As filed with the Securities and Exchange Commission on July 19, 2021.
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Cognition Therapeutics, Inc.
(Exact name of registrant as specified in its charter)
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Delaware
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2836
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13-4365359
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(State or other jurisdiction of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification Number)
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2500 Westchester Ave.
Purchase, NY 10577
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Lisa Ricciardi
President and Chief Executive Officer
Cognition Therapeutics, Inc.
2500 Westchester Ave.
Purchase, NY 10577
(412) 481-2210
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
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Rachael M. Bushey
Joseph Walsh
Troutman Pepper Hamilton Sanders LLP
3000 Two Logan Square
Philadelphia, Pennsylvania 19103
(215) 981-4331
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Stephen Older
Rakesh Gopalan
David S. Wolpa
McGuireWoods LLP
1251 Avenue of the Americas, 20th Floor
New York, New York 10020
(212) 548-2100
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Approximate date of commencement of proposed sale to the public: As soon as practicable 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. ☐
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please 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, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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☐
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Accelerated filer
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☐
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Non-accelerated filer
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☒
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Smaller reporting company
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☒
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Emerging growth company
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☒
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
CALCULATION OF REGISTRATION FEE
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Title of each class of
securities to be registered
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Proposed
maximum
aggregate
offering price(1)
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Amount of
registration fee(2)
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Common Stock, $0.001 par value per share
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$50,000,000
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$
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5,455
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(1)
Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended. Includes the aggregate offering price of additional shares of common stock that the underwriters have the option to purchase.
(2)
Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price.
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. We 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 it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to completion, dated July 19, 2021
Preliminary prospectus
shares
Common stock
This is the initial public offering of shares of common stock of Cognition Therapeutics, Inc.
We are offering shares of our common stock. It is currently estimated that the initial public offering price per share will be between $ and $ . Prior to this offering, there has been no public market for our common stock.
We have applied to list our common stock on the Nasdaq Global Market under the trading symbol “CGTX”.
We are an “emerging growth company” and a “smaller reporting company” as defined under the federal securities laws and, as such, have elected to comply with certain reduced public company reporting requirements for this prospectus and may elect to do so in future filings.
Investing in our common stock involves a high degree of risk. See the section titled “Risk Factors” beginning on page 11 to read about factors you should consider before buying shares of our common stock.
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Per share
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Total
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Initial public offering price
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$
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$
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Underwriting discounts and commissions(1)
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$
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$
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Proceeds to us before expenses
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$
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$
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(1)
See the section titled “Underwriting” beginning on page 174 for additional information regarding compensation payable to the underwriters.
We have granted the underwriters an option for a period of 45 days to purchase up to additional shares of common stock at the initial public offering price, less the underwriting discounts and commissions.
The underwriters expect to deliver the shares against payment in New York, New York on , 2021.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities, or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
B. Riley Securities
Prospectus dated , 2021
TABLE OF CONTENTS
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Page
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1
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7
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9
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11
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65
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67
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69
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70
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73
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76
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78
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93
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134
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145
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157
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160
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162
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167
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170
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174
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178
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179
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180
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F-1
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“Cognition Therapeutics, Inc.” the “Cognition Therapeutics” logo and other trademarks, trade names or service marks of Cognition Therapeutics, Inc. appearing in this prospectus are the property of Cognition Therapeutics, Inc. All other trademarks, trade names and service marks appearing in this prospectus are the property of their respective owners. Solely for convenience, the trademarks and trade names in this prospectus may be referred to without the ® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert their rights thereto.
Neither we nor the underwriters have authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses prepared by or on behalf of us or to which we have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus or in any applicable free writing prospectus is current only as of its date, regardless of its time of delivery or any sale of shares of our common stock. Our business, financial condition and results of operations may have changed since that date.
For investors outside the United States: Neither we nor the underwriters have done anything that would permit this offering or possession or distribution of this prospectus or any free writing prospectus we may provide to you in connection with this offering in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus and any such free writing prospectus outside the United States.
Through and including , 2021 (25 days after the date of this prospectus), all dealers that effect transactions in our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to unsold allotments or subscriptions.
Market and Industry Data
This prospectus contains estimates and other statistical data made by independent parties relating to our industry and the markets in which we operate, including estimates and statistical data about our market position, market opportunity, the incidence of certain medical conditions and other industry data. These data, to the extent they contain estimates or projections, involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates or projections. Although we have not independently verified the accuracy or completeness of the data contained in these industry publications and reports, based on our industry experience we believe that the publications are reliable, the conclusions contained in the publications and reports are reasonable and the third-party information included in this prospectus and in our estimates is accurate and complete.
PROSPECTUS SUMMARY
This summary highlights selected information contained in greater detail elsewhere in this prospectus. This summary is not complete and does not contain all of the information you should consider in making your investment decision. Before investing in our common stock, you should carefully read this entire prospectus. You should carefully consider, among other things, the sections titled “Risk Factors,” “Special Note Regarding Forward-Looking Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus. As used in this prospectus, unless the context otherwise requires, references to “we,” “us,” “our,” the “company,” “Cognition” and similar references refer to Cognition Therapeutics, Inc., and its consolidated subsidiary.
Overview
We are a clinical-stage biopharmaceutical company engaged in the discovery and development of innovative, small molecule therapeutics targeting age-related degenerative diseases and disorders of the central nervous system, or CNS, and retina. Currently available therapies for these diseases are limited, with many diseases having no approved therapies or treatments. Our goal is to develop disease modifying treatments for patients with these degenerative disorders by initially leveraging our expertise in the σ-2 (sigma-2) receptor, or S2R, which is expressed by multiple cell types, including neuronal synapses, and acts as a key regulator of cellular damage commonly associated with certain age-related degenerative diseases of the CNS and retina. We believe that targeting the S2R complex represents a mechanism that is functionally distinct from other current approaches in clinical development for the treatment of degenerative diseases.
Since our inception, we have collaborated and worked closely with key healthcare organizations and thought leading institutions in the field of degenerative diseases to develop and advance our therapeutic candidates. To date we have been awarded approximately $168.4 million in grants and financial support primarily from the National Institute of Aging, or NIA, a division of the National Institutes of Health to support our clinical trials.
Our lead product candidate, CT1812, is an orally delivered, small molecule antagonist designed to penetrate the blood-brain barrier and bind selectively to the S2R complex. The S2R complex is comprised of transmembrane protein 97, or TMEM97, a four-domain transmembrane protein that forms a complex with progesterone receptor membrane component 1, or PGRMC1. The S2R complex is expressed in the CNS, the retina, as well as peripheral organs, including the pancreas, liver and kidney. Internal and third-party studies suggest that the role of PGRMC1 and TMEM97, the protein components of the S2R complex, regulate cell damage response processes, including cholesterol biosynthesis, vesicle trafficking, progesterone signaling, lipid membrane-bound protein trafficking and receptor stabilization at the cell surface. In addition, the S2R complex regulates autophagy, the cellular process by which altered cellular proteins are degraded and removed. The aberrant activity of these processes, believed to be triggered by cellular stresses, is a hallmark of the dysfunction related to degenerative diseases.
We have initially focused on the development of CT1812 for the treatment of Alzheimer’s disease, or AD, a disease that afflicts approximately 6.2 million people in the United States and disease prevalence is expected to more than double by 2050. The direct healthcare costs to care for patients with AD and other dementias in the United States is currently estimated to exceed $300 billion. CT1812 targets the accumulation of β-amyloid, or Aβ, oligomers, which has been linked to AD. By displacing these Aβ oligomers from neuronal receptors in the S2R complex, we expect to demonstrate that CT1812 can slow the loss of synapses and cognitive decline observed in AD. CT1812 is the first S2R antagonist to reach clinical trials and is currently in Phase 2 development for the treatment of AD.
We are continuing to enroll patients in two ongoing Phase 2 clinical trials (SHINE and SEQUEL) with CT1812 in mild-to-moderate AD. Preliminary results from an interim analysis of the first 24 patients in Part A of our ongoing SHINE Phase 2 clinical trial demonstrated a statistically significant decline in the presence of Aβ and a positive trend on cognitive function as measured by the Alzheimer’s Disease Assessment Scale-Cognitive Subscale, or ADAS-Cog, in patients receiving CT1812 compared to placebo, and we anticipate top-line data from this study in the first half of 2023. Our ongoing SEQUEL Phase 2 clinical trial is also evaluating changes in brain function, as measured by electroencephalography, or EEG, in mild-to-moderate AD with top-line data expected in 2023. We have treated an estimated 164 subjects with CT1812
in our clinical trials to date including 76 patients with mild-to-moderate AD. CT1812 has continued to be well tolerated and has been granted Fast Track designation by the U.S. Food and Drug Administration, or the FDA, in this indication.
With the support of a grant of approximately $81.0 million from the NIA, we intend to enroll 540 patients in our COG0203 clinical trial with mild cognitive impairment, or MCI, due to AD or mild AD who have elevated levels of Aβ as determined by positron emission tomography, or PET, imaging or as measured in cerebral spinal fluid, or CSF. Patients will be randomized to receive CT1812 or a placebo for 18 months. In addition to cognitive and functional measures, such as the Clinical Dementia Rating Scale, or CDR, Sum of Boxes, or SOB, and ADAS-Cog, we intend to use a variety of biomarkers to measure target and/or pathway engagement and assess changes in neurodegeneration and disease progression. We will conduct this clinical trial in collaboration with the Alzheimer’s Clinical Trial Consortium, or ACTC, an NIA-funded clinical trials network designed to accelerate studies for therapeutics for AD and related dementias. We expect to begin enrollment for this trial in the first half of 2022.
We intend to expand our CT1812 pipeline to include additional indications such as dry age-related macular degeneration, or dry AMD, a disease that results in the deterioration of the macula, causing visual distortion, loss of central vision and eventual blindness, for which there are currently no FDA approved treatments. The S2R complex is expressed in the retina in several cell types including the retinal pigment epithelial cells, or RPE, photoreceptors and retinal ganglion cells. We believe that an S2R antagonist, such as CT1812, may help to regulate the damage-response processes related to these cells that are impaired in dry AMD. After the completion of our ongoing preclinical studies, and subject to discussion with the FDA, we intend to advance directly into a Phase 2 clinical trial in the second half of 2021, leveraging our knowledge of CT1812’s preclinical and clinical profile to date. We have initiated discussions with the FDA regarding our plan.
We also intend to develop and advance other product candidates in the area of synucleinopathies. Synucleinopathies are a group of degenerative diseases characterized by the abnormal accumulation of the alpha-synuclein protein in neural cell bodies, including Parkinson’s disease, or PD, and dementia with Lewy bodies, or DLB.
Our Pipeline
We are developing a pipeline of innovative, small molecule product candidates that are designed to target the S2R complex, a key regulator of the cellular damage response for diseases such as AD, dry AMD, geographic atrophy (an advanced form of dry AMD), or GA, and other conditions for which there is significant unmet medical need. Our current pipeline is summarized below:
Our Strategy
Our objectives are to develop and advance our portfolio, beginning with our lead product candidate, CT1812, through clinical development for the treatment of age-related degenerative diseases and disorders of the CNS and retina and to leverage our understanding of the S2R complex and its regulation of pathways to pursue indications in other degenerative disorders. The key elements of our strategy include:
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Advance clinical development of our lead product candidate, CT1812, in mild-to-moderate AD and earlier stages of the disease. Our lead product candidate, CT1812, has progressed through Phase 1 and into Phase 2 clinical trials. Funding of the Phase 1 and Phase 2 trials is primarily through the NIA. We plan to evaluate CT1812 in other AD populations as well and develop CT1812 for patients with earlier symptomatic stages of AD and Mild Cognitive Impairment, which is a slight and noticeable measurable decline in cognitive abilities due to AD. We plan to initiate the COG0203 clinical trial in patients with mild dementia associated with early-stage AD in the first half of 2022, which has been funded by a grant award of approximately $81.0 million from the NIA.
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Pursue the development of CT1812 for dry AMD. We plan to evaluate CT1812 as a potential therapy for dry AMD, a common eye disease that results in the deterioration of the macula, causing visual distortion, loss of central vision and eventual blindness. We believe that an S2R antagonist, such as CT1812, may help to regulate the damage-response processes related to these cells that are impaired in dry AMD. After the completion of our ongoing preclinical studies, and subject to discussion with the FDA, we intend to advance directly into a Phase 2 clinical trial in the second half of 2021, leveraging our knowledge of CT1812’s preclinical and clinical profile to date. We have initiated discussions with the FDA regarding our plan.
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Leverage our understanding of the S2R complex to develop product candidates for other CNS and degenerative diseases, including synucleinopathies. We intend to develop and advance other product candidates to treat synucleinopathies, which include PD and DLB. In the second half of 2021, we anticipate initiating a study of CT1812 in patients with DLB subject to discussion with FDA. Data published in February 2021 showed that the S2R complex may play an integral role in the pathology of PD and we believe these results merit further study.
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Expand our pipeline through internal development, in-licensing and acquisitions. We intend to leverage our expertise in drug development and business development to evaluate additional product candidates as well as bring forward novel chemical matter using our library generation and Novel Improved Conditioned Extraction, or NICE, screening platform. To achieve this objective, we may supplement our internal development initiatives through selective in-licensing arrangements, as well as investments in strategic collaborations or partnerships which complement our initiatives.
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Optimize the value of CT1812 and other product candidates in major markets. We currently retain all worldwide rights to CT1812 for all indications. We plan to develop and pursue approval of CT1812 and other future product candidates in major markets. Where appropriate, we may use strategic collaborations or partnerships to accelerate development and maximize the commercial potential of our programs. We and our key opinion leaders believe CT1812 also can be used in combination with other therapeutics targeting AD biologies and which may provide us with additional partnering opportunities.
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Continue to pursue non-dilutive funding opportunities. The majority of our clinical trials have been funded by approximately $168.4 million in cumulative grants awarded primarily by the NIA, which includes a grant award of approximately $81.0 million from the NIA to fund our upcoming Phase 2 (COG0203) study of CT1812 in patients with early-stage AD. These grants are non-dilutive and allow us to collaborate with research institutions in pursuing the development of our product candidates for age-related degenerative diseases. We intend to continue our work with these research institutions and plan to seek additional non-dilutive funding for our clinical development when possible.
Our Team
We have assembled a management team with extensive experience with CNS and degenerative diseases, significant expertise in the S2R biology domain, as well as drug discovery, clinical development, general management and business development. Collectively, our management team has a track record of managing drug development programs that have received regulatory approval and been successfully commercialized. These include programs at Bristol-Myers Squibb Company, Pfizer Inc. and Roche Holding AG. We augment the strengths of our management team with an experienced board of directors and scientific and medical advisory boards.
Risks Associated with our Business
Our business is subject to a number of risks of which you should be aware before making a decision to invest in our common stock. These risks are more fully described in the section titled “Risk Factors” immediately following this prospectus summary. These risks include, among others, the following:
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we are a clinical-stage biopharmaceutical company with no products approved for commercial sale and have incurred significant losses since our inception in 2007. We expect to incur significant losses over for the foreseeable future and may never achieve or maintain profitability;
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we have not yet completed Phase 2 clinical trials and have no history of commercializing products, which may make it difficult for an investor to evaluate the success of our business to date and to assess our future viability;
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even if this offering is successful, we will need substantial additional financing to meet our financial obligations and to pursue our business objectives;
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to date, we have partially relied on non-dilutive grants to cover certain of our capital requirements for our clinical trials, and we may fail to continue to receive non-dilutive funding;
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our business has been and could continue to be adversely affected by the evolving and ongoing COVID-19 global pandemic in regions where we or third parties on which we rely have significant manufacturing facilities, concentrations of clinical trial sites or other business operations;
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our business is heavily dependent on the successful development, regulatory approval and commercialization of CT1812 and any future product candidates that we may develop or acquire;
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we may not successfully expand our pipeline of product candidates, including by pursuing additional indications for CT1812 or by in-licensing or acquiring additional product candidates for other diseases;
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preclinical and clinical development involves a lengthy and expensive process with an uncertain outcome, and the results of preclinical studies and early clinical trials are not necessarily predictive of future results;
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we have not tested any of our product candidates in pivotal clinical trials and our product candidates may not have favorable results in future clinical trials;
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we have conducted, and in the future plan to conduct, clinical trials for product candidates outside the United States, and the FDA and comparable foreign regulatory authorities may not accept data from such trials;
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even if our current or future product candidates obtain regulatory approval, they may fail to achieve the broad degree of adoption and use by physicians, patients, hospitals, healthcare payors and others in the medical community necessary for commercial success; and
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if we are unable to obtain and maintain patent protection for our technology and product candidates including our lead product candidate, CT1812, or if the scope of the patent protection obtained is not sufficiently broad, we may not be able to compete effectively in our markets.
SAFE Offering
In March 2021, we entered into simple agreements for future equity, or SAFEs, with various investors, pursuant to which we received gross proceeds in an aggregate amount equal to $8.94 million. The amount invested by the investors in the SAFEs is automatically convertible into shares of our common stock upon the closing of this offering at a conversion price equal to 80% of the initial public offering price of our common stock in this offering.
Recent Developments
Notes Conversion
From March 2018 to July 2020, we issued convertible promissory notes in the aggregate principal amount of $13.0 million with an interest rate of 8.0% per annum, pursuant to note purchase agreements entered into with certain holders of our capital stock. On May 1, 2021, the holders of all of our outstanding convertible promissory notes agreed to an acceleration of the date of the automatic conversion from June 30, 2021 to May 1, 2021 for all convertible promissory notes. Accordingly, on May 1, 2021, all of our outstanding convertible promissory notes were converted into 10,926,089 shares of our Series B-1 convertible preferred stock, at a conversion price equal to $1.385 per share. As of the date of this prospectus, no notes are outstanding. Pursuant to the terms of our Series B-1 convertible preferred stock, all shares will automatically convert into shares of our common stock upon the closing of this offering on a one-for-one basis.
Our Corporate Information
We were incorporated under the laws of the State of Delaware on August 21, 2007. Our principal executive offices are located at 2500 Westchester Ave., Purchase, NY 10577, and our telephone number is (412) 481-2210. Our corporate website address is www.cogrx.com. Information contained on, or accessible through, our website shall not be deemed incorporated into and is not a part of this prospectus or the registration statement of which it forms a part. We have included our website in this prospectus solely as an inactive textual reference.
Implications of Being an Emerging Growth Company
As a company with less than $1.07 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting requirements that are otherwise generally applicable to public companies. As such, we may take advantage of reduced disclosure and other requirements otherwise generally applicable to public companies, including:
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presenting only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure in this prospectus;
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not being required to have our registered independent public accounting firm attest to management’s assessment of our internal control over financial reporting;
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presenting reduced disclosure about our executive compensation arrangements;
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not being required to hold non-binding advisory votes on executive compensation or golden parachute arrangements; and
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extended transition periods for complying with new or revised accounting standards.
We have taken advantage of some of these reduced disclosure and other requirements in this prospectus. Accordingly, the information contained herein may be different than the information you receive from our competitors that are public companies or other public companies in which you hold stock.
The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies.
We will remain an emerging growth company until the earliest of (1) the last day of the fiscal year following the fifth anniversary of the closing of this offering, (2) the last day of the fiscal year in which we have total annual gross revenue of at least $1.07 billion, (3) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, which would occur if the market value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year or (4) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.
We are also a “smaller reporting company,” meaning that the market value of our stock held by non-affiliates plus the proposed aggregate amount of gross proceeds to us as a result of this offering is less than $700.0 million and our annual revenue is less than $100.0 million during the most recently completed fiscal year. We may continue to be a smaller reporting company after this offering if either (i) the market value of our stock held by non-affiliates is less than $250.0 million or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700.0 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.
THE OFFERING
Cognition Therapeutics, Inc.
Common stock offered by us
shares (or shares if the underwriters’ exercise in full their option to purchase additional shares).
$ per share.
Common stock outstanding before the
offering
shares.
Common stock to be outstanding after this offering
shares (or shares if the underwriters exercise in full their option to purchase additional shares).
We have granted a 45-day option to the underwriters to purchase up to additional shares of common stock to cover overallotments, if any.
We estimate that the net proceeds from this offering will be approximately $ million (or approximately $ million if the underwriters exercise in full their option to purchase up to additional shares of common stock), based on an assumed initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
We intend to use the net proceeds from this offering to fund research and development of our product candidates and development programs, including our planned Phase 2 trials of CT1812 for the treatment of mild-to-moderate AD, our planned Phase 2 proof of concept trials of CT1812 for dry AMD, our IND-enabling studies of compounds in our library for the treatment of neurodegenerative indications such as PD, and the remainder for our other research and development activities, as well as for working capital and other general corporate purposes. See the section titled “Use of Proceeds” for additional information.
Investing in our common stock involves a high degree of risk. You should read the section titled “Risk Factors” for a discussion of factors to consider carefully, together with all the other information included in this prospectus, before deciding to invest in our common stock.
Proposed Nasdaq Global Market trading symbol
“CGTX”
The number of shares of our common stock to be outstanding after this offering is based on shares of common stock outstanding as of March 31, 2021, assuming (i) the automatic conversion of all outstanding shares of our convertible preferred stock into an aggregate of 51,450,435 shares of our common stock, (ii) the issuance of shares of our common stock upon the assumed net exercise of warrants that otherwise expire upon or prior to the closing of this offering (assuming an initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus), and (iii) the issuance of shares of our common stock issuable upon the conversion of the SAFEs upon
the closing of this offering in the aggregate amount of $8.94 million (assuming an initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus), and excludes:
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14,414,342 shares of our common stock issuable upon the exercise of stock options as of March 31, 2021, at a weighted-average exercise price of $0.31 per share;
•
690,678 shares of our common stock reserved for issuance pursuant to future awards as of March 31, 2021 under our 2017 Equity Incentive Plan, or the 2017 Plan, which will become available under our 2021 Equity Incentive Plan, or the 2021 Plan, after the closing of this offering;
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shares of our common stock reserved for future issuance under the 2021 Plan which will become effective upon the effectiveness of the Registration Statement of which this prospectus forms a part, as well any future increases in the number of shares of our common stock reserved for future issuance pursuant to the 2021 Plan; and
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shares of our common stock reserved for future issuance under our Employee Stock Purchase Plan, or the ESPP, which will become effective upon the effectiveness of the Registration Statement of which this prospectus forms a part, as well as any future increases in the number of shares of common stock reserved for issuance under the ESPP.
Unless otherwise indicated, all information contained in this prospectus, including the number of our shares of common stock that will be outstanding after this offering, assumes or gives effect to:
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no exercise of the outstanding options described above;
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the filing and effectiveness of our third amended and restated certificate of incorporation immediately prior to the closing of this offering;
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a for reverse stock split of our common stock to be effected prior to the closing of this offering;
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the automatic conversion of all our outstanding preferred stock into an aggregate of 51,450,435 shares of our common stock upon the closing of this offering;
•
the issuance of shares of common stock upon the assumed net exercise of warrants that otherwise expire upon the closing of this offering (assuming an initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus);
•
the issuance of shares of our common stock issuable upon the conversion of the SAFEs in the aggregate amount of $8.94 million (assuming an initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus); and
•
no exercise by the underwriters of their option to purchase up to additional shares of our common stock.
SUMMARY CONSOLIDATED FINANCIAL DATA
The following tables set forth a summary of our historical consolidated financial data as of, and for the period ended on, the dates indicated. We have derived the consolidated statements of operations data for the years ended December 31, 2019 and 2020 and the consolidated balance sheet data as of December 31, 2019 and 2020 from our audited consolidated financial statements and related notes appearing elsewhere in this prospectus. For interim periods, we have derived our consolidated financial data for the three months ended March 31, 2020 and 2021 and the selected balance sheet data as of March 31, 2021 from our unaudited consolidated financial statements and related notes appearing elsewhere in this prospectus. The unaudited financial statements were prepared on a basis consistent with our audited financial statements and include, in management’s opinion, all adjustments, consisting only of normal recurring adjustments that we consider necessary for a fair presentation of the financial information set forth in those statements. Our historical results are not necessarily indicative of the results that may be expected in the future and our interim results are not necessarily indicative of our expected results for the year ending December 31, 2021. You should read the selected financial data below in conjunction with the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes included elsewhere in this prospectus. The summary consolidated financial data in this section are not intended to replace the financial statements and are qualified in their entirety by the financial statements and related notes included elsewhere in this prospectus.
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Year Ended December 31,
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Three Months Ended March 31,
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(in thousands, except share and per share data)
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2019
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2020
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2020
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2021
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Consolidated Statements of Operations Data:
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Operating Expenses:
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Research and development
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$
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14,379
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$
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12,887
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$
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3,446
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$
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4,430
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General and administrative
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3,452
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4,520
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1,445
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1,153
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Total operating expenses
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17,831
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17,407
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4,891
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5,583
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Loss from operations
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(17,831)
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(17,407)
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(4,891)
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(5,583)
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Other income (expense):
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Grant income
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13,164
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10,855
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2,273
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4,692
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Change in the fair value of the derivative liability
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(231)
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18
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345
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1,063
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Change in the fair value of the warrant liability
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(7)
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181
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30
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—
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Other income, net
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1,087
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394
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142
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145
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(Loss) gain on debt extinguishment
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—
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(129)
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(129)
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443
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Interest expense, net
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(1,024)
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(1,751)
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(276)
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(537)
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Total other income (expense), net
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12,989
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9,568
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2,385
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5,806
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Net (loss) income
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(4,842)
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(7,839)
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(2,506)
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223
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Cumulative preferred stock dividends
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(3,920)
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(4,234)
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(1,053)
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(1,128)
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Net loss attributable to common stockholders
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$
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(8,762)
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$
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(12,073)
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$
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(3,559)
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$
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(905)
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Net loss per share attributable to common stockholders, basic and diluted
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$
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(5.77)
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$
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(7.35)
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$
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(2.34)
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$
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(0.51)
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Weighted-average common shares outstanding, basic and diluted(1)
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1,519,285
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1,643,514
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1,519,431
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1,779,573
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Pro forma loss per share, basic and diluted(2)
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$
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$
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Pro forma weighted-average common shares outstanding, basic and diluted(2)
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(1)
See Note 2 to our consolidated financial statements included elsewhere in this prospectus for an explanation of the method used to calculate the basic and diluted net loss per share and the number of shares used in the computation of the per share amounts.
(2)
The calculations for the pro forma net loss per share attributable to common stockholders, basic and diluted, and the pro forma weighted-average shares of common stock outstanding, basic and diluted, assume the conversion of all our outstanding shares of preferred stock into common stock, the assumed net exercise of warrants to purchase common stock that otherwise expire upon or prior to the closing of this offering and the conversion of the SAFEs into shares of our common stock, as if the conversion or exercise had occurred at the beginning of the period presented, or the issuance date, if later.
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As of December 31,
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As of March 31,
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(in thousands)
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2019
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2020
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2021
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Consolidated Balance Sheet Data:
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Cash and cash equivalents
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$
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2,890
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$
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5,189
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$
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13,373
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Working capital(1)
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3,477
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3,658
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11,614
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Total assets
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7,459
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7,119
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16,512
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Simple Agreements for Future Equity
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—
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—
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8,942
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Derivative liability
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1,493
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2,209
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1,146
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Warrant liability
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181
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—
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—
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Convertible notes, net
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6,897
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12,409
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12,691
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Total liabilities
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12,954
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19,933
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28,996
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Convertible preferred stock
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52,927
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55,370
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55,370
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Accumulated deficit
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(58,239)
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(68,220)
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(67,997)
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Total stockholders’ deficit
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(58,422)
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(68,184)
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(67,854)
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(1)
We define working capital as total current assets less total current liabilities. See our audited and unaudited consolidated financial statements included elsewhere in this prospectus and related notes for further details regarding our total current assets and total current liabilities.
RISK FACTORS
Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below, as well as the other information in this prospectus, including our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding whether to invest in our common stock. We have listed below (not necessarily in order of importance or probability of occurrence) what we believe to be the most significant risk factors applicable to us. The occurrence of any of the events or developments described below could materially and adversely affect our business, financial condition, results of operations and prospects. In such an event, the market price of our common stock could decline and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. Some of the statements in the following risk factors constitute forward-looking statements. Please see the section titled “Special Note Regarding Forward-Looking Statements.”
Risks Related to Our Financial Position and Capital Needs
We are a clinical-stage biopharmaceutical company with no products approved for commercial sale and have incurred significant losses since our inception in 2007. We expect to incur significant losses over the foreseeable future and may never achieve or maintain profitability.
Since our inception, we have incurred significant net losses, and we expect to continue to incur significant expenses and operating losses for the foreseeable future. Our net losses were $4.8 million and $7.8 million for the years ended December 31, 2019 and 2020, respectively, and $2.5 million for the three months ended March 31, 2020. As of March 31, 2021, we had an accumulated deficit of $68.0 million. Our clinical trials have been funded by approximately $168.4 million in cumulative nondilutive grants, awarded primarily by the National Institute of Aging, or NIA, a division of the National Institutes of Health. We have also raised $57.5 million in gross proceeds through our private placements of convertible preferred stock, convertible promissory notes and Simple Agreements for Future Equity, or SAFEs. We have no products approved for commercialization and have never generated any revenue from product sales.
We have devoted substantially all of our financial resources and efforts to the development of our product candidates, including conducting preclinical studies and clinical trials. We expect to continue to incur significant expenses and operating losses over the next several years. We expect that it could be several years, if ever, before we have a commercialized product. Our net losses may fluctuate significantly from quarter to quarter and year to year. We anticipate that our expenses will increase substantially for the foreseeable future as we:
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conduct our ongoing and planned clinical trials of CT1812, as well as initiate and complete additional clinical trials;
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pursue regulatory approval of CT1812 for the treatment of mild-to-moderate Alzheimer’s disease, or AD, dry age-related macular degeneration, or dry AMD, and Parkinson’s disease, or PD, and dementia with Lewy bodies, or DLB, and other age-related degenerative diseases and disorders of the central nervous system, or CNS, and retina;
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seek to discover and develop additional clinical and preclinical product candidates using Novel Improved Conditioned Extraction, or NICE, screening platform;
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adapt our regulatory compliance efforts to incorporate requirements applicable to marketed products;
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maintain, expand and protect our intellectual property portfolio;
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hire additional clinical, manufacturing and scientific personnel;
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add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts;
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incur additional legal, accounting and other expenses in operating as a public company;
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scale up our clinical and regulatory capabilities; and
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establish a commercialization infrastructure and scale up external manufacturing and distribution capabilities to commercialize any product candidates for which we may obtain regulatory approval, including CT1812.
To become and remain profitable, we must succeed in developing and eventually commercializing product candidates that generate significant revenue. This will require us to be successful in a range of challenging activities, including completing preclinical testing and clinical trials of our product candidates, obtaining regulatory approval, and manufacturing, marketing and selling any product candidates for which we may obtain regulatory approval, as well as discovering and developing additional product candidates. We are only in the preliminary stages of most of these activities. We may never succeed in these activities and, even if we do, may never generate any revenue or revenue that is significant enough to achieve profitability. Even if we achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress the value of our company and could impair our ability to raise capital, expand our business, maintain our development efforts, obtain product approvals, diversify our offerings or continue our operations. A decline in the value of our company could also cause you to lose all or part of your investment.
We have not yet completed Phase 2 clinical trials and have no history of commercializing products, which may make it difficult for an investor to evaluate the success of our business to date and to assess our future viability.
We commenced operations in 2007, and our operations to date have been largely focused on developing our clinical and preclinical product candidates and our Novel, Improved Conditioned Extraction, or NICE, screening platform, or NICE screening platform. To date, we have not yet demonstrated our ability to successfully complete pivotal clinical trials, obtain regulatory approvals, manufacture a product on a commercial scale, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful commercialization. Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer operating history or a history of successfully developing and commercializing products.
We may encounter unforeseen expenses, difficulties, complications, delays and other known or unknown factors in achieving our business objectives. We may also need to transition from a company with a research focus to a company capable of supporting commercial activities. Our inability to adequately address these risks and difficulties or successfully make such a transition could adversely affect our business, financial condition, results of operations and growth prospects.
Even if this offering is successful, we will need substantial additional capital to meet our financial obligations and to pursue our business objectives. If we are unable to raise capital when needed, we could be forced to curtail our planned operations and the pursuit of our growth strategy.
Our operations have required substantial amounts of capital since inception, and we expect our expenses to increase significantly in the foreseeable future. Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain regulatory approval and achieve product sales. We expect to continue to incur significant expenses and operating losses over the next several years as we complete our ongoing clinical trials of our product candidates, initiate future clinical trials of our product candidates, seek marketing approval for CT1812 for the treatment of age-related degenerative diseases and disorders of the CNS and retina, such as AD, dry AMD, PD and DLB, and advance any of our other product candidates we may develop or otherwise acquire. In addition, our product candidates, if approved, may not achieve commercial success. Our revenue, if any, will be derived from sales of products that we do not expect to be commercially available for the foreseeable future, if at all. If we obtain marketing approval for CT1812 or any other product candidates that we develop or otherwise acquire, we expect to incur significant commercialization expenses related to product sales, marketing, distribution and manufacturing. We also expect an increase in our expenses associated with creating additional infrastructure to support operations as a public company.
As of March 31, 2021, we had $13.4 million in cash and cash equivalents and have not generated positive cash flows from operations. Based on our current business plans, we believe that the net proceeds
from this offering, together with our existing cash and cash equivalents and income from our non-dilutive grants, will be sufficient for us to fund our operating expenses and capital expenditures requirements through at least . We have based these estimates on assumptions that may prove to be incorrect or require adjustment as a result of business decisions, and we could utilize our available capital resources sooner than we currently expect. Our future capital requirements will depend on many factors, including, but not limited to:
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the scope, progress, costs and results of our ongoing and planned clinical trials of CT1812, as well as the associated costs, including any unforeseen costs we may incur as a result of preclinical study or clinical trial delays due to the COVID-19 pandemic or other delays;
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the scope, progress, costs and results of preclinical development, laboratory testing and clinical trials for any future product candidates we may decide to pursue;
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the extent to which we develop, in-license or acquire other product candidates and technologies;
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the costs and timing of process development and manufacturing scale-up activities associated with our product candidates and other programs we advance them through preclinical and clinical development;
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the availability, timing and receipt of any future NIA Grants;
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the number and development requirements of other product candidates that we may pursue;
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the costs, timing and outcome of regulatory review of our product candidates;
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the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any of our product candidates for which we receive marketing approval;
•
the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval;
•
our ability to establish collaborations to commercialize CT1812 or any of our other product candidates outside the United States;
•
the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims; and
•
the additional costs we may incur as a result of operating as a public company, including our efforts to enhance operational systems and hire additional personnel, including enhanced internal controls over financial reporting.
The expected net proceeds from this offering will not be sufficient to fund any of our product candidates through regulatory approval, and we will need to raise substantial additional capital to complete the development and commercialization of C1812 and our product candidates. If we receive regulatory approval for any of these product candidates, we expect to incur significant commercialization expenses related to product manufacturing, sales, marketing and distribution, depending on where we choose to commercialize. Additional funds may not be available on a timely basis, on favorable terms, or at all, and such funds, if raised, may not be sufficient to enable us to continue to implement our long-term business strategy. Further, our ability to raise additional capital may be adversely impacted by recent volatility in the equity markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic. If we are unable to raise sufficient additional capital, we could be forced to curtail our planned operations and the pursuit of our growth strategy.
To date, we have partially relied on non-dilutive grants to cover certain of our capital requirements for our clinical trials, and we may fail to continue to receive non-dilutive funding.
To date, we have partially relied on the availability of non-dilutive grants from the NIA, or NIA Grants. Although we currently anticipate applying for and potentially receiving additional NIA Grants, we cannot be certain that our grant applications will be successful, that additional NIA Grants will be made available to support our clinical trials or that we will continue to satisfy the award criteria of prior NIA Grants that have already been awarded to us. If we fail to continue to receive NIA Grants, our ability to
continue our clinical programs for CT1812 may be impaired and delayed, and we may otherwise need to seek additional financing through dilutive methods, such as through equity or debt financings. For example, while we have partially relied on NIA Grants in the past, we have issued from time to time shares of our preferred stock, warrants to purchase our preferred stock, convertible promissory notes, and common stock, and entered into SAFEs. Upon the closing of this offering, all outstanding shares of our convertible preferred stock will convert into an aggregate of 51,450,435 shares of our common stock, shares of our common stock will be issued upon the assumed net exercise of warrants (assuming an initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus), and shares of our common stock will be issued issuable upon conversion of the SAFEs in the aggregate amount of $8.9 million (assuming an initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus).
We could be subject to audit and repayment of our non-dilutive NIA Grants.
In addition, in connection with the NIA Grants, we may be subject to routine audits by government agencies. As part of an audit, these agencies may review our performance, cost structures and compliance with applicable laws, regulations, policies and standards and the terms and conditions of the applicable NIA Grant. If any of our expenditures are found to be unallowable or allocated improperly or if we have otherwise violated terms of such NIA Grant, the expenditures may not be reimbursed and/or we may be required to repay funds already disbursed. Any audit by the NIA could require significant financial and management resources and may result in a material adjustment to our results of operations and financial condition and harm our ability to operate in accordance with our business plan. Additionally, negative results in any of our ongoing and planned clinical trials of CT1812 that are funded with NIA Grants may result in our failure to receive additional NIA Grants to fund future clinical trials.
The NIA recently issued guidance providing extensions and flexibility for certain NIA Grant recipients conducting NIA-funded clinical trials and human subject studies that are impacted by the declared public health emergency for the COVID-19 pandemic. The ultimate impact of the COVID-19 pandemic on our clinical trials is highly uncertain and subject to change. We have not made a formal assessment with respect to the NIA’s current and expanded flexibilities in light of the COVID-19 pandemic, but we continue to monitor the situation closely and are prepared to take all necessary steps to ensure the safety of all human participants and research staff involved in our clinical trials.
Due to the significant resources required for the development of our product candidates, we must prioritize development of certain product candidates and/or certain disease indications. We may expend our limited resources on candidates or indications that do not yield a successful product and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.
We are currently focused on developing product candidates to address age-related degenerative diseases and disorders of the CNS and retina. We seek to maintain a process of prioritization and resource allocation among our programs to maintain a balance between aggressively advancing our lead product candidate, CT1812, in identified indications and exploring additional indications or mechanisms as well as developing future product candidates. However, due to the significant resources required for the development of our product candidates, we must focus on specific diseases and disease pathways and decide which product candidates to pursue and the amount of resources to allocate to each such product candidate.
Our decisions concerning the allocation of research, development, collaboration, management and financial resources toward particular product candidates or therapeutic areas may not lead to the development of any viable commercial product and may divert resources away from better opportunities. Similarly, any decision to delay, terminate or collaborate with third parties with respect to certain programs may subsequently also prove to be suboptimal and could cause us to miss valuable opportunities. If we make incorrect determinations regarding the viability or market potential of any of our programs or product candidates or misread trends in the market of age-related degenerative diseases and disorders of the CNS and retina or pharmaceutical, biopharmaceutical or biotechnology industry, our business, financial condition and results of operations could be materially adversely affected. As a result, we may fail to capitalize on viable commercial products or profitable market opportunities, be required to forego or delay pursuit of opportunities with other product candidates or other diseases and disease pathways that may later prove to
have greater commercial potential than those we choose to pursue, or relinquish valuable rights to such product candidates through collaboration, licensing or other royalty arrangements in cases in which it would have been advantageous for us to invest additional resources to retain development and commercialization rights.
Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations.
Our quarterly and annual operating results may fluctuate significantly, which makes it difficult for us to predict our future operating results. These fluctuations may occur due to a variety of factors, many of which are outside of our control and may be difficult to predict, including:
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the timing and cost of, and level of investment in, research, development and, if approved, commercialization activities relating to our product candidates, which may change from time to time;
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the timing and status of enrollment for our clinical trials;
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the cost of manufacturing our product candidates, as well as building out our supply chain, which may vary depending on the quantity of production and the terms of our agreements with manufacturers;
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the availability, timing, and receipt of any future NIA grants;
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expenditures that we may incur to acquire, develop or commercialize additional product candidates and technologies;
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timing and amount of any milestone, royalty or other payments due under any collaboration or license agreement;
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future accounting pronouncements or changes in our accounting policies;
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the timing and success or failure of preclinical studies and clinical trials for our product candidates or competing product candidates, or any other change in the competitive landscape of our industry, including consolidation among our competitors or partners;
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the timing of receipt of approvals for our product candidates from regulatory authorities in the United States and internationally;
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coverage and reimbursement policies with respect to our product candidates, if approved, and potential future drugs that compete with our products; and
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the level of demand for our product candidates, if approved, which may vary significantly over time.
The cumulative effects of these factors could result in large fluctuations and unpredictability in our quarterly and annual operating results. As a result, comparing our operating results on a period-to-period basis may not be meaningful. Investors should not rely on our past results as an indication of our future performance.
This variability and unpredictability could also result in our failing to meet the expectations of industry or financial analysts or investors for any period. If our revenue or operating results fall below the expectations of analysts or investors or below any forecasts we may provide to the market, or if any forecasts we provide to the market are below the expectations of analysts or investors, the price of our common stock could decline substantially. Such a stock price decline could occur even when we have met any previously publicly stated revenue or earnings guidance we may provide.
Our business has been and could continue to be adversely affected by the evolving and ongoing COVID-19 global pandemic in regions where we or third parties on which we rely have significant manufacturing facilities, concentrations of clinical trial sites or other business operations. The COVID-19 pandemic could adversely affect our business and our financial results and could cause a disruption to the development of our product candidates, as well as the business or operations of our manufacturers or other third parties with whom we conduct business.
Our business has been and could continue to be adversely affected by the effects of the evolving and ongoing COVID-19 pandemic, which was declared by the World Health Organization as a global pandemic.
As COVID-19 continues to spread, we may experience ongoing disruptions that could severely impact our business and clinical trials, including:
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delays or difficulties in enrolling and retaining patients in our clinical trials;
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delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff;
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delays in clinical sites receiving the supplies and materials needed to conduct our clinical trials, interruption of, or delays in receiving, supplies of our product candidates from our contract manufacturing organizations due to staffing shortages, production slowdowns, or stoppages and disruptions in materials and reagents or interruptions in global shipping that may affect the transport of clinical trial materials;
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changes in federal and local regulations as part of a response to the COVID-19 outbreak which may require us to change the ways in which our clinical trials are conducted, which may result in unexpected costs, or to discontinue the clinical trials altogether;
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the diversion of healthcare resources away from the conduct of clinical trials, including the diversion of healthcare professionals and other staff involved in our clinical trials and healthcare facilities serving as clinical trial sites;
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the interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others, or interruption of clinical trial subject visits and study procedures, the occurrence of which could affect the integrity of clinical trial data;
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limitations on employee resources that would otherwise be focused on the conduct of our preclinical studies and clinical trials, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people, an increased reliance on working from home, school closures, or mass transit disruptions;
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limitations on maintaining our corporate culture that facilitates the transfer of institutional knowledge within our organization and fosters innovation, teamwork, and a focus on execution;
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interruption of or delays in the operations of the FDA or other regulatory authorities, which may impact review and approval timelines;
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delays in necessary interactions with regulators, ethics committees, and other important agencies and contractors due to limitations in employee resources or forced furlough of government or contractor personnel;
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additional delays, difficulties or interruptions as a result of current or future shutdowns due to the COVID-19 pandemic in countries where we or our third-party service providers operate; and
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the risk that participants enrolled in our clinical trials or study staff conducting the clinical trial visits will acquire COVID-19 while the clinical trial is ongoing, which could impact the results of the clinical trial, including by increasing the number of observed adverse events, or the ability to complete study visits and collect data.
These and other disruptions in our operations and the global economy could negatively impact our business, operating results and financial condition.
Our clinical trials have been, and may in the future be, affected by the COVID-19 pandemic. For example, the COVID-19 pandemic may impact patient enrollment in our ongoing and future clinical trials of CT1812. In particular, some sites have in the past or may in the future pause enrollment to focus on, and direct resources to, COVID-19, while at other sites, patients may choose not to enroll or continue participating in the clinical trial as a result of the pandemic. In addition, patient visits to medical providers in the United States have slowed as a result of the COVID-19 pandemic. Further, according to the Centers for Disease Control and Prevention, people who have serious chronic medical conditions are at higher risk of getting very sick from COVID-19. As a result, potential patients in our ongoing and future clinical trials of CT1812 may choose to not enroll, not participate in follow-up clinical visits or drop out of the trial as a
precaution against contracting COVID-19. Further, some patients may not be able or willing to comply with clinical trial protocols if quarantines impede patient movement or interrupts healthcare services.
We are unable to predict with confidence the duration of such patient enrollment delays and difficulties. If patient enrollment is delayed for an extended period of time, our ongoing or future clinical trials could be delayed or otherwise adversely affected. Similarly, our ability to recruit and retain principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19, may be adversely impacted.
Ongoing or planned clinical trials may also be impacted by interruptions or delays in the operations of the FDA and comparable foreign regulatory authorities. For example, we have made certain adjustments to the operation of our trials in an effort to ensure the monitoring and safety of patients and minimize risks to trial integrity during the pandemic in accordance with the guidance issued by the FDA, and may need to make further adjustments in the future. We have also initiated our clinical trial protocols to enable remote visits to mitigate any potential impacts as a result of the COVID-19 pandemic. Many of these adjustments are new and untested, may not be effective, may affect the integrity of data collected, and may have unforeseen effects on the progress and completion of our clinical trials and the findings from such clinical trials.
In addition, we may encounter a shortage in supplies of, or in delays in shipping, our study drug or other components of the clinical trial vital for successful conduct of the trial. Further, the successful conduct of our ongoing and future clinical trials depends on retrieving laboratory, imaging and other data from patients. Any failure by the vendors with which we work with to send us such data could impair the progress of such clinical trials. These events could delay our clinical trials, increase the cost of completing our clinical trials and negatively impact the integrity, reliability or robustness of the data from our clinical trials.
Furthermore, quarantines, shelter-in-place and similar government orders, or the perception that such orders, shutdowns or other restrictions on the conduct of business operations could occur, related to COVID-19 or other infectious diseases, could impact personnel at our study sites or third-party manufacturing facilities upon which we rely, or the availability or cost of materials, which could disrupt the supply chain for our drug and combination therapy candidates. To the extent our suppliers and service providers are unable to comply with their obligations under our agreements with them or they are otherwise unable to deliver or are delayed in delivering goods and services to us due to the COVID-19 pandemic, our ability to continue meeting clinical supply demand for our product candidates or otherwise advancing development of our product candidates may become impaired.
The spread of COVID-19 and actions taken to reduce its spread may also materially affect us economically. While the potential economic impact brought by, and the duration of, the COVID-19 pandemic may be difficult to assess or predict, there could be a significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity and financial position. In addition, the trading prices for other pharmaceutical companies have been highly volatile as a result of the COVID-19 pandemic. As a result, we may face difficulties raising capital through sales of our common stock or such sales may be on unfavorable terms.
COVID-19 and actions taken to reduce its spread continue to rapidly evolve. The extent to which COVID-19 may impede the development of our product candidates, reduce the productivity of our employees, disrupt our supply chains, delay our clinical trials, reduce our access to capital or limit our business development activities, will depend on future developments, which are highly uncertain and cannot be predicted with confidence.
To the extent the ongoing COVID-19 pandemic adversely affects our business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties described in this “Risk Factors” section.
Risks Related to Discovery, Development and Regulatory Approval of Our Product Candidates
Our business is heavily dependent on the successful development, regulatory approval and commercialization of CT1812 and any future product candidates that we may develop or acquire.
We currently have no products approved for sale, and our lead product candidate is in early stages of clinical development. The success of our business, including our ability to finance our company and generate
revenue in the future, will primarily depend on the successful development, regulatory approval and commercialization of our product candidates and, in particular, the advancement of CT1812, currently our only clinical-stage product candidate. However, given our stage of development, it may be many years, if we succeed at all, before we have demonstrated the safety and efficacy of a product candidate sufficient to warrant approval for commercialization. We cannot be certain that our product candidates will receive regulatory approval or be successfully commercialized even if we receive regulatory approval.
The clinical and commercial success of CT1812 and any future product candidates that we may develop or acquire will depend on a number of factors, including the following:
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our ability to raise any additional required capital on acceptable terms, or at all;
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our ability to complete an investigational new drug application, or IND, enabling studies and successfully submit INDs or comparable applications;
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timely completion of our preclinical studies and clinical trials, which may be significantly slower or cost more than we currently anticipate and will depend substantially upon the performance of third-party contractors;
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delays or difficulties in enrolling and retaining patients in our clinical trials;
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whether we are required by the U.S. Food and Drug Administration, or FDA, or similar foreign regulatory agencies to conduct additional clinical trials or other studies beyond those planned to support the approval and commercialization of our product candidates or any future product candidates;
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acceptance of our proposed indications and primary endpoint assessments relating to the proposed indications of our product candidates by the FDA and similar foreign regulatory authorities;
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our ability to demonstrate to the satisfaction of the FDA and similar foreign regulatory authorities the safety, efficacy and acceptable risk to benefit profile of our product candidates or any future product candidates;
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the prevalence, duration and severity of potential side effects or other safety issues experienced with our product candidates or future approved products, if any;
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achieving and maintaining, and, where applicable, ensuring that our third-party contractors achieve and maintain, compliance with our contractual obligations and with all regulatory requirements applicable to our product candidates or any future product candidates or approved products, if any;
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the ability of third parties with whom we contract to manufacture adequate clinical trial and commercial supplies of our product candidates or any future product candidates remain in good standing with regulatory agencies and develop, validate and maintain commercially viable manufacturing processes that are compliant with current good manufacturing practices, or cGMPs;
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the convenience of our treatment or dosing regimen;
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the timely receipt of necessary marketing approvals from the FDA and similar foreign regulatory authorities;
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acceptance by physicians, payors and patients of the benefits, safety and efficacy of our product candidates or any future product candidates, if approved, including relative to alternative and competing treatments;
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the willingness of physicians, operators of clinics and patients to utilize or adopt any of our product candidates or any future product candidates, if approved;
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our ability to achieve sufficient market acceptance, coverage and adequate reimbursement from third-party payors and adequate market share and revenue for any approved products;
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the COVID-19 pandemic, which may result in clinical site closures, delays to patient enrollment, patients discontinuing their treatment or follow up visits or changes to trial protocols;
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our ability to successfully develop a commercial strategy and thereafter commercialize our product candidates or any future product candidates in the United States and internationally, if approved for
marketing, reimbursement, sale and distribution in such countries and territories, whether alone or in collaboration with others;
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patient demand for our product candidates, if approved, including patients’ willingness to pay out-of-pocket for any approved products in the absence of coverage and/or adequate reimbursement from third-party payors;
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our ability to establish and enforce intellectual property rights in and to our product candidates or any future product candidates; and
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our ability to avoid third-party patent interference, intellectual property challenges or intellectual property infringement claims.
In addition, the FDA or other regulatory agencies may not agree with our clinical development plan and require that we conduct additional clinical trials to support our regulatory submissions. We have not yet conducted an end of Phase 2 meeting with the FDA to discuss the registration pathway for CT1812, and our current clinical development plans for CT1812 in mild-to-moderate AD may change as a result of future interactions with the FDA. For example, the FDA may not accept the results of the ongoing CT1812 clinical trials and may require that we conduct additional trials, including more than one pivotal trial, in order to gain approval in AD. Furthermore, any approval of CT1812 for AD may be limited to CT1812 in combination with the existing standard of care.
These factors, many of which are beyond our control, could cause us to experience significant delays or an inability to obtain regulatory approvals or commercialize our product candidates. Even if regulatory approvals are obtained, we may never be able to successfully commercialize any of our product candidates. Accordingly, we cannot provide assurances that we will be able to generate sufficient revenue through the sale of our product candidates or any future product candidates to continue our business or achieve profitability.
Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern.
Our recurring losses from operations raise substantial doubt about our ability to continue as a going concern. As a result, our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements for the years ended December 31, 2020 and 2019 with respect to this uncertainty. While we believe that the net proceeds from this offering, together with our existing cash and cash equivalents and the income from non-dilutive grants, will be sufficient for us to fund our operating expenses and capital expenditures requirements through at least , we have based these estimates on assumptions that may prove to be wrong, and we may need to raise additional funds. If we are unable to raise capital when needed or on acceptable terms, we could be forced to delay, reduce or eliminate the development and commercialization of our product candidates.
We may not successfully expand our pipeline of product candidates, including by pursuing additional indications for CT1812 or by in-licensing or acquiring additional product candidates for other diseases.
A key element of our strategy is to build and expand our pipeline of product candidates, including by developing CT1812 for the treatment of dry AMD and age-related degenerative diseases and disorders of the CNS beyond indications in AD, and by identifying other product candidates using our NICE platform. In addition, we may in-license or acquire additional product candidates for other diseases. We may not be able to identify or develop additional product candidates that are safe, tolerable and effective. Even if we are successful in continuing to build our pipeline, the potential product candidates that we identify, in-license or acquire may not be suitable for clinical development. For example, our research methodology may be unsuccessful in identifying potential drug candidates or those we identify may be shown to have harmful side effects or other characteristics that make them unmarketable or unlikely to receive regulatory approval. We have devoted significant resources to discovery efforts through our proprietary NICE platform, and we cannot guarantee that we will be successful in identifying additional potential drug candidates, or that we will be able to successfully identify and in-license new and valuable product candidates from other parties.
Research and development of pharmaceuticals is inherently risky. We cannot give any assurance that any of our product candidates will receive regulatory approval.
We are at an early stage of clinical development of our only clinical stage product candidate, CT1812. Our future success is dependent on our ability to successfully develop, obtain regulatory approval for and then successfully commercialize our product candidates, and we may fail to do so for many reasons, including the following:
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our product candidates may not successfully complete preclinical studies or clinical trials;
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a product candidate may on further study be shown to have harmful side effects or other characteristics that indicate it does not meet applicable regulatory criteria;
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our competitors may develop therapeutics that render our product candidates obsolete or less attractive;
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the market for a product candidate may change so that the continued development of that product candidate is no longer reasonable or commercially attractive;
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a product candidate may not be capable of being produced in commercial quantities at an acceptable cost, or at all;
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if a product candidate obtains regulatory approval, we may be unable to establish sales and marketing capabilities, or successfully market such approved product candidate; and
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a product candidate may not be accepted as safe and effective by patients, the medical community or third-party payors.
