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EX-23.1 - EXHIBIT 23.1 - Neurotrope, Inc.v457606_ex23-1.htm
EX-5.1 - EXHIBIT 5.1 - Neurotrope, Inc.v457606_ex5-1.htm

 

As filed with the Securities and Exchange Commission on January 30, 2017

 

Registration Statement No. 333-215159

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Amendment No. 1 to

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

 

 

 

Neurotrope, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada 2834 46-3522381

(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification Number)

 

205 East 42nd Street – 16th Floor

New York, NY 10017

973-242-0005

(Address, including zip code, and telephone number,

including area code, of registrant’s principal executive offices)

 

Robert Weinstein, Chief Financial Officer

Neurotrope, Inc.

205 East 42nd Street – 16th Floor

New York, NY 10017

973-242-0005

(Name, address, including zip code, and telephone number,

including area code, of agent for service)

 

Copy to:

Kenneth R. Koch, Esq.

Jeffrey P. Schultz, Esq.

Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C.

666 Third Avenue

New York, New York 10017

212-935-3000

 

Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this registration statement.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. þ

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

  

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨ 

 

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

 

(Check one):  
Large accelerated filer ¨ Accelerated filer ¨
Non-accelerated filer ¨ (Do not check if a smaller reporting company) Smaller reporting company þ

 

 

 

 

CALCULATION OF REGISTRATION FEE

 

Title of Each Class of Securities to be Registered   Amount to
 be
Registered (1)
  Proposed
Maximum
Offering
Price
Per Share (2)
    Proposed
Maximum
Aggregate
Offering
Price
    Amount of
Registration
Fee (3)
 
                             
Common stock, par value $0.0001 per share   8,040,395 shares   $ 6.98     $ 56,121,957.10     $ 6,504.54  

 

(1) Consists of (a) 3,828,754 shares of our common stock, par value $0.0001 per share, (b) 3,828,754 shares of our common stock issuable upon exercise of the outstanding Series F warrants to purchase our common stock having an exercise price of $12.80 per share and (c) 382,887 shares of our common stock issuable upon exercise of the outstanding placement agent warrants to purchase our common stock having an exercise price of $6.40 per share.  Pursuant to Rule 416 under the Securities Act of 1933, as amended, the securities being registered hereunder include such indeterminate number of additional shares of common stock as may be issued after the date hereof as a result of stock splits, stock dividends, or similar transactions.  The table above has been revised solely to give effect to the 1-for-32 reverse stock split of our common stock effected on January 11, 2017.

 

(2) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) under the Securities Act of 1933, as amended, based on the average of the high and low prices of the registrant’s common stock as reported by the OTCQB marketplace (the “OTC Market”) on January 19, 2017, giving effect to the 1-for-32 reverse stock split of our common stock. The shares offered hereunder may be sold by the selling stockholders from time to time in the open market, through privately negotiated transactions or a combination of these methods, at market prices prevailing at the time of sale or at negotiated prices.

 

(3) $8,349.47 was previously paid.

 

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

 

The information in this prospectus is not complete and may be changed. The selling stockholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and the selling stockholders are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

Subject to completion, dated January 30, 2017

 

 

 

Neurotrope, Inc.

 

Prospectus

 

8,040,395 Shares

 

Common Stock

 

This prospectus relates to the sale of up to 8,040,395 shares of our common stock, par value $0.0001 per share, by the selling stockholders of Neurotrope, Inc., a Nevada corporation, named in this prospectus.  The shares being offered consist of the following: (a) 3,828,754 shares of our common stock, (b) 3,828,754 shares of our common stock issuable upon exercise of the outstanding Series F warrants to purchase our common stock having an exercise price of $12.80 per share and (c) 382,887 shares of our common stock issuable upon exercise of the outstanding placement agent warrants to purchase our common stock having an exercise price of $6.40 per share. The shares offered by this prospectus were issued in connection with our private placement of securities, which was completed in November 2016 (the “November 2016 Private Placement”), and may be sold by the selling stockholders from time to time in the open market, through privately negotiated transactions or a combination of these methods, at market prices prevailing at the time of sale or at negotiated prices.

 

Our common stock is traded on the OTCQB marketplace, or the OTC Market, under the symbol “NTRP.” On January 18, 2017, the last reported sale price for our common stock was $6.75 per share after giving effect to the 1-for-32 reverse stock split of our common stock effected on January 11, 2017. For 20 business days following the effectiveness of our reverse stock split, a “D” will be placed at the end of the symbol (“NTRPD”).

 

The distribution of the shares by the selling stockholders is not subject to any underwriting agreement. We will not receive any proceeds from the sale of the shares by the selling stockholders. We will bear all expenses of registration incurred in connection with this offering, but all selling and other expenses incurred by the selling stockholders will be borne by them.

 

Our business and an investment in our securities involve a high degree of risk. Before making any investment in our securities, you should read and carefully consider the risks described in the “Risk Factors” section beginning on page 12 of this prospectus.

 

You should rely only on the information contained in this prospectus and any prospectus supplement or amendment. We have not authorized anyone to provide you with different information. This prospectus may only be used where it is legal to sell these securities. The information in this prospectus is only accurate on and as of the date of this prospectus, regardless of the time of any sale of securities.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

This prospectus is dated                             , 2017

 

 

 

 

You should rely only on the information contained in this prospectus or any prospectus supplement or amendment. We have not authorized any other person to provide you with information that is different from, or adds to, that contained in this prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. The selling stockholders are offering to sell and seeking offers to buy our common stock only in jurisdictions where offers and sales are permitted. You should assume that the information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date. We are not making an offer of any securities in any jurisdiction.

 

 

 

 

TABLE OF CONTENTS

 

  Page
   
PROSPECTUS SUMMARY 3
   
THE OFFERING 9
   
NOTE REGARDING FORWARD-LOOKING STATEMENTS 11
   
RISK FACTORS 12
   
SELLING STOCKHOLDERS 25
   
USE OF PROCEEDS 46
   
DETERMINATION OF OFFERING PRICE 46
   
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 46
   
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 49
   
DESCRIPTION OF BUSINESS 62
   
LEGAL PROCEEDINGS 81
   
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS 82
   
EXECUTIVE COMPENSATION 88
   
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 95
   
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 97
   
PLAN OF DISTRIBUTION 105
   
DESCRIPTION OF SECURITIES 107
   
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES 111
   
LEGAL MATTERS 111
   
EXPERTS 111
   
WHERE YOU CAN FIND MORE INFORMATION 112
   
Index to Consolidated Financial Statements F-1

 

 

 

 

PROSPECTUS SUMMARY

 

The following summary highlights information contained elsewhere in this prospectus. This summary is not complete and does not contain all of the information that should be considered before investing in our common stock. Potential investors should read the entire prospectus carefully, including the more detailed information regarding our business provided below in the “Description of Business” section, the risks of purchasing our common stock discussed under the “Risk Factors” section, and our consolidated financial statements and the accompanying notes to the consolidated financial statements. Unless otherwise noted, all share and per share data in this prospectus give effect to the 1-for-32 reverse stock split of our common stock that was effected on January 11, 2017. For more information about our reverse stock split, see “Recent Developments.”

 

Unless the context indicates otherwise, all references in this registration statement to “Neurotrope,” the “Company,” “we,” “us” and “our” refer to Neurotrope, Inc. and its wholly-owned consolidated operating subsidiary, Neurotrope BioScience, Inc. All references in this prospectus to “Neurotrope BioScience” refer solely to Neurotrope BioScience, Inc.

 

Overview

 

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

 

According to the Alzheimer’s Association, an estimated 36 million people worldwide had AD in 2015. The prevalence of AD is independent of race, ethnicity, geography, life style and, to a large extent, genetics. The most common cause of developing AD is old age. In developing countries, where the median age of death is less than 65 years old, AD is rarely recognized or diagnosed. In the U.S., 5.3 million people were estimated to have AD in 2015, and 96% of these people were older than 65 years of age.

 

Researchers have explored and continue to explore a wide range of drug mechanisms in hopes of developing drugs to combat AD. We believe that our approach, which involves the activation of an enzyme called protein kinase C epsilon (“PKCε”), represents a novel mechanism in potential AD drug therapies.

 

CRE is conducting an expanded access program, formerly known as compassionate use, of Bryostatin-1 in patients with advanced AD. Thus far, five patients have been treated, four of which were treated under an Investigational New Drug Application (“IND”), cleared by the U.S. Food and Drug Administration (the “FDA”). The IND was initially held by CRE and was recently transferred to Neurotrope. One of these patients, who had familial AD, has died, but the death was not drug-related. The study for another one of these patients has concluded after almost one year on the protocol. We are providing limited funding, study drug, and personnel support under the terms of our agreement with CRE for this modest expansion of our clinical effort in AD during the 2016 timeframe.

 

In October 2015, we announced the initiation of a Phase 2 clinical trial to evaluate bryostatin for the treatment of patients with moderately severe to severe AD. We have completed enrollment and plan to randomize a total of up to 150 patients in this double-blind, placebo-controlled, study at approximately 30 sites. The primary objective of the clinical trial will be to assess the safety of bryostatin along with preliminary evaluation of the safety and efficacy of two doses of bryostatin in the patient population. We believe bryostatin may restore synaptic structures and functions damaged by AD, leading to improvements in cognition and memory. Beyond AD, we believe that several other neurodegenerative diseases, such as Fragile X Syndrome and Niemann Pick Type C Disease (both of which we are pursuing), ischemic stroke, traumatic brain injury, depression and aging in the brain, may be amenable to treatment with bryostatin. In August 2016, we announced that we submitted to the FDA an amended protocol for our Phase 2 clinical trial of lead candidate bryostatin-1 for the treatment of advanced AD. As planned in the original protocol, the primary efficacy outcome will occur at Week 13, and does not change with the amendment. The primary efficacy endpoint is based on the Severe Impairment Battery scale, a well-validated assessment used extensively in severe AD drug trials. Secondary efficacy endpoints include Activities of Daily Living, Neuropsychiatric Inventory and Mini-Mental State Exam. As a result of the amendment, we expect to report top line data late in the first quarter or early in the second quarter of 2017.

 

 3 

 

 

To the extent resources permit, we intend to pursue development of selected technology platforms with applications related to the treatment of AD and other neurodegenerative disorders based on our current licensed technology or technology available from third party licensors or collaborators.

 

Financings to Date

 

In February 2013, through a private placement, Neurotrope BioScience issued 9,073,300 shares of its Series A convertible preferred stock (“Neurotrope BioScience Series A Stock”), at $1.00 per share, resulting in gross proceeds of $9,073,300. In May 2013, Neurotrope BioScience issued an additional 1,313,325 shares of Neurotrope BioScience Series A Stock at $1.00 per share, resulting in gross proceeds of $1,313,325. In August 2013, Neurotrope BioScience issued 11,533,375 of Neurotrope BioScience Series A Stock at $1.00 per share, resulting in gross proceeds of $11,533,375. All of the outstanding shares of Neurotrope BioScience Series A Stock were converted on a one-for-one basis into shares of Neurotrope, Inc.’s Series A convertible preferred stock, par value $0.0001 per share (“Series A Stock”), in connection with the Reverse Merger (as defined below) in August 2013. In October 2013, we issued 1,080,000 additional shares of our Series A Stock at $1.00 per share, resulting in gross proceeds of $1,080,000, for a total of $23,000,000 of gross proceeds raised between February and October 2013.

 

In a November 2015 private placement, we sold units consisting of our Series B convertible preferred stock, par value $0.0001 per share (the “Series B Stock”), together with Series A warrants to purchase shares of our common stock (“Series A Warrants”), Series B warrants to purchase shares of our common stock (“Series B Warrants”), Series C warrants to purchase shares of our common stock (“Series C Warrants”), Series D warrants to purchase shares of our common stock (“Series D Warrants”) and Series E warrants to purchase shares of our common stock (“Series E Warrants” and, together with the Series A Warrants, Series B Warrants, Series C Warrants and Series D Warrants, the “Series A-E Warrants”), and certain placement agent warrants, resulting in gross proceeds of $15,640,963 (the “November 2015 Private Placement”). The private placement was completed in two closings, which took place on November 13, 2015 and November 30, 2015. In connection with this private placement, effective as of November 13, 2015, the holders of all 16,656,894 shares of our Series A Stock converted their shares into 620,781 shares of our common stock, which included 100,253 shares of our common stock issued in accordance with anti-dilution rights of the Series A Stock.

 

In a November 2016 private placement, we sold 3,828,754 shares of common stock and warrants to purchase an equivalent number of shares of our common stock, with an exercise price of $12.80 per share (subject to adjustment), for a period of five years from the date of issuance (the “Series F Warrants”), at a purchase price of $6.40 per share of Common Stock and Series F Warrant, resulting in gross proceeds of approximately $24.5 million (the “November 2016 Private Placement”). The private placement was completed in two closings, which took place on November 17, 2016 and November 22, 2016.

 

In connection with the November 2016 Private Placement, on November 17, 2016, we filed with the Secretary of State of the State of Nevada an Amendment to our Certificate of Designations, Preferences and Rights of Series B Preferred Stock (the “Series B COD Amendment”), originally filed November 13, 2015 with the Secretary of State of the State of Nevada, as corrected by the Certificate of Correction filed November 19, 2015 with the Secretary of State of the State of Nevada (as so corrected, the “Certificate of Designation”). The Series B COD Amendment (i) provided that the Company’s entry into a binding securities purchase agreement, by and among the Company and the investors signatory thereto, in connection with a private placement of the Company’s common stock and warrants, that results in at least $8,000,000 of aggregate gross proceeds to the Company (a “Private Placement”), shall result in the automatic conversion of the Company’s Series B Stock into shares of the Company’s common stock at a conversion price of $18.56 immediately prior to the initial closing of the Private Placement with aggregate gross proceeds to the Company of at least $8 million and (ii) amended the definition of “Excluded Securities” to include the issuance of the Company’s common stock and warrants issued in any Private Placement. As a result of the November 2016 Private Placement, all of the issued and outstanding shares of Series B Stock were converted into an aggregate of 825,962 shares of our common stock on November 17, 2016. The Series B COD Amendment was approved by the “Required Holders” as defined in the Certificate of Designation. As a result of the mandatory conversion of the Series B Stock, the anti-dilution protection for dilutive issuances in the Series A Warrants, the Series C Warrants and the Series E Warrants ceased to be effective pursuant to the terms of such warrants.

 

 4 

 

 

Pursuant to the purchase agreement entered into in connection with November 2016 Private Placement, we agreed to reduce the exercise prices of certain of our outstanding warrants to purchase shares of common stock that were issued in connection with the November 2015 Private Placement. Effective as of November 18, 2016, the exercise price of each of the Series A Warrants and the Series C Warrants was reduced to $0.32 per share and the exercise price of the Series E Warrants was reduced to $32.00 per share, in each case subject to adjustment as provided in such Warrants.

 

In connection with the Offering, pursuant to a Placement Agency Agreement, dated October 13, 2016 (the “Placement Agency Agreement”), among the Company, Katalyst Securities LLC and GP Nurmenkari Inc. (the “Placement Agents”), we agreed to pay the Placement Agents (i) a cash fee at each closing under the Purchase Agreement equal to ten percent (10%) of each closing’s gross proceeds and (ii) warrants to purchase shares of Common Stock at each closing under the Purchase Agreement equal to ten percent (10%) of the number of shares of Common Stock sold in each closing, with an exercise price of $6.40 per share and a five-year term (the “Broker Warrants”). Such Warrants shall not become exercisable until the Company’s stockholders have approved an amendment to its Articles of Incorporation to increase the number of authorized shares and such amendment is filed in Nevada.

 

Under the Placement Agency Agreement, we agreed to amend certain warrants previously issued to the Placement Agents. Immediately following the receipt of at least $8,000,000 of gross proceeds as part of the Offering, the exercise price of the 70,119 unexercised Placement Agent Series B Warrants and/or broker warrants issued by the Company as placement agent compensation to Katalyst Securities LLC, their registered representatives and designees, assignees or successors in interest, in connection with the Company’s completed financing in November 2015 (collectively, the “Series B Broker Warrants”), shall be reduced to $0.32 per share of Common Stock, provided that the Series B Broker Warrants that have their exercise price reduced shall not be exercisable for six months from the date of the initial closing under the Purchase Agreement. Additionally, immediately following the receipt of at least $10,000,000 of gross proceeds as part of the Offering, the exercise price of the 41,416 unexercised Placement Agent Series A Warrants and/or broker warrants issued by the Company as placement agent compensation to EDI Financial, Inc., Katalyst Securities LLC, their registered representatives and designees, assignees or successors in interest, in connection with the Company’s completed financings in 2013 (collectively, the “Series A Broker Warrants”) shall be reduced to $0.32 per share of Common Stock, provided that the Series A Broker Warrants that have their exercise price reduced shall not be exercisable for one year from the date of the initial closing under the Purchase Agreement. Accordingly, the exercise price of the Series A Broker Warrants and the Series B Broker Warrants has been reduced to $0.32 per share of Common Stock as of November 23, 2016.

 

Organizational History

 

We were incorporated as BlueFlash Communications, Inc. in Florida on January 11, 2011. Prior to the Reverse Merger (as defined below) and Split-Off (as defined below), our business was to provide software solutions to deliver geo-location targeted coupon advertising to mobile internet devices.

 

On August 9, 2013, we reincorporated in the State of Nevada by merging into a newly-formed special-purpose subsidiary, Neurotrope, Inc., which was incorporated on June 13, 2013 and was the surviving corporation in such reincorporation merger, or the Reincorporation Merger. As a result of the Reincorporation Merger, (i) we changed our name to Neurotrope, Inc., (ii) we changed our jurisdiction of incorporation from Florida to Nevada, (iii) we increased our authorized capital stock from 300,000,000 pre-split shares of common stock, par value $0.0001 per share, to 300,000,000 pre-split shares of common stock, par value $0.0001 per share, and 50,000,000 shares of “blank check” preferred stock, par value $0.0001 per share, (iv) each share of BlueFlash Communications, Inc. common stock outstanding at the time of the Reincorporation Merger was automatically converted into 2.242 pre-split shares of Neurotrope, Inc. common stock, our common stock, with the result being that the 10,200,000 pre-split shares of common stock of BlueFlash Communications, Inc. outstanding immediately prior to the Reincorporation Merger were converted into 22,868,400 pre-split shares of common stock of Neurotrope, Inc. outstanding immediately thereafter. All share and per share numbers in this prospectus relating to the common stock of Neurotrope, Inc., prior to the Reincorporation Merger have been adjusted to give effect to this conversion, unless otherwise stated.

 

 5 

 

 

In connection with the Reincorporation Merger, we changed our fiscal year from a fiscal year ending on January 31 of each year to one ending on December 31 of each year.

 

On August 23, 2013, our wholly-owned subsidiary, Neurotrope Acquisition, Inc., or Acquisition Sub, a corporation formed in the State of Nevada on August 15, 2013 merged with and into Neurotrope BioScience, a corporation incorporated in the State of Delaware on October 31, 2012. Neurotrope BioScience was the surviving corporation in the merger, or the Reverse Merger, and became our wholly-owned subsidiary. All of the outstanding shares of Neurotrope BioScience common stock, or Neurotrope BioScience Common Stock, were converted into shares of our common stock, par value $0.0001 per share, and all of the outstanding shares of Neurotrope BioScience Series A Stock were converted into shares of our Series A Stock, in each case on a one-for-one basis.

 

In connection with the Reverse Merger and pursuant to a split-off agreement, or Split-Off, we transferred our pre-Reverse Merger business to Marissa Watson, our pre-Reverse Merger majority stockholder, in exchange for the surrender and cancellation of 20,178,000 pre-split shares of our common stock owned by her.

 

As a result of the Reverse Merger and Split-Off, we discontinued our pre-Reverse Merger business and acquired the business of Neurotrope BioScience. Following the Reverse Merger and Split-off, we have undertaken the business operations of Neurotrope BioScience as a publicly-traded company under the name Neurotrope, Inc., through Neurotrope BioScience, which is now our wholly-owned subsidiary.

 

In accordance with “reverse merger” accounting treatment, our historical financial statements as of period ends, and for periods ended, prior to the Reverse Merger have been and will be replaced with the historical financial statements of Neurotrope BioScience prior to the Reverse Merger in all applicable filings with the Securities and Exchange Commission, or the SEC.

 

Recent Developments

 

On January 11, 2017, we effected a 1-for-32 reverse stock split of our shares of common stock. As a result of the reverse stock split, every thirty-two (32) shares of our pre-reverse split common stock was combined and reclassified into one share of common stock. In addition, our pre-reverse split 400,000,000 authorized shares of common stock was proportionately reduced to 12,500,000 authorized shares of common stock as a result of the reverse stock split.

 

About This Offering

 

This prospectus relates to the offering, which is not being underwritten, by the selling stockholders listed in this prospectus, of up to 8,040,395 shares of our common stock.  The shares being offered consist of the following: (a) 3,828,754 shares of our common stock, (b) 3,828,754 shares of our common stock issuable upon exercise of the outstanding Series F warrants to purchase our common stock having an exercise price of $12.80 per share and (c) 382,887 shares of our common stock issuable upon exercise of the outstanding placement agent warrants to purchase our common stock having an exercise price of $6.40 per share. The shares offered by this prospectus were issued in connection with the November 2016 Private Placement, and may be sold by the selling stockholders from time to time in the open market, through negotiated transactions or otherwise at market prices prevailing at the time of sale or at negotiated prices.  We will receive none of the proceeds from the sale of the shares by the selling stockholders.  We are registering the shares of common stock and the warrants described above pursuant to the Registration Rights Agreement, dated as of November 17, 2016, between us and the investors in the November 2016 Private Placement. We will bear all expenses of registration incurred in connection with this offering, but all selling and other expenses incurred by the selling stockholders will be borne by them.

 

 6 

 

 

Selected Risks Associated with Our Business and Our Common Stock

 

Our business is subject to numerous risks described in the section entitled “Risk Factors” and elsewhere in this prospectus, which you should review carefully. You should carefully consider these risks before making an investment. Some of these risks include the following:

 

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

 

  · We cannot guarantee that we will continue as a going concern because we have not yet been successful in establishing profitable operations.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

  · We are dependent upon the National Cancer Institute, or the NCI, to supply bryostatin for our clinical trials.

 

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

 

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

 

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

 

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

 

 7 

 

 

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

 

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

 

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

 

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

 

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

 

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

 

  · We cannot assure you that our common stock will become liquid or that it will be listed on a securities exchange.

 

  · Our common stock may be subject to the “penny stock” rules of the SEC and the trading market in the securities is limited, which makes transactions in the stock cumbersome and may reduce the value of an investment in our common stock.

 

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

 

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

 

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

 

  · Because state securities “Blue Sky” laws prohibit trading absent compliance with individual state laws, state Blue Sky registration requirements could limit resale of the shares.

