as redundant, duplicative, overlapping, outdated or superseded in wake of recent accounting pronouncements.
The amended rules became effective November 5, 2018. We analyzed the release in preparation of this Form 10-Q, which resulted in
the additional disclosure of changes to stockholders’ equity during interim periods, as presented within this Form 10-Q within
the condensed consolidated statements of stockholders’ equity. We note that many of the amended requirements under this Release
are not applicable to the Company, as we do not make dividend payments to stockholders, currently report our activities under a
single business segment, and already provided all other significant disclosure requirements.
In November 2018,
the FASB issued ASU-2018-18,
Collaborative Arrangements (Topic 808).
In November 2018, the FASB issued new guidance to clarify
the interaction between the authoritative guidance for collaborative arrangements and revenue from contracts with customers. The
new guidance clarifies that, when the collaborative arrangement participant is a customer in the context of a unit-of-account,
revenue from contracts with customers guidance should be applied, adds unit-of-account guidance to collaborative arrangements guidance,
and requires, that in a transaction with a collaborative arrangement participant who is not a customer, presenting the transaction
together with revenue recognized under contracts with customers is precluded. The guidance is effective for the Company beginning
in the first quarter of fiscal year 2020. Early adoption is permitted. The Company will assess the impact of the adoption of this
guidance on its consolidated financial statements once the Company begins to generate revenue.
Accounting
Pronouncements Adopted During the Period:
In February 2016,
the FASB issued new guidance related to how an entity should account for lease assets and lease liabilities. The guidance
specifies that an entity who is a lessee under lease agreements should recognize lease assets and lease liabilities for those
leases classified as operating leases under previous FASB guidance. Accounting for leases by lessors is largely unchanged
under the new guidance. The guidance is effective for the Company beginning in the first quarter of 2019. Early adoption
is permitted. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest
period presented using a modified retrospective approach. The adoption of this standard did not have a material impact to
its financial statements based upon the de minimis amount of short-term lease commitments.
Note 3 – Collaborative Agreements
:
Stanford License Agreements
On May 12, 2014,
the Company entered into a license agreement (the “Stanford Agreement”) with The Board of Trustees of The Leland Stanford
Junior University (“Stanford”), pursuant to which Stanford has granted to the Company a revenue-bearing, world-wide
right and exclusive license, with the right to grant sublicenses (on certain conditions), under certain patent rights and related
technology for the use of bryostatin structural derivatives, known as “bryologs,” for use in the treatment of central
nervous system disorders, lysosomal storage diseases, stroke, cardio protection and traumatic brain injury, for the life of the
licensed patents. We are required by the Stanford Agreement to use commercially reasonable efforts to develop, manufacture and
sell products (“Licensed Products”) in the Licensed Field of Use (as defined in the Stanford Agreement) during the
term of the licensing agreement which expires upon the termination of the last valid claim of any licensed patent under this agreement.
In addition, we must meet specific diligence milestones, and upon meeting such milestones, make specific milestone payments to
Stanford. We will also pay Stanford royalties of 3% on net sales, if any, of Licensed Products (as defined in the Stanford Agreement)
and milestone payments of up to $3.7 million dependent upon stage of product development To-date, no royalties nor milestone payments
have been made.
On January 19,
2017, the Company entered into an additional, second license agreement with Stanford, pursuant to which Stanford has granted to
the Company a revenue-bearing, world-wide right and exclusive license, with the right to grant sublicenses (on certain conditions),
under certain patent rights and related technology for the use of “Bryostatin Compounds and Methods of Preparing the Same,”
or synthesized bryostatin, for use in the treatment of neurological diseases, cognitive dysfunction and psychiatric disorders,
for the life of the licensed patents. The Company paid Stanford $70,000 upon executing the license and is obligated to pay an additional
$10,000 annually as a license maintenance fee. In addition, based upon certain milestones which include product development and
commercialization, the Company will be obligated to pay up to an additional $2.1 million and between 1.5% and 4.5% royalty payments
on certain revenues generated by the Company relating to the licensed technology. The Company has made all required annual maintenance
payments.