If any of these events occur, we may be forced to abandon our development efforts for a product candidate or candidates, which would have a material adverse effect on our business and could potentially cause us to cease operations. Failure of a product candidate may occur at any stage of preclinical or clinical development, and we may never succeed in developing marketable products or generating product revenue.
We may not be successful in our efforts to further develop our current and future product candidates. Each of our product candidates will require significant clinical development, management of preclinical, clinical and manufacturing activities, regulatory approval, adequate manufacturing supply, a commercial organization and significant marketing efforts before we generate any revenue from product sales, if at all. Any clinical studies that we may conduct may not be acceptable to the FDA or other regulatory authorities or demonstrate the efficacy and safety necessary to obtain regulatory approval to market our product candidates. If the results of our ongoing or future clinical studies are inconclusive with respect to the efficacy of our product candidates, if we do not meet the clinical endpoints with statistical significance or if there are safety concerns or adverse events associated with our product candidates, we may be prevented or delayed in obtaining marketing approval for our product candidates.
In addition, to obtain regulatory approval in countries outside the United States, we must comply with numerous and varying regulatory requirements of such other countries regarding safety, efficacy, chemistry, manufacturing and controls, clinical trials, commercial sales, pricing and distribution of our product candidates. We may also rely on collaborators or partners to conduct the required activities to support an application for regulatory approval and to seek approval for one or more of our product candidates. We cannot be sure that any such collaborators or partners will conduct these activities successfully or do so within the timeframe we desire. Even if we or any future collaborators or partners are successful in obtaining approval in one jurisdiction, we cannot ensure that we will obtain approval in any other jurisdictions. If we are unable to obtain approval for our product candidates in multiple jurisdictions, our revenue and results of operations could be negatively affected.
We may encounter substantial delays in our preclinical studies and clinical trials or may not be able to conduct or complete our preclinical studies or clinical trials on the timelines we expect, if at all.
Clinical trials are expensive and can take many years to complete, and the outcome is inherently uncertain. We cannot guarantee that any clinical trials will be conducted as planned or completed on
schedule, if at all. A failure of one or more clinical trials can occur at any stage and our future clinical trials may not be successful. Clinical trials can be delayed or terminated for a variety of reasons, including delays or failures related to:
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the COVID-19 pandemic, which may result in clinical site closures, delays to patient enrollment, patients discontinuing their treatment or follow up visits or changes to trial protocols;
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the FDA or comparable foreign regulatory authorities disagreeing as to the design or implementation of our clinical trials;
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delays in obtaining, or failure to obtain, regulatory authorization to commence a trial;
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imposition of a temporary or permanent clinical hold by the FDA or comparable foreign regulatory authorities;
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reaching agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;
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identifying, recruiting and training suitable clinical investigators;
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obtaining institutional review board, or IRB, approval at each trial site;
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new safety findings that present unreasonable risk to clinical trial participants;
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a negative finding from an inspection of our clinical trial operations or study sites;
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recruiting an adequate number of suitable patients to participate in a trial;
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having subjects complete a trial or return for post-treatment follow-up;
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clinical sites deviating from trial protocol or dropping out of a trial;
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addressing subject safety concerns that arise during the course of a trial;
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adding a sufficient number of clinical trial sites; or
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obtaining sufficient supply of product candidates for use in preclinical studies or clinical trials from third-party suppliers.
We may experience numerous adverse or unforeseen events during, or as a result of, preclinical studies and clinical trials which could delay or prevent our ability to receive marketing approval or commercialize our product candidates, including:
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we may receive feedback from regulatory authorities that requires us to modify the design of our clinical trials or require that we submit additional data or information before allowing a clinical trial to be initiated or continue;
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clinical studies of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon drug development programs;
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the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may drop out of these clinical trials at a higher rate than we anticipate;
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our third-party contractors may fail to comply with regulatory requirements, fail to maintain adequate quality controls or be unable to provide us with sufficient product supply to conduct and complete preclinical studies or clinical trials of our product candidates in a timely manner, or at all;
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we or our investigators might have to suspend or terminate clinical trials of our product candidates for various reasons, including non-compliance with regulatory requirements, a finding that our product candidates have undesirable side effects or other unexpected characteristics or a finding that the participants are being exposed to unacceptable health risks;
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the cost of clinical trials of our product candidates may be greater than we anticipate;
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the quality of our product candidates or other materials necessary to conduct preclinical studies or clinical trials of our product candidates may be insufficient or inadequate;
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regulators may revise the requirements for approving our product candidates or such requirements may not be as we anticipate; and
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any future collaborators may conduct clinical trials in ways they view as advantageous to them but that are suboptimal for us.
If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete clinical trials of our product candidates or other testing, if the results of these trials or tests are not positive or are only moderately positive or if there are safety concerns, we may:
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incur unplanned costs;
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be delayed in obtaining marketing approval for our product candidates or not obtain marketing approval at all;
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obtain marketing approval in some countries and not in others;
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obtain marketing approval for indications or patient populations that are not as broad as intended or desired;
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obtain marketing approval with labeling that includes significant use or distribution restrictions or safety warnings, including boxed warnings;
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be subject to additional post-marketing testing requirements; or
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have the product removed from the market after obtaining marketing approval.
If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.
We may not be able to initiate or continue clinical trials on a timely basis or at all for any product candidates we identify or develop if we are unable to locate and enroll a sufficient number of eligible patients to participate in the trials as required by applicable regulations or as needed to provide appropriate statistical power for a given trial. The timely completion of clinical trials in accordance with their protocols depends on, among other things, our ability to enroll a sufficient number of patients who remain in the study until its conclusion. The enrollment of patients depends on many factors, including:
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clinicians’ and patients’ perceptions as to the potential advantages of the product candidate being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating; the severity and difficulty of diagnosing the disease under investigation;
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the patient eligibility and exclusion criteria defined in the protocol;
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the size of the patient population required for analysis of the trial’s primary endpoints;
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the proximity of patients to trial sites;
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competition with other companies for clinical trial sites or patients;
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the design of the trial;
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our ability to recruit clinical trial investigators with the appropriate competencies and experience;
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the existing body of safety and efficacy data with respect to the study drug and safety concerns;
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patient referral practices of physicians;
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risk that enrolled subjects will drop out before completion of the trial, including as a result of contracting COVID-19 or other health conditions or being forced to quarantine;
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ability to monitor patients adequately during and after treatment;
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availability and efficacy of approved medications or therapies, or other clinical trials, for the disease or condition under investigation;
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our ability to obtain and maintain patient consents.
In addition, our clinical trials may compete with other clinical trials for product candidates that are in the same therapeutic areas as our product candidates, and this competition will reduce the number and types of patients available to us, because some patients who might have opted to enroll in our trials may instead opt to enroll in a trial being conducted by one of our competitors. Delays in patient enrollment may result in increased costs or may affect the timing or outcome of the planned clinical trials, which could prevent completion of these trials and adversely affect our ability to advance the development of our product candidates.
Our product candidates may cause undesirable and unforeseen side effects or have other properties that could halt their clinical development, delay or prevent their regulatory approval, limit their commercial potential or result in significant negative consequences.
Adverse events or other undesirable side effects caused by our product candidates or related to procedures conducted as part of the clinical trials could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or comparable foreign regulatory authorities. Results of our planned clinical trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics. If unacceptable side effects arise in the development of our product candidates, we, the FDA, the IRBs at the institutions in which our studies are conducted or the Data Safety Monitoring Board, or DSMB, could suspend or terminate our clinical trials or the FDA or comparable foreign regulatory authorities could order us to cease clinical trials or deny approval of our product candidates for any or all targeted indications. Treatment-related side effects may not be appropriately recognized or managed by the treating medical staff. We expect to have to train medical personnel using our product candidates to understand the side effect profiles for our clinical trials and upon any commercialization of any of our product candidates. Inadequate training in recognizing or managing the potential side effects of our product candidates could result in patient injury or death. Any of these occurrences may materially and adversely affect our business, financial condition, results of operations and prospects.
In addition, early clinical trials may only include a limited number of subjects and limited duration of exposure to our product candidates. In particular, we are pursuing a new approach to inhibiting the synaptic binding and signaling of soluble Aβ oligomers through the use of small molecule receptor antagonists, like CT1812. As a result, our product candidates may cause unforeseen safety events when evaluated in larger patient populations. Further, clinical trials may not be sufficient to determine the effect and safety consequences of taking our product candidates over a multi-year period.
If any of our product candidates receives marketing approval, and we or others later identify undesirable and unforeseen side effects caused by such product, a number of potentially significant negative consequences could result, including but not limited to:
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regulatory authorities may suspend, limit or withdraw approvals of such product, or seek an injunction against its manufacture or distribution;
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we may be required to conduct additional clinical trials or post-approval studies;
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we may be required to recall a product or change the way such product is administered to patients;
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additional restrictions may be imposed on the marketing of the particular product or the manufacturing processes for the product or any component thereof;
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regulatory authorities may require the addition of labeling statements, such as a “black box” warning or a contraindication, or issue safety alerts, Dear Healthcare Provider letters, press releases or other communications containing warnings or other safety information about the product;
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we may be required to implement a Risk Evaluation and Mitigation Strategy, or REMS, or create a Medication Guide outlining the risks of such side effects for distribution to patients, a communication plan for healthcare providers and/or other elements to assure safe use;
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we could be sued and held liable for harm caused to patients;
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we may be subject to fines, injunctions or the imposition of criminal penalties;
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the product may become less competitive; and
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our reputation may suffer.
Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and result in the loss of significant revenues to us, which would materially and adversely affect our business, financial condition, results of operations and prospects.
Preclinical and clinical development involves a lengthy and expensive process with an uncertain outcome, and the results of preclinical studies and early clinical trials are not necessarily predictive of future results. We have not tested any of our product candidates in pivotal clinical trials and our product candidates may not have favorable results in future clinical trials.
Preclinical and clinical development is expensive and can take many years to complete, and its outcome is inherently uncertain. We cannot guarantee that any preclinical studies or clinical trials will be conducted as planned or completed on schedule, if at all, and failure can occur at any time during the preclinical study or clinical trial process. Despite promising preclinical or clinical results, any product candidate can unexpectedly fail at any stage of preclinical or clinical development. The historical failure rate for product candidates in our industry is high.
The results from preclinical studies or clinical trials of a product candidate may not predict the results of later clinical trials of the product candidate, and interim, topline, or preliminary results of a clinical trial are not necessarily indicative of final results. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy characteristics despite having progressed through preclinical studies and initial clinical trials. In particular, while we have conducted certain Phase 2 clinical trials of CT1812 targeting mild-to-moderate AD, we do not know whether CT1812 will perform in future clinical trials as it has performed in these prior trials. The positive results we have observed for CT1812 in past clinical trials may not be predictive of our ongoing and future clinical trials in humans. It is not uncommon to observe results in clinical trials that are unexpected based on preclinical studies and early clinical trials, and many product candidates fail in clinical trials despite very promising early results. Moreover, preclinical and clinical data may be susceptible to varying interpretations and analyses. In addition, changes to the design of our current or future clinical trials may be necessary if there are new developments in the field of Alzheimer’s research. A number of companies in the biopharmaceutical, pharmaceutical and biotechnology industries have suffered significant setbacks in clinical development even after achieving promising results in earlier studies.
For the foregoing reasons, we cannot be certain that any of our ongoing and planned preclinical studies or clinical trials will be successful or acceptable to the FDA or other regulatory authorities.
Interim “top-line” and preliminary data from studies or trials that we announce or publish from time to time may change as more data become available and are subject to audit and verification procedures that could result in material changes in the final data.
From time to time, we may publish interim “top-line” or preliminary data from preclinical studies or clinical trials. Interim data are subject to the risk that one or more of the outcomes may materially change as more data become available. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data when we publish such data. As a result, the “top-line” results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results once additional data have been received and fully evaluated. Preliminary or “top-line” data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, interim and preliminary data should be viewed with caution until the final data are available. Additionally, interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment
continues and more patient data become available. Adverse differences between preliminary or interim data and final data could significantly harm our business, financial condition, results of operations and prospects.
Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and our company in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is the material or otherwise appropriate information to include in our disclosure. Any information we determine not to disclose may ultimately be deemed significant by you or others with respect to future decisions, conclusions, views, activities or otherwise regarding a particular product candidate or our business. If the top-line data that we report differ from final results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, product candidates may be harmed, which could significantly harm our business, financial condition, results of operations and prospects.
We have initially concentrated our research and development efforts on the treatment of AD, a disease that has seen limited success in drug development.
Efforts by biopharmaceutical and pharmaceutical companies in treating AD have seen limited success in drug development. Only one disease-modifying therapeutic option has been approved by the FDA. Biogen’s Aduhelm, a monoclonal antibody administered via infusion, received accelerated approval from the FDA on June 7, 2021. We cannot be certain that our oral, small-molecule approach will lead to the development of approvable or marketable products. With the exception of Aduhelm, the only drugs approved by the FDA to treat patients with AD address the symptoms of the disease. Since 2003, over 500 clinical studies have been completed and only Aduhelm has been approved by the FDA, compared to a success rate of 50% to 80% for all other drug candidates. As a result, the FDA has a limited set of products to rely on in evaluating CT1812. This could result in a longer than expected regulatory review process, increased expected development costs or the delay or prevention of commercialization of CT1812 for the treatment of AD.
We have never conducted pivotal clinical trials, and we may be unable to do so for any product candidates we may develop.
We will need to successfully complete pivotal clinical trials in order to obtain the approval of the FDA, EMA or other regulatory agencies to market CT1812 or any future product candidate. Carrying out pivotal clinical trials is a complicated process that requires significant financial resources. As an organization, we have not previously conducted any later stage or pivotal clinical trials. In order to do so, we will need to expand our clinical development and regulatory capabilities, and we may be unable to recruit and train qualified personnel. We also expect to continue to rely on third parties to conduct our pivotal clinical trials. Consequently, we may be unable to successfully and efficiently execute and complete necessary clinical trials in a way that leads to NDA submission and approval of CT1812 or future product candidates. We may require more time and incur greater costs than our competitors and may not succeed in obtaining regulatory approvals of product candidates that we develop. Failure to commence or complete, or delays in, our planned clinical trials, could prevent us from or delay us in commercializing our product candidates.
A Breakthrough Therapy designation by the FDA, even if granted for any of our product candidates, may not lead to a faster development or regulatory review or approval process, and it does not increase the likelihood that our product candidates will receive marketing approval.
We may seek a Breakthrough Therapy designation for our product candidates if the clinical data support such a designation for one or more product candidates. A breakthrough therapy is defined as a drug or biologic that is intended, alone or in combination with one or more other drugs or biologics, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the drug, in our case, may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. For product candidates that have been designated as breakthrough therapies, interaction and communication between
the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens.
Designation as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if we believe one of our product candidates meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation. In any event, the receipt of a Breakthrough Therapy designation for a product candidate may not result in a faster development process, review or approval compared to drugs considered for approval under non-expedited FDA review procedures and does not assure ultimate approval by the FDA. In addition, even if one or more of our product candidates qualify as breakthrough therapies, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened.
A Fast Track designation by the FDA, even if granted for any of our product candidates, may not lead to a faster development or regulatory review or approval process, and does not increase the likelihood that our product candidates will receive marketing approval.
The FDA granted CT1812 Fast Track designation in October 2017 for the treatment of mild-to-moderate AD, and, in the future, we may seek Fast Track designation for other of our product candidates. If a drug is intended for the treatment of a serious or life-threatening condition and the drug demonstrates the potential to address unmet medical needs for this condition, the drug sponsor may apply for Fast Track designation. The FDA has broad discretion whether or not to grant this designation. Even if we believe a particular product candidate is eligible for this designation, we cannot assure you that the FDA would decide to grant it. Fast Track designation may not result in a faster development process, review or approval compared to conventional FDA procedures. The FDA may withdraw Fast Track designation if it believes that the designation is no longer supported by data from our clinical development program. Many small molecule product candidates that have received Fast Track designation have failed to obtain marketing approval.
Disruptions at the FDA and other government agencies caused by funding shortages or global health concerns could hinder their ability to hire, retain or deploy key leadership and other personnel, or otherwise prevent new or modified products from being developed, approved or commercialized in a timely manner or at all, which could negatively impact our business.
The ability of the FDA to review and/or approve new products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory, and policy changes, the FDA’s ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the FDA’s ability to perform routine functions. Average review times at the FDA have fluctuated in recent years as a result. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.
Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. On March 18, 2020, the FDA announced its intention to temporarily postpone routine surveillance inspections of domestic manufacturing facilities. Regulatory authorities outside the United States may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic. If a prolonged government shutdown occurs, or if global health concerns continue to prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business.
We have conducted, and in the future plan to conduct, clinical trials for product candidates outside the United States, and the FDA and comparable foreign regulatory authorities may not accept data from such trials.
We have conducted clinical trials of our product candidates outside the United States, and plan to continue to do so in the future. For example, we initially conducted our Phase 1b SNAP clinical trial of CT1812 in collaboration with the Karolinska Institute in Sweden. In addition, the Phase 1 single and multiple ascending dose studies of CT1812 in healthy volunteers (COG0101) as well as the first-in-patient study
(COG0102) were conducted in Australia. The acceptance of study data from clinical trials conducted outside the United States or another jurisdiction by the FDA, any comparable foreign regulatory authority may be subject to certain conditions or may not be accepted at all. In cases where data from foreign clinical trials are intended to serve as the basis for marketing approval in the United States, the FDA will generally not approve the application on the basis of foreign data alone unless:
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the data are applicable to the U.S. population and U.S. medical practice;
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the trials were performed pursuant to good clinical practice, or GCP, requirements; and
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if necessary, the FDA is able to validate the data through an on-site inspection.
Many foreign regulatory authorities have similar requirements. In addition, foreign trials are subject to the applicable local laws of the foreign jurisdictions where the trials are conducted. There can be no assurance that the FDA or any comparable foreign regulatory authority will accept data from trials conducted outside of the United States or the applicable jurisdiction. If the FDA or any comparable foreign regulatory authority does not accept such data, it would result in the need for additional trials, which would be costly and time-consuming and delay aspects of our business plan, and which may result in product candidates that we may develop not receiving approval or clearance for commercialization in the applicable jurisdiction.
If we are not successful in identifying, developing and commercializing additional product candidates, our ability to expand our business and achieve our strategic objectives would be impaired.
Although a substantial amount of our effort will focus on the continued development and potential approval of our current product candidates, a key element of our strategy is to identify, develop and commercialize a portfolio of products that help restore normal cellular damage responses in age-related degenerative diseases and disorders of the CNS and retina. A component of our strategy is to evaluate our product candidates in multiple indications based, in part, on our evaluation of certain biomarkers in a disease area. For example, we intend to evaluate CT1812 and other product candidates discovered through our NICE platform in other diseases beyond indications in AD, such as dry AMD, geographic atrophy, or GA, and synucleinopathies, including PD and DLB. However, we have not yet evaluated CT1812 in these patient populations and we may find that while we have seen promising results in one neurodegenerative disease, that effect is not replicated across other indications with promising similarities. Even if we successfully identify additional product candidates, we may still fail to yield additional product candidates for development and commercialization for many reasons, including the following:
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the research methodology used may not be successful in identifying potential product candidates;
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we may be unable to identify viable product candidates through our NICE platform;
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competitors may develop alternatives that render our additional product candidates obsolete;
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additional product candidates we develop may be covered by third parties’ patents or other exclusive rights;
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an additional product candidate may be shown to have harmful side effects or other characteristics that indicate it is unlikely to be effective or otherwise does not meet applicable regulatory criteria;
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an additional product candidate may not be capable of being produced in commercial quantities at an acceptable cost, or at all; and
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an additional product candidate may not be accepted as safe and effective by physicians and patients.
We therefore cannot provide any assurance that we will be able to successfully identify or acquire additional product candidates, advance any of these additional product candidates through the development process, successfully commercialize any such additional product candidates, if approved, or assemble sufficient resources to identify, acquire, develop or, if approved, commercialize additional product candidates. If we are unable to successfully identify, acquire, develop and commercialize additional product candidates, our commercial opportunities may be limited.
Even if the product candidates that we develop receive regulatory approval in the United States or another jurisdiction, they may never receive approval in other jurisdictions, which would limit market opportunities for our product candidates and adversely affect our business.
Approval of a product candidate in the United States by the FDA or by the requisite regulatory agencies in any other jurisdiction does not ensure approval of such product candidate by regulatory authorities in other countries or jurisdictions. The approval process varies among countries and may limit our or any future collaborators’ ability to develop, manufacture, promote and sell product candidates internationally. Failure to obtain marketing approval in international jurisdictions would prevent the product candidates from being marketed outside of the jurisdictions in which regulatory approvals have been received. In order to market and sell product candidates in the European Union, or EU, and many other jurisdictions, we and any future collaborators must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and may involve additional preclinical studies or clinical trials both before and after approval. In many countries, any product candidate for human use must be approved for reimbursement before it can be approved for sale in that country. In some cases, the intended price for such product is also subject to approval. Further, while regulatory approval of a product candidate in one country does not ensure approval in any other country, a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory approval process in others. If we or any future collaborators fail to comply with the regulatory requirements in international markets or to obtain all required marketing approvals, the target market for a particular potential product will be reduced, which would limit our ability to realize the full market potential for the product and adversely affect our business.
Risks Related to Our Business and Industry
We are heavily dependent on the success of CT1812, our lead product candidate, which is still under clinical development, and if CT1812 does not receive regulatory approval or is not successfully commercialized, our business may be harmed.
The success of our business, including our ability to finance our company and generate revenue in the future, will primarily depend on the successful development, regulatory approval and commercialization of CT1812, currently our only clinical-stage product candidate. To date, we have invested a significant portion of our efforts and financial resources in the development of CT1812 for the treatment of AD. Our future success is substantially dependent on our ability to successfully complete clinical development for, obtain regulatory approval for and successfully commercialize CT1812, which may never occur. We expect that a substantial portion of our efforts and expenditures over the next few years will be devoted to CT1812, which will require additional clinical development, management of clinical and manufacturing activities, regulatory approval in multiple jurisdictions, obtaining manufacturing supply, building of a commercial organization, substantial investment and significant marketing efforts before we can generate any revenues from any commercial sales. We cannot be certain that we will be able to successfully complete any of these activities.
Furthermore, while inhibition of Aβ oligomers has been validated as a therapeutic approach, the use of small molecule receptor antagonists, such as CT1812, to inhibit the synaptic binding and signaling of soluble Aβ oligomers is an innovative therapeutic approach, which exposes us to certain risks. For example, we may discover unforeseen safety events or that CT1812 does not possess certain properties required for therapeutic effectiveness. Even if found to be effective in one type of disease, CT1812, or the associated therapeutic approach, may not be effective in other diseases. In addition, given our therapeutic approach, designing preclinical studies and clinical trials to demonstrate its effect is complex and exposes us to risks.
The research, testing, manufacturing, labeling, approval, sale, marketing and distribution of drug products are subject to extensive regulation by the FDA and comparable regulatory authorities in other countries. We are not permitted to market CT1812 in the United States until we receive approval of an NDA from the FDA, or in any foreign countries until we receive the requisite approval from such countries. We have not submitted an NDA to the FDA or comparable applications to other regulatory authorities for CT1812 and may not be in a position to do so for several years, if ever. If we are unable to obtain the necessary regulatory approvals for CT1812, we will not be able to commercialize CT1812 in AD, dry AMD, PD and
DLB or other age-related degenerative diseases and disorders of the CNS and retina, and our financial position will be materially adversely affected and we may not be able to generate sufficient revenue to continue our business.
We will need to increase the size of our organization, and we may experience difficulties in managing growth.
As of March 31, 2021, we had 20 full-time and 2 part-time employees. We will need to continue to expand our managerial, operational, finance and other resources in order to manage our operations and clinical trials, continue our development activities and commercialize CT1812, our lead product candidate, or any future product candidates. Our management and personnel, systems and facilities currently in place may not be adequate to support this future growth. Our need to effectively execute our growth strategy requires that we:
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manage our clinical trials effectively;
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identify, recruit, retain, incentivize and integrate additional employees, including personnel focused on research and development and, if our product candidates receive marketing approval, sales;
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manage our internal development and operational efforts effectively while carrying out our contractual obligations to third parties; and
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continue to improve our operational, financial and management controls, reports systems and procedures.
Our future financial performance and our ability to develop, manufacture and commercialize CT1812 and our product candidates, if approved, will depend, in part, on our ability to effectively manage any future growth, and our management may also have to divert financial and other resources, and a disproportionate amount of its attention away from day-to-day activities in order to devote a substantial amount of time, to managing these growth activities.
If we are not able to effectively expand our organization by hiring new employees and expanding our groups of consultants and contractors, we may not be able to successfully implement the tasks necessary to further develop and commercialize CT1812, if approved, and our product candidates and, accordingly, may not achieve our research, development and commercialization goals.
If we fail to attract and retain senior management and key scientific personnel, our business may be materially and adversely affected.
Our success depends in part on our continued ability to attract, retain and motivate highly qualified management and clinical and scientific personnel. We are highly dependent upon members of our senior management, particularly our President and Chief Executive Officer, Lisa Ricciardi, as well as our senior scientists and other members of our management team. The loss of services of any of these individuals could delay or prevent the successful development of our product pipeline, initiation or completion of our planned clinical trials or the commercialization of our product candidates or any future product candidates.
Competition for qualified personnel in the biopharmaceutical field is intense due to the limited number of individuals who possess the skills and experience required by our industry. We will need to hire additional personnel as we expand our clinical development and if we initiate commercial activities. We may not be able to attract and retain quality personnel on acceptable terms, or at all. In addition, to the extent we hire personnel from competitors, we may be subject to allegations that they have been improperly solicited or that they have divulged proprietary or other confidential information, or that their former employers own their research output.
If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our current or future product candidates.
We face an inherent risk of product liability as a result of the clinical testing of our product candidates and will face an even greater risk if we commercialize any products. For example, we may be sued if any product we develop allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in
manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability and breach of warranty. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our product candidates. Even a successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:
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decreased demand for our current or future product candidates;
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injury to our reputation;
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withdrawal of clinical trial participants;
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costs to defend the related litigation;
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diversion of management’s time and our resources;
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substantial monetary awards to trial participants or patients;
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regulatory investigations, product recalls, withdrawals or labeling, marketing or promotional restrictions;
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loss of revenue; and
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the inability to commercialize our current or any future product candidates.
If we are unable to obtain and maintain sufficient product liability insurance at an acceptable cost and scope of coverage to protect against potential product liability claims, the commercialization of our current or any future product candidates we develop could be inhibited or prevented. We currently carry product liability insurance covering our clinical trials. Although we maintain such insurance, any claim that may be brought against us could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage. Our insurance policies also have various exclusions and deductibles, and we may be subject to a product liability claim for which we have no coverage. We will have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient funds to pay such amounts. Moreover, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses. If and when we obtain approval for marketing any of our product candidates, we intend to expand our insurance coverage to include the sale of such product candidate; however, we may be unable to obtain this liability insurance on commercially reasonable terms or at all.
We may explore strategic collaborations that may never materialize or may fail.
We may attempt to broaden the global reach of our platform by selectively collaborating with leading therapeutic companies and other organizations. As a result, we may periodically explore a variety of possible additional strategic collaborations in an effort to gain access to additional product candidates or resources. At the current time, we cannot predict what form such a strategic collaboration might take. In the event we do form such collaborations, we intend to retain significant economic and commercial rights to our programs in key geographic areas that are core to our long-term strategy. We are likely to face significant competition in seeking appropriate strategic collaborators, and strategic collaborations can be complicated and time consuming to negotiate and document. We may not be able to negotiate strategic collaborations on acceptable terms, or at all. We are unable to predict when, if ever, we will enter into any additional strategic collaborations because of the numerous risks and uncertainties associated with establishing them.
We may seek to grow our business through acquisitions of complementary businesses, and the failure to manage acquisitions, or the failure to integrate them with our existing business, could harm our financial condition and operating results.
From time to time, we may consider opportunities to acquire other companies, products or technologies that may enhance our manufacturing capabilities, expand the breadth of our markets or customer base, or advance our business strategies. Potential acquisitions involve numerous risks, including: problems assimilating
the acquired service offerings, products or technologies; issues maintaining uniform standards, procedures, quality control and policies; unanticipated costs associated with acquisitions; diversion of management’s attention from our existing business; risks associated with entering new markets in which we have limited or no experience; increased legal and accounting costs relating to the acquisitions or compliance with regulatory matters; and unanticipated or undisclosed liabilities of any target.
We have no current commitments with respect to any acquisition. We do not know if we will be able to identify acquisitions we deem suitable, whether we will be able to successfully complete any such acquisitions on favorable terms or at all, or whether we will be able to successfully integrate any acquired service offerings, products or technologies. Our potential inability to integrate any business, products or technologies effectively may adversely affect our business, results of operations and financial condition.
Significant disruptions of information technology systems, breaches of data security and other incidents could materially adversely affect our business, results of operations and financial condition.
We collect and maintain information in digital and other forms that is necessary to conduct our business, and we are increasingly dependent on information technology systems and infrastructure to operate our business. In the ordinary course of our business, we collect, store and transmit large amounts of confidential information, including intellectual property, proprietary business information and personal information. It is critical that we do so in a secure manner to maintain the privacy, security, confidentiality and integrity of such confidential information. We have established physical, electronic and organizational measures designed to safeguard and secure our systems to prevent a data compromise, and rely on commercially available systems, software, tools and monitoring to provide security for our information technology systems and the processing, transmission and storage of digital information. We have also outsourced elements of our information technology infrastructure, and as a result a number of third-party vendors may have access to our confidential information. Our internal information technology systems and infrastructure, and those of any future collaborators and our contractors, consultants, vendors and other third parties on which we rely, are vulnerable to damage or unauthorized access or use resulting from computer viruses, malware, natural disasters, terrorism, war, telecommunication and electrical failures, cyber-attacks or cyber-intrusions over the Internet, denial or degradation of service attacks, ransomware, hacking, phishing and other social engineering attacks, attachments to emails, persons inside our organization or persons with access to systems inside our organization.
The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. The prevalent use of mobile devices that access confidential information also increases the risk of lost or stolen devices, security incidents and data security breaches, which could lead to the loss of confidential information or other intellectual property. As a result of the COVID-19 pandemic, we may face increased risks of a security breach or disruption due to our reliance on internet technology and the number of our employees who are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities. The costs to us to investigate, mitigate and remediate security incidents, breaches, disruptions, network security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant, and while we have implemented security measures to protect our data security and information technology systems, our efforts to address these problems may not be successful, and these problems could result in unexpected interruptions, delays, cessation of service, negative publicity and other harm to our business and our competitive position. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our product development programs. For example, the loss of clinical trial data from completed or ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Any security compromise affecting us, our partners or our industry, whether real or perceived, could harm our reputation, erode confidence in the effectiveness of our security measures and lead to regulatory scrutiny. Moreover, if a computer security breach affects our systems or results in the unauthorized access to or unauthorized use, disclosure, release or other processing of personally identifiable information or clinical trial data, it may be necessary to notify individuals, governmental authorities, supervisory bodies, the media and other parties pursuant to privacy and security laws, and our reputation could be materially damaged. We would also be exposed to a risk of loss, governmental
investigations or enforcement, or litigation and potential liability, which could materially adversely affect our business, results of operations and financial condition.
Failure to comply with health and data protection laws and regulations could lead to government enforcement actions and civil or criminal penalties, private litigation or adverse publicity and could negatively affect our operating results and business.
We are subject to or affected by federal, state and foreign data protection laws and regulations which address privacy and data security. In the United States, numerous federal and state laws and regulations, including the U.S. federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 and its implementing regulations, or HITECH, state data breach notification laws, state health information privacy laws and federal and state consumer protection laws, including Section 5 of the Federal Trade Commission Act, which govern the collection, use, disclosure and protection of health-related and other personal information, may apply to our operations and the operations of any future collaborators. In addition, we may obtain health information from third parties, including research institutions from which we obtain clinical trial data, that are subject to privacy and security requirements under HIPAA, as amended by HITECH, and other privacy and data security laws. Depending on the facts and circumstances, we could be subject to significant administrative, civil and criminal penalties if we obtain, use or disclose individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA. Further, various states have implemented similar privacy laws and regulations. For example, California also recently enacted the California Consumer Privacy Act of 2018, or CCPA. The CCPA gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing and receive detailed information about how their personal information is used. The CCPA also provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. The CCPA went into effect on January 1, 2020 and grants the California Attorney General the power to bring enforcement actions for violations beginning July 1, 2020. The CCPA has been amended from time to time, and it remains unclear what, if any, further modifications will be made to this legislation or how it will be interpreted. As currently written, the CCPA may impact our business activities and as a result may increase our compliance costs and potential liability. Many similar privacy laws have been proposed at the federal level and in other states.
Foreign data protection laws, including Regulation 2016/679, known as the General Data Protection Regulation, or GDPR, may also apply to health-related and other personal information data subjects in the EU or the United Kingdom, or UK. The GDPR went into effect on May 25, 2018. Companies that must comply with the GDPR face increased compliance obligations and risk, including robust regulatory enforcement of data protection requirements as well as potential fines for noncompliance of up to €20 million or 4% of annual global revenue of the noncompliance company, whichever is greater. The GDPR imposes numerous requirements for the collection, use, storage and disclosure of personal information of EU or UK data subjects, including requirements relating to providing notice to and obtaining consent from data subjects, personal data breach notification, cross-border transfers of personal information, and honoring and providing for the rights of EU or UK individuals in relation to their personal information, including the right to access, correct and delete their data.
Compliance with U.S. and foreign data protection laws and regulations could require us to take on more onerous obligations in our contracts, require us to engage in costly compliance exercises, restrict our ability to collect, use and disclose data, or in some cases, impact our or our partners’ or suppliers’ ability to operate in certain jurisdictions. Failure to comply with U.S. and foreign data protection laws and regulations could result in government investigations and/or enforcement actions, fines, civil or criminal penalties, private litigation or adverse publicity and could negatively affect our operating results and business.
Moreover, clinical trial subjects about whom we or any of our potential collaborators obtain information, as well as the providers who share this information with us, may contractually limit our ability to use and disclose the information. Claims that we have violated individuals’ privacy rights, failed to comply with data protection laws or breached our contractual obligations, even if we are not found liable, could be expensive and time consuming to defend and could result in adverse publicity that could materially and adversely affect our business, financial condition, results of operations and prospects.
Our employees and independent contractors, including principal investigators, consultants, any future commercial collaborators, service providers and other vendors, may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have an adverse effect on our results of operations.
We are exposed to the risk that our employees and independent contractors, including principal investigators, consultants, any future commercial collaborators, service providers and other vendors may engage in misconduct or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or other unauthorized activities that violate the laws and regulations of the FDA and other similar regulatory bodies, including those laws that require the reporting of true, complete and accurate information to such regulatory bodies; manufacturing standards; U.S. federal and state healthcare fraud and abuse, data privacy laws and other similar non-U.S. laws; or laws that require the true, complete and accurate reporting of financial information or data. Activities subject to these laws also involve the improper use or misrepresentation of information obtained in the course of clinical trials, the creation of fraudulent data in our preclinical studies or clinical trials, or illegal misappropriation of product, which could result in regulatory sanctions and cause serious harm to our reputation. It is not always possible to identify and deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with such laws or regulations. In addition, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and financial results, including, without limitation, the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgements, possible exclusion from participation in Medicare, Medicaid and other U.S. healthcare programs, other sanctions, imprisonment, contractual damages, reputational harm, diminished profits and future earnings and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
Risks Related to Our Intellectual Property
If we are unable to obtain and maintain patent protection for our technology and product candidates including our lead product candidate, CT1812, or if the scope of the patent protection obtained is not sufficiently broad, we may not be able to compete effectively in our markets.
We rely, and will continue to rely, upon a combination of patents, trademarks, trade secret protection and confidentiality agreements with employees, consultants, collaborators, advisors and other third parties to protect the intellectual property related to our current and future drug development programs and product candidates. Our success depends in large part on our ability to obtain and maintain patent protection in the United States and other countries with respect to our technology and product candidates. We seek to protect our proprietary position by filing patent applications in the United States and abroad related to our current and future drug development programs and product candidates, successfully defend our intellectual property rights against third-party challenges and successfully enforce our intellectual property rights to prevent third-party infringement. The patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner.
It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. We may choose not to seek patent protection for certain innovations or products and may choose not to pursue patent protection in certain jurisdictions, and under the laws of certain jurisdictions, patents or other intellectual property rights may be unavailable or limited in scope and, in any event, any patent protection we obtain may be limited. As a result, some of our product candidates are not, and in the future may not be, protected by patents. We generally apply for patents in those countries where we intend to make, have made, use, offer for sale, or sell products and where we assess the risk of infringement to justify the cost of seeking patent protection. However, we do not seek protection in all countries where we intend to sell products and we may not accurately predict all the countries where patent protection would ultimately be desirable. If we fail to timely file a patent application in any such country, we may be precluded from doing so at a later date. The patent applications that we own may
fail to result in issued patents with claims that cover any of our product candidates in the United States or in other foreign countries. We may also inadvertently make statements to regulatory agencies during the regulatory approval process that may be inconsistent with positions that have been taken during prosecution of our patents, which may result in such patents being narrowed, invalidated or held unenforceable, and vice versa that may affect the regulatory approval process.
The patents and patent applications that we own may fail to result in issued patents with claims that protect any of our product candidates in the United States or in other foreign countries. We cannot guarantee any current or future patents will provide us with any meaningful protection or competitive advantage. There is no assurance that all of the potentially relevant prior art relating to our patents and patent applications has been found, which can prevent a patent from issuing from a pending patent application, or be used to invalidate a patent. The examination process may require us to narrow our claims, which may limit the scope of patent protection that we may obtain. Even if patents do successfully issue based on our patent applications, and even if such patents cover our product candidates, uses of our product candidates, or other aspects related to our product candidates, third parties may challenge their validity, enforceability or scope, which may result in such patents being narrowed, invalidated or held unenforceable, any of which could limit our ability to prevent competitors and other third parties from developing and marketing similar products or limit the length of terms of patent protection we may have for our products and technologies. Other companies may also design around technologies we have patented or developed. Any successful opposition to these patents or any other patents owned by us in the future could deprive us of rights necessary for the successful commercialization of any of our product candidates, if approved. Further, if we encounter delays in regulatory approvals, the period of time during which we could market a product candidate under patent protection could be reduced. If any of our patents are challenged, invalidated, circumvented by third parties or otherwise limited or expire prior to the commercialization of our products, and if we do not own or have exclusive rights to other enforceable patents protecting our products or other technologies, competitors and other third parties could market products and use processes that are substantially similar to, or superior to, ours and our business would suffer.
If the patent applications we hold with respect to our development programs and product candidates fail to issue, if their breadth or strength of protection is threatened, or if they fail to provide meaningful exclusivity for any of our product candidates, it could dissuade companies from collaborating with us to develop product candidates, and threaten our ability to commercialize, future products. Our pending applications cannot be enforced against third parties practicing the technology claimed in such applications unless and until a patent issues from such applications. Any such outcome could harm our business.
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions, and has in recent years been the subject of much litigation. The standards that the USPTO and its foreign counterparts use to grant patents are not always applied predictably or uniformly. In addition, the laws of foreign countries may not protect our rights to the same extent as the laws of the United States, and many companies have encountered significant problems in protecting and defending such rights in foreign jurisdictions. For example, European patent law restricts the patentability of methods of treatment of the human body more than U.S. law does. Publications of discoveries in scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot know with certainty whether we were the first to make the inventions claimed in our owned patents or pending patent applications, or that we were the first to file for patent protection of such inventions. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our pending and future patent applications may not result in patents being issued which protect our technology or product candidates, in whole or in part, or which effectively prevent others from commercializing competitive technologies and products. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection.
Patent reform legislation in the United States, including the Leahy-Smith America Invents Act, or the Leahy-Smith Act, could increase those uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents. The Leahy-Smith Act was signed into law on September 16, 2011 and includes a number of significant changes to U.S. patent law. These include
provisions that affect the way patent applications are prosecuted, redefine prior art and provide more efficient and cost-effective avenues for competitors to challenge the validity of patents. These include allowing third-party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent by USPTO administered post-grant proceedings, including post-grant review, inter partes review, and derivation proceedings. After March 15, 2013, under the Leahy-Smith Act, the United States transitioned to a first inventor to file system in which, assuming that the other statutory requirements are met, the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a third party was the first to invent the claimed invention. The Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications, our ability to obtain future patents, and the enforcement or defense of our issued patents, all of which could harm our business, financial condition, results of operations and prospects.
Moreover, we may be subject to a third-party pre-issuance submission of prior art to the USPTO or become involved in opposition, derivation, reexamination, inter partes review, post-grant review or interference proceedings challenging our owned patent rights. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates.
The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our patents may be challenged in the courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and products. Moreover, patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after it is filed. Various extensions may be available; however, the life of a patent, and the protection it affords, is limited. Without patent protection for our current or future product candidates, we may be open to competition from generic versions of such products. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
We may not be able to protect our intellectual property rights throughout the world.
Filing, prosecuting and defending patents on our product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States. The requirements for patentability may differ in certain countries, particularly developing countries, and the breadth of patent claims allowed can be inconsistent. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and may also export infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our products and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.
We do not have patent rights in certain foreign countries in which a market may exist. Moreover, in foreign jurisdictions where we do have patent rights, proceedings to enforce such rights could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly, and our patent applications at risk of not issuing. Additionally, such proceedings could provoke third parties to assert claims against us. We may not prevail in
any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Thus, we may not be able to stop a competitor from marketing and selling in foreign countries products and services that are the same as or similar to our products and services, and our competitive position in the international market would be harmed.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets, and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop.
Patent terms may be inadequate to protect our competitive position on our product candidates including our lead product candidate, CT1812 for an adequate amount of time.
Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited. In the United States, a patent’s term may be lengthened by patent term adjustment, which compensates a patentee for administrative delays by the U.S. Patent and Trademark Office, or USPTO, in examining and granting a patent, or may be shortened if a patent is terminally disclaimed over an earlier filed patent. Even if patents covering our product candidates are obtained, once the patent life has expired, we may be open to competition from competitive products, including generics or biosimilars.
Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours. We expect to seek extensions of patent terms in the United States and, if available, in other countries where we are prosecuting patents.
Depending upon the timing, duration and specifics of FDA marketing approval of our drug candidates, one or more of our U.S. patents may be eligible for limited patent term extension, or PTE, under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent restoration term of up to five years beyond the normal expiration of the patent as compensation for patent term lost during development and the FDA regulatory review process, which is limited to the approved indication (and potentially additional indications approved during the period of extension) covered by the patent. This extension is limited to only one patent that covers the approved product, the approved use of the product, or a method of manufacturing the product. However, the applicable authorities, including the FDA and the USPTO in the United States, and any equivalent regulatory authority in other countries, may not agree with our assessment of whether such extensions are available, and may refuse to grant extensions to our patents, or may grant more limited extensions than we request. We may not be granted an extension because of, for example, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements. Moreover, the applicable time-period or the scope of patent protection afforded could be less than we request. Even if we are able to obtain an extension, the patent term may still expire before or shortly after we receive FDA marketing approval.
If we are unable to extend the expiration date of our existing patents or obtain new patents with longer expiry dates, our competitors may be able to take advantage of our investment in development and clinical trials by referencing our clinical and preclinical data to obtain approval of competing products following our patent expiration and launch their product earlier than might otherwise be the case.
If we do not obtain protection under the Hatch-Waxman Amendments by obtaining data exclusivity, our business may be harmed.
Our commercial success will largely depend on our ability to obtain market exclusivity in the United States and other countries with respect to our drug candidates and their target indications. Depending upon the timing, duration and specifics of FDA marketing approval of our drug candidates, certain of our product candidates may be eligible for marketing exclusivity. The FDCA provides a five-year period of non-patent marketing exclusivity within the United States to the first applicant to obtain approval of an NDA for a new chemical entity, or NCE. A drug is an NCE if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. If market exclusivity is granted for an NCE, during the exclusivity period, the FDA may not accept for review or approve an abbreviated new drug application, or ANDA, or a 505(b)(2) NDA submitted by another company for another version of such drug where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement to one of the patents listed in the FDA’s publication Approved Drug Products with Therapeutic Equivalence Evaluations, which we refer to as the Orange Book, with the FDA by the innovator NDA holder. The FDCA also provides three years of marketing exclusivity for an NDA, or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example new indications, dosages, dosage forms or strengths of an existing drug. This three-year exclusivity covers only the conditions associated with the new clinical investigations and prohibits the FDA from approving an ANDA, or a 505(b)(2) NDA submitted by another company with overlapping conditions associated with the new clinical investigations for the three-year period. Clinical investigation exclusivity does not prohibit the FDA from approving ANDAs for drugs containing the original active agent. Five-year and three-year exclusivity will not delay the submission or approval of an NDA for the same drug. However, an applicant submitting an NDA would be required to conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.
If we are unable to obtain such marketing exclusivity for our product candidates, our competitors may be able to take advantage of our investment in development and clinical trials by referencing our clinical and preclinical data to obtain approval of competing products and launch their product earlier than might otherwise be the case.
The validity, scope and enforceability of any patents listed in the Orange Book that cover our product candidates including our lead product candidate CT1812 can be challenged by third parties.
If one of our product candidates is approved by the FDA, one or more third parties may challenge the current patents, or patents that may issue in the future, within our portfolio which could result in the invalidation of, or render unenforceable, some or all of the relevant patent claims or a finding of non-infringement. For example, if a third party files an application under Section 505(b)(2) or an ANDA for a generic drug containing any of our product candidates, and relies in whole or in part on studies conducted by or for us, the third party will be required to certify to the FDA that either: (1) there is no patent information listed in the Orange Book with respect to our NDA for the applicable approved drug candidate; (2) the patents listed in the Orange Book have expired; (3) the listed patents have not expired, but will expire on a particular date and approval is sought after patent expiration; or (4) the listed patents are invalid or will not be infringed by the manufacture, use or sale of the third party’s generic drug. A certification that the new drug will not infringe the Orange Book-listed patents for the applicable approved drug candidate, or that such patents are invalid, is called a paragraph IV certification. If the third party submits a paragraph IV certification to the FDA, a notice of the paragraph IV certification must also be sent to us once the third party’s ANDA is accepted for filing by the FDA. We may then initiate a lawsuit to defend the patents identified in the notice. The filing of a patent infringement lawsuit within 45 days of receipt of the notice automatically prevents the FDA from approving the third party’s ANDA until the earliest of 30 months or the date on which the patent expires, the lawsuit is settled, or the court reaches a decision in the infringement lawsuit in favor of the third party. If we do not file a patent infringement lawsuit within the required 45-day period, the third party’s ANDA will not be subject to the 30-month stay of FDA approval.
Moreover, a third party may challenge the current patents, or patents that may issue in the future, within our portfolio which could result in the invalidation of some or all of the patents that might otherwise be eligible for listing in the Orange Book for one of our products. If a third party successfully challenges all of the patents that might otherwise be eligible for listing in the Orange Book for one of our products, we will not be entitled to the 30-month stay of FDA approval upon the filing of an ANDA for a generic drug containing any of our product candidates, and relies in whole or in part on studies conducted by or for us.
Litigation or other proceedings to enforce or defend intellectual property rights are often very complex in nature, may be very expensive and time-consuming, may divert our management’s attention from our core business, and may result in unfavorable results that could limit our ability to prevent third parties from competing with our drug candidates.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.
Periodic maintenance fees on any issued patent are due to be paid to the USPTO and other foreign patent agencies in several stages over the lifetime of the patent. The USPTO and various foreign national or international patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of patent rights include, but are not limited to, failure to timely file national and regional stage patent applications based on our international patent application, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. If we fail to maintain the patents and patent applications covering any of our product candidates, our competitors might be able to enter the market earlier than anticipated, which would harm our business.
We may need to license intellectual property from third parties, and such licenses may not be available or may not be available on commercially reasonable terms.
The issuance of a patent does not give us the right to practice the patented invention. A third party may hold intellectual property, including patent rights, that are important or necessary to the development of our product candidates. Third parties may also have blocking patents that could prevent us from marketing our products or practicing our own patented technology. It may be necessary for us to use the patented or proprietary technology of third parties to commercialize our drug candidates, in which case we would be required to obtain a license from these third parties on commercially reasonable terms. Such a license may not be available, or it may not be available on commercially reasonable terms, in which case our business would be harmed.
The risks described elsewhere pertaining to our intellectual property rights also apply to any intellectual property rights that we may in-license, and any failure by us or our potential licensors to obtain, maintain, defend and enforce these rights could harm our business. In some cases we may not have control over the prosecution, maintenance or enforcement of the patents that we may license, and may not have sufficient ability to provide input into the patent prosecution, maintenance and defense process with respect to such patents, and our potential licensors may fail to take the steps that we believe are necessary or desirable in order to obtain, maintain, defend and enforce the licensed patents.
Third-party claims or litigation alleging infringement of patents or other proprietary rights, or seeking to invalidate patents or other proprietary rights, may delay or prevent the development and commercialization of any of our product candidates including our lead product candidate, CT1812.
Our commercial success depends in part on our avoiding infringement and other violations of the patents and proprietary rights of third parties. However, while certain research, development and commercialization activities may be protected by the safe harbor provision of the Hatch Waxman Act, other activities may subject to claims that we infringe or otherwise violate patents or other intellectual
property rights owned or controlled by third parties. There is a substantial amount of litigation, both within and outside the United States, involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, interferences, derivation and administrative law proceedings, inter partes review and post-grant review before the USPTO, as well as oppositions and similar processes in foreign jurisdictions. Numerous United States and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we and our collaborators are developing product candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, and as we gain greater visibility and market exposure as a public company, the risk increases that our product candidates or other business activities may be subject to claims of infringement of the patent and other proprietary rights of third parties. Third parties may assert that we are infringing their patents or employing their proprietary technology without authorization.
There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates. Because patent applications can take many years to issue, there may be currently pending patent applications that may later result in issued patents that our product candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents. If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of any of our product candidates, any molecules formed during the manufacturing process or any final product itself, the holders of any such patents may be able to block our ability to commercialize such product candidate unless we obtained a license under the applicable patents, or until such patents expire. Similarly, if any third-party patent was to be held by a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture or methods of use, including combination therapy, the holders of any such patent may be able to block our ability to develop and commercialize the applicable product candidate unless we obtained a license or until such patent expires. In either case, such a license may not be available on commercially reasonable terms or at all. In addition, we may be subject to claims that we are infringing other intellectual property rights, such as trademarks or copyrights, or misappropriating the trade secrets of others, and to the extent that our employees, consultants or contractors use intellectual property or proprietary information owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.
Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize one or more of our product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. In the event of a successful infringement or other intellectual property claim against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses from third parties, pay royalties or redesign our affected products, which may be impossible or require substantial time and monetary expenditure. We cannot predict whether any such license would be available at all or whether it would be available on commercially reasonable terms. Furthermore, even in the absence of litigation, we may need to obtain licenses from third parties to advance our research or allow commercialization of our product candidates, and we have done so from time to time. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we would be unable to further develop and commercialize one or more of our product candidates, which could harm our business significantly. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business.
Some of our competitors may be able to sustain the costs of complex intellectual property litigation more effectively than we can because they have substantially greater resources. In addition, intellectual property litigation, regardless of its outcome, may cause negative publicity, adversely impact prospective customers, cause product shipment delays, or prohibit us from manufacturing, marketing or otherwise commercializing our products, services and technology. Any uncertainties resulting from the initiation and continuation of any litigation could adversely impact our ability to raise additional funds or otherwise harm our business, results of operation, financial condition or cash flows.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by
disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments, which could adversely impact the price of our common shares. If securities analysts or investors perceive these results to be negative, it could adversely impact the price of our common shares. The occurrence of any of these events may harm our business, results of operation, financial condition or cash flows.
We cannot provide any assurances that third-party patents do not exist which might be enforced against our drugs or product candidates, resulting in either an injunction prohibiting our sales, or, with respect to our sales, an obligation on our part to pay royalties or other forms of compensation to third parties.
We may not identify relevant third-party patents or may incorrectly interpret the relevance, scope or expiration of a third-party patent, which might harm our ability to develop and market our products.
We cannot guarantee that any of our patent searches or analyses, including the identification of relevant patents, the scope of patent claims or the expiration of relevant patents, are complete or thorough, nor can we be certain that we have identified each and every third-party patent and pending application in the United States and abroad that is or may be relevant to or necessary for the commercialization of our product candidates in any jurisdiction. Patent applications in the United States and elsewhere are not published until approximately 18 months after the earliest filing for which priority is claimed, with such earliest filing date being commonly referred to as the priority date. In addition, U.S. patent applications filed before November 29, 2000 and certain U.S. patent applications filed after that date that will not be filed outside the United States remain confidential until patents issue. Therefore, patent applications covering our products could have been filed by others without our knowledge. Additionally, pending patent applications that have been published can, subject to certain limitations, be later amended in a manner that could cover our product candidates or the use of our products.
The scope of a patent claim is determined by an interpretation of the law, the written disclosure in a patent and the patent’s prosecution history. Our interpretation of the relevance or the scope of a patent or a pending application may be incorrect, which may negatively impact our ability to market our products. We may incorrectly determine that our products are not covered by a third-party patent or may incorrectly predict whether a third party’s pending application will issue with claims of relevant scope. Our determination of the expiration date of any patent in the United States or abroad that we consider relevant may be incorrect, and our failure to identify and correctly interpret relevant patents may negatively impact our ability to develop and market our products.
If we fail to identify and correctly interpret relevant patents, we may be subject to infringement claims. We cannot guarantee that we will be able to successfully settle or otherwise resolve such infringement claims. If we fail in any such dispute, in addition to being forced to pay damages, we may be temporarily or permanently prohibited from commercializing any of our products that are held to be infringing. We might, if possible, also be forced to redesign products or services so that we no longer infringe the third-party intellectual property rights. Any of these events, even if we were ultimately to prevail, could require us to divert substantial financial and management resources that we would otherwise be able to devote to our business.
We may become involved in lawsuits to protect or enforce our patents or our other intellectual property rights, which could be expensive, time consuming and unsuccessful.