 

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

  

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

 

  · Being a public company is expensive and administratively burdensome.

 

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

 

  · There can be no assurance that the reverse stock split will achieve the desired benefits. 

 

  · The reverse stock split may decrease the liquidity of the shares of our common stock.

 

Corporate Information

 

Our principal executive offices are located at 205 East 42nd Street – 16th Floor, New York, NY 10017. Our telephone number is 1-973-242-0005. Our website address is http://www.neurotropebioscience.com. The information on, or that can be accessed through, our website is not part of this prospectus.

 

 8 

 

 

THE OFFERING

 

Common stock currently outstanding   6,987,411 shares (1)
     
Series A, Series C, Series E and Series F Investor Warrants currently outstanding   Warrants to purchase an aggregate of 5,515,451 shares of our common stock
     
Placement Agent Warrants currently outstanding   Warrants to purchase an aggregate of 495,999 shares of our common stock,
     
Common stock offered by the Company   None
     
Common stock offered by the selling stockholders   Up to 8,040,395 shares (2)
     
Use of proceeds   We will not receive any of the proceeds from the sales of our common stock by the selling stockholders.
     
OTC Market symbol   NTRP.  For 20 business days following the effectiveness of our reverse stock split, a “D” will be placed at the end of the symbol (“NTRPD”).
     
Risk Factors   You should carefully consider the information set forth in this prospectus and, in particular, the specific factors set forth in the “Risk Factors” section beginning on page 12 of this prospectus before deciding whether or not to invest in shares of our common stock.

 

  (1) As of January 25, 2017, and excludes warrants to purchase 5,515,451 shares of our common stock, placement agent warrants to purchase 495,999 shares of our common stock and options to purchase 683,217 shares of our common stock (with exercise prices ranging from $10.56 to $71.04 per share).

 

  (2) Consists of (a) 3,828,754 shares of our common stock, par value $0.0001 per share, (b) 3,828,754 shares of our common stock issuable upon exercise of the outstanding Series F warrants to purchase our common stock having an exercise price of $12.80 per share and (c) 382,887 shares of our common stock issuable upon exercise of the outstanding placement agent warrants to purchase our common stock having an exercise price of $6.40 per share.

 

 9 

 

 

Summary Financial Information

 

   Fiscal Year
Ended
December 31,
2015
   Fiscal Year
Ended
December 31,
2014
   Nine Months
Ended
September 30,
2016
   Nine Months
Ended
September 30,
2015
 
                 
Statement of Operations Data                    
                     
Revenues  $   $   $   $ 
                     
Total operating expenses  $9,445,757   $9,267,120   $7,918,584   $6,911,018 
                     
Net loss  $(9,441,535)  $(9,253,323)  $(7,913,134)  $(6,908,174)
                     
Statement of Cash Flows Data                    
                     
Cash used in operating activities  $(10,316,600)  $(7,152,576)  $(4,701,686)  $(6,475,749)
                     
Cash used in investing activities  $(11,827)  $(54,943)  $(2,947)  $(11,827)
                     
Cash provided by (used in) financing activities  $13,548,707   $6,132   $(10,237)  $20,756 

 

   At
December 31,
2015
   At
December 31,
2014
   At
September 30,
2016
   At
September 30,
2015
 
                 
Balance Sheet Data                    
                     
Total current assets  $12,723,249   $8,107,430   $6,739,473   $1,891,468 
                     
Total assets  $12,782,424   $8,161,048   $6,796,407   $1,952,254 
                     
Total current liabilities  $990,969   $1,289,188   $1,953,034   $1,598,978 
                     
Total liabilities  $990,969   $1,289,188   $1,953,034   $1,598,978 
                     
Convertible redeemable preferred stock  $11,814,874   $18,524,163   $11,570,695   $14,522,010 
                     
Total stockholders’ deficit  $(23,419)  $(11,652,303)  $(6,727,322)  $(14,168,734)

 

 10 

 

 

NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

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

 

The forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may not be realized because they are based upon our current projections, plans, objectives, beliefs, expectations, estimates and assumptions and are subject to a number of risks and uncertainties and other influences, many of which we have no control over. Actual results and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements as a result of these risks and uncertainties. Factors that may influence or contribute to the inaccuracy of the forward-looking statements or cause actual results to differ materially from expected or desired results may include, without limitation, our inability to obtain adequate financing, the significant length of time associated with drug development and related insufficient cash flows and resulting illiquidity, our inability to expand our business, significant government regulation of pharmaceuticals and the healthcare industry, lack of product diversification, volatility in the price of our raw materials, existing or increased competition, results of arbitration and litigation, stock volatility and illiquidity, and our failure to implement our business plans or strategies. A description of some of the risks and uncertainties that could cause our actual results to differ materially from those described by the forward-looking statements in this prospectus appears in the section captioned “Risk Factors” and elsewhere in this prospectus. Readers should carefully review this prospectus in its entirety, including, but not limited to, our financial statements and the notes thereto and the risks described herein. We advise you to carefully review the reports and documents we file from time to time with the SEC, particularly our annual reports on Form 10-K, our quarterly reports on Form 10-Q and our current reports on Form 8-K.

 

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

 

 11 

 

 

RISK FACTORS

 

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

 

Risks Related to Our Business and Financial Condition

 

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

 

As of September 30, 2016, we had approximately $6.5 million of available cash and cash equivalents. We raised approximately $24.5 million of gross proceeds in the November 2016 Private Placement. We are currently reviewing our current operating plans, and we will require additional capital in the future. Additional funds may be raised through the issuance of equity securities and/or debt financing, there being no assurance that any type of financing on terms acceptable to us will be available or otherwise occur. Debt financing must be repaid regardless of whether we generate revenues or cash flows from operations and may be secured by substantially all of our assets. Any equity financing or debt financing that requires the issuance of warrants or other equity securities to the lender would cause the percentage ownership by our current stockholders to be diluted, which dilution may be substantial. Also, any additional equity securities issued may have rights, preferences or privileges senior to those of existing stockholders. If such financing is not available when required or is not available on acceptable terms, we may be required to reduce or eliminate certain product candidates and development activities, including those related to bryostatin, the “bryologs” or polyunsaturated fatty acid analogs, and it may ultimately require us to suspend or cease operations, which could cause investors to lose the entire amount of their investment.

 

We cannot guarantee that we will continue as a going concern because we have not yet been successful in establishing profitable operations.

 

We received a report from our independent registered public accounting firm on our financial statements for fiscal years ended December 31, 2015 and 2014, which contained emphasis of matter language indicating substantial doubt about the Company’s ability to continue as a going concern. In addition, and consistent with 2014, the footnotes to our financial statements contained herein list factors, including substantial losses, substantial contractual commitments, and failure to generate revenues, which raise substantial doubt about our ability to continue as a going concern.

 

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

 

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

 

 12 

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 13 

 

 

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

 

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

 

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

 

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

 

 14 

 

 

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

 

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

 

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

 

As of September 30, 2016, we had aggregate federal and state net operating loss carryforwards of approximately $29 million, which begin to expire in fiscal 2032. Under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, changes in our ownership may limit the amount of our net operating loss carryforwards that could be utilized annually to offset our future taxable income, if any. This limitation would generally apply in the event of a cumulative change in ownership of our company of more than 50% within a three-year period. Any such limitation may significantly reduce our ability to utilize our net operating loss carryforwards and tax credit carryforwards before they expire. Any such limitation, whether as the result of future offerings, prior private placements, sales of our common stock by our existing stockholders or additional sales of our common stock by us in the future (through the conversion of preferred stock, the exercise of outstanding warrants, or otherwise), could have a material adverse effect on our results of operations in future years. We have not completed a study to assess whether an ownership change for purposes of Section 382 has occurred, or whether there have been multiple ownership changes since our inception, due to the significant costs and complexities associated with such study.

 

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

 

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

 

 15 

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

  

 16 

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 17 

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 18 

 

 

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

 

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

 

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

 

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

 

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

 

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

 

Risks Related to Our Common Stock

 

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

 

There is currently a limited public market for shares of our common stock, and an active trading market may never develop or, if developed, may not be maintained. Our common stock is not listed on a stock exchange. Our common stock is quoted on the OTC Market. The OTC Market is a thinly traded market and lacks the liquidity of certain other public markets with which some investors may have more experience. The average daily trading volume in our common stock was approximately 21,678 shares during the 90-day period ended January 20, 2017. We do not currently and may not ever be able to satisfy the listing requirements for our common stock to be listed on a national securities exchange, which are often a more widely-traded and liquid market. Some, but not all, of the factors which may delay or prevent the listing of our common stock on a more widely-traded and liquid market include the following: our stockholders’ equity may be insufficient; the market value of our outstanding securities may be too low; our net income from operations may be too low; our common stock may not be sufficiently widely held; we may not be able to secure market makers for our common stock; and we may fail to meet the rules and requirements mandated by the several exchanges and markets to have our common stock listed. Should we fail to satisfy the initial listing standards of the national exchanges, or our common stock is otherwise rejected for listing and remains listed on the OTC Market or suspended from the OTC Market, the trading price of our common stock could suffer and the trading market for our common stock may be less liquid and our common stock price may be subject to increased volatility.

 

 19 

 

 

We cannot assure you that our common stock will become liquid or that it will be listed on a securities exchange.

 

Until our common stock is listed on a national securities exchange, such as The New York Stock Exchange or The Nasdaq Stock Market, we expect our common stock to remain eligible for quotation on the OTC Market, or on another over-the-counter quotation system, or in the “pink sheets.” In those venues, however, an investor may find it difficult to obtain accurate quotations as to the market value of our common stock. In addition, if we fail to meet the criteria set forth in SEC regulations, various requirements would be imposed by law on broker-dealers who sell our securities to persons other than established customers and accredited investors. Consequently, such regulations may deter broker-dealers from recommending or selling our common stock, which may further affect the liquidity of our common stock. This would also make it more difficult for us to raise capital.

  

Our common stock may be subject to the “penny stock” rules of the SEC and the trading market in the securities is limited, which makes transactions in the stock cumbersome and may reduce the value of an investment in our common stock.

 

The SEC has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:

 

  · that a broker or dealer approve a person’s account for transactions in penny stocks; and

 

  · that the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

 

In order to approve a person’s account for transactions in penny stocks, the broker or dealer must:

 

  · obtain financial information and investment experience objectives of the person; and

 

  · make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

 

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form sets forth:

 

  · the basis on which the broker or dealer made the suitability determination; and

 

  · that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

 

Generally, brokers and potential investors may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for existing stockholders to dispose of such securities and cause a decline in the market value of such securities.

 

Rule 15g-2 requires that disclosure has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. If we remain subject to the penny stock rules for any significant period, it could have an adverse effect on the market, if any, for our securities. If our securities are subject to the penny stock rules, investors will find it more difficult to dispose of our securities.

 

 20 

 

 

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

 

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

 

  · additions or departures of key personnel;

 

  · actual or anticipated variations in our operating results;

 

  · announcements of developments by us or our competitors;

 

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

 

  · adoption of new accounting standards affecting our industry;

 

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

 

  · changes in our industry;

 

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

 

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

 

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

 

  · our ability to execute our business plan;

 

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

 

  · announcement of clinical trial results.

 

The stock market is subject to significant price and volume fluctuations. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been initiated against the public company. Litigation initiated against us, whether or not successful, could result in substantial costs and diversion of our management’s attention and resources, which could harm our business and financial condition.

 

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

 

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

 

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

 

 21 

 

 

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

 

Because state securities “Blue Sky” laws prohibit trading absent compliance with individual state laws, state Blue Sky registration requirements could limit resale of the shares.

 

Transfer of our common stock may be restricted under the securities laws and regulations promulgated by various states and foreign jurisdictions, commonly referred to as “Blue Sky” laws. Absent compliance with such individual “Blue Sky” laws, our common stock may not be traded in such jurisdictions. We currently maintain information which permits sales of securities pursuant to the “manuals exemption.” This manuals exemption permits a security to be sold by stockholders in a particular state without being registered if the company issuing the security has a listing for that security in a securities manual recognized by that state. The listing entry must contain (i) the names of issuers, officers, and directors, (ii) an issuer’s balance sheet, and (iii) a profit and loss statement for either the fiscal year preceding the balance sheet or for the most recent fiscal year of operations. The principal accepted manuals are those published by Standard and Poor’s, and Mergent, Inc. Many states expressly recognize these manuals. Certain states either do not recognize principal accepted manuals or do not expressly recognize the manuals exemption. These states include: Alabama, California, Illinois, Kentucky, Louisiana, Missouri, New Hampshire, New York, Tennessee and Virginia. Registration of the securities is required in these states in order for such securities to be sold by stockholders in such states. As a result, it will not be possible for persons to resell shares of our common stock pursuant to this registration statement in these states without such registration. There is no assurance that the state securities divisions will approve these registrations. Accordingly, investors should consider the secondary market for our securities to be a limited one.

 

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

 

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

 

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

 

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

 

 22 

 

 

Being a public company is expensive and administratively burdensome.

 

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

 

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

 

  · maintain policies relating to disclosure controls and procedures;

 

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

 

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

 

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

 

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

 

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

 

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

 

 23 

 

 

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

 

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

 

There can be no assurance that the reverse stock split will achieve the desired benefits. 

 

On January 11, 2017, we effected a 1-for-32 reverse stock split of our shares of common stock. As a result of the reverse stock split, every thirty-two (32) shares of our pre-reverse split common stock was combined and reclassified into one share of common stock. In addition, our pre-reverse split 400,000,000 authorized shares of common stock was proportionately reduced to 12,500,000 authorized shares of common stock as a result of the reverse stock split.

 

We cannot predict with certainty the short or long term effects of the reverse stock split upon the market price of our common stock. The market price of our common stock following the reverse stock split may not increase, or may increase only briefly. In the event the market price of our common stock does increase, there can be no assurance that the reverse stock split will result in a share price that will attract new investors, including institutional investors. In addition, there can be no assurance that the market price of our common stock will satisfy the investing requirements of such investors.

 

The reverse stock split may decrease the liquidity of the shares of our common stock.

 

The liquidity of our shares of our common stock may be adversely affected by the reverse stock split given the reduced number of shares outstanding immediately following the reverse stock split. In addition, the reverse stock split may increase the number of stockholders who own odd lots (less than 100 shares) of our common stock, creating the potential for such stockholders to experience greater difficulty and an increase in the cost of selling their shares.

 

 24 

 

 

SELLING STOCKHOLDERS

 

The shares of common stock being offered by the selling shareholders are those issued to the selling shareholders pursuant to the Securities Purchase Agreement and upon exercise of the warrants. For additional information regarding the issuance of that common stock and warrants, see "The Offering" above. We are registering the shares of common stock in order to permit the selling shareholders to offer the shares for resale from time to time. Except for the ownership of the shares of common stock and the warrants issued pursuant to the Securities Purchase Agreement, the selling shareholders have not had any material relationship with us within the past three years.

 

The table below lists the selling shareholders and other information regarding the beneficial ownership of the shares of common stock by each of the selling shareholders, giving effect to the 1-for-32 reverse stock split that was effected on January 11, 2017. The second column lists the number of shares of common stock beneficially owned by each selling shareholder, based on its ownership of the common stock and warrants, as of November 28, 2016, assuming exercise of all warrants held by the selling shareholders on that date, without regard to any limitations on exercise.

 

The third column lists the shares of common stock being offered by this prospectus by the selling shareholders.

 

In accordance with the terms of a registration rights agreement with the selling shareholders, this prospectus generally covers the resale of at least the sum of (i) the number of shares of common stock issued pursuant to the Securities Purchase Agreement as of the Trading Day immediately preceding the date the registration statement is initially filed with the SEC, and (ii) the maximum number of shares of common stock issued and issuable upon exercise of the related warrants as of the Trading Day immediately preceding the date the registration statement is initially filed with the SEC. The fourth column assumes the sale of all of the shares offered by the selling shareholders pursuant to this prospectus.

 

Under the terms of the warrants, a selling shareholder may not exercise the warrants to the extent such exercise would cause such selling shareholder, together with its affiliates, to beneficially own a number of shares of common stock which would exceed 9.99% of our then outstanding shares of common stock following such exercise, excluding for purposes of such determination shares of common stock issuable upon exercise of the warrants which have not been exercised. The number of shares in the second column does not reflect this limitation. The selling shareholders may sell all, some or none of their shares in this offering. See "Plan of Distribution."

 

 25 

 

 

    Number of  Shares
of Common Stock
Owned Prior to
Completion of the
Offering
    Maximum Number
of  Shares of
Common Stock to be
Sold Pursuant to this
Prospectus(1)
    Number
of  Shares
of
Common
Stock
Owned
Upon
Completion
of the
Offering(2)
    Percentage
of
Common
Stock
Beneficially
Owned
Upon
Completion
of the
Offering(2)
 
                         
ACNYC, LLC(3)     78,126       78,126       -       *  
                                 
AddSamDev Family LLC(4)     7,814       7,814       -       *  
                                 
AG Family L.P.(5)     93,750       93,750       -       *  
                                 
Allan Lipkowitz Revocable Living Trust 8.26.2005(6)     18,321       7,814       10,507       *  
                                 
Allen Chase Foundation-Special Investment Account(7)     3,126       3,126       -       *  
                                 
Alpha Capital Anstalt(8)     168,644       70,314       98,330       1.5 %
                                 
Alpha North Asset Management(9)     234,376       234,376       -       *  
                                 
Anderson, Kent Tucker(10)     60,063       31,250       28,813       *  
                                 
Anson Investments Master Fund LP(11)     109,376       109,376       -       *  
                                 
Applied Food Sciences, Inc.(12)     31,250       31,250       -       *  
                                 
Armitage, Barclay(13)     9,265       6,250       3,015       *  
                                 
Arnett, Jan     46,876       46,876       -       *  
                                 
Arrow, Alexander     31,250       31,250       -       *  
                                 
Baker, Adrienne(14)     27,959       15,626       12,333       *  
                                 
Baker, Christopher(14)     41,757       31,250       10,507       *  
                                 
Baldwin, Wayne K.     6,250       6,250       -       *  
                                 
Bechtle, Kimberley(15)     604       426       178       *  
                                 
Bendell, Bruce     7,814       7,814       -       *  
                                 
Bennett Yanowitz Credit Shelter Trust(16)     6,250       6,250       -       *  
                                 
Berman, Jeffrey(17)     68,153       68,153       -       *  
                                 
Bigger, Michael     15,626       15,626       -       *  
                                 
Bigger, Michael Custodian for Andreas Bigger(18)     15,626       15,626       -       *  
                                 
Bigger, Michael Custodian for Mathias Bigger(18)     15,626       15,626       -       *  
                                 
Bilzi, Alan     4,953       3,126       1,827       *  
                                 
Blatt, Jonathan & Gina(19)     10,336       7,814       2,522       *  
                                 
Blazier, John C.(20)     13,068       7,814       5,254       *  

 

 26 

 

 

Blum, Christopher     7,642       6,250       1,392       *  
                                 
Bodmer, Hans Conrad     58,182       46,876       11,306       *  
                                 
Bonanno, Raymond J. & Joan L.     62,500       62,500       -       *  
                                 
Boris, Marvin     15,626       15,626       -       *  
                                 
Bradley Resources Company LLC(21)     15,626       15,626       -       *  
                                 
Brenner, Andrew(22)     19,409       15,626       3,783       *  
                                 
Burkhardt, Robert     8,077       6,250       1,827       *  
                                 
Cadenasso, Richard J.     7,182       6,250       932       *  
                                 
Caione, Robert IRA(23)     7,814       7,814       -       *  
                                 
Cardone, Scott(24)     15,026       9,057       5,969       *  
                                 
Chase, O. Stuart     2,478       1,564       914       *  
                                 
Chestler, Daniel(25)     20,447       6,250       14,197       *  
                                 
Chitayat Holdings, LLC(26)     15,626       15,626       -       *  
                                 
Cialone, Juli-Ann(27)     8,422       3,126       5,296       *  
                                 
Clyde Smith McGregor and LeAnn Pederson Pope Revocable Trust U/A/D 10/22/16(28)     876,341       390,626       485,715       3.0 %
                                 
Codi, Joseph(29)     12,915       6,250       6,665       *  
                                 
Contributory IRA of Teresa Denise Dereniak Charles Schwab & Co. Inc. CUST(30)     7,500       7,500       -       *  
                                 
Cooperman, Edwin     7,814       7,814       -       *  
                                 
Corbin, Lee Harrison(31)     36,924       31,250       5,674       *  
                                 
Cotter, John A. & Wendy M. JTWROS(32)     27,522       23,438       4,084       *  
                                 
Cozzolino, Christopher(33)     5,205       4,785       420       *  
                                 
Cresswell Advisors, Inc.(34)     15,626       15,626       -       *  
                                 
Currie Family Trust Dtd. 6/26/1987, As Amended (35)     26,580       11,250       15,330       *  
                                 
Cynergy Healthcare Investors Emerging Bridge, LLC(36)     15,626       15,626       -       *  
                                 
Dailey, Robert J.(37)     26,133       15,626       10,507       *  
                                 
Dave Rickey & Daughters Foundation Charitable Trust(38)     12,676       7,814       4,862       *  
                                 
David M. Rickey Trust dtd 05.08.02(39)     21,930       15,626       6,304       *  
                                 
David, Richard     7,814       7,814       -       *  
                                 
Davis, Christopher F.     15,626       15,626       -       *  
                                 
Dawna Paton TOD Dawna L. Paton Trust 2011(40)     7,814       7,814       -       *  
                                 
Deardorf 1987 Family Trust     14,497       11,720       2,777       *  
                                 
DeLoach, Dennis R., Jr. & Faye M., JTWROS(41)     35,525       23,438       12,087       *  
                                 
Demarco-Konik, Lisa & Konik, Randal, JTWROS(42)     9,829       5,626       4,203       *  

 

 27 

 

 

DeMaris, Brian     3,126       3,126       -       *  
                                 
Dereniak, Teresa D.     7,500       7,500       -       *  
                                 
Ding, Ruijian     7,814       7,814       -       *  
                                 
DiPaolo, Barrett     3,126       3,126       -       *  
                                 
Dritz, James L.(43)     23,393       9,376       14,017       *  
                                 
Dritz, Russell S.(44)     8,422       3,126       5,296       *  
                                 
Due Mondi Investments LP(45)     9,667       4,688       4,979       *  
                                 
Duty, Clinton N.     15,626       15,626       -       *  
                                 
EFD Capital , Inc.(46)     7,677       6,114       1,563       *  
                                 
Ehrenstein, Paul(47)     2,189       1,251       938       *  
                                 
Ellis International LP(48)     371,079       85,938       285,141       2.2 %
                                 
Elmes, Tim     7,814       7,814       -       *  
                                 
Empire Group Ltd.(49)     31,250       31,250       -       *  
                                 
Endeavor Asset Management, L.P.(50)     31,250       31,250       -       *  
                                 
Engel, Suzanne B.(51)     10,334       6,250       4,084       *  
                                 
Equity Investments L.P.(52)     62,500       62,500       -       *  
                                 
Ernest W. Moody Revocable Trust, DTD Jan 14 2009(53)     261,315       156,250       105,065       1.2 %
                                 