Mt. Sinai License Agreement
On July 14, 2014,
Neurotrope BioScience entered into an Exclusive License Agreement (the “Mount Sinai Agreement”) with the Icahn School
of Medicine at Mount Sinai (“Mount Sinai”). Pursuant to the Mount Sinai Agreement, Mount Sinai granted Neurotrope BioScience
(a) a revenue-bearing, world-wide right and exclusive license, with the right to grant sublicenses (on certain conditions), under
Mount Sinai’s interest in certain joint patents held by the Company and Mount Sinai (the “Joint Patents”) as
well as in certain results and data (the “Data Package”) and (b) a non-exclusive license, with the right to grant sublicenses
on certain conditions, to certain technical information, both relating to the diagnostic, prophylactic or therapeutic use for treating
diseases or disorders in humans relying on activation of Protein Kinase C Epsilon (“PKCε”), which includes
Niemann-Pick Disease (the “Mount Sinai Field of Use”). The Mount Sinai Agreement allows Neurotrope BioScience to research,
discover, develop, make, have made, use, have used, import, lease, sell, have sold and offer certain products, processes or methods
that are covered by valid claims of Mount Sinai’s interest in the Joint Patents or an Orphan Drug Designation Application
covering the Data Package (“Mount Sinai Licensed Products”) in the Mount Sinai Field of Use (as such terms are defined
in the Mount Sinai Agreement).
Clinical Trial Services Agreements
On May 4, 2018,
Neurotrope BioScience executed a new Services Agreement (the “New Services Agreement”) with Worldwide Clinical Trials
(“WCT”). The New Services Agreement relates to services for Neurotrope BioScience’s Phase 2 confirmatory clinical
study assessing the safety, tolerability and efficacy of bryostatin in the treatment of moderately severe to severe AD (the “Study”).
Pursuant to the terms of the Services Agreement, WCT is providing services to target enrollment of approximately one hundred (100)
Study subjects. The total estimated budget for the services, including pass-through costs, drug supply and other statistical analyses,
is approximately $7.3 million. Of the total estimated Study costs, as of March 31, 2019, the Company has incurred approximately
$5.3 million in expenses of which WCT has represented a total of approximately $5.0 million and approximately $300,000 of expenses
have been incurred to other trial-related vendors and consultants. In addition, the Company paid $1.2 million to WCT as prepaid
deposits of which the Company has utilized approximately $1 million, leaving a balance included in prepaid expenses of approximately
$200,000.
Note 4 – Related Party Transactions
and Licensing / Research Agreements
:
James Gottlieb,
a director of the Company, serves as a director of CRE, and Shana Phares, also a director of the Company, serves as President and
Chief Executive Officer of CRE. CRE is a stockholder of a corporation, Neuroscience Research Ventures, Inc. (“NRV, Inc.”),
which owned approximately 2.2% of the Company's outstanding common stock as of March 31, 2019.
Effective October
31, 2012, Neurotrope BioScience executed a Technology License and Services Agreement (the “TLSA”) with CRE, a related
party, and NRV II, LLC (“NRV II”), another affiliate of CRE, which was amended by Amendment No. 1 to the TLSA as of
August 21, 2013. As of February 4, 2015, the parties entered into an Amended and Restated Technology License and Services Agreement
(the “CRE License Agreement”). The CRE License Agreement provides research services and has granted Neurotrope BioScience
the exclusive and nontransferable world-wide, royalty-bearing right, with a right to sublicense (in accordance with the terms and
conditions described below), under CRE’s and NRV II’s respective right, title and interest in and to certain patents
and technology owned by CRE or licensed to NRV II by CRE as of or subsequent to October 31, 2012, to develop, use, manufacture,
market, offer for sale, sell, distribute, import and export certain products or services for therapeutic applications for AD and
other cognitive dysfunctions in humans or animals (the “Field of Use”). Additionally, the TLSA specifies that all patents
that issue from a certain patent application shall constitute licensed patents and all trade secrets, know-how and other confidential
information claimed by such patents constitute licensed technology under the CRE License. The CRE License Agreement terminates
on the later of the date (a) the last of the licensed patent expires, is abandoned, or is declared unenforceable or invalid or
(b) the last of the intellectual property enters the public domain. After the initial Series A Stock financing, the CRE License
Agreement required Neurotrope BioScience to enter into scope of work agreements with CRE as the preferred service provider for
any research and development services or other related scientific assistance and support services.
In addition,
the CRE License Agreement requires the Company to pay CRE a “Fixed Research Fee” of $1 million per year for five years,
commencing on the date that the Company completes a Series B Preferred Stock financing resulting in proceeds of at least $25,000,000
(the “Series B Financing”). This Fixed Research Fee is not yet due. The CRE License Agreement also requires the payment
of royalties ranging between 2% and 5% of the Company’s revenues generated from the licensed patents and other intellectual
property, dependent upon the percentage ownership that NRV, Inc. holds in the Company. Under the CRE License Agreement, the Company
was required to prepay royalty fees at a rate of 5% of all investor funds raised in the Series A or Series B Stock financings or
any subsequent rounds of financing prior to a public offering, less commissions.