Competitors may infringe or otherwise violate our patents or our other intellectual property rights. To counter infringement or unauthorized use, we may be required to file legal claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. As a result, we cannot predict with certainty how much protection, if any, will be given to our patents if we attempt to enforce them and they are challenged in court. Further, even if we prevail against an infringer in U.S. district court, there is always the risk that the infringer will file an appeal and the district court judgment will be overturned at the appeals court and/or that an adverse decision will be issued by the appeals court relating to the validity or enforceability of our patents. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications
at risk of not issuing. The initiation of a claim against a third party may also cause the third party to bring counter claims against us such as claims asserting that our patents are invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, non-enablement or lack of written description or statutory subject matter. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant material information from the USPTO, or made a materially misleading statement, during prosecution. Third parties may also raise similar validity claims before the USPTO in post-grant proceedings such as ex parte reexaminations, inter partes review, or post-grant review, or oppositions or similar proceedings outside the United States, in parallel with litigation or even outside the context of litigation. The outcome following legal assertions of invalidity and unenforceability is unpredictable. We cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of any future patent protection on our current or future product candidates.
We may not be able to detect or prevent misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States. Our business could be harmed if in litigation the prevailing party does not offer us a license on commercially reasonable terms. Any litigation or other proceedings to enforce our intellectual property rights may fail, and even if successful, may result in substantial costs and distract our management and other employees.
Even if we establish infringement, the court may decide not to grant an injunction against further infringing activity and instead award only monetary damages, which may or may not be an adequate remedy. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could harm the price of our common shares.
Because of the expense and uncertainty of litigation, we may not be in a position to enforce our intellectual property rights against third parties.
Because of the expense and uncertainty of litigation, we may conclude that even if a third party is infringing our issued patent, any patents that may be issued as a result of our pending or future patent applications or other intellectual property rights, the risk-adjusted cost of bringing and enforcing such a claim or action may be too high or not in the best interest of our company or our shareholders. In such cases, we may decide that the more prudent course of action is to simply monitor the situation or initiate or seek some other non-litigious action or solution.
Changes in U.S. patent law or the patent law of other countries or jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our product including our lead product candidate, CT1812.
The United States has recently enacted and implemented wide-ranging patent reform legislation. In addition, patent reform legislation may pass in the future that could lead to additional uncertainties and increased costs surrounding the prosecution, enforcement and defense of our patents and pending patent applications. The United States Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on actions by the United States Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce patents that we own or that we might obtain in the future. Similarly, changes in patent law and regulations in other countries or jurisdictions or changes in the governmental bodies that enforce them or changes in how the relevant governmental authority enforces patent laws or regulations may weaken our ability to obtain new patents or to enforce patents that we own or that we may
obtain in the future. We cannot predict future changes in the interpretation of patent laws or changes to patent laws that might be enacted into law by United States and foreign legislative bodies. Those changes may materially affect our patents or patent applications and our ability to obtain additional patent protection in the future. The United States federal government retains certain rights in inventions produced with its financial assistance under the Bayh-Dole Act. The federal government retains a “nonexclusive, nontransferable, irrevocable, paid-up license” for its own benefit. The Bayh-Dole Act also provides federal agencies with “march-in rights.” March-in rights allow the government, in specified circumstances, to require the contractor or successors in title to the patent to grant a “nonexclusive, partially exclusive, or exclusive license” to a “responsible applicant or applicants.” If the patent owner refuses to do so, the government may grant the license itself.
We may not be able to protect our intellectual property rights throughout the world, which could impair our business.
Filing, prosecuting and defending patents covering any of our product candidates throughout the world would be prohibitively expensive. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we may obtain patent protection, but where patent enforcement is not as strong as that in the United States. These products may compete with our products in jurisdictions where we do not have any issued patents and any future patent claims or other intellectual property rights may not be effective or sufficient to prevent them from so competing. We do not have patent rights in certain foreign countries in which a market may exist. Moreover, many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of some countries do not favor the enforcement of patents and other intellectual property protection, which could make it difficult for us to stop the infringement of our patents generally. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. Additionally, such proceedings could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Thus, we may not be able to stop a competitor from marketing and selling in foreign countries products and services that are the same as or similar to our products and services, and our competitive position in the international market would be harmed.
Many countries, including European Union countries, India, Japan and China, have compulsory licensing laws under which a patent owner may be compelled under specified circumstances to grant licenses to third parties. In those countries, we may have limited remedies if patents are infringed or if we are compelled to grant a license to a third party, which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop.
Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed.
Because we expect to rely on third parties to manufacture our product candidates, and we expect to continue to collaborate with third parties on the development of our product candidates, we must, at times, share trade secrets with them. We seek to protect our proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, consulting agreements or other similar agreements with our advisors, employees, third-party contractors and consultants prior to beginning research or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose our confidential information, including our trade secrets. Despite the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. Any disclosure, either intentional or unintentional, by our employees, the employees of third parties with whom we share our facilities or third-party consultants and vendors that we engage to perform research,
clinical trials or manufacturing activities, or misappropriation by third parties (such as through a cybersecurity breach) of our trade secrets or proprietary information could enable competitors to duplicate or surpass our technological achievements, thus eroding our competitive position in our market. Further, adequate remedies may not exist in the event of unauthorized use or disclosure. Given that our proprietary position is based, in part, on our know-how and trade secrets, a competitor’s discovery of our trade secrets or other unauthorized use or disclosure would impair our competitive position and may harm our business and results of operations.
In addition, these agreements typically restrict the ability of our advisors, employees, third-party contractors and consultants to publish data potentially relating to our trade secrets, although our agreements may contain certain limited publication rights. Policing unauthorized use of our intellectual property is difficult, expensive and time-consuming, and we may be unable to determine the extent of any unauthorized use. Moreover, enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. Despite our efforts to protect our trade secrets, our competitors may discover our trade secrets, either through breach of our agreements with third parties, independent development or publication of information by any of our third-party collaborators. A competitor’s discovery of our trade secrets would impair our competitive position and have an adverse impact on our business.
We may be subject to claims that our employees, consultants, independent contractors or we have wrongfully used or disclosed confidential information of their former employers or other third parties.
We do and may employ individuals who were previously employed at universities or other biotechnology or pharmaceutical companies, competitors or potential competitors. Although we seek to protect our ownership of intellectual property rights by ensuring that our agreements with our employees, collaborators and other third parties with whom we do business include provisions requiring such parties to assign rights in inventions to us and to not use the confidential information of their former employer, we may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed confidential information of our employees’ former employers or other third parties. Litigation may be necessary to defend against these claims. There is no guarantee of success in defending these claims, and if we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Such intellectual property rights could be awarded to a third party, and we could be required to obtain a license from such third party to commercialize our technology or product candidates. Such a license may not be available on commercially reasonable terms or at all. Even if we are successful, litigation could result in substantial cost and be a distraction to our management and other employees. Moreover, any such litigation or the threat thereof may harm our reputation, our ability to form strategic alliances or sublicense our rights to collaborators, engage with scientific advisors or hire employees or consultants, each of which would harm our business, results of operations and financial condition.
We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.
We may be subject to claims that former employees, collaborators or other third parties have an interest in our patents, trade secrets, or other intellectual property as an inventor or co-inventor. For example, we may have inventorship disputes arise from conflicting obligations of employees, consultants or others who are involved in developing our product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship or our ownership of our patents, trade secrets or other intellectual property. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, intellectual property that is important to our product candidates. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees. Any of the foregoing could harm our business, financial condition, results of operations and prospects.
In addition, while it is our policy to require our employees and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we
may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own. Our and their assignment agreements may not be self-executing or may be breached, and we may be forced to bring claims against third parties, or defend claims they may bring against us, to determine the ownership of what we regard as our intellectual property.
If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to management.
Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities, and have a harmful effect on the success of our business.
Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses, and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could adversely impact the price of our common shares. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property. In addition, the uncertainties associated with litigation could compromise our ability to raise the funds necessary to continue our clinical trials and internal research programs. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could compromise our ability to compete in the marketplace, including compromising our ability to raise the funds necessary to continue our clinical trials, continue our research programs, license necessary technology from third parties, or enter into development collaborations that would help us commercialize our product candidates, if approved.
If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
In addition to seeking patents for our product candidates, we also rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position. We seek to protect our trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Monitoring unauthorized uses and disclosures of our intellectual property is difficult, and we do not know whether the steps we have taken to protect our intellectual property will be effective. In addition, we may not be able to obtain adequate remedies for any such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed.
Any trademarks we have obtained or may obtain may be infringed or successfully challenged, resulting in harm to our business.
We expect to rely on trademarks as one means to distinguish any of our drug candidates that are approved for marketing from the products of our competitors. Once we select new trademarks and apply to register them, our trademark applications may not be approved. Third parties may oppose or attempt to
cancel our trademark applications or trademarks, or otherwise challenge our use of the trademarks. In the event that our trademarks are successfully challenged, we could be forced to rebrand our drugs, which could result in loss of brand recognition and could require us to devote resources to advertising and marketing new brands. Our competitors may infringe our trademarks and we may not have adequate resources to enforce our trademarks. If we attempt to enforce our trademarks and assert trademark infringement claims, a court may determine that the marks we have asserted are invalid or unenforceable, or that the party against whom we have asserted trademark infringement has superior rights to the marks in question. In this case, we could ultimately be forced to cease use of such trademarks.
Our intellectual property agreements with third parties may be subject to disagreements over contract interpretation, which could narrow the scope of our rights to the relevant intellectual property or technology.
Certain provisions in our intellectual property agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could affect the scope of our rights to the relevant intellectual property or technology, or affect financial or other obligations under the relevant agreement, either of which could harm our business, financial condition, results of operations and prospects. For example, the NIA has provided grants to fund certain of our preclinical activities and clinical trials. If the United States or another jurisdiction decides that the NIA grant bestows rights to our patent applications, that could affect our ability to obtain valid and enforceable patent claims protecting our rights as they relate to our lead product candidate, CT1812, our other product candidates and our NICE platform. As a consequence of these and other factors, our patent applications may fail to result in issued patents with claims that cover our product candidates in the United States or in other countries. Such a loss of patent protection could harm our business.
Intellectual property rights do not necessarily address all potential threats to our competitive advantage.
Once granted, patents may remain open to invalidity challenges including opposition, interference, re-examination, post-grant review, inter partes review, nullification or derivation action in court or before patent offices or similar proceedings for a given period after allowance or grant, during which time third parties can raise objections against such grant. In the course of such proceedings, which may continue for a protracted period of time, the patent owner may be compelled to limit the scope of the allowed or granted claims thus attacked, or may lose the allowed or granted claims altogether.
In addition, the degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect our business, provide a barrier to entry against our competitors or potential competitors, or permit us to maintain our competitive advantage. Moreover, if a third party has intellectual property rights that cover the practice of our technology, we may not be able to fully exercise or extract value from our intellectual property rights. The following examples are illustrative:
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others may be able to make product that is similar to product candidates we intend to commercialize that is not covered by the patents that we own;
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we, or any collaborators might not have been the first to make or reduce to practice the inventions covered by the issued patents or pending patent applications that we own;
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we or any collaborators might not have been the first to file patent applications covering certain of our inventions;
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others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights;
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it is possible that our pending patent applications will not lead to issued patents;
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issued patents that we own may not provide us with any competitive advantages, or may be held invalid or unenforceable as a result of legal challenges;
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our competitors might conduct research and development activities in the United States and other countries that provide a safe harbor from patent infringement claims for certain research and development activities, as well as in countries where we do not have patent rights, and then use the
information learned from such activities to develop competitive products for sale in our major commercial markets; and we may not develop additional proprietary technologies that are patentable;
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third parties performing manufacturing or testing for us using our products or technologies could use the intellectual property of others without obtaining a proper license;
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parties may assert an ownership interest in our intellectual property and, if successful, such disputes may preclude us from exercising exclusive rights over that intellectual property;
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we may not develop additional proprietary technologies that are patentable;
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we may not be able to obtain and maintain necessary licenses on commercially reasonable terms, or at all; and
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the patents of others may harm our business.
Should any of these events occur, they could significantly harm our business and results of operations.
Risks Related to Commercialization, Manufacturing and Reliance on Third Parties
Even if our current or future product candidates obtain regulatory approval, they may fail to achieve the broad degree of adoption and use by physicians, patients, hospitals, healthcare payors and others in the medical community necessary for commercial success.
Even if one or more of our product candidates receive FDA or other regulatory approvals, they may nonetheless fail to gain sufficient market acceptance by physicians, patients, healthcare payors and others in the medical community. Most of our product candidates target mechanisms for which there are limited or no currently approved products, which may result in slower adoption by physicians, patients and payors. If our product candidates do not achieve an adequate level of acceptance, we may not generate significant product revenue and we may not become profitable. The degree of market acceptance of our product candidates, if approved for commercial sale, will depend on a number of factors, including:
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the clinical indications for which the product is approved and patient demand for approved products that treat those indications;
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the safety and efficacy of our product as compared to other available therapies;
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the availability of coverage and adequate reimbursement from governmental healthcare plans or third party payors for any of our product candidates that may be approved;
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acceptance by physicians, operators of clinics and patients of the product as a safe and effective treatment;
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physician and patient willingness to adopt a new therapy over other available therapies to treat approved indications;
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overcoming any biases physicians or patients may have toward particular therapies for the treatment of approved indications;
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proper training and administration of our product candidates by physicians and medical staff;
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public misperception regarding the use of our therapies, if approved for commercial sale;
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patient satisfaction with the results and administration of our product candidates and overall treatment experience, including, for example, the convenience of any dosing regimen;
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the cost of treatment with our product candidates in relation to alternative treatments and reimbursement levels, if any, and willingness to pay for the product, if approved, on the part of insurance companies and other third-party payors, physicians and patients;
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the revenue and profitability that our products may offer a physician as compared to alternative therapies;
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limitations or warnings contained in the FDA-approved labeling for our products;
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any FDA requirement to undertake a REMS;
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the effectiveness of our sales, marketing and distribution efforts;
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adverse publicity about our products or favorable publicity about competitive products; and
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potential product liability claims.
We cannot assure you that our current or future product candidates, if approved, will achieve broad market acceptance among physicians, patients, healthcare payors and others in the medical community. Even if we receive regulatory approval to market any of our product candidates, we cannot assure you that any such product candidate will be more effective than other commercially available alternatives or successfully commercialized. Any approval we may obtain could be for indications or patient populations that are not as broad as intended or desired or may require labeling that includes significant use or distribution restrictions or safety warnings. We may also be required to perform additional or unanticipated clinical trials to obtain approval or be subject to additional post-marketing testing requirements to maintain approval. In addition, regulatory authorities may withdraw their approval of a product or impose restrictions on its distribution, such as in the form of a REMS. Any failure by our product candidates that obtain regulatory approval to achieve market acceptance or commercial success would adversely affect our reputation, ability to raise additional capital, financial condition, results of operations and business prospects.
The market opportunities for CT1812, if approved, may be smaller than we anticipate.
We expect to initially seek approval for CT1812 for AD, dry AMD, PD and DLB and other age-related degenerative diseases and disorders of the CNS and retina. Our estimates of market potential have been derived from a variety of sources, including scientific literature, patient foundations and market research and may prove to be incorrect. Even if we obtain significant market share for CT1812 after FDA approval, the potential target populations may be too small to consistently generate revenue, and we may never achieve profitability without obtaining marketing approval for additional indications.
We rely on third-party suppliers to manufacture our product candidates, and we intend to rely on third parties to produce commercial supplies of any approved product. The loss of these suppliers, or their failure to comply with applicable regulatory requirements or to provide us with sufficient quantities at acceptable quality levels or prices, or at all, would materially and adversely affect our business, financial condition, results of operations and prospects.
We do not currently have nor do we plan to build or acquire the infrastructure or capability internally to manufacture supplies of our product candidates or the materials necessary to produce our product candidates for use in the conduct of our preclinical studies or clinical trials, and we lack the internal resources and the capability to manufacture any of our product candidates on a preclinical, clinical or commercial scale. The facilities used by our contract manufacturers to manufacture our product candidates are subject to various regulatory requirements and may be subject to the inspection of the FDA or other regulatory authorities. We do not control the manufacturing processes of, and are completely dependent on, our contract manufacturing partners for compliance with the regulatory requirements, known as cGMPs. If our contract manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or comparable regulatory authorities in foreign jurisdictions, we may not be able to rely on their manufacturing facilities for the manufacture of our product candidates. In addition, we have limited control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority finds these facilities inadequate for the manufacture of our product candidates or if such facilities are subject to enforcement action in the future or are otherwise inadequate, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates.
We currently rely on third parties at key stages in our supply chain. For instance, the supply chains for our lead product candidate involves several manufacturers that specialize in specific operations of the manufacturing process, specifically, raw materials manufacturing, drug substance manufacturing and drug product manufacturing. As a result, the supply chain for the manufacturing of our product candidates is complicated, and we expect the logistical challenges associated with our supply chain to grow more complex as our product candidates are further developed.
We do not have any control over the process or timing of the acquisition or manufacture of materials by our manufacturers. We generally do not begin preclinical or clinical trials unless we believe we have access to a sufficient supply of a product candidate to complete such study. In addition, any significant delay in, or quality control problems with respect to, the supply of a product candidate, or the raw material components thereof, for an ongoing study could considerably delay completion of our preclinical or clinical trials, product testing and potential regulatory approval of our product candidates.
We have not yet engaged any manufacturers for the commercial supply of our product candidates. Although we intend to enter into such agreements prior to commercial launch of any of our product candidates, we may be unable to enter into any such agreement or do so on commercially reasonable terms, which could have a material adverse impact upon our business. Moreover, if there is a disruption to one or more of our third-party manufacturers’ or suppliers’ relevant operations, or if we are unable to enter into arrangements for the commercial supply of our product candidates, we will have no other means of producing our product candidates until they restore the affected facilities or we or they procure alternative manufacturing facilities or sources of supply. Our ability to progress our preclinical and clinical programs could be materially and adversely impacted if any of the third-party suppliers upon which we rely were to experience a significant business challenge, disruption or failure due to issues such as financial difficulties or bankruptcy, issues relating to other customers such as regulatory or quality compliance issues, or other financial, legal, regulatory or reputational issues. Additionally, any damage to or destruction of our third-party manufacturers’ or suppliers’ facilities or equipment may significantly impair our ability to manufacture our product candidates on a timely basis.
In addition, to manufacture our product candidates in the quantities which we believe would be required to meet anticipated market demand, our third-party manufacturers would likely need to increase manufacturing capacity and we may need to secure alternative sources of commercial supply, which could involve significant challenges and may require additional regulatory approvals. In addition, the development of commercial-scale manufacturing capabilities may require us and our third-party manufacturers to invest substantial additional funds and hire and retain the technical personnel who have the necessary manufacturing experience. Neither we nor our third-party manufacturers may successfully complete any required increase to existing manufacturing capacity in a timely manner, or at all. If our manufacturers or we are unable to purchase the raw materials necessary for the manufacture of our product candidates on acceptable terms, at sufficient quality levels or in adequate quantities, if at all, the commercial launch of our product candidates would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of such product candidates, if approved.
Our product candidates have never been manufactured on a commercial scale, and there are risks associated with scaling up manufacturing to commercial scale. In particular, we will need to develop a larger scale manufacturing process that is more efficient and cost-effective to commercialize our potential products, which may not be successful.
Our product candidates have never been manufactured on a commercial scale, and there are risks associated with scaling up manufacturing to commercial scale including, among others, cost overruns, potential problems with process scale-up, process reproducibility, stability issues, lot consistency and timely availability of raw materials. There is no assurance that our third-party manufacturers will be successful in establishing a larger-scale commercial manufacturing process for our product candidates which achieves our objectives for manufacturing capacity and cost of goods. In addition, there is no assurance that our third-party manufacturers will be able to manufacture our product candidates to specifications acceptable to the FDA or other regulatory authorities, to produce it in sufficient quantities to meet the requirements for the potential launch of such products or to meet potential future demand. Our failure to properly or adequately scale scaling up manufacturing for commercial scale would adversely affect our business, results of operations and financial condition.
We rely on third parties in the conduct of all of our clinical trials. If these third parties do not successfully carry out their contractual duties, fail to comply with applicable regulatory requirements or meet expected deadlines, we may be unable to obtain regulatory approval for our product candidates.
We currently do not have the ability to independently conduct clinical trials that comply with the regulatory requirements known as good laboratory practice, or GLP, requirements or GCP requirements,
respectively. The FDA and regulatory authorities in other jurisdictions require us to comply with GCP requirements for conducting, monitoring, recording and reporting the results of clinical trials, in order to ensure that the data and results are scientifically credible and accurate and that the trial subjects are adequately informed of the potential risks of participating in clinical trials. We rely on medical institutions, clinical investigators, contract laboratories and other third parties, such as CROs, to conduct GLP-compliant preclinical studies and GCP-compliant clinical trials on our product candidates properly and on time. While we have agreements governing their activities, we control only certain aspects of their activities and have limited influence over their actual performance. The third parties with whom we contract for execution of our GLP-compliant preclinical studies and our GCP-compliant clinical trials play a significant role in the conduct of these studies and the subsequent collection and analysis of data. These third parties are not our employees and, except for restrictions imposed by our contracts with such third parties, we have limited ability to control the amount or timing of resources that they devote to our programs. Although we rely on these third parties to conduct our GLP-compliant preclinical studies and GCP-compliant clinical trials, we remain responsible for ensuring that each of our preclinical studies and clinical trials is conducted in accordance with its investigational plan and protocol and applicable laws and regulations, and our reliance on the CROs does not relieve us of our regulatory responsibilities.
Many of the third parties with whom we contract may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting preclinical studies, clinical trials or other drug development activities that could harm our competitive position. If the third parties conducting our preclinical studies or our clinical trials do not adequately perform their contractual duties or obligations, experience significant business challenges, disruptions or failures, do not meet expected deadlines, terminate their agreements with us or need to be replaced, or if the quality or accuracy of the data they obtain is compromised due to their failure to adhere to our protocols or to GLPs or GCPs, or for any other reason, we may need to enter into new arrangements with alternative third parties. This could be difficult, costly or impossible, and our preclinical studies or clinical trials may need to be extended, delayed, terminated or repeated. As a result we may not be able to obtain regulatory approval in a timely fashion, or at all, for the applicable product candidate, our business, financial results and the commercial prospects for our product candidates would be harmed, our costs could increase, and our ability to generate revenues could be delayed.
We face significant competition in an environment of rapid technological and scientific change, and there is a possibility that our competitors may achieve regulatory approval before us or develop therapies that are safer, more advanced or more effective than ours, which may negatively impact our ability to successfully market or commercialize any product candidates we may develop and ultimately harm our financial condition.
The development and commercialization of new drug products is highly competitive. Moreover, the neurodegenerative field is characterized by strong and increasing competition, and a strong emphasis on intellectual property. We may face competition with respect to any of our product candidates that we seek to develop or commercialize in the future from major pharmaceutical companies, specialty pharmaceutical companies, and biotechnology companies worldwide. Potential competitors also include academic institutions, government agencies, and other public and private research organizations that conduct research, seek patent protection, and establish collaborative arrangements for research, development, manufacturing, and commercialization.
There are a number of large pharmaceutical and biotechnology companies that are currently pursuing the development of product candidates for the treatment of the diseases and disorders for which we have research programs, including AD, dry AMD, PD and DLB. Companies developing therapeutics for similar indications include large companies with significant financial resources, such as AbbVie, AstraZeneca, Biogen, Celgene, Eli Lilly, GlaxoSmithKline, Johnson & Johnson, Novartis, Pfizer, Roche, Sanofi and Takeda. In addition to competition from other companies targeting neurodegenerative indications, any products we may develop may also face competition from other types of therapies.
Many of our current or potential competitors, either alone or with their strategic partners, have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals, and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may
result in even more resources being concentrated among a smaller number of our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient, or are less expensive than any products that we may develop. Furthermore, currently approved products could be discovered to have application for treatment of age-related degenerative diseases and disorders, which could give such products significant regulatory and market timing advantages over any of our product candidates. Our competitors also may obtain FDA, EMA or other regulatory approval for their products more rapidly than we may obtain approval for ours and may obtain orphan product exclusivity from the FDA for indications our product candidates are targeting, which could result in our competitors establishing a strong market position before we are able to enter the market. Additionally, products or technologies developed by our competitors may render our potential product candidates uneconomical or obsolete, and we may not be successful in marketing any product candidates we may develop against competitors.
In addition, we could face litigation or other proceedings with respect to the scope, ownership, validity and/or enforceability of our patents relating to our competitors’ products and our competitors may allege that our products infringe, misappropriate or otherwise violate their intellectual property. The availability of our competitors’ products could limit the demand, and the price we are able to charge, for any products that we may develop and commercialize. See “Risks Related to Our Intellectual Property.” The successful commercialization of our product candidates will depend in part on the extent to which governmental authorities and health insurers establish adequate coverage, reimbursement levels and pricing policies. Failure to obtain or maintain coverage and adequate reimbursement for our product candidates, if approved, could limit our ability to market those products and decrease our ability to generate revenue.
The successful commercialization of our product candidates will depend in part on the extent to which governmental authorities and health insurers establish adequate coverage, reimbursement levels and pricing policies. Failure to obtain or maintain coverage and adequate reimbursement for our product candidates, if approved, could limit our ability to market those drugs and decrease our ability to generate revenue.
The availability and adequacy of coverage and reimbursement by governmental healthcare programs such as Medicare and Medicaid, private health insurers and other third-party payors are essential for most patients to be able to afford prescription medications such as our product candidates, if approved. Our ability to achieve acceptable levels of coverage and reimbursement for products by governmental authorities, private health insurers and other organizations will have an effect on our ability to successfully commercialize our product candidates. Even if we obtain coverage for our product candidates by a third-party payor, the resulting reimbursement payment rates may not be adequate or may require co-payments that patients find unacceptably high. We cannot be sure that coverage and reimbursement in the United States, the European Union or elsewhere will be available for our product candidates or any product that we may develop, and any reimbursement that may become available may be decreased or eliminated in the future.
Third-party payors increasingly are challenging prices charged for biopharmaceutical products and services, and many third-party payors may refuse to provide coverage and reimbursement for particular drugs or biologics when an equivalent generic drug, biosimilar or a less expensive therapy is available. It is possible that a third-party payor may consider our product candidates as substitutable and only offer to reimburse patients for the cost of the less expensive product. Even if we show improved efficacy or improved convenience of administration with our product candidates, pricing of existing third-party therapeutics may limit the amounts we will be able to charge for our product candidates. These payors may deny or revoke the reimbursement status of a given product or establish prices for new or existing marketed products at levels that are too low to enable us to realize an appropriate return on our investment in our product candidates. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize our product candidates and may not be able to obtain a satisfactory financial return on our investment in the development of product candidates.
There is significant uncertainty related to the insurance coverage and reimbursement of newly-approved products. In the United States, third-party payors, and governmental healthcare plans, such as the
Medicare and Medicaid programs, play an important role in determining the extent to which new drugs and biologics will be covered. The Medicare and Medicaid programs increasingly are used as models in the United States for how private payors and other governmental payors develop their coverage and reimbursement policies for drugs and biologics. Some third-party payors may require pre-approval of coverage for new or innovative devices or drug therapies before they will reimburse healthcare providers who use such therapies. We cannot predict at this time what third-party payors will decide with respect to the coverage and reimbursement for our product candidates.
No uniform policy for coverage and reimbursement for products exists among third-party payors in the United States. Therefore, coverage and reimbursement for products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our product candidates to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. Furthermore, rules and regulations regarding reimbursement change frequently, in some cases on short notice, and we believe that changes in these rules and regulations are likely.
Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe and other foreign jurisdictions have and will continue to put pressure on the pricing and usage of our product candidates. In many countries, the prices of medical products are subject to varying price control mechanisms as part of national health systems. Other countries allow companies to fix their own prices for medical products, but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amounts that we are able to charge for our product candidates. Accordingly, in markets outside the United States, the reimbursement for our product candidates may be reduced compared with the United States and may be insufficient to generate commercially-reasonable revenue and profits.
Moreover, increasing efforts by governmental and third-party payors in the United States and abroad to cap or reduce healthcare costs may cause such organizations to limit both coverage and the level of reimbursement for newly approved products, and, as a result, they may not cover or provide adequate payment for our product candidates. We expect to experience pricing pressures in connection with the sale of our product candidates due to the trend toward managed health care, the increasing influence of health maintenance organizations and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs and biologics and surgical procedures and other treatments, has become intense. As a result, increasingly high barriers are being erected to the entry of new products.
We currently have no sales organization. If we are unable to establish sales capabilities on our own or through third parties, we may not be able to market and sell our product candidates, if approved, effectively in the United States and foreign jurisdictions or generate product revenue.
We currently do not have a marketing or sales organization. In order to commercialize our product candidates in the United States and foreign jurisdictions, we must build our marketing, sales, distribution, managerial and other non-technical capabilities or make arrangements with third parties to perform these services, and we may not be successful in doing so. If any of our product candidates receive regulatory approval, we expect to establish a sales organization with technical expertise and supporting distribution capabilities to commercialize each such product candidate, which will be expensive and time consuming. We have no prior experience in the marketing, sale and distribution of biopharmaceutical products, and there are significant risks involved in building and managing a sales organization, including our ability to hire, retain and incentivize qualified individuals, generate sufficient sales leads, provide adequate training to sales and marketing personnel and effectively manage a geographically dispersed sales and marketing team. Any failure or delay in the development of our internal sales, marketing and distribution capabilities would adversely impact the commercialization of these products. We may choose to collaborate with third parties that have direct sales forces and established distribution systems, either to augment our own sales force and distribution systems or in lieu of our own sales force and distribution systems. If we are unable to enter into such arrangements on acceptable terms or at all, we may not be able to successfully commercialize our product candidates. If we are not successful in commercializing our product candidates or any future product candidates, either on our own or through arrangements with one or more third parties, we may not be able to generate any future product revenue and we would incur significant additional losses.
Risks Related to Government Regulation
Even if we obtain regulatory approval for a product candidate, our products will remain subject to regulatory scrutiny.
If our product candidates are approved, they will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping, conduct of post-marketing studies and submission of safety, efficacy and other post-market information, including both federal and state requirements in the United States and requirements of comparable foreign regulatory authorities.
Manufacturers and manufacturers’ facilities are required to comply with extensive FDA and comparable foreign regulatory authority requirements, including ensuring that quality control and manufacturing procedures conform to cGMP regulations. As such, we and our contract manufacturers will be subject to continual review and inspections to assess compliance with cGMPs and adherence to commitments made in any approved marketing application. Accordingly, we and others with whom we work must continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production and quality control.
We will have to comply with requirements concerning advertising and promotion for any future products. Promotional communications with respect to prescription drugs and biologics are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product’s approved label. We may not promote products for indications or uses for which they do not have approval. The holder of an approved application must submit new or supplemental applications and obtain approval for certain changes to the approved product, product labeling or manufacturing process. We could also be asked to conduct post-marketing clinical trials to verify the safety and efficacy of our products in general or in specific patient subsets. An unsuccessful post-marketing study or failure to complete such a study could result in the withdrawal of marketing approval.
If a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, or disagrees with the promotion, marketing or labeling of a product, such regulatory agency may impose restrictions on that product or us, including requiring withdrawal of the product from the market. If we fail to comply with applicable regulatory requirements, a regulatory agency or enforcement authority may, among other things:
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issue warning letters;
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impose civil or criminal penalties;
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suspend or withdraw regulatory approval;
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suspend any of our clinical trials;
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refuse to approve pending applications or supplements to approved applications submitted by us;
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impose restrictions on our operations, including closing our contract manufacturers’ facilities; or
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seize or detain products, or require a product recall.
Any government investigation of alleged violations of law could require us to expend significant time and resources in response, and could generate negative publicity. Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to commercialize and generate revenue from any future products. If regulatory sanctions are applied or if regulatory approval is withdrawn, the value of our company and our operating results will be adversely affected.
Healthcare legislation, including potentially unfavorable pricing regulations or other healthcare reform initiatives, may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates.
We operate in a highly regulated industry. The commercial potential for our approved products, if any, could be affected by changes in healthcare spending and policy in the United States and abroad. New laws,
regulations or judicial decisions or new interpretations of existing laws, regulations or decisions, related to healthcare availability, the method of delivery or payment for healthcare products and services could adversely affect our business, operations and financial condition. The United States and many foreign jurisdictions have enacted or proposed legislative and regulatory changes affecting the healthcare system that may affect our ability to profitably sell our product and product candidates, if approved. The United States government, state legislatures and foreign governments also have shown significant interest in implementing cost-containment programs to limit the growth of government-paid healthcare costs, including price controls, restrictions on reimbursement and requirements for substitution of generic products for branded prescription drugs and biologics.
The Affordable Care Act was intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. There have been significant ongoing administrative, executive and legislative efforts to modify or eliminate the Affordable Care Act. For example, the Tax Act enacted on December 22, 2017 repealed the shared responsibility payment for individuals who fail to maintain minimum essential coverage under section 5000A of the Internal Revenue Code, commonly referred to as the individual mandate. The Trump administration issued executive orders which sought to reduce burdens associated with the Affordable Care Act and modified how it was implemented. Other legislative changes have been proposed and adopted since passage of the Affordable Care Act. The Affordable Care Act has also been subject to challenges in the courts. On December 14, 2018, a Texas U.S. District Court Judge ruled that the Affordable Care Act is unconstitutional in its entirety because the “individual mandate” was repealed by Congress. On December 18, 2019, the Fifth Circuit U.S. Court of Appeals held that the individual mandate is unconstitutional and remanded the case to the Texas District Court to reconsider its earlier invalidation of the entire Affordable Care Act. An appeal was taken to the U.S. Supreme Court which heard oral arguments in the case on November 10, 2020. On June 17, 2021, the Supreme Court ruled that the plaintiffs lacked standing to challenge the law as they had not alleged personal injury traceable to the allegedly unlawful conduct. As a result, the Supreme Court did not rule on the constitutionality of the ACA or any of its provisions.
Further changes to and under the Affordable Care Act remain possible, although the new Biden administration has signaled that it plans to build on the Affordable Care Act and expand the number of people who are eligible for subsidies under it. President Biden indicated that he intends to use executive orders to undo changes to the Affordable Care Act made by the Trump administration and would advocate for legislation to build on the Affordable Care Act. It is unknown what form any such changes or any law proposed to replace the Affordable Care Act would take, and how or whether it may affect our business in the future. We expect that changes to the Affordable Care Act, the Medicare and Medicaid programs, changes allowing the federal government to directly negotiate drug and biologic prices and changes stemming from other healthcare reform measures, especially with regard to healthcare access, financing or other legislation in individual states, could have a material adverse effect on the healthcare industry.
The Budget Control Act of 2011 has resulted in reductions in spending on certain government programs, including aggregate reductions to Medicare payments to healthcare providers of up to 2.0% per fiscal year. These reductions have been extended until 2030 unless additional Congressional action is taken.
Any reduction in reimbursement from Medicare, Medicaid, or other government programs may result in a similar reduction in payments from private payers. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain and maintain profitability of our product and product candidates, if approved.
We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we or any related third parties are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we or any related third parties are not able to maintain regulatory compliance, CT1812 or any future product candidates may lose any marketing approval that may have been obtained and we may not achieve or sustain profitability, which would materially affect our business, financial condition and results of operations.
If we develop a small molecule product candidate that obtains regulatory approval, additional competitors could enter the market with generic versions of such drugs, which may result in a material decline in sales of affected products.
Under the Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Act, a pharmaceutical manufacturer may file an abbreviated new drug application, or ANDA, seeking approval of a generic version of an approved, small molecule innovator product. Under the Hatch-Waxman Act, a manufacturer may also submit an NDA, under section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act that references the FDA’s prior approval of the small molecule innovator product. A 505(b)(2) NDA product may be for a new or improved version of the original innovator product. The Hatch-Waxman Act also provides for certain periods of regulatory exclusivity, which preclude FDA approval (or in some circumstances, FDA filing and review) of an ANDA or 505(b)(2) NDA. In addition to the benefits of regulatory exclusivity, an innovator NDA holder may have patents claiming the active ingredient, product formulation or an approved use of the drug, which would be listed with the product in the FDA publication, “Approved Drug Products with Therapeutic Equivalence Evaluations,” known as the Orange Book. If there are patents listed in the Orange Book for a product, a generic or 505(b)(2) applicant that seeks to market its product before expiration of the patents must include in their applications what is known as a “Paragraph IV” certification, challenging the validity or enforceability of, or claiming non-infringement of, the listed patent or patents. Notice of the certification must be given to the patent owner and NDA holder and if, within 45 days of receiving notice, either the patent owner or NDA holder sues for patent infringement, approval of the ANDA or 505(b)(2) NDA is stayed for up to 30 months.
Accordingly, if we choose to develop a small molecule product candidate, and the product is approved, competitors could file ANDAs for generic versions of our small molecule drug products or 505(b)(2) NDAs that reference our small molecule drug products. If there are patents listed for our small molecule drug products in the Orange Book, those ANDAs and 505(b)(2) NDAs would be required to include a certification as to each listed patent indicating whether the ANDA applicant does or does not intend to challenge the patent. We cannot predict which, if any, patents in our current portfolio or patents we may obtain in the future will be eligible for listing in the Orange Book, how any generic competitor would address such patents, whether we would sue on any such patents, or the outcome of any such suit.
We may not be successful in securing or maintaining proprietary patent protection for products and technologies we develop or license. Moreover, if any of our owned or in-licensed patents that are listed in the Orange Book are successfully challenged by way of a Paragraph IV certification and subsequent litigation, the affected product could immediately face generic competition and its sales would likely decline rapidly and materially.
Our business operations and current and future relationships with investigators, healthcare professionals, consultants, third-party payors, patient organizations and customers will be subject to applicable healthcare regulatory laws, which could expose us to penalties.
Our business operations and current and future arrangements with investigators, healthcare professionals, consultants, third-party payors, patient organizations and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations. These laws may constrain the business or financial arrangements and relationships through which we conduct our operations, including how we research, market, sell and distribute our product candidates, if approved. Such laws include, without limitation:
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the U.S. federal civil and criminal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, offering, receiving or providing any remuneration (including any kickback, bribe, or certain rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, lease, order or recommendation of, any good, facility, item or service, for which payment may be made, in whole or in part, under U.S. federal and state healthcare programs such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;
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the U.S. federal false claims laws, including the False Claims Act, which can be enforced through whistleblower actions, and civil monetary penalties laws, which, among other things, impose criminal
and civil penalties against individuals or entities for knowingly presenting, or causing to be presented, to the U.S. federal government, claims for payment or approval that are false or fraudulent, knowingly making, using or causing to be made or used, a false record or statement material to a false or fraudulent claim, or from knowingly making a false statement to avoid, decrease or conceal an obligation to pay money to the U.S. federal government. In addition, the government may assert that a claim including items and services resulting from a violation of the U.S. federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act;
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HIPAA, which imposes criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement, in connection with the delivery of, or payment for, healthcare benefits, items or services; similar to the U.S. federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;
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HIPAA, as amended by the HITECH and its implementing regulations, which also imposes certain obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information without appropriate authorization by covered entities, such as health plans, healthcare clearinghouses and healthcare providers, as well as their business associates that perform certain services involving the use or disclosure of individually identifiable health information;
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federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers;
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the U.S. Physician Payments Sunshine Act and its implementing regulations, which require certain manufacturers of drugs, devices, biologics and medical supplies that are reimbursable under Medicare, Medicaid or the Children’s Health Insurance Program to report annually to the government information related to certain payments and other transfers of value to physicians, as defined by such law, and teaching hospitals, as well as ownership and investment interests held by the physicians described above and their immediate family members. Effective January 1, 2022, the U.S. federal physician transparency reporting requirements will extend to include transfers of value made during the previous year to certain non-physician providers such as physician assistants and nurse practitioners;
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analogous U.S. state laws and regulations, including: state anti-kickback and false claims laws, which may apply to our business practices, including but not limited to, research, distribution, sales and marketing arrangements and claims involving healthcare items or services reimbursed by any third-party payor, including private insurers; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state and local laws that require the registration of pharmaceutical sales representatives; state laws and regulations that require drug manufacturers to file reports relating to pricing and marketing information, which requires tracking gifts and other remuneration and items of value provided to healthcare professionals and entities; and state laws governing the privacy, security and disposal of personal information and health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts;
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the U.S. Foreign Corrupt Practices Act of 1977, as amended, which prohibits, among other things, U.S. companies and their employees and agents from authorizing, promising, offering or providing, directly or indirectly, corrupt or improper payments or anything else of value to foreign government officials, employees of public international organizations and foreign government owned or affiliated entities, candidates for foreign political office and foreign political parties or officials thereof; and
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similar data protection and healthcare laws and regulations in the European Union and other jurisdictions, including reporting requirements detailing interactions with and payments to healthcare providers and laws governing the privacy and security of personal data, including the GDPR,
which imposes obligations and restrictions on the collection and use of personal data relating to individuals located in the European Union and European Economic Area (including with regard to health data).
Ensuring that our internal operations and future business arrangements with third parties comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations, agency guidance or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of the laws described above or any other governmental laws and regulations that may apply to us, we may be subject to significant penalties, including civil, criminal and administrative penalties, damages, fines, exclusion from government-funded healthcare programs, such as Medicare and Medicaid or similar programs in other countries or jurisdictions, disgorgement, imprisonment, contractual damages, reputational harm, diminished profits and the curtailment or restructuring of our operations. Further, defending against any such actions can be costly and time-consuming and may require significant personnel resources. Even if we are successful in defending against any such actions that may be brought against us, our business may be impaired.
Changes in tax laws and regulations may have a material adverse effect on our business, financial condition and results of operations.
New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could affect the tax treatment of any of our future domestic and foreign earnings. Any new taxes could adversely affect our domestic and international business operations, and our business and financial performance. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us. For example, the U.S. government enacted significant tax reforms in the past, and certain provisions of any new laws may adversely affect us. Changes in recent years include, but are not limited to, a federal corporate tax rate decrease to 21% for tax years beginning after December 31, 2017, a reduction to the maximum deduction allowed for net operating losses generated in tax years after December 31, 2017, eliminating carrybacks of net operating losses, and providing for indefinite carryforwards for losses generated in tax years after December 31, 2017. The legislation is unclear in many respects and could be subject to potential amendments and technical corrections, and will be subject to interpretations and implementing regulations by the Treasury and Internal Revenue Service, any of which could mitigate or increase certain adverse effects of the legislation. In addition, it is unclear how these U.S. federal income tax changes will affect state and local taxation. Generally, future changes in applicable U.S. tax laws and regulations, or their interpretation and application could have an adverse effect on our business, financial conditions and results of operations.
We are subject to U.S. and certain foreign export and import controls, sanctions, embargoes, anti-corruption laws, and anti-money laundering laws and regulations. Compliance with these legal standards could impair our ability to compete in domestic and international markets. We can face criminal liability and other serious consequences for violations, which can harm our business.
We are subject to export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations, various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls, the U.S. Foreign Corrupt Practices Act of 1977, as amended, or FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, and other state and national anti-bribery and anti-money laundering laws in the countries in which we conduct activities. Anti-corruption laws are interpreted broadly and prohibit companies and their employees, agents, contractors and other collaborators from authorizing, promising, offering or providing, directly or indirectly, improper payments or anything else of value to recipients in the public or private sector. We may engage third parties to sell our products outside the United States, to conduct clinical trials and/or to obtain necessary permits, licenses, patent registrations and other regulatory approvals. We have direct or indirect interactions with officials and employees of government agencies or government-affiliated hospitals, universities and other organizations. We can be held liable for the corrupt or other illegal activities of our employees, agents, contractors and other collaborators, even if we do not explicitly authorize or have actual knowledge of such activities. Any violations of the laws and regulations described above may result in substantial civil and criminal fines and penalties,
imprisonment, the loss of export or import privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm and other consequences.
Risks Related to Our Common Stock and this Offering
Our stock price may be volatile and you may not be able to resell shares of our common stock at or above the price you paid.
The trading price of our common stock following this offering could be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. In particular, the trading prices for biopharmaceutical companies have been highly volatile as a result of the COVID-19 pandemic. These factors include those discussed in this “Risk Factors” section of this prospectus and others such as:
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results from, and any delays in, our current and future clinical trials with CT1812 or any other future clinical development programs, including any delays related to the COVID-19 pandemic;
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announcements of regulatory approval or disapproval of CT1812 or any future product candidates;
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failure or discontinuation of any of our research and development programs;
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the termination of any future collaborations or license agreements;
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delays in the commercialization of CT1812 or any future product candidates;
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public misperception regarding the use of our product candidates;
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acquisitions and sales of new products or product candidates, technologies or businesses;
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manufacturing and supply issues related to our product candidates for clinical trials or future product candidates for commercialization;
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quarterly variations in our results of operations or those of our competitors;
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changes in coverage and recommendations by securities analysts;
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announcements by us or our competitors of new products or product candidates, significant contracts, commercial relationships, acquisitions or capital commitments;
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developments with respect to intellectual property rights;
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our commencement of, or involvement in, litigation;
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changes in financial estimates or guidance;
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any major changes in our board of directors or management;
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new legislation or regulation in the United States relating to the sale or pricing of pharmaceuticals;
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FDA or other U.S. or foreign regulatory actions affecting us or our industry;
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product liability claims or other litigation or public concern about the safety of our product candidates;
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market conditions in the biopharmaceutical sectors; and
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general economic conditions in the United States and abroad.
In addition, the stock markets in general, and the markets for biopharmaceutical stocks in particular, have experienced extreme volatility that may have been unrelated to the operating performance of the issuer. These broad market fluctuations may adversely affect the trading price or liquidity of our common stock.
An active, liquid and orderly market for our common stock may not develop, and you may not be able to resell your common stock at or above the public offering price.
Prior to this offering, there has been no public market for shares of our common stock. Although we intend to apply to have our common stock listed on the Nasdaq Global Market, an active public market for
our shares may not develop or be sustained after this offering. We and the representatives of the underwriters will determine the initial public offering price of our common stock through negotiation. This price will not necessarily reflect the price at which investors in the market will be willing to buy and sell our shares following this offering. In addition, an active trading market may not develop following the consummation of this offering or, if it is developed, may not be sustained. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. An inactive market may also impair our ability to raise capital by selling shares and may impair our ability to acquire other product candidates, businesses or technologies using our shares as consideration.
We are an “emerging growth company” and a “smaller reporting company” and, as a result of the reduced disclosure and governance requirements applicable to emerging growth companies and smaller reporting companies, our common stock may be less attractive to investors.
We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and we intend to take advantage of some of the exemptions from reporting requirements that are applicable to other public companies that are not emerging growth companies, including:
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not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting;
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not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;
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reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements; and
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not being required to hold a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. We may take advantage of these reporting exemptions until we are no longer an emerging growth company. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the closing of our initial public offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
Under Section 107(b) of the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. Even after we no longer qualify as an emerging growth company, we may, under certain circumstances, still qualify as a “smaller reporting company,” which would allow us to take advantage of many of the same exemptions from disclosure requirements, including reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.
Purchasers in this offering will experience immediate and substantial dilution in the book value of their investment.
The initial public offering price of our common stock is substantially higher than the pro forma net tangible book value per share of our common stock before giving effect to this offering. Accordingly, if you purchase our common stock in this offering, you will incur immediate substantial dilution of approximately $ per share, based on an assumed initial public offering price of $ per share, the midpoint of the estimated price range set forth on the cover of this prospectus, and our pro forma as adjusted net tangible book value as of March 31, 2021. In addition, following this offering, purchasers in this offering will have contributed approximately % of the total gross consideration paid by stockholders to us to purchase shares of our common stock through March 31, 2021, but will own only approximately % of the shares of common stock outstanding immediately after this offering. Furthermore, if the underwriters
exercise their option to purchase additional shares or outstanding options are exercised, you could experience further dilution. For a further description of the dilution that you will experience immediately after this offering, see the section titled “Dilution.”
If we sell shares of our common stock in future financings, stockholders may experience immediate dilution and, as a result, our stock price may decline.
Because we expect our expenses to increase significantly in the foreseeable future and because, based on our current business plans, we believe that the net proceeds from this offering, together with our existing cash, cash equivalents and marketable securities, will be insufficient for us to fund our operating and capital expenditures beyond the date that is months after the date of this offering, we may from time to time issue additional shares of common stock. These issuances may be at a discount from the current trading price of our common stock. As a result, our stockholders would experience immediate dilution upon the purchase of any shares of our common stock sold at such discount. In addition, as opportunities present themselves, we may enter into financing or similar arrangements in the future, including the issuance of debt securities, preferred stock or common stock. If we issue common stock or securities convertible into common stock, our common stockholders will experience additional dilution and, as a result, our stock price may decline.
Concentration of ownership of our common stock among our existing executive officers, directors and principal stockholders may prevent new investors from influencing significant corporate decisions.
Our executive officers, directors and current beneficial owners of 5% or more of our common stock and their respective affiliates are expected to beneficially own % of our outstanding common stock following the consummation of this offering. As a result, these persons, acting together, would be able to significantly influence all matters requiring stockholder approval, including the election and removal of directors, any merger, consolidation, sale of all or substantially all of our assets, or other significant corporate transactions.
Some of these persons or entities may have interests different than yours. For example, because many of these stockholders purchased their shares at prices substantially below the current market price of our common stock and have held their shares for a longer period, they may be more interested in selling our company to an acquirer than other investors, or they may want us to pursue strategies that deviate from the interests of other stockholders.
Sales of a substantial number of shares of our common stock in the public market could cause our stock price to fall.
If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market after the lock-up and other legal restrictions on resale discussed in this prospectus lapse, the trading price of our common stock could decline. Based upon the number of shares outstanding as of March 31, 2021, including 51,450,435 shares of our common stock issuable upon conversion of our preferred stock, shares of common stock upon the assumed net exercise of warrants (assuming an initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus), shares of our common stock issuable upon the conversion of the SAFEs upon the closing of in the aggregate amount of $8.9 million (assuming an initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus), we will have outstanding a total of shares of common stock, assuming no exercise of the underwriters’ option to purchase additional shares. Of these shares, substantially all of the shares of our common stock sold in this offering, plus any shares sold upon exercise of the underwriters’ option to purchase additional shares, will be freely tradable, without restriction, in the public market immediately following this offering.
The lock-up agreements pertaining to this offering will expire 180 days from the date of this prospectus. Based upon the number of shares outstanding as of March 31, 2021, plus 51,450,435 shares of our common stock issuable upon conversion of our preferred stock, shares of common stock upon the assumed net exercise of warrants (assuming an initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus); shares of our common stock issuable upon the conversion of the SAFEs upon the closing of in the aggregate amount of $8.9 million (assuming an initial public offering price of $ per share, the midpoint of the price range set forth on
the cover page of this prospectus), after the lock-up agreements expire, up to approximately additional shares of common stock will be eligible for sale in the public market, approximately of which shares are held by directors, executive officers and other affiliates and will be subject to Rule 144 under the Securities Act of 1933, as amended, or the Securities Act. National Securities Corporation may, however, in their sole discretion, permit our officers, directors and other stockholders who are subject to these lock-up agreements to sell shares prior to the expiration of the lock-up agreements.
In addition, promptly following the closing of this offering, we intend to file one or more registration statements on Form S-8 under the Securities Act of 1933, as amended, or the Securities Act, registering the issuance of shares of common stock subject to options or other equity awards issued or reserved for future issuance under our equity incentive plans. Shares registered under these registration statements on Form S-8 will be available for sale in the public market subject to vesting arrangements and exercise of options, the lock-up agreements described above and the restrictions of Rule 144 in the case of our affiliates.
After this offering, the holders of approximately shares of our common stock, or approximately % of our total outstanding shares of common stock, will be entitled to rights with respect to the registration of their shares under the Securities Act, subject to the lock-up agreements described above. Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares purchased by affiliates. Any sales of securities by these stockholders could have a material adverse effect on the trading price of our common stock.
We have broad discretion to determine how to use the funds raised in this offering, and may use them in ways that may not enhance our operating results or the price of our common stock.
Our management will have broad discretion over the use of proceeds from this offering, and we could spend the proceeds from this offering in ways our stockholders may not agree with or that do not yield a favorable return, if at all. We currently expect to use the net proceeds from this offering to fund research and development of our product candidates and development programs, including our planned Phase 2 trials of CT1812 for the treatment of mild-to-moderate AD, our planned Phase 2 proof of concept trials of CT1812 for the dry AMD, our IND-enabling studies of compounds in our library for the treatment of neurodegenerative indications such as PD, and the remainder for our other research and development activities, as well as for working capital and other general corporate purposes, including costs and expenses associated with being a public company. However, our use of these proceeds may differ substantially from our current plans. If we do not invest or apply the proceeds of this offering in ways that improve our operating results, we may fail to achieve expected financial results, which could cause our stock price to decline.
Our ability to use net operating loss carryforwards and other tax attributes may be limited.
As of December 31, 2020, we had federal net operating loss, or NOL, carryforwards of approximately $37.9 million and state NOL carryforwards of approximately $37.9 million available to offset future taxable income. If not utilized, the federal and state NOL carryforwards will begin to expire in various years beginning in 2027. As of December 31, 2020, we also had $3.7 million of federal research and development tax credit carryforwards available to reduce future income taxes. The federal research and development tax credits will begin to expire in 2027, if not utilized. The state research and development tax credits have no expiration date. Utilization of NOL carryforwards and credits may be subject to an annual limitation due to the “ownership change” provisions under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended. An “ownership change” is generally defined as a cumulative change in the ownership interest of significant stockholders over a rolling three-year period in excess of 50 percentage points. Similar provisions under state tax law may also apply. If finalized, Treasury Regulations currently proposed under Section 382 of the Code may further limit our ability to utilize our pre-change NOLs or credits if we undergo a future ownership change. We may experience an ownership change in the future as a result of subsequent shifts in our stock ownership, some of which changes are outside our control. Such ownership changes could result in the expiration of our NOL carryforwards and other tax attributes before they can be utilized and, if we are profitable, our future cash flows could be adversely affected due to our increased tax liability.