Fidelity Management Trust Company FBO: Peter M. Knapp, Jr. IRA Rollover(54)     7,814       7,814       -       *  
                                 
Fingleton, James G.     23,438       23,438       -       *  
                                 
FirstFire Global Opportunities Fund LLC(55)     57,652       15,626       42,026       *  
                                 
Fisher, Melissa(56)     78,792       31,250       47,542       *  
                                 
Foster Family Trust(57)     26,133       15,626       10,507       *  
                                 
Four Jr. Investments Ltd.(58)     15,626       15,626       -       *  
                                 
Frankel, Robert D.(59)     11,549       6,250       5,299       *  
                                 
Gaines, Ira     7,814       7,814       -       *  
                                 
Gans, Walter G.     8,822       6,250       2,572       *  
                                 
Garrison, William     25,000       25,000       -       *  
                                 
Gasby, Clarence     15,626       15,626       -       *  
                                 
George E. & Diane M. Conniff 2002 Family Trust(60)     31,250       31,250       -       *  
                                 
Gibbs, John D.     31,250       31,250       -       *  
                                 
Gibralt Capital Corporation(61)     104,257       93,750       10,507       *  
                                 
Goethe, Bruce D. & Laura K., JTWROS     9,376       9,376       -       *  

 

 28 

 

 

Gostanian, Justin(62)     20,880       15,626       5,254       *  
                                 
Grosvenor, J. Mark     15,626       15,626       -       *  
                                 
Gubbay Investments, LLC(63)     13,981       7,814       6,167       *  
                                 
H Investment Company(64)     36,227       19,532       16,695       *  
                                 
Hackett Family Trust dtd. 7.27.98(65)     76,972       62,500       14,472       *  
                                 
Harrigan, Robert     6,250       6,250       -       *  
                                 
Harrigan, Todd(66)     5,832       2,813       3,019       *  
                                 
Hart, Kara L.(67)     7,641       3,438       4,203       *  
                                 
Herrmann, Timothy(68)     19,832       12,779       7,053       *  
                                 
HRMG Inc. Profit Sharing Plan dtd 7/04 FBO James Moore(69)     4,688       4,688       -       *  
                                 
Hummel, Daniel W. and Allaire JTWROS(70)     5,191       2,344       2,847       *  
                                 
Imbert, Peter T.     15,626       15,626       -       *  
                                 
Iroquois Capital Investment Group, LLC(71)     304,287       281,250       23,037       *  
                                 
Iroquois Master Fund Ltd.(72)     445,414       187,500       257,914       2.1 %
                                 
Irwin Blitt Rev. Trust Dtd 01.28.78(73)     31,250       31,250       -       *  
                                 
J. Goldman Master Fund, L.P.(74)     312,500       312,500       -       *  
                                 
Janssen, Morgan(75)     3,737       3,663       74       *  
                                 
Janssen, Peter K.(76)     32,153       29,419       2,734       *  
                                 
Janssen, Peter W.     7,814       7,814       -       *  
                                 
JEPAP, LLC(77)     703,126       703,126       -       *  
                                 
John R. Raphael Rollover IRA(78)     31,250       31,250       -       *  
                                 
Justin Keener D/B/A JMJ Financial(79)     156,250       156,250       -       *  
                                 
JVM Investment Company LP(80)     7,814       7,814       -       *  
                                 
Kaplan, Rochelle L.     15,626       15,626       -       *  
                                 
Karipineni, Ramesh     7,814       7,814       -       *  
                                 
Kastner, Peter Scott(81)     13,068       7,814       5,254       *  
                                 
Kaul, Pradeep(82)     126,016       93,750       32,266       *  
                                 
Kay, Lina     62,500       62,500       -       *  
                                 
Koch, Kevin & Susan, JTWROS(83)     5,648       1,564       4,084       *  
                                 
Konik, Ryan(84)     2,257       1,822       435       *  
                                 
Landskowsky, David(85)     90,604       65,101       25,503       *  
                                 
Landskowsky, Steven and Lisa, JTWROS     3,126       3,126       -       *  
                                 
Lebhar, Clay G.(86)     47,640       31,250       16,390       *  

 

 29 

 

 

Leede Jones Gable Inc.(87)     14,985       14,985       -       *  
                                 
Leonard Edward Samuels Converted Roth IRA(88)     84,376       84,376       -       *  
                                 
Lester, Andrew L.     15,626       15,626       -       *  
                                 
Levy, Leonard     3,126       3,126       -       *  
                                 
Ligi Investments LLLP(89)     31,250       31,250       -       *  
                                 
Lincoln Park Capital Fund, LLC(90)     78,530       31,250       47,280       *  
                                 
Liss, Norman     218,750       218,750       -       *  
                                 
Livison, Roman(91)     4,394       4,394       -       *  
                                 
Loegering, Charles     7,814       7,814       -       *  
                                 
Lytton, Laurence     46,876       46,876       -       *  
                                 
M+T Bank as Trustee FBO Jeffrey Benison IRA(92)     7,814       7,814       -       *  
                                 
Manos, Peter and Gina, JTWROS     15,626       15,626       -       *  
                                 
Marano, Veronica and Thomas M. Volckening, JTWROS     15,626       15,626       -       *  
                                 
Mark P. Pacchini Rev. Living Trust dtd 8/21/92(93)     31,250       31,250       -       *  
                                 
Martillo Finance Limited     23,438       23,438       -       *  
                                 
Mason, Jeffrey S.     2,814       2,814       -       *  
                                 
Mathieu, Michael J.     7,814       7,814       -       *  
                                 
Mattei, Ernest & Michelle, JTWROS     7,814       7,814       -       *  
                                 
McGrandy, Lindsey(94)     2,852       2,180       672       *  
                                 
McGurk, Tom(95)     9,916       7,814       2,102       *  
                                 
Medici, Charles & Diane, JTWROS     7,814       7,814       -       *  
                                 
Meryle Evans Family Trust(96)     27,601       7,814       19,787       *  
                                 
Michael, Daniel(97)     19,974       15,626       4,348       *  
                                 
Mills, Tim     12,500       12,500       -       *  
                                 
MKF Holdings LLC(98)     23,438       23,438       -       *  
                                 
Moody, Brian C.     3,126       3,126       -       *  
                                 
Morgens, Edwin H.     31,250       31,250       -       *  
                                 
Mossanen, Shahzad & Betty, JTWROS     78,126       78,126       -       *  
                                 
Mut, Stephen R.     15,626       15,626       -       *  
                                 
Next Edge Bio-Tech Plus Fund(99)     31,250       31,250       -       *  
                                 
Nicholson, Steven(100)     6,960       6,960       -       *  
                                 
Northlea Partners LLLP(101)     329,665       62,500       267,165       3.8 %

 

 30 

 

 

Nowak, Russell L.     15,626       15,626       -       *  
                                 
O'Connell, Edward(102)     10,430       6,250       4,180       *  
                                 
Oi, Terence & Meehan, Patricia M., JTWROS     7,814       7,814       -       *  
                                 
Omenn, Gilbert S.(103)     24,021       14,064       9,957       *  
                                 
Osprey I, LLC(104)     15,626       15,626       -       *  
                                 
Palmer Family Trust(105)     15,626       15,626       -       *  
                                 
Palmer, Scott & Debra, JTWROS     15,626       15,626       -       *  
                                 
Palmeri, Basil & Eileen, JTWROS     7,814       7,814       -       *  
                                 
Pareto LLC(106)     3,126       3,126       -       *  
                                 
Pastore, Roger Charles     7,814       7,814       -       *  
                                 
Pathfinder Asset Management Limited(107)     125,000       125,000       -       *  
                                 
Pauline M. Howard Trust, Candy D'Azevedo TTEE(108)     3,126       3,126       -       *  
                                 
Peierls Foundation, Inc., The(109)     233,726       76,250       157,476       1.7 %
                                 
Peierls, Brian E.(110)     39,015       18,750       20,265       *  
                                 
Peierls, E. Jeffrey(111)     45,170       12,500       32,670       *  
                                 
Peierls, Brian E., UD E.F. for(112)     21,229       6,250       14,979       *  
                                 
Peierls, E. Jeffrey, UD E.F. for(113)     21,229       6,250       14,979       *  
                                 
Peierls, E.F. et al, UD E.S. Peierls for(114)     14,953       5,000       9,953       *  
                                 
Peierls, Brian Eliot, UD J.N. Peierls for(115)     24,257       6,250       18,007       *  
                                 
Peierls, E. Jeffrey, UD J.N. Peierls for(116)     24,257       6,250       18,007       *  
                                 
Peierls, Brian E. Accumulation, UW E.S. Peierls for(117)     18,256       5,000       13,256       *  
                                 
Peierls, E. Jeffrey Accumulation, UW E.S. Peierls for(118)     11,394       3,126       8,268       *  
                                 
Peierls, Brian E., UW J.N. Peierls for(119)     20,697       4,376       16,321       *  
                                 
Peierls, E. Jeffrey, UW J.N. Peierls for(120)     20,697       4,376       16,321       *  
                                 
Peierls, Ethel F. Charitable Lead Trust(121)     29,016       12,500       16,516       *  
                                 
Petracca, Lester     31,250       31,250       -       *  
                                 
Pezone, Albert(122)     7,573       7,573       -          
                                 
Pizzo, Kenneth S.     125,000       125,000       -       *  
                                 
Portnoy, Michael E.     15,626       15,626       -       *  
                                 
Prensky, Zachary     21,876       21,876       -       *  
                                 
Propper, Kerry     15,626       15,626       -       *  
                                 
Pruzansky, Joel(123)     20,880       15,626       5,254       *  
                                 
Rapfogel, Scott E.     4,688       4,688       -       *  

 

 31 

 

 

Raza, S. Atiq and Saraiya, Nandini JTWROS(124)     26,133       15,626       10,507       *  
                                 
Renaud, Stephen(125)     48,811       30,430       18,381       *  
                                 
Republic Construction Corporation(126)     4,686       3,126       1,560       *  
                                 
Rogers, Dyke     62,770       31,250       31,520       *  
                                 
Rosenblum, Matthew     46,876       15,626       31,250       *  
                                 
Rothstein, Allan     7,814       7,814       -       *  
                                 
Rozzo, Louis     3,126       3,126       -       *  
                                 
RS & VS Ltd(127)     13,068       7,814       5,254       *  
                                 
Rubenstein, Eric(128)     96,537       65,101       31,436       *  
                                 
Rubenstein, Tracy L.     31,250       31,250       -       *  
                                 
Sack Family Investment Fund LLC(129)     47,483       15,626       31,857       *  
                                 
Salvas, Daniel     62,500       62,500       -       *  
                                 
Salzhauer, Michael     7,814       7,814       -       *  
                                 
Samet, Asaf     156,250       156,250       -       *  
                                 
Saran, Renita     6,250       6,250       -       *  
                                 
Saxe, Barry     15,625       15,625       -       *  
                                 
SBM Trust(130)     78,126       78,126       -       *  
                                 
Scher Family Ltd Partnership(131)     15,626       15,626       -       *  
                                 
Schlosser, Alyson D.(132)     8,422       3,126       5,296       *  
                                 
Schump, Joseph     78,126       78,126       -       *  
                                 
SDL Ventures, LLC(133)     171,697       93,750       77,947       1.0 %
                                 
Segal, Aaron(134)     17,504       7,451       10,053       *  
                                 
Seyburn, Bruce H.(135)     21,445       10,938       10,507       *  
                                 
Shabto, Uri     31,250       31,250       -       *  
                                 
Shumpert, Stephen     31,250       31,250       -       *  
                                 
Shymansky, J. Stephen(136)     28,438       10,626       17,812       *  
                                 
Silverman, Michael(137)     71,588       46,055       25,533       *  
                                 
SJO Worldwide, LLC(138)     78,126       78,126       -       *  
                                 
Skrzypczak, Casimir S.(139)     11,597       7,814       3,783       *  
                                 
Smith, Brian C.(140)     7,598       2,344       5,254       *  
                                 
Stark, Michael(141)     13,633       3,126       10,507       *  
                                 
Stephan, Roderick C.     15,626       15,626       -       *  

 

 32 

 

 

Strawbridge, William(142)     11,898       9,376       2,522       *  
                                 
Strazzulla, Domenic(143)     9,311       3,126       6,185       *  
                                 
Struve, Clayton(144)     64,314       31,250       33,064       *  
                                 
Swadesh Family Trust(145)     78,126       78,126       -       *  
                                 
Tan-DeMattei Family Trust dtd 5.4.99(146)     3,126       3,126       -       *  
                                 
The Barry A. Kaplan 2000 Family Trust(147)     23,438       23,438       -       *  
                                 
The Jacks 2016 Irrevocable Trust(148)     31,250       31,250       -       *  
                                 
The Special Equities Group, LLC(149)     15,626       15,626       -       *  
                                 
Trust of Abraham Schloss UAD 06/15/2011(150)     7,814       7,814       -       *  
                                 
Trust UA2 Will Hallie Hicklin FBO Lauren Morgens(151)     31,250       31,250       -       *  
                                 
Trust Under Article III of the Thomas E. Brophy 2004 Grantor Retained Annuity Trust dtd 3.2.04(152)     31,250       31,250       -       *  
                                 
VI LLC(153)     15,626       15,626       -       *  
                                 
W East 21 Associates, LLC(154)     62,500       62,500       -       *  
                                 
Wagner, John(155)     21,079       7,814       13,265       *  
                                 
Wardle, Christopher     31,250       31,250       -       *  
                                 
Wardle, Marianne     31,250       31,250       -       *  
                                 
Washburn, Christopher(156)     13,349       6,250       7,099       *  
                                 
Wayne M. Pichon Revocable Non-Survivor Community Property Trust U/A/D 1/2/1985 Wayne M. Pichon Trustee(157)     15,626       15,626       -       *  
                                 
Weidenbener, Erich     6,250       6,250       -       *  
                                 
Wheeler, Donald Craig     7,814       7,814       -       *  
                                 
Whited, Craig(158)     50,054       31,250       18,804       *  
                                 
Whitewater Holdings LLC(159)     62,500       62,500       -       *  
                                 
Whiting Holdings LP(160)     98,635       46,876       51,759       *  
                                 
Wiesenberg, James H.(161)     5,652       2,500       3,152       *  
                                 
Willis, Jason and Amanda, JTWROS     15,626       15,626       -       *  
                                 
Willis, Michael L. and Sharon D., JTWROS(162)     82,328       75,000       7,328       *  
                                 
Windward Venture Partners(163)     9,376       9,376       -       *  
                                 
Wolsonovich SEF LLC(164)     15,626       15,626       -       *  
                                 
YangKao, Julie     7,814       7,814       -       *  
                                 
Yanowitz, Gerald     9,376       9,376       -       *  
                                 
Yanowitz, Jason(165)     190       190       -       *  
                                 
Yanowitz, Joel(166)     5,767       1,564       4,203       *  
                                 
Zahavi, Thomas(167)     18,148       15,626       2,522       *  
                                 
Zimmerman, Michael     3,282       3,282       -       *  

 

 33 

 

 

* indicates ownership of less than 1%

  

  1) Includes an aggregate of (a) 3,828,754 shares of our common stock, (b) 3,828,754 shares of common stock issuable upon exercise of the outstanding Series F warrants having an exercise price of $12.80 per share and (c) 382,887 shares of common stock issuable upon exercise of placement agent warrants having an exercise price of $6.40 per share. We are registering 100% of such securities.
     
  2) Assumes all of the shares of common stock to be registered on the registration statement of which this prospectus is a part, including all shares of our common stock underlying shares of our Series F purchase warrants held by the selling stockholders, are sold in the offering and that shares of our common stock beneficially owned by such selling stockholders but not being registered by this prospectus are not sold.
     
  3) Andrew Cader is the Managing Member of ACNYC, LLC and has voting and investment power over the shares owned thereby.  Includes 39,063 shares of common stock and warrants to purchase an additional 39,063 shares of common stock at $12.80 per share.
     
  4) Tim Elmes is the Manager of AddSamDev Family LLC and has voting and investment power over the shares owned thereby.  Includes 3,907 shares of common stock and warrants to purchase an additional 3,907 shares of common stock at $12.80 per share.
     
  5) Thomas A. Satterfield, Jr. is the Managing Investment Partner of AG Family L.P and has voting and investment power over the shares owned thereby.  Includes 46,875 shares of common stock and warrants to purchase an additional 46,875 shares of common stock at $12.80 per share.
     
  6) Allan Lipkowitz is the Trustee of Allan Lipkowitz Revocable Living Trust 8/26/2005 and has sole voting and investment power over the shares owned thereby.  Ownership prior to completion of the offering includes warrants to purchase up to 7,813 shares of common stock relating to the Series B financing.
     
  7) O. Stuart Chase is the Headmaster Emeritus of Allen Chase Foundation-Special Investment Account and has voting and investment power over the shares owned thereby.  Includes 1,563 shares of common stock and warrants to purchase an additional 1,563 shares of common stock at $12.80 per share.
     
  8) Konrad Ackerman has voting and dispositive control with respect to the securities being offered.  Ownership prior to completion of the offering includes warrants to purchase up to 58,596 shares of common stock relating to the Series B financing.
     
  9) Joey Javier is the Managing Partner of Alpha North Asset Management and has voting and investment power over the shares owned thereby.  Includes 117,188 shares of common stock and warrants to purchase an additional 117,188 shares of common stock at $12.80 per share.
     
  10) Ownership prior to completion of the offering includes warrants to purchase up to 15,938 shares of common stock relating to the Series B financing.
     
  11) Amin Nathoo is the Advising Rep, Anson Advisors Inc. of Anson Investments Master Fund LP and has voting and investment power over the shares owned thereby.  Includes 54,688 shares of common stock and warrants to purchase an additional 54,688 shares of common stock at $12.80 per share.
     
  12) Alan Andrews is the Vice President of Applied Food Sciences, Inc. and has voting and investment power over the shares owned thereby.  Includes 15,625 shares of common stock and warrants to purchase an additional 15,625 shares of common stock at $12.80 per share.
     
  13) Ownership prior to completion of the offering includes warrants to purchase up to 1,563 shares of common stock relating to the Series B financing.

 

 34 

 

 

  14) Ownership prior to completion of the offering includes warrants to purchase up to 7,815 shares of common stock relating to the Series B financing.
     
  15) Ownership prior to completion of the offering includes warrants to purchase up to 145 shares of common stock relating to the Series A and Series B financings. Maximum number of shares of common stock issuable upon exercise of warrants and registered hereby consists of private placement warrants to purchase up to 425 shares of common stock at $6.40 per share.
     
  16) Alan Yanowitz is the Trustee of Bennett Yanowitz Credit Shelter Trust and has voting and investment power over the shares owned thereby.  Includes 3,125 shares of common stock and warrants to purchase an additional 3,125 shares of common stock at $12.80 per share.
     
  17) Maximum number of shares of common stock issuable upon exercise of warrants and registered hereby consists of private placement warrants to purchase up to 68,153 shares of common stock at $6.40/share, issuable upon exercise of common stock purchase warrants received by Jeffrey Berman, an affiliate of a broker-dealer which acted as placement agent in the offering. Mr. Berman received the warrants in the ordinary course of business for his own account and, at the time of receipt, had no agreements or understandings with any person, directly or indirectly, to further distribute the securities.
     
  18) Michael Bigger is the custodian for Andreas and Mathias Bigger and has voting and investment power over the shares owned thereby.  Includes 7,813 shares of common stock and warrants to purchase an additional 7,813 shares of common stock at $12.80 per share for Andreas and Mathias.
     
  19) Ownership prior to completion of the offering includes warrants to purchase up to 1,875 shares of common stock relating to the Series B financing.
     
  20) Ownership prior to completion of the offering includes warrants to purchase up to 3,909 shares of common stock relating to the Series B financing.
     
  21) George W. Holbrook, Jr. is the Manager of Bradley Resources Company LLC and has voting and investment power over the shares owned thereby.  Includes 7,813 shares of common stock and warrants to purchase an additional 7,813 shares of common stock at $12.80 per share.
     
  22) Ownership prior to completion of the offering includes warrants to purchase up to 2,814 shares of common stock relating to the Series B financing.
     
  23) Robert Caione is the IRA Custodian for Oppenheimer & Co., Inc.
     
  24) Ownership prior to completion of the offering includes warrants to purchase up to 3,506 shares of common stock relating to the Series A and Series B financings. Maximum number of shares of common stock issuable upon exercise of warrants and registered hereby consists of private placement warrants to purchase up to 9,057 shares of common stock at $6.40 per share.
     
  25) Ownership prior to completion of the offering includes warrants to purchase up to 7,813 shares of common stock relating to the Series B financing.
     
  26) Jack Chitayat is the Trustee of Chitayat Holdings, LLC and has voting and investment power over the shares owned thereby.  Includes 7,813 shares of common stock and warrants to purchase an additional 7,813 shares of common stock at $12.80 per share.
     
  27) Ownership prior to completion of the offering includes warrants to purchase up to 3,939 shares of common stock relating to the Series B financing.
     
  28) Ownership prior to completion of the offering includes warrants to purchase up to 312,501 shares of common stock relating to the Series B financing.  Securities owned prior to completion of the offering are held by Clyde McGregor Revocable Trust dtd 6/6/97 for the benefit of the Clyde S. McGregor Revocable 7 Charitable Remainder Trust, the Clyde S. McGregor Revocable 14 Charitable Remainder Trust, and the Clyde S. McGregor Revocable 20 Charitable Remainder Trust, for which Mr. McGregor is the trustee. Clyde S. McGregor and LeAnn Pope are the Trustees of Clyde Smith McGregor and LeAnn Pederson Pope Revocable Trust U/A/D 10/22/16 and have voting and investment power over the shares owned thereby.  Includes 195,313 shares of common stock and warrants to purchase an additional 195,313 shares of common stock at $12.80 per share.

 

 35 

 

 

  29) Ownership prior to completion of the offering includes warrants to purchase up to 3,909 shares of common stock relating to the Series B financing.
     
  30) The Contributory IRA of Teresa Denise Dereniak Charles Schwab & Co. Inc. CUST has voting and investment power over the shares owned thereby.  Includes 3,750 shares of common stock and warrants to purchase an additional 3,750 shares of common stock at $12.80 per share.
     
  31) Ownership prior to completion of the offering includes warrants to purchase up to 4,221 shares of common stock relating to the Series B financing.
     