On November 12,
2015, Neurotrope BioScience, CRE, and NRV II entered into an amendment (the “Amendment”) to the TLSA pursuant to which
CRE granted rights in certain technology to Neurotrope BioScience. Under the Amendment, the “Advances on Future Royalties”
section of the TLSA was amended and restated to (i) eliminate the requirement that Neurotrope BioScience pay CRE prepaid royalties
equal to five percent (5%) of financing proceeds received by Neurotrope BioScience in any financing prior to a public offering,
and (ii) provide that Neurotrope BioScience will deliver to CRE, following each closing pursuant to a certain securities purchase
agreement, an amount equal to 2.5% of the Post-PA Fees Proceeds received at such closing. In addition, the Amendment provides that
on or prior to December 31, 2016, Neurotrope Bioscience shall deliver to CRE an amount equal to 2.5% of the aggregate Post-PA Fee
Proceeds received at the closings. Each payment would constitute an advance royalty payment to CRE and will be offset (with no
interest) against the amount of future royalty obligations payable until such time that the amount of such future royalty obligations
equals in full the amount of the advance royalty payments made. “Post-PA Fee Proceeds” means the gross proceeds received,
less all amounts paid to the placement agent(s), in relation to such gross proceeds. No other expenses of Neurotrope Bioscience
shall be subtracted from the gross proceeds to determine the “Post-PA Fee Proceeds.” As of March 31, 2019, the Company
has paid its entire obligation of $1,166,666 resulting from this Amendment.
In addition,
on November 10, 2018, Neurotrope BioScience and CRE entered into a second amendment (the “Second Amendment”) to the
TLSA to which CRE granted certain patent prosecution and maintenance rights to Neurotrope BioScience. Under the Second Amendment,
Neurotrope BioScience will have the sole and exclusive right and the obligation, to apply for, file, prosecute and maintain patents
and applications for the intellectual property licensed to Neurotrope BioScience, and pay all fees, costs and expenses related
to the licensed intellectual property. Neurotrope BioScience paid CRE $10,000 in consideration of this Second Amendment.
Note 5 – Common Stock
:
December 2018 Offering
On
December 17, 2018, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with certain
investors (the “Purchasers”). Pursuant to the terms of the Purchase Agreement, the Company agreed to sell to the Purchasers
in a registered direct offering an aggregate of 5,012,677 shares of its common stock and Series G warrants to purchase up to an
aggregate of 5,012,677 shares of common stock at a combined purchase price of $4.495 per share and accompanying warrant. The warrants
were not deemed to be derivative securities. As a result, the value of the warrants were accounted for as offsetting entries in
the stockholders’ equity section of the balance sheet. The warrants will be exercisable at a price of $4.37 per share beginning
six months following the date of issuance and will expire five years from the exercise date. The net proceeds to the Company from
the offering were approximately $20.5 million, after deducting placement agent fees, financial advisory fees and estimated offering
expenses payable by the Company of approximately $2.1 million.
Pursuant
to a placement agent agreement, dated December 17, 2018 (the “Placement Agent Agreement”), the Company paid (i) a cash
fee of $442,000 (8.0% of the aggregate gross proceeds raised from Purchasers first contacted by the placement agent in connection
with the offering) and (ii) warrants to purchase 24,583 shares of common stock (represents the number of shares of common stock
equal to 2.0% of the aggregate number of shares sold to Purchasers first contacted by the placement agent in connection with the
offering). The Company also agreed to reimburse the placement agent an additional $25,000 for its legal expenses.
The
placement agent warrants have substantially the same terms as the warrants issued to the investors in the offering, except that
the placement agent warrants have an exercise price equal to $6.25 and a term of five years from the effective date of the offering.
Pursuant
to separate advisory consulting agreements (as amended, the “Consulting Agreements”), the Company engaged advisory
financial consultants in connection with the offering. The Company agreed to pay total consulting fees of approximately $1.6 million,
plus reimbursement of up to $50,000 of their legal expenses. In addition, the financial consultants received a total of warrants
to purchase 75,657 shares of common stock. Such warrants issued to the advisory financial consultants have the same terms and are
in the same form as the placement agent warrants described above.
Note 6 – Stock Options
:
Option Grants
The following
is a summary of stock option activity under the stock option plans for the three months ended March 31, 2019:
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Weighted-
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Average
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Weighted-
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Remaining
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Aggregate
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Average
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Contractual
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Intrinsic
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Number of
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Exercise
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Term
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Value
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Shares
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Price
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(Years)
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(in millions)
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Options outstanding at January 1, 2019
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1,520,246
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$
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18.07
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8.2
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Options granted
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675,000
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$
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3.95
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Less options forfeited
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-
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$
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-
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Less options expired/cancelled
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-
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$
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-
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Less options exercised
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-
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$
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-
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Options outstanding at March 31, 2019
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2,195,246
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$
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13.72
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8.5
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$
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1.1408
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Options exercisable at March 31, 2019
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1,329,986
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$
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17.06
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8.1
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$
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0.463
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In January 2019, the Company granted stock options to purchase an aggregate of 595,000 shares of the Company’s
common stock to eight members of the Company’s Board of Directors, three Company officers and two Company employees. The
stock options have an exercise price of $3.93 per share and an expiration date that is ten years from the date of issuance. All
of the options vest 50% at time of issuance and 50% quarterly over the subsequent two year period after the issuance date. Options
to purchase an aggregate of 29,923 shares cannot be exercised until, and are subject to, stockholder approval of an increase in
shares under the Company’s 2017 Equity Incentive Plan. If stockholder approval is not obtained, such options shall be cancelled.