Additionally, under the Tax Cut and Jobs Act, the Tax Act, as modified by the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act”, NOL carryforwards arising in tax years beginning after
December 31, 2020 are limited to 80% of taxable income. Under the Tax Act, federal NOL carryforwards arising in tax years beginning after December 31, 2017 may be carried forward indefinitely. Under the CARES Act, federal NOL carryforwards arising in tax years beginning after December 31, 2017 and before January 1, 2021 may be carried back to each of the five tax years preceding the tax year of such loss. The changes in the carryforward and carryback periods as well as the limitation on use of NOL carryforwards may significantly impact our ability to use NOL carryforwards, particularly for tax years beginning after December 31, 2020, as well as the timing of any such use, and could adversely affect our results of operations.
Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable and may lead to entrenchment of management.
Our amended and restated certificate of incorporation and amended and restated bylaws, both of which will become effective immediately prior to the completion of this offering, will contain provisions that could delay or prevent changes in control or changes in our management without the consent of our board of directors. These provisions will include the following:
•
a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors;
•
no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;
•
the exclusive right of our board of directors to elect a director to fill a vacancy, however occurring, including by an expansion of the board of directors, which prevents stockholders from being able to fill vacancies on our board of directors;
•
the ability of our board of directors to authorize the issuance of shares of preferred stock and to determine the price and other terms of those shares, including voting or other rights or preferences, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror;
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the ability of our board of directors to alter our amended and restated bylaws without obtaining stockholder approval;
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the required approval of at least 66 2/3% of the shares entitled to vote at an election of directors to adopt, amend or repeal our amended and restated bylaws or repeal the provisions of our amended and restated certificate of incorporation regarding the election and removal of directors;
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a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;
•
the requirement that a special meeting of stockholders may be called only by the board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and
•
advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of us.
We are also subject to the anti-takeover provisions contained in Section 203 of the Delaware General Corporation Law. Under Section 203, a corporation may not, in general, engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other exceptions, the board of directors has approved the transaction. For a description of our capital stock, see the section titled “Description of Capital Stock.”
Our third amended and restated certificate of incorporation and amended and restated bylaws will provide that the Court of Chancery of the State of Delaware will be the exclusive forum for certain disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our third amended and restated certificate of incorporation and amended and restated bylaws will provide that the Court of Chancery of the State of Delaware (or, in the event that the Court of Chancery
does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) is the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a claim of breach of fiduciary duty, any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our third amended and restated certificate of incorporation or our amended and restated bylaws, or any action asserting a claim against us that is governed by the internal affairs doctrine; provided that, the exclusive forum provision will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction; and provided further that, if and only if the Court of Chancery of the State of Delaware dismisses any such action for lack of subject matter jurisdiction, such action may be brought in another state or federal court sitting in the State of Delaware. Our third amended and restated certificate of incorporation and amended and restated bylaws will also provide that the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action against us or any of our directors, officers, employees or agents and arising under the Securities Act. Nothing in our third amended and restated certificate of incorporation and amended and restated bylaws precludes stockholders that assert claims under the Exchange Act from bringing such claims in state or federal court, subject to applicable law.
This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims, although our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder. Furthermore, the enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that a court could find these types of provisions to be inapplicable or unenforceable. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions, and there can be no assurance that such provisions will be enforced by a court in those other jurisdictions. If a court were to find the choice of forum provision that will be contained in our amended and restated certificate of incorporation and amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.
We do not currently intend to pay dividends on our common stock, and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.
We do not currently intend to pay any cash dividends on our common stock for the foreseeable future. We currently intend to invest our future earnings, if any, to fund our growth. Therefore, you are not likely to receive any dividends on your common stock for the foreseeable future. Since we do not intend to pay dividends, your ability to receive a return on your investment will depend on any future appreciation in the market value of our common stock. There is no guarantee that our common stock will appreciate or even maintain the price at which our holders have purchased it.
Participation in this offering by our existing stockholders and/or their affiliated entities may reduce the public float for our common stock.
To the extent certain of our existing stockholders and their affiliated entities participate in this offering, such purchases would reduce the non-affiliate public float of our shares, meaning the number of shares of our common stock that are not held by officers, directors and controlling stockholders. A reduction in the public float could reduce the number of shares that are available to be traded at any given time, thereby adversely impacting the liquidity of our common stock and depressing the price at which you may be able to sell shares of common stock purchased in this offering.
General Risk Factors
Unfavorable global economic or political conditions could adversely affect our business, financial condition or results of operations.
Our business is susceptible to general conditions in the global economy and in the global financial markets. A global financial crisis or a global or regional political disruption could cause extreme volatility in
the capital and credit markets. A severe or prolonged economic downturn, including a recession or depression resulting from the current COVID-19 pandemic, or political disruption could result in a variety of risks to our business, including weakened demand for our product candidates or any future product candidates, if approved, and our ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy or political disruption could also strain our manufacturers or suppliers, possibly resulting in supply disruption, or cause our customers to delay making payments for our potential products. Any of the foregoing could materially and adversely affect our business, financial condition, results of operations and prospects, and we cannot anticipate all of the ways in which the political or economic climate and financial market conditions could adversely impact our business.
If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our stock, our stock price and trading volume could decline.
The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no or few securities or industry analysts commence coverage of us, the trading price for our stock would be negatively impacted. In the event we obtain securities or industry analyst coverage, if any of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model, our intellectual property or our stock performance, or if our clinical trials and operating results fail to meet the expectations of analysts, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
We may be subject to securities litigation, which is expensive and could divert our management’s attention.
In the past, companies that have experienced volatility in the market price of their securities have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Regardless of the merits or the ultimate results of such litigation, securities litigation brought against us could result in substantial costs and divert our management’s attention from other business concerns.
We will incur significant costs as a result of operating as a public company, and our management will devote substantial time to new compliance initiatives. We may fail to comply with the rules that apply to public companies, including Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, which could result in sanctions or other penalties that could materially and adversely affect our business, financial condition, results of operations and prospects.
We will incur significant legal, accounting and other expenses as a public company, including costs resulting from public company reporting obligations under the Exchange Act and regulations regarding corporate governance practices. The listing requirements of the Nasdaq Global Market and the rules of the Securities and Exchange Commission, or SEC, require that we satisfy certain corporate governance requirements relating to director independence, filing annual and interim reports, stockholder meetings, approvals and voting, soliciting proxies, conflicts of interest and a code of conduct. Our management and other personnel will need to devote a substantial amount of time to ensure that we comply with all of these requirements. Moreover, the reporting requirements, rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. Any changes we make to comply with these obligations may not be sufficient to allow us to satisfy our obligations as a public company on a timely basis, or at all. These reporting requirements, rules and regulations, coupled with the increase in potential litigation exposure associated with being a public company, could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors or board committees or to serve as executive officers, or to obtain certain types of insurance, including directors’ and officers’ insurance, on acceptable terms.
After this offering, we will be subject to Section 404 and the related rules of the SEC, which generally require our management and independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting. Beginning with the second annual report that we will be required to file with the SEC, Section 404 requires an annual management assessment of the effectiveness of our internal control over financial reporting. However, for so long as we remain an emerging growth
company as defined in the JOBS Act, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404. Once we are no longer an emerging growth company or, if prior to such date, we opt to no longer take advantage of the applicable exemption, we will be required to include an opinion from our independent registered public accounting firm on the effectiveness of our internal control over financial reporting.
During the course of our review and testing, we may identify deficiencies and be unable to remediate them before we must provide the required reports. Furthermore, if we identify any material weaknesses, we may not detect errors on a timely basis and our financial statements may be materially misstated. We or our independent registered public accounting firm may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting, which could materially and adversely affect our business, financial condition, results of operations and prospects, cause investors to lose confidence in our reported financial information and cause the trading price of our stock to fall. In addition, as a public company we will be required to file accurate and timely quarterly and annual reports with the SEC under the Exchange Act. In order to report our results of operations and financial statements on an accurate and timely basis, we will depend in part on CROs and other third parties to provide timely and accurate notice of their costs to us. Any failure to report our financial results on an accurate and timely basis could result in sanctions, lawsuits, delisting of our shares from the Nasdaq Global Market or other adverse consequences that would materially and adversely affect our business, financial condition, results of operations and prospects.
We will incur increased costs and demands upon management as a result of being a public company.
As a public company listed in the United States, we will incur significant additional legal, accounting and other costs. These additional costs could negatively affect our financial results. In addition, changing laws, regulations and standards relating to corporate governance and public disclosure, including regulations implemented by the SEC and The Nasdaq Stock Market LLC, may increase legal and financial compliance costs and make some activities more time-consuming. These laws, regulations and standards are subject to varying interpretations and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If notwithstanding our efforts to comply with new laws, regulations and standards, we fail to comply, regulatory authorities may initiate legal proceedings against us and our business may be harmed.
Failure to comply with these rules might also make it more difficult for us to obtain some types of insurance, including director and officer liability insurance, and we might be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, on committees of our board of directors or as members of senior management.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements concerning our business, operations and financial performance, as well as our plans, objectives and expectations for our business operations and financial performance and condition. All statements other than statements of historical or current facts included in this prospectus are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “design,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “positioned,” “potential,” “predict,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. In addition, statements that “we believe” or similar statements reflect our beliefs and opinions on the relevant subject. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed in, or implied by these, forward-looking statements and therefore, you should not unduly rely on such statements, including, but not limited to:
•
our ability to raise additional capital to fund our operations and continue the development of our current and future product candidates;
•
the clinical nature of our business and our ability to successfully advance our current and future product candidates through our ongoing and future clinical trials, preclinical studies and development activities;
•
our ability to generate revenue from future product sales and our ability to achieve and maintain profitability;
•
the accuracy of our projections and estimates regarding our expenses, capital requirements, cash utilization, and need for additional financing;
•
the expected uses of the net proceeds from this offering;
•
the extent to which the COVID-19 pandemic and measures taken to contain its spread ultimately impact our business, including our ongoing and future clinical trials, preclinical studies and development activities;
•
our dependence on the success of CT1812, our lead product candidate;
•
the novelty of our approach to targeting the S2R complex to treat age-related degenerative diseases and disorders, and the challenges we will face due to the novel nature of such approach;
•
the success of competing therapies that are or become available;
•
the initiation, progress, success, cost, and timing of our ongoing and future clinical trials, preclinical studies and development activities;
•
our ability to obtain and maintain regulatory clearance of CT1812 for approved IND applications and any future IND applications for any of our other product candidates;
•
the timing, scope and likelihood of regulatory filings and approvals, including final regulatory approval of our product candidates;
•
the performance of third parties in connection with the development of our product candidates, including third parties conducting our future clinical trials as well as third-party suppliers and manufacturers;
•
our ability to attract and retain strategic collaborators with development, regulatory, and commercialization expertise;
•
our ability to successfully commercialize our product candidates and develop sales and marketing capabilities, if our product candidates are approved;
•
the size and growth of the potential markets for our product candidates and our ability to serve those markets;
•
regulatory developments and approval pathways in the United States and foreign countries for our product candidates;
•
the potential scope and value of our intellectual property and proprietary rights;
•
our ability, and the ability of any future licensors, to obtain, maintain, defend, and enforce intellectual property and proprietary rights protecting our product candidates, and our ability to develop and commercialize our product candidates without infringing, misappropriating, or otherwise violating the intellectual property or proprietary rights of third parties;
•
our ability to recruit and retain key members of management and other clinical and scientific personnel;
•
developments relating to our competitors and our industry; and
•
other risks and uncertainties, including those described under the caption “Risk Factors” in this prospectus.
We have based these forward-looking statements largely on our current expectations, estimates, forecasts and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. In light of the significant uncertainties in these forward-looking statements, you should not rely upon forward-looking statements as predictions of future events. Although we believe that we have a reasonable basis for each forward-looking statement contained in this prospectus, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur at all. You should refer to the section titled “Risk Factors” and elsewhere in this prospectus for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. Except as required by law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.
You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of the forward-looking statements in this prospectus by these cautionary statements.
USE OF PROCEEDS
We estimate that the net proceeds from this offering will be approximately $ million (or $ million if the underwriters exercise their option to purchase additional shares in full), assuming an initial offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and offering expenses payable by us.
Each $1.00 increase or decrease in the assumed initial public offering price of $ per share would increase or decrease, as applicable, the net proceeds to us from this offering by $ million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. Each increase or decrease of 1.0 million shares in the number of shares offered by us would increase or decrease, as applicable, the net proceeds to us from this offering by $ million, assuming that the assumed initial public offering price remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We do not expect that a change in the initial public offering price or the number of shares by these amounts would have a material effect on our uses of the proceeds from this offering, although it may accelerate the time when we need to seek additional capital.
The principal purposes of this offering are to increase our capitalization and financial flexibility, establish a public market for our common stock and to facilitate future access to the public equity markets by us, our employees and our stockholders, obtain additional capital to support our operations and increase our visibility in the marketplace. We currently intend to use the net proceeds from this offering together with our existing cash and cash equivalents as follows:
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approximately $ million to fund our planned Phase 2 trials of CT1812 for the treatment of mild-to-moderate AD;
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approximately $ million to fund our planned Phase 2 proof of concept trials of CT1812 for the dry AMD;
•
approximately $ million to fund our IND-enabling studies of compounds in our library for the treatment of neurodegenerative indications such as PD; and
•
the remainder for our other research and development activities, as well as for working capital and other general corporate purposes.
The expected use of the net proceeds from this offering represents our intentions based on our current plans and business conditions, which could change in the future as our plans and business conditions evolve. Further, due to the uncertainties inherent in the small molecule development process, it is difficult to estimate with certainty the exact amounts of the net proceeds from this offering that may be used for the above purposes. We may also use a portion of our net proceeds to acquire or invest in complementary products, technologies, or businesses. However, we currently have no agreements or commitments to do so. As a result, our management will have broad discretion over the use of the net proceeds from this offering, and our investors will be relying on the judgment of our management regarding the application of the net proceeds of this offering. The amounts and timing of our expenditures will depend upon numerous factors including the results of our research and development efforts, the timing, number, scope and success of our nonclinical studies and clinical trials, and the timing and success of any regulatory submissions.
Based on our current business plans, we believe that the net proceeds from this offering, together with our existing cash and cash equivalents and the income from non-dilutive grants, will be sufficient for us to fund our operating expenses and capital expenditures requirements through at least . In particular, we expect that the net proceeds from this offering will fund us through receipt of topline data readouts for our planned Phase 2 trials of CT1812 for the treatment of mild-to-moderate AD, Phase 2 proof of concept trials or CT1812 for dry AMD as well as IND-enabling studies and IND applications for compounds in our library for the treatment of neurodegenerative indications such as PD. The expected net proceeds from this offering will not be sufficient for us to fund any of our product candidates through regulatory approval and commercialization, and we will need to raise substantial additional capital to complete the development and commercialization of our product candidates. We have based these estimates on assumptions that may
prove to be incorrect or require adjustment as a result of business decisions, and we could utilize our available capital resources sooner than we currently expect. For additional information regarding our potential capital requirements, including factors that could cause actual costs to vary from the estimates set forth above, see the section of this prospectus titled “Risk Factors.”
As of the date of this prospectus, we intend to invest the net proceeds in short-term interest-bearing investment-grade securities, certificates of deposit or government securities. The goal with respect to the investment of these net proceeds is capital preservation and liquidity so that such funds are readily available to fund our operations.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock, and we do not currently intend to pay any cash dividends on our common stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to support operations and to finance the growth and development of our business. Any future determination to pay dividends will be made at the discretion of our board of directors subject to applicable laws and will depend upon, among other factors, our results of operations, financial condition, contractual restrictions and capital requirements. Our future ability to pay cash dividends on our common stock may be limited by any future debt instruments or preferred securities.
CAPITALIZATION
The following table sets forth our cash, cash equivalents, short term investments and our capitalization as of March 31, 2021:
•
on an actual basis;
•
on a pro forma basis to give effect to (i) the filing and effectiveness of our third amended and restated certificate of incorporation immediately prior to the closing of this offering, (ii) the automatic conversion of all outstanding shares of our convertible preferred stock into an aggregate of 51,450,435 shares of our common stock upon the closing of this offering, (iii) the issuance of shares of our common stock upon the assumed net exercise of warrants that otherwise expire upon or prior to the closing of this offering (assuming an initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus), and (iv) the issuance of shares of our common stock issuable upon conversion of the SAFEs upon the closing of this offering in the aggregate amount of $8.9 million (assuming an initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus); and
•
on a pro forma as adjusted basis to give effect to (i) the pro forma adjustments described above and (ii) the issuance and sale of shares of our common stock in this offering at an assumed initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
The pro forma as adjusted information set forth in the table below is illustrative only and will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this table together with the sections of this prospectus captioned “Selected Consolidated Financial Data,” “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Description of Capital Stock” and our financial statements and related notes included elsewhere in this prospectus.
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As of March 31, 2021
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Actual
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Pro Forma(1)
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Pro Forma
as Adjusted(2)
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(in thousands except share and per share data)
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Cash and cash equivalents
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$
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13,373
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$
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$
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Convertible notes
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12,691
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Accrued interest
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1,879
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Derivative liability
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1,146
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Simple Agreements for Future Equity
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8,942
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|
|
Series A convertible preferred stock, par value $0.001 per share, 3,067,519 shares authorized at March 31, 2021, 2,819,027 shares issued and outstanding as of March 31, 2021; liquidation preference of $4,860 as of March 31, 2021
|
|
|
|
|
4,616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A-1 convertible preferred stock, par value $0.001 per share, 3,970,776 shares authorized at March 31, 2021, 3,730,366 shares issued and outstanding as of March 31, 2021; liquidation preference of $5,682 as of March 31, 2021
|
|
|
|
|
5,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A-2 convertible preferred stock, par value $0.001 per share, 3,565,063 shares authorized at March 31, 2021, 3,565,063 shares issued and outstanding as of March 31, 2021; liquidation preference of $6,115 as of March 31, 2021
|
|
|
|
|
5,809
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series B convertible preferred stock, par value $0.001 per share,
30,450,000 shares authorized at March 31, 2021, 30,409,890 shares
issued and outstanding as of March 31, 2021; liquidation
preference of $41,632 as of March 31, 2021
|
|
|
|
|
39,547
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series B-1 convertible preferred stock, par value $0.001 per share, 0
shares authorized at March 31, 2021, 0 shares issued and
outstanding as of March 31, 2021; liquidation preference of $0 as
of March 31, 2021
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity (deficit):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value, 58,000,000 shares authorized at March 31, 2021; 1,809,998 shares issued and outstanding at March 31, 2021
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
|
|
333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated deficit
|
|
|
|
|
(67,997)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss
|
|
|
|
|
(192)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders’ deficit
|
|
|
|
|
(67,854)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
|
|
$
|
12,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
The pro forma and pro forma as adjusted information set forth above is illustrative only, and our cash and cash equivalents and capitalization following the completion of this offering will depend on the actual initial public offering price and other terms of the offering determined at the pricing of this offering. Each $1.00 increase (decrease) in the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents, additional paid-in capital, total stockholders’ equity and total capitalization by $ million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 1,000,000 shares in the number of shares offered by us would increase (decrease) the pro forma as adjusted amounts of each of cash and cash equivalents,
additional paid-in capital, total stockholders’ equity and total capitalization by $ million, assuming that the assumed initial public offering price remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
(2)
If the underwriters exercise in full their option to purchase additional shares of our common stock, (i) an additional shares of common stock would be issued and we would receive approximately $ in additional net proceeds, based on the assumed initial offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us; and (ii) cash and cash equivalents, additional paid-in-capital, total stockholders’ equity and total capitalization would each increase by $ .
The number of shares of our common stock to be outstanding after this offering reflected in the table above is based on shares of our common stock outstanding as of March 31, 2021, which gives effect to the pro forma transactions described above and excludes:
•
14,414,342 shares of our common stock issuable upon the exercise of stock options as of March 31, 2021, at a weighted-average exercise price of $0.31 per share;
•
690,678 shares of our common stock reserved for issuance pursuant to future awards as of March 31, 2021 under our 2017 Plan, which will become available under our 2021 Plan, after the closing of this offering;
•
shares of our common stock reserved for future issuance under the 2021 Plan which will become effective upon the effectiveness of the Registration Statement of which this prospectus forms a part, as well any future increases in the number of shares of our common stock reserved for future issuance pursuant to the 2021 Plan; and
•
shares of our common stock reserved for future issuance under our ESPP, which will become effective upon the effectiveness of the Registration Statement of which this prospectus forms a part, as well as any future increases in the number of shares of common stock reserved for issuance under the ESPP.
DILUTION
If you invest in our common stock in this offering, your ownership interest will be diluted to the extent of the difference between the initial public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock after this offering.
Our historical net tangible book deficit as of March 31, 2021 was $(67.9) million, or $(37.49) per share of our common stock. Our historical net tangible book deficit is the amount of our total tangible assets less our total liabilities and preferred stock, which is not included within stockholders’ deficit. Historical net tangible book deficit per share represents historical net tangible book deficit divided by the number of shares of our common stock outstanding as of March 31, 2021.
Our pro forma net tangible book value as of March 31, 2021, before giving effect to this offering, was $ million, or $ per share. Pro forma net tangible book value, before the issuance and sale of shares in this offering, gives effect to:
•
the automatic conversion of all outstanding shares of convertible preferred stock into an aggregate of 51,450,435 shares of our common stock upon the closing of this offering;
•
the issuance of shares of common stock upon the assumed net exercise of warrants that otherwise expire upon or prior to the closing of this offering (assuming an initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus); and
•
the issuance of shares of our common stock issuable upon the conversion of the SAFEs upon the closing of this offering in the aggregate amount of $8.9 million (assuming an initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus).
Pro forma net tangible book value per share represents pro forma net tangible book value divided by the total number of shares outstanding as of March 31, 2021 after giving effect to the pro forma adjustments described above.
Net tangible book value dilution per share to new investors represents the difference between the amount per share paid by purchasers of common stock in this offering and the pro forma as adjusted net tangible book value per share of our common stock immediately following the closing of this offering. After giving effect to the pro forma transactions described above and the sale of shares of common stock in this offering at an assumed initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of March 31, 2021 would have been $ million, or $ per share. This represents an immediate increase in pro forma as adjusted net tangible book value of $ per share to our existing stockholders and an immediate dilution of $ per share to new investors participating in this offering. The following table illustrates this dilution on a per share basis:
|
|
Assumed initial public offering price per share
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
Historical net tangible book value per share as of March 31, 2021
|
|
|
|
$
|
(37.49)
|
|
|
|
|
|
|
|
|
|
|
Increase per share attributable to the pro forma adjustments described above
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net tangible book value per share as of March 31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in pro forma net tangible book value per share attributed to new investors purchasing shares of common stock in this offering
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma as adjusted net tangible book value per share immediately after this offering
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilution per share to new investors purchasing shares of common stock in this offering
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
Each $1.00 increase or decrease in the assumed initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, our pro forma as adjusted net tangible book value per share after this offering by $ per share
and the dilution per share to new investors participating in this offering by $ per share, assuming that the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, an increase of 1.0 million in the number of shares of common stock offered by us would increase the pro forma as adjusted net tangible book value after this offering by $ per share and decrease the dilution per share to new investors participating in this offering by $ per share, and a decrease of 1.0 million shares of common stock offered by us would decrease the pro forma as adjusted net tangible book value by $ per share, and increase the dilution per share to new investors in this offering by $ per share, assuming that the assumed initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
If the underwriters exercise in full their option to purchase additional shares of common stock from us, the pro forma as adjusted net tangible book value per share after giving effect to this offering at an assumed initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, would be $ per share, representing an immediate increase to existing stockholders of $ per share, and dilution to new investors participating in this offering of $ per share.
The following table summarizes, as of March 31, 2021, on the pro forma as adjusted basis described above, the total number of shares of common stock purchased from us on an as converted to common stock basis, the total consideration paid or to be paid, and the weighted-average price per share paid or to be paid by existing stockholders and by new investors in this offering at an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. As the table shows, new investors purchasing common stock in this offering will pay an average price per share substantially higher than our existing stockholders paid.
|
|
|
|
Shares
purchased
|
|
|
Percentage
|
|
|
Amount
|
|
|
Percentage
|
|
|
Average price
per share
|
|
|
Existing stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
Public stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
100.0%
|
|
|
|
|
|
|
|
|
|
|
|
100.0%
|
|
|
|
|
|
|
|
|
The table above assumes no exercise of the underwriters’ option to purchase additional shares in this offering. If the underwriters’ option to purchase additional shares is exercised in full, the number of shares of our common stock held by existing stockholders would be reduced to approximately % of the total number of shares of our common stock outstanding after this offering, and the number of shares of common stock held by new investors purchasing shares of common stock in this offering would be increased to approximately % of the total number of shares of our common stock outstanding after this offering.
A $1.00 increase or decrease in the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease the total consideration paid by new investors by $ million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same. An increase or decrease of 1,000,000 shares in the number of shares offered by us would increase or decrease the total consideration paid by new investors by $ million, assuming that the assumed initial public offering price remains the same.
The number of shares of our common stock to be outstanding after this offering is based on shares of our common stock outstanding as of March 31, 2021, which gives effect to the pro forma transactions described above and excludes:
•
14,414,342 shares of our common stock issuable upon the exercise of stock options as of March 31, 2021, at a weighted-average exercise price of $0.31 per share;
•
690,678 shares of our common stock reserved for issuance pursuant to future awards as of March 31, 2021 under our 2017 Plan, which will become available under our 2021 Plan, after the closing of this offering;
•
shares of our common stock reserved for future issuance under the 2021 Plan which will become effective upon the effectiveness of the Registration Statement of which this prospectus forms a part, as well any future increases in the number of shares of our common stock reserved for future issuance pursuant to the 2021 Plan; and
•
shares of our common stock reserved for future issuance under our ESPP, which will become effective upon the effectiveness of the Registration Statement of which this prospectus forms a part, as well as any future increases in the number of shares of common stock reserved for issuance under the ESPP.
To the extent that any outstanding stock options or warrants are exercised, new stock options are issued, or we issue additional shares of common stock in the future at per share prices below the price per share to the public in this offering, there will be further dilution to new investors. In addition, we may choose to raise additional capital because of market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans. If we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders.
SELECTED CONSOLIDATED FINANCIAL DATA
The following tables summarize our selected financial data for the periods and as of the dates indicated. We have derived our selected statements of operations data for the years ended December 31, 2019 and 2020 and the selected balance sheet data as of December 31, 2019 and 2020 from our audited financial statements and related notes included elsewhere in this prospectus. For interim periods, we have derived our selected statements of operations data for the three months ended March 31, 2020 and 2021 and the selected balance sheet data as of March 31, 2021 from our unaudited financial statements and related notes included elsewhere in this prospectus. The unaudited financial statements were prepared on a basis consistent with our audited financial statements and include, in management’s opinion, all adjustments, consisting only of normal recurring adjustments that we consider necessary for a fair presentation of the financial information set forth in those statements. Our historical results are not necessarily indicative of the results that may be expected in the future and our interim results are not necessarily indicative of our expected results for the year ending December 31, 2021. You should read the selected financial data below in conjunction with the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes included elsewhere in this prospectus. The selected financial data in this section are not intended to replace the financial statements and are qualified in their entirety by the financial statements and related notes included elsewhere in this prospectus.
|
|
|
|
Year Ended December 31,
|
|
|
Three Months Ended March 31,
|
|
|
(in thousands, except share and per share data)
|
|
|
2019
|
|
|
2020
|
|
|
2020
|
|
|
2021
|
|
|
Consolidated Statements of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
|
$
|
14,379
|
|
|
|
|
$
|
12,887
|
|
|
|
|
$
|
3,446
|
|
|
|
|
$
|
4,430
|
|
|
|
General and administrative
|
|
|
|
|
3,452
|
|
|
|
|
|
4,520
|
|
|
|
|
|
1,445
|
|
|
|
|
|
1,153
|
|
|
|
Total operating expenses
|
|
|
|
|
17,831
|
|
|
|
|
|
17,407
|
|
|
|
|
|
4,891
|
|
|
|
|
|
5,583
|
|
|
|
Loss from operations
|
|
|
|
|
(17,831)
|
|
|
|
|
|
(17,407)
|
|
|
|
|
|
(4,891)
|
|
|
|
|
|
(5,583)
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant income
|
|
|
|
|
13,164
|
|
|
|
|
|
10,855
|
|
|
|
|
|
2,273
|
|
|
|
|
|
4,692
|
|
|
|
Change in the fair value of the derivative liability
|
|
|
|
|
(231)
|
|
|
|
|
|
18
|
|
|
|
|
|
345
|
|
|
|
|
|
1,063
|
|
|
|
Change in the fair value of the warrant liability
|
|
|
|
|
(7)
|
|
|
|
|
|
181
|
|
|
|
|
|
30
|
|
|
|
|
|
—
|
|
|
|
Other income, net
|
|
|
|
|
1,087
|
|
|
|
|
|
394
|
|
|
|
|
|
142
|
|
|
|
|
|
145
|
|
|
|
(Loss) gain on debt extinguishment
|
|
|
|
|
—
|
|
|
|
|
|
(129)
|
|
|
|
|
|
(129)
|
|
|
|
|
|
443
|
|
|
|
Interest expense, net
|
|
|
|
|
(1,024)
|
|
|
|
|
|
(1,751)
|
|
|
|
|
|
(276)
|
|
|
|
|
|
(537)
|
|
|
|
Total other income (expense), net
|
|
|
|
|
12,989
|
|
|
|
|
|
9,568
|
|
|
|
|
|
2,385
|
|
|
|
|
|
5,806
|
|
|
|
Net (loss) income
|
|
|
|
|
(4,842)
|
|
|
|
|
|
(7,839)
|
|
|
|
|
|
(2,506)
|
|
|
|
|
|
223
|
|
|
|
Cumulative preferred stock dividends
|
|
|
|
|
(3,920)
|
|
|
|
|
|
(4,234)
|
|
|
|
|
|
(1,053)
|
|
|
|
|
|
(1,128)
|
|
|
|
Net loss attributable to common stockholders
|
|
|
|
$
|
(8,762)
|
|
|
|
|
$
|
(12,073)
|
|
|
|
|
$
|
(3,559)
|
|
|
|
|
$
|
(905)
|
|
|
|
Net loss per share attributable to common stockholders, basic and diluted
|
|
|
|
$
|
(5.77)
|
|
|
|
|
$
|
(7.35)
|
|
|
|
|
$
|
(2.34)
|
|
|
|
|
$
|
(0.51)
|
|
|
|
Weighted-average common shares outstanding, basic and diluted(1)
|
|
|
|
|
1,519,285
|
|
|
|
|
|
1,643,514
|
|
|
|
|
|
1,519,431
|
|
|
|
|
|
1,779,573
|
|
|
|
Pro forma loss per share, basic and diluted(2)
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
Pro forma weighted-average common shares outstanding, basic and diluted(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
See Note 2 to our consolidated financial statements included elsewhere in this prospectus for an explanation of the method used to calculate the basic and diluted net loss per share and the number of shares used in the computation of the per share amounts.
(2)
The calculations for the pro forma net loss per share attributable to common stockholders, basic and diluted, and the pro forma weighted-average shares of common stock outstanding, basic and diluted, assume the conversion of all our outstanding shares of preferred stock into common stock, the assumed net exercise of warrants to purchase common stock that otherwise expire upon or prior to the closing of this offering and the conversion of the SAFEs into shares of our common stock, as if the conversion or exercise had occurred at the beginning of the period presented, or the issuance date, if later.
|
(in thousands)
|
|
|
As of December 31,
|
|
|
As of March 31,
|
|
|
|
2019
|
|
|
2020
|
|
|
2021
|
|
|
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
$
|
2,890
|
|
|
|
|
$
|
5,189
|
|
|
|
|
$
|
13,373
|
|
|
|
Working capital
|
|
|
|
|
3,477
|
|
|
|
|
|
3,658
|
|
|
|
|
|
11,614
|
|
|
|
Total assets
|
|
|
|
|
7,459
|
|
|
|
|
|
7,119
|
|
|
|
|
|
16,512
|
|
|
|
Simple Agreements for Future Equity
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
8,942
|
|
|
|
Derivative liability
|
|
|
|
|
1,493
|
|
|
|
|
|
2,209
|
|
|
|
|
|
1,146
|
|
|
|
Warrant liability
|
|
|
|
|
181
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Convertible notes, net
|
|
|
|
|
6,897
|
|
|
|
|
|
12,409
|
|
|
|
|
|
12,691
|
|
|
|
Total liabilities
|
|
|
|
|
12,954
|
|
|
|
|
|
19,933
|
|
|
|
|
|
28,996
|
|
|
|
Convertible preferred stock
|
|
|
|
|
52,927
|
|
|
|
|
|
55,370
|
|
|
|
|
|
55,370
|
|
|
|
Accumulated deficit
|
|
|
|
|
(58,239)
|
|
|
|
|
|
(68,220)
|
|
|
|
|
|
(67,997)
|
|
|
|
Total stockholders’ deficit
|
|
|
|
|
(58,422)
|
|
|
|
|
|
(68,184)
|
|
|
|
|
|
(67,854)
|
|
|
(1)
We define working capital as total current assets less total current liabilities. See our audited and unaudited consolidated financial statements included elsewhere in this prospectus and related notes for further details regarding our total current assets and total current liabilities.
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 the section entitled “Summary Financial Data” and our financial statements and related notes appearing elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the section entitled “Risk Factors,” our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. You should carefully read the sections entitled “Risk Factors” and “Special Note Regarding Forward-Looking Statements” to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements.
Overview
We are a clinical-stage biopharmaceutical company engaged in the discovery and development of innovative, small molecule therapeutics targeting age-related degenerative diseases and disorders of the central nervous system, or CNS, and retina. Currently available therapies for these diseases are limited, with many diseases having no approved therapies or treatments. Our goal is to develop disease modifying treatments for patients with these degenerative disorders by initially leveraging our expertise in the σ-2 (sigma-2) receptor, or S2R, which is expressed by multiple cell types, including neuronal synapses, and acts as a key regulator of cellular damage commonly associated with certain age-related degenerative diseases of the CNS and retina. We believe that targeting the S2R complex represents a mechanism that is functionally distinct from other current approaches in clinical development for the treatment of degenerative diseases.
Since our inception in 2007, we have incurred significant operating losses and devoted substantially all of our time and resources to developing our lead product candidate, CT1812, building our intellectual property portfolio, raising capital and recruiting management and technical staff to support these operations. As of March 31, 2021, we had an accumulated deficit of $68.0 million and we incurred a net loss of $2.5 million for the three months ended March 31, 2020 and we had net income of $0.2 million for the three months ended March 31,2021. We incurred net losses of $4.8 million and $7.8 million for the years ended December 31, 2019 and 2020, respectively.
To date, we have funded our operations primarily with proceeds from grants awarded by the National Institute of Aging, or NIA, a division of the National Institutes of Health and proceeds from the sales of our convertible promissory notes, convertible preferred stock, Simple Agreements for Future Equity, or SAFEs, and stock option exercises. Since our inception, we have received approximately $168.4 million in cumulative grant awards to fund our clinical trials, primarily from the NIA, and we have raised approximately $57.5 million in net proceeds from sales of our equity securities, convertible notes, SAFEs and stock option exercises. On March 25, 2021, we entered into SAFEs, with various investors, pursuant to which we received gross proceeds in an aggregate amount equal to $8.9 million. As of March 31, 2021, we had cash and cash equivalents of $13.4 million. We expect to continue to incur significant and increasing expenses and net losses for the foreseeable future, as we advance our current and future product candidates through preclinical and clinical development, manufacture drug product and drug supply, seek regulatory approval for our current and future product candidates, maintain and expand our intellectual property portfolio, hire additional research and development and business personnel and operate as a public company. We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our product candidates. In addition, if we obtain regulatory approval for our product candidates and do not enter into a third-party commercialization partnership, we expect to incur significant expenses related to developing our commercialization capability to support product sales, marketing, manufacturing and distribution activities.
As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity offerings, debt financings or other sources, such as potential collaboration agreements and strategic alliances, licensing or similar arrangements with third parties. To the extent available, we expect to continue our pursuit of non-dilutive
research contributions, or grants, including additional NIA grant funding. However, we may fail to receive additional NIA grants, or we may be unable to raise additional funds or enter into such other agreements or arrangements when needed on acceptable terms, or at all. Our failure to obtain additional NIA grants or raise capital or enter into such agreements as and when needed could have a material adverse effect on our business, results of operations and financial condition.
Because of the numerous risks and uncertainties associated with product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to raise capital, maintain our research and development efforts, expand our business or continue our operations at planned levels, and as a result we may be forced to substantially reduce or terminate our operations.
We do not own or operate manufacturing facilities. We rely, and expect to continue to rely, on third parties for the manufacture of CT1812 for preclinical studies and clinical trials, as well as for commercial manufacture if CT1812 obtains marketing approval. We also rely, and expect to continue to rely, on third parties to manufacture, package, label, store, and distribute CT1812, if marketing approval is obtained. We believe that this strategy allows us to maintain a more efficient infrastructure by eliminating the need for us to invest in our own manufacturing facilities, equipment, and personnel while also enabling us to focus our expertise and resources on the development of CT1812.
Impact of COVID-19 on Our Business
Our business has been and could continue to be adversely affected by the effects of the recent and evolving COVID-19 pandemic, which was declared by the World Health Organization as a global pandemic. Our clinical trials have been, and may in the future be, affected by the COVID-19 pandemic. For example, the COVID-19 pandemic may impact patient enrollment in our ongoing and future clinical trials of CT1812. In particular, some sites have in the past or may in the future pause enrollment to focus on, and direct resources to, COVID-19, while at other sites, patients may choose not to enroll or continue participating in the clinical trial as a result of the pandemic. In addition, patient visits to medical providers in the United States have slowed as a result of the COVID-19 pandemic. Further, according to the Centers for Disease Control and Prevention, people who have serious chronic medical conditions are at higher risk of getting very sick from COVID-19. As a result, potential patients in our ongoing and future clinical trials of CT1812 may choose to not enroll, not participate in follow-up clinical visits or drop out of the trial as a precaution against contracting COVID-19. Further, some patients may not be able or willing to comply with clinical trial protocols if quarantines impede patient movement or interrupts healthcare services.
Our ongoing or planned clinical trials may also be impacted by interruptions or delays in the operations of the FDA and comparable foreign regulatory authorities. For example, we have made certain adjustments to the operation of our trials in an effort to ensure the monitoring and safety of patients and minimize risks to trial integrity during the pandemic in accordance with the guidance issued by the FDA and may need to make further adjustments in the future. We have also initiated our clinical trial protocols to enable remote visits to mitigate any potential impacts as a result of the COVID-19 pandemic. Many of these adjustments are new and untested, may not be effective, may affect the integrity of data collected, and may have unforeseen effects on the progress and completion of our clinical trials and the findings from such clinical trials.
The spread of COVID-19 and actions taken to reduce its spread may also materially affect us economically. While the potential economic impact brought by, and the duration of, the COVID-19 pandemic may be difficult to assess or predict, there could be a significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity and financial position. In addition, the trading prices for other pharmaceutical companies have been highly volatile as a result of the COVID-19 pandemic. As a result, we may face difficulties raising capital through sales of our common stock or such sales may be on unfavorable terms.
SAFE Offering
In March 2021, we entered SAFEs with various investors, pursuant to which we received gross proceeds in an aggregate amount equal to $8.9 million. The amount invested by the investors in the SAFEs is automatically convertible into shares of our common stock upon the closing of this offering at a conversion price equal to 80.0% of the initial public offering price of our common stock in this offering.
Recent Developments
Notes Conversion
From March 2018 to July 2020, we issued convertible promissory notes in the aggregate principal amount of $13.0 million with an interest rate of 8.0% per annum, pursuant to note purchase agreements entered into with certain holders of our capital stock. On May 1, 2021, the holders of all of our outstanding convertible promissory notes agreed to an acceleration of the date of the automatic conversion from June 30, 2021 to May 1, 2021 for all convertible promissory notes. Accordingly, on May 1, 2021, all of our outstanding convertible promissory notes were converted into 10,926,089 shares of our Series B-1 convertible preferred stock, at a conversion price equal to $1.385 per share. As of the date of this prospectus, no notes are outstanding. Pursuant to the terms of our Series B-1 convertible preferred stock, all shares will automatically convert into shares of our common stock upon the closing of this offering on a one-for-one basis.
Lease
On July 1, 2021, we entered into an agreement to lease 2,864 square feet of office space in Purchase, New York. The lease has a term of 89 months and is expected to commence on October 1, 2021. The annual base rent under the lease is $70,000 for the first lease year and is subject to annual increases of between 1.82% and 2.04%. We provided a security deposit in the form of Letter of Credit in the amount of $35,000 pursuant to the terms of the lease.
Components of Our Results of Operations
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of direct and indirect costs incurred for our research activities, including development of our drug discovery efforts and the development of our product candidates. Direct costs include laboratory materials and supplies, contracted research and manufacturing, clinical trial costs, consulting fees, and other expenses incurred to sustain our research and development program. Indirect costs include personnel-related expenses, consisting of employee salaries, related benefits, and stock-based compensation expense for employees engaged in research and development activities, facilities, and other expenses consisting of direct and allocated expenses for rent and depreciation, and lab consumables.
We expense research and development costs as incurred. Non-refundable advance payments for goods and services that will be used over time for research and development are capitalized and recognized as goods are delivered or as the related services are performed. In-licensing fees and other costs to acquire technologies used in research and development that have not yet received regulatory approval and that are not expected to have an alternative future use are expensed when incurred. We track direct costs by stage of program, clinical or preclinical. However, we do not track indirect costs on a program specific basis because these costs are deployed across multiple programs and, as such, are not separately classified.
We cannot reasonably determine the nature, timing, and estimated costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, any of our product candidates. Product candidates in later stages of development generally have higher development costs than those in earlier stages. We expect that our research and development expenses will increase substantially for the foreseeable future as we continue to invest in research and development activities related to developing our
product candidates, as our product candidates advance into later stages of development, as we begin to conduct larger clinical trials, as we seek regulatory approvals for any product candidates that successfully complete clinical trials, as we expand our product pipeline, as we maintain, expand, protect and enforce our intellectual property portfolio, and as we incur expenses associated with hiring additional personnel to support our research and development efforts.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel-related costs, including employee salaries, related benefits, and stock-based compensation expense for our employees in the executive, finance and accounting, and other administrative functions. General and administrative expenses also include third-party costs such as legal costs, insurance costs, accounting, auditing and tax related fees, consulting fees and facilities and other expenses not otherwise included as research and development expenses. We expense general and administrative costs as incurred.
We expect that our general and administrative expenses will increase substantially for the foreseeable future as we increase our headcount to support our continued research activities and development of our programs. Following the completion of this offering, we also anticipate that we will incur substantially increased expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the Securities and Exchange Commission, and those of any national securities exchange on which our securities are traded, legal, auditing, additional insurance expenses, investor relations activities, and other administrative and professional services.
Other Income (Expense)
Grant Income
Grant income relates to the grants awarded from governmental bodies that are conditional cost reimbursement grants and are recognized as grant income as allowable costs are incurred and the right to payment is realized. The grants awarded relate to agreed upon direct and indirect costs for specific studies or clinical trials, which may include personnel and consulting costs, costs paid to contract research organizations, or CROs, research institutions and /or consortiums involved in the grant , as well as facilities and administrative costs. These grants are cost plus fixed fee arrangements in which we are reimbursed for eligible direct and indirect costs over time, up to the maximum amount of each specific grant award. Only costs that are allowable under the grant award, certain government regulations and the NIH’s supplemental policy and procedure manual may be claimed for reimbursement, and the reimbursements are subject to routine audits from governmental agencies from time to time. Our clinical trials have been funded by approximately $168.4 million in cumulative grants awarded primarily by the NIA, which includes an approximately $81.0 million grant from the NIA to fund our upcoming Phase 2 (COG0203) study of CT1812 in patients with early-stage AD.
Change in fair value of derivative liability
Change in fair value of our derivative liability consists of changes in the fair value of certain conversion and redemption features associated with our convertible notes that are required to be bifurcated and accounted for as free-standing derivative financial instruments.
Change in fair value of warrant liability
Change in fair value of our warrant liability consists primarily of the change in fair value of our unexercised Series A-1 preferred stock warrants during the applicable periods. These warrants expired unexercised in October 2020 and were derecognized at that time.
Interest expense, net
Interest expense, net primarily consists of interest expense from our convertible notes, partially offset by interest income from interest-bearing cash equivalents.
Other income, net
Other income, net consists primarily of research and development tax credits earned in the applicable period, as well as foreign currency transaction gains or losses.
Results of Operations
Comparison of the Years Ended December 31, 2019 and 2020
The following table summarizes our results of operations (in thousands):
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
2020
|
|
|
Change
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
|
$
|
14,379
|
|
|
|
|
$
|
12,887
|
|
|
|
|
$
|
(1,492)
|
|
|
|
General and administrative
|
|
|
|
|
3,452
|
|
|
|
|
|
4,520
|
|
|
|
|
|
1,068
|
|
|
|
Total operating expenses
|
|
|
|
|
17,831
|
|
|
|
|
|
17,407
|
|
|
|
|
|
(424)
|
|
|
|
Loss from operations
|
|
|
|
|
(17,831)
|
|
|
|
|
|
(17,407)
|
|
|
|
|
|
(424)
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant income
|
|
|
|
|
13,164
|
|
|
|
|
|
10,855
|
|
|
|
|
|
(2,309)
|
|
|
|
Change in the fair value of the derivative liability
|
|
|
|
|
(231)
|
|
|
|
|
|
18
|
|
|
|
|
|
249
|
|
|
|
Change in the fair value of the warrant liability
|
|
|
|
|
(7)
|
|
|
|
|
|
181
|
|
|
|
|
|
188
|
|
|
|
Other income, net
|
|
|
|
|
1,087
|
|
|
|
|
|
394
|
|
|
|
|
|
(693)
|
|
|
|
Loss on debt extinguishment
|
|
|
|
|
—
|
|
|
|
|
|
(129)
|
|
|
|
|
|
(129)
|
|
|
|
Interest expense, net
|
|
|
|
|
(1,024)
|
|
|
|
|
|
(1,751)
|
|
|
|
|
|
(727)
|
|
|
|
Total other income (expense), net
|
|
|
|
|
12,989
|
|
|
|
|
|
9,568
|
|
|
|
|
|
(3,421)
|
|
|
|
Net loss
|
|
|
|
$
|
(4,842)
|
|
|
|
|
$
|
(7,839)
|
|
|
|
|
$
|
(2,997)
|
|
|
Research and Development Expenses
The following table summarizes our research and development expenses (in thousands):
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
2020
|
|
|
Change
|
|
|
Clinical programs
|
|
|
|
$
|
8,398
|
|
|
|
|
$
|
5,263
|
|
|
|
|
$
|
(3,135)
|
|
|
|
Personnel
|
|
|
|
|
3,039
|
|
|
|
|
|
4,026
|
|
|
|
|
|
987
|
|
|
|
Manufacturing
|
|
|
|
|
1,426
|
|
|
|
|
|
1,798
|
|
|
|
|
|
372
|
|
|
|
Preclinical programs
|
|
|
|
|
1,400
|
|
|
|
|
|
1,693
|
|
|
|
|
|
293
|
|
|
|
Facilities and other costs
|
|
|
|
|
116
|
|
|
|
|
|
107
|
|
|
|
|
|
(9)
|
|
|
|
|
|
|
|
$
|
14,379
|
|
|
|
|
$
|
12,887
|
|
|
|
|
$
|
(1,492)
|
|
|
Research and development expenses were $14.4 million for the year ended December 31, 2019, compared to $12.9 million for the year ended December 31, 2020. The decrease of $1.5 million was primarily due to the following:
•
a decrease of $3.1 million in clinical programs related to delays due to COVID 19, resulting in timing and scope changes to clinical studies;
•
an increase of $1.0 million in personnel costs due to increased salaries and bonus expense and increased headcount associated with expanded research and development activities; and
•
an increase of $0.4 million in manufacturing expense related to costs incurred with contract manufacturing organizations for production of pre-clinical and future clinical trial materials associated with our most advanced product candidates; and
•
an increase of $0.3 million in preclinical programs due to increased sponsored research spend under grants.
General and Administrative Expenses
General and administrative expenses were $3.5 million for the year ended December 31, 2019, compared to $4.5 million for the year ended December 31, 2020. The increase of $1.0 million was primarily due to the following:
•
an increase of $0.6 million in salaries and bonus expense associated with increased headcount to develop our financial and administrative staff;
•
an increase of $0.2 million in professional fees driven by increased audit, tax, valuation and legal services; and
•
an increase of $0.2 million associated equity-based compensation.
Other Income (Expense)
Grant Income
Grant income was $13.2 million for the year ended December 31, 2019, compared to $10.9 million for the year ended December 31, 2020. The change in grant income is correlated with the decrease in eligible reimbursable costs incurred during 2020 as compared to 2019.
Change in Fair Value of the Derivative Liability
Changes in the fair value derivative liability resulted in a loss of $0.2 million for the year ended December 31, 2019, compared to $.02 million gain for the year ended December 31, 2020. Overall, the change in fair value of these derivative liabilities was not significant in either period.
Change in Fair Value of the Warrant Liability
Changes in the fair value of warrant liabilities resulted in an expense of $0.01 million for the year ended December 31, 2019, compared to a gain of $0.2 million for the year ended December 31, 2020. The increase of $0.2 million was due primarily to the expiration of warrants to purchase Series A-1 preferred stock in October 2020.
Other Income, Net
Other income, net was $1.1 million for the year ended December 31, 2019, compared to $0.4 million for the year ended December 31, 2020. The decrease was primarily the result of a decrease in research and development incentive income of $0.5 million.
Loss on Debt Extinguishment
Loss on debt extinguishment was $0.1 million for the year ended December 31, 2020. The loss was the result of the execution of the second amendment to the convertible notes on February 27, 2020, which resulted in an extinguishment of the existing notes for accounting purposes. There was no such amendment in the prior year.
Interest Expense, Net
Interest expense, net was $1.0 million for the year ended December 31, 2019 compared to interest expense, net of $1.8 million for the year ended December 31, 2020. The change of $0.8 million in interest expense, net was the result of a higher overall convertible note balance during 2020.
Comparison of the Three Months Ended March 31, 2020 and 2021
The following table summarizes our results of operations (in thousands):
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
2021
|
|
|
Change
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
|
$
|
3,446
|
|
|
|
|
$
|
4,430
|
|
|
|
|
$
|
984
|
|
|
|
General and administrative
|
|
|
|
|
1,445
|
|
|
|
|
|
1,153
|
|
|
|
|
|
(292)
|
|
|
|
Total operating expenses
|
|
|
|
|
4,891
|
|
|
|
|
|
5,583
|
|
|
|
|
|
692
|
|
|
|
Loss from operations
|
|
|
|
|
(4,891)
|
|
|
|
|
|
(5,583)
|
|
|
|
|
|
(692)
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant income
|
|
|
|
|
2,273
|
|
|
|
|
|
4,692
|
|
|
|
|
|
2,419
|
|
|
|
Change in the fair value of the derivative liability
|
|
|
|
|
345
|
|
|
|
|
|
1,063
|
|
|
|
|
|
718
|
|
|
|
Change in the fair value of the warrant liability
|
|
|
|
|
30
|
|
|
|
|
|
—
|
|
|
|
|
|
(30)
|
|
|
|
Other income, net
|
|
|
|
|
142
|
|
|
|
|
|
145
|
|
|
|
|
|
3
|
|
|
|
(Loss) gain on debt extinguishment
|
|
|
|
|
(129)
|
|
|
|
|
|
443
|
|
|
|
|
|
572
|
|
|
|
Interest expense, net
|
|
|
|
|
(276)
|
|
|
|
|
|
(537)
|
|
|
|
|
|
(261)
|
|
|
|
Total other income (expense), net
|
|
|
|
|
2,385
|
|
|
|
|
|
5,806
|
|
|
|
|
|
3,421
|
|
|
|
Net (loss) income
|
|
|
|
$
|
(2,506)
|
|
|
|
|
$
|
223
|
|
|
|
|
$
|
2,729
|
|
|
Research and Development Expenses
The following table summarizes our research and development expenses (in thousands):
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
2021
|
|
|
Change
|
|
|
Clinical programs
|
|
|
|
$
|
1,989
|
|
|
|
|
$
|
926
|
|
|
|
|
$
|
(1,063)
|
|
|
|
Personnel
|
|
|
|
|
974
|
|
|
|
|
|
840
|
|
|
|
|
|
(134)
|
|
|
|
Manufacturing
|
|
|
|
|
131
|
|
|
|
|
|
2,308
|
|
|
|
|
|
2,177
|
|
|
|
Preclinical programs
|
|
|
|
|
325
|
|
|
|
|
|
327
|
|
|
|
|
|
2
|
|
|
|
Facilities and other costs
|
|
|
|
|
27
|
|
|
|
|
|
29
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
$
|
3,446
|
|
|
|
|
$
|
4,430
|
|
|
|
|
$
|
984
|
|
|
Research and development expenses were $3.4 million for the three months ended March 31, 2020, compared to $4.4 million for the three months ended March 31, 2021. The increase of $1.0 million was primarily due to the following:
•
an increase of $2.1 million in manufacturing expense related to costs incurred with contract manufacturing organizations for production of pre-clinical and future clinical trial materials associated with our most advanced product candidates; and
•
a decrease of $1.1 million in spending on clinical programs related to delays due to COVID 19, resulting in timing and scope changes to clinical studies.
General and Administrative Expenses
General and administrative expenses were $1.4 million for the three months ended March 31, 2020, compared to $1.2 million for the three months ended March 31, 2021. The decrease of $0.2 million was primarily due to the following:
•
a decrease of $0.4 million in personnel-related costs as a result of severance liabilities incurred in 2020; partially offset by
•
an increase of $0.2 million in professional fees and consulting services.
Other Income (Expense)
Grant Income
Grant income was $2.3 million for the three months ended March 31, 2020, compared to $4.7 million for the three months ended March 31, 2021. The change in grant income is correlated with the increase in eligible reimbursable costs incurred during the three months ended March 31, 2021 as compared to the three months ended March 31, 2020.
Change in Fair Value of the Derivative Liability
Changes in the fair value derivative liability resulted in a gain of $0.3 million for the three months ended March 31, 2020, compared to a gain of $1.1 million for the three months ended March 31, 2021. The change was primarily driven by the change in the probability of occurrence of future event inputs in the derivative valuation models during these periods.