  32) Ownership prior to completion of the offering includes warrants to purchase up to 2,346 shares of common stock relating to the Series B financing.
     
  33) Ownership prior to completion of the offering includes warrants to purchase up to 332 shares of common stock relating to the Series A and Series B financings. Maximum number of shares of common stock issuable upon exercise of warrants and registered hereby consists of private placement warrants to purchase up to 4,785 shares of common stock at $6.40 per share.
     
  34) David G.P. Allan is the Principal of Cresswell Advisors, Inc. and has voting and investment power over the shares owned thereby.  Includes 7,813 shares of common stock and warrants to purchase an additional 7,813 shares of common stock at $12.80 per share.
     
  35) Dr. Malcolm Currie and Barbara Currie are Co-Trustees of the Currie Family Trust and have shared voting and investment power over the shares owned thereby.  Ownership prior to completion of the offering includes warrants to purchase up to 7,815 shares of common stock relating to the Series B financing.
     
  36) Patrick Adams is the Managing Partner of Cynergy Healthcare Investors Emerging Bridge, LLC and has voting and investment power over the shares owned thereby.  Includes 7,813 shares of common stock and warrants to purchase an additional 7,813 shares of common stock at $12.80 per share.
     
  37) Ownership prior to completion of the offering includes warrants to purchase up to 7,815 shares of common stock relating to the Series B financing.
     
  38) David M. Rickey is the Trustee of the Dave Rickey & Daughters Foundation Charitable Trust and has sole voting and investment power over the shares owned thereby.  Ownership prior to completion of the offering includes warrants to purchase up to 2,346 shares of common stock relating to the Series B financing.
     
  39) David M. Rickey is the Trustee of the David M. Rickey Trust dtd 5/8/02 and has sole voting and investment power over the shares owned thereby.  Ownership prior to completion of the offering includes warrants to purchase up to 4,689 shares of common stock relating to the Series B financing.
     
  40) Dawna Paton is the Trustee of Dawna Paton TOD Dawna L. Paton Trust 2011 and has voting and investment power over the shares owned thereby.  Ownership prior to completion of the offering includes 3,907 shares of common stock and warrants to purchase an additional 3,907 shares of common stock at $12.80 per share.
     
  41) Ownership prior to completion of the offering includes warrants to purchase up to 3,939 shares of common stock relating to the Series B financing.
     
  42) Ownership prior to completion of the offering includes warrants to purchase up to 3,126 shares of common stock relating to the Series B financing.

 

 36 

 

 

  43) Ownership prior to completion of the offering includes warrants to purchase up to 7,875 shares of common stock relating to the Series B financing.
     
  44) Ownership prior to completion of the offering includes warrants to purchase up to 3,939 shares of common stock relating to the Series B financing.
     
  45) Robert S. Beadle is the President of Due Mondi Investments Ltd. and has sole voting and investment power over the shares owned thereby. Ownership prior to completion of the offering includes warrants to purchase up to 1,719 shares of common stock relating to the Series B financing.
     
  46) Barbara J. Glenns, President of the selling stockholder, has the power to vote or dispose of the securities held of record by the selling stockholder and may be deemed to beneficially own those securities. Ownership prior to completion of the offering includes warrants to purchase up to 1,563 shares of common stock relating to the Series B financing. Includes 6,114 shares the selling shareholder has the right to acquire through the exercise of a common stock warrant.
     
  47) Ownership prior to completion of the offering includes warrants to purchase up to 939 shares of common stock relating to the Series B financing. Maximum number of shares of common stock issuable upon exercise of warrants and registered hereby consists of private placement warrants to purchase up to 1,250 shares of common stock at $6.40 per share.
     
  48) Ownership prior to completion of the offering includes warrants to purchase up to 212,034 shares of common stock relating to the Series B financing. The selling shareholder is controlled by Mendy Scheen who has the power and control to vote and sell the securities.
     
  49) Primeway S.A. is the Director of Empire Group Ltd. and has voting and investment power over the shares owned thereby.  Includes 15,625 shares of common stock and warrants to purchase an additional 15,625 shares of common stock at $12.80 per share.
     
  50) Patrick Tully is the Managing General Partner of Endeavor Asset Management, L.P. and has voting and investment power over the shares owned thereby.  Includes 15,625 shares of common stock and warrants to purchase an additional 15,625 shares of common stock at $12.80 per share.
     
  51) Ownership prior to completion of the offering includes warrants to purchase up to 2,346 shares of common stock relating to the Series B financing.
     
  52) Helen M. Carroll & Schevon V. Miller is the CIBC Trust Company (Bahamas) Limited as Trustee of Settlement T-555, General Partner of Equity Investments L.P. and has voting and investment power over the shares owned thereby.  Includes 31,250 shares of common stock and warrants to purchase an additional 31,250 shares of common stock at $12.80 per share.
     
  53) Ernest W. Moody is the Trustee of the Ernest W. Moody Revocable Trust, dated Jan 14, 2009. As a result of the foregoing, he may be deemed to have beneficial ownership (as determined under Section 13(d) of the Securities Exchange Act of 1934, as amended) of the shares of common stock beneficially owned by Ernest W. Moody Revocable Trust, dated Jan 14, 2009. Ownership prior to completion of the offering includes warrants to purchase up to 78,126 shares of common stock relating to the Series B financing.
     
  54) Fidelity Management Trust Company for the benefit of Peter M. Knapp, Jr. IRA Rollover has voting and investment power over the shares owned thereby.  Ownership prior to completion of the offering includes 3,907 shares of common stock and warrants to purchase an additional 3,907 shares of common stock at $12.80 per share.
     
  55) Seth Fireman is the managing partner of FirstFire Global Opportunities Fund LLC and owns voting control of the membership interests in FirstFire Global Opportunities Fund LLC, and Mr. Fireman has sole power to vote or to direct the vote and sole power to dispose or to direct the disposition of all securities owned directly by FirstFire Global Opportunities Fund LLC.  Ownership prior to completion of the offering includes warrants to purchase up to 31,251 shares of common stock relating to the Series B financing.
     
  56) Ownership prior to completion of the offering includes warrants to purchase up to 31,251 shares of common stock relating to the Series B financing.

 

 37 

 

 

  57) Dwight D. Foster, III and Jane C. Foster are Trustees of the Foster Family Trust, U.D.T. dated June 18, 2010, or the Foster Trust, and share voting and dispositive power over the shares held by the Foster Trust.  Ownership prior to completion of the offering includes warrants to purchase up to 7,815 shares of common stock relating to the Series B financing.
     
  58) Robert Burke is the Manager of Four Jr. Investments Ltd. and has voting and investment power over the shares owned thereby.  Includes 7,813 shares of common stock and warrants to purchase an additional 7,813 shares of common stock at $12.80 per share.
     
  59) Ownership prior to completion of the offering includes warrants to purchase up to 1,875 shares of common stock relating to the Series B financing.
     
  60) George E. Conniff is the Trustee of George E. & Diane M. Conniff 2002 Family Trust and has voting and investment power over the shares owned thereby.  Includes 15,625 shares of common stock and warrants to purchase an additional 15,625 shares of common stock at $12.80 per share.
     
  61) Ryan Chan is the Chief Financial Officer of Gibralt Capital Corporation and has sole voting and investment power over the shares owned thereby.  Ownership prior to completion of the offering includes warrants to purchase up to 7,815 shares of common stock relating to the Series B financing.
     
  62) Ownership prior to completion of the offering includes warrants to purchase up to 3,909 shares of common stock relating to the Series B financing.
     
  63) David Gubbay is the Manager of Gubbay Investments LLC and has sole voting and investment power over the shares owned thereby.  Ownership prior to completion of the offering includes warrants to purchase up to 3,906 shares of common stock relating to the Series B financing.
     
  64) Pamela M. Baker is the manager of the selling stockholder has the power to vote or dispose of the securities held of record by the selling stockholder and may be deemed to beneficially own those securities. Ms. Baker disclaims beneficial ownership with respect to such shares, except to the extent of her pecuniary interest therein, if any.  Ownership prior to completion of the offering includes warrants to purchase up to 7,815 shares of common stock relating to the Series B financing.
     
  65) Terry Clinton Hackett is the Trustee of the Hackett Family Trust dtd 7.27.98 and has sole voting and investment power over the shares owned thereby.  Ownership prior to completion of the offering includes warrants to purchase up to 9,375 shares of common stock relating to the Series B financing.
     
  66) Ownership prior to completion of the offering includes warrants to purchase up to 2,166 shares of common stock relating to the Series A and Series B financings. Maximum number of shares of common stock issuable upon exercise of warrants and registered hereby consists of private placement warrants to purchase up to 2,813 shares of common stock at $6.40 per share.
     
  67) Ownership prior to completion of the offering includes warrants to purchase up to 3,126 shares of common stock relating to the Series B financing.
     
  68) Ownership prior to completion of the offering includes warrants to purchase up to 4,782 shares of common stock relating to the Series A and Series B financings. Maximum number of shares of common stock issuable upon exercise of warrants and registered hereby consists of private placement warrants to purchase up to 12,780 shares of common stock at $6.40 per share.  

 

 38 

 

 

  69) HRMG Inc. Profit Sharing Plan dtd 7/04 for the business of James Moore has voting and investment power over the shares owned thereby.  Includes 2,344 shares of common stock and warrants to purchase an additional 2,344 shares of common stock at $12.80 per share.
     
  70) Ownership prior to completion of the offering includes warrants to purchase up to 1,563 shares of common stock relating to the Series B financing.
     
  71) Richard Abbe is the natural persons with voting and dispositive power over the shares held by Iroquois Capital Investment Group LLC.  Ownership prior to completion of the offering includes warrants to purchase up to 15,627 shares of common stock relating to the Series B financing.
     
  72) Iroquois Capital Management L.L.C. (“Iroquois Capital”) is the investment manager of Iroquois Master Fund, Ltd (“IMF”). Consequently, Iroquois Capital has voting control and investment discretion over securities held by IMF. As President of Iroquois Capital, Richard Abbe makes voting and investment decisions on behalf of Iroquois Capital in its capacity as investment manager to IMF. As a result of the foregoing, Mr. Abbe may be deemed to have beneficial ownership (as determined under Section 13(d) of the Securities Exchange Act of 1934, as amended) of the securities held by IMF.  Ownership prior to completion of the offering includes warrants to purchase up to 187,500 shares of common stock relating to the Series B financing.
     
  73) Irwin Blitt is the Trustee of Irwin Blitt Rev. Trust Dtd 01.28.79 and has voting and investment power over the shares owned thereby.  Includes 15,625 shares of common stock and warrants to purchase an additional 15,625 shares of common stock at $12.80 per share.
     
  74) Adam J. Reback is the CCO, J. Goldman & Co., L.P. of J. Goldman Master Fund, L.P. and has voting and investment power over the shares owned thereby.  Includes 156,250 shares of common stock and warrants to purchase an additional 156,250 shares of common stock at $12.80 per share.
     
  75) Maximum number of shares of common stock issuable upon exercise of warrants and registered hereby consists of private placement warrants to purchase up to 3,663 shares of common stock at $6.40 per share.
     
  76) Ownership prior to completion of the offering includes warrants to purchase up to 2,738 shares of common stock relating to the Series B financing. Maximum number of shares of common stock issuable upon exercise of warrants and registered hereby consists of private placement warrants to purchase up to 21,604 shares of common stock at $6.40 per share.  
     
  77) Philip Proujansky is the Member of JEPAP, LLC and has voting and investment power over the shares owned thereby.  Includes 351,563 shares of common stock and warrants to purchase an additional 351,563 shares of common stock at $12.80 per share.
     
  78) John R. Raphael Rollover IRA has voting and investment power over the shares owned thereby.  Includes 15,625 shares of common stock and warrants to purchase an additional 15,625 shares of common stock at $12.80 per share.
     
  79) Justin Keener, doing business as JMJ Financial, has voting and investment power over the shares owned thereby.  Includes 78,125 shares of common stock and warrants to purchase an additional 78,125 shares of common stock at $12.80 per share.
     
  80) Dale Menard is the President of General Partner of JVM Investment Company LP and has voting and investment power over the shares owned thereby.  Includes 3,907 shares of common stock and warrants to purchase an additional 3,907 shares of common stock at $12.80 per share.
     
  81) Ownership prior to completion of the offering includes warrants to purchase up to 3,909 shares of common stock relating to the Series B financing.

 

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  82) Ownership prior to completion of the offering includes warrants to purchase up to 7,815 shares of common stock relating to the Series B financing.
     
  83) Ownership prior to completion of the offering includes warrants to purchase up to 2,346 shares of common stock relating to the Series B financing.
     
  84) Ownership prior to completion of the offering includes warrants to purchase up to 326 shares of common stock relating to the Series B financing. Maximum number of shares of common stock issuable upon exercise of warrants and registered hereby consists of private placement warrants to purchase up to 1,822 shares of common stock at $6.40 per share.  
     
  85) Ownership prior to completion of the offering includes warrants to purchase up to 15,850 shares of common stock relating to the Series A and Series B financings. Maximum number of shares of common stock issuable upon exercise of warrants and registered hereby consists of private placement warrants to purchase up to 65,101 shares of common stock at $6.40 per share.
     
  86) Ownership prior to completion of the offering includes warrants to purchase up to 7,815 shares of common stock relating to the Series B financing.
     
  87) Maximum number of shares of common stock issuable upon exercise of warrants and registered hereby consists of private placement warrants to purchase up to 14,985 shares of common stock at $6.40/share, issuable upon exercise of common stock purchase warrants received by Leede Jones Gable Inc., an affiliate of a broker-dealer which acted as placement agent in the offering. Leede Jones Gable Inc. received the warrants in the ordinary course of business for its own account and, at the time of receipt, had no agreements or understandings with any person, directly or indirectly, to further distribute the securities.
     
  88) Leonard Edward Samuels Converted Roth IRA has voting and investment power over the shares owned thereby.  Includes 42,188 shares of common stock and warrants to purchase an additional 42,188 shares of common stock at $12.80 per share.
     
  89) Jennifer P. Ligeti is the Manager of General Partner of Ligi Investments LLLP and has voting and investment power over the shares owned thereby.  Includes 15,625 shares of common stock and warrants to purchase an additional 15,625 shares of common stock at $12.80 per share.
     
  90) Ownership prior to completion of the offering includes warrants to purchase up to 35,157 shares of common stock relating to the Series B financing.
     
  91) Maximum number of shares of common stock issuable upon exercise of warrants and registered hereby consists of private placement warrants to purchase up to 4,394 shares of common stock at $6.40 per share.  
     
  92) M+T Bank, Trustee for the benefit of Jeffrey Benison IRA, has voting and investment power over the shares owned thereby.  Includes 3,907 shares of common stock and warrants to purchase an additional 3,907 shares of common stock at $12.80 per share.
     
  93) Mark P. Pacchini is the Trustee of Mark P. Pacchini Rev. Revocable Living Trust dtd 8/21/92 and has voting and investment power over the shares owned thereby.  Includes 15,625 shares of common stock and warrants to purchase an additional 15,625 shares of common stock at $12.80 per share.
     
  94) Ownership prior to completion of the offering includes warrants to purchase up to 547 shares of common stock relating to the Series A and Series B financings. Maximum number of shares of common stock issuable upon exercise of warrants and registered hereby consists of private placement warrants to purchase up to 2,180 shares of common stock at $6.40 per share.
     
  95) Ownership prior to completion of the offering includes warrants to purchase up to 1,563 shares of common stock relating to the Series B financing.

 

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  96) Steven Evans is the Trustee of the Meryle Evans Family Trust and has sole voting and investment power over the shares owned thereby.  Ownership prior to completion of the offering includes warrants to purchase up to 7,815 shares of common stock relating to the Series B financing.
     
  97) Ownership prior to completion of the offering includes warrants to purchase up to 1,875 shares of common stock relating to the Series B financing.  
     
  98) Mary Kay Fagin is the Member Manager of MKF Holdings LLC and has voting and investment power over the shares owned thereby.  Includes 11,719 shares of common stock and warrants to purchase an additional 11,719 shares of common stock at $12.80 per share.
     
  99) Eden Rahim is the Portfolio Manager of Next Edge Bio-Tech Plus Fund and has voting and investment power over the shares owned thereby.  Includes 15,625 shares of common stock and warrants to purchase an additional 15,625 shares of common stock at $12.80 per share.
     
  100) Maximum number of shares of common stock issuable upon exercise of warrants and registered hereby consists of private placement warrants to purchase up to 6,960 shares of common stock at $6.40 per share.  
     
  101) John H. Abeles is the Managing Member of Northlea Partners, LLLP and has sole voting and investment power over the shares owned thereby. Dr. Abeles served on our Board of Directors until November 12, 2015. Shares of our common stock beneficially owned prior to the offering includes warrants to purchase up to 35,157 shares of common stock relating to the Series B financing, 35,225 shares underlying stock options held by Dr. Abeles that are vested as of November 28, 2016 or will vest within 60 days thereafter, but does not include 2,450 shares underlying stock options that will not vest within 60 days after November 28, 2016.
     
  102) Ownership prior to completion of the offering includes warrants to purchase up to 1,875 shares of common stock relating to the Series B financing.
     
  103) Ownership prior to completion of the offering includes warrants to purchase up to 4,689 shares of common stock relating to the Series B financing.
     
  104) Dale Burns is the Manager of Osprey I, LLC and has voting and investment power over the shares owned thereby.  Includes 7,813 shares of common stock and warrants to purchase an additional 7,813 shares of common stock at $12.80 per share.
     
  105) Steven Palmer is the Trustee of Palmer Family Trust and has voting and investment power over the shares owned thereby.  Includes 7,813 shares of common stock and warrants to purchase an additional 7,813 shares of common stock at $12.80 per share.
     
  106) Aldo Pascarella is the Manager of Pareto, LLC and has voting and investment power over the shares owned thereby.  Includes 1,563 shares of common stock and warrants to purchase an additional 1,563 shares of common stock at $12.80 per share.
     
  107) Rob Ballard is the Associate Portfolio Manager of Pathfinder Asset Management Limited and has voting and investment power over the shares owned thereby.  Includes 62,500 shares of common stock and warrants to purchase an additional 62,500 shares of common stock at $12.80 per share.
     
  108) Candy D’Azevedo Bathon is the Trustee of Pauline M. Howard Trust, Candy D'Azevedo TTEE and has voting and investment power over the shares owned thereby.  Includes 1,563 shares of common stock and warrants to purchase an additional 1,563 shares of common stock at $12.80 per share.
     
  109) E. Jeffrey Peierls is the President and Authorized Officer of The Peierls Foundation, Inc. and has sole voting and investment power over the shares owned thereby. Mr. Peierls is also a selling stockholder for his own account.  Ownership prior to completion of the offering includes warrants to purchase up to 87,501 shares of common stock relating to the Series B financing. Includes 38,125 shares of common stock and warrants to purchase an additional 38,125 shares of common stock at $12.80 per share.

 

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  110) Ownership prior to completion of the offering includes warrants to purchase up to 10,221 shares of common stock relating to the Series B financing. Includes 9,375 shares of common stock and warrants to purchase an additional 9,375 shares of common stock at $12.80 per share.
     
  111) Ownership prior to completion of the offering includes warrants to purchase up to 18,750 shares of common stock relating to the Series B financing. Includes 6,250 shares of common stock and warrants to purchase an additional 6,250 shares of common stock at $12.80 per share.
     
  112) E. Jeffrey Peierls is the Trustee of UD E.F. Peierls for Brian E. Peierls and has sole voting and investment power over the shares owned thereby. Mr. Peierls is also a selling stockholder for his own account.  Ownership prior to completion of the offering includes warrants to purchase up to 7,689 shares of common stock relating to the Series B financing. Includes 3,125 shares of common stock and warrants to purchase an additional 3,125 shares of common stock at $12.80 per share.
     
  113) E. Jeffrey Peierls is the Trustee of UD E.F. Peierls for E. Jeffrey Peierls and has sole voting and investment power over the shares owned thereby. Mr. Peierls is also a selling stockholder for his own account. Ownership prior to completion of the offering includes warrants to purchase up to 7,689 shares of common stock relating to the Series B financing. Includes 3,125 shares of common stock and warrants to purchase an additional 3,125 shares of common stock at $12.80 per share.
     
  114) E. Jeffrey Peierls is the Trustee of UD E.S. Peierls for E.F. Peierls et al and has sole voting and investment power over the shares owned thereby. Mr. Peierls is also a selling stockholder for his own account. Ownership prior to completion of the offering includes warrants to purchase up to 5,157 shares of common stock relating to the Series B financing. Includes 2,500 shares of common stock and warrants to purchase an additional 2,500 shares of common stock at $12.80 per share.
     
  115) Jeffrey Peierls is the Trustee of UD J.N. Peierls For Brian E. Peierls and has sole voting and investment power over the shares owned thereby. Mr. Peierls is also a selling stockholder for his own account.  Ownership prior to completion of the offering includes warrants to purchase up to 9,375 shares of common stock relating to the Series B financing.  Includes 3,125 shares of common stock and warrants to purchase an additional 3,125 shares of common stock at $12.80 per share.
     
  116) Jeffrey Peierls is the Trustee of UD J.N. Peierls For E. Jeffrey Peierls and has sole voting and investment power over the shares owned thereby. Mr. Peierls is also a selling stockholder for his own account.  Ownership prior to completion of the offering includes warrants to purchase up to 9,375 shares of common stock relating to the Series B financing. Includes 3,125 shares of common stock and warrants to purchase an additional 3,125 shares of common stock at $12.80 per share.
     
  117) Jeffrey Peierls is the Trustee of UW E.S. Peierls for Brian E. Peierls – Accumulation and has sole voting and investment power over the shares owned thereby. Mr. Peierls is also a selling stockholder for his own account.  Ownership prior to completion of the offering includes warrants to purchase up to 6,750 shares of common stock relating to the Series B financing. Includes 2,500 shares of common stock and warrants to purchase an additional 2,500 shares of common stock at $12.80 per share.
     
  118) Jeffrey Peierls is the Trustee of UW E.S. Peierls for E. Jeffrey Peierls – Accumulation and has sole voting and investment power over the shares owned thereby. Mr. Peierls is also a selling stockholder for his own account.  Ownership prior to completion of the offering includes warrants to purchase up to 4,221 shares of common stock relating to the Series B financing. Includes 1,563 shares of common stock and warrants to purchase an additional 1,563 shares of common stock at $12.80 per share.
     
  119) Jeffrey Peierls is the Trustee of UW J.N. Peierls for Brian E. Peierls and has sole voting and investment power over the shares owned thereby. Mr. Peierls is also a selling stockholder for his own account.  Ownership prior to completion of the offering includes warrants to purchase up to 8,250 shares of common stock relating to the Series B financing. Includes 2,188 shares of common stock and warrants to purchase an additional 2,188 shares of common stock at $12.80 per share.
     