Pursuant to the Company’s non-employee director compensation plan, in March 2019, the Company granted stock options to purchase
an aggregate of 80,000 shares of the Company’s common stock to eight members of the Company’s Board of Directors. The
stock options have an exercise price of $4.06 per share and an expiration date that is ten years from the date of issuance. All
of these options vest upon the first anniversary of the issuance date.
Such
options cannot be exercised until, and are subject to, stockholder approval of an increase in shares under the Company’s
2017 Equity Incentive Plan. If stockholder approval is not obtained, such options shall be cancelled. No compensation expense has
been taken on the 109,923 options subject to stockholder approval.
As of March 31,
2019, there was approximately $4.2 million of total unrecognized compensation costs related to unvested stock options. These costs
are expected to be recognized over a weighted average period of 1.9 years.
The Company used
the Black-Scholes valuation model to calculate the fair value of stock options. The fair value of stock options issued for the
three months ended March 31, 2019 was estimated at the grant date using the following weighted average assumptions: Dividend yield
0%; Expected term 10 years; Volatility 92.2%; and Risk-free interest rate 2.72%. The weighted average grant date fair value of
options granted for the three months ended March 31, 2019 is $3.45 per share.
The total stock
option-based compensation recorded as operating expense was $1,593,764 and $675,696 for the three months ended March 31, 2019 and
2018, respectively.
Note 7 – Common Stock Warrants
:
The following
is a summary of common stock warrant activity for the three months ended March 31, 2019:
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Number
of shares
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Warrants outstanding January 1, 2019
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10,214,357
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Warrants issued
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-
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Warrants exercised
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-
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Warrants outstanding March 31, 2019
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10,214,357
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As of March 31,
2019, the Company’s warrants by exercise price were as follows: 147,606 warrants exercisable at $0.32, 5,012,677 warrants
exercisable at $4.37, 100,240 warrants exercisable at $6.25, 382,887 warrants exercisable at $6.40, 3,751,033 warrants exercisable
at $12.80 and 819,914 warrants exercisable at $32.00.
Note 8 – Commitments and Contingencies
On March 29,
2019, the Company entered into an employment agreement (the “Employment Agreement”) with Michael Ciraolo, J.D., Ph.D.,
pursuant to which Dr. Ciraolo agreed to serve as General Counsel and Chief Operating Officer of the Company, commencing April 1,
2019 (the “Effective Date”). Dr. Ciraolo will receive an initial annual base salary of $335,000 with a target annual
bonus equal to 30% of his base salary as then in effect. Dr. Ciraolo also has received an initial inducement equity grant of options
to purchase 100,000 shares of Common Stock, 25% of which will vest immediately and the remaining 75% of which will vest in equal
monthly installments over a two year period.
If the Company
terminates Dr. Ciraolo’s employment without cause (as defined in the Employment Agreement) or if Dr. Ciraolo terminates his
employment with the Company for good reason (as defined in the Employment Agreement), Dr. Ciraolo is entitled to receive 1/12 of
his base salary as then in effect for the Severance Period, which is defined in the Employment Agreement as (i) if no Change of
Control (as defined in the Employment Agreement) has occurred, (A) three months if the termination date is prior to the first anniversary
of the Effective Date, (B) six months if the termination date is after the first anniversary of the Effective Date but before the
second anniversary, or (C) nine months if the termination date is after the second anniversary of the Effective Date, and (ii)
if a Change of Control has occurred as of the termination date, twelve months.
The Company
is a party to various contractual commitments pursuant to its normal course of business including previously disclosed commitments
with WCT and strategic agreements with certain academic institutions for product development opportunities in various therapeutic
categories. The Company maintains two offices for which it pays approximately $80,000 per year. The Company’s leases are
all short term in nature.
Note 9 – Subsequent Events
On April 15,
2019, the Company granted its new General Counsel and Chief Operating Officer options to purchase 100,000 shares of Common Stock.
The stock options have an exercise price of $5.67 per share and an expiration date that is ten years from the date of issuance,
25% of which will vest immediately and the remaining 75% of which will vest in equal monthly installments over a two year period
(See Note 7 - “Commitments and Contingencies”.)