Change in Fair Value of the Warrant Liability
Changes in the fair value of warrant liabilities resulted in a gain of $.03 million for the three months ended March 31, 2020. There was no gain or loss for the three months ended March 31, 2021 as the warrants to purchase Series A-1 preferred stock expired in October 2020.
Other Income, Net
Other income, net was less than $0.2 million for the three months ended March 31, 2020 and 2021. Overall, the change in income was not significant in either period.
(Loss) gain on Debt Extinguishment
Loss on debt extinguishment was $0.1 million for the three months ended March 31, 2020. Gain on debt extinguishment was $0.4 million for the three months ended March 31, 2021. The loss was the result of the execution of the second amendment to the convertible notes on February 27, 2020, which resulted in an extinguishment of the existing notes for accounting purposes. The gain was the result of the forgiveness of the Paycheck Protection Program loan on January 21, 2021.
Interest Expense, Net
Interest expense, net was $0.3 million for the three months ended March 31, 2020 compared to interest expense, net of $0.5 million for the three months ended March 31, 2021. The change of $0.2 million in interest expense, net was the result of a higher overall convertible note balance during the three months ended March 31, 2021.
Liquidity and Capital Resources
Sources of Liquidity
To date, we have funded our operations primarily with proceeds from grants awarded by the NIA, and proceeds from the sales of our convertible promissory notes, convertible preferred stock, and SAFEs, and stock option exercises. Since our inception, we have received grant awards primarily from the NIA in the aggregate amount of approximately $168.4 million and have raised approximately $57.5 million in net proceeds from sales of our equity securities, convertible notes and SAFEs, and stock option exercises. On March 25, 2021, we completed a SAFE offering with various investors, pursuant to which we received gross proceeds in an aggregate amount equal to $8.9 million. As of March 31, 2021, we had $13.4 million in cash and cash equivalents and have not generated positive cash flows from operations. Based on our current business plans, we believe that the net proceeds from this offering, together with our existing cash and cash equivalents and income from non-dilutive grants, will be sufficient for us to fund our operating expenses and capital
expenditures requirements through at least . We have based these estimates on assumptions that may prove to be incorrect or require adjustment as a result of business decisions, and we could utilize our available capital resources sooner than we currently expect.
Future Funding Requirements
We expect to continue to incur significant and increasing expenses and net losses for the foreseeable future, as we advance our current and future product candidates through preclinical and clinical development, manufacture drug product and drug supply, seek regulatory approval for our current and future product candidates, maintain and expand our intellectual property portfolio, hire additional research and development and business personnel and operate as a public company. We anticipate that we will need to raise additional funding in the future to fund our operations, including the commercialization of any approved product candidates. We are subject to the risks typically related to the development of new products, and we may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect our business. Even after this offering, we will need to raise substantial additional capital to fund the development of our product candidates.
Our future funding requirements will depend on many factors, including, but not limited to:
•
the scope, progress, costs and results of our ongoing and planned clinical trials of CT1812, as well as the associated costs, including any unforeseen costs we may incur as a result of preclinical study or clinical trial delays due to the COVID-19 pandemic or other delays;
•
the scope, progress, costs and results of preclinical development, laboratory testing and clinical trials for any future product candidates we may decide to pursue;
•
the extent to which we develop, in-license or acquire other product candidates and technologies;
•
the costs and timing of process development and manufacturing scale-up activities associated with our product candidates and other programs as we advance them through preclinical and clinical development;
•
the availability, timing, and receipt of any future NIA grants;
•
the number and development requirements of other product candidates that we may pursue;
•
the costs, timing and outcome of regulatory review of our product candidates;
•
the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any of our product candidates for which we receive marketing approval;
•
the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval;
•
our ability to establish collaborations to commercialize CT1812 or any of our other product candidates outside the United States;
•
the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims; and
•
the additional costs we may incur as a result of operating as a public company, including our efforts to enhance operational systems and hire additional personnel, including enhanced internal controls over financial reporting.
Until such time as we can generate significant revenue from product sales, we expect to finance our operations through a combination of public or private equity offerings, debt financings or other sources, such as potential collaboration agreements and strategic alliances, licensing or similar arrangements with third parties. To the extent available, we expect to continue our pursuit of non-dilutive research contributions, or grants, including additional NIA grant funding. However, we may fail to receive additional NIA grants, or we may be unable to raise additional funds or enter into such other agreements or arrangements when needed on acceptable terms, or at all. Our failure to obtain additional NIA grants or raise capital or enter
into such agreements as and when needed could have a material adverse effect on our business, results of operations and financial condition.
To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, licenses and other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. Adequate funding may not be available when needed or on terms acceptable to us, or at all. Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic and otherwise. If we fail to obtain necessary capital when needed on acceptable terms, or at all, it could force us to delay, limit, reduce or terminate our product development programs, commercialization efforts or other operations. Insufficient liquidity may also require us to relinquish rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise choose. We cannot assure you that we will ever be profitable or generate positive cash flows from operating activities.
Going Concern Assessment
Our consolidated financial statements included elsewhere in this prospectus have been prepared on a basis which assumes we are a going concern. As discussed in Note 1 to those financial statements, we have suffered recurring losses from operations, do not expect to generate revenues or operating cash flows for the foreseeable future, and have stated that substantial doubt exists about our ability to continue as a going concern. Our ability to continue as a going concern may be viewed unfavorably by current and prospective investors, as well as by analysts and creditors. This may in turn make it more difficult for us to raise the additional financing necessary to continue to operate our business and we may be forced to significantly alter our business strategy, substantially curtail our current operations, or cease operations altogether. Based on our current business plans, we believe that the net proceeds from this offering, together with our existing cash and cash equivalents and the income from non-dilutive grants, will be sufficient for us to fund our operating expenses and capital expenditures requirements through at least . This estimate is based on certain significant assumptions, which are uncertain and may turn out to be incorrect.
Cash Flows
The following table summarizes our cash flows for the periods indicated (in thousands):
|
|
|
|
Year Ended
December 31,
|
|
|
Three Months Ended
March 31,
|
|
|
|
2019
|
|
|
2020
|
|
|
2020
|
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
Cash flows (used in) provided by operating activities
|
|
|
|
$
|
(3,098)
|
|
|
|
|
$
|
(3,433)
|
|
|
|
|
$
|
530
|
|
|
|
|
$
|
(772)
|
|
|
|
Cash flows used in investing activities
|
|
|
|
|
(144)
|
|
|
|
|
|
(10)
|
|
|
|
|
|
(10)
|
|
|
|
|
|
—
|
|
|
|
Cash flows provided by financing activities
|
|
|
|
|
2,794
|
|
|
|
|
|
5,765
|
|
|
|
|
|
3,782
|
|
|
|
|
|
8,956
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
|
|
(60)
|
|
|
|
|
|
(23)
|
|
|
|
|
|
(34)
|
|
|
|
|
|
—
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
|
$
|
(508)
|
|
|
|
|
$
|
2,299
|
|
|
|
|
$
|
4,268
|
|
|
|
|
$
|
8,184
|
|
|
Operating Activities
Net cash used in operating activities for the year ended December 31, 2019 was $3.1 million, which consisted primarily of our net loss of $4.8 million partially offset by net non-cash charges of $1.1 million and a net change of $0.6 million in our operating assets and liabilities. The non-cash charges primarily
consisted of depreciation and amortization of $0.1 million, amortization of debt discounts of $0.5 million, change in derivative liabilities of $0.2 million, and equity-based compensation of $0.4 million. The net change in our operating assets and liabilities was primarily due to a net increase in other receivables of $1.1 million, an increase in accounts payable of $0.9 million, an increase in accrued expenses of $0.9 million, and a decrease in other current liabilities of $0.1 million.
Net cash used in operating activities for the year ended December 31, 2020 was $3.4 million, which consisted primarily of our net loss of $7.8 million partially offset by net non-cash charges of $1.3 million and a net decrease of $3.1 million in our operating assets. The non-cash charges primarily consisted of depreciation and amortization of $0.1 million, amortization of debt issuances costs of $0.1 million, amortization of debt discounts of $0.8 million, change in warrant liabilities of $0.2 million, loss on debt extinguishment of $0.1 million, and equity-based compensation of $0.5 million. The net decrease in our net operating assets was primarily due to a net decrease in other receivables of $0.9 million, a decrease in accounts payable of $0.4 million, an increase in accrued expenses of $0.6 million, a decrease in grant receivables of $2.1 million, and an increase in other current liabilities of $0.3 million.
Net cash provided by operating activities for the three months ended March 31, 2020 was $0.5 million, which consisted primarily of our net loss of $2.5 million, offset by the net change of $3.0 million in our operating assets and liabilities. The net change in our operating assets and liabilities was primarily due to a decrease in grant receivables of $2.0 million, net decrease in other receivables of $0.2 million, an increase in accounts payable of $0.3 million, and an increase in accrued expenses of $0.5 million.
Net cash used in operating activities for the three months ended March 31, 2021 was $0.8 million, which consisted primarily of our net income of $0.2 million partially offset by the net non-cash gains of $1.1 million and a net change of $0.1 million in our operating assets and liabilities. The non-cash gains primarily consisted of the change in derivative liabilities of $1.1 million and a gain on debt extinguishment of $0.4 million. The net change in our operating assets and liabilities was primarily due to an increase in grant receivables of $1.1 million, a decrease in prepaid expenses and other current assets of $0.3 million, a net increase in other receivables of $0.1 million, an increase in accounts payable of $1.0 million, an increase in accrued expenses of $0.3 million, and a decrease in other current liabilities of $0.3 million.
Investing Activities
During the years ended December 31, 2019 and 2020, we used $0.1 million and $0.01 million of cash, respectively, for investing activities related to purchases of property and equipment.
During the three months ended March 31, 2020 we used $0.01 million of cash for investing activities related to purchases of property and equipment. We did not use any cash for investing activities for the three months ended March 31, 2021.
Financing Activities
Net cash provided by financing activities was $2.8 million and $5.8 million for the years ended December 31, 2019 and 2020, respectively. The increase in cash provided by financing activities in 2020 relates primarily to a higher level of convertible notes issued during 2020 as compared to 2019 and the paycheck protection program loan. During the first quarter of 2021, we received forgiveness of the paycheck protection program loan in full.
Net cash provided by financing activities was $3.8 million and $9.0 million for the three months ended March 31, 2020 and 2021, respectively. The increase in cash provided by financing activities in 2021 relates primarily to the $8.9 million of SAFEs issued during the three months ended March 31, 2021, as compared to $3.8 million of convertible notes issued in the three months ended March 31, 2020.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements.
Contractual Obligations
The following table summarizes our contractual obligations as of March 31, 2021 (in thousands):
|
|
|
|
Less than
1 Year
|
|
|
1 to 3
Years
|
|
|
3 to 5
Years
|
|
|
More than 5
Years
|
|
|
Total
|
|
|
Operating lease obligations
|
|
|
|
$
|
89
|
|
|
|
|
$
|
177
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
266
|
|
|
|
Total
|
|
|
|
$
|
89
|
|
|
|
|
$
|
177
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
266
|
|
|
We have entered into an operating lease for office and laboratory facilities under agreements that run through June 30, 2023. The amounts reflected in the table above consist of the future minimum lease payments under the non-cancelable lease arrangement.
In March 2021, we entered into SAFEs with various investors, pursuant to which we received gross proceeds in an aggregate amount equal to $8.9 million. The amount invested by the investors in the SAFEs is automatically convertible into shares of our common stock upon the closing of this offering at a conversion price equal to 80.0% of the initial public offering price of our common stock in this offering. The amounts reflected in the table above do not include cash payments that would be payable by us to the holders of the SAFEs if, prior to the closing of this offering: (i) we undergo a change of control, (ii) we voluntarily terminate our operations, (iii) there is a general assignment for the benefit of our creditors or (iv) we effect any other liquidation, dissolution or winding up of our company, whether voluntary or involuntary.
From March 2018 to July 2020, we issued convertible promissory notes in the aggregate principal amount of $13.0 million with an interest rate of 8.0% per annum, pursuant to note purchase agreements entered into with certain holders of our capital stock. On May 1, 2021, the holders of all of our outstanding convertible promissory notes agreed to an acceleration of the date of the automatic conversion from June 30, 2021 to May 1, 2021 for all convertible promissory notes. Accordingly, on May 1, 2021, all of our outstanding convertible promissory notes were converted into 10,926,089 shares of our Series B-1 convertible preferred stock at a conversion price equal to $1.385 per share. The amounts reflected in the table above do not include cash payments that would have become payable by us to the holders of the convertible promissory notes on June 30, 2021, assuming no holders of our convertible promissory notes agreed to an equity conversion. As of the date of this prospectus, no notes are outstanding.
On July 1, 2021, we entered into an agreement to lease 2,864 square feet of office space in Purchase, New York. The lease has a term of 89 months and is expected to commence on October 1, 2021. The annual base rent under the lease is $70,000 for the first lease year and is subject to annual increases of between 1.82% and 2.04%. We provided a security deposit in the form of a Letter of Credit in the amount of $35,000 pursuant to the terms of the lease. The amounts reflected in the table above do not include the new lease, which we entered into after March 31, 2021.
We enter into contracts in the normal course of business with contract research organizations and other vendors to assist in the performance of our research and development and other services and products for operating purposes. These contracts typically do not contain minimum purchase commitments and generally provide for termination on notice, and therefore are cancelable contracts and not included in the table of contractual obligations.
Critical Accounting Policies and Use of Estimates
We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.
Research and Development Costs, Accrued Research and Development Costs and Related Prepaid Expenses
Research and development costs are expensed as incurred. Research and development expenses consist principally of personnel costs, including salaries, stock-based compensation, and benefits for employees, third-party license fees and other operational costs related to our research and development activities, including allocated facility-related expenses and external costs of outside vendors, and other direct and
indirect costs. Non-refundable advance payments for research and development costs are deferred and expensed as the related goods are delivered or services are performed. Costs for external development activities are recognized based on an evaluation of the progress to completion of specific tasks. Costs for certain research and development activities are recognized based on the pattern of performance of the individual arrangements, which may differ from the pattern of billings incurred, and are reflected in the consolidated financial statements as prepaid expenses or as accrued research and development expenses.
Equity-Based Compensation
We maintain an equity-based compensation plan as a long-term incentive for employees, non-employee directors and consultants. The plan allows for the issuance of incentive stock options, non-qualified stock options, restricted stock units, and other forms of equity awards.
We recognize equity-based compensation expense for stock options subject to time-based vesting on a straight-line basis over the requisite service period and account for forfeitures as they occur. To the extent any stock option grants are made subject to the achievement of a performance condition, management evaluates when the achievement of any such performance-based milestone is probable based on the relative satisfaction of the performance conditions as of the reporting date. Our stock-based compensation costs are based upon the grant date fair value of options estimated using the Black-Scholes option pricing model.
The Black-Scholes option pricing model utilizes inputs which are highly subjective assumptions and generally require significant judgment. These assumptions include:
•
Expected Term. The expected term represents the period that the stock-based awards are expected to be outstanding. As we do not have sufficient historical experience for determining the expected term of the stock option awards granted, expected term has been calculated using the simplified method.
•
Risk-Free Interest Rate. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the date of grant for zero-coupon U.S. Treasury constant maturity notes with terms approximately equal to the stock-based awards’ expected term.
•
Expected Volatility. Because we have been privately held and do not have a trading history of common stock, the expected volatility was derived from the average historical stock volatilities of the common stock of several public companies within the industry that we consider to be comparable to our business over a period equivalent to the expected term of the stock-based awards.
•
Expected Dividend Yield. The expected dividend yield is zero as we have not paid and do not anticipate paying any dividends in the foreseeable future.
•
Fair Value of Common Stock. — The fair value of the shares of common stock underlying the stock-based awards has historically been determined by the Board of Directors with input from management. Because there has been no public market for the common stock, the Board of Directors has determined the fair value of the common stock at the time of grant of the stock-based award by considering a number of objective and subjective factors, including having contemporaneous valuations of the common stock performed by a third-party valuation specialist.
See Note 13 to our audited financial statements for more information concerning certain of the specific assumptions we used in applying the Black-Scholes option pricing model to determine the estimated fair value of our stock options. Certain of such assumptions involve inherent uncertainties and the application of significant judgment.
As of March 31, 2021, the total unrecognized compensation expense related to unvested time-based vesting awards was $1.1 million, which is expected to be recognized over weighted-average remaining vesting period of approximately 3.1 years. As of March 31, 2021, total unrecognized compensation expense related to un-vested performance-based awards was $0.3 million, which would be recognized commencing with the period in which the performance condition is deemed probable of achievement.
Based upon the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, the aggregate intrinsic value of options outstanding as of March 31, 2021 was $ million, of which $ million related to vested options and $ million related to unvested options.
Common Stock Valuations
Historically, for all periods prior to this offering, since there has been no public market of our common stock to date, the fair value of the shares of common stock underlying our share-based awards was estimated on each grant date by our board of directors. To determine the fair value of our common stock underlying option grants, our board of directors considered, among other things, input from management, valuations of our common stock prepared by unrelated third-party valuation firms in accordance with the guidance provided by the American Institute of Certified Public Accountants 2013 Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, and our board of directors’ assessment of additional objective and subjective factors that it believed were relevant, and factors that may have changed from the date of the most recent valuation through the date of the grant. These factors include, but are not limited to:
•
our results of operations and financial position, including our levels of available capital resources;
•
our stage of development and material risks related to our business;
•
progress of our research and development activities;
•
our business conditions and projections;
•
the valuation of publicly traded companies in the life sciences and biotechnology sectors, as well as recently completed mergers and acquisitions of peer companies;
•
the lack of marketability of our common stock as a private company;
•
the rights, preferences, and privileges of our convertible preferred stock relative to those of our common stock;
•
the likelihood of achieving a liquidity event for our securityholders, such as an initial public offering or a sale of our company, given prevailing market conditions;
•
the hiring of key personnel and the experience of management;
•
trends and developments in our industry
In valuing our common stock as of December 31, 2019 we utilized a hybrid method of the option pricing model, or OPM, and the probability weighted expected return method, PWERM, for determining the fair value of our common stock based on our stage of development and other relevant factors. Under this method, the per share value calculated on the OPM and PWERM are weighted based on expected exit outcomes to arrive and a final estimated fair value per share of the common stock before a discount for marketability is applied. The calculation of the grant date fair values of share based payments awarded in 2020 utilized the December 31, 2019 common stock value, as there had been no significant changes in our stage of development or other relevant factors impacting the common stock value as of any of the grant dates.
Following the closing of this offering, our board of directors will determine the fair market value of our common stock based on its closing price as reported on the date of grant on the primary stock exchange on which our common stock is traded.
Convertible Instruments
We account for hybrid contracts with embedded conversion features in accordance with GAAP. ASC 815 — Derivatives and Hedging Activities, requires companies to bifurcate certain conversion options and redemption features from their host instruments and account for them as free-standing derivative financial instruments should certain criteria be met. The features requiring bifurcation were initially recorded at fair value, with gains and losses arising from changes in fair value recognized as a component of other income (expense) in the consolidated statement of operations and comprehensive loss.
Recent Accounting Pronouncements
For a description of recent accounting pronouncements, see Note 2 of the notes to our audited financial statements for the year ended December 31, 2020 included elsewhere in this prospectus.
Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
We are exposed to market risk related to changes in interest rates. We had cash and cash equivalents of $13.4 million as of March 31, 2021. Our exposure to interest rate risk is not significant and a hypothetical 1% change in interest rates during any of the periods presented would not have had a material impact on our financial statements included elsewhere in this prospectus.
Foreign Currency
Our functional currency is the U.S. dollar. As of the date of this prospectus, we are exposed to foreign currency rate risk related to various third-party service contracts denominated in foreign currencies. On July 14, 2015 we established an Australian subsidiary to facilitate for the purpose of conducting research and development efforts. Transaction gains and losses are included in other income (expense), net on our statements of operations and comprehensive loss and were not material for any of the periods presented. A hypothetical 10% change in exchange rates during any of the periods presented would not have had a material impact on our financial statements included elsewhere in this prospectus.
Effects of Inflation
Inflation generally affects us by increasing our cost of labor and clinical trial costs. We believe that inflation has not had a material effect on our financial statements included elsewhere in this prospectus.
Emerging Growth Company Status
We are an emerging growth company, as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (1) are no longer an emerging growth company or (2) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
We will remain an emerging growth company until the earliest to occur of: (1) the last day of the fiscal year in which we have at least $1.07 billion in annual revenue; (2) the last day of the fiscal year in which we are deemed to be a “large accelerated filer,” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, which would occur if the market value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year; (3) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period; and (4) the last day of the fiscal year ending after the fifth anniversary of this offering.
BUSINESS
Overview
We are a clinical-stage biopharmaceutical company engaged in the discovery and development of innovative, small molecule therapeutics targeting age-related degenerative diseases and disorders of the central nervous system, or CNS, and retina. Currently available therapies for these diseases are limited, with many diseases having no approved therapies or treatments. Our goal is to develop disease modifying treatments for patients with these degenerative disorders by initially leveraging our expertise in the σ-2 (sigma-2) receptor, or S2R, which is expressed by multiple cell types, including neuronal synapses, and acts as a key regulator of cellular damage commonly associated with certain age-related degenerative diseases of the CNS and retina. We believe that targeting the S2R complex represents a mechanism that is functionally distinct from other current approaches in clinical development for the treatment of degenerative diseases.
Our lead product candidate, CT1812, is an orally delivered, small molecule antagonist designed to penetrate the blood-brain barrier and bind selectively to the S2R complex. We have initially focused on the development of CT1812 for the treatment of Alzheimer’s disease, or AD, by targeting the accumulation of β-amyloid, or Aβ, oligomers, which has been linked to the disease. By displacing these Aβ oligomers from neuronal receptors in the S2R complex, we expect to demonstrate that CT1812 can slow the loss of synapses and cognitive decline observed in AD. CT1812 is the first S2R antagonist to reach clinical trials and is currently in Phase 2 development for the treatment of AD. The direct healthcare costs to care for patients with AD and other dementias in the United States is currently estimated to exceed $300 billion. Approximately 5.8 million people in the U.S. have been diagnosed with AD, and the World Health Organization estimates that AD affects as many as 35 million people globally. Among people with AD, approximately 50% have mild disease, 30% have moderate disease and 20% have severe disease.
We are continuing to enroll patients in two ongoing Phase 2 clinical trials (SHINE and SEQUEL) with CT1812 in mild-to-moderate AD. Preliminary results from an interim analysis of the first 24 patients in Part A of our ongoing SHINE Phase 2 clinical trial demonstrated a statistically significant decline in the presence of Aβ and a positive trend on cognitive function as measured by the Alzheimer’s Disease Assessment Scale-Cognitive Subscale, or ADAS-Cog, in patients receiving CT1812 compared to placebo. We anticipate top-line data in 2023. Our ongoing SEQUEL Phase 2 clinical trial is also evaluating changes in brain function, as measured by electroencephalography, or EEG, in mild-to-moderate AD with top-line data expected in 2023. We have treated 164 subjects with CT1812 in our clinical trials to date including 76 patients with mild-to-moderate AD. CT1812 has continued to be well tolerated and has been granted Fast Track designation by the U.S. Food and Drug Administration, or FDA, in this indication.
Our clinical trials have been funded by approximately $168.4 million in cumulative grants awarded primarily by the National Institute of Aging, or NIA, a division of the National Institutes of Health, which includes a grant award of approximately $81.0 million from the NIA to fund our upcoming Phase 2 (COG0203) study of CT1812 in patients with early-stage AD. We intend to enroll 540 patients in our COG0203 clinical trial with mild cognitive impairment, or MCI, due to AD or mild AD who have elevated levels of Aβ as determined by positron emission tomography, or PET, imaging or as measured in cerebral spinal fluid, or CSF. Patients will be randomized to receive CT1812 or a placebo for 18 months. In addition to cognitive and functional measures, such as the Clinical Dementia Rating Scale, or CDR, Sum of Boxes, or SOB, and ADAS-Cog, we intend to use a variety of biomarkers to measure target and/or pathway engagement and assess changes in neurodegeneration and disease progression. We will conduct this clinical trial in collaboration with the Alzheimer’s Clinical Trial Consortium, or ACTC, an NIA-funded clinical trials network designed to accelerate studies for therapeutics for AD and related dementias, and we expect to begin enrollment in the first half of 2022.
We intend to expand our CT1812 pipeline to include additional indications such as dry age-related macular degeneration, or dry AMD, a disease that results in the deterioration of the macula, causing distortion, loss of central vision and eventual blindness, for which there are currently no FDA approved treatments. The S2R complex is expressed in the retina in several cell types including the retinal pigment epithelial cells, or RPE, photoreceptors and retinal ganglion cells. We believe that an S2R antagonist, such as CT1812, may help to regulate the damage-response processes related to these cells that are impaired in dry AMD. After the completion of our ongoing preclinical studies and subject to discussion with the FDA, we
intend to advance directly into a Phase 2 clinical trial in the second half of 2021, leveraging our knowledge of CT1812’s preclinical and clinical profile to date. We have initiated discussions with the FDA regarding our plan.
In addition, we intend to develop and advance other product candidates in the area of synucleinopathies. Synucleinopathies are a group of degenerative diseases characterized by the abnormal accumulation of the alpha-synuclein protein in neural cell bodies, including Parkinson’s disease, or PD, and dementia with Lewy bodies, or DLB.
Our Pipeline
We are developing a pipeline of innovative, small molecule product candidates that are designed to target the S2R complex, a key regulator of the cellular damage response for diseases such as AD, dry AMD, geographic atrophy (an advanced form of dry AMD), or GA, and other conditions for which there is significant unmet medical need. Our current pipeline is summarized below:
Mild to Moderate AD
We are currently engaged in two ongoing Phase 2 clinical trials, designed to evaluate safety, dosing and potential efficacy for CT1812 as a treatment for mild-to-moderate AD. These trials include evaluations of CT1812’s ability to engage with the S2R complex enabling the displacement of Aβ oligomers, its impact in synaptic density and its restoration of synaptic function. In the largest of these trials, our COG0201 SHINE study, we are assessing CT1812’s ability to alter disease progression and cognition, with a target enrollment of 120 participants.
Early-stage AD
We plan to evaluate CT1812 in a 540-patient Phase 2 COG0203 clinical trial to investigate the potential for CT1812’s use at an earlier stage of AD. In addition to cognitive and functional measures, such as CDR-SOB, ADAS-Cog and volumetric magnetic resonance imaging, or vMRI, we intend to use a variety of biomarkers to measure target and/or pathway engagement and assess changes in neurodegeneration and disease progression. We plan to initiate this clinical trial in the first half of 2022, which has been funded by a grant of approximately $81.0 million from the NIA.
DLB
We plan to evaluate CT1812 in a 120-patient Phase 2 COG1201 clinical trial to investigate the potential for CT1812’s use as a disease-modifying agent in DLB. We intend to assess cognitive and functional measures
such as Montreal Cognitive Assessment (MoCA), Cognitive Drug Research Battery (CDR), Clinician Assessment of Fluctuation (CAF), Epworth Sleepiness Scale (ESS), Unified Parkinson’s Disease Rating Scale — Part III (MDS-UPDRS3), Clinical Global Impression of Change (ADCS-CGIC), ADCS-Activities of Daily Living (ADCS-ADL) and Neuropsychiatric Inventory (NPI). We plan to initiate this clinical trial in the second half of 2021, subject to discussion with FDA. The trial has been funded by a grant of approximately $30 million from the NIA.
Dry AMD
We are also evaluating the use of CT1812 to treat dry AMD. We believe that human genetic and internal proteomic pathway analyses obtained through our AD trials provides evidence of a relationship between the S2R complex and dry AMD. We are currently engaged in preclinical development activities for this indication, including studies to elucidate the key mechanisms by which CT1812 and the S2R complex alter the biological processes that contribute to dry AMD. We believe that an S2R antagonist, such as CT1812, may help to regulate the damage-response processes related to these cells that are impaired in dry AMD. After the completion of our ongoing preclinical studies and subject to discussion with the FDA, we intend to advance directly into a Phase 2 clinical trial in the second half of 2021, leveraging our knowledge of CT1812’s preclinical and clinical profile to date. We have initiated discussions with the FDA regarding our plan.
Discovery Initiatives
We are actively engaged in a number of early-stage discovery programs which are built upon our identification of five structurally distinct chemical series. We believe we have identified several structurally distinct compounds that possess advantages for specific disease indications and patient populations. Two of these next-generation S2R modulators have been identified for synucleinopathies and dry AMD and are being assessed as potential IND candidates.
One of our S2R modulators, CT2168, has shown potential disease modification in synucleinopathies such as DLB and PD. Data indicate that this next-generation S2R modulator has activity in α-synuclein assays, indicating the potential to alleviate α-synuclein oligomer-induced neurotoxicity.
Another of our next-generation S2R modulators, CT2074, has shown activity in cell-based dry AMD assays suggesting the potential to maintain homeostatic functions of RPEs, ameliorate lysosomal dysfunction, and prevent RPE cell death. It has further demonstrated retinal exposures above 80% receptor occupancy with oral administration and favorable PK properties, including high degree of bioavailability and high retina-to-plasma ratio, which we believe may provide us with a suitable next-gen molecule to advance for this indication. Therefore, we believe S2R modulators may present a novel therapeutic approach for these indications and intend to pursue development as described below.
Our Strategy
Our objectives are to develop and advance our portfolio, beginning with our lead product candidate, CT1812, through clinical development for the treatment of age-related degenerative diseases and disorders of the CNS and retina and to leverage our understanding of the S2R complex and its regulation of pathways to pursue indications in other degenerative disorders. The key elements of our strategy include:
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Advance clinical development of our lead product candidate, CT1812, in mild-to-moderate AD and earlier stages of the disease. Our lead product candidate, CT1812, has progressed through Phase 1 and into Phase 2 clinical trials. Funding of the Phase 1 and into Phase 2 trials is primarily through the NIA. We plan to evaluate CT1812 in other AD populations as well and develop CT1812 for patients with earlier symptomatic stages of AD and Mild Cognitive Impairment, which is a slight and noticeable measurable decline in cognitive abilities due to AD. We plan to initiate this clinical trial for COG0203 in patients with mild dementia associated with early-stage AD in the first half of 2022, which has been funded by a grant of approximately $81.0 million awarded from the NIA.
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Pursue the development of CT1812 for dry AMD. We plan to evaluate CT1812 as a potential therapy for dry AMD, a common eye disease that results in the deterioration of the macula, causing visual distortion, loss of central vision and eventual blindness. We believe that an S2R antagonist,
such as CT1812, may help to regulate the damage-response processes related to these cells that are impaired in dry AMD. After the completion of our ongoing preclinical studies and subject to discussion with the FDA, we intend to advance directly into a Phase 2 clinical trial in the second half of 2021, leveraging our knowledge of CT1812’s preclinical and clinical profile to date. We have initiated discussions with the FDA regarding our plan.
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Leverage our understanding of the S2R complex to develop product candidates for other CNS and degenerative diseases, including synucleinopathies. We intend to develop and advance other product candidates to treat synucleinopathies, which include PD and DLB. In the second half of 2021, we anticipate initiating a study of CT1812 in patients with DLB, subject to discussion with the FDA. Data published in February 2021 showed that the S2R complex may play an integral role in the pathology of PD and we believe these results merit further study.
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Expand our pipeline through internal development, in-licensing and acquisitions. We intend to leverage our expertise in drug development and business development to evaluate additional product candidates as well as bring forward novel chemical matter using our library generation and Novel Improved Conditioned Extraction, or NICE, screening platform. To achieve this objective, we may supplement our internal development initiatives through selective in-licensing arrangements, as well as investments in strategic collaborations, and partnerships which complement our initiatives.
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Optimize the value of CT1812 and other product candidates in major markets. We currently retain all worldwide rights to CT1812 for all indications. We plan to develop and pursue approval of CT1812 and other future product candidates in major markets. Where appropriate, we may use strategic collaborations or partnerships to accelerate development and maximize the commercial potential of our programs. We and our key opinion leaders believe CT1812 also can be used in combination with other therapeutics targeting AD biologies and thus may have many partnering opportunities.
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Continue to pursue non-dilutive funding opportunities. The majority of our clinical trials have been funded by approximately $168.4 million in cumulative grants awarded primarily by the NIA, which includes an approximately $81.0 million grant award from the NIA to fund our upcoming Phase 2 (COG0203) study of CT1812 in patients with early-stage AD. These grants are non-dilutive and allow us to collaborate with research institutions in pursuing the development of our product candidates for age-related degenerative diseases. We intend to continue our work with these research institutions and plan to seek additional non-dilutive funding for our clinical development when possible.
Our Team and Collaborators
We have assembled a management team with extensive experience with CNS and degenerative diseases, significant expertise in the S2R biology domain, as well as drug discovery, clinical development, general management and business development. Collectively, our management team has a track record of managing drug development programs that have received regulatory approval and been successfully commercialized. These include programs at Bristol-Myers Squibb Company, Pfizer Inc. and Roche Holding AG. In addition, our management team has built companies that have initiated innovative technologies and investigational new drug programs. We augment the strengths of our management team with an experienced board of directors and scientific and medical advisory boards. We believe our team, with its deep scientific and drug development background, positions us to become a leader in the development of therapies for age-related degenerative diseases and disorders.
Since our inception, we have collaborated and worked closely with key healthcare organizations and thought leading institutions in the field of degenerative diseases to develop and advance our therapeutic candidates. To date we have received approximately $168.4 million in grants and financial support primarily from the NIA to support our clinical trials.
Our Approach to Treating Age-Related Degenerative Diseases of the CNS and Retina
Age-related degenerative diseases are defined by an age-related decline of cellular function often resulting in cell death. Neurodegenerative diseases, perhaps the most prominent of these degenerative disorders, are a variety of conditions defined by progressive degeneration of nerve cells, or neurons, which
often leads to neuronal death, causing decline in cognition or other functions, resulting in decreased quality of life and shorter life span. The two most common neurodegenerative diseases are AD and PD.
To our knowledge, no other biopharmaceutical company has focused solely on stopping the synaptic binding and signaling of soluble Aβ oligomers through the use of small molecule receptor antagonists, such as CT1812. We believe our deep expertise in oligomer and synaptic biology provides us with a competitive advantage and led to the creation of (1) proprietary assays that target the critical molecular step causing memory loss and (2) proprietary chemical libraries yielding highly brain penetrant small molecule drugs.
Based on this expertise, we are able to discover and optimize small molecule receptor antagonists like CT1812 that we believe represent a functionally distinct and promising approach to synaptorestorative AD therapeutics where neurons remain viable and functional. These molecules were designed to displace Aβ oligomers bound to neuronal receptors at synapses by selectively targeting and clearing Aβ oligomers from the brain into the CSF.
In addition to neurodegenerative diseases, other degenerative diseases include AMD. AMD is a common eye disease that results in the deterioration of the macula, causing visual distortion, loss of central vision and eventual blindness. It is the leading cause of blindness in people over 60 years of age and afflicts approximately 11 million Americans, including an estimated 12% of all U.S. adults over 80 years of age. We believe that human genetic and internal proteomic pathway analyses obtained through our AD trials provides evidence of a relationship between the S2R complex and dry AMD. We are currently engaged in preclinical development activities for this indication, including studies to elucidate the key mechanisms by which CT1812 and the S2R complex alter the biological processes that contribute to dry AMD. We believe that an S2R antagonist, such as CT1812, may help to regulate the damage-response processes related to these cells that are impaired in dry AMD. After the completion of our ongoing preclinical studies and subject to discussion with the FDA, we intend to advance directly into a Phase 2 clinical trial in the second half of 2021, leveraging our knowledge of CT1812’s preclinical and clinical profile to date. We have initiated discussions with the FDA regarding our plan. Other S2R modulators are being explored, currently in lead identification studies, prior to lead optimization and candidate selection for IND-enabling studies.
The Sigma-2 Receptor Complex
The S2R complex is comprised of transmembrane protein 97, or TMEM97, a four-domain transmembrane protein that forms a complex with progesterone receptor membrane component 1, or PGRMC1. The S2R complex is expressed in the CNS, the retina, as well as peripheral organs, including the pancreas, liver and kidney. Within the brain, the S2R complex is found in several areas, including the cerebellum, cortex, hippocampus and substantia nigra, and is enriched in neurons as compared to glial cells in the adult brain. In the retina, the S2R complex is expressed in several cell types including the RPE cells, photoreceptors and retinal ganglion cells.
The sigma-2 receptor (S2R) complex
Internal and third-party studies suggest that the role of PGRMC1 and TMEM97, the protein components of the S2R complex, regulate cell damage response processes, including cholesterol biosynthesis, vesicle trafficking, progesterone signaling, lipid membrane-bound protein trafficking and receptor stabilization at the cell surface. In addition, the S2R complex regulates autophagy, the cellular process by which altered cellular proteins are degraded and removed. The aberrant activity of these processes, believed to be triggered by cellular stresses, is a hallmark of the dysfunction related to degenerative diseases. The S2R complex is a key regulator of processes that have been implicated in several age-related degenerative diseases and disorders including AD, retinal diseases, such as dry AMD, and synucleinopathies, such as PD and DLB.
We believe the array of degenerative disorders which involve protein components of the S2R complex allows for the potential therapeutic use of proprietary S2R antagonists in numerous indications. While a fuller understanding of the molecular mechanisms involving the S2R complex remains to be elucidated, evidence suggests that targeting the S2R complex may provide therapeutic benefit to a wide range of age-related degenerative diseases and disorders. We believe modulating the S2R complex to normalize cellular function may provide a restoration of normal cellular processes.
Biomarker and Imaging-Driven Evidence
Biomarkers have become increasingly important in the development of treatments for neurodegenerative diseases for a number of reasons, including monitoring drug activity in patients, assessing changes in disease pathology during treatment and identifying responder populations for clinical studies. Given that biomarker-enabled therapeutics have a higher rate of success at gaining product approval, we elected to employ biomarkers in our programs to mitigate clinical development risk. To that end, in addition to a number of cognitive tests, our clinical trials use a variety of biomarkers to measure target and/or pathway engagement and assess changes in disease progression. For example, in AD, changes in cerebrospinal fluid, or CSF, concentrations of neurogranin and synaptotagmin-1 can be indicative of damage to synapses. In PD and other synucleinopathies, changes in markers such as α-synuclein species, lysosomal enzymes, markers of amyloid and tau pathology, and neurofilament light chain can indicate dysfunction in membrane trafficking and autophagy processes. Quantitative EEG and PET imaging agents as well as vMRI may have utility in several neurodegenerative disorders to measure synaptic function, synaptic density and brain atrophy, respectively.
Our Novel, Improved Conditioned Extracts (NICE) Screening Platform
Chemical structures that we are currently evaluating as potential therapeutics for degenerative diseases originate from our NICE screening platform. The NICE screening platform allows us to generate proprietary small molecule libraries derived from natural chemical scaffolds through a proprietary process which we refer to as conditioned extraction. Conditioned extraction, a process pioneered by our cofounder, allows us to eliminate undesirable properties of well characterized, biologically active compounds sourced from natural products, while retaining their biological activity. The resulting molecular configurations are then subjected to proprietary functional in vitro screening assays designed to replicate the mature brain and its intricate connections and patterns of electrical signaling. Unlike most other screening assays, such as cells lines derived from immortalized neuronal tumor cells, our use of mature primary neuronal cultures provides us with information-rich measurements more indicative of normal brain function and predicative of functional benefit. We have utilized our NICE screening platform in conjunction with these mature primary neuronal cultures to develop product candidates for our proprietary Early Alzheimer’s Screening System, or EASSY.
The candidate library produced by the NICE screening platform is predisposed to compounds with attractive drug-like properties such as low molecular weight, low number of reactive hydrogen bonds, lipophilicity and relatively neutral chemistry properties. These characteristics reduce the reactivity of the molecules and related toxicities, while also enhancing their ability to cross the blood-brain and blood-retina barriers. As a result, the NICE screening platform is designed to accelerate drug development time while reducing development risk. We believe these characteristics provide us with a screening platform that is differentiated from other discovery strategies.
Our Product Candidates
We are leveraging our expertise in the biology of the S2R complex, synaptic function and plasticity, and our understanding of the role of toxic age-related soluble proteins, to construct a pipeline of innovative, differentiated small molecule product candidates that are intended to restore normal cellular damage responses. We intend to develop therapeutics with the potential to overcome diseases associated with age-related toxic protein buildups that disrupt key cellular processes. Our initial product candidates target diseases characterized by dysfunction or dysregulation of the S2R complex that leads to cellular degeneration, as observed in age-related degenerative diseases and disorders, such as AD, dry AMD, PD and DLB as depicted in the illustration below.
Our Lead Product Candidate: CT1812
Our lead product candidate, CT1812, is an orally delivered, small molecule antagonist that penetrates the blood-brain and blood-retina barriers and binds selectively to the S2R complex; and through its modulation restores normal function of synapses, as well as critical cellular processes such as autophagy, cholesterol biosynthesis, vesicle trafficking, progesterone signaling, lipid membrane-bound protein trafficking and receptor stabilization at the cell surface. CT1812 originated from our initial efforts with our NICE screening platform which enables the generation of innovative leads. Leads identified through NICE were then evaluated using proprietary in vitro assays designed to better emulate in vivo synaptic activity. We believe the use of these assays allows us to identify functionally active structures which may impact neuronal behavior significantly faster than alternate screening approaches. We currently retain worldwide rights to CT1812 for all indications and are developing CT1812 as a potential treatment for a range of diseases including AD, dry AMD and synucleinopathies, such as DLB.
CT1812 for the Treatment of Alzheimer’s Disease (AD)
CT1812 was designed to selectively target and displace Aβ oligomers bound to neuronal receptors at synapses by a new and differentiated mechanism of action. CT1812 allosterically modulates, changing the conformation of a key multiprotein regulator of oligomer receptors, the sigma-2 receptor complex. This destabilizes the Aβ oligomer binding site, increasing the off-rate and thereby displacing bound Aβ oligomers, which are then cleared from synapses. In our preclinical studies, CT1812 has demonstrated the potential to protect synapses, facilitate their restoration and improve cognitive performance. These preclinical results are currently being validated in our ongoing Phase 2 clinical trials.
Overview of the Disease
AD is a progressive neurodegenerative disorder characterized by cognitive dysfunction, memory loss, dementia and the impairment of daily living activities, along with numerous behavioral and neuropsychiatric symptoms. In the advanced stages of the disease, an AD patient is unable to recognize faces, use or
understand language and displays a lack of awareness for their surroundings. Continued functional decline ultimately results in the patient’s death.
Due to the size of the affected population and the current lack of effective disease modifying therapies, we believe that AD is one of the most significant unmet medical needs of our time. Nearly six million Americans have been diagnosed with AD and disease prevalence is expected to more than double by 2050. The direct healthcare costs to care for patients with AD and other dementias in the United States is currently estimated to exceed $300 billion and projected to increase to $1 trillion by 2050. Absent the development of meaningful intervention in the course of the disease, the number of people diagnosed with, and dying from, AD is anticipated to escalate appreciably as lifespans lengthen, since prevalence increases significantly with age. The Centers for Disease Control listed AD as the primary cause of death for more than 121,000 Americans in 2019. The disease is equally devastating worldwide, with the World Health Organization estimating that AD affects as many as 35 million people globally.
Currently Approved AD Therapeutics
Only one disease-modifying therapeutic option has been approved by the FDA. Specifically, Biogen’s Aduhelm received accelerated approval on June 7, 2021. The FDA allows accelerated approval for drugs to treat serious conditions that fill an unmet medical need based on a surrogate endpoint. A surrogate endpoint is a marker thought to predict clinical benefit but is not itself a measure of clinical benefit. After receiving accelerated approval, drug companies are still required to conduct studies to confirm the clinical benefit. If the required studies confirm the drug’s benefit, then the FDA grants traditional approval of the drug. Aduhelm is a monoclonal antibody administered via infusion reported to reduce Aβ plaques, which is distinct from our small molecule approach to modulate the S2R, thereby blocking Aβ oligomers from binding to synapses. The only other therapies approved for AD are indicated to treat the symptoms of AD: acetylcholinesterase inhibitors, or AChEIs, and glutamatergic modulators and an orexin receptor antagonist. AChEIs are designed to slow the degradation of the neurotransmitter acetylcholine, helping to preserve neuronal communication and function temporarily. Glutamatergic modulators are designed to block sustained, low-level activation of the N-methyl-D-aspartate, or NMDA, receptor without inhibiting the normal function of the receptor in memory and cognition. Namenda (memantine), an NMDA receptor antagonist was approved in the United States in 2003. These therapeutic products do not modify or alter the progression of the underlying disease and provide only modest efficacy in treating the symptoms.
Therapeutic Approaches in Development to Treat the Underlying Disease Have Shown Little Success
Numerous therapeutic approaches have been evaluated to remedy the causes of AD. Those focused on reducing the aberrant production, or removal, of intraneuronal neurofibrillary tangles of tau protein have yielded limited clinical benefit. Development initiatives intended to inhibit hyperphosphorylation of the tau protein and related kinase activity, enhance microtubule stability or block tau aggregation have largely been discontinued due to toxicity or a lack of efficacy. Microglial activation and its role in AD-induced neuroinflammation has emerged as another potential target for therapeutic development as has the proper functioning of processes dictating synaptic plasticity, believed to be of central importance to neuronal activity and continued viability. These efforts have also not yielded meaningful clinical advances.
Among the more prevalent and targeted mechanisms implicated in AD, is the accumulation of Aβ aggregates in the neuronal synapse where disease progression leads to synaptic dysfunction and dysregulation. The accompanying deterioration in neuronal activity ultimately results in neuronal death. As a result, the reduction in the levels of Aβ aggregates at the synapse has been a prominent objective of a significant number of therapeutic candidates, including active and passive immunotherapies, designed specifically to target Aβ aggregates. As with other treatment strategies, with the exception of Aduhelm, these approaches have likewise yielded few meaningful treatment advances.
We believe the overarching issue with therapeutic interventions intended to limit Aβ aggregate concentrations in the brain is that they fail to discriminate between different forms of Aβ aggregates: fibrils, plaques and oligomers. Accordingly, these efforts may demonstrate success clearing fibrils and the largely inert plaques, but fail to address the specific neurotoxic effects of Aβ oligomers. We believe that unlike
previously pursued approaches, our strategy of targeting the S2R has the potential to prevent Aβ oligomer toxicity by acting directly at the synapse, thereby preventing synaptotoxicity, a mechanism we are testing in the clinic currently.
The Role of Aβ Oligomers on Synapses and the Downstream Impact to Brain Function and AD
Synapses are specialized points of contact between neurons, where electrical signaling and communication takes place. It is well established that synapses are routinely sprouted and resorbed as part of the normal process of learning and memory. Each neuron is covered with an estimated 10,000 synapses and these synapses participate in a complex electrical circuit with other neurons. Neurons do not divide or reproduce as part of normal physiological function.
Emerging scientific evidence suggests that Aβ oligomers, formed over time through the buildup of Aβ and its aggregates, bind to specific parts of the synaptic structure and interfere with the normal process of memory formation. This ligand-like activity confers to Aβ oligomers potent synaptotoxic activity. In response, the neuron dismantles and resorbs the synaptic structure to prevent its abnormal function from interfering with what remains of the normal circuit behavior. If a large enough number of synapses are lost, the neuron dies.
Synaptic loss, however, is not necessarily permanent and synapses can be regained or sprout again once the oligomers are removed. We have observed this process in our research involving preclinical AD models. This observation leads us to believe that displacement of synaptotoxic Aβ oligomers may enable synapses to recover and potentially slow cognitive decline. We are further encouraged by the numerous precedents which exist that demonstrate the therapeutic utility of blocking ligand-receptor interactions in the brain with small molecule drugs capable of crossing the blood-brain barrier.
CT1812 Uses a Differentiated Mechanism of Action to Selectively Target Aβ Oligomers
Our proprietary CT1812 clinical candidate employs a novel and fundamentally different mechanism which through alteration of S2R activity selectively facilitates removal of neurotoxic Aβ oligomers. Experimental evidence suggests that Aβ oligomers likely occupy binding sites contiguous to the S2R complex. Binding at these locations is believed to produce structural distortions which inhibit the proper functioning of the S2R complex including its role in regulating critical signaling pathways. The preferential binding of CT1812 to the S2R complex produces conformational changes that alters the binding affinity of Aβ oligomers. CT1812 binding to the S2R complex likely modulates the conformation of the S2R complex, which in turn allosterically alters the conformation of the oligomer binding pocket on the oligomer receptors. Binding pocket destabilization leads to displacement of Aβ oligomers from the neurons and neuronal synapse. Once displaced, Aβ oligomers are unable to rebind as long as threshold concentrations of CT1812 are present and are rapidly removed from the synapse. Based on our preclinical studies, we believe that CT1812 not only prevents binding of Aβ oligomers, displacing them from the S2R complex sites at neuronal synapses, but also slows Aβ oligomer-induced loss of synapses and restores synaptic activity, which may reverse downstream alterations related to membrane trafficking.
The Use of an S2R Targeted Approach is Supported by the A673T Mutation
We believe the benefit of the mechanism by which CT1812 stops the toxic impact of Aβ oligomers on cellular function is further supported by an analysis of the Aβ sequence variant, A673T, which is commonly referred to as the “Icelandic” mutation. The A673T mutation is the first variant associated with a mutation in the protein structure of Aβ, first identified through a genomic analysis of the Icelandic population, and is notable in that carriers of the mutation are four-fold less likely to develop AD. The A673T mutation, which involves the substitution of the amino acid alanine for threonine at position 673 of the precursor molecule, not only produces fewer Aβ monomers, but our research indicated that the toxic Aβ oligomers generated have four-fold lower affinity for brain cell synapses. This reduced binding is evidenced in the results of in vitro experiments, which are presented below. Whereas wildtype Aβ oligomer binding is pronounced, the binding of the A673T variant is much lower.
Binding affinities of wildtype versus mutant Aβ oligomers to synapses
(intensity in arbitrary fluorescent units)
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Kd (nM)
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B maxa
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wt Aβ (1 – 42) oligomers
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Site 1:442 ± 70
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7.98 × 105 ± 0.29 × 105
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A673T mutant Aβ (1 – 42) oligomers
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Site 1:1,955 ± 502
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5.98 × 105 ± 0.50 × 105
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Kd is a constant used to evaluate and rank the strengths of interactions for ligands and their receptors. The smaller the Kd value, the greater the binding affinity. Bmax refers to the maximum amount of a ligand that can bind specifically to a receptors. Intensity is measured in arbitrary fluorescent units.
We believe that CT1812 is the only drug currently in clinical trials that mimics the effects of the A673T mutation. As the images presented below suggest, both CT1812 and the A673T mutation similarly reduce the binding of toxic Aβ oligomers to synapses. We believe that drugs like CT1812 that mimic the protective effects of the A673T mutation are more likely to succeed in the clinical setting in patients with mild-to-moderate AD.
CT1812 Clinical Results in AD
We have completed four clinical trial evaluations of CT1812, in both healthy volunteers and patients with mild-to-moderate AD, with two clinical trials ongoing and one additional trial with topline results currently available and final results expected in the second half of 2021. The clinical trials we have conducted
to date have enabled us to ascertain the safety of CT1812, as well as validate its mechanism through proof-of-concept trials and conduct initial assessments of its clinical disease modifying efficacy. The following is the status of our completed and ongoing clinical trials.
Overview of our completed, ongoing and planned clinical studies
COG0201 — Phase 2 (SHINE) Clinical Trial
Our COG0201 SHINE study is a randomized, double-blind, placebo-controlled Phase 2 clinical trial designed to enroll up to a total of 120 patients with mild-to-moderate AD to evaluate the safety and potential efficacy of CT1812. Participants are divided in two CT1812 dose groups (100 mg or 300 mg) and one placebo group, dosed daily for six months. Endpoints include safety and biomarker evidence of disease modification as well as cognitive function, as measured by the ADAS-Cog 11-item version, or ADAS-Cog 11. ADAS-Cog 11 is a globally recognized cognitive scale that is used to assess cognition in patients with AD.
Preliminary results from an interim analysis of the first 24 patients from the COG0201 study demonstrated that CT1812 continued to be generally well tolerated. There were four serious adverse events, or SAEs, which were not drug-related and occurred in a single placebo patient. The patient was discontinued due to one of the SAEs. Treatment emergent adverse events, or TEAEs, were well balanced across all treatment groups. We observed mild and transient elevations of liver enzymes in three patients without any other indications of liver injury. These results were consistent with findings from earlier clinical studies.
The preliminary results also demonstrated a significant decline in the presence of Aβ and a three-point mean improvement in the rate of cognitive decline as measured by ADAS-Cog 11, in patients receiving CT1812 when compared to placebo. These results were observed in patients receiving CT1812 or placebo in addition to background therapies they may have already been receiving for AD. We believe these preliminary results provide promising evidence of CT1812’s cognitive and biological impact on the 24 patients included in the interim analysis of the SHINE study. These results indicate that patients treated with CT1812 showed relative stability on a measure of cognitive performance compared to the placebo group. A mean difference in the rate of decline of approximately three points was observed between the CT1812 dose groups receiving either 100 mg or 300 mg versus the placebo group based on the ADAS-Cog 11 measurements. After review of these results, which are presented in the graph below, we decided to continue trial enrollment, and anticipate enrolling the remaining patients in the second half of 2021.
Results indicate a three-point improvement in cognitive decline in CT1812-treated patients.
Proteomic measurements were also performed of CSF and plasma from these patients, from which we have comprehensive datasets of whole proteome changes observed in AD patients given CT1812 versus placebo for six months. From this, we identified product candidate pharmacodynamic biomarkers that could reflect processes of target engagement, pathway engagement and/or early disease modification.
The SHINE trial was not powered to detect statistically significant treatment differences. Nevertheless, p-values were calculated at the time of the interim analysis with respect to the clinical and biomarker outcomes to help inform on the potential importance of observed numerical treatment differences. For these interim analyses, p-values<0.05 were considered “significant” while p values>0.05 were considered “non-significant.” The approximately three point treatment difference relative to placebo observed for the pooled dose groups that was observed on the ADAS-Cog 11 was non-significant (p>0.05; p=0.1295), while the treatment difference relative to placebo that observed for the reduction in CSF Aβ 42 protein at the 300mg dose was significant (p<0.05; p=0.0178).