  120) Jeffrey Peierls is the Trustee of UW J.N. Peierls for E. Jeffrey Peierls and has sole voting and investment power over the shares owned thereby. Mr. Peierls is also a selling stockholder for his own account.  Ownership prior to completion of the offering includes warrants to purchase up to 8,250 shares of common stock relating to the Series B financing. Includes 2,188 shares of common stock and warrants to purchase an additional 2,188 shares of common stock at $12.80 per share.
     
  121) Jeffrey Peierls is the Trustee of UD Ethel F. Peierls Charitable Lead Trust and has sole voting and investment power over the shares owned thereby. Mr. Peierls is also a selling stockholder for his own account.  Ownership prior to completion of the offering includes warrants to purchase up to 9,096 shares of common stock relating to the Series B financing. Includes 6,250 shares of common stock and warrants to purchase an additional 6,250 shares of common stock at $12.80 per share.

 

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  122) Maximum number of shares of common stock issuable upon exercise of warrants and registered hereby consists of private placement warrants to purchase up to 7,573 shares of common stock at $6.40 per share.
     
  123) Ownership prior to completion of the offering includes warrants to purchase up to 3,909 shares of common stock relating to the Series B financing.
     
  124) Ownership prior to completion of the offering includes warrants to purchase up to 7,815 shares of common stock relating to the Series B financing.
     
  125) Ownership prior to completion of the offering includes warrants to purchase up to 16,830 shares of common stock relating to the Series A and Series B financings. Maximum number of shares of common stock issuable upon exercise of warrants and registered hereby consists of private placement warrants to purchase up to 30,430 shares of common stock at $6.40 per share.
     
  126) Richard Arnos is the President of the Republic Construction Corporation and has sole voting and investment power over the shares owned thereby.
     
  127) Rodney N. Schorlemmer is the Manager of RS & VS Ltd. and has sole voting and investment power over the shares held thereby.  Ownership prior to completion of the offering includes warrants to purchase up to 3,909 shares of common stock relating to the Series B financing.
     
  128) Ownership prior to completion of the offering includes warrants to purchase up to 19,629 shares of common stock relating to the Series A and Series B financings. Maximum number of shares of common stock issuable upon exercise of warrants and registered hereby consists of private placement warrants to purchase up to 65,101 shares of common stock at $6.40 per share.  
     
  129) Burton M. Sack is the Managing Member of the Sack Family Investment Fund, LLC and has sole voting and investment power over the shares owned thereby.  Ownership prior to completion of the offering includes warrants to purchase up to 15,627 shares of common stock relating to the Series B financing.
     
  130) Shahzad Mossanen is the trustee of SBM Trust and has voting and investment power over the shares owned thereby.  Includes 39,063 shares of common stock and warrants to purchase an additional 39,063 shares of common stock at $12.80 per share.
     
  131) Avi Gelboim is the Manager of General Partner of Scher Family L.P. and has voting and investment power over the shares owned thereby.  Includes 7,813 shares of common stock and warrants to purchase an additional 7,813 shares of common stock at $12.80 per share.
     
  132) Ownership prior to completion of the offering includes warrants to purchase up to 3,939 shares of common stock relating to the Series B financing.
     
  133) Donald R. Scifres is the Managing Director of SDL Ventures, LLC and has sole voting and investment power over the shares owned thereby.  Ownership prior to completion of the offering includes warrants to purchase up to 46,875 shares of common stock relating to the Series B financing.
     
  134) Ownership prior to completion of the offering includes warrants to purchase up to 7,242 shares of common stock relating to the Series A and Series B financings. Maximum number of shares of common stock issuable upon exercise of warrants and registered hereby consists of private placement warrants to purchase up to 7,451 shares of common stock at $6.40 per share.
     
  135) Ownership prior to completion of the offering includes warrants to purchase up to 7,815 shares of common stock relating to the Series B financing.
     
  136) Ownership prior to completion of the offering includes warrants to purchase up to 10,944 shares of common stock relating to the Series B financing.

 

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  137) Ownership prior to completion of the offering includes warrants to purchase up to 3,019 shares of common stock relating to the Series A and Series B financings. Maximum number of shares of common stock issuable upon exercise of warrants and registered hereby consists of private placement warrants to purchase up to 46,055 shares of common stock at $6.40 per share, issuable upon exercise of common stock purchase warrants received by Michael Silverman, an affiliate of a broker-dealer which acted as placement agent in the offering. Mr. Silverman received the warrants in the ordinary course of business for his own account and, at the time of receipt, had no agreements or understandings with any person, directly or indirectly, to further distribute the securities.
     
  138) Kilburn Sherman is the Managing Director of SJO Worldwide, LLC and has voting and investment power over the shares owned thereby.  Includes 39,063 shares of common stock and warrants to purchase an additional 39,063 shares of common stock at $12.80 per share.
     
  139) Ownership prior to completion of the offering includes warrants to purchase up to 2,814 shares of common stock relating to the Series B financing.
     
  140) Ownership prior to completion of the offering includes warrants to purchase up to 3,909 shares of common stock relating to the Series B financing.
     
  141) Ownership prior to completion of the offering includes warrants to purchase up to 7,815 shares of common stock relating to the Series B financing.
     
  142) Ownership prior to completion of the offering includes warrants to purchase up to 1,875 shares of common stock relating to the Series B financing.
     
  143) Ownership prior to completion of the offering includes warrants to purchase up to 3,909 shares of common stock relating to the Series B financing.
     
  144) Ownership prior to completion of the offering includes warrants to purchase up to 20,313 shares of common stock relating to the Series B financing.
     
  145) Rajvir Singh is the Trustee of Swadesh Family Trust and has voting and investment power over the shares owned thereby.  Includes 39,063 shares of common stock and warrants to purchase an additional 39,063 shares of common stock at $12.80 per share.
     
  146) Louis M. DeMattei is the Trustee of Tan-DeMattei Family Trust dtd 5.4.99 and has voting and investment power over the shares owned thereby.  Includes 1,563 shares of common stock and warrants to purchase an additional 1,563 shares of common stock at $12.80 per share.
     
  147) Rochelle L. Kaplan is the Trustee of The Barry A. Kaplan 2000 Family Trust and has voting and investment power over the shares owned thereby.  Includes 11,719 shares of common stock and warrants to purchase an additional 11,719 shares of common stock at $12.80 per share.
     
  148) Quinlan Murphy is the Trustee of The Jacks 2016 Irrevocable Trust and has voting and investment power over the shares owned thereby.  Includes 15,625 shares of common stock and warrants to purchase an additional 15,625 shares of common stock at $12.80 per share.
     
  149) Jonathan Schechter is the Managing Member of The Special Equities Group, LLC and has voting and investment power over the shares owned thereby.  Includes 7,813 shares of common stock and warrants to purchase an additional 7,813 shares of common stock at $12.80 per share.
     
  150) Abraham Schloss is the Trustee of Trust of Abraham Schloss UAD 06/15/2011 and has voting and investment power over the shares owned thereby.  Includes 3,907 shares of common stock and warrants to purchase an additional 3,907 shares of common stock at $12.80 per share.

 

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  151) Edwin H. Morgens is the Trustee of Trust UA2 Will Hallie Hicklin FBO Lauren Morgens and has voting and investment power over the shares owned thereby.  Includes 15,625 shares of common stock and warrants to purchase an additional 15,625 shares of common stock at $12.80 per share.
     
  152) Karen Brophy is the Trustee of Trust Under Article III of the Thomas E. Brophy 2004 Grantor Retained Annuity Trust dtd 3.2.04 and has voting and investment power over the shares owned thereby.  Includes 15,625 shares of common stock and warrants to purchase an additional 15,625 shares of common stock at $12.80 per share.
     
  153) Timothy I Cohen is the Sole Proprietor of VI LLC and has voting and investment power over the shares owned thereby.  Includes 7,813 shares of common stock and warrants to purchase an additional 7,813 shares of common stock at $12.80 per share.
     
  154) Abraham Wolfson is the Member of W East 21 Associates, LLC and has voting and investment power over the shares owned thereby.  Includes 31,250 shares of common stock and warrants to purchase an additional 31,250 shares of common stock at $12.80 per share.
     
  155) Ownership prior to completion of the offering includes warrants to purchase up to 7,815 shares of common stock relating to the Series B financing.
     
  156) Ownership prior to completion of the offering includes warrants to purchase up to 3,909 shares of common stock relating to the Series B financing.
     
  157) Wayne M. Pichon is the Trustee of Wayne M. Pichon Revocable Non-Survivor Community Property Trust U/A/D 1/2/1985 Wayne M. Pichon Trustee and has voting and investment power over the shares owned thereby.  Includes 7,813 shares of common stock and warrants to purchase an additional 7,813 shares of common stock at $12.80 per share.
     
  158) Ownership prior to completion of the offering includes warrants to purchase up to 4,689 shares of common stock relating to the Series B financing.
     
  159) Evan Genack is the President of Whitewater Holdings LLC and has voting and investment power over the shares owned thereby.  Includes 31,250 shares of common stock and warrants to purchase an additional 31,250 shares of common stock at $12.80 per share.
     
  160) Mark S. Whiting is the Member of Whiting Management, G.P., which is the General Partner of Whiting Holdings, LP and has sole voting and investment power over the shares owned thereby.  Ownership prior to completion of the offering includes warrants to purchase up to 33,000 shares of common stock relating to the Series B financing.
     
  161) Ownership prior to completion of the offering includes warrants to purchase up to 2,346 shares of common stock relating to the Series B financing.
     
  162) Ownership prior to completion of the offering includes warrants to purchase up to 3,126 shares of common stock relating to the Series B financing.
     
  163) Peter Kozlowski is the Managing Director of Windward Venture Partners and has voting and investment power over the shares owned thereby.  Includes 4,688 shares of common stock and warrants to purchase an additional 4,688 shares of common stock at $12.80 per share.
     
  164) N. Michael Wolsonovich, Jr. is the Managing Member of Wolsonovich SEF LLC and has voting and investment power over the shares owned thereby.  Includes 7,813 shares of common stock and warrants to purchase an additional 7,813 shares of common stock at $12.80 per share.
     
  165) Maximum number of shares of common stock issuable upon exercise of warrants and registered hereby consists of private placement warrants to purchase up to 190 shares of common stock at $6.40 per share.
     
  166) Ownership prior to completion of the offering includes warrants to purchase up to 3,126 shares of common stock relating to the Series B financing.
     
  167) Ownership prior to completion of the offering includes warrants to purchase up to 1,875 shares of common stock relating to the Series B financing.

 

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USE OF PROCEEDS

 

We will not receive proceeds from sales of our common stock made under this prospectus.

 

DETERMINATION OF OFFERING PRICE

 

There currently is a limited public market for our common stock. The selling stockholders will determine at what price they may sell the offered shares, and such sales may be made at prevailing market prices or at privately negotiated prices. See “Plan of Distribution” below for more information.

 

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

 

Market Information and Holders

 

Our common stock is currently eligible for quotation and trades on the OTC Market under the symbol “NTRP.” For 20 business days following the effectiveness of our reverse stock split, a “D” will be placed at the end of the symbol (“NTRPD”). The quotation of our common stock began on or about October 2, 2013. On January 20, 2017, the last reported sale price for our common stock was $8.45 per share. There has been very limited trading in our common stock to date.

 

As of January 25, 2017, we had 6,987,411 shares of our common stock issued and outstanding held by approximately 425 stockholders of record. To date, we have not paid dividends on our common stock.

 

As of January 25, 2017, we also had the following securities outstanding:

 

  · Series A Warrants to purchase 379,786 shares of our common stock at an exercise price of $0.32 per share, with an expiration date five years from the date of issuance.

 

  · Series C Warrants to purchase 487,079 shares of our common stock at an exercise price of $0.32 per share, with an expiration date of five years from the date of issuance.

 

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

 

  · Series F Warrants to purchase 3,828,672 shares of our common stock at an exercise price of $12.80 per share, with an expiration date five years from the date of issuance.

 

  · Placement agent warrants to purchase 113,112 shares of our common stock at an exercise price of $0.32 per share.

 

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

  

The following table sets forth the high and low closing bid prices for our common stock for the fiscal quarter indicated as reported on the OTC Market. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. Our common stock is very thinly traded and, thus, pricing of our common stock on the OTC Market does not necessarily represent its fair market value. All prices have been retroactively adjusted to reflect the 1-for-32 reverse stock split that was effected on January 11, 2017, but do not account for any fractional shares.

 

Period   High     Low  
Quarter ended March 31, 2015     57.28       25.60  
Quarter ended June 30, 2015     41.28       16.32  
Quarter ended September 30, 2015     32.00       17.60  
Quarter ending December 31, 2015     21.12       9.60  
Quarter ended March 31, 2016     17.28       8.32  
Quarter ended June 30, 2016     17.92       11.84  
Quarter ended September 30, 2016     16.00       9.92  
Quarter ended December 31, 2016     19.20       7.20  
Quarter ending March 31, 2017 (through January 20, 2017)     8.50       6.75  

 

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Dividends

 

We have never paid any cash dividends on our capital stock and do not anticipate paying any cash dividends on our common stock in the foreseeable future. We intend to retain future earnings, if any, to fund our ongoing operations and future capital requirements. Any future determination to pay cash dividends will be at the discretion of our Board and will be dependent upon our financial condition, results of operations, capital requirements and such other factors as the Board deems relevant. Other than provisions of the Nevada Revised Statutes requiring post-dividend solvency according to certain measures, there are no material statutory restrictions limiting, or that are likely to limit, our ability to pay dividends on our common stock.

 

Securities Authorized for Issuance under Equity Compensation Plan

 

On August 22, 2013, our Board adopted, and on August 22, 2013, our stockholders approved, our 2013 Equity Incentive Plan, which reserved a total of 218,750 shares of our common stock for issuance pursuant to awards granted under the plan. On July 23, 2014, our Board and stockholders approved an amendment to our 2013 Equity Incentive Plan to increase the number of shares of common stock issuable thereunder by an additional 93,750 shares, so that the Company’s officers, key employees, consultants and directors can be granted stock options and other equity incentive awards with respect to an aggregate of 312,500 shares of our common stock. On November 23, 2016, our Board approved an amendment to our 2013 Equity Incentive Plan to increase the number of shares of common stock issuable thereunder to 685,322 shares. Pursuant to the Internal Revenue Code, this amendment must be approved by our stockholders within one year in order to allow for incentive stock option grants to be made. We hereinafter refer to our 2013 Equity Incentive Plan, as amended, as the 2013 Plan.

 

The following table provides information as of December 31, 2016, with respect to the shares of our common stock that may be issued under our existing equity compensation plan:

 

Equity Compensation Plan Information

 

Plan category   Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
    Weighted-average
exercise price of
outstanding options,
warrants and rights
    Number of securities
remaining available for
future issuance under
equity
compensation plans
(excluding securities
reflected in column (a))
 
    (a)     (b)     (c)  
Equity compensation plans approved by security holders (1)      308,799     $ 39.12       3,701  
Equity compensation plans not approved by security holders     372,829       10.56       0  
Total     681,628     $ 23.50       3,701  

 

(1) The 2013 Plan. Includes the increase in the number of shares available for issuance that became effective on November 21, 2016, which increased the number of available shares by 372,829 for an aggregate total of 685,329 shares available for issuance. On November 21, 2016, the Company issued options to purchase an aggregate of 372,829 shares of common stock, which options feature an exercise price of $10.56 per share.

 

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

 

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

 

Administration

 

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

 

Grants

 

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

 

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

 

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

 

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

 

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

 

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

 

The maximum aggregate number of shares of common stock that may be awarded and sold under the 2013 Plan is 685,329.

 

Duration, Amendment, and Termination

 

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

  

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

You should read the following discussion and analysis of our financial condition and results of operations together with “Selected Financial Data” and our financial statements and the related notes appearing elsewhere in this prospectus. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included elsewhere in this prospectus. Unless otherwise noted, all share and per share data give effect to the 1-for-32 reverse stock split of our common stock that was effected on January 11, 2017.

 

On August 23, 2013, our wholly-owned subsidiary, Neurotrope Acquisition, Inc., a corporation formed in the State of Nevada on August 15, 2013 merged with and into Neurotrope BioScience. Neurotrope BioScience was the surviving corporation in the Reverse Merger and became Neurotrope, Inc.’s wholly-owned subsidiary. All of the outstanding Neurotrope BioScience Common Stock was converted into shares of the Company’s common stock on a one-for-one basis, and all of the outstanding shares of Neurotrope BioScience Series A Stock were converted into shares of our Series A Stock, in each case on a one-for-one basis. As the result of the Reverse Merger and the change in business and operations of the Company, from engaging in the business of providing software solutions to deliver geo-location targeted coupon advertising to mobile internet devices, to the biotechnology business, including the development of a drug candidate called bryostatin for the treatment of Alzheimer’s disease (“AD”), a discussion of the past financial results of Neurotrope, Inc. (i.e., while operating as BlueFlash Communications, Inc.) is not pertinent, and under applicable accounting principles, the historical financial results of Neurotrope BioScience, the accounting acquirer, prior to the Reverse Merger, are considered our historical financial results.

 

The following discussion highlights our results of operations and the principal factors that have affected our financial condition as well as our liquidity and capital resources for the periods described, and provides information that management believes is relevant for an assessment and understanding of the statements of financial condition and results of operations presented herein. The following discussion and analysis are based on the unaudited financial statements contained in this report, which we have prepared in accordance with United States generally accepted accounting principles. You should read the discussion and analysis together with such financial statements and the related notes thereto.

 

Basis of Presentation

 

The audited financial statements for our fiscal years ended December 31, 2015 and 2014 and the unaudited financial statements for our fiscal quarters ended September 30, 2016 and 2015, include a summary of our significant accounting policies and should be read in conjunction with the discussion below and our financial statements and related notes included elsewhere in this prospectus. In the opinion of management, all material adjustments necessary to present fairly the results of operations for such periods have been included in financial statements. All such adjustments are of a normal recurring nature.

 

Overview

 

Neurotrope BioScience was founded as a Delaware corporation in October 2012. Our activities since Neurotrope BioScience’s inception through September 30, 2016 have been devoted primarily to the research and development of AD therapeutic products and related diagnostics using patented technology and raising capital. This technology is licensed by us from CRE, and its affiliate, NRV II, LLC (“NRV II”) pursuant to the Amended and Restated Technology License and Services Agreement (“CRE License”), entered into on February 4, 2015 and amended on November 12, 2015. Prior to being licensed to us, the technology had been under development by CRE since 1999 and was financed by CRE from a variety of non-investor sources including not-for-profit foundations, the National Institutes of Health and individual philanthropists up until March 2013. From March 2013 forward, development of the licensed technology has been funded principally through collaboration by CRE with Neurotrope BioScience. See the description of Neurotrope BioScience financings below in “Financial Condition, Liquidity and Capital Resources – Sources and Uses of Liquidity.” The Company has not realized any revenues from its operations.

 

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Pursuant to the CRE License, Neurotrope BioScience maintained its exclusive (except as described below), non-transferable (except pursuant to the CRE License’s assignment provision), world-wide, royalty-bearing right, with a right to sublicense (in accordance with the terms and conditions described below), under CRE’s and NRV II’s respective right, title and interest in and to certain patents and technology owned by CRE or licensed to NRV II, LLC by CRE as of or subsequent to October 31, 2012 to develop, use, manufacture, market, offer for sale, sell, distribute, import and export certain products or services for therapeutic applications for AD and other cognitive dysfunctions in humans or animals (the “Field of Use”). Additionally, the CRE License specifies that all patents that issue from a certain patent application, shall constitute licensed patents and all trade secrets, know-how and other confidential information claimed by such patents constitute licensed technology under the CRE License. Furthermore, on July 10, 2015 under the terms of the Statement of Work and Account Satisfaction Agreement dated February 4, 2015, Neurotrope BioScience’s rights relating to an in vitro diagnostic test system reverted to CRE and, accordingly, Neurotrope BioScience no longer has any rights under the CRE License for diagnostic applications using the CRE patent portfolio or technology.

 

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

 

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

  

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

 

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

 

On November 12, 2015, we entered into an amendment to the CRE License. Pursuant to the amendment, we paid an aggregate of approximately $348,000 to CRE following the closings of the Series B private placement, which constituted an advance royalty payment to CRE and will be offset (with no interest) against the amount of future royalty obligations payable until such time that the amount of such future royalty obligations equals in full the amount of the advance royalty payments made.

 

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The term of the CRE License continues until the later of the date (i) the last of the licensed patents expires, is abandoned or is declared unenforceable or invalid (in each case, determined in accordance with the CRE License) and (ii) the last of the licensed technology enters the public domain. Either party has the right to terminate the CRE License after 30 days prior notice in certain circumstances, including if either party were to materially breach any provisions of the CRE License and does not cure such material breach within 60-days from notice of such material breach from the non-breaching party, and for breaches that are capable of being cured, in the event of certain bankruptcy or insolvency proceedings.

 

Concurrently with the November 12, 2015 amendment to the CRE License, Neurotrope Bioscience entered into a new Statement of Work Agreement pursuant to the CRE License Agreement (the “November 2015 SOW Agreement”). The November 2015 SOW Agreement replaced the February 2015 SOW Agreement, which was effective as of October 1, 2014 and expired on September 30, 2015.

 

Pursuant to the November 2015 SOW Agreement, Neurotrope Bioscience agreed to pay CRE $1,166,666 in service fees payable in the amount of $83,333 per month for each month from November 1, 2015 through December 31, 2016. The payments under the November 2015 SOW Agreement will satisfy Neurotrope Bioscience’s obligations to reimburse CRE pursuant to Section 5.6 of the CRE License for any and all attorneys’ fees, translation costs, filing fees, maintenance fees, and other costs and expenses related to applying for, filing, prosecuting, and maintaining patents and applications for the licensed intellectual property incurred by CRE during the term of the November 2015 SOW Agreement (but, for the avoidance of doubt, such payments shall not satisfy any attorneys’ fees, translation costs, filing fees, maintenance fees, or other costs or expenses related to applying for, filing, prosecuting, and maintaining patents and applications for the licensed intellectual property incurred by CRE after the expiration or termination of the November 2015 SOW Agreement term), as well as any litigation costs which CRE may incur related to any of the licensed intellectual property during the November 2015 SOW Agreement term. CRE shall not commence any litigation to enforce the licensed intellectual property without the consent of Neurotrope Bioscience (which consent shall not be unreasonably withheld, delayed, or denied).

 

In consideration for the payments made pursuant to the November 2015 SOW Agreement, CRE shall perform the services requested by Neurotrope Bioscience for the further development of Neurotrope’s bryostatin drug platform. In addition, under the terms of the November 2015 SOW Agreement, CRE may enroll one additional compassionate use, in addition to the compassionate use patient (who has currently completed a compassionate use trial) in trials of CRE’s Alzheimer’s therapeutic drug platform during the November 2015 SOW Agreement term, and the payments set forth above, shall satisfy any and all of Neurotrope Bioscience’s obligation whatsoever to CRE or to any other third party for costs incurred or to be incurred by CRE relating to such trials. Neurotrope Bioscience and CRE shall jointly review protocols which shall be established to the parties’ mutual satisfaction and contain appropriate safety measures to be employed by the treating physician. No additional compassionate use or expanded access patients will be enrolled by CRE without the consent of Neurotrope Bioscience.

 

On July 28, 2016, CRE filed a petition for Chapter 11 Reorganization in the United States Bankruptcy Court for the Northern District of West Virginia. As part of the bankruptcy filing, CRE asked the Bankruptcy Court to reject certain executory contracts including employment agreements with a number of its researchers and other personnel, including, without limitation, Dr. Daniel Alkon, who is our President and Chief Scientific Officer and was also the former scientific director of CRE, and who led a team of CRE scientists who are principally involved on behalf of CRE in support of the Neurotrope-CRE License Agreement. CRE has not requested that the Neurotrope-CRE License Agreement itself be rejected. We do not believe that CRE, as a matter of law, has a right to terminate the CRE License Agreement as a result of the bankruptcy filing and have been advised by CRE’s representatives that there will be no action regarding the Neurotrope-CRE license and that CRE intends to meet all of its obligations in support of the Company’s work. On September 23, 2016, the United States Bankruptcy Court for the Northern District of West Virginia entered an order approving the sale of a substantial amount of CRE's assets to West Virginia University. The Court also entered an order approving a settlement agreement between Dr. Alkon, CRE and West Virginia University. As part of the asset sale, CRE sold the BRNI name and all derivatives to West Virginia University. Consequently, the Board of CRE resolved on September 28, 2016 to change its name to Cognitive Research Enterprises, Inc.

 

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On May 12, 2014, we entered into a license agreement (the “Stanford Agreement”) with The Board of Trustees of the Leland Stanford Junior University (“Stanford”) pursuant to which Stanford granted us 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. Pursuant to the Stanford Agreement, we paid a $60,000 license initiation fee to Stanford. We currently pay Stanford a $10,000 annual license maintenance fee, and will pay milestone payments in the aggregate amount of up to $3,700,000 upon the achievement of certain product development events commencing upon the filing of the first IND application through approval of an applicable product, as well as low single-digit royalties on net sales of the licensed products. Each party has the right to terminate the Stanford Agreement for an uncured material breach of the other party. Additionally, we may terminate the Stanford Agreement at any time upon 60 days written notice to Stanford. In January 2017, we entered into an additional license agreement with Stanford relating to an accelerated synthesis of bryostatin-1.

  

On July 29, 2014, we announced that we initiated our Phase 2a clinical trial to evaluate bryostatin for the treatment of patients with AD. The trial was being conducted under an IND application filed by CRE. CRE transferred its rights and obligations arising under such IND application to us on February 4, 2015. We enrolled a total of nine patients in the randomized, double-blind, placebo-controlled, single dose study. Six patients were randomized to receive bryostatin by injection and three received a matching placebo control. The primary objective of the clinical trial was to assess the safety and tolerability of a single dose of bryostatin in the treatment of patients with AD. The secondary objectives of the study were the preliminary evaluation of the efficacy of a single dose of bryostatin in the treatment of patients with AD, its pharmacokinetics and pharmacodynamics and the evaluation of any correlation between changes in PKCε with plasma levels of bryostatin and with improvement in cognitive function. On February 24, 2015, we announced that the Phase 2a clinical trial met its primary endpoint demonstrating preliminary safety and tolerability of bryostatin. On March 17, 2015, we announced that preliminary assessment of PKCε levels in peripheral monocytes demonstrated a significant increase in total PKC protein levels at the end of the bryostatin infusion consistent with target engagement. An additional secondary objective of the study was the evaluation of efficacy following a single dose of bryostatin and there was no measurable improvement in cognition in this mildly impaired patient population.

 

Following on these results, on October 9, 2015, Neurotrope BioScience executed a Services Agreement with Worldwide Clinical Trials, Inc. (“WCT”), effective as of August 31, 2015. The Services Agreement relates to services for Neurotrope BioScience’s Phase 2 clinical study assessing the safety, tolerability and efficacy of bryostatin in the treatment of moderately severe to severe AD (the “Study”). Pursuant to the terms of the Services Agreement, WCT will provide services to enroll approximately one hundred and fifty (150) study subjects at approximately 30 sites across the United States. We began enrollment at the initial sites at the end of 2015 and completed enrollment in November 2016. This trial was designed to administer dosing of bryostatin for up to six months for moderately severe to severe AD patients but has been amended to administer dosing of bryostatin for up to three months (see details of the amendment below). Among the trial’s endpoints are the measurement of improvement in cognition, activities of daily living and behavior. The Company’s goal is to show the robust treatment effect that the regulatory agencies, the marketplace and, most importantly, our patients and their caregivers are seeking.

 

On July 27, 2016, we received approval of the institutional review board (“IRB”) for our amended protocol submitted on July 21, 2016 to the U.S. Food and Drug Administration (the “FDA”) relating to the Phase 2b clinical trial of our lead drug candidate, Bryostatin-1, for the treatment of advanced AD, which amended protocol eliminates the second, exploratory, study period following the first 12 weeks of treatment. The primary objective is the assessment of safety and tolerability of bryostatin to occur at 13 weeks and that has not been changed with this amendment. The secondary objective is to assess efficacy, also at week 13. Such amendment, to cut the exploratory part of the study, was made for business reasons in order to provide earlier completion of the study and for the planning of future studies. The changes to the study design were not due to any safety concerns. In the study, two doses of bryostatin, 20μg or 40μg, will be compared to placebo. Study subjects receive a total of 7 doses of the study drug over 12 weeks of treatment, followed by safety and efficacy assessments at week 13 and a final study visit at week 16. There will be no second randomization for additional treatment. Subjects who have already entered into the second study period will be discontinued and evaluated 30 days following last treatment for their final study visit. In November 2016, we completed patient enrollment we currently expect to report data late in the first quarter or the beginning of the second quarter of 2017.

 

The total estimated budget for the services, including pass-through costs, was approximately $11.6 million before the amendment of its Phase 2 clinical study protocol as outlined above. As a result of the amendment, the Company believes that the total trial cost will be reduced. Neurotrope BioScience may terminate the Services Agreement without cause upon sixty (60) days’ prior written notice. As of September 30, 2016, Neurotrope BioScience has paid WCT approximately $3.7 million for current and future services.

 

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Strategy

   

Our strategy is to efficiently utilize our licensed proprietary and patented technologies to further the development of those technologies toward commercializing a therapeutic for AD and potentially utilize these technologies to treat other neurological diseases. We may also seek to acquire, by license or otherwise, other development stage products that are consistent with our product portfolio objectives and commercialization strategy. In addition, we plan to utilize technologies licensed from CRE and Mount Sinai in order to pursue therapeutics for orphan drug indications, including Fragile X Syndrome and Niemann-Pick Type C disease. Through an agreement with CRE, we have the exclusive worldwide license relating to Fragile X Syndrome (“FXS”). FXS is the most common cause of inherited intellectual disability and the most common known genetic cause of autism or autism spectrum disorders. Symptoms of FXS include a range from learning disabilities to more severe cognitive or intellectual disabilities. Delays in speech and language development are common, as are a variety of physical and behavioral characteristics. FXS is caused by a “full mutation” of the FMR1 Gene. There are approximately 135,000 Fragile X Syndrome patients in the United States and a similar number in Europe. Neurotrope BioScience received support from the FRAXA Research Foundation, Inc. (“FRAXA”) to fund a pre-clinical FXS behavior study for bryostatin at FRAXA’s sponsored laboratory located at the University of Chile in Santiago, Chile. FRAXA provided full funding for a preclinical study to evaluate the behavioral effects of bryostatin-1 in an FXS mouse model. Twice weekly treatment for 13 weeks yielded statistically significant improvements in outcome measures with bryostatin compared to placebo. We have formed and are advancing our discussions with an experienced clinical advisory board to assist us with protocol development for a planned Phase 2a study in FXS patients. We seek resources to initiate the first clinical trial with bryostatin in patients with FXS. We have been granted orphan drug designation by the FDA for the use of bryostatin in the treatment of Fragile X Syndrome.

 

Use of bryostatin to treat a serious and deadly lysosomal storage disorder, Niemann-Pick Type C Disease (“NP-C”), is being explored by the Company in collaboration with the Icahn School of Medicine at Mount Sinai in New York City. NP-C mainly affects children who develop severe neurologic symptoms including gait disturbance and cognitive deficits early in life. There are approximately 3,500 NP-C patients in the United States and a similar number in Europe. Patients with NP-C have a gene defect that results in the loss of the “normal” NPC1 or NPC2 protein that is important for cholesterol trafficking.

  

A study was funded by several family foundations under the auspices of SOAR-NPC. This study examined the effects of various dosing regimens of bryostatin in NP-C mice over a brief treatment period. Although bryostatin showed mixed results in vivo, the SOAR study did not find encouraging results with its in vivo animal model. Another in vivo study began at the beginning of 2016 and is currently underway at Mt. Sinai to evaluate the effect of bryostatin in an animal model (NPC1 mice) of Niemann-Pick Type C. Depending upon the in vivo results and available funding, we will work towards completion of the necessary pre-clinical work in order to file and obtain FDA approval of an IND, or investigational new drug application. We are encouraged by preliminary data.in the NPC1 animal model. Assuming that the pre-clinical work shows positive activity, we expect to apply for orphan drug designation for this indication.

 

Neurotrope has entered into a research collaboration with the International Rett Syndrome Foundation (“Foundation”), under the Rett Syndrome.org Scout Program, funded by the Foundation, whereby bryostatin will be tested using mouse models. The hope is that bryostatin will activate key synaptic growth factors that are deficient in patients suffering from Rett Syndrome.

 

The Company is also advancing its drug development program thru a licensing agreement with Stanford regarding the synthesis of brylogs and related technology.

 

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Recent Developments

 

November 2016 Private Placement

 

In a November 2016 private placement, we sold 3,828,763 shares of common stock and warrants to purchase an equivalent number of shares of our common stock, with an exercise price of $12.80 per share (subject to adjustment), for a period of five years from the date of issuance (the “Series F Warrants”), at a purchase price of $6.40 per share of Common Stock and Series F Warrant, resulting in gross proceeds of approximately $24.5 million (the “November 2016 Private Placement”). The private placement was completed in two closings, which took place on November 17, 2016 and November 22, 2016.

 

In connection with the November 2016 Private Placement, on November 17, 2016, we filed with the Secretary of State of the State of Nevada an Amendment to our Certificate of Designations, Preferences and Rights of Series B Preferred Stock (the “Series B COD Amendment”), originally filed November 13, 2015 with the Secretary of State of the State of Nevada, as corrected by the Certificate of Correction filed November 19, 2015 with the Secretary of State of the State of Nevada (as so corrected, the “Certificate of Designation”). The Series B COD Amendment (i) provided that the Company’s entry into a binding securities purchase agreement, by and among the Company and the investors signatory thereto, in connection with a private placement of the Company’s common stock and warrants, that results in at least $8,000,000 of aggregate gross proceeds to the Company (a “Private Placement”), shall result in the automatic conversion of the Company’s Series B Stock into shares of the Company’s common stock at a conversion price of $18.56 immediately prior to the initial closing of the Private Placement with aggregate gross proceeds to the Company of at least $8 million and (ii) amended the definition of “Excluded Securities” to include the issuance of the Company’s common stock and warrants issued in any Private Placement. As a result of the November 2016 Private Placement, all of the issued and outstanding shares of Series B Stock were converted into an aggregate of 825,962 shares of our common stock on November 17, 2016. The Series B COD Amendment was approved by the “Required Holders” as defined in the Certificate of Designation. As a result of the mandatory conversion of the Series B Stock, the anti-dilution protection for dilutive issuances in the Series A Warrants, the Series C Warrants and the Series E Warrants ceased to be effective pursuant to the terms of such warrants.

 

Pursuant to the purchase agreement entered into in connection with November 2016 Private Placement, we agreed to reduce the exercise prices of certain of our outstanding warrants to purchase shares of common stock that were issued in connection with the November 2015 Private Placement. Effective as of November 18, 2016, the exercise price of each of the Series A Warrants and the Series C Warrants was reduced to $0.32 per share and the exercise price of the Series E Warrants was reduced to $32.00 per share, in each case subject to adjustment as provided in such Warrants.

 

January 2017 Reverse Stock Split

 

On January 11, 2017, we filed with the Secretary of State of the State of Nevada a Certificate of Change to our Articles of Incorporation to effect a one-for-thirty-two (32) reverse stock split of our shares of common stock. Such amendment and ratio were previously approved by our board of directors. As a result of the reverse stock split, every thirty-two (32) shares of our pre-reverse split common stock were combined and reclassified into one share of common stock. Proportionate voting rights and other rights of common stock holders were not affected by the reverse stock split. Stockholders who would otherwise have held a fractional share of common stock received an increase to their common stock as the common stock was rounded up to a full share. No fractional shares were issued in connection with the reverse stock split. In addition, our pre-reverse split 400,000,000 authorized shares of common stock was proportionately reduced to 12,500,000 authorized shares of common stock as a result of the reverse stock split.

 

Going Concern

 

As shown in the consolidated financial statements contained in this report, we have generated no revenues to date, have incurred substantial losses, and have substantial contractual commitments pursuant to various agreements to which we are a party including costs associated with our ongoing Phase 2 clinical trial and related amendments to the clinical trial protocol.

 

Our ability to continue existence is dependent upon our continuing efforts to obtain additional financing to carry out our business plan. We intend to fund our operations through equity and/or debt financing arrangements and any revenues generated in the future. Any equity financing, if available, would most likely be significantly dilutive to our current stockholders. However, there can be no assurance that these arrangements, if any, will be sufficient to fund our ongoing capital expenditures, working capital, and other cash requirements. The outcome of these matters cannot be predicted at this time.

 

There can be no assurance that any additional financings will be available to us on satisfactory terms and conditions, if at all. Prior to the completion of the November 2016 Private Placement, these conditions raised substantial doubt as to our ability to continue as a going concern.

 

The unaudited condensed consolidated financial statements contained in this report do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that may result should we be unable to continue as a going concern.

 

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Critical Accounting Policies, Estimates, and Judgments

 

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

 

Results of Operations

 

Comparison of the Years ended December 31, 2015 and December 31, 2014

 

Revenues

 

We did not generate any revenues for the years ended December 31, 2015 and 2014.

 

Operating Expenses

 

Overview

 

Total operating expenses for the year ended December 31, 2015 were $9,445,757 versus $9,267,120 for the year ended December 31, 2014, an increase of approximately 2%. The slight decrease in operating expenses is due primarily to the acceleration of product research and development activities relating to its collaboration with CRE for treatment of neurodegenerative diseases offset by a decrease in expenses associated with discontinuing the diagnostic product development in 2015, and by a decrease in general and administrative and non-cash stock-based compensation expenses.

  

Research and Development Expenses

 

   Year ended December 31, 2015   Year ended December 31, 2014 
   Therapeutic   Diagnostic   Patents &
Licenses
   Total   Therapeutic   Diagnostic   Patents &
Licenses
   Total 
Related Party (CRE)   NA    NA    NA   $2,023,595   $789,172   $1,096,984   $337,487   $2,223,643 
Non-Related Party  $2,083,961   $50,183   $46,119   $2,180,263   $1,183,534   $0   $59,172   $1,242,706 
Total  $2,083,961   $50,183   $46,119   $4,203,858   $1,972,706   $1,096,984   $396,659   $3,466,349 

  

For the year ended December 31, 2015, we incurred $2,023,595 of research and development – related party expenses versus $2,223,643 for the year ended December 31, 2014. These expenses are incurred pursuant to our strategic alliance with CRE for ongoing research and development principally relating to the development of our potential therapeutic under the terms of the February 2015 SOW. We paid a flat fee of $200,000 per month through September 30, 2015 and $166,667 for the remainder of 2015 pursuant to the November 12, 2015 SOW, which covered product development activities and maintenance of the licensed patent portfolio, and incurred $41,047 separately for certain expenses relating to analytical testing and consulting fees.

 

For the year ended December 31, 2015, we incurred $2,180,263 in research and development expenses with non-related parties versus $1,242,706 for the year ended December 31, 2014, an increase of approximately 75%. These expenses were incurred pursuant to developing the potential AD therapeutic product and products relating to orphan drug indications. Of these expenses, for the year ended December 31, 2015, $1,896,779 related to conducting our AD Phase 2a clinical trial and related production, inventory management and storing of drug product versus $997,834 for the comparable 2014 period, $182,880 related to clinical consulting services versus $185,700 for the comparable 2014 period, $46,119 related to licensing payment amortization relating to the Stanford and Mount Sinai license agreements versus $59,172 for the comparable 2014 period, $36,484 related to orphan drug development costs versus $0 for the comparable 2014 period, and $18,000 related to development of alternative drug supply with Stanford University versus $0 for the comparable 2014 period. We expect our research and development expenses to increase, as our resources permit, in order to advance our potential products. 

 

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General and Administrative Expenses

 

We incurred related party general and administrative expenses totaling $804,022 and $108,693 for the years ended December 31, 2015 and 2014, respectively. Of these amounts, for the year ended December 31, 2015, we incurred $696,022 of prepaid royalty expenses to CRE pursuant to our November 2015 private placement. Of the total amount due, 50% was paid in 2015 and the remaining 50% is due by December 31, 2016 and is recorded as a related party payable. The remaining amounts of $108,000 and $108,693 for the years ended December 31, 2015 and 2014, respectively, are attributable to the payments to our prior Chairman for services provided to us as a director. 

 

We incurred $3,714,943 and $4,488,415 of other general and administrative expenses for the years ended December 31, 2015 and 2014, respectively, a decrease of approximately 17%. Of the amounts for the years ended December 31, 2015 versus the comparable 2014 period: $2,256,354 was incurred for wages, bonuses, vacation pay, severance, taxes and insurance for five employees plus our Chairman, versus $2,123,189 for six employees for the 2014 comparable period; $583,658 was incurred for ongoing legal expenses versus $691,867; $190,014 was incurred for investor relations services versus $188,310; $219,140 was incurred for insurance versus $104,320; $0 was incurred for outside operations consulting services versus $876,704 based upon the Company either hiring the consultants or completing services provided by such consultants; $130,640 was incurred for travel expenses versus $215,696; $124,679 was incurred for professional fees associated with auditing, financial, accounting and tax advisory services versus $147,635; and $290,955 was incurred for office rent and utilities, supplies, license fees, filing costs, rent, advertising and other, mostly relating to office facilities in New Jersey offset by a credit of $80,497 relating to a settlement of a payable to a service provider versus $80,694.

 

Stock Based Compensation Expenses

 

We incurred related party non-cash expenses totaling $175,752 versus $252,868 for the years ended December 31, 2015 and 2014, respectively, in connection with the vesting of stock options, and we incurred $547,182 and $950,795 of non-related party non-cash expenses for vesting of stock options for the years ended December 31, 2015 and 2014, respectively. The decrease is a result of canceling previously issued stock options terminated in 2014 partially offset by the issuance of new stock options during the year ended December 31, 2015.

 

Other Income

 

We earned $4,222 of net interest income for the year ended December 31, 2015 versus $13,797 for the year ended December 31, 2014 on funds temporarily deposited in an interest bearing money market account. This decrease is attributable to the reduction in average cash balances.

 

Net loss and earnings (losses) per share

 

We incurred losses of $9,441,535 and $9,253,323 for the years ended December 31, 2015 and 2014, respectively. The increased loss was primarily due to our increased research and development activities and prepaid royalty obligations to CRE during 2015 offset by a decrease in non-cash stock-based compensation expenses. Earnings (losses) per common share including dividends accruable on Series B Stock for 2015 and Series A Stock for 2014 were ($11.52) and ($15.68) post-split for the years ended December 31, 2015 and 2014, respectively. The decrease in loss per share is primarily attributable to the slight increase in our operating loss for the current period partially offset by the increase in the weighted average number of shares.

 

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Comparison of the nine months ended September 30, 2016 and September 30, 2015

 

Revenues

 

We did not generate any revenues for the nine months ended September 30, 2016 and 2015.

 

Operating Expenses

 

Overview

 

Total operating expenses for the nine months ended September 30, 2016 were $7,918,584 as compared to $6,911,018 for the nine months ended September 30, 2015, an increase of approximately 15%. The increase in operating expenses is due primarily to the increase in research and development associated primary with our ongoing Phase 2 clinical trial in AD and non-cash stock compensation expenses, partially offset by the decrease in related party research and development and general and administrative expenses.

 

Research and Development Expenses

 

For the nine months ended September 30, 2016, we incurred $764,557 of research and development – related party as compared to $1,852,428 for the nine months ended September 30, 2015. These expenses consisted primarily of a flat fee of $83,333 per month as compared to $200,000 per month for the nine months ended September 30, 2016 versus 2015, respectively, plus $14,557 as compared to $52,428 for expenses relating to the Company’s therapeutic activities for the nine months ended September 30, 2016 and 2015, respectively. These fees and expenses are incurred pursuant to our strategic alliance with CRE for ongoing research and development principally relating to the development of our potential therapeutic products. The change in monthly expense is pursuant to the November 2015 SOW, which covered product development activities and maintenance of the licensed patent portfolio.

 

For the nine months ended September 30, 2016, we incurred $3,548,608 in research and development expenses with non-related parties as compared to $1,348,143 for the nine months ended September 30, 2015. These expenses were incurred pursuant to developing the potential AD therapeutic product, specifically conducting the Phase 2 clinical trial for AD and products relating to orphan drug indications. Of these expenses, for the nine months ended September 30, 2016, $3,410,398 related to conducting our AD Phase 2 clinical trial and related storing of drug product, $63,670 for clinical consulting services, $16,939 of licensing payment amortization relating to the Stanford and Mount Sinai license agreements, $37,600 for orphan drug development costs and $20,000 for development of alternative drug supply with Stanford University as compared to, for the nine months ended September 30, 2015, $1,108,509 related to conducting our AD Phase 2a clinical trial and related storing of drug product, $156,072 for clinical consulting services, $41,078 of licensing payment amortization relating to the Stanford and Mount Sinai license agreements, $30,484 for orphan drug development costs and $12,000 for development of alternative drug supply with Stanford University.

 

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General and Administrative Expenses

 

We incurred related party general and administrative expenses totaling $59,500 for the nine months ended September 30, 2016 as compared to $81,000 for the nine months ended September 30, 2015. These amounts are attributable to the payments to our prior Chairman for services provided to us which ended in July 2016.