Proof-of-Concept Clinical Trials for the Mechanism of CT1812
We have conducted and are continuing to conduct a series of clinical proof-of-concept trials intended to assess target engagement and the impact of CT1812 on synaptic activity. These proof-of-concept trials are presented in more detail below.
COG0202 — Phase 2 (SEQUEL) Trial
Our COG0202 SEQUEL study is a randomized, double-blind, placebo-controlled Phase 2 clinical trial of 16 patients with mild-to-moderate AD to evaluate the potential efficacy of CT1812 in restoring synaptic function in patients through quantitative EEG measurement, as reflected by relative theta power. The trial is configured as a two-arm crossover trial, in which half of the participants will receive 300 mg of CT1812 daily for 29 days. After a 14-day wash out period, these participants will receive placebo for an additional 29 days. The other half of the participants receive placebo daily for 29 days. After a 14-day wash out period, these participants will receive CT1812 treatment for an additional 29 days. CSF and EEG evaluations are taken periodically throughout the duration of the trial. We anticipate reporting topline data from this trial in 2023.
COG0105 — Phase 1(SPARC) Trial
The COG0105 SPARC study is a randomized, double-blind, placebo-controlled Phase 1 clinical trial of 23 patients with mild-to-moderate AD. The primary objectives of the study were to evaluate CT1812 for safety and tolerability. The secondary objectives were to evaluate potential effects of CT1812 on biologically relevant endpoints using various imaging modalities, including PET imaging and vMRI as well as CSF biomarkers, and cognitive and clinical endpoints.
Participants were randomized to receive treatment with 100 mg or 300 mg of CT1812 or placebo once daily for 24 weeks. A preliminary analysis has been made of safety, clinical laboratory measurements, PET
imaging, functional MRI and vMRI, CSF biomarkers and clinical outcomes in patients treated with CT1812 compared to those in patients receiving placebo.
Seventeen patients completed the study protocol, eleven in the CT1812 arm (six in the 100mg cohort; five in the 300mg cohort) and six in the placebo arm. CT1812 was well-tolerated with similar adverse event rates across treatment arms. Most adverse events were mild-to-moderate in severity with no deaths and no treatment-related SAEs reported. We observed mild and transient elevations of liver enzymes without any other indications of liver injury in two patients in the 300 milligram group. The patients were discontinued from the study and the liver enzyme levels returned to normal.
Topline results from the analyses of secondary endpoints demonstrated that after 24-weeks of treatment, there were no significant treatment differences on the ADAS-Cog 11 change from baseline. In addition, there were no significant treatment differences on SV2A signal change compared to baseline. However, vMRI showed a trend (p=0.0641) towards a significant reduction in the loss of composite brain volume in CT1812-treated patients (pooled) compared to placebo. A statistically significant (p<0.05) reduction in loss of brain volume was also observed in three brain regions (hippocampus, prefrontal cortex and pericentral cortex) in treated patients (pooled) compared to placebo, as shown in the table below.
Additional analyses are underway, including examination of CSF biomarkers including Aβ, tTau, pTau181 and a host of synaptic biomarkers. Results are expected 2H 2021.
COG0104 — Phase 1 (SNAP) Trial
Our COG0104 SNAP study was a randomized, double-blind, placebo-controlled Phase 1 clinical trial that enrolled three patients with mild-to-moderate AD to measure the effects of CT1812 on displacement of Aβ oligomers. Patients were randomized 2:1 to receive a single dose of CT1812 or placebo. Patients enrolled in the trial had an indwelling catheter placed in the lumbar CSF space. CSF samples were collected hourly over a 28-hour period. Five CSF samples were collected before and 24 samples collected after administration of a single 560 mg oral dose of CT1812 or placebo. CSF samples from trial participants were analyzed to measure the concentration of Aβ oligomers over the trial period.
Results of this trial revealed an increase in Aβ oligomer levels in the CSF over the 24-hour period following treatment with CT1812, but not in the patient administered placebo. These findings were observed using two independent methods, microimmunoelectrode and western blots. This effect of CT1812 was specific to Aβ oligomers, as no CT1812-related increase in Aβ 1-40 or 1-42 monomer was observed.
We believe these results provide the early proof of principle of CT1812 target engagement in AD patients. Further, we believe that they corroborate our mechanism of action previously demonstrated in preclinical studies, providing the first evidence that our preclinical studies translate to patients with AD.
First evidence of target engagement in humans, which mirrors that found preclinically; and
we believe this reinforces that our mechanism of action extends to patients with AD
COG0102 — Phase 1 Trial
Our COG0102 study was a randomized, double-blind, placebo-controlled, Phase 1 clinical trial of 19 patients with mild-to-moderate AD. Participants were administered one of three oral doses of CT1812, either 90 mg, 280 mg or 560 mg, once daily for 28 days. The primary endpoint of the trial was safety with a secondary objective of establishing the pharmacokinetic, or PK, profile of CT1812. Also included as exploratory endpoints were measurement of CT1812 in CSF, and protein expression changes in CSF and plasma.
In order to gauge the impact of CT1812 on synaptic damage due to AD, we measured concentrations of synaptic proteins, neurogranin and synaptotagmin-1, in CSF samples from these patients using clinically validated standardized assays. Our evaluation of AD protein biomarkers in the CSF revealed that neurogranin levels, shown in the left graph below, in patients treated with CT1812 for 28 days was significantly decreased compared to levels measured in patients administered placebo (p =0.05, analysis of covariance). Neurogranin is a synaptic damage marker that increases in the CSF of AD patients reflecting its decrease in
the brain. The lowering of synaptic damage markers in the CSF is consistent with CT1812’s mechanism of action as observed in our preclinical studies and demonstrates the potential of the drug to slow Aβ oligomer-induced synapse loss.
Another synaptic damage biomarker that is elevated in the CSF of AD patients is synaptotagmin-1. CSF levels of synaptotagmin-1 were similar at baseline and end of study in patients treated with CT1812, whereas its levels in the placebo group displayed a marked increase over the same time period. This analysis of CT1812’s impact on synaptotagmin-1 levels is presented in the right graph below. Consistent with our belief that targeting the S2R has the potential to prevent Aβ oligomer toxicity, we observed a reduction in neurogranin and synaptotagmin in CSF, which are measures of synaptic damage, suggesting that CT1812 may have the ability to protect synapses in AD patients.
Treatment with CT1812 was associated with lower levels of neurogranin and
synaptotagmin-1 compared to placebo
CT1812 was well tolerated in the COG0102 study. All AEs were mild-to-moderate. Some of the participants in the highest dose group experienced lymphocytopenia or elevated liver enzymes. These laboratory abnormalities resolved in most patients with continued dosing of CT1812. One trial participant was discontinued from CT1812 prior to study completion because of elevated liver enzymes with subsequent resolution of this abnormality. Lymphocytopenia or elevated liver enzymes were not observed in either the 90 mg or 280 mg dosing cohorts. There were no SAEs.
Our Phase 1 Safety Trials
In addition to Phase 1 clinical trials conducted in our targeted patient population, we also conducted a series of Phase 1 clinical trials in healthy volunteers designed to establish the safety profile of CT1812, as well as determine potential drug-food or drug-drug interactions. These trials and their results, which are summarized below, indicated that CT1812 was generally well-tolerated.
COG0101 — First in human phase 1 clinical trial
Our COG0101 study was a randomized, double-blind, placebo-controlled ascending dose Phase 1 multi-cohort clinical trial of 93 healthy volunteers to assess the safety and potential drug-food interactions of CT1812. The trial was conducted in two segments.
The first segment was structured as an ascending single dose trial, in which participants received one dose of CT1812 with increasing doses given to each of six cohorts. In this segment of the trial, eight participants were enrolled per dosing cohort with six participants receiving CT1812 and two receiving placebo. The doses evaluated were 10 mg, 30 mg, 90 mg, 180 mg, 450 mg and 1,120 mg. A seventh cohort of six patients received a single 90-mg dose after receiving a standardized meal. All doses were administered as scheduled.
The second segment was configured as a multiple ascending dose trial, that enrolled 39 healthy volunteers, divided in three cohorts of ten participants, with one additional cohort consisting of nine healthy elderly volunteers. Each participant in this segment of the trial received a single dose of CT1812 each day for 14 days. The doses evaluated in this second segment were 280 mg, 560 mg and 840 mg.
CT1812 CSF concentrations correlated to a >80% S2R predicted receptor occupancy in brain
Following completion of each trial cohort, bioanalytical evaluation of plasma CT1812 PK was conducted.
This trial demonstrated that administration of CT1812 in single doses of up to 1,120 mg, administered once, as well as up to 840 mg of CT1812 dosed for 14 consecutive days was well tolerated. Significantly, CT1812 concentrations detected in the CSF correlated to an estimated receptor occupancy in the brain of greater than 80%. There was one SAE in the multiple-dose portion of the study that was deemed unrelated to study drug. There were no SAEs related to the product candidate or TEAEs leading to withdrawal from the study.
COG0103 — Phase 1 trial
Our COG0103 study was a Phase 1 clinical trial of 15 healthy volunteers designed to evaluate the potential effects of CT1812 on select CYP isoenzymes: CYP2C19, CYP2C9, CYP2D6 and CYP3A4. This was accomplished by assessing its effects on substrates of these isoenzymes: 20 mg omeprazole, 500 mg tolbutamide, 50 mg dextromethorphan and 4 mg midazolam. The 15 healthy volunteers who participated in the trial received the substrates of these isoenzymes two days prior to the initial dose of CT1812 and PK assessments were performed. A dose of 560 mg of CT1812 was administered to each of the trial participants for the following six consecutive days. The day 6 dose of CT1812 was administered concomitantly with the four-substrate cocktail and PK assessments were repeated.
A weak drug interaction was observed between CT1812 and midazolam and dextromethorphan. A lack of any clinically meaningful interaction was observed with coadministration of omeprazole or tolbutamide. Based on the small magnitude of change in PK parameters of the probe drugs observed in this study for the isoenzymes CYP2D6 and CYP3A4, clinically meaningful interactions are unlikely.
Clinical Development Plans and Future Trials
Our Upcoming COG0203 Phase 2 Clinical Trial Fully Funded by NIA Grant of approximately $81.0 million
Our COG0203 study will be a randomized, double-blind, placebo-controlled Phase 2 clinical trial designed to enroll 540 patients with early-stage AD and powered to show a change in the rate of cognitive and functional decline. We intend to enroll patients with MCI, due to AD or mild AD who have elevated levels of Aβ as determined by PET imaging or as measured in CSF. The trial will be conducted in collaboration with the ACTC and will utilize up to 35 academic sites associated with the consortium. Patients will be randomized to receive CT1812 or a placebo for 18 months. In addition to a battery of cognitive measures, we intend to use a variety of biomarkers to measure target engagement and assess changes in neurodegeneration and disease progression. We have received a grant of approximately $81.0 million from the NIA to fully fund this trial.
Preclinical Results
Prior to entering clinical trials, the therapeutic potential of CT1812 was observed in numerous preclinical studies. As is demonstrated in the images below, the addition of Aβ oligomers to neuronal cell cultures resulted in synaptotoxicity as illustrated by the reduced expression of synaptic markers neurogranin, synaptotagmin and SV2A. The lack of immunoreactivity of these three synaptic proteins can be seen in the middle column of the image below. However, the presence of CT1812 blocked the Aβ oligomer-induced loss of synapses, as reflected by the presence of synaptic protein expression displayed in the right-hand column below.
CT1812 prevents Aβ oligomer-mediated synaptic damage
Results showed that CT1812 also slowed the loss of synapses that is triggered by Aβ oligomers. A higher resolution image of the cell culture exposed to Aβ oligomer is shown below, before the addition of CT1812, which is presented on the left, and after the addition of CT1812, which is presented on the right. Aβ oligomers shown in red bind to synaptic receptors and reduce numbers of synapses shown in green. The
addition of CT1812 displaces Aβ oligomer binding and appears to block the effects induced by the Aβ oligomers, with the synapse numbers remaining at levels similar to normal.
CT1812 slows loss of synapse numbers in the presence of Aβ oligomers
The protective benefits of CT1812 observed in these in vitro assays are supported by functional in vivo assessments of CT1812. In one such preclinical study, the memory of mice was tested based on the subject’s ability to recall fear-inducing triggers and its performance in a maze. The mice exhibiting symptoms of AD, depicted by the red bars in the image below, performed significantly worse in both the fear and maze tests when compared to normal, non-transgenic mice, represented by the blue bars. However, after administration of CT1812, the AD mice, represented by the solid green bars, were seen to perform at a level similar to that achieved by normal mice. We believe these results are illustrative of CT1812’s ability to restore synaptic proteins and numbers to normal levels and with it, the animal’s functional capabilities.
CT1812 restores functional capabilities in a mouse model of AD
CT1812 for the Treatment of Dry Age-Related Macular Degeneration (Dry AMD)
We believe that several lines of evidence suggest that modulation of the S2R complex may provide significant therapeutic utility for the treatment of dry AMD. Human genetics points to TMEM97 as a promising therapeutic target for dry AMD, as indicated via several large-scale, independent genome-wide association, or GWA, studies. In addition, unbiased pathway analysis of AD patient proteomic data obtained during our clinical trials provides independent evidence of a relationship between the S2R complex and dry AMD.
We are currently engaged in preclinical development activities for this indication, including studies to elucidate the key mechanisms by which CT1812 and the S2R complex alter the biological processes that contribute to dry AMD.
Early proof-of-concept studies with CT1812 indicate a role of S2R modulators in rescuing key aspects of dry AMD including maintaining homeostatic functions of RPEs, ameliorating lysosomal dysfunction and preventing RPE cell death. PK assessment indicates that we can achieve therapeutic levels (>80% receptor occupancy) of CT1812 in retinal tissue through oral administration.
We intend to initiate a Phase 2 clinical trial in second half of 2021, subject to discussion with the FDA. We believe that well-characterized clinical endpoints and a defined regulatory path increase the attractiveness of this indication.
Overview of the Disease
AMD is the leading cause of blindness in people over 50 years of age in the United States, afflicting approximately 11 million people in the U.S., including an estimated 12% of all U.S. adults over 80 years of age. Dry AMD is a progressive condition and accounts for up to 90% of all AMD cases. Advanced dry AMD, or GA, affects approximately 2 million people in the U.S. There are no approved therapeutics available for dry AMD. Other treatments in development are primarily invasive, including intravitreal injections, stem cell replacement and gene therapy approaches. We believe the limited treatment options available for patients with dry AMD, coupled with newly implicated biochemical pathways, make dry AMD an attractive target for the development of therapeutics.
There are two types of AMD, the first of which is neovascular, or wet AMD, and non-neovascular, or dry AMD. Dry AMD, which accounts for approximately 90% of all AMD cases, is a progressive condition that involves a dysregulation of cellular processes, among which is the accumulation of lipid deposits, known as drusen, that causes a thickening of the Bruch’s membrane. This thickening disrupts the cytoarchitecture of the retinal pigment epithelium, or RPE, and this disruption, coupled with oxidative stress and inflammation, leads to the diminished health and function of RPE and photoreceptor cells, with accumulated damage resulting in cell death and visual impairment.
The anatomy of the eye and the regions impacted by AMD
Limitations of Current Treatments
Treatments for dry AMD are currently limited to vitamins and over-the-counter zinc. While there are no therapeutics approved by the FDA to treat dry AMD, there is considerable development activity ongoing involving numerous targets. Among the areas of ongoing interest are efforts targeting the complement pathway and its role in inflammation, as mutations in this pathway have been associated with higher risk of dry AMD. In addition, cell and gene therapy approaches are being evaluated to regenerate RPE cells and rescue the loss of photoreceptors. Small molecule visual cycle modulators are also under evaluation to maintain retinal integrity. Most of these approaches require invasive administrations.
Rationale for S2R Mechanism of Action
Indications of S2R Involvement in Dry AMD
We believe that several lines of evidence suggest that modulation of the S2R complex may provide significant therapeutic utility for the treatment of dry AMD. First, human genetics point to TMEM97 as a
promising therapeutic target, as indicated via several large-scale, independent genome-wide association, or GWA, studies. These studies indicate a genetic mutation known as a single nucleotide polymorphism, or SNP, in the TMEM-VTN locus confers decreased risk for dry AMD. It remains unknown if this mutation confers a change in TMEM97 expression levels. However, knockdown of TMEM97 in in vitro models of the disease partially rescues RPE cells from oxidative stress-induced cell death. Investigation of the effects of pharmacological perturbation of the S2R complex signaling is currently ongoing to determine if the rescue of cell death mediated by decreasing TMEM97 expression can be replicated by S2R antagonists, such as CT1812.
Unbiased Analysis of Clinical Trial Sample Proteomics Data: Top Disease Ontologies
Unbiased pathway analysis of AD patient proteomic data obtained during the COG0102 and SHINE Part-A clinical trials provides independent evidence of the relationship between the S2R complex and dry AMD. Analyses of CSF were performed to ascertain which predesignated functional disease ontologies may be affected by the administration of CT1812. These analysis identified GA and macular degeneration as two of the top indications affected, with GA presenting the most significant relationship. Subsequent analyses identified several subsets of proteins altered by CT1812 that are involved in dry AMD.
In subsequent analyses examining the overlap of proteins altered in CSF and plasma biofluids of AD patients treated with CT1812 versus placebo, we identified a set of proteins, altered by CT1812 that have been previously shown by other groups to be disrupted in dry AMD or GA, compared to age-matched controls. Subsequent analysis identified several pathways in which these proteins are involved, many of which have known genetic or biological links to processes disrupted in dry AMD. We believe the collective insights provided by these analyses provide early proof of concept that an S2R modulator may be capable of altering AMD relevant proteins and pathways in an aged patient population.
Preclinical Support for Clinical Trials
Early proof-of-concept studies indicate a clear role of S2R modulators in rescuing key aspects of dry AMD. Mechanistic studies and pathway analysis suggest a key role of S2R modulators in dry AMD.
Mechanistic Studies Indicate CT1812 Plays a Role in Cell Survival
and Inflammatory Pathways in RPE Cells
Functional studies support a role of S2R modulators in preventing cell death in a concentration dependent manner, as indicated by the chart below, which suggests that S2R modulators may prevent RPE cell death in dry AMD.
Functional Data Indicates That σ-2 Modulators Rescue Cell Death in RPE Cells
Additional functional studies extend our method of action, or MoA, beyond rescuing cell death, and suggest S2R modulators may ameliorate disruptions in homeostatic functions of RPEs, including ameliorating lysosomal dysfunction and salvaging the ability of RPE cells to recycle photoreceptor outer segments.
Working Hypothesis of MoA in Dry AMD
We believe preclinical studies provide further evidence supporting a clinical trial for CT1812 as a potential treatment for dry AMD. PK assessment indicates that we can achieve therapeutic levels (>80% receptor occupancy) of CT1812 in retinal tissue through oral administration. Moreover, as is illustrated in the graph below, CT1812 levels recorded in the retina were similar to those in the brain, suggesting that the dose(s) used to achieve potential therapeutic levels in the retina needed to achieve efficacy will be similar to the dose(s) for AD.
Similarities in CT1812 concentrations following oral administration in the brain and retina
Our next-generation S2R modulator, CT2074, shows good retinal exposures above 80% receptor occupancy with oral administration. This modulator has favorable PK properties, including high degree of bioavailability and high retina-to-plasma ratio, and shows activity in rescuing deficits in AMD assays.
![[MISSING IMAGE: TM2113659D6-LC_S2RMODUL4CLR.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/07/19/0001104659-21-093246_TM2113659D6-LC_S2RMODUL4CLR.JPG)
Additional studies are underway to elucidate the key mechanisms by which CT1812 and the S2R complex alter the biological processes that contribute to dry AMD. In vitro and in vivo preclinical studies are evaluating the utility of CT1812 to impede the death of retinal ganglion cells. Not only is it anticipated that these proof-of-concept studies will allow us to further elucidate the mechanism by which the S2R complex modulators act upon the various disease pathologies, but the learnings from this may also inform appropriate patient selection, time of intervention and clinical outcome measurements to enable a successful clinical trial design. We anticipate completing dry AMD preclinical proof-of-concept studies in mid-2021.
Proposed Phase 2 Clinical Trial Design
We believe that an S2R antagonist, such as CT1812, may help to regulate the damage-response processes related to these cells that are impaired in dry AMD. After the completion of our ongoing preclinical studies and subject to discussion with the FDA, we intend to advance directly into a Phase 2 clinical trial in the second half of 2021, leveraging our knowledge of CT1812’s preclinical and clinical profile to date. We have initiated discussions with the FDA regarding our plan to leverage results of our previous clinical trials to accelerate clinical development of CT1812 as a treatment for dry AMD.
We anticipate the design of this trial to be a double-blind, placebo-controlled, randomized trial involving three dosing groups, two active treatment dose groups and a placebo group. We plan to enroll 300 patients in this 12-month study, with equal participant numbers in each of the three dose groups, with each trial participant dosed daily. Eligibility requirements are anticipated to include individuals 50 years of age or older that have received a diagnosis of dry AMD, with a best corrected visual acuity, or BCVA, score of 24 letters or more, with GA of between 2.5 mm2 and 17.5 mm2. The proposed primary endpoint of the trial is change in GA lesion area using fundus autofluorescence imaging. Proposed secondary endpoints are expected to include change in the square root of the GA lesion area, low luminance visual acuity, or LLVA, and BCVA, low luminance visual acuity deficit and drusen volume as measured by optical coherence tomography. We plan on measuring these outcomes at three-month intervals.
S2R Modulators for the Treatment of Synucleinopathies
Substantial cellular and clinical biomarker evidence demonstrate that our S2R modulators, including our clinical drug candidate CT1812, have a beneficial impact on the pathways impaired in synucleinopathies,
namely the localization of α-synuclein aggregates in Lewy bodies, which is a chief hallmark of PD and other synucleinopathies. More recently, human genetic evidence has linked SNCA, the gene encoding α-synuclein, to the pathology of synucleinopathies.
We have conducted preclinical studies of S2R ligands in our library, including CT1812, to explore the potential of S2R antagonists to rescue the biological processes that are impaired in synucleinopathies. Subject to discussion with the FDA, we intend to conduct clinical studies in DLB, PD and potentially other synucleinopathies as outlined below.
An Overview of Synucleinopathies
Synucleinopathies are a group of neurodegenerative disorders in which the protein alpha-synuclein accumulates abnormally to form inclusions in the cell bodies or axons of neurons or oligodendrocytes. Two of the primary synucleinopathies are PD and DLB, which each involve motor and cognitive dysfunction. While the cell types and brain structures that are affected in PD and DLB vary markedly between the disorders, synucleinopathies share a characteristic accumulation of α-synuclein aggregates into fibrils, the major constituent of the Lewy bodies that occur inside brain neurons in these diseases.
Increasing evidence suggests that α-synuclein also aggregates into oligomers, and that oligomers are more toxic than fibrils. α-synuclein oligomers contribute to neurodegeneration through a variety of mechanisms including disrupting normal autophagy, and inducing synaptic dysfunction and loss. Synaptic dysfunction and loss contribute to the cognitive and motor symptoms of these diseases.
Synucleinopathies are second only to AD in terms of neurodegenerative disease prevalence. In the United States, as many as one million people suffer from PD and an estimated 1.4 million from DLB. According to the Parkinson’s Foundation and the Lewy Body Dementia Association, the direct healthcare costs for patients with PD and DLB are estimated to be approximately $25 billion and $31.5 billion per year, respectively. For PD, these direct medical costs include an estimated $2.5 billion for medications annually in the United States.
Limitations of Current Treatments
Most approved therapeutic products treat the symptoms of the diseases and modulate dopamine. While some existing products provide meaningful symptomatic relief, they have significant side effect risks, fail to address the progression of the disease, and over time gradually lose their effectiveness in treating the symptoms of the disease. There are no currently approved disease-modifying therapeutics for PD or other synucleinopathies.
Rationale for S2R Mechanism of Action for Synucleinopathies
α-synuclein is a protein primarily found in neural tissue that plays a role in neurotransmission. In synucleinopathies such as DLB and PD, α-synuclein builds up in brain cells and forms oligomers that saturably bind to neurons where they impair critical cellular processes, causing synaptic dysfunction and eventual loss. Our decision to pursue the treatment of synucleinopathies with S2R compounds is based on internal and third-party data, indicating that the S2R components PGRMC1 and TMEM97 regulate cell pathways known to be impaired in synucleinopathies, such as autophagy, vesicle trafficking and lipid synthesis; α-synuclein oligomers bind directly to PGRMC1; and synucleinopathies share certain mechanistic similarities with AD, including pathologies related to aberrant oligomeric protein formations.
As summarized below, we believe our preclinical studies provide compelling evidence supporting the use of CT1812 and our next-generation S2R modulators as potential therapeutics to treat synucleinopathies.
As with oligomers of the Aβ protein in AD, oligomers of α-synuclein are highly toxic when bound to brains cells and internalized. This binding causes cellular stress, including three major pathway disruptions: upregulation of the autophagy receptor LAMP2A, dysregulation of lipid metabolism and a reduction in membrane trafficking. The S2R complex components, PGRMC1 and TMEM97, directly regulate these processes, activities which are compromised by the binding and internalization of α-synuclein oligomers.
Compounds that bind to S2R and block α-synuclein binding and/or internalization are therefore expected to be disease-modifying.
Preclinical Study Support for Clinical Trials
The results of in vitro studies suggest that S2R antagonists, such as CT1812, may have disease modifying effect on the synucleinopathies by reversing pathway disruption and dysregulation caused by α-synuclein oligomers. In work funded by a grant from the Michael J. Fox Foundation, α-synuclein oligomers were found to bind to brain cells in culture and are internalized, indicated by the red dots in the image to the left below. With the addition of S2R antagonist CT1812, the binding and thus internalization of the α-synuclein oligomers is inhibited as indicated in the image to the right below.
CT1812 blocks the binding and internalization of α-synuclein oligomers the neuronal synapses
![[MISSING IMAGE: TM2113659D3-PH_BLOCKS4C.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/07/19/0001104659-21-093246_TM2113659D3-PH_BLOCKS4C.JPG)
The potential for S2R antagonists to reverse the deleterious cellular effects of α-synuclein oligomers is also reflected in the in vitro analysis of LAMP2A expression presented below. LAMP2A is a critical component of chaperone-mediated autophagy, one of several processes that eliminate damaged cellular proteins. Its expression, noted in orange, is upregulated in the presence of the toxic α-synuclein oligomer, likely a compensatory mechanism in response to the cellular insult. S2R antagonists, which block membrane trafficking deficits caused by α-synuclein oligomers, are observed to inhibit the upregulation of LAMP2A, as evidenced by the dark and light gray in the below chart. As these antagonists are selective for the S2R complex, their ability to reverse the effects of α-synuclein on LAMP2A expression provides compelling evidence of the S2R complex’s importance in the regulation of this autophagy pathway.
In vitro analysis further illustrates α-synuclein oligomers’ dose-dependent inhibition of membrane trafficking. Importantly, oligomer-related inhibition was noted to be four-fold higher than that observed with high concentrations of monomeric α-synuclein, illustrative of the significantly greater toxicity of
α-synuclein oligomers. The addition of CT1812 was observed to reverse the membrane trafficking deficit related to the presence of α-synuclein oligomer, while having no effect on membrane activity when dosed in its absence.
S2R antagonists reverse the effects of α-synuclein oligomers on LAMP2A expression and trafficking
Proposed Phase 2 Clinical Trial in Dementia with Lewy bodies (DLB)
We plan to initiate a Phase 2 clinical trial evaluating the use of CT1812 to treat patients diagnosed with DLB in the second half of 2021, subject to discussion with the FDA. We anticipate the design of this trial to be a double-blind, randomized trial involving three dose groups, two active treatment cohorts and a placebo group. We expect to enroll 120 patients in a six-month study, with equal participant numbers in each of the three dose groups, with daily (QD) dosing. Eligibility requirements will include individuals between 50 and 80 years of age that have received a diagnosis of DLB and have a mini-mental state exam, or MMSE, score of between 18 and 27. Proposed clinical endpoints of the trial include safety and physical activity measurements, cognitive assessments, and PK and pharmacodynamic biomarker analyses compared to baseline measurements recorded at the beginning of the trial. In addition, CSF will be collected and analyzed for α-synuclein content and established patterns of differential protein expression.
Additional Product Candidates
Many degenerative disorders likely involve a dysfunctional cellular damage response mechanism and significant evidence is emerging which highlights the importance of the S2R complex and its components in regulating this response. The complex likely contains a number of relevant binding sites that may allow for multiple disease intervention approaches, making it an attractive therapeutic target. Accordingly, we are actively engaged in a number of earlier-stage discovery programs which are built upon our identification of five structurally distinct chemical series. From these series we have multiple leads which will be optimize each of our lead series. Each of these leads has demonstrated favorable potency with variable selectivity in early preclinical testing and each of the molecular series possesses distinct bioavailability and PK properties, including differences in half-life and blood-brain and blood-retina permeability.
Proposed Synucleinopathies Clinical Program
Subject to additional funding, we plan to study several next-generation S2R modulators derived from chemically distinct series to measure their ability to rescue cell death in synucleinopathies such as PD and DLB. We would also study α-synuclein pathology and motor deficits in two mechanistically distinct in vivo models of synucleinopathies. In parallel, these studies will elucidate the mechanism of action by which S2R
modulators are efficacious in PD and DLB and provide essential data to support potential biomarker nomination for PD and DLB.
Grant Funding
Historically, we have sought grant funding to strategically advance our programs. To date, we have secured non-dilutive funds from the NIA, the Michael J Fox Foundation, or MJFF and other groups to pursue our commonly aligned interests of developing therapeutics for neurodegenerative disorders. Taken together, the company has been awarded approximately $168.4 million in grants for the advancement of our pipeline programs. Of this, approximately $128.5 million in cumulative non-dilutive grants have been awarded by the NIA to fund development of CT1812 for the treatment of Alzheimer’s disease.
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Funding Org
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Year
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Project
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Amount
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National Institute on Aging (NIH)
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2016
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COG0101 Ph1b first-in-patient trial for CT1812
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$2,410,669
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National Institute on Aging (NIH)
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2016
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COG0102 Ph1b/2a Clinical Trial for CT1812
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$2,410,669
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|
|
|
National Institute on Aging (NIH)
|
|
|
2017
|
|
|
COG0104 Ph1 SNAP Study: CSF Catheter
|
|
|
$2,527,271
|
|
|
|
National Institute on Aging (NIH)
|
|
|
2017
|
|
|
COG0105 Ph1 SPARC Study: SV2a PET
|
|
|
$4,795,774
|
|
|
|
National Institute on Aging (NIH)
|
|
|
2018
|
|
|
COG0201 Ph2 SHINE Study
|
|
|
$16,848,329
|
|
|
|
National Institute on Aging (NIH)
|
|
|
2019
|
|
|
COG0202 Ph2 SEQUEL Study: qEEG
|
|
|
$3,300,642
|
|
|
|
National Institute on Aging (NIH)
|
|
|
2020
|
|
|
COG0203 Ph2 Study with ACTC
|
|
|
$80,974,766
|
|
|
|
National Institute on Aging (NIH)
|
|
|
2021
|
|
|
COG0108 Study: hAME
|
|
|
$1,642,783
|
|
|
|
National Institute on Aging (NIH)
|
|
|
2021
|
|
|
COG0201 Ph2 SHINE Amendment
|
|
|
$13,634,548
|
|
|
|
National Institute on Aging (NIH)
|
|
|
2021
|
|
|
COG1201: Study: DLB
|
|
|
$29,498,048
|
|
|
|
NIH and others
|
|
|
2010-2018
|
|
|
Ten Preclinical Programs
|
|
|
$10,359,971
|
|
|
|
|
|
|
|
|
|
|
|
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$168,403,470
|
|
Each of the grants awarded to us relate to agreed upon direct and indirect costs for specific studies or clinical trials, which may include personnel and consulting costs, costs paid to CROs, research institutions and/or consortiums involved in the grant, as well as facilities and administrative costs. These grants are cost plus fixed fee arrangements in which we are reimbursed for our eligible direct and indirect costs over time, up to the maximum amount of each specific grant award. Only costs that are allowable under the grant award, certain government regulations and the NIH’s supplemental policy and procedure manual may be claimed for reimbursement, and the reimbursements are subject to routine audits from governmental agencies from time to time. While these NIA grant do not contain payback provisions, the NIA or other government agency may review our performance, cost structures and compliance with applicable laws, regulations, policies and standards and the terms and conditions of the applicable NIA Grant. If any of our expenditures are found to be unallowable or allocated improperly or if we have otherwise violated terms of such NIA grant, the expenditures may not be reimbursed and/or we may be required to repay funds already disbursed. To date, we have not been found to have breached the terms of any NIA grant.
Intellectual Property
We seek to protect and enhance our proprietary technology, inventions, and improvements that are commercially important to the development of our business by seeking, maintaining, and defending patent rights, in the United States and internationally, whether developed internally or licensed from third parties. We will also seek to rely on regulatory protection afforded through inclusion in expedited development and review, data exclusivity, market exclusivity and patent term extensions where available.
Company Owned Intellectual Property
As of May 31, 2021, our intellectual property portfolio contained eight issued U.S. patents, 50 issued foreign patents as well as three pending U.S. provisional applications, three pending U.S. patent applications,
one pending PCT application and 22 foreign pending patent applications directed to the composition of matter of, pharmaceutical compositions of, methods of use of, and methods for selecting subsets of patients for treatment with our chemical structures, including our lead CT1812. Our current issued patents relating to CT1812 are projected to begin to expire no earlier than 2035, with the composition of matter patent covering CT1812 set to naturally expire in 2035, subject to adjustment or extension of patent term available in a particular jurisdiction. We will likely be awarded Patent Term Extension, or PTE, when CT1812 is approved as a New Chemical Entity, or NCE, that will extend the term of the CT1812 composition of matter patent by up to five years, and we anticipate pursuing additional patents to further protect CT1812 and to further extend the patent term associated with CT1812. We expect to file additional patent applications in support of current and new product candidates as well as new platform and core technologies.
We are the exclusive owner of six patent families that include several granted U.S. patents and pending U.S. patent applications, as well as granted patents and pending patent applications in numerous foreign jurisdictions, relating to compositions of matter and pharmaceutical compositions of CT1812, analogs of CT1812, and the use of CT1812 for the treatment in certain diseases, disorders and conditions including AD, dry AMD, PD, and synucleinopathies.
The first of these patent families is directed to compositions of matter of CT1812, pharmaceutical compositions of CT1812, methods of using CT1812 for inhibiting amyloid beta effects on a neuronal cell, and methods of using CT1812 to treat AD, and we are the exclusive owner of this patent family in the United States and certain foreign jurisdictions, including Australia, Brazil, Canada, China, the European Union, Hong Kong, India, Israel, Japan, South Korea, Mexico, New Zealand, Russia, and South Africa. As of May 31, 2021, this patent family includes granted patents claiming composition of matter of CT1812, pharmaceutical compositions of CT1812, methods of using CT1812 for inhibiting amyloid beta effects on a neuronal cell, and methods of using CT1812 to treat AD in the United States (three patents), Australia, China, the European Union, Hong Kong, Israel, Japan, Mexico, Russia and South Africa. This patent family also includes a pending U.S. patent application and pending application in certain foreign jurisdictions including Brazil, Canada, the European Union, India, New Zealand, and South Korea. This patent family has a natural expiration date in 2035 subject to any adjustment or extension of patent term that may be available in in a particular jurisdiction such as PTE following NDA approval in the United States or extension of patent term via a Supplementary Protection Certificate, or SPC, following EMEA marketing authorization. Upon approval of the NDA for CT1812 in the United States, the patents in this family claiming compositions of matter of CT1812, pharmaceutical compositions of CT1812, and methods of using CT1812 for inhibiting amyloid beta effects on a neuronal cell, and methods of using CT1812 to treat AD will be eligible to be listed in the FDA’s publication “Approved Drug Products with Therapeutic Equivalence Evaluations,” which we refer to as the Orange Book. These patents complement the regulatory exclusivity by providing the basis for an additional waiting periods prior to the FDA’s approval of an abbreviated new drug application, or ANDA, or 505(b)(2) applicant. If an ANDA or 505(b)(2) applicant were to file its application referencing the NDA for CT1812 before expiration of our composition of matter, pharmaceutical composition, and method of use patents and the applicant asserted that our patents identified on the Orange Book to be invalid or not be infringed, it may be subject to additional waiting periods prior to the FDA’s approval (including a statutory 30-month stay if we sue for infringement, or a shorter period if the patent expires or there are certain settlements or judicial decisions in the patent litigation, starting at the end of the five-year NCE regulatory exclusivity period).
In addition to patent exclusivity, under the provisions of the Hatch-Waxman Act, upon any approval in the United States, we believe that CT1812 will be eligible for five-year NCE regulatory exclusivity, during which time no 505(b)(2) NDA or ANDA can be approved that contains the same active moiety as the chemical entity in the CT1812 NDA. When approved in Europe, CT1812 will also be eligible for 10 years of data and market exclusivity which is extendible for an additional year upon market authorization for one or more new indications during the first eight years of the data and market exclusivity period.
We also own two families of pending patent application directed to methods for selecting subsets of patients with AD for treatment with CT1812 and methods of modulating amyloid beta monomer and oligomer levels using CT812, as well as three pending provisional patent applications that are directed to radiolabeled forms of CT1812, method of treating dry AMD with CT1812, and methods of treating various neurologic disease including Parkinson’s disease and synucleinopathies with CT1812. Any of these
applications, if issued, will have a natural expirations between 2038 and 2042, subject to any adjustment or extension of patent term that may be available such as PTE following NDA approval in the United States as well as any term limitations based upon earlier expiring patents.
Additional Product Candidates
We are the exclusive owner of three patent families that include several pending U.S. patent applications, as well as pending patent applications in numerous foreign jurisdictions directed to additional product candidates, including CT2168 and CT2074, among others. These patent families have expirations no earlier than 2038 subject to any adjustment or extension of patent term that may be available such as PTE following NDA approval in the United States as well as any term limitations based upon earlier expiring patents.
Manufacturing Strategy
We oversee and manage third party contract manufacturing organizations to support development and manufacture of product candidates for our clinical trials, and, if we receive marketing approval, we will rely on such manufacturers to meet commercial demand. We expect this strategy will enable us to maintain a more efficient infrastructure, avoiding dependence on our own manufacturing facility and equipment, while simultaneously enabling us to focus our expertise on the clinical development and future commercialization of our products. Currently, we rely on and have agreements with a single third-party contract manufacturer to supply the drug substance for CT1812 and with a single third-party contract manufacturer to manufacture clinical trial supplies of CT1812, and we expect to enter into commercial supply agreements with such manufacturers prior to any potential approval of CT1812. We continue to develop a commercial route for CT1812 API and to meet all requirements for our planned clinical trials. We plan to transfer the API manufacture to a larger third-party manufacturer once the commercial route is developed. The current API manufacturer is able to supply all of our needs for the planned clinical studies.
CT1812 drug product is manufactured via conventional pharmaceutical processing procedures, employing commercially available excipients and packaging materials. The procedure and equipment employed for manufacture and analysis are consistent with standard organic synthesis or pharmaceutical production, and are transferable to a range of manufacturing facilities, if needed. We have selected a larger third-party drug product manufacturer and will be executing technology transfer of drug product manufacture to a larger manufacturer. We will also maintain the current drug substance and product manufacturer as part of our supply chain strategy.
Commercialization Strategy
We currently have no marketing, sales or distribution capabilities. In order to commercialize any products that are approved for commercial sale, we must either develop a sales and marketing infrastructure or collaborate with third parties that have sales and marketing experience.
We may to seek third-party support from established pharmaceutical and biotechnology companies for those products that would benefit from the promotional support of a large sales and marketing force. In these cases, we might seek to promote our products in collaboration with marketing partners or rely on relationships with one or more companies with large established sales forces and distribution systems.
We may elect to establish our own sales force to market and sell a product for which we obtain regulatory approval if we expect that the geographic market for a product we develop on our own is limited or that the prescriptions for the product will be written principally by a relatively small number of physicians. If we decide to market and sell any products ourselves, we do not expect to establish direct sales capability until shortly before the products are approved for commercial sale.
Competition
We face substantial competition from multiple sources, including large and specialty biotechnology and pharmaceutical companies, academic research institutions and governmental agencies and public and private research institutions. Our competitors compete with us on the level of the technologies employed, or on
the level of development of product candidates. In addition, many small biotechnology companies have formed collaborations with large, established companies to (i) obtain support for their research, development and commercialization of products or (ii) combine several treatment approaches to develop longer lasting or more efficacious treatments that may potentially directly compete with our current or future product candidates. We anticipate that we will continue to face increasing competition as new therapies and combinations thereof, technologies, and data emerge.
In addition to the current standard of care treatments for patients with neurodegenerative diseases, numerous commercial and academic preclinical studies and clinical trials are being undertaken by a large number of parties to assess technologies and product candidates in the CNS field.
Many of our competitors, either alone or in combination with their respective strategic partners, have significantly greater financial resources and expertise in research and development, manufacturing, the regulatory approval process, and marketing than we do. Mergers and acquisition activity in the biopharmaceutical sector is likely to result in greater resource concentration among a smaller number of our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through sizeable collaborative arrangements with established companies. These competitors also compete with us in recruiting and retain qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.
Our commercial opportunity could be reduced or eliminated if one or more of our competitors develop and commercialize products that are safer, more effective, better tolerated, or of greater convenience or economic benefit than our proposed product offering. Our competitors also may be in a position to obtain FDA or other regulatory approval for their products more rapidly, resulting in a stronger or dominant market position before we are able to enter the market. The key competitive factors affecting the success of all of our programs are likely to be product safety, efficacy, convenience and treatment cost.
Employees and Human Capital Resources
As of May 31, 2021, we had 20 employees, 18 of whom were full-time and nine of whom were engaged in research and development activities. Six of our employees hold Ph.D. or M.D. degrees. None of our employees are represented by a labor union. We consider our relationship with our employees to be good.
Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees, advisors and consultants. The principal purposes of our equity and cash incentive plans are to attract, retain and reward personnel through the granting of stock-based and cash-based compensation awards, in order to increase stockholder value and the success of our company by motivating such individuals to perform to the best of their abilities and achieve our objectives.
Facilities
Our corporate headquarters is located in the greater New York City area with laboratories in Pittsburgh, PA, where we currently lease approximately 6,068 square feet of laboratory and office space. We believe that our current facilities are adequate to meet our ongoing needs, and that, if we require additional space, we will be able to obtain additional facilities on commercially reasonable terms.
Government Regulation
Government authorities in the United States, at the federal, state, and local level, and other countries extensively regulate, among other things, the research, development, nonclinical and clinical testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing, and export and import of products such as those we are developing. Generally, before a new drug can be marketed, considerable data must be generated, which demonstrate the drug’s quality, safety, and efficacy. Such data must then be organized into a format specific for each regulatory authority, submitted for review and approved by the regulatory authority.
U.S. Drug Development Process
In the United States, the FDA regulates drugs under the federal Food, Drug, and Cosmetic Act, or FDCA, and its implementing regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, the approval process or after approval may subject an applicant to administrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us.
The process required by the FDA before a drug may be marketed in the United States generally involves the following:
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completion of nonclinical laboratory tests, animal studies, and formulation studies in accordance with FDA’s good laboratory requirements and other applicable regulations;
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submission to the FDA of an IND, which must become effective before human clinical trials may begin;
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approval by an independent IRB ethics committee, either centralized or with respect to each clinical site, before each clinical trial may be initiated;
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performance of adequate and well-controlled human clinical trials in accordance with GCP requirements to establish the safety and efficacy of the proposed drug for its intended use;
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submission to the FDA of an NDA after completion of all pivotal trials;
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determination by the FDA within 60 days of its receipt of an NDA to accept the filing for substantive review;
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satisfactory completion of an FDA advisory committee review, if applicable;
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satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance with cGMP requirements to ensure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality, and purity, and of selected clinical investigation sites to assess compliance with GCPs;
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FDA review and approval of the NDA to permit commercial marketing of the product for particular indications for use in the United States;
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compliance with any post-approval requirements, including potential requirements to conduct any post-approval studies required by the FDA or the potential requirement to implement a REMS; and
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compliance with the Pediatric Research Equity Act, or PREA, which requires either exemption from the requirements or may require conducting clinical research in a pediatric population.
Prior to beginning the first clinical trial with a product candidate in the United States, we must submit an IND to the FDA. An IND is a request for authorization from the FDA to administer an investigational new drug product to humans. The central focus of an IND submission is on the general investigational plan and the protocol(s) for clinical studies. The IND also includes results of animal and in vitro studies assessing the toxicology, PK, pharmacology, and pharmacodynamic characteristics of the product; chemistry, manufacturing, and controls information; and any available human data or literature to support the use of the investigational product. An IND must become effective before human clinical trials may begin. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises safety concerns or questions about the proposed clinical trial. In such a case, the IND may be placed on clinical hold and the IND sponsor and the FDA must resolve any outstanding concerns or questions before the clinical trial can begin. Submission of an IND therefore may or may not result in FDA authorization to begin a clinical trial.
Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with GCPs, which include the requirement that all research subjects provide their informed consent for their participation in any clinical study. Clinical trials are conducted under protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A separate submission to the existing IND must be made for each successive clinical trial conducted during product development and for any subsequent protocol amendments. Furthermore, an independent IRB for each site proposing to conduct the clinical trial must review and approve the plan for any clinical trial and its informed consent form before the clinical trial begins at that site and must monitor the study until completed. Regulatory authorities, the IRB or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health risk or that the clinical trial is unlikely to meet its stated objectives. Some studies also include oversight by an independent group of qualified experts organized by the clinical study sponsor, known as a data safety monitoring board, which may review data and endpoints at designated check points, make recommendations and/or halt the clinical trial if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy. There are also requirements governing the reporting of ongoing clinical studies and clinical study results to public registries.
Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:
Phase One: The product candidate is initially introduced into healthy human subjects or patients with the target disease or condition. These studies are designed to test the safety, dosage tolerance, absorption, metabolism, and distribution of the investigational product in humans, the side effects associated with increasing doses, and, if possible, to gain early evidence on effectiveness. In the case of some products for severe or life-threatening diseases, especially when the product may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing;
Phase Two: The product candidate is administered to a limited patient population with a specified disease or condition to evaluate the preliminary efficacy, optimal dosages, and dosing schedule and to identify possible adverse side effects and safety risks. Multiple Phase 2 clinical trials may be conducted to obtain information prior to beginning;
Phase Three: The product candidate is administered to an expanded patient population to further evaluate dosage, to provide statistically significant evidence of clinical efficacy and to further test for safety, generally at multiple geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk.
Post-approval clinical trials, sometimes referred to as Phase 4 studies, may be conducted after initial marketing approval. These clinical trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication. In certain instances, the FDA may mandate the performance of Phase 4 clinical trials as a condition of approval of an NDA.
The FDA or the sponsor may place a clinical trial on a full or partial clinical hold at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk or concerns related to chemistry, manufacturing and controls. A clinical hold is an order issued by the FDA to delay or suspend an investigation Following the issuance of a clinical hold or a partial clinical hold, a clinical trial may only proceed after FDA has notified the sponsor that any deficiencies have been corrected and FDA is authorizing the trial to proceed. In addition, an IRB representing each institution participating in the clinical trial must review and approve the plan for any clinical trial before it commences at that institution, and the IRB must conduct continuing review and reapprove the study at least annually. The IRB must review and approve, among other things, the study protocol and informed consent information to be provided to study subjects. An IRB must operate in compliance with FDA regulations. An IRB can suspend or terminate approval of a clinical trial at its institution, or an institution it represents, if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the product candidate has been associated with unexpected serious harm to patients. Finally, some clinical trials are overseen by an independent group of qualified experts organized by the sponsor, known as a data safety monitoring board
or committee. Depending on its charter, this group may determine whether a clinical trial may move forward at designated check points based on access to certain data from the clinical trial.
During the development of a new drug, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior to submission of an IND, at the end of Phase 2, and before an NDA is submitted. Meetings at other times may be requested. These meetings can provide an opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and the FDA to reach agreement on the next phase of development. Sponsors typically use the meetings at the end of the Phase 2 clinical trial to discuss Phase 2 clinical results and present plans for the pivotal Phase 3 clinical trials that they believe will support approval of the new drug.
Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the drug and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, the manufacturer must develop methods for testing the identity, strength, quality, and purity of the final drug. In addition, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.
While the IND is active and before approval, progress reports summarizing the results of the clinical trials and nonclinical studies performed since the last progress report must be submitted at least annually to the FDA, and written IND safety reports must be submitted to the FDA and investigators for serious and unexpected suspected adverse events, findings from other studies suggesting a significant risk to humans exposed to the same or similar drugs, findings from animal or in vitro testing suggesting a significant risk to humans, and any clinically important increased incidence of a serious suspected adverse reaction compared to that listed in the protocol or investigator brochure.
NDA Review and Approval Process
Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, the results of product development nonclinical and clinical trials, along with descriptions of the manufacturing process, analytical tests conducted on the chemistry of the drug, proposed labeling and other relevant information are submitted to the FDA as part of an NDA requesting approval to market the product. The submission of an NDA is subject to the payment of substantial user fees; a waiver of such fees may be obtained under certain limited circumstances. Additionally, no user fees are assessed on NDAs for products designated as orphan drugs, unless the product also includes a non-orphan indication.
The FDA reviews an NDA to determine, among other things, whether a product is safe and effective for its intended use and whether its manufacturing is cGMP-compliant to assure and preserve the product’s identity, strength, quality, and purity. Under the Prescription Drug User Fee Act, or PDUFA, guidelines that are currently in effect, the FDA has a goal of ten months from the date of “filing” of a standard NDA for a new molecular entity to review and act on the submission. This review typically takes 12 months from the date the NDA is submitted to FDA because the FDA has approximately two months to make a “filing” decision after the application is submitted. The FDA conducts a preliminary review of all NDAs within the first 60 days after submission, before accepting them for filing, to determine whether they are sufficiently complete to permit substantive review The FDA may request additional information rather than accept an NDA for filing. In this event, the NDA must be resubmitted with the additional information. The resubmitted application is also subject to review before the FDA accepts it for filing.
The FDA may refer an application for a novel drug to an advisory committee. An advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.
Before approving an NDA, the FDA will typically inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing
processes and facilities are in compliance with cGMP and adequate to assure consistent production of the product within required specifications. Additionally, before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCPs. If the FDA determines that the application, manufacturing process, or manufacturing facilities are not acceptable, it will outline the deficiencies in the submission and often will request additional testing or information. Notwithstanding the submission of any requested additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.
After the FDA evaluates an NDA, it will issue an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the drug with prescribing information for specific indications. A Complete Response Letter indicates that the review cycle of the application is complete, and the application will not be approved in its present form. A Complete Response Letter usually describes the specific deficiencies in the NDA identified by the FDA and may require additional clinical data, such as an additional pivotal Phase 3 clinical trial or other significant and time-consuming requirements related to clinical trials, nonclinical studies, or manufacturing. If a Complete Response Letter is issued, the sponsor must resubmit the NDA, addressing all of the deficiencies identified in the letter, or withdraw the application. Even if such data and information are submitted, the FDA may decide that the NDA does not satisfy the criteria for approval.
If regulatory approval of a product is granted, such approval will be granted for particular indications and may entail limitations on the indicated uses for which such product may be marketed. For example, the FDA may approve the NDA with a REMS to ensure the benefits of the product outweigh its risks. A REMS is a safety strategy to manage a known or potential serious risk associated with a medicine and to enable patients to have continued access to such medicines by managing their safe use. It could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries, and other risk minimization tools. The FDA also may offer conditional approval subject to, among other things, changes to proposed labeling or the development of adequate controls and specifications. Once approved, the FDA may withdraw the product approval if compliance with pre- and post-marketing requirements is not maintained or if problems occur after the product reaches the marketplace. The FDA may also require one or more Phase 4 post-market studies and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization, and may limit further marketing of the product based on the results of these post-marketing studies. In addition, new government requirements, including those resulting from new legislation, may be established, or the FDA’s policies may change, which could impact the timeline for regulatory approval or otherwise impact ongoing development programs.
Expedited Development and Review Programs
The FDA has a fast track designation program that is intended to expedite or facilitate the process for reviewing new drug products that meet certain criteria. Specifically, new drugs are eligible for fast track designation if they are intended to treat a serious or life-threatening disease or condition and demonstrate the potential to address unmet medical needs for the disease or condition. With regard to a fast track product, the FDA may consider for review sections of the NDA on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the NDA, the FDA agrees to accept sections of the NDA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the NDA. CT1812 was awarded Fast Track designation by the FDA in 2016.
Any product submitted to the FDA for approval, including a product with a fast track designation, may also be eligible for other types of FDA programs intended to expedite development and review, such as priority review and accelerated approval. A product is eligible for priority review if it has the potential to provide safe and effective therapy where no satisfactory alternative therapy exists or a significant improvement in the treatment, diagnosis, or prevention of a disease compared to marketed products. The FDA will attempt to direct additional resources to the evaluation of an application for a new drug designated for priority review in an effort to facilitate the review. The FDA endeavors to review applications with priority review designations within six months of the filing date as compared to ten months for review of new molecular entity NDAs under its current PDUFA review goals.
In addition, a product may be eligible for accelerated approval. Drug products intended to treat serious or life-threatening diseases or conditions may be eligible for accelerated approval upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. As a condition of approval, the FDA may require that a sponsor of a drug receiving accelerated approval perform adequate and well-controlled post-marketing clinical trials. In addition, the FDA currently requires pre-approval of promotional materials as a condition for accelerated approval, which could adversely impact the timing of the commercial launch of the product.
The Food and Drug Administration Safety and Innovation Act established a category of drugs referred to as “breakthrough therapies” that may be eligible to receive breakthrough therapy designation. A sponsor may seek FDA designation of a product candidate as a “breakthrough therapy” if the product is intended, alone or in combination with one or more other products, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The designation includes all of the fast track program features, as well as more intensive FDA interaction and guidance. The breakthrough therapy designation is a distinct status from both accelerated approval and priority review, which can also be granted to the same drug if relevant criteria are met. If a product is designated as breakthrough therapy, the FDA will work to expedite the development and review of such drug.
Fast track designation, priority review, accelerated approval, and breakthrough therapy designation do not change the standards for approval, but may expedite the development or approval process. Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened. We may explore some of these opportunities for our product candidates as appropriate.
Post-Approval Requirements
Any products manufactured or distributed by us pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to record-keeping, reporting of adverse experiences, periodic reporting, product sampling and distribution, and advertising and promotion of the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review and approval. There are continuing, annual program fees for any marketed products. 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 cGMP, which impose certain procedural and documentation requirements upon us and our third-party manufacturers. Changes to the manufacturing process are strictly regulated, and, depending on the significance of the change, may require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting requirements upon us and any third-party manufacturers that we may decide to use. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance.
The FDA may withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical studies to assess new safety risks; or imposition of distribution restrictions or other restrictions under a REMS program. Other potential consequences include, among other things:
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restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;
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fines, warning letters, or untitled letters;
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clinical holds on post-approval or Phase IV clinical studies, if applicable;
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refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product license approvals;
•
product seizure or detention, or refusal to permit the import or export of products;
•
consent decrees, corporate integrity agreements, debarment, or exclusion from federal healthcare programs; and
•
mandated modification of promotional materials and labeling and the issuance of corrective information.
Under the Pediatric Research Equity Act (PREA) an NDA must contain data to assess the safety and efficacy of the applicant product for indications in applicable pediatric populations. It must also contain information to support dose administration for pediatric populations where the drug may be utilized. FDA has the ability to grant complete waivers, partial waivers, or deferrals for compliance with PREA. PREA requirements may be waived for applications for approval of drug candidates intended to treat, mitigate, prevent, diagnose or cure diseases and other conditions that do not occur in pediatric populations. Generally PREA does not apply for drug candidates which have obtained an orphan designation, unless otherwise regulated by the FDA. Despite this, separate PREA compliance or waivers may still be required for each product indication. Although noncompliance with PREA will generally not be considered for withdrawal of an approval it may be considered by the FDA as the sole basis for enforcement action such as injunction or seizure as non-compliance and may render the drug misbranded.
The FDA closely regulates the marketing, labeling, advertising, and promotion of drug products. A company can make only those claims relating to safety and efficacy that are approved by the FDA and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. Failure to comply with these requirements can result in, among other things, adverse publicity, warning letters, corrective advertising, and potential civil and criminal penalties. Physicians may prescribe, in their independent professional medical judgment, legally available products for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA. 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 manufacturer’s communications on the subject of off-label use of their products. The federal government has levied large civil and criminal fines against companies for alleged improper promotion of off-label use and has enjoined companies from engaging in off-label promotion. The FDA and other regulatory agencies have also required that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed. However, companies may share truthful and not misleading information that is otherwise consistent with a product’s FDA-approved labelling.
Marketing Exclusivity
Market exclusivity provisions authorized under the FDCA can delay the submission and approval of certain marketing applications for products containing the same active ingredient. The FDCA provides a five-year period of non-patent marketing exclusivity within the United States to the first applicant to obtain approval of an NDA for a NCE. A drug is an NCE if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. The FDCA also permits patent term restoration of up to five years as compensation for a patent term lost during product development and FDA regulatory review process to the first applicant to obtain approval of an NDA for a new chemical entity in the United States. Patent-term restoration, however, cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. During the NCE exclusivity period, the FDA may not approve or even accept for review an ANDA or an NDA submitted under Section 505(b)(2) (505(b)(2) NDA), submitted by another company for another drug based on the same active moiety, regardless of whether the drug is intended for the same indication as the original innovative drug or for another indication, where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement to one of the patents listed
in the FDA’s publication Approved Drug Products with Therapeutic Equivalence Evaluations, which we refer to as the Orange Book, with the FDA by the innovator NDA holder. Upon approval of an NDA, each of the patents listed in the application for the drug is then published in the Orange Book. These products may be cited by potential competitors in support of approval of an ANDA or 505(b)(2) NDA. Any competitor who files an ANDA seeking approval of a generic equivalent version of a drug listed in the Orange Book or a 505(b)(2) NDA referencing a drug listed in the Orange Book must make patent certifications to the FDA that (1) no patent information on the drug or method of use that is the subject of the application has been submitted to the FDA; (2) the patent has expired; (3) the date on which the patent has expired and approval will not be sought until after the patent expiration; or (4) the patent is invalid or will not be infringed upon by the manufacture, use, or sale of the drug product for which the application is submitted. Generally, the ANDA or 505(b)(2) NDA cannot be approved until all listed patents have expired, except where the ANDA or 505(b)(2) NDA applicant challenges a listed patent through the last type of certification, also known as a paragraph IV certification. If the applicant does not challenge the listed patents or indicates that it is not seeking approval of a patented method of use, the ANDA or 505(b)(2) NDA application will not be approved until all of the listed patents claiming the referenced product have expired. If the ANDA or 505(b)(2) NDA applicant has provided a paragraph IV certification the applicant must send notice of the paragraph IV certification to the NDA and patent holders once the application has been accepted for filing by the FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice of the paragraph IV certification. If the paragraph IV certification is challenged by an NDA holder or the patent owner(s) asserts a patent challenge to the paragraph IV certification, the FDA may not approve that application until the earlier of 30 months from the receipt of the notice of the paragraph IV certification, the expiration of the patent, when the infringement case concerning each such patent was favorably decided in the applicant’s favor or settled, or such shorter or longer period as may be ordered by a court. This prohibition is generally referred to as the 30-month stay. In instances where an ANDA or 505(b)(2) NDA applicant files a paragraph IV certification, the NDA holder or patent owner(s) regularly take action to trigger the 30-month stay, recognizing that the related patent litigation may take many months or years to resolve. Thus, approval of an ANDA or 505(b)(2) NDA could be delayed for a significant period of time depending on the patent certification the applicant makes and the reference drug sponsor’s decision to initiate patent litigation. If the drug has NCE exclusivity and the ANDA is submitted four years after approval, the 30-month stay is extended so that it expires 7 1/2 years after approval of the innovator drug, unless the patent expires or there is a decision in the infringement case that is favorable to the ANDA applicant before then.
The FDCA alternatively provides three years of marketing exclusivity for an NDA, or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example new indications, dosages, or strengths of an existing drug. This three-year exclusivity covers only the modification for which the drug received approval on the basis of the new clinical investigations and does not prohibit the FDA from approving ANDAs or 505(b)(2) NDAs for drugs containing the active agent for the original indication or condition of use. Five-year and three-year exclusivity will not delay the submission or approval of a full NDA. However, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to any nonclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.
Pediatric exclusivity is another type of marketing exclusivity available in the United States. Pediatric exclusivity provides for an additional six months of marketing exclusivity attached to another period of exclusivity if a sponsor conducts clinical trials in children in response to a written request from the FDA. The issuance of a written request does not require the sponsor to undertake the described clinical trials. The indications the Company is currently pursuing for its product candidates will not be eligible for pediatric exclusivity because they are age-related degenerative diseases and disorders that do not occur in the pediatric population. In addition, orphan drug exclusivity, as described above, may offer a seven-year period of marketing exclusivity, except in certain circumstances.
Other Healthcare Laws
Pharmaceutical manufacturers are subject to additional healthcare laws, regulation, and enforcement by the federal government and by authorities in the states and foreign jurisdictions in which they conduct
their business. Such laws include, without limitation, U.S. federal anti-kickback, anti-self-referral, false claims, transparency, including the federal Physician Payments Sunshine Act, consumer fraud, pricing reporting, data privacy, data protection, and security laws and regulations as well as similar foreign laws in the jurisdictions outside the U.S. Similar state and local laws and regulations may also restrict business practices in the pharmaceutical industry, such as state anti-kickback and false claims laws, which may apply to business practices, including but not limited to, research, distribution, sales, and marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, or by patients themselves; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws and regulations that require drug manufacturers to file reports relating to pricing and marketing information; state and local laws which require the tracking of gifts and other remuneration and any transfer of value provided to physicians, other healthcare providers and entities; and state and local laws that require the registration of pharmaceutical sales representatives; and state and local laws governing the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. For example, California recently enacted the CPPA, which creates new individual privacy rights for California consumers (as defined in the law) and places increased privacy and security obligations on entities handling certain personal data of consumers or households. The CCPA requires covered companies to provide new disclosure to consumers about such companies’ data collection, use and sharing practices, provide such consumers new ways to opt-out of certain sales or transfers of personal information, and provide consumers with additional causes of action. The CCPA took effect on January 1, 2020, and the California Attorney General may bring enforcement actions for violations of the CCPA until January 2023. Further, California voters approved a new privacy law, the California Privacy Rights Act, or CPRA, in the November 3, 2020 election. The final text of the CPRA will be promulgated by July 1, 2022. The CPRA will be fully effective starting on January 1, 2023. The CPRA will significantly modify the CCPA, including by expanding consumers’ rights with respect to certain sensitive personal information. The CPRA also creates a new state agency, the California Privacy Protection Agency, that will be vested with authority to implement and enforce the CCPA and the CPRA. New legislation proposed or enacted in various other states will continue to shape the data privacy environment nationally.
The risk of our being found in violation of these or other laws and regulations is increased by the fact that many have not been fully interpreted by the regulatory authorities or the courts and their provisions are open to various interpretations. These laws and regulations are subject to change, which can increase the resources needed for compliance and delay drug approval or commercialization. Any action brought against us for violations of these laws or regulations, even successfully defended, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. Also, we may be subject to private “qui tam” actions brought by individual whistleblowers on behalf of the federal or state governments. Actual or alleged violation of any such laws or regulations may lead to investigations and other claims and proceedings by regulatory authorities and in certain cases, private actors, and violation of any of such laws or any other governmental regulations that apply may result in penalties, including, without limitation, significant administrative, civil and criminal penalties, damages, fines, additional reporting obligations, and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, the curtailment or restructuring of operations, exclusion from participation in government healthcare programs and imprisonment.
The Office of Inspector General, or OIG, continues to make modifications to existing Anti-Kickback Statute, or AKS, safe harbors which may increase liability and risk as well as adversely impact sales relationships. On November 20, 2020, OIG issued the final rule for Safe Harbors under the Federal AKS. This new final rule creates additional safe harbors including ones pertaining to patient incentives. OIG is able to modify safe harbors as well as regulatory compliance requirements which could impact our business adversely. The majority of states also have statutes or regulations similar to these federal laws, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payer.
Coverage and Reimbursement
Sales of any pharmaceutical product depend, in part, on the extent to which such product will be covered by third-party payors, such as federal, state, and foreign government healthcare programs,
commercial insurance, and managed healthcare organizations, and the level of reimbursement for such product by third-party payors. Significant uncertainty exists as to the coverage and reimbursement status of any newly approved product. Decisions regarding the extent of coverage and amount of reimbursement to be provided are made on a plan-by-plan basis. One third-party payor’s decision to cover a particular product does not ensure that other payors will also provide coverage for the product. As a result, the coverage determination process can require manufacturers to provide scientific details, information on cost-effectiveness, and clinical support for the use of a product to each payor separately. This can be a time-consuming process, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.
In addition, third-party payors are increasingly reducing reimbursements for pharmaceutical products and related services. The U.S. government and state legislatures have continued implementing cost-containment programs, including price controls, restrictions on coverage and reimbursement and requirements for substitution of generic products. Third-party payors are increasingly challenging the prices charged, examining the medical necessity and reviewing the cost effectiveness of pharmaceutical products, in addition to questioning their safety and efficacy. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit sales of any product. Decreases in third-party reimbursement for any product or a decision by a third-party payor not to cover a product could reduce physician usage and patient demand for the product.
At the state level, there are also new laws and ongoing ballot initiatives that create additional pressure on drug pricing and may affect how pharmaceutical products are covered and reimbursed. A number of states have adopted or are considering various pricing actions, such as those requiring pharmaceutical manufacturers to publicly report proprietary pricing information, limit price increases or to place a maximum price ceiling or cap on certain products. Existing and proposed state pricing laws have added complexity to the pricing of pharmaceutical drug products.
In international markets, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilings on specific products and therapies. For example, the European Union provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. A member state may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. Pharmaceutical products may face competition from lower-priced products in foreign countries that have placed price controls on pharmaceutical products and may also compete with imported foreign products. Furthermore, there is no assurance that a product will be considered medically reasonable and necessary for a specific indication, that it will be considered cost-effective by third-party payors, that an adequate level of reimbursement will be established even if coverage is available, or that the third-party payors’ reimbursement policies will not adversely affect the ability for manufacturers to sell products profitably.
Healthcare Reform
In the United States and certain foreign jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes to the healthcare system. In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, the ACA, was signed into law, which substantially changed the way healthcare is financed by both governmental and private insurers in the United States. By way of example, the ACA increased the minimum level of Medicaid rebates payable by manufacturers of brand name drugs from 15.1% to 23.1%; it required collection of rebates for drugs paid by Medicaid managed care organizations; imposed a non-deductible annual fee on pharmaceutical manufacturers or importers who sell certain “branded prescription drugs” to specified federal government programs; it implemented a new methodology under which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted, or injected; it expanded the eligibility criteria for Medicaid programs; it created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; and it established a Center for Medicare Innovation at the Centers for Medicare & Medicaid Services, or CMS, to
test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.
Since its enactment, there have been executive, judicial and Congressional challenges to certain aspects of the ACA, and we expect there will be additional challenges and amendments to the ACA in the future. Since January 2017, President Trump signed several Executive Orders and other directives designed to delay the implementation of certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the ACA. While Congress has not passed comprehensive repeal legislation, several bills affecting the implementation of certain taxes under the ACA have passed. For example, in 2017, Congress enacted the Tax Act, which eliminated the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year, a process that is commonly referred to as the “individual mandate.” In addition, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the ACA-mandated “Cadillac” tax on high-cost employer-sponsored health coverage and medical device tax and, effective January 1, 2021, also eliminates the health insurer tax. On December 14, 2018, a Texas U.S. District Court Judge ruled that the individual mandate is a critical and inseverable feature of the ACA, and therefore, because it was repealed as part of the Tax Act, the remaining provisions of the ACA are invalid as well. On December 18, 2019, the U.S. Court of Appeals for the 5th Circuit ruled that the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the ACA are invalid as well. On March 2, 2020, the U.S. Supreme Court granted the petitions for writs of certiorari to review the case and held oral arguments in November 2020. On June 17, 2021, the Supreme Court ruled that the plaintiffs lacked standing to challenge the law as they had not alleged personal injury traceable to the allegedly unlawful conduct. As a result, the Supreme Court did not rule on the constitutionality of the ACA or any of its provisions. There may be other efforts to challenge, repeal, or replace the ACA. If successful, it may potentially impact our business in the future.
President Joseph R. Biden, Jr. signed the Executive Order on Strengthening Medicaid and stating his administration’s intentions to reverse the actions of his predecessor and strengthen the ACA. As part of this Executive Order, the Department of Health and Human Services, United States Treasury, and the Department of Labor are to review all existing regulations, orders, guidance documents, policies, and agency actions to consider if they are consistent with ensuring both coverage under the ACA and if they make high-quality healthcare affordable and accessible to Americans. We are unable to predict the likelihood of changes to the Affordable Care Act or other healthcare laws which may negatively impact our profitability. President Biden intends, as his predecessor did, to take action against drug prices which are considered “high.” The most likely time to address this would be in the reauthorization of the Prescription Drug User Fee Act, or PDUFA, in 2022 as part of a package bill. Drug pricing continues to be a subject of debate at the executive and legislative levels of U.S. government and we expect to see legislation focusing on this in the coming year. The American Rescue Plan Act of 2021 signed into law by President Biden on March 14, 2021 includes a provision that will eliminate the statutory cap on rebates drug manufacturers pay to Medicaid beginning in January 2024. With the elimination of the cap, manufacturers may be required to compensate states in an amount greater than what the state Medicaid programs pay for the drug.
Other legislative changes have been proposed and adopted since the ACA was enacted. These changes include aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, effective April 1, 2013, which, due to subsequent legislative amendments, will stay in effect through 2030 with the exception of a temporary suspension implemented under various COVID-19 relief legislation from May 1, 2020 through March 31, 2021, unless additional congressional action is taken. Moreover, there has recently been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted legislation designed, among other things, to bring more transparency to product pricing, to review the relationship between pricing and manufacturer patient programs, and to reform government program reimbursement methodologies for pharmaceutical products. The Prescription Drug Pricing Reduction Act, or PDPRA, which was introduced in Congress in 2019, and again in 2020, proposed to, among other things, penalize pharmaceutical manufacturers for raising prices on drugs covered by Medicare Parts B and D faster than the rate of inflation, cap out-of-pocket expenses for Medicare Part D beneficiaries, and proposes a number of changes to how drugs are reimbursed in Medicare Part B. A similar drug pricing bill, the Elijah E. Cummings
Lower Drug Costs Now Act proposes to enable direct price negotiations by the federal government on certain drugs (with the maximum price paid by Medicare capped based on an international index), requires manufacturers to offer these negotiated prices to other payers, and restricts manufacturers from raising prices on drugs covered by Medicare Parts B and D. This Act passed in the House of Representatives when it was introduced in 2019, and it has been introduced again in the 2021 term. We cannot predict whether any proposed legislation will become law and the effect of these possible changes on our business cannot be predicted at this time.
Legal Proceedings
We are not currently a party to any material legal proceedings. From time to time, we may become involved in other litigation or legal proceedings relating to claims arising from the ordinary course of business.
MANAGEMENT
The following table sets forth information regarding our executive officers and directors:
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Name
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|
|
Age
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|
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Position(s)
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|
|
Executive Officers
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|
|
|
|
|
|
|
|
Lisa Ricciardi
|
|
|
61
|
|
|
Chief Executive Officer, President and Director
|
|
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James M. O’Brien
|
|
|
54
|
|
|
Chief Financial Officer
|
|
|
Employee Director
|
|
|
|
|
|
|
|
|
Susan Catalano, Ph.D.(4)
|
|
|
57
|
|
|
Director and Chief Science Officer
|
|
|
Non-Employee Directors
|
|
|
|
|
|
|
|
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Jack A. Khattar(2)(3)
|
|
|
59
|
|
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Director, Chairman of the Board
|
|
|
Brett P. Monia, Ph.D.(1)(2)
|
|
|
59
|
|
|
Director
|
|
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Aaron Fletcher, Ph.D.(1)(2)
|
|
|
41
|
|
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Director
|
|
|
Stephen Sands(5)
|
|
|
64
|
|
|
Director
|
|
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Peggy Wallace(3)
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|
|
64
|
|
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Director
|
|
|
Mark H. Breedlove(1)
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|
|
64
|
|
|
Director
|
|
(1)
Member of our audit committee upon effectiveness of the Registration Statement of which this prospectus forms a part.
(2)
Member of our compensation committee upon effectiveness of the Registration Statement of which this prospectus forms a part.
(3)
Member of our nominating and corporate governance committee upon effectiveness of the Registration Statement of which this prospectus forms a part.
(4)
Dr. Catalano has notified us that she will resign from our board of directors effective immediately prior to the effectiveness of the Registration Statement of which this prospectus forms a part.
(5)
Mr. Sands has notified us that he will resign from our board of directors effective immediately prior to the effectiveness of the Registration Statement of which this prospectus forms a part.
Executive Officers
Lisa Ricciardi
Ms. Ricciardi has served as our Chief Executive Officer and President since March 2020 and as a member of our board of directors since March 2019. From July 2018 to October 2019, she served as CEO of Suono Bio, a biotech company based on Langer Labs (MIT) technology. Prior to her position at Suono Bio, Ms. Ricciardi was a retained executive for BioBusiness Links from November 2015 to June 2018 where she performed interim operating executive and advisory board roles. She served as the Senior Vice President, Global Corporate & Business Development of Foundation Medicine from July 2014 to November 2015, and Senior Vice President, US and International Business Development of Express Scripts from October 2010 to October 2012 and in both cases, led deal teams to sell the two companies. Ms. Ricciardi was in the commercial division of Pfizer Inc., taking three drugs to launch before being appointed by the Chairman to run Global Business Development. Ms. Ricciardi previously served on the boards of Contrafect (Nasdaq: CFRX), Chimerix (Nasdaq: CMRX), United Drug Healthcare Group, PLC (LSE: UDG) and Sepracor (Nasdaq: SEPR). She was appointed as the executive in residence at Columbia Technology Ventures in January 2020.
Ms. Ricciardi earned a Bachelor of Arts degree cum laude in English and Religion from Wesleyan University and an MBA from the University of Chicago Booth School of Management.
We believe that Ms. Ricciardi is qualified to serve on our board of directors due to the valuable experience she brings in her capacity as our Chief Executive Officer and President along with her extensive experience and knowledge of our industry.
James M. O’Brien
Mr. O’Brien has served as our Chief Financial Officer since October 2019. From February 2014 to October 2019, Mr. O’Brien served as Executive Vice President of finance for Enzo Biochem, Inc. (NYSE: ENZ), a biotechnology company providing reference laboratory services to the medical community. From November 2010 to June 2013, Mr. O’Brien served as Vice President and Corporate Controller for Allergan, Inc., (formerly known as Actavis plc.) which has now been acquired by Abbvie (NYSE: ABBV), a pharmaceutical company. He also previously served as a Vice President at Takeda Pharmaceuticals (NYSE: TAK) (formerly known as Nycomed) from January 2010 to August 2010, Chief Accounting Officer at USI Holdings from January 2008 to August 2009, and Vice President and Corporate Controller at Aptuit, an Evotec company (Frankfurt Stock Exchange: EVT) and pharmaceutical services provider, from July 2005 to December 2007. Mr. O’Brien also held leadership roles at Purdue Pharma, Bristol-Myers Squibb and PricewaterhouseCoopers in the earlier stages of his career.
Mr. O’Brien is a certified public accountant (CPA) with a Bachelor of Accountancy from George Washington University and an MBA from Fordham University.
Employee Director
Susan Catalano, Ph.D.
Dr. Catalano is a pharmaceutical industry executive with 22 years of experience in strategic and operational scientific leadership of neurobiology and oncology drug discovery and development programs. She is currently our Chief Science Officer and member of our board of directors since co-founding our company in 2007 . Dr. Catalano guided the discovery and development of CT1812. She also established the “International Symposium on sigma-2 Receptors (ISS2R): Role in Health and Disease,” now in its fifth year, authored numerous publications and patents and continues to serve as principal investigator of several National Institute of Health, or NIH, awards, and has served on various NIH review panels in the areas of drug discovery and clinical development for neurodegenerative diseases and on the editorial Board of Assay and Drug Discovery Technologies for over 10 years. Previously, she held scientific leadership positions at Acumen Pharmaceuticals, Inc. from 2004 to 2007, Rigel Pharmaceuticals, Inc. from 2001 to 2003, and Roche Biosciences from 1999 to 2001.
Dr. Catalano received her Bachelor of Arts from Barnard College and Ph.D. in Neurobiology from U.C. Irvine with postdoctoral training at U.C. Berkeley and Caltech.
We believe that Dr. Catalano is qualified to serve on our board of directors due to her extensive experience leading the company’s discovery and development efforts since its inception, scientific expertise on receptor and disease biology, and knowledge of our industry. Dr. Catalano has notified us that she will resign from our board of directors effective immediately prior to the effectiveness of the Registration Statement of which this prospectus forms a part.
Non-employee Directors
Jack A. Khattar
Mr. Khattar has served as member of our board of directors since July 2020 and was appointed chairman in April 2021. Mr. Khattar founded Supernus Pharmaceuticals, Inc., a pharmaceutical company (Nasdaq:SUPN), in 2005 and has served as its President, Chief Executive Officer, Secretary and director since then. Since June 2016, Mr. Khattar has served as a member of the board of directors of scPharmaceuticals Inc., a pharmaceutical company (Nasdaq:SCPH), and has served as its chairperson since June 2016. From 1999 to 2005, Mr. Khattar served in various positions during that time as a board member, President and Chief Executive Officer of Shire Laboratories Inc., the drug delivery subsidiary of Shire plc. From 1999 to 2004, he also served as a member of Shire plc’s Executive Committee. Prior to that, Mr. Khattar served as an executive officer and the chairman of the Management Committee at CIMA Labs Inc., a drug delivery company where he was also responsible for business development, corporate alliances and strategic planning. Prior to joining CIMA in 1995, Mr. Khattar held several marketing and business development positions at Merck & Co., Novartis International AG, Playtex and Kodak Company in various locations, including the
United States, Europe and the Middle East. Mr. Khattar currently serves on the board of Navitor Pharmaceuticals, Inc., a private company, since 2020 and Supernus Pharmaceuticals (Nasdaq: SUPN) since 2005. He previously served on the board of Rockville Economic Development, Inc. from 2003 to 2013 and Prevacus, Inc., a privately held development stage biotechnology company from 2015 to 2020. Mr. Khattar has also served on the Advisory Board of New Rhein Healthcare, a private equity firm, since 2019.
Mr. Khattar earned his degrees in Marketing with a BBA from American University of Beirut and an MBA from the Wharton School of the University of Pennsylvania.
We believe that Mr. Khattar is qualified to serve on our board of directors due his leadership, executive, managerial, business and pharmaceutical company experience, along with his more than 30 years of industry experience in the development and commercialization of pharmaceutical products.
Brett P. Monia, Ph.D.
Dr. Monia has served as a member of our board of directors since October 2020. Dr. Monia founded Ionis Pharmaceuticals, Inc., a biotechnology company (Nasdaq: IONS), in 1989, and has served as its Chief Executive Officer since January 2020 after serving as the Chief Operating Officer and Senior Vice President since 2018, as a member of its board of directors since March 2019, and in various other positions with the company since its founding. He is also a director of Dynacure LTD, a clinical stage drug development company, since 2016.
Dr. Monia received his Bachelor of Science in Biology, Biological Sciences and Chemistry from Stockton State College and a Ph.D. in Pharmacology from the University of Pennsylvania.
We believe that Dr. Monia is qualified to serve on our board of directors due to his extensive management experience and deep understanding of our industry.
Aaron Fletcher, Ph.D.
Dr. Fletcher has served as a member of our board of directors since July 2015. In 2014, Dr. Fletcher founded Bios Partners, LP, a biotech venture capital firm, and has served as its Managing Partner since then. In 2012, Dr. Fletcher founded Bios Research, LLC, a financial services firm that provides public equity research in the healthcare space tailored to institutional firms and large family offices. He also currently serves as a director of Cue Biopharma (NYSE: CUE) since October 2019, SKW Holdings Corporation (Nasdaq: SWKH) since August 2019, TFF Pharmaceuticals (Nasdaq: TFFP) since March 2018 where he serves as the chairman of the board, AbiliTech Medical, Inc. since November 2016, Actuate Therapeutics, Inc. since January 2015 where he serves as the chairman of the board, and LTI since August 2014. Dr. Fletcher has also served as a professor at Dallas Baptist University since 2008, where he teaches biochemistry, bioethics and cell biology.
Dr. Fletcher holds a BS in Biology from York College and received his Ph.D. in Biochemistry from Colorado State University.
We believe that Dr. Fletcher is qualified to serve on our board of directors due to his extensive business experience and board membership in venture capital and life science companies.
Stephen Sands
Mr. Sands has served as member of our board of directors since June 2017. Mr. Sands has served as Vice Chairman of Investment Banking since March 2014 and Chairman of the Healthcare Group at Lazard Group LLC since May 2016 and has held other positions at Lazard since 1994. From July 1986, Mr. Sands worked at McKinsey & Company, leaving as a Partner in the healthcare practice in October 1994. While on leave from McKinsey from December 1987 to August 1990, he co-founded two life sciences companies: Enzytech (acquired by Alkermes) and Opta Food Ingredients (acquired by Stake Technology and now SunOpta). He currently is a director of Cytosite Biopharma Inc., a private biotechnology company, since February 2019. Mr. Sands has previously served as director on the boards of several life sciences companies, including National Imaging Associates (acquired by Magellan Health), Inc. and Isogen LLC. (acquired by Monsanto).
In addition to his responsibilities at Lazard, Mr. Sands is a member of the Washington University (St. Louis) School of Engineering & Applied Science National Counsel and of the board of trustees of the New York Hall of Science. Mr. Sands earned a Bachelor of Arts in Biology from Oberlin College, a Bachelor of Science and Master of Science in Chemical Engineering from Washington University in St. Louis, and an MBA with a concentration in Finance from New York University.
We believe that Mr. Sands is qualified to serve on our board of directors due to his deep knowledge of the life sciences industry and financial advisory experience in the biopharma sector. Mr. Sands has notified us that he will resign from our board of directors effective immediately prior to the effectiveness of the Registration Statement of which this prospectus forms a part.
Peggy Wallace
Ms. Wallace has served as member of our board of directors since September 2016. Ms. Wallace has served as Co-Chief Executive Officer and Managing Partner of Golden Seeds, LLC and Golden Seeds Funds, an investment company, since 2011 and 2008, respectively, prior to which she served as a Managing Director from 2005 to 2008. Ms. Wallace currently is a member of the board of directors of Chromis Technologies, a fiber optic products supplier, since 2006.
Ms. Wallace received her Bachelor of Arts from George Washington University.
We believe that Ms. Wallace is qualified to serve on our board of directors due to her extensive business experience and experience in venture capital and the life science industry.
Mark H. Breedlove
Mark H. Breedlove has served as member of our board of directors since January 2011. Since 2010, Mr. Breedlove served as General Partner for the Breedlove Family Limited Partnership, a family investment partnership, where he is responsible for all direct investment activity, including a strategy of investing in life sciences companies. Since 2003, Mr. Breedlove also has served as President and CEO of Keystone Profiles, Ltd., a steel manufacturing company. From 1999 to 2000, Mr. Breedlove served as President, COO and a member of the Board of Directors of Qualitor Inc., an aftermarket vehicle parts company.
Mr. Breedlove has a Bachelor of Science degree in Business Administration, Finance, from the Pennsylvania State University. He also has an MBA with an emphasis in Finance from the University of Michigan.
We believe that Mr. Breedlove is qualified to serve on our board of directors due to his experience as an investor and his experience with financial matters in a variety of businesses.
Family Relationships
There are no family relationships among our directors and executive officers.
Board Composition and Election of Directors
Our board of directors is currently comprised of eight directors, and following the resignation of Susan Catalano, Ph.D. and Stephen Sands upon the effectiveness of the Registration Statement of which this prospectus forms a part, will consist of six members. Five of our directors qualify as independent directors in accordance with the independent director guidelines of Nasdaq. The election of the members of our board of directors is currently governed by the third amended and restated voting agreement that we entered into with certain holders of our common stock and convertible preferred stock and the related provisions of our second amended and restated certificate of incorporation. Pursuant to our third amended and restated voting agreement and second amended and restated certificate of incorporation, our current directors were elected as follows:
•
Ms. Wallace was elected as the designee of Golden Seeds Cognition Therapeutics LLC, Golden Seeds Fund LP, Golden Seeds Advisors Fund 2 LP and/or Golden Seeds Fund 2 LP and/or any of their affiliates;
•
Dr. Fletcher was elected as a designee of BIOS Memory SPV I, LP and/or any of its affiliates;
•
Dr. Monia was elected by the holders of our common stock and convertible preferred stock and designated as an industry expert;
•
Ms. Ricciardi was elected by the holders of our common stock and convertible preferred stock and designated as our then-serving and current Chief Executive Officer;
•
Mr. Breedlove, Mr. Khattar and Mr. Sands were elected by the holders of our common stock and our convertible preferred stock; and
•
Dr. Catalano was elected as the designee by certain holders pursuant to a voting agreement that terminates upon closing of this offering.
After this offering, the number of directors will be fixed by our board of directors, subject to the terms of our third amended and restated certificate of incorporation and amended and restated bylaws that will become effective immediately prior to the closing of this offering. Each of our current directors will continue to serve as a director until the election and qualification of his or her successor, or until his or her earlier death, resignation or removal.
Classified Board of Directors
In accordance with our third amended and restated certificate of incorporation, which will become effective immediately prior to the closing of this offering, our directors will be divided into three classes serving staggered three-year terms. At each annual meeting of stockholders, a class of directors will be subject to re-election for a three-year term. As a result, only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms. Our then current directors will be divided among the three classes as follows:
•
the Class I directors will be Mr. Breedlove and Ms. Wallace, and their terms will expire at the first annual meeting of stockholders held following the closing of this offering;
•
the Class II directors will be Dr. Fletcher and Ms. Ricciardi, and their terms will expire at the second annual meeting of stockholders held following the closing of this offering; and
•
the Class III directors will be Mr. Khattar and Dr. Monia, and their terms will expire at the third annual meeting of stockholders held following the closing of this offering.
Each director’s term continues until the election and qualification of his or her successor, or his or her earlier death, resignation or removal. Our third amended and restated certificate of incorporation and our amended and restated bylaws, which will become effective immediately prior to the closing of this offering, will authorize only our board of directors to fill vacancies on our board of directors. Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. The classification of our board of directors may have the effect of delaying or preventing a change in control or management. See “Description of Capital Stock — Anti-Takeover Provisions of Delaware Law and our Charter Documents” for a discussion of other anti-takeover provisions will be included in our third amended and restated certificate of incorporation.
Board Leadership Structure
Our board of directors is currently led by our Chairman, Mr. Khattar, an independent director. Our board of directors recognizes that it is important to determine an optimal board leadership structure to ensure the independent oversight of management as the company continues to grow. We separate the roles of chief executive officer and chairman of the board of directors in recognition of the differences between the two roles. The chief executive officer is responsible for setting the strategic direction for our company and the day-to-day leadership and performance of our company, while the chairman of the board of directors provides guidance to the chief executive officer and presides over meetings of the full board of directors. We believe that this separation of responsibilities provides a balanced approach to managing the board of directors and overseeing our company.
Our board of directors has concluded that our current leadership structure is appropriate at this time. However, our board of directors will continue to periodically review our leadership structure and may make such changes in the future as it deems appropriate.
Role of Board in Risk Oversight
Risk assessment and oversight are an integral part of our governance and management processes. Our board of directors encourages management to promote a culture that incorporates risk management into our corporate strategy and day-to-day business operations. Management discusses strategic and operational risks at regular management meetings, and conducts specific strategic planning and review sessions during the year that include a focused discussion and analysis of the risks facing us. Throughout the year, senior management reviews these risks with the board of directors at regular board meetings as part of management presentations that focus on particular business functions, operations or strategies, and presents the steps taken by management to mitigate or eliminate such risks.
Our board of directors does not have a standing risk management committee, but rather administers this oversight function directly through our board of directors as a whole, as well as through various standing committees of our board of directors that address the risks inherent in their respective areas of oversight. While our board of directors is responsible for monitoring strategic risk exposure, our audit committee oversees management of financial reporting, compliance and litigation risks, as well as the steps management has taken to monitor and control such exposures. Our nominating and corporate governance committee manages risks associated with the independence of our board of directors, potential conflicts of interest and the effectiveness of our board of directors and our compensation committee is responsible for overseeing the management of risks relating to our executive compensation policies, plans and arrangements and the extent to which those policies or practices increase or decrease risks for our company.
Director Independence
In connection with this offering, we intend to apply to list our common stock on the Nasdaq Global Market. Under the Nasdaq listing rules, or the Listing Rules, independent directors must comprise a majority of a listed company’s board of directors within a specified period following the closing of this offering. In addition, the Nasdaq Listing Rules require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and governance committees be independent. Under the Nasdaq Listing Rules, a director will only qualify as an “independent director” if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended, or the Exchange Act. In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors or any other board committee: (i) accept, directly or indirectly, any consulting, advisory or other compensatory fee from the listed company or any of its subsidiaries; or (ii) be an affiliated person of the listed company or any of its subsidiaries. We intend to satisfy the audit committee independence requirements of Rule 10A-3 as of the closing of this offering.
Additionally, compensation committee members must not have a relationship with us that is material to the director’s ability to be independent from management in connection with the duties of a compensation committee member. We intend to satisfy the compensation committee independence requirements as of the closing of this offering.
Our board of directors has undertaken a review of the independence of each director and determined that all of our directors, other than Ms. Ricciardi and Dr. Catalano, qualify as “independent” directors in accordance with the Nasdaq Listing Rules. Ms. Ricciardi and Dr. Catalano are not considered independent by virtue of their position as our Chief Executive Officer and President, and as our Chief Science Officer, respectively. In making these determinations, our board of directors reviewed and discussed information provided by the directors and us with regard to each director’s business and personal activities and relationships as they may relate to us and our management.
Board Committees
Our board of directors has established an audit committee, a compensation committee and a nominating and corporate governance committee, each of which will have the composition and responsibilities described below upon effectiveness of the Registration Statement of which this prospectus forms a part. Our board of directors may establish other committees to facilitate the management of our business. Members serve on these committees until their resignation or until otherwise determined by our board of directors. Each committee intends to adopt a written charter that satisfies the applicable rules and regulations of the SEC and Nasdaq Listing Rules, which we will post on our website at www.cogrx.com upon the closing of this offering.
Audit Committee
Our audit committee will consist of Mr. Breedlove, Dr. Fletcher and Dr. Monia. Our board of directors has determined that each member of our audit committee is independent under the Nasdaq Listing Rules and Rule 10A-3(b)(1) of the Exchange Act. The chair of our audit committee will be Mr. Breedlove. Our board of directors has determined that each member of the audit committee can read and understanding fundamental consolidated financial statements and that Mr. Breedlove is an “audit committee financial expert” as such term is currently defined in Item 407(d)(5) of Regulation S-K. Our audit committee will be directly responsible for, among other things:
•
appointing, evaluating, and overseeing a firm to serve as our independent registered public accounting firm to audit our consolidated financial statements;
•
ensuring the independence of the independent registered public accounting firm;
•
discussing the scope and results of the audit with the independent registered public accounting firm and reviewing, with management and that firm, our interim and year-end operating results;
•
establishing procedures for employees to anonymously submit concerns about questionable accounting or audit matters;
•
considering the adequacy of our internal controls and internal audit function;
•
monitoring and reviewing legal, regulatory, and administrative compliance to the extent affecting our financial results;
•
reviewing proposed waivers of the code of business conduct and ethics for directors and executive officers;
•
reviewing and recommending changes or amendments to the code of business and conduct and ethics;
•
reviewing material related party transactions or those that require disclosure;
•
determining and reviewing risk assessment guidelines and policies, including cybersecurity risks, financial risk exposure, and internal controls regarding information security; and
•
approving or, as permitted, pre-approving all audit and non-audit services to be performed by the independent registered public accounting firm.
Compensation Committee
Our compensation committee will consist of Dr. Monia, Dr. Fletcher and Mr. Khattar. Our board of directors has determined that each member of this committee is a non-employee director, as defined by Rule 16b-3 promulgated under the Exchange Act and meets the requirements for independence under the Nasdaq Listing Rules. The chair of our compensation committee will be Dr. Monia. The compensation committee will be responsible for, among other things:
•
reviewing and approving the compensation of our vice presidents and above and recommending that our board of directors approve, the compensation of our Chief Executive Officer;
•
reviewing and recommending to our board of directors the compensation of our directors;
•
administering our stock and equity incentive plans and overseeing regulatory compliance related to such plans;
•
reviewing and approving, or making recommendations to our board of directors with respect to, incentive compensation and equity plans; and
•
reviewing our overall compensation philosophy.
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee will consist of Mr. Khattar and Ms. Wallace. Our board of directors has determined that each member of the nominating and corporate governance committee meets the requirements for independence under the Nasdaq Listing Rules. The chair of our nominating and corporate governance committee will be Mr. Khattar. The nominating and corporate governance committee will be responsible for, among other things:
•
developing and recommending selection criteria for new directors for our board of directors;
•
identifying and recommending candidates for membership on our board of directors;
•
reviewing and determining board director independence annually and, as needed, as potential conflicts of interest arise;
•
reviewing and recommending our corporate governance guidelines and policies;
•
overseeing the process of evaluating the performance of our board of directors; and
•
assisting our board of directors on corporate governance matters.
Compensation Committee Interlocks and Insider Participation
None of the members of our compensation committee is currently, or has been at any time, one of our executive officers or employees. None of our executive officers currently serves, or has served during the last year, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our board of directors or on our compensation committee.
Board Diversity
Upon the closing of this offering, our nominating and corporate governance committee will be responsible for reviewing with the board of directors, on an annual basis, the appropriate characteristics, skills and experience required for the board of directors as a whole and its individual members. In evaluating the suitability of individual candidates (both new candidates and current members), the nominating and corporate governance committee, in recommending candidates for election, and the board of directors, in approving (and, in the case of vacancies, appointing) such candidates, may take into account many factors, including but not limited to the following:
•
personal and professional integrity;
•
ethics and values;
•
experience in corporate management, such as serving as an officer or former officer of a publicly held company;
•
professional and academic experience relevant to our industry;
•
experience as a board member of another publicly held company;
•
strength of leadership skills;
•
experience in finance and accounting and/or executive compensation practices;
•
ability to devote the time required for preparation, participation and attendance at board of directors’ meetings and committee meetings, if applicable;
•
background, gender, age and ethnicity;
•
conflicts of interest; and
•
ability to make mature business judgments.
Following the closing of this offering, our board of directors will evaluate each individual in the context of the board of directors as a whole, with the objective of ensuring that the board of directors, as a whole, has the necessary tools to perform its oversight function effectively in light of our business and structure.
Non-employee Director Compensation
The following table presents the total compensation earned by each of our non-employee directors in the year ended December 31, 2020. Other than as described below, none of our non-employee directors received any other compensation in the year ended December 31, 2020.
|
Name
|
|
|
Fees earned
or paid in
cash
($)
|
|
|
Option
awards
($)(1)
|
|
|
All other
compensation
($)
|
|
|
Total
($)
|
|
|
Jack A. Khattar
|
|
|
|
|
19,000
|
|
|
|
|
|
40,711
|
|
|
|
|
|
—
|
|
|
|
|
|
59,711
|
|
|
|
Brett P. Monia, Ph.D.
|
|
|
|
|
9,625
|
|
|
|
|
|
40,092
|
|
|
|
|
|
—
|
|
|
|
|
|
49,717
|
|
|
|
Aaron Fletcher, Ph.D.
|
|
|
|
|
—
|
|
|
|
|
|
11,543
|
|
|
|
|
|
—
|
|
|
|
|
|
11,543
|
|
|
|
Stephen Sands(2)
|
|
|
|
|
—
|
|
|
|
|
|
7,723
|
|
|
|
|
|
—
|
|
|
|
|
|
7,723
|
|
|
|
Peggy Wallace
|
|
|
|
|
—
|
|
|
|
|
|
11,543
|
|
|
|
|
|
—
|
|
|
|
|
|
11,543
|
|
|
|
Mark H. Breedlove
|
|
|
|
|
—
|
|
|
|
|
|
11,543
|
|
|
|
|
|
—
|
|
|
|
|
|
11,543
|
|
|
(1)
Amounts in this column represent the aggregate grant date fair value of the stock options awarded to our directors in fiscal year 2020. For a discussion of the assumptions and methodologies used to calculate the amounts referred to above, please see the discussion of option awards contained in Note 13, Stock Based Compensation, to our financial statements included elsewhere in this filing. As of December 31, 2020, each non-employee director held outstanding options to acquire the following number of shares: Mr. Khattar, 135,000; Dr. Monia, 135,000; Dr. Fletcher, 62,500; Mr. Sands, 172,500; Ms. Wallace, 62,500; and Mr. Breedlove, 74,621.
(2)
Mr. Sands has notified us that he will resign from our board of directors effective immediately prior to the effectiveness of the Registration Statement of which this prospectus forms a part.
Non-employee Director Compensation Policy
Prior to this offering, we did not have a formal policy to provide any cash or equity compensation to our non-employee directors for their service on our board of directors or committees of our board of directors. The Company has entered into the following agreements, amended certain agreements, and granted the following awards:
•
In 2020, in connection with joining our board of directors as independent, non-employee directors, we entered into agreements with Mr. Khattar and Dr. Monia whereby they would be paid $50,000 per annum, prorated for any partial year of service, plus a one-time option award of 135,000 shares. Mr. Khattar and Dr. Monia are also eligible for annual option awards of 25,000 shares.
•
In 2020, the board of directors awarded Mr. Sands 25,000 stock options. In addition, in order to compensate Mr. Sands on terms consistent with other independent, non-employee directors, in April 2021 our board of directors approved compensation at a rate of $50,000 per annum for Mr. Sands. At that time, the board of directors also approved a $25,000 payment to Mr. Sands in respect of prior service during 2020, which will be reflected in the director compensation table for 2021.
•
Non-independent directors generally receive an option award to purchase 12,500 shares of our common stock in respect of each year of service on the board. Accordingly, during 2020, our board of directors awarded Dr. Fletcher, Ms. Wallace and Mr. Breedlove 37,500 stock options each, for prior and current years of service.
•
Director stock option awards generally vest in four equal annual installments on the first, second, third and fourth anniversaries from the date of grant or from the date of appointment to the board.
In connection with this offering, our board of directors approved the following annual non-employee director compensation program, which will take effect following the closing of this offering.
|
Compensation Elements: Non-Employee Director Compensation Policy
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
|
|
|
Annual Cash Retainer
|
|
|
|
$
|
35,000
|
|
|
|
Independent Chair Retainer
|
|
|
|
$
|
65,000
|
|
|
|
Annual Committee Chair Retainer
|
|
|
|
|
|
|
|
|
Audit
|
|
|
|
$
|
15,000
|
|
|
|
Compensation
|
|
|
|
$
|
10,000
|
|
|
|
Nominating and Corporate Governance
|
|
|
|
$
|
8,000
|
|
|
|
Annual Committee Member Retainer
|
|
|
|
|
|
|
|
|
Audit
|
|
|
|
$
|
7,500
|
|
|
|
Compensation
|
|
|
|
$
|
5,000
|
|
|
|
Nominating and Corporate Governance
|
|
|
|
$
|
4,000
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
Initial Option Grant
|
|
|
shares(1)
|
|
|
Annual Option Grant
|
|
|
shares(2)
|
|
(1)
Represents .078% of the total shares outstanding upon the initial public offering, vesting monthly over a period of 36 months, subject to continued service.
(2)
Represents .039% of the total shares outstanding upon the initial public offering, vesting in full on the first anniversary of the date of the grant, subject to continued service.
Each annual cash retainer will be paid quarterly in arrears. Our board of directors may, in its discretion, permit a non-employee director to elect to receive any portion of the annual cash retainer in the form of fully vested shares of our common stock in lieu of cash.
Code of Business Conduct and Ethics
In connection with this offering, our board of directors will adopt a written code of business conduct and ethics that will apply to all of our directors, officers and employees. The code of business conduct and ethics will cover fundamental ethics and compliance-related principles and practices such as accurate accounting records and financial reporting, avoiding conflicts of interest, the protection and use of our property and information and compliance with legal and regulatory requirements. Our code of business conduct and ethics will be posted on the investor relations section of our website at www.cogrx.com. We intend to disclose any amendments to our code of business conduct and ethics, or waivers of its requirements, on our website to the extent required by the applicable rules and exchange requirements.
Limitation on Liability and Indemnification Matters
Our third amended and restated certificate of incorporation and our amended and restated bylaws, which will each become effective immediately prior to the closing of this offering, will limit our directors’ liability and may indemnify our directors and officers to the fullest extent permitted under the Delaware General Corporation Law, or DGCL. The DGCL provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except for liability for:
•
any breach of the director’s duty of loyalty to us or our stockholders;
•
any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
•
any unlawful payment of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the DGCL; or
•
any transaction from which the director derived an improper benefit.
The DGCL and our amended and restated bylaws provide that we will, in certain situations, indemnify our directors and officers and may indemnify other employees and other agents, to the fullest extent permitted by law.
We have entered or intend to enter into indemnification agreements with each of our directors and officers. These indemnification agreements may require us, among other things, to indemnify our directors and officers for some expenses, including attorneys’ fees, judgments, penalties, fines and settlement amounts incurred by a director or officer in any action or proceeding arising out of his or her service as one of our directors or officers, or any of our subsidiaries or any other company or enterprise to which the person provides services at our request. Subject to certain limitations, our indemnification agreements also require us to advance expenses incurred by our directors, officers and key employees for the defense of any action for which indemnification is required or permitted.
We maintain a directors’ and officers’ insurance policy pursuant to which our directors and officers are insured against liability for actions taken in their capacities as directors and officers. We believe that these provisions in our amended and restated certificate of incorporation and amended and restated bylaws and these indemnification agreements are necessary to attract and retain qualified persons as directors and officers.
The limitation of liability and indemnification provisions in our third amended and restated certificate of incorporation and amended and restated bylaws may discourage stockholders from bringing a lawsuit against our directors and officers for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and our stockholders. Further, a stockholder’s investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and officers as required by these indemnification provisions.
At present, there is no pending litigation or proceeding involving any of our directors, officers or employees for which indemnification is sought and we are not aware of any threatened litigation that may result in claims for indemnification.
Insofar as indemnification for liabilities arising under the Securities Act, may be permitted to directors, officers or control persons, in the opinion of the SEC, such indemnification is against public policy, as expressed in the Securities Act and is therefore unenforceable.
EXECUTIVE COMPENSATION
Our named executive officers, or NEOs, for the year ended December 31, 2020, which consist of our current principal executive officer our former principal executive officer, and our other most highly compensated executive officer, are:
•
Lisa Ricciardi, our Chief Executive Officer and President;
•
Kenneth I. Moch, our former Chief Executive Officer and President; and
•
James M. O’Brien, our Chief Financial Officer.
Summary Compensation Table
The following table provides information regarding the compensation earned by our NEOs for the year ended December 31, 2020.
|
Name and principal position
|
|
|
Year
|
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Option
awards
($)(1)
|
|
|
Non-equity
incentive plan
compensation
($)(2)
|
|
|
All other
compensation
($)
|
|
|
Total
($)
|
|
|
Lisa Ricciardi(3)
|
|
|
|
|
2020
|
|
|
|
|
|
287,385
|
|
|
|
|
|
—
|
|
|
|
|
|
901,904
|
|
|
|
|
|
79,893
|
|
|
|
|
|
3,415(4)
|
|
|
|
|
|
1,272,597
|
|
|
|
Chief Executive Officer and President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth I. Moch(5)
|
|
|
|
|
2020
|
|
|
|
|
|
93,591
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
609,293(6)
|
|
|
|
|
|
702,884
|
|
|
|
Former Chief Executive Officer and President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James M. O’Brien
|
|
|
|
|
2020
|
|
|
|
|
|
340,000
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
70,890
|
|
|
|
|
|
7,323(4)
|
|
|
|
|
|
418,213
|
|
|
|
Chief Financial Officer
|
|
|
|
|
|
|
|
|
(1)
Amounts shown in this column represent the aggregate grant date fair value of the stock options awarded to the NEO in fiscal year 2020. For a discussion of the assumptions and methodologies used to calculate the amounts referred to above, please see the discussion of option awards contained in Note 13, Stock Based Compensation, to our financial statements included elsewhere in this prospectus. The amounts reported in this column reflect the accounting cost for these stock options and do not correspond to the actual economic value that may be received by the NEO upon exercise of the stock options.
(2)
Amounts shown are cash incentive payments earned in respect of 2020 performance and paid in 2021.
(3)
Ms. Ricciardi served as a non-employee director beginning in January 2020, and was appointed our Chief Executive Officer and President in March 2020. The amount shown in the Option Awards column includes an option grant with a grant date fair value of $7,696, awarded to Ms. Ricciardi at the beginning of 2020 as compensation for her services as a non-employee director.
(4)
Amounts shown are Company 401(k) match payments.
(5)
Mr. Moch resigned as Chief Executive Officer and President in March 2020.
(6)
Amounts shown for Mr. Moch represent severance of $386,250 (payable over the 12-month period following his termination date of March 17, 2020), a lump sum payment of $104,288, accrued vacation payment of $14,856 and payment of $100,000 in connection with consulting services payable over the 12-month period following his termination date. In addition, Mr. Moch received $3,899 in Company match 401(k) payments prior to his termination date.
Narrative Disclosure to the Summary Compensation Table
Elements of Compensation in 2020
The compensation of our NEOs generally consists of base salary, annual cash bonus opportunities, long term incentive compensation in the form of equity awards and other benefits, as described below.
Base Salary
The base salary payable to each NEO is intended to provide a fixed component of compensation reflecting the executive’s skill set, experience, role, responsibilities, and contributions. Each NEO’s initial base salary was specified in her or his employment agreement or letter agreement, as described below, and is reviewed (and, if applicable, adjusted) from time to time by our board of directors or compensation committee. For 2020, the NEOs’ annual base salary rates were: $386,000 for Ms. Ricciardi, $340,000 for Mr. O’Brien and $386,250 for Mr. Moch.
Annual Performance-Based Bonus
Each of our NEOs’ performance-based cash bonus opportunity is expressed as a percentage of base salary that can be achieved at a target level by meeting predetermined corporate and individual performance objectives. Historically, our compensation committee annually sets each executive’s target bonus for the year. The 2020 annual bonus for Ms. Ricciardi and Mr. O’Brien were targeted at 40% and 30% of their respective base salaries. Mr. Moch did not receive a bonus for 2020.
For 2020, Ms. Ricciardi and Mr. O’Brien were eligible to earn their annual bonuses pursuant to the achievement of corporate and/or individual performance goals, including certain clinical milestones, pipeline, platform and manufacturing development, operations, financing, corporate development, human resources, scientific leadership, and intellectual property. Following a review of the corporate goals attained in 2020, our compensation committee recommended, and our board of directors approved, 2020 annual bonus payments to each of Ms. Ricciardi and Mr. O’Brien in an amount equal to 70% of their respective target bonus amounts, totaling $79,893 and $70,890, respectively (pro-rated in the case of Ms. Ricciardi, to account for her start date).
Long Term Equity Incentives
Our equity-based incentive awards are designed to align our interests and the interests of our stockholders with those of our employees and consultants, including our NEOs. Our board of directors or compensation committee approves equity grants. Ms. Ricciardi received options to purchase shares of our common stock in 2020. See “— Employment Arrangements with our NEOs” for more information regarding equity awards made in 2020 to Ms. Ricciardi.
Employment Arrangements with our NEOs
Lisa Ricciardi
In February 2020, in her capacity as a director, we issued to Ms. Ricciardi an option to purchase 25,000 shares of our common stock, at an exercise price of $0.33. The option will vest over a four-year period, with 25% of the shares of our common stock underlying the option vesting on March 7, 2021, and 75% of the shares of common stock underlying the option vesting in equal annual installments thereafter.