 

We incurred $2,581,140 and $3,242,220 of other general and administrative expenses for the nine months ended September 30, 2016 and 2015, respectively, a decrease of approximately 20%. Of the amounts for the nine months ended September 30, 2016 as compared to the comparable 2015 period: $1,330,679 was incurred primarily for wages, vacation pay, taxes and insurance, for four employees plus our Chairman and our Chief Executive Officer, versus $2,017,166 for five employees plus our Chairman for the 2015 comparable period; $464,344 versus $597,096 for ongoing legal expenses as the Company had significant contractual negotiations for the prior nine month period, $116,755 was incurred for outside operations consulting services versus $0 as the Company hired a consultant to help recruit our new Chief Medical Officer during the current nine month period; $82,659 was incurred for travel expenses, versus $117,090; $161,103 was incurred for investor relations services versus $171,736; $107,587 was incurred for professional fees associated with auditing, financial, accounting and tax advisory services versus $98,023; $133,025 was incurred for insurance versus $177,800, and; $204,988 was incurred for office rent, including acceleration of expense based upon abandonment of approximately $120,000, and utilities, supplies, license fees, filing costs, rent, advertising and other, versus $143,806, which is offset by a credit of $80,497 relating to a settlement of a payable to a service provider for the comparable 2015 period. As further discussed in Note 4 (Contractual Commitments) that are included in the Notes to Condensed Consolidated Financial Statements (Unaudited) above, with respect to the amounts that we incurred for severance, we accrued a total of $265,000 of severance payments as of September 30, 2015, which was contingent upon the Company raising additional capital in excess of $7.5 million. The capital raise was completed in November 2015.

 

Stock Based Compensation Expenses

 

We incurred related party non-cash expenses totaling $134,444 as compared to $131,453 for the nine months ended September 30, 2016 and 2015, respectively, in connection with the vesting of stock options.

 

We incurred $830,335 and $255,774 of non-related party non-cash expenses for issuance of stock options for the nine months ended September 30, 2016 and 2015, respectively. The increase is a result of the issuance of stock options during the fourth quarter of 2015 and the first nine months of 2016 and the acceleration of options vesting for two of the Company’s former board members and former President and Chief Executive Officer as discussed in Note 4 (Contractual Commitments) that are included in the Notes to Condensed Consolidated Financial Statements (Unaudited) above.

 

Other Income

 

We earned $5,450 of interest income for the nine months ended September 30, 2016 as compared to $2,844 for the nine months ended September 30, 2015 on funds temporarily deposited in an interest bearing money market account. This increase is attributable to the Company’s capital raising activities in November 2015 offset by the reduction in cash balances.

 

Net losses and earnings per share

 

We incurred losses of $7,913,134 and $6,908,174 for the nine months ended September 30, 2016 and 2015, respectively. The increased loss was primarily due to our increase in expenses associated with our current Phase 2 clinical trial and an increase in stock-based compensation expense, offset by a decrease in related-party research and development expenses and lower general and administrative expenses. Earnings (losses) per common share were ($6.08) and ($9.60) for the nine months ended September 30, 2016 and 2015, respectively. The decrease in loss per share is primarily attributable to the increased weighted average common shares outstanding partially offset by an increase in accrued preferred stock dividends.

 

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Comparison of the three months ended September 30, 2016 and September 30, 2015

 

Revenues

 

We did not generate any revenues for the three months ended September 30, 2016 and 2015.

 

Operating Expenses

 

Overview

 

Total operating expenses for the three months ended September 30, 2016 were $3,593,659 as compared to $1,892,304 for the three months ended September 30, 2015, an increase of approximately 90%. The increase in operating expenses is due primarily to the increase in research and development associated primary with our ongoing Phase 2 clinical trial in AD, a slight increase in general and administrative expenses and an increase in non-cash stock compensation expenses, partially offset by the decrease in related party research and development expenses.

 

Research and Development Expenses

 

For the three months ended September 30, 2016, we incurred $249,999 of research and development expenses – related party as compared to $636,547 for the three months ended September 30, 2015. These expenses consisted primarily of a flat fee of $83,333 per month as compared to $200,000 per month for the three months ended September 30, 2016 versus 2015, respectively, plus $0 as compared to $20,666 for expenses relating to the Company’s therapeutic activities for the three months ended September 30, 2016 and 2015, respectively. These fees and expenses are incurred pursuant to our strategic alliance with CRE for ongoing research and development principally relating to the development of our potential therapeutic products. The change in monthly expense / flat fee is pursuant to the November 2015 SOW, which covered product development activities and maintenance of the licensed patent portfolio.

  

For the three months ended September 30, 2016, we incurred $1,729,929 in research and development expenses with non-related parties as compared to $268,665 for the three months ended September 30, 2015. These expenses were incurred pursuant to the development of the potential AD therapeutic product and related Phase 2 clinical trial and products relating to orphan drug indications. Of these expenses, for the three months ended September 30, 2016, $1,682,602 related to conducting our AD Phase 2 clinical trial and related storing of drug product, $30,304 for clinical consulting services, $3,022 of licensing payment amortization relating to the Stanford and Mount Sinai license agreements, $6,000 for orphan drug development costs and $8,000 for development of alternative drug supply with Stanford University as compared to, for the three months ended September 30, 2015, $235,724 related to conducting our AD Phase 2a clinical trial and related storing of drug product, $17,331 for clinical consulting services, $7,341 of licensing payment amortization relating to the Stanford and Mount Sinai license agreements, $12,469 for orphan drug development costs and ($4,200) for development of alternative drug supply with Stanford University. The credit relates to a reclassification and capitalization of licensing fees paid during the first half of 2015.

 

General and Administrative Expenses

 

We incurred related party general and administrative expenses totaling $5,500 and $27,000 for the three months ended September 30, 2016 and 2015, respectively. These amounts are attributable to the payments to our prior Chairman for services provided to us which ended in July 2016.

 

We incurred $1,058,139 and $817,880 of other general and administrative expenses for the three months ended September 30, 2016 and 2015, respectively, an increase of approximately 29%. Of the amounts for the three months ended September 30, 2016 versus the comparable 2015 period: $606,802 was primarily incurred for wages, vacation pay, taxes and insurance, for four employees plus our Chairman and our Chief Executive Officer, versus $506,818 for five employees plus our Chairman for the 2015 comparable period; $252,781 versus $200,796 for ongoing legal expenses; $26,072 was incurred for travel expenses, versus $35,061; $49,230 was incurred for investor relations services versus $43,616; $23,475 was incurred for professional fees associated with auditing, financial, accounting and tax advisory services versus $22,521; $47,744 was incurred for insurance versus $51,051; and $7,280 was incurred for office supplies, license fees, filing costs, advertising and other, versus $38,514 which includes office rent and utilities not included for the comparable 2016 period and which is offset by a credit of $80,497 relating to a settlement of a payable to a service provider for the comparable 2015 period.

 

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Stock Based Compensation Expenses

 

We incurred related party non-cash expenses totaling $46,809 versus $44,299 for the three months ended September 30, 2016 and 2015, respectively, in connection with the vesting of stock options.

 

We incurred $503,283 and $97,913 of non-related party non-cash expenses for issuance of stock options for the three months ended September 30, 2016 and 2015, respectively. The increase is primarily attributable to acceleration of options vesting for two of the Company’s former board members and former President and Chief Executive Officer as discussed in Note 4 (Contractual Commitments) that are included in the Notes to Condensed Consolidated Financial Statements (Unaudited) above.

 

Other Income

 

We earned $1,516 of interest income for the three months ended September 30, 2016 as compared to $355 for the three months ended September 30, 2015, on funds temporarily deposited in an interest bearing money market account. This increase is attributable to the Company’s capital raising activities in November 2015 offset by the reduction in cash balances.

 

Net losses and earnings per share

 

We incurred losses of $3,592,143 and $1,891,949 for the three months ended September 30, 2016 and 2015, respectively. The increased loss was primarily attributable to our increase in expenses associated with our current Phase 2 clinical trial, a slight increase in other general and administrative expenses and an increase in stock-based compensation expense, offset by a decrease in related-party research and development expenses. Losses per common share were ($2.56) for the three months ended September 30, 2016 and 2015. The flat loss per share is primarily attributable to the increased weighted average common shares outstanding and a reduction in our loss from operations, partially offset by an increase in accrued preferred stock dividends.   

  

Financial Condition, Liquidity and Capital Resources

 

Since the inception of Neurotrope BioScience, we have primarily devoted our efforts to the development of our therapeutic products, raising capital, negotiating the CRE License and, until June 30, 2015, the license we formerly held under the CRE License Agreement to certain technology, including rights relating to an in vitro test system based on examination of skin cells intended to predict the presence of AD in humans (the “AD Diagnostic Test”) toward commercialization while conducting business planning and recruiting executive management.

 

Cash and Working Capital

 

Since inception, we have incurred negative cash flows from operations. As of September 30, 2016, we had an accumulated deficit of $35,637,358 and had working capital of $4,786,439 as compared to working capital of $11,732,280 as of December 31, 2015. The $6,945,841 decrease in working capital was primarily attributable to expenditures relating to development of a potential therapeutic product and general and administrative expenses, which resulted in a net loss of $7,913,134 plus capital expenditures of $2,947 for the nine months ended September 30, 2016. 

 

In the November 2016 Private Placement, we sold 3,828,754 shares of common stock and warrants to purchase an equivalent number of shares of our common stock, with an exercise price of $12.80 per share (subject to adjustment), for a period of five years from the date of issuance (the “Series F Warrants”), at a purchase price of $6.40 per share of Common Stock and Series F Warrant, resulting in gross proceeds of approximately $24.5 million.

 

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Sources and Uses of Liquidity

 

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

 

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

  

We expect to use the net proceeds from the November 2016 Private Placement to support the development of Bryostatin, our novel drug targeting the activation of PKC epsilon. Funds are anticipated to be used to complete the current phase 2 study treating moderate to severe Alzheimer's patients, plus the initiation of an open label extension study treating patients enrolled in the current phase 2 study. We also plan to initiate an open label study in Fragile X syndrome. The balance of the funds will be used for general corporate and working capital purposes. 

 

Off-Balance Sheet Arrangements

 

We did not engage in any “off-balance sheet arrangements” (as that term is defined in Item 303(a)(4)(ii) of Regulation S-K) as of September 30, 2016. 

 

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DESCRIPTION OF BUSINESS

 

History

 

As described in the Prospectus Summary above under the heading “Organizational History,” we were incorporated in Florida as BlueFlash Communications, Inc. on January 11, 2011. Prior to the Reverse Merger and Split-Off (each as defined above), our business was established to provide software solutions to deliver geo-location targeted coupon advertising to mobile internet devices. As a result of the Split-Off and the Reverse Merger, the Company discontinued its pre-Reverse Merger business and acquired the business of Neurotrope BioScience.

 

Our authorized capital stock currently consists of 12,500,000 shares of common stock, par value $0.0001, and 50,000,000 shares of “blank check” preferred stock, par value $0.0001, 24,325,000 of which has been designated as Series A Preferred Stock and 333,333 of which has been designated as Series B Stock. Our common stock is quoted on the OTC Market (OTCQB) under the symbol “NTRP.” For 20 business days following the effectiveness of our reverse stock split, a “D” will be placed at the end of the symbol (“NTRPD”).

 

Our principal executive offices are located at 205 East 42nd Street – 16th Floor, New York, NY 10017. Our telephone number is 1-973-242-0005. Our website address is www.neurotropebioscience.com.

 

Neurotrope BioScience was incorporated on October 31, 2012, under the laws of the State of Delaware, for the primary purpose of commercializing the technologies initially developed by CRE for therapeutic and diagnostic applications for AD and other cognitive dysfunctions. We relinquished our rights to diagnostic applications for AD under the CRE License in July 2015. The Company has been principally focused on developing a drug candidate called bryostatin for the treatment of AD, which is in the clinical testing stage.

 

On October 31, 2012, Neurotrope BioScience entered into the Technology License and Services Agreement, the CRE License, with CRE and its affiliate NRV II, LLC, pursuant to which it was granted an exclusive non-transferable license to certain patents and technologies required to develop our proposed products. On February 4, 2015, the parties entered into an Amended and Restated Technology License and Services Agreement that further amended and restated the CRE License. (For additional information, see “Certain Relationships and Related Transactions—CRE License.”) Neurotrope BioScience was formed for the primary purpose of commercializing certain technologies, which were initially developed by CRE, for therapeutic or diagnostic applications for AD or other neurodegenerative disorders. These technologies have been under development by CRE since 1999 and, up until March 2013, were financed by CRE through significant funding from a variety of non-investor sources (which included not-for-profit foundations, the National Institutes of Health (which is part of the U.S. Department of Health and Human Services) and contributions from individuals). From March 2013 forward, development of the licensed technology has been funded principally through collaboration by CRE with Neurotrope BioScience.

 

Bryostatin is a potent modulator of the enzyme protein kinase C epsilon (“PKCε”). In preclinical in vivo models, this effect has been shown to play an important role in slowing or reversing AD and restoring cognition, memory and motor skills.

 

Bryostatin modulates the same enzyme target used by the former diagnostic test for the detection of AD. We believe bryostatin may restore synaptic structures and functions damaged by AD, leading to improvements in cognition and memory. Beyond AD, several other neurodegenerative diseases, such as ischemic stroke, traumatic brain injury, Fragile X mental retardation, depression and aging in the brain, may be amenable to treatment with the same approach.

 

CRE is conducting an enhanced access program, formerly known as compassionate use, of Bryostatin-1 in patients with advanced AD. Thus far, five patients with advanced AD have been treated, four of which were treated under an IND application cleared by the FDA. The IND was initially held by CRE and was recently transferred to Neurotrope. One of these patients, who had familial AD, has died, but the death was not drug-related. The study for another one of these patients concluded after almost one year on the protocol. On the basis of communication from caregivers and treating physicians, CRE, with our support, has decided to enroll additional patients in the extended access program. We are providing limited funding, study drug and personnel support under the terms of our agreement with CRE for this modest expansion of our clinical effort in AD during the 2016 timeframe.

 

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On July 29, 2014, we announced that we initiated our Phase 2a clinical trial to evaluate bryostatin for the treatment of patients with AD. The trial was being conducted under an IND application filed by CRE. CRE transferred its rights and obligations arising under such IND application to us on February 4, 2015. We enrolled a total of nine patients in the randomized, double-blind, placebo-controlled, single dose study. Six patients were randomized to receive bryostatin by injection and three received a matching placebo control. The primary objective of the clinical trial was to assess the safety and tolerability of a single dose of bryostatin in the treatment of patients with AD. The secondary objectives of the study were the preliminary evaluation of the efficacy of a single dose of bryostatin in the treatment of patients with AD, its pharmacokinetics and pharmacodynamics, and the evaluation of any correlation between changes in PKCε with plasma levels of bryostatin and with improvement in cognitive function. On February 24, 2015, we announced that the Phase 2a clinical trial met its primary endpoint demonstrating preliminary safety and tolerability of bryostatin. On March 17, 2015, we announced that preliminary assessment of PKCε levels in peripheral monocytes demonstrated a significant increase in total PKC protein levels at the end of the bryostatin infusion consistent with target engagement. An additional secondary objective of the study was the evaluation of efficacy following a single dose of bryostatin.

 

Following on these results, on October 9, 2015, Neurotrope BioScience executed a Services Agreement with Worldwide Clinical Trials, Inc. (“WCT”), effective as of August 31, 2015. The Services Agreement relates to services for Neurotrope BioScience’s Phase 2 clinical study assessing the safety, tolerability and efficacy of bryostatin in the treatment of moderately severe to severe AD (the “Study”). Pursuant to the terms of the Services Agreement, WCT will provide services to enroll approximately one hundred and fifty (150) study subjects at approximately 30 sites across the United States. We began enrollment at the initial sites at the end of 2015 and completed enrollment in November 2016. This trial was designed to administer dosing of bryostatin for up to six months for moderately severe to severe AD patients but has been amended to administer dosing of bryostatin for up to three months (see details of the amendment below). Among the trial’s endpoints are the measurement of improvement in cognition, activities of daily living and behavior. The Company’s goal is to show the robust treatment effect that the regulatory agencies, the marketplace and, most importantly, our patients and their caregivers are seeking.

 

On July 27, 2016, we received approval of the institutional review board (“IRB”) for our amended protocol submitted on July 21, 2016 to the U.S. Food and Drug Administration (the “FDA”) relating to the Phase 2b clinical trial of our lead drug candidate, Bryostatin-1, for the treatment of advanced AD, which amended protocol eliminates the second, exploratory, study period following the first 12 weeks of treatment. The primary objective is the assessment of safety and tolerability of bryostatin to occur at 13 weeks and that has not been changed with this amendment. The secondary objective is to assess efficacy, also at week 13. Such amendment, to cut the exploratory part of the study, was made for business reasons in order to provide earlier completion of the study and for the planning of future studies. The changes to the study design were not due to any safety concerns. In the study, two doses of bryostatin, 20μg or 40μg, will be compared to placebo. Study subjects receive a total of 7 doses of the study drug over 12 weeks of treatment, followed by safety and efficacy assessments at week 13 and a final study visit at week 16. There will be no second randomization for additional treatment. Subjects who have already entered into the second study period will be discontinued and evaluated 30 days following last treatment for their final study visit. In November 2016, we completed patient enrollment we currently expect to report data late in the first quarter or the beginning of the second quarter of 2017.

 

The total estimated budget for the services, including pass-through costs, was approximately $11.6 million before the amendment of its Phase 2 clinical study protocol as outlined above. As a result of the amendment, the Company believes that the total trial cost will be reduced. Neurotrope BioScience may terminate the Services Agreement without cause upon sixty (60) days’ prior written notice. As of September 30, 2016, Neurotrope BioScience has paid WCT approximately $3.7 million for current and future services.

 

In addition to bryostatin for AD, we intend to pursue development of selected other technology platforms with applications related to the treatment of AD and other neurodegenerative disorders based on our current licensed technology or technology available from third party licensors or collaborators.

 

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AD and the Potential Market for our Products 

 

The Epidemic of AD

 

According to the Alzheimer’s Association, it was estimated that 36 million people worldwide had AD in 2015. The prevalence of AD is independent of race, ethnicity, geography, lifestyle and, to a large extent, genetics. The most common cause of developing AD is living a long life. In developing countries where the median age of death is less than 65 years old, AD is rarely recognized or diagnosed. In the U.S. in 2015, 5.3 million people are estimated to have AD, and approximately 96% of these people are older than 65 years of age.

 

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

 

Figure 1. Different Pharmacologic Targets being pursued for the Treatment of AD1

 

 

 

It has been shown that, during several years preceding the diagnosis of dementia associated with AD, there is a gradual cognition decline, which at first may have rather benign characteristics. Entering the mild cognitive impairment (“MCI”) phase of the disease marks progression of AD to the point where there is a significant loss of synapses (the junctions between nerve cells) preventing effective neurotransmission (Figure 2). This precursor phase transitions into mild, moderate and, finally, severe stages of the disease that are characterized by greater systemic loss of neurons in the brain tissue.

   

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

 

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Figure 2. Early Diagnosis of AD is Essential to Effective Treatment2

 

 

  

This progressive degeneration produces some abnormalities in the brain’s neurotransmitter systems. Multiple failures in acetylcholine and glutamate neurotransmitter systems (neurotransmitters) appear to underlie some of the symptomology of AD, and thus these systems have become targets for pharmacologic intervention.

 

The loss of neuronal function and neuronal cell death is also related to the abnormal processing of β amyloid (“Aβ”) peptide, ultimately leading to the formation of Aβ plaques (protein deposits) in the brain. As illustrated in Figure 2, this amyloid load in the brain usually becomes marked before the symptoms of the MCI phase appear in AD patients.

 

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

 

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

 

In animal studies, CRE found that PKCε activation in neurons targets the loss of synapses in the brains of animals with AD, and can delay or temporarily arrest other elements of the disease, i.e. the elevation of the toxic Aβ peptide, the loss of neurons, the appearance of plaques, and the loss of cognitive function.

 

Potential Market for Our Products

 

According to an article titled “Progress in AD” published in The Journal of Neurology in 2012, there has been a dearth of new product introductions in the last 20 years either for the treatment of AD symptoms or its definitive diagnosis in patients who begin exhibiting the memory and cognitive disorders associated with the disease. According to the Alzheimer’s Association, all of the products introduced to date for the treatment of AD have yielded negative or marginal results with no long-term effect on the progression of AD and no improvement in the memory or cognitive performance of the patients receiving these therapies. With 36 million people worldwide estimated to have had AD in 2015, there is significant commercial potential for a new therapeutic that is effective in delaying the progression of the disease.

 

2 Lancet Neurol. 2010; 9, 119. CR Jack et al, “ Hypothetical model of dynamic biomarkers of the Alzheimer’s pathological cascade”

 

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We believe the markets for drugs or therapies to treat and analyze AD exist exclusively in the developed world and principally comprise the North American, European and Japanese markets. The aggregate AD market is subdivided into four distinct segments, which are shown in Figure 3, as are the projected compounded annual growth rates (“CAGRs”) for these segments over the 2009-2014 timeframe.

  

Sales of the major drug therapies available only by prescription are reported in Figure 3, which includes, among others, the acetylcholinesterase inhibitors (Exelon®, Razadyne®, and Aricept®) and the glutamate antagonist, Namenda®.These drugs are approved for the symptomatic treatment of the cognitive aspects of AD, but have no meaningful effect on disease progression, giving only temporary improvement in cognitive decline. Despite their limited efficacy, this group of drugs had collective worldwide sales in 2011 in excess of approximately $6 billion, according to a BBC Research Report. The negative CAGR for this segment reflects the fact that this class of drugs faces generic competition over the timeframe considered.

 

Figure 3. Global Market for AD ($ mm): 2009-20144

 

Market Segments  2009   2014   CAGR%
2009-14
 
Prescription Drugs for AD   5,947    5,211    -2.6 
Diagnostics / Biomarkers   1,164    2,855    19.6 
Therapeutics for Treatment of Symptoms   567    726    5.1 
Imaging   361    852    18.7 
Total   8,039    9,644    3.7 

  

The “Therapeutics for Treatment of Symptoms” category cited in Figure 3 represents drugs from other classes that are being used to temporarily treat some of the symptoms of AD.5

 

Neurotrope’s Proposed Products

 

Challenges in Treating AD

 

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

 

Dead or dying neurons cannot be returned to function, and many in the AD field currently believe that stemming the progression of the disease may only be possible with very early stage intervention. The FDA is encouraging the pharmaceutical industry to increase efforts to investigate such early stage interventional treatments by recommending that modified clinical endpoints, both functional and cognitive, be established to monitor the efficacy of drug prototypes being tested in early stage AD patients, according to an article published in The New England Journal of Medicine.6

 

3 Exelon is a registered trademark of Novartis AG Corporation; Razadyne is a registered trademark of Johnson & Johnson Corporation; Aricept is a registered trademark of Eisai R&D Management Co., Ltd. Corporation; and Namenda is a registered trademark of Merz Pharma GmbH & Co.

4 BCC Research Report PHM062A AD Therapeutics and Diagnostics: Global Markets, January 2010. Available at http://www.bccresearch.com/market-research/pharmaceuticals/alzheimers-disease-therapeutics-phm062a.html.

5 See footnote 3. 

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

 

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

  

Synaptogenesis

 

We believe that deficient activity or low concentrations of PKCε in aging subjects is one of the main causes of the neurodegeneration seen in AD. The schematic in Figure 4 illustrates only a portion of the changes mediated by PKCε, and how it may help reverse the neuronal damage and loss central to the pathogenic process in AD.

 

Figure 4. PKCε Activation Involves 5 Different Mechanisms to Stop the Progression of AD7

 

 

 

Activation of PKCε has been achieved with drug prototypes that mimic the activity of diacylglycerol and phosphatidylserine, which are the natural binding targets for this enzyme. In addition, a variety of in vitro and in vivo animal models have demonstrated that these drug prototypes are effective in restoring the structure and function of neuronal synapses. Our first clinical application of the PKCε activators is focused on the treatment of AD, but a number of other neurodegenerative diseases may be amenable to similar treatment. A list of these potential future drug targets is shown in Figure 5.

 

7 Based on unpublished CRE research.

 

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Figure 5. Therapeutic targets for neuroregeneration through PKCε activation

 

 

 

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

 

CRE’s research program in this area lies outside the conventional wisdom that has dominated research efforts in the industry. The pathology of AD likely has multiple layers in its development, and the accumulating presence of tau phosphorylated tangles and Aβ are causative factors in the poisoning of neurons and the resultant cognitive and memory disorders. However, once this process presents clinical manifestations of AD, restoring synaptic function thus far has not been effectively achieved by removing Aβ plaques with experimental drug interventions. Once neurons are poisoned with Aβ, the loss of function to the patient has been irreversible.

 

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

 

PKCε Activation Stimulates the Formation of New Synaptic Connections

 

The new synaptic connections formed from the damaged neurons in rats can be demonstrated in various behavioral models for the animals that are used to measure memory functions. Treatment with bryostatin, for 12 weeks in genetically modified rodents pre-disposed to develop an AD-type of pathology showed that bryostatin promoted the growth of new synapses and preserved the existing synapses. In addition, this drug also stopped the decrease of PKCε and the increase of soluble amyloid.8

 

In cell tissue cultures, the difference in morphology between neurons damaged by the application of ASPD (a modified form of Aβ) as compared to neurons activated by the application of bryostatin + retinoic acid (a metabolite of vitamin A) is seen in Figure 6. Treatment with bryostatin, through PKCε activation, stimulates the regeneration of neurons and the formation of new synaptic connections.

 

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

 

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Figure 6. Synaptogenesis in Hippocampus Neurons9

 

 

 

The Central Role of PKCε in Maintaining Neuron Structure and Function

 

Upon activation, PKCε migrates from the intracellular fluid to the cell membrane, where it activates signal-regulating enzymes (specifically the MAP kinases Erk1/2 and NF-κβ), causing a series of changes leading to increased DNA transcription, synaptic maturation, a consequent increase in levels of growth factor proteins (such as nerve growth factor and brain-derived neurotrophic factor), an inhibition of programmed cell-death and a reduction of β amyloid.

 

This myriad of events is orchestrated by PKCε, and prompts a number of secondary events occurring in both the pre- and post-synaptic portions of the neuron. Cellular visualization of this effect shows an increase in the number of pre-synaptic vesicles in the neurons, an increase in pre-synaptic levels of PKCε and an increase in the number of mushroom spines associated with individual synaptic boutons (knoblike enlargements at the end of a nerve fiber, where it forms a synapse), which spines may be important in memory. Their genesis in these neurons is responsible for the formation of new synapses.

 

The central role of PKCε activation in these dynamic events does not contradict the amyloid hypotheses for AD, but offers an alternative target for therapeutic intervention which could prevent the formation of tangles and plaque.

 

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

 

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

 

Testing PKCε Activation in Humans

 

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

 

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

 

9 Based on unpublished CRE research.

 

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Drug Prototypes That Treat AD through Regeneration

 

CRE has developed a new chemical family of polyunsaturated fatty acid (“PUFA”) analogs, which appear to be effective in the activation of PKCε. Representative structures of bryostatin and a lead PUFA analog are shown in Figure 7

 

Figure 7. Structures of Bryostatin 1 and a PUFA Analog Effective in the Activation of PKCε10

 

 

 

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

 

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

 

Part of the hierarchal array of in vitro and in vivo tests useful in optimizing the potency of our potential drug prototypes is displayed in Figure 8.  

 

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

 

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Figure 8. Optimization of PKCε Activation Effects in Lead Drug Candidates: Array of in vitro and in vivo Test Models11

  

 

 

Bryostatin

 

Our lead product candidate is bryostatin. Bryostatin is a natural product isolated from a marine invertebrate organism, a bryozoan called Bugula neritina. Several total syntheses of this complex molecule have been achieved in recent years in various academic chemistry laboratories, and these approaches represent a possible alternative source of this drug. Bryostatin is a PKCα and e activator that was originally developed as a potential anticancer drug. According to Clinical Cancer Research, this drug candidate was previously evaluated in 63 clinical studies involving more than 1,400 patients at the NCI for the treatment of various forms of cancer. While having failed these studies as an experimental anti-cancer therapy, much useful information on the safety, pharmacodynamics and toxicity of the drug was obtained from these in-human trials.

 

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

 

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

 

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

 

11 Based on unpublished CRE research.

 

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Bryologs

 

On May 12, 2014, we entered into a license agreement (the “Stanford License”) with The Board of Trustees of the Leland Stanford Junior University (“Stanford”) pursuant to which Stanford has granted to us a revenue-bearing, world-wide right and exclusive license, with the right to grant sublicenses (on certain conditions), under three issued U.S. patents and one pending U.S. patent and related technology for the use of bryostatin structural derivatives, known as “bryologs,” for use in the treatment of central nervous system disorders, lysosomal storage diseases, stroke, cardioprotection and traumatic brain injury, collectively referred to as the Licensed Field of Use, for the life of the licensed patents. In January 2017, we entered into an additional license agreement with Stanford relating to an accelerated synthesis of bryostatin-1.

  

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

 

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

 

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

 

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

 

PUFA Analogs

 

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

 

Other Potential Products

 

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

  

Discontinued Research 

 

We had planned to develop two other lines of research related to learning and memory disorders: (i) drug prototypes that activate or inhibit the enzyme carbonic anhydrase to modulate the attention status of animals, which may have had applications for attention deficit disorder and post-traumatic stress disorder, and (ii) generalizing the application of a blood-brain-barrier delivery system to a variety of drugs through a contract research service to be offered to other pharmaceutical companies seeking to improve the penetration of their drug prototypes into the brain.

 

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We have decided, however, to focus our efforts on neurodegenerative diseases, which are the most advanced programs in our portfolio, and therefore will not be pursuing either the drug candidate for activating carbonic anhydrase or the blood-brain-barrier delivery system.

 

We also relinquished rights to the AD diagnostic system under the terms of the February 2015 SOW (see below).

 

February 2015 SOW and November 2015 SOW

 

Effective November 13, 2013, we agreed to a statement of work with CRE pursuant to which we contracted for the further development of our potential therapeutic product. Pursuant to this statement of work, we paid CRE $251,939 for related personnel and research services. CRE completed the services pursuant to this statement of work in 2014. As of March 12, 2014, we entered into a statement of work with CRE to continue pre-clinical activities relating to the commercialization of our therapeutic product. We paid CRE the entire total pursuant to this statement of work of approximately $465,000 during the year ended December 31, 2014. CRE completed the services pursuant to this statement of work in 2014.

 

On February 4, 2015, we entered into a Statement of Work and Account Satisfaction Agreement with CRE (the “February 2015 SOW”), which was effective as of October 1, 2014 and continued until September 30, 2015.

 

Pursuant to the February 2015 SOW, we agreed, among other things, to pay CRE twenty thousand dollars ($20,000) in quarterly payments during the twelve months from the date of the February 2015 SOW in exchange for advising and consulting services by CRE’s chief scientist regarding our contract with Icahn School of Medicine at Mt. Sinai Hospital for the use of bryostatin in the treatment of Niemann-Pick Type C disease.

 

Under the February 2015 SOW, Neurotrope BioScience also agreed to pay CRE two million four hundred thousand dollars ($2,400,000) in service fees and other amounts payable at a rate of two hundred thousand dollars ($200,000) per month for each month from October 1, 2014 through September 30, 2015. The parties agreed that the first six hundred thousand dollars ($600,000) of payments satisfy certain outstanding amounts owed to CRE. In consideration for the February 2015 SOW, in addition to the terms described above, CRE also agreed to (a) use commercially reasonable efforts to enroll, at no cost to Neurotrope BioScience, at least four (4) additional compassionate use or expanded access patients, in trials of CRE’s Alzheimer’s therapeutic drug platform during the term of the February 2015 SOW, (b) perform certain services requested by Neurotrope BioScience for the further development of CRE’s Alzheimer’s therapeutic drug platform, (c) perform certain services for the further development of CRE’s Alzheimer’s diagnostic test, (d) to the extent permitted by applicable law, transfer all of its rights and regulatory obligations, except for those relating to the compassionate use expanded access trials, associated with CRE’s IND 71,276 to Neurotrope BioScience, (e) conduct initial research on the application of its PKCε platform to treat Fragile X disease, along with various other terms and conditions, (f) conduct initial research on PUFA derivatives for the purpose of developing a commercially usable PKCε activator and (g) provide assistance, advice and other similar services to us regarding our analysis of bryologs pursuant to our agreement with Stanford University, for the purpose of developing a commercially usable PKCε activator. Furthermore, CRE agreed to transfer a certain amount of bryostatin drug substance and bryostatin kits containing drug substance for non-human use to a third-party for storage. In order for CRE to perform certain of the services described in (c) above, Neurotrope BioScience reimbursed a third party for services CRE received from such third party in the amount of $150,000 in connection with CRE’s former diagnostic trial program with such third party.

 

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Neurotrope Bioscience entered into a new Statement of Work Agreement on November 12, 2015 (the “November 2015 SOW Agreement”). The November 2015 SOW Agreement replaced the February 2015 SOW Agreement, which was effective as of October 1, 2014 and expired on September 30, 2015. Pursuant to the November 2015 SOW Agreement, Neurotrope Bioscience agreed to pay CRE one million one hundred sixty-six thousand six hundred sixty-six dollars ($1,166,666) in service fees payable in the amount of eighty-three thousand three hundred thirty-three dollars ($83,333) per month for each month from November 1, 2015 through December 31, 2016. The payments under the November 2015 SOW Agreement will satisfy Neurotrope Bioscience’s obligations to reimburse CRE pursuant to Section 5.6 of the CRE License for any and all attorneys’ fees, translation costs, filing fees, maintenance fees, and other costs and expenses related to applying for, filing, prosecuting, and maintaining patents and applications for the licensed intellectual property incurred by CRE during the term of the November 2015 SOW Agreement (but, for the avoidance of doubt, such payments shall not satisfy any attorneys’ fees, translation costs, filing fees, maintenance fees, or other costs or expenses related to applying for, filing, prosecuting, and maintaining patents and applications for the licensed intellectual property incurred by CRE after the expiration or termination of the November 2015 SOW Agreement term), as well as any litigation costs which CRE may incur related to any of the licensed intellectual property during the November 2015 SOW Agreement term. CRE shall not commence any litigation to enforce the licensed intellectual property without the consent of Neurotrope (which consent shall not be unreasonably withheld, delayed, or denied).

 

In consideration for the payments made pursuant to the November 2015 SOW Agreement, CRE shall perform the services requested by Neurotrope Bioscience for the further development of Neurotrope’s bryostatin drug platform. Thus far, four patients have been treated, three of which were treated under an IND cleared by the FDA. The payments set forth above shall satisfy any and all of Neurotrope Bioscience’s obligation whatsoever to CRE or to any other third party for costs incurred or to be incurred by CRE relating to such trials. Neurotrope Bioscience and CRE shall jointly review protocols which shall be established to the parties’ mutual satisfaction and contain appropriate safety measures to be employed by the treating physician. No additional compassionate use or expanded access patients will be enrolled by CRE without the consent of Neurotrope Bioscience.

 

Services Agreement

 

On October 9, 2015, Neurotrope BioScience, our wholly-owned subsidiary, executed a Services Agreement with Worldwide Clinical Trials, Inc. (“WCT”), effective as of August 31, 2015. The Services Agreement relates to services for Neurotrope BioScience’s Phase 2 clinical study assessing the safety, tolerability and efficacy of bryostatin in the treatment of moderately severe to severe AD (the “Study”). Pursuant to the terms of the Services Agreement, WCT will provide services to enroll approximately one hundred and fifty (150) study subjects at approximately 30 sites across the United States. We began enrollment at the initial sites at the end of 2015 and completed enrollment in November 2016. This trial was designed to administer dosing of bryostatin for up to six months for moderately severe to severe AD patients but has been amended to administer dosing of bryostatin for up to three months (see details of the amendment below). Among the trial’s endpoints are the measurement of improvement in cognition, activities of daily living and behavior. The Company’s goal is to show the robust treatment effect that the regulatory agencies, the marketplace and, most importantly, our patients and their caregivers are seeking.

 

On July 27, 2016, we received approval of the institutional review board (“IRB”) for our amended protocol submitted on July 21, 2016 to the U.S. Food and Drug Administration (the “FDA”) relating to the Phase 2b clinical trial of our lead drug candidate, Bryostatin-1, for the treatment of advanced AD, which amended protocol eliminates the second, exploratory, study period following the first 12 weeks of treatment. The primary objective is the assessment of safety and tolerability of bryostatin to occur at 13 weeks and that has not been changed with this amendment. The secondary objective is to assess efficacy, also at week 13. Such amendment, to cut the exploratory part of the study, was made for business reasons in order to provide earlier completion of the study and for the planning of future studies. The changes to the study design were not due to any safety concerns. In the study, two doses of bryostatin, 20μg or 40μg, will be compared to placebo. Study subjects receive a total of 7 doses of the study drug over 12 weeks of treatment, followed by safety and efficacy assessments at week 13 and a final study visit at week 16. There will be no second randomization for additional treatment. Subjects who have already entered into the second study period will be discontinued and evaluated 30 days following last treatment for their final study visit. In November 2016, we completed patient enrollment we currently expect to report data late in the first quarter or the beginning of the second quarter of 2017.

 

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Intellectual Property

 

Technology License and Services Agreement

 

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

 

Pursuant to the CRE License, Neurotrope BioScience maintained its exclusive (except as described below), non-transferable (except pursuant to the CRE License’s assignment provision), world-wide, royalty-bearing right, with a right to sublicense (in accordance with the terms and conditions described below), under CRE’s and NRV II’s respective right, title and interest in and to certain patents and technology owned by CRE or licensed to NRV II, LLC by CRE as of or subsequent to October 31, 2012 to develop, use, manufacture, market, offer for sale, sell, distribute, import and export certain products or services for therapeutic applications for AD and other cognitive dysfunctions in humans or animals (the “Field of Use”). Additionally, the CRE License specifies that all patents that issue from a certain patent application, shall constitute licensed patents and all trade secrets, know-how and other confidential information claimed by such patents constitute licensed technology under the CRE License. Furthermore, on July 10, 2015, under the terms of the Statement of Work and Account Satisfaction Agreement dated February 4, 2015, Neurotrope BioScience’s rights relating to an in vitro diagnostic test system reverted back to CRE and, accordingly, Neurotrope BioScience no longer has any rights under the CRE License for diagnostic applications using the CRE patent portfolio or technology.

 

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

 

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

 

Pursuant to the terms of the November 12, 2015 amendment to the CRE License, 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 Fee 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.”

 

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

 

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

 

Our Licensed Intellectual Property

 

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

 

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

 

  · therapies based on bryostatin and PUFA chemical families; and

 

  · methods for treating AD.

 

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

 

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

 

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

 

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

 

Governmental Regulation and Product Approval

 

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

 

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United States Regulation of Drugs

 

Before any drug product can be marketed in the United States, it must receive approval from the FDA. To receive this approval, any drug we develop must undergo rigorous preclinical testing and clinical trials that demonstrate the product candidate’s safety and effectiveness for each indicated use. This extensive regulatory process controls, among other things, the development, testing, manufacture, safety, efficacy, record keeping, labeling, storage, approval, advertising, promotion, sale, and distribution of pharmaceutical products.

 

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

 

  · preclinical laboratory and animal tests;

 

  · submission of an 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 proposed drug for

its intended use;

 

  · pre-approval inspection of manufacturing facilities and selected clinical investigators;

 

  · submission of a New Drug Application (“NDA”) to the FDA; and

 

  ·

FDA approval of an NDA or an NDA supplement (for subsequent indications or other modifications, including

a change in location of the manufacturing facility).

 

Preclinical Testing

 

In the United States, drug candidates are tested in animals until adequate proof of safety and efficacy is established. These preclinical studies generally evaluate the mechanism of action and pharmacology of the product and assess the potential safety and efficacy of the product. Tested compounds must be produced according to applicable current good manufacturing practice requirements and preclinical safety tests must be conducted in compliance with FDA and international regulations regarding good laboratory practices. The results of the preclinical tests, together with manufacturing information and analytical data, are generally submitted to the FDA as part of an IND, which must become effective before human clinical trials may commence. The IND will automatically become effective 30 days after receipt by the FDA, unless before that time the FDA requests an extension or raises concerns about the conduct of the clinical trials as outlined in the application. If the FDA has any concerns, the sponsor of the IND and the FDA must resolve the concerns before clinical trials can begin. Regulatory authorities may require additional preclinical data before allowing the clinical studies to commence or proceed from one phase to another, and could demand that the studies be discontinued or suspended at any time if there are significant safety issues. Furthermore, an independent institutional review board for each medical center proposing to participate in the conduct of the clinical trial must review and approve the clinical protocol and patient informed consent form before commencement of the study at the respective medical center.

 

Clinical Trials

 

Clinical trials for new drug candidates are typically conducted in three sequential phases that may overlap. In phase 1, the initial introduction of the drug candidate into healthy human volunteers, the emphasis is on testing for safety or adverse effects, dosage, tolerance, metabolism, distribution, excretion, and clinical pharmacology. Phase 2 involves studies in a limited patient population to determine the initial efficacy of the drug candidate for specific targeted indications, to determine dosage tolerance and optimal dosage and to identify possible adverse side effects and safety risks. Once a compound shows evidence of activity and is found to have an acceptable safety profile in phase 2 evaluations, pivotal phase 3 trials are undertaken to more fully evaluate clinical outcomes and to establish the overall risk/benefit profile of the drug, and to provide, if appropriate, an adequate basis for product labeling. During all clinical trials, physicians will monitor patients to determine effectiveness of the drug candidate and to observe and report any reactions or safety risks that may result from use of the drug candidate. The FDA, the trial sites institutional review board or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health risk.

 

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

 

Data Review and Approval

 

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

 

Once issued, the FDA may withdraw product approval if ongoing regulatory standards are not met or if safety problems occur after the product reaches the market. In addition, the FDA may require testing and surveillance programs to monitor the effect of approved products which have been commercialized, and the FDA has the power to prevent or limit further marketing of a product based on the results of these post-marketing programs. The FDA may also request additional clinical trials after a product is approved. These so-called phase 4 studies may be made a condition to be satisfied after a drug receives approval. The results of phase 4 studies can confirm the effectiveness of a product candidate and can provide important safety information via the FDA’s voluntary adverse drug reaction reporting system. Any products manufactured or distributed by us pursuant to FDA approvals would be subject to continuing regulation by the FDA, including record-keeping requirements and reporting of adverse experiences with the drug. Drug manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with good manufacturing practices, which impose certain procedural and documentation requirements upon us and our third-party manufacturers. We cannot be certain that we or our present or future suppliers will be able to comply with the good manufacturing practices regulations and other FDA regulatory requirements. If our present or future suppliers are not able to comply with these requirements, the FDA may halt our clinical trials, require us to recall a drug from distribution or withdraw approval of the NDA for that drug. Furthermore, 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.

 

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The FDA closely regulates the marketing and promotion of drugs. Approval may be subject to post-marketing surveillance and other record keeping and reporting obligations, and involve ongoing requirements. Product approvals may be withdrawn if compliance with regulatory standards is not maintained or if problems occur following initial marketing. A company can make only those claims relating to safety and efficacy that are approved by the FDA. Failure to comply with these requirements can result in adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties. Physicians may prescribe legally available drugs for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA. Such off-label uses are common across medical specialties. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturers’ communications on the subject of such off-label use.

 

Fast Track Approval

 

The Federal Food, Drug, and Cosmetic Act, as amended, and FDA regulations provide certain mechanisms for the accelerated “Fast Track” approval of potential products intended to treat serious or life-threatening illnesses which have demonstrated the potential to address unmet medical needs. The procedures permit early consultation and commitment from the FDA regarding the preclinical and clinical studies necessary to gain marketing approval. Provisions of this regulatory framework also permit, in certain cases, NDAs to be approved on the basis of valid indirect measurements of benefit of product effectiveness, thus accelerating the normal approval process. In the future, certain potential products employing our technology might qualify for this accelerated regulatory procedure. Even if the FDA agrees that these potential products qualify for accelerated approval procedures, the FDA may deny approval of our drugs or may require additional studies before approval. The FDA may also require us to perform post-approval, or phase 4, studies as a condition of such early approval. In addition, the FDA may impose restrictions on distribution and/or promotion in connection with any accelerated approval, and may withdraw approval if post-approval studies do not confirm the intended clinical benefit or safety of the potential product.

 

Orphan Drug Designation

 

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

 

Foreign Regulation

 

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

 

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

 

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

 

Other Government Regulation

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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Competition 

 

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

 

Employees 

 

As of the date of this prospectus, we have five full-time personnel. We have no part-time employees.

 

Description of Properties 

 

Our principal executive offices are currently located at 205 East 42nd St - 16th Floor, New York NY 10017, for which there is no lease or rent.

 

LEGAL PROCEEDINGS

 

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in any litigation matters that may arise from time to time that may harm business.

 

There are currently no pending legal proceedings that we believe will have, either individually or in the aggregate, a material adverse effect on our business, financial condition or operating results. As far as we are aware, no governmental authority is contemplating any proceeding to which we are a party or to which any of our properties is subject.

 

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DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

 

Directors and Executive Officers

 

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

 

Name