In March 2020, we entered into an interim CEO letter agreement with Ms. Ricciardi, which provided for a six-month term through September 2020 and her continued service as a member of our board. Pursuant to her interim CEO letter agreement, we issued to Ms. Ricciardi a fully vested option to purchase 65,000 shares of our common stock at an exercise price of $0.37 per share.
In June 2020, we terminated and replaced Ms. Ricciardi’s interim CEO letter agreement with a new employment agreement when she assumed her permanent position. Ms. Ricciardi’s current employment agreement provides for her at-will employment as our Chief Executive Officer and President and sets her initial annual base salary at $386,000 and her initial target annual bonus opportunity at 40% of her base salary (pro-rated for 2020). Ms. Ricciardi’s annual performance bonus was prorated based on the portion of the fiscal year during which she was actually employed as the Chief Executive Officer, including her time served in an interim capacity.
Ms. Ricciardi’s employment agreement also provided for the issuance of an option (the “Initial Stock Option”) to purchase 2,898,689 shares of our common stock, or 5% of our fully diluted equity, at an exercise
price of $0.37 per share, which was granted on June 1, 2020. The Initial Stock Option vests over a four-year period, with 25% of the common stock underlying the Initial Stock Option vesting on June 1, 2021, and 75% of our common stock underlying the Initial Stock Option vesting in 36 equal monthly installments thereafter, with accelerated vesting upon a change in control, in each case subject to continued employment. The employment agreement also provided for the issuance of an additional option in certain cases as anti-dilution protection for the Initial Stock Option (the “Anti-Dilution Option”).
Additionally, Ms. Ricciardi’s employment agreement provides for the issuance of stock options to purchase shares of our common stock representing up to 2% of our fully diluted equity, in the event that we achieve certain equity value targets upon one or more offerings of our equity securities (the “Additional Options”). The Additional Options would vest 25% on the grant date and 75% in 36 equal monthly installments thereafter, with full or partial accelerated vesting upon a change in control depending upon the value of our preferred stock upon the change in control, in each case subject to continued employment.
Accordingly, as required by Ms. Ricciardi’s employment agreement, the Board granted to Ms. Ricciardi under the 2021 Plan, effective upon our execution of an underwriting agreement in connection with this offering, options to purchase shares of our common stock if the initial public offering price is less than $ , or shares of our common stock if the initial public offering price is $ or greater. The options have an exercise price equal to the initial public offering price, and will generally vest 25% on the grant date and 75% in 36 equal monthly installments thereafter, subject to continued employment. These options are in full satisfaction of the requirement in Ms. Ricciardi’s employment agreement to grant the Anti-Dilution Option and Additional Options.
Ms. Ricciardi’s employment agreement provides for severance benefits upon a termination of her employment by us without “cause” or her resignation for “good reason”, subject to Ms. Ricciardi’s execution of a form release of claims. The severance benefits include: (i) payment of all accrued and unpaid base salary, (ii) payment of any expenses incurred by not yet reimbursed, (iii) any benefits that have accrued to Ms. Ricciardi under the terms of the employee benefits of the Company, (iv) to the extent unpaid, payment of the cash bonus awarded to Ms. Ricciardi with respect to the fiscal year prior to the fiscal year of termination, (v) continuation of her base salary for 12 months, (vi) COBRA premiums paid by us until the earlier of the date at the end of the 12 month period following the termination date or the date the she becomes eligible for group health insurance through another employer, (vii) and with respect to any of her awarded and outstanding options that are subject to time-based vesting, a number of stock options equal to the number of shares of common stock that would have vested if Ms. Ricciardi continued to be employed by the Company for a period equal to nine (9) months following the date of termination will become vested and exercisable. In addition, if such termination without “cause” or for “good reason” occurs within the 12 month period immediately following a “change of control”, then in addition to payments in (i)-(iv) and (vii) above, Ms. Ricciardi’ base salary and COBRA continuation period will be extended from 12 months to 18 months and she will receive an amount equal to her target cash bonus for the year in which she was terminated.
Ms. Ricciardi’s employment agreement also contains customary non-competition and non-solicitation provisions that extend for up to one-year following termination of her employment with us. The payment of any severance benefits under Ms. Ricciardi’s employment agreement is conditioned on continued compliance with such covenants.
In connection with this offering, we have entered into a new employment agreement with Ms. Ricciardi, that will be effective upon closing of this offering and replace her current employment agreement. The new employment agreement provides for Ms. Ricciardi’s at-will employment and sets forth an annual base salary of $512,500, a target annual bonus opportunity at 50% of base salary, and eligibility to participate generally in our employee benefit plans. In addition, Ms. Ricciardi has entered into a new Employee Restrictive Covenant Agreement (“Restrictive Covenant Agreement”) in connection with this offering, described below on page 149 in greater detail.
Ms. Ricciardi’s new employment agreement provides for severance benefits upon a termination of her employment by us without “cause”, or her resignation for “good reason”, subject to Ms. Ricciardi’s execution of a form release of claims. The severance benefits are: (i) payment of all accrued and unpaid base salary and business expenses properly incurred but not yet reimbursed, (ii) payment of any otherwise earned but
unpaid annual bonus for the prior year, and (iii) continuation of her base salary and COBRA premiums paid by us for up to twelve (12) months. In addition, if such termination without “cause” or for “good reason” occurs within the three (3) month period prior to or the twelve (12) month period immediately following a change in control, then (i) Ms. Ricciardi’s salary and COBRA continuation period will be extended from twelve (12) months to eighteen (18) months, (ii) she will receive a lump sum payment in an amount equal to one and a half (1.5) times her target annual bonus, and (iii) all outstanding time-based equity awards will become vested on the later of Ms. Ricciardi’s termination date and the change in control.
James M. O’Brien
In October 2019, we entered into a letter agreement with Mr. O’Brien. Mr. O’Brien’s letter agreement provides for Mr. O’Brien’s at-will employment as our Chief Financial Officer and sets forth his initial annual base salary of $340,000 and his initial target annual bonus opportunity at 30% of his base salary. Mr. O’Brien’s letter agreement also provided for the issuance of an option to purchase 423,978 shares of our common stock, or 0.75% of our outstanding equity on a fully diluted basis, at an exercise price of $0.33 per share. The option will vest over a four year period, with 25% of the shares of common stock underlying the option vesting on October 7, 2020, and 75% of the shares of common stock underlying the option vesting in equal monthly installments thereafter, in each case if Mr. O’Brien remains employed by the Company through the applicable vesting dates. See “— Outstanding Equity Awards at Fiscal Year-End” for additional details regarding the stock option granted to Mr. O’Brien in connection with his hire.
Mr. O’Brien’s letter agreement provides for severance benefits upon a termination of his employment by us without “cause”, or his resignation for “good reason”, subject to Mr. O’Brien’s execution of a general release of claims. The severance benefits include: (i) payment of all accrued and unpaid base salary, (ii) payment for any vacation time accrued but not used, (iii) payment of any business expenses incurred by not yet reimbursed, (iv) continuation of his base salary for six (6) months, (v) payment of any bonus to which he would have otherwise been entitled for the prior fiscal year but for the termination of his employment, and (vi) COBRA premiums paid by us for six (6) months. In addition, if such termination without “cause” or for “good reason” occurs within the 12 month period immediately following a “change of control”, then in addition to payments in (i) through (iii) and (v) above, Mr. O’Brien’s base salary continuation period will be extended from six (6) to twelve (12) months and all unvested restricted stock, stock options and other equity incentives awarded to Mr. O’Brien will become immediately and automatically fully vested and exercisable.
Mr. O’Brien is also subject to certain restrictive covenants. The payment of any severance benefits under Mr. O’Brien’s letter agreement is conditioned on continued compliance with such covenants.
In connection with this offering, we have entered into a new employment agreement with Mr. O’Brien, that will be effective upon closing of the offering and replace his letter agreement. The new employment agreement provides for Mr. O’Brien’s at-will employment and sets forth an annual base salary of $387,500, a target annual bonus opportunity at 40% of base salary, and eligibility to participate generally in employee benefit plans. In addition, Mr. O’Brien has entered into a new Restrictive Covenant Agreement in connection with this offering, as described below on page 149.
Mr. O’Brien’s new employment agreement provides for severance benefits upon a termination of his employment by us without “cause”, or his resignation for “good reason”, subject to Mr. O’Brien’s execution of a general release of claims. The severance benefits are: (i) payment of all accrued and unpaid base salary and business expenses properly incurred but not yet reimbursed, (ii) payment of any otherwise earned but unpaid annual bonus for the prior year, and (iii) continuation of his base salary and COBRA premiums paid by us for up to nine (9) months. In addition, if such termination without “cause” or for “good reason” occurs within the three (3) month period prior to or twelve (12) month period immediately following a change in control, (i) Mr. O’Brien’s salary and COBRA continuation period will be extended from nine (9) months to twelve (12) months, (ii) he will receive a lump sum payment in an amount equal to his target annual bonus, and (iii) all outstanding time-based equity awards will become vested on the later of Mr. O’Brien’s termination date and the change in control.
The Board has approved a stock option grant to Mr. O’Brien under the 2021 Plan, effective upon our execution of an underwriting agreement in connection with this offering, with an exercise price equal to the
initial public offering price. The stock option grant will be with respect to shares of our common stock. The grant will generally vest 25% on the first anniversary of the grant date and 75% in 36 equal monthly installments thereafter, subject to continued employment.
Restrictive Covenant Agreement
In connection with this offering and our entry into new employment agreements with Ms. Ricciardi and Mr. O’Brien, each executive entered into a new Restrictive Covenant Agreement. These new Restrictive Covenant Agreements include customary prohibitions against competition with us and solicitation of our customers and employees, both during employment and for one year following any cessation of employment. The Restrictive Covenant Agreements also include standard provisions relating to the Company’s intellectual property rights, and prohibiting the executive from disclosing confidential information. The Restrictive Covenant Agreements are incorporated by reference into the new employment agreements and payment of any severance benefits under each executive’s new employment agreement is conditioned on continued compliance with his or her Restrictive Covenant Agreement.
Kenneth I. Moch
Mr. Moch was previously party to an employment agreement with us that contained customary non-competition and non-solicitation provisions extending for up to one-year following termination of his employment with us and a customary invention assignment regarding ownership of intellectual property.
Mr. Moch’s employment agreement provided for severance benefits upon a termination of his employment by the Company without “cause” or his resignation for “good reason,” subject to Mr. Moch’s execution of a form release of claims, as follows: (i) payment of all accrued and unpaid base salary, (ii) payment of any expenses incurred but not yet reimbursed, (iii) any benefits that have accrued to Ms. Moch under the terms of the employee benefit programs of the Company, (iv) payment of his base salary for twelve (12) months following termination and (v) COBRA premiums paid by us until the earlier of the date at the end of the twelve (12) month period following termination date or the date the he becomes eligible for group health insurance through another employer. In addition, if such termination without “cause” or for “good reason” had occurred within the 12-month period immediately following a “change of control”, then in addition to payments in (i)-(v) above, Mr. Moch’s base salary and COBRA continuation period would have been extended from 12 months to 18 months and he would have received an amount equal to his target cash bonus for the year in which he was terminated.
In connection with Mr. Moch’s resignation on March 17, 2020, we entered into a separation and release agreement with Mr. Moch. Under the terms of the separation and release agreement, we agreed to provide to Mr. Moch the following payments and benefits, subject to his execution of a release and compliance with restrictive covenants: (i) payment of his base salary of $386,250 for 12 months, (ii), the making of a lump sum payment to him in the amount of $104,287.50, (iii) waiving in the entirety the medical insurance premiums under COBRA until the earlier of March 17, 2021 (12 months after his termination of employment date) and the date Mr. Moch becomes eligible for medical benefits through another employer. Mr. Moch also agreed that except as set forth in the immediately preceding sentence, none of the Company or its affiliates have any obligation or liability to Mr. Moch, including under Mr. Moch’s employment agreement. Mr. Moch’s options to purchase 2,339,304 shares of our common stock that were vested on his date of separation remain exercisable for a period of three year plus three months, and all unvested options on the date of separation were forfeited.
In connection with Mr. Moch’s termination of employment, we entered into an advisor services agreement with Mr. Moch. Pursuant to Mr. Moch’s advisor services agreement, Mr. Moch agreed to provide certain transition services and other consulting services to the company for twelve (12) months, including with respect to our business strategy, legal matters and investor relations as our Chief Executive Officer requests, and Mr. Moch received an aggregate fee of $100,000, paid in equal monthly installments for the twelve (12) month period following his termination date.
Outstanding Equity Awards at Fiscal Year-End
The following table provides information regarding the outstanding equity awards held by our NEOs as of December 31, 2020. All awards were granted pursuant to the 2017 Plan and 2007 Plan. See “— Equity incentive plans — 2017 Plan and 2007 Plan” below for additional information.
|
Name
|
|
|
Number of Securities
Underlying
Unexercised Options
(#) Exercisable
|
|
|
Number of Securities
Underlying Unexercised
Options (#)
Unexercisable
|
|
|
Equity incentive
awards: number of
securities underlying
unexercised unearned
options (#)
|
|
|
Option
Exercise
Price ($)
|
|
|
Option Expiration
Date
|
|
|
Lisa Ricciardi
|
|
|
|
|
33,750(1)
|
|
|
|
|
|
101,250(1)
|
|
|
|
|
|
—
|
|
|
|
|
|
0.33
|
|
|
|
|
|
9/29/2029
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
25,000(2)
|
|
|
|
|
|
—
|
|
|
|
|
|
0.33
|
|
|
|
|
|
4/30/2030
|
|
|
|
|
|
|
|
|
65,000
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
0.37
|
|
|
|
|
|
4/22/2030
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
2,898,686(3)
|
|
|
|
|
|
—
|
|
|
|
|
|
0.37
|
|
|
|
|
|
5/31/2030
|
|
|
|
James M. O’Brien
|
|
|
|
|
123,519(4)
|
|
|
|
|
|
299,978(4)
|
|
|
|
|
|
—
|
|
|
|
|
|
0.33
|
|
|
|
|
|
10/7/2029
|
|
|
|
Kenneth I. Moch
|
|
|
|
|
2,339,204
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
0.27
|
|
|
|
|
|
6/17/2023
|
|
|
(1)
This option vests in equal, annual installments with 25% vested on March 18, 2020, with the remaining 75% in 3 equal annual installments thereafter, subject generally to continued service.
(2)
This option vests in equal, annual installments with 25% vesting on March 7, 2021, with the remaining 75% in 3 equal annual installments thereafter, subject generally to continued service.
(3)
This option vests as follows: 25% vesting on June 1, 2021, with the remaining 75% vesting in 36 substantially equal monthly installments thereafter, subject generally to continued service.
(4)
This option vests as follows: 25% vested on October 7, 2020, with the remaining 75% vesting in 36 substantially equal monthly installments thereafter, subject generally to continued service.
Equity Incentive Plans
2021 Plan
Our 2021 Plan will become effective upon the effectiveness of the Registration Statement of which this prospectus forms a part. Upon the effectiveness of the 2021 Plan, we will cease granting awards under our 2017 Plan. A summary of the material terms of the 2021 Plan follows below.
The 2021 Plan authorizes the award of both equity-based and cash-based incentive awards, including: (i) stock options (both incentive stock options and nonqualified stock options), (ii) stock appreciation rights, or SARs, (iii) restricted stock awards, or RSAs, (iv) restricted stock units, or RSUs, and (v) cash or other stock based awards. Incentive stock options may be granted only to employees. All other types of awards may be issued to employees, directors, consultants and other service providers.
Shares Subject to 2021 Plan. We will initially reserve shares of our common stock for issuance under our 2021 Plan. The number of shares reserved for issuance under our 2021 Plan will increase automatically on January 1, 2022 and each anniversary of such date prior to the termination of the 2021 Plan, equal to the lesser of (i) 5% of our shares of common stock issued and outstanding on the last day of the immediately preceding fiscal year and (ii) such smaller number of shares as determined by our board or compensation committee. No more than shares of our common stock may be issued under the 2021 Plan through incentive stock options.
The following shares will be added (or added back) to the shares available for issuance under the 2021 Plan:
•
Shares subject to 2007 Plan or 2017 Plan (collectively, the “Prior Plans”) or 2021 Plan awards that expire, terminate or are cancelled or forfeited for any reason after the effectiveness of the 2021 Plan;
•
Shares that after the effectiveness of the 2021 Plan are withheld to satisfy the exercise price of an option issued under a Prior Plan or the 2021 Plan; and
•
Shares that after the effectiveness of the 2021 Plan are withheld to satisfy tax withholding obligations related to any award under a Prior Plan or the 2021 Plan.
However, the total number of shares underlying Prior Plan awards that may be recycled into the 2021 Plan pursuant to the above-described rules will not exceed shares, which was the number of shares underlying 2007 Plan and 2017 Plan awards as of the date the Board adopted the 2021 Plan.
Shares of our common stock issued by us through the assumption or substitution of awards in connection with a future acquisition of another entity will not reduce the shares available for issuance under the 2021 Plan.
Administration. We expect that our 2021 Plan will be administered by our compensation committee. The administrator of the plan will have the authority to, among other things, interpret the plan and award agreements, select grantees, determine the vesting, payment and other terms of awards, and modify or amend awards. Our compensation committee may delegate to one or more of our officers the authority to issue awards under the 2021 Plan to grantees who are not executive officers, subject to parameters established by the compensation committee.
Adjustments. In the event of certain corporate events or transactions (such as a merger, consolidation, reorganization, recapitalization, stock split, reverse stock split, spin-off, stock dividend, or similar transaction or change in our capital structure), our compensation committee will make adjustments or substitutions to the number and kind of shares that may be issued under the 2021 Plan, the number and kind of shares subject to outstanding awards, the exercise price or base price of outstanding awards, and/or any other affected terms and conditions of the 2021 Plan or outstanding awards, in each case as it deems appropriate and equitable.
Stock options. The 2021 Plan provides for the grant of both incentive stock options and non-qualified stock options to purchase shares of our common stock at a stated exercise price. The exercise price of stock options granted under the 2021 Plan must be at least equal to the fair market value of our common stock on the date of grant. The maximum term of options granted under our 2021 Plan is ten years.
Our compensation committee may provide in the terms of the applicable award agreement that the participant may exercise an unvested portion in exchange for restricted stock subject to the same vesting terms as the option.
Stock appreciation rights. An SAR provides for a payment, in cash or shares of our common stock or a combination of both, to the holder based upon the difference between the fair market value of our common stock on the date of exercise and a predetermined exercise price, multiplied by the number of shares. The base price of a SAR must be at least the fair market value of a share of our common stock on the date of grant. SARs may not have a term that is longer than ten years from the date of grant.
Restricted stock awards. An RSA is an issuance of shares of our common stock subject to forfeiture restrictions that lapse based on the satisfaction of service and/or performance conditions. The price, if any, of each share subject to an RSA will be determined by the compensation committee. During the vesting period, a participant will have the right to vote and receive any dividends with respect to restricted stock, provided that our compensation committee may specify that any such dividends are subject to the same vesting schedule as the shares to which they relate.
Restricted stock units. RSUs represent the right to receive shares of our common stock (or cash equal to the value of such shares) at a specified time in the future, following the satisfaction of specified service and/or performance conditions.
Cash or other stock based awards. Cash or other stock based awards (including awards to receive unrestricted shares of our common stock or immediate cash payments) may be granted to participants. Our compensation committee will determine the terms and conditions of each such award, including, as applicable, the term, any exercise or purchase price, performance goals, vesting conditions, and other terms and conditions. Payment in respect of a cash or other stock based award may be made in cash, shares of our common stock, or a combination of both, at the discretion of our compensation committee.
Change in control. Upon or in anticipation of a change in control (which includes certain merger, asset or stock transactions, certain changes in our board composition and any other event deemed by our board of directors to constitute a change in control), our compensation committee may take such actions as it deems appropriate with respect to outstanding awards under the 2021 Plan. Such actions may include (among other things) the acceleration of award vesting, the substitution of awards, the cancellation of unexercised or unvested awards and the redemption or cashout of awards. In the discretion of our compensation committee, any cash or other substitute consideration payable upon redemption or cashout
of an award may be subjected to the same vesting terms that applied to the original award, or earn-out, escrow, holdback or similar arrangements comparable to those applicable to stockholders in connection with the change in control. The compensation committee need not treat all outstanding awards in an identical manner.
Prohibition on Repricing. Neither the compensation committee nor the board may take any of the following actions absent prior stockholder approval: (i) cancel options or stock appreciation rights outstanding under the 2021 Plan in exchange for new options or stock appreciation rights with a lower exercise or base price per share; (ii) cancel underwater options or stock appreciation rights outstanding under the 2021 Plan in exchange for consideration payable in our equity securities or cash; or (iii) otherwise directly reduce the exercise or base price of options or stock appreciation rights outstanding under the 2021 Plan.
Director Compensation Limits. Beginning in 2022, the aggregate amount of equity and cash compensation payable to a non-employee director with respect to a calendar year for his or her service as a director may not exceed $500,000 (or $750,000, in the case of a newly appointed or newly elected non-employee director’s first year of service with us). This director compensation limit will not apply to (i) compensation earned by a non-employee director solely in his or her capacity as chairman of the Board or lead independent director, (ii) compensation earned by a non-employee director for services he or she performs outside of his or her role as a non-employee director (i.e. as an advisor or consultant), or (iii) compensation awarded by the Board to a non-employee director in extraordinary circumstances, as determined by the Board in its discretion, so long as, in each case, the non-employee director does not participate in the decision to award him- or herself the additional compensation.
Clawback. Awards under the 2021 Plan will be subject to clawback or recoupment pursuant to any applicable policy, law or exchange listing requirement in effect from time to time.
Transferability. Except for certain estate planning transfers authorized by the compensation committee, awards granted under the 2021 Plan are generally nontransferable except by will or by the laws of descent and distribution.
Amendment and termination. Our board of directors may amend our 2021 Plan at any time, subject to stockholder approval if required by applicable law or exchange listing requirement. The 2021 Plan will terminate ten years after it becomes effective.
2017 Plan
Our Cognition Therapeutics, Inc. 2017 Equity Incentive Plan (“2017 Plan”) was adopted by our board of directors, approved by shareholders, and made effective as of September 20, 2017. Our 2017 Plan was originally adopted to enable the issuance of stock options and stock awards to our employees, advisors, directors, and consultants.
As noted above, we expect to terminate the 2017 Plan and will cease granting awards thereunder upon the effective date of our 2021 Plan (described above). Any outstanding awards will continue to be subject to the terms of the 2017 Plan and the applicable award agreements, until such awards are exercised or settled, or until they terminate or expire by their terms.
A summary of the material terms of the 2017 Plan follows below.
Administration. We expect that our compensation committee will administer the 2017 Plan and outstanding awards thereunder following the date of this offering.
As of July [_], 2021, there were (i) [__] shares available for issuance in respect of new awards under the 2017 Plan and (ii) options outstanding under the 2017 Plan with respect to [__] shares of our common stock.
Share recycling. Shares underlying 2017 Plan awards that are forfeited, expired, canceled, reacquired by the company prior to vesting will become available for grant under the 2021 Plan.
Options. The 2017 Plan provides for the grant of both (i) incentive stock options, which are intended to qualify for tax treatment as set forth under Section 422 of the Code, as amended, or the Code, and
(ii) non-qualified stock options to purchase shares of our common stock at a stated exercise price. The exercise price of stock options granted under the 2017 Plan must be at least equal to the fair market value of our common stock on the date of grant. The maximum term of options granted under our 2017 Plan is ten years.
The board of directors may approve certain stock options issued under the 2017 Plan to become exercisable prior to vesting in exchange for restricted shares of common stock subject to a repurchase right in favor of the company during a specified restriction period.
Stock Awards. The 2017 Plan also allows for the grant or sale of stock awards that may be subject to restrictions, as determined by the board of directors. The price, if any, of each share subject to a stock award will be determined by the board of directors/compensation committee. During the restriction period, a participant will have the right to vote and receive any dividends with respect to stock awards.
Change of Control. If we are subject to a “Change of Control” as defined in the 2017 Plan (including certain dissolution, liquidation, asset sale or merger transactions), the board of directors will determine how to treat outstanding awards under our 2017 Plan. This may include one or more of the following: (i) the acceleration of outstanding options or lapse in restrictions on outstanding stock awards, (ii) the termination of outstanding awards, unless exercised prior to the Change of Control; and (iii) the cashout or redemption of outstanding awards. The board of directors need not treat all outstanding awards in an identical manner.
Adjustments. In the event of a stock dividend, reorganization, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification, merger, asset sale, or other similar event or transaction affecting our common stock, proportional adjustments will be made to the number of shares reserved for issuance under our 2017 Plan; the number and class of shares subject to outstanding awards; and the exercise or repurchase price applicable to outstanding awards.
Transferability. Unless otherwise determined by the board of directors and/or specified in the applicable award agreement, awards under the 2017 Plan generally may not be transferred in any manner other than by will, the laws of descent, and distribution or qualified domestic relations order.
Amendment/Termination. The board of directors may amend or terminate the 2017 Plan at any time; provided, however, that the board of directions shall not amend this Plan without stockholder approval if such approval is required in order to comply with the Code or other applicable laws.
2007 Plan
Our Cognition Therapeutics Inc. Amended and Restated 2007 Equity Incentive Plan (“2007 Plan”) was adopted by our board of directors, approved by shareholders, and made effective as of October 1, 2007, and was most recently amended and restated on January 10, 2017. Our 2007 Plan was originally adopted to enable the issuance of stock options and stock awards to our employees, advisors, directors, and consultants. The 2007 Plan was implemented to encourage the participants to contribute materially to the growth of the company and therefore benefit the company’s stockholders.
As of July [_], 2021, there were stock options with respect to [__] shares outstanding and no additional shares available for issuance in respect of new awards under the 2007 Plan. Any outstanding awards will continue to be subject to the terms of the 2007 Plan and the applicable award agreements, until such awards are exercised or settled, or until they terminate or expire by their terms.
A summary of the material terms of the 2007 Plan follows below.
Administration. We expect that our compensation committee will administer the 2007 Plan and outstanding awards thereunder following the date of this offering.
Share recycling. If and to the extent shares granted are terminated, expired, canceled, forfeited, exchanged or surrendered without having been exercised, the shares subject to such grants will be available for grant under the 2021 Plan.
Options. The 2007 Plan provides for the grant of both (i) incentive stock options, which are intended to qualify for tax treatment as set forth under Section 422 of the Code, as amended, or the Code, and
(ii) non-qualified stock options to purchase shares of our common stock at a stated exercise price. The exercise price of stock options granted under the 2007 Plan must be at least equal to the fair market value of our common stock on the date of grant. The maximum term of options granted under our 2007 Plan is ten years.
The board of directors may approve certain stock options issued under the 2007 Plan to become exercisable prior to vesting in exchange for restricted shares of common stock subject to a repurchase right in favor of the company during a specified restriction period.
Stock Awards. The 2007 Plan also allows for the grant or sale of stock awards that may be subject to restrictions, as determined by the board of directors. The price, if any, of each share subject to a stock award will be determined by the board of directors/compensation committee. During the restriction period, a participant will have the right to vote and receive any dividends with respect to stock awards.
Change of Control. If we are subject to a “Change of Control” as defined in the 2007 Plan (including certain dissolution, liquidation, asset sale or merger transactions), the board of directors will determine how to treat outstanding awards under our 2007 Plan. This may include one or more of the following: (i) the acceleration of outstanding options or lapse in restrictions on outstanding stock awards, (ii) the termination of outstanding awards, unless exercised prior to the Change of Control; and (iii) the cashout or redemption of outstanding awards. The board of directors need not treat all outstanding awards in an identical manner.
Adjustments. In the event of a stock dividend, reorganization, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification, merger, asset sale, or other similar event or transaction affecting our common stock, proportional adjustments will be made to the number of shares reserved for issuance under our 2007 Plan; the number and class of shares subject to outstanding awards; and the exercise or repurchase price applicable to outstanding awards.
Transferability. Unless otherwise determined by the board of directors and/or specified in the applicable award agreement, awards under the 2007 Plan generally may not be transferred in any manner other than by will, the laws of descent, and distribution or qualified domestic relations order.
Amendment/Termination. The board of directors may amend or terminate the 2007 Plan at any time; provided, however, that the board of directions shall not amend this Plan without stockholder approval if such approval is required in order to comply with the Code or other applicable laws.
Employee Stock Purchase Plan
Our board of directors has adopted the Employee Stock Purchase Plan, or ESPP, prior to closing of this offering, under which we may provide our employees and employees of our subsidiary with an opportunity to purchase shares of our common stock at a discounted purchase price. The material terms of the ESPP are summarized below. The ESPP is intended to qualify as an “employee stock purchase plan” meeting the requirements of Section 423 of the Code.
Administration. Subject to the express provisions of the ESPP, our compensation committee will have the authority to construe and interpret the ESPP, prescribe, amend, and rescind rules relating to the ESPP’s administration and take any other actions necessary or desirable for the administration of the ESPP and to facilitate compliance with Section 423 of the Code and other applicable law.
Stock Subject to the ESPP. Subject to adjustment as provided in the ESPP, a total of shares of our common stock will be authorized and reserved for issuance under the ESPP. In addition, subject to prior approval by our board of directors in each instance, on or about January 1, 2022 and each anniversary of such date thereafter prior to the termination of the ESPP, the number of shares of our common stock authorized and reserved for issuance under the ESPP will be increased by a number of shares of our common stock equal to the least of (i) shares of our common stock, (ii) 1% of the shares of our common stock outstanding on the final day of the immediately preceding calendar year, and (iii) such smaller number of shares of our common stock as determined by our board of directors. Such shares of our common stock may be newly issued shares, treasury shares or shares acquired on the open market. In the event that any dividend or other distribution (whether in the form of cash, our common stock, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up,
spin-off, or exchange of our common stock or our other securities, or other change in our structure affecting our common stock occurs, then in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the ESPP, our compensation committee will, in such manner as it deems equitable, adjust the number of shares and class of common stock that may be delivered under the ESPP, the purchase price per share and the number of shares covered by each outstanding option under the ESPP, and the numerical limits described above.
Eligibility. Generally, our employees and employees of our subsidiary who customarily are employed for at least twenty (20) hours per week and for more than five (5) months in any calendar year will be eligible to participate in the ESPP. Notwithstanding the foregoing, our compensation committee may exclude from participation in the ESPP or any offering period employees who are (i) “highly compensated employees” within the meaning of Section 414(q) of the Code, or (ii) citizens or residents of a foreign jurisdiction where the grant of an option under the ESPP to such employee would be prohibited under the laws of such foreign jurisdiction or the grant of an option under the ESPP to such employee in compliance with the laws of such foreign jurisdiction would cause the ESPP to violate the requirements of Section 423 of the Code. No employee may be granted options to purchase shares of our common stock under the ESPP if such employee (x) immediately after the grant would own capital stock possessing 5% or more of the total combined voting power or value of all classes of our capital stock, or (y) holds rights to purchase shares of our common stock under all of our employee stock purchase plans (in accordance with Section 423(b)(8) of the Code) that accrue at a rate exceeding $25,000 (determined as of the option grant date) for each calendar year in which such rights are outstanding.
Grant and exercise of options. The ESPP provides for six (6) month offering periods, commencing on or about January 1st and July 1stof each year, unless specified otherwise by our compensation committee. Eligible employees may elect to become a participant in the ESPP by submitting an enrollment form, pursuant to which an employee may elect to enroll in the ESPP, authorize a new level of payroll deductions, or stop payroll deductions and withdraw from an offering period. However, a participant may not purchase more than shares of our common stock during each offering period.
During each offering period for which a participant has enrolled, the participant may contribute through payroll deductions in an amount equal to (i) between 1% and 15%, in whole percentages, of his or her compensation, or (ii) a fixed dollar amount, in each case, on each pay day occurring during such offering period. A participant’s compensation for purposes of the ESPP includes base salary and base wages (including overtime). No interest shall accrue on or be payable with respect to the payroll deductions of a participant in the ESPP. Payroll deductions would be made before deduction for any salary deferral contributions made by the employee to any tax-qualified or nonqualified deferred compensation plan, cafeteria plan or similar arrangement.
On the last trading day of each offering period, a participant’s option to purchase shares of our common stock will be exercised automatically. The per-share purchase price will be the lesser of (i) eighty-five percent (85%) of the fair market value of one share of our common stock on the first trading day of the applicable offering period and (ii) eighty-five percent (85%) of the fair market value of one share of our common stock on the last trading day of the applicable offering period. As soon as reasonably practicable after the last day of each offering period, we will arrange for the delivery to each participant of the shares of our common stock purchased upon exercise of his or her option. We may require that the shares of our common stock be deposited and/or retained for a specified period of time with a financial services firm or other agent it designates as broker. Neither payroll deductions nor rights with respect to the exercise of an option or to receive shares of our common stock are transferable, other than by will, by the laws of descent and distribution, or by written designation of a beneficiary with our compensation committee.
Termination of Employment and Withdrawal from the ESPP. Participants may elect to withdraw from the ESPP at any time and receive back any of their contributions, without interest, not used to purchase shares of our common stock; provided that if a participant wishes to withdraw his or her funds prior to purchase, he or she must submit a revised enrollment form to our compensation committee at least fifteen (15) days prior to the end of the then-current offering period. Participants who terminate employment before the end of an offering period will be deemed to have withdrawn from the ESPP and the payroll deductions in the participant’s notional account that have not been used to purchase shares of our common stock will be returned to the participant.
Amendment and Termination of the ESPP. Our compensation committee may amend or terminate the ESPP at any time for any reason. If the ESPP is terminated, our compensation committee may elect to terminate the outstanding offering period either immediately, or after shares of our common stock have been purchased on the last trading day of the offering period (which may, in the discretion of our compensation committee, be accelerated) and all amounts that have not been used to purchase shares of our common stock will then be returned to participants as soon as administratively practicable. In the event of a merger, consolidation, acquisition of property or stock, separation, reorganization, or other corporate event described in Section 424 of the Code, each outstanding option will be assumed or an equivalent option substituted by the successor corporation, or a parent, or subsidiary of such successor corporation. If the successor corporation refuses to assume or substitute the option, the offering period with respect to which the option relates will be shortened by setting a new purchase date that occurs before the date of the applicable transaction. Unless terminated earlier pursuant to the terms of the ESPP, the ESPP will have a term of 10 years following the ESPP’s effective date.
Other Benefits
We currently provide welfare benefits that are available to all of our employees, including our NEOs, including health, dental, life, vision and disability insurance.
In addition, we maintain, and the NEOs participate in, a 401(k) plan that provides eligible employees with an opportunity to save for retirement on a tax-advantaged basis and under which we are permitted to make safe harbor and discretionary employer contributions. The 401(k) plan also provides for automatic enrollment for eligible employees who do not make a deferral election. Employees’ pre-tax contributions are allocated to each participant’s individual account and are then invested in selected investment alternatives according to the participants’ directions. The 401(k) plan is intended to be qualified under Section 401(a) of the Code, with the related trust intended to be tax exempt under Section 501(a) of the Code. As the 401(k) plan is a safe harbor plan, we are required to make a certain level of matching contributions. We match 100% of a participating employee’s deferral contributions up to 4% of annual compensation, and participants are always fully vested in their safe harbor matching employer contributions.
We do not maintain any defined benefit pension plans or nonqualified deferred compensation plans.
Rule 10b5-1 Sales Plans
Our directors and executive officers may adopt written plans, known as Rule 10b5-1 plans, in which they will contract with a broker to buy or sell our common stock on a periodic basis. Under a Rule 10b5-1 plan, a broker executes trades pursuant to parameters established by the director or officer when entering into the plan, without further direction from them. The director or officer may amend or terminate a Rule 10b5-1 plan subject to compliance with our insider trading policy. Our directors and executive officers also may buy or sell additional shares outside of a Rule 10b5-1 plan when they are not in possession of material nonpublic information subject to compliance with our insider trading policy. Prior to 180 days after the date of this offering, subject to early termination, the sale of any shares under such plan would be prohibited by the lock-up agreement that the director or officer has entered into with the underwriters.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The following includes a summary of transactions since January 1, 2018 and any currently proposed transactions to which we were or are expected to be a participant in which (1) the amount involved exceeded or will exceed the lesser of $120,000 or one percent of our average total assets at year-end for the last two completed fiscal years, and (2) any of our directors, executive officers or holders of more than 5% of our capital stock, or any affiliate or member of the immediate family of the foregoing persons, had or will have a direct or indirect material interest, other than compensation and other arrangements that are described under the section titled “Executive compensation” and “Management — Non-employee director compensation.”
We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that we would pay or receive, as applicable, in arm’s-length transactions.
Convertible Promissory Note Financing and Conversion
From March 2018 to July 2020, we issued convertible promissory notes in the aggregate principal amount of $13.0 million with an interest rate of 8.0% per annum, pursuant to note purchase agreements entered into with certain holders of our capital stock. On May 1, 2021, the holders of all of our outstanding convertible promissory notes agreed to an acceleration of the date of the automatic conversion from June 30, 2021 to May 1, 2021 for all convertible promissory notes. Accordingly, on May 1, 2021, all of our outstanding convertible promissory notes were converted into 10,926,089 shares of our Series B-1 convertible preferred stock, at a conversion price equal to $1.385 per share. As of the date of this prospectus, no notes are outstanding. Pursuant to the terms of our Series B-1 convertible preferred stock, all shares will automatically convert into shares of our common stock upon the closing of this offering on a one-for-one basis.
The table below sets forth the principal amount of convertible promissory notes purchased by our directors and holders of more than 5.0% of our capital stock and their affiliated entities, and the number of shares of our Series B-1 convertible preferred stock issued pursuant to the Notes Conversion.
|
Name
|
|
|
Principal Amount
of Convertible
Notes
|
|
|
Shares of
Series B-1
Convertible
Preferred Stock
|
|
|
Entities affiliated with Breedlove Family Limited Partnership(1)
|
|
|
|
$
|
475,730
|
|
|
|
|
|
343,487
|
|
|
|
Entities affiliated with Golden Seeds Cognition Therapeutics, LLC(2)
|
|
|
|
$
|
1,841,258
|
|
|
|
|
|
1,329,428
|
|
|
|
Entities affiliated with BIOS Memory SPV I, LP(3)
|
|
|
|
$
|
4,250,000
|
|
|
|
|
|
3,068,592
|
|
|
|
Ogden CAP Associates, LLC(4)
|
|
|
|
$
|
491,127
|
|
|
|
|
|
354,604
|
|
|
|
Stephen Sands(5)
|
|
|
|
$
|
25,000
|
|
|
|
|
|
18,050
|
|
|
(1)
Mr. Breedlove, one of our directors, is the General Partner of the Breedlove Family Limited Partnership.
(2)
Golden Seeds Cognition Therapeutics, LLC is a beneficial owner of more than 5% of our common stock or shares of common stock issuable upon the exercise of stock options or warrants that are exercisable within 60 days of , 2021. Ms. Wallace, one of our directors, is the Co-Chief Executive Officer and Managing Partner of Golden Seeds, LLC and Golden Seeds Funds.
(3)
BIOS Memory SPV I, LP is a beneficial owner of more than 5% of our common stock or shares of common stock issuable upon the exercise of stock options or warrants that are exercisable within 60 days of , 2021. Dr. Fletcher, one of our directors, is the Managing Partner of Bios Partners, LP and founded Bios Research, LLC.
(4)
Ogden CAP Associates, LLC is a beneficial owner of more than 5% of our common stock or shares of common stock issuable upon the exercise of stock options or warrants that are exercisable within 60 days of , 2021 and has been granted a board observer seat in connection with such holdings.
(5)
Mr. Sands is one of our independent directors. Mr. Sands has notified us that he will resign from our board of directors effective immediately prior to the effectiveness of the Registration Statement of which this prospectus forms a part.
Simple Agreements for Future Equity
In March 2021, we entered into the SAFEs, or the safe offering, with various investors, pursuant to which we received gross proceeds in an aggregate amount equal to $8.9 million. The amount invested by the investors in the safe offering is automatically convertible into shares of our common stock upon the closing of this offering at a conversion price equal to 80% of the initial public offering price of our common stock in this offering. As a result, upon the closing of this offering, the principal amount invested in the sale offering is convertible into shares of our common stock, based on an assumed initial offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus.
The table below sets forth the amount invested in the safe offering by holders of more than 5% of our capital stock and their affiliated entities and the number of shares or our common stock issuable upon conversion of the principal amount invested in the safe offering upon the closing of this offering.
|
Name
|
|
|
Amount
of SAFEs
|
|
|
Shares of
Common Stock
|
|
|
Entities affiliated with Golden Seeds Cognition Therapeutics, LLC(1)
|
|
|
|
$
|
3,092,383
|
|
|
|
|
|
|
Entities affiliated with BIOS Memory SPV I, LP(2)
|
|
|
|
$
|
2,000,000
|
|
|
|
|
|
(1)
Golden Seeds Cognition Therapeutics, LLC is a beneficial owner of more than 5% of our common stock or shares of common stock issuable upon the exercise of stock options or warrants that are exercisable within 60 days of, 2021. Ms. Wallace, one of our directors, is the Co-Chief Executive Officer and Managing Partner of Golden Seeds, LLC and Golden Seeds Funds.
(2)
BIOS Memory SPV I, LP is a beneficial owner of more than 5% of our common stock or shares of common stock issuable upon the exercise of stock options or warrants that are exercisable within 60 days of , 2021. Dr. Fletcher, one of our directors, is the Managing Partner of Bios Partners, LP and founded Bios Research, LLC.
Voting Agreement
In connection with the issuance and sale of our shares of preferred stock, we entered into a voting agreement with certain holders of our common stock and each holder of our preferred stock. Each holder of more than 5% of our capital stock, as set forth in the section titled “Principal Stockholders,” is a party to these agreements. Our directors who are parties to these agreements or who are related to parties to these agreements are Dr. Catalano, Ms. Wallace, Dr. Fletcher and Mr. Breedlove. The voting agreement, including all rights thereunder, will automatically terminate immediately prior to the closing of this offering.
Right of First Refusal and Co-Sale Agreement
In connection with the issuance and sale of our shares of preferred stock, we entered into a right of first refusal and co-sale agreement with certain holders of our common stock and each holder of our preferred stock. Each holder of more than 5% of our capital stock, as set forth in the section titled “Principal Stockholders,” is a party to these agreements. Our directors who are parties to these agreements or who are related to parties to these agreements are Dr. Catalano, Ms. Wallace, Dr. Fletcher and Mr. Breedlove.
The right of first refusal and co-sale agreement, including all rights thereunder, will automatically terminate immediately prior to the closing of this offering.
Investors’ Rights Agreement
In connection with the issuance and sale of our shares of preferred stock, we entered into an investors’ rights agreement, as amended, or the investors’ rights agreement, with certain holders of our common stock and each holder of our preferred stock. The holders of more than 5% of our capital stock listed above are
parties to these agreements. The investors’ rights agreement imposes certain affirmative obligations on us, including with respect to financial reporting obligations and investor inspections, and also grants certain other rights to certain of the holders of our capital stock party thereto, including rights of first offer, demand and piggyback registration rights and, if we are eligible, Form S-3 registration rights, with respect to the shares of capital stock held by them. See the section titled “Description of Capital Stock — Registration Rights” for additional information. Certain provisions of the investors’ rights agreement, including our affirmative obligations and the right of first offer rights will terminate immediately prior to the closing of this offering, while the registration rights set forth in the investors’ rights agreement will continue in effect after the closing of this offering until they expire in accordance with their terms.
Executive Officer and Director Compensation
Please see “Executive compensation” and “Management — Non-employee director compensation” for information regarding the compensation of our directors and executive officers.
Employment Agreements
We have entered into employment agreements and letter agreements with certain of our executive officers that, among other things, provide for certain compensatory and change in control benefits, as well as severance benefits. For a description of these agreements with our NEOs, see the section titled “Executive compensation — Employment Arrangements with our NEOs.”
Indemnification Agreements
We have entered and intend to continue to enter into indemnification agreements with each of our directors and officers. These indemnification agreements may require us, among other things, to indemnify our directors and officers for some expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by a director or officer in any action or proceeding arising out of his or her service as one of our directors or officers, or any of our subsidiaries or any other company or enterprise to which the person provides services at our request. For more information regarding these indemnification agreements, see “Management — Limitation on liability and indemnification matters.”
Policies and Procedures for Related Party Transactions
Our board of directors will adopt a written related party transaction policy, which will become effective upon the closing of this offering, setting forth the policies and procedures for the review and approval or ratification of related-party transactions. This policy will cover any transaction, arrangement or relationship or any series of similar transactions, arrangements or relationships, in which we were or are to be a participant and a related party had or will have a direct or indirect material interest, as determined by the audit committee of our board of directors, including, without limitation, purchases of goods or services by or from the related party or entities in which the related party has a material interest, and indebtedness, guarantees of indebtedness or employment by us of a related party.
All related party transactions described in this section occurred prior to adoption of this policy and as such, these transactions were not subject to the approval and review procedures set forth in the policy. However, these transactions were reviewed and approved by our board of directors.
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of , 2021, information regarding beneficial ownership of our capital stock by:
•
each person, or group of affiliated persons, known by us to beneficially own more than 5% of our common stock;
•
each of our NEOs;
•
each of our directors; and
•
all of our executive officers and directors as a group.
The percentage ownership information under the column titled “Beneficial ownership prior to this offering” is based on shares of common stock outstanding as of , 2021, assuming (i) the automatic conversion of all outstanding shares of our convertible preferred stock into an aggregate of 51,450,435 shares of common stock upon the closing of this offering, (ii) the issuance of shares of common stock upon the exercise of warrants that otherwise expire upon or prior to the closing of this offering (assuming an initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus), and (iii) the issuance of shares of our common stock issuable upon the conversion of the SAFEs in the aggregate amount of $8.94 million upon the closing of this offering (assuming an initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus). The percentage ownership information under the column titled “Beneficial ownership after this offering” is based on the sale of shares of common stock in this offering (assuming an initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus). The percentage ownership information assumes no exercise of the underwriters’ option to purchase additional shares.
Beneficial ownership is determined according to the rules of the SEC and generally means that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security. In addition, shares of common stock issuable upon the exercise of stock options or warrants and the conversion of convertible securities that are exercisable or convertible within 60 days of , 2021, are included in the following table. These shares are deemed to be outstanding and beneficially owned by the person holding those options or warrants for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. The information contained in the following table does not necessarily indicate beneficial ownership for any other purpose. Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws.
Unless otherwise noted below, the address for each beneficial owner listed in the table below is c/o Cognition Therapeutics, Inc., 2500 Westchester Ave., Purchase, NY 10577.
|
|
|
|
Beneficial ownership prior to
this offering
|
|
|
Beneficial ownership after
this offering
|
|
|
Name of Beneficial Owner
|
|
|
Number of
shares
beneficially
owned
|
|
|
Percentage of
beneficial
ownership
|
|
|
Number of
shares
beneficially
owned
|
|
|
Percentage
of
beneficial
ownership
|
|
|
5% and Greater Stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Golden Seeds Cognition Therapeutics, LLC
|
|
|
|
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
Ogden CAP Associates, LLC
|
|
|
|
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
BIOS Memory SPV I, LP
|
|
|
|
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
Pittsburgh Life Sciences Greenhouse
|
|
|
|
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
Named Executive Officers and Directors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lisa Ricciardi
|
|
|
|
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
James M. O’Brien
|
|
|
|
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial ownership prior to
this offering
|
|
|
Beneficial ownership after
this offering
|
|
|
Name of Beneficial Owner
|
|
|
Number of
shares
beneficially
owned
|
|
|
Percentage of
beneficial
ownership
|
|
|
Number of
shares
beneficially
owned
|
|
|
Percentage
of
beneficial
ownership
|
|
|
Susan Catalano, Ph.D.
|
|
|
|
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
Mark H. Breedlove
|
|
|
|
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
Aaron Fletcher, Ph.D.
|
|
|
|
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
Jack A. Khattar
|
|
|
|
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
Brett P. Monia, Ph.D.
|
|
|
|
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
Stephen Sands
|
|
|
|
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
Peggy Wallace
|
|
|
|
|
|
|
|
%
|
|
|
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All current directors and executive officers as a group (13 persons)
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DESCRIPTION OF CAPITAL STOCK
The following descriptions are summaries of the material terms of our third amended and restated certificate of incorporation, amended and restated bylaws, the investor rights agreement to which we and certain of our stockholders are parties and of the DGCL. Because the following is only a summary, it does not contain all of the information that may be important to you. For a complete description, you should refer to our form of third amended and restated certificate of incorporation, form of amended and restated bylaws and investors’ rights agreement, copies of which have been filed as exhibits to the registration statement of which this prospectus is part.
General
Upon the closing of this offering and the filing of our third amended and restated certificate of incorporation with the Secretary of State for the State of Delaware, our authorized capital stock will consist of shares of common stock, par value $0.001 per share, and shares of preferred stock, par value $0.001 per share. All of our outstanding shares of common stock are, and the shares of common stock to be issued in this offering will be, fully paid and nonassessable.
Common Stock
Outstanding Shares
As of , 2021, there would have been shares of common stock outstanding, held by stockholders of record, after giving effect to the automatic conversion of all our preferred stock outstanding into an aggregate of 51,450,435 shares of our common stock, the issuance of shares of our common stock issuable upon the exercise of warrants to purchase common stock that otherwise would expire upon or prior to the closing of this offering, and the issuance of shares of our common stock issuable upon the conversion of the SAFEs in the aggregate amount of $8.9 million, in each case immediately upon the closing of this offering (assuming an initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus).
Voting Rights
Each holder of our common stock is entitled to one vote for each share on all matters submitted to a vote of the stockholders, including the election of directors. Our stockholders do not have cumulative voting rights in the election of directors. Accordingly, holders of a majority of the voting shares are able to elect all of the directors. In addition, the affirmative vote of holders of 662∕3% of the voting power of all of the then outstanding voting stock will be required to take certain actions, including amending certain provisions of our third amended and restated certificate of incorporation, such as the provisions relating to amending our amended and restated bylaws, procedures for our stockholder meetings, the classified board, director liability, and exclusive forum for proceedings.
Dividends
Subject to preferences that may be applicable to any then outstanding preferred stock, holders of our common stock are entitled to receive dividends, if any, as may be declared from time to time by our board of directors out of legally available funds.
Liquidation
In the event of our liquidation, dissolution or winding up, holders of our common stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities and the satisfaction of any liquidation preference granted to the holders of any then outstanding shares of preferred stock.
Rights and Preferences
Holders of our common stock have no preemptive, conversion, subscription or other rights, and there are no redemption or sinking fund provisions applicable to our common stock. The rights, preferences and
privileges of the holders of our common stock are subject to and may be adversely affected by the rights of the holders of shares of any series of our preferred stock that we may designate in the future.
Preferred Stock
Upon the closing of this offering, all outstanding shares of our preferred stock will be automatically converted into an aggregate of 51,450,435 shares of common stock. Under the terms of our third amended and restated certificate of incorporation that will become effective immediately prior to the closing of this offering, our board of directors is authorized to direct us to issue shares of preferred stock in one or more series without stockholder approval. Our board of directors has the discretion to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of preferred stock.
The purpose of authorizing our board of directors to issue preferred stock and determine its rights and preferences is to eliminate delays associated with a stockholder vote on specific issuances. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions, future financings and other corporate purposes, could have the effect of making it more difficult for a third-party to acquire, or could discourage a third-party from seeking to acquire, a majority of our outstanding voting stock. Upon the closing of this offering, there will be no shares of preferred stock outstanding, and we have no present plans to issue any shares of preferred stock.
Warrants
As of March 31, 2021, the certain intuitional investors held warrants to purchase an aggregate of 650,656 shares of our common stock at a weighted average exercise price of $0.06 per share, subject to customary adjustments provided in the warrant agreement. The warrants expire upon the closing of the offering.
Stock Options and Grant Plan Shares
As of March 31, 2021, 14,414,342 shares of common stock were issuable upon the exercise of outstanding stock options, at a weighted average exercise price of $0.31 per share. For additional information regarding terms of our equity incentive plans, see the section titled “Executive compensation — Equity incentive plans.”
Registration Rights
The investors’ rights agreement grants certain of the holders of shares of our capital stock party thereto certain registration rights in respect of the “registrable securities” held by them, which securities include (1) the shares of our common stock issued upon the conversion of shares of our preferred stock, (2) the shares of common stock issued upon the conversion and/or exercise of any other security, and (3) any shares of our common stock issued as a dividend or other distribution with respect to the shares described in the foregoing clause (1) and (2). The registration of the resale of these shares of our common stock pursuant to the exercise of these registration rights would enable the holders thereof to sell such shares without restriction under the Securities Act when the applicable registration statement is declared effective.
Holders of shares of our common stock (including shares issuable upon the conversion of our preferred stock) are entitled to such registration rights pursuant the investors’ rights agreement.
Expenses of Registration
Subject to specified conditions and limitations, we are required to pay all expenses, other than underwriting discounts and commissions and stock transfer taxes incurred in connection with any exercise of these registration rights.
Expiration of Registration Rights
These registration rights will expire on the earlier to occur of (1) such time after the closing of this offering in which all of such holder’s registrable shares may be sold without limitation during a three-month period without registration, and (2) the four-year anniversary of the closing of this offering.
Demand Registration Rights
At any time beginning six months after the closing of this offering, the holders of a majority of the common stock issued or issuable upon conversion of our preferred stock then outstanding may, on not more than two occasions, request that we prepare, file and maintain a registration statement on Form S-1 to register the sale of their registrable securities, provided such registrable securities represent at least 20% of all registrable securities then outstanding. Once we are eligible to use a registration statement on Form S-3, the stockholders party to the investors’ rights agreement representing at least 10% of the registrable securities then outstanding may, not more than twice in any twelve-month period, request that we prepare, file and maintain a registration statement on Form S-3 covering the sale of their registrable securities, but only if the anticipated offering price, net of underwriting discounts and commissions, would exceed $1.0 million.
Piggyback Registration Rights
In the event that we propose to register any of our securities under the Securities Act, either for our own account or for the account of other security holders, the stockholders party to the investors’ rights agreement will be entitled to certain “piggyback” registration rights allowing them to include their registrable securities in such registration, subject to certain marketing and other limitations. As a result, whenever we propose to file a registration statement under the Securities Act, other than with respect to a demand registration or a registration statement on Form S-8, these holders will be entitled to notice of the registration and will have the right to include their registrable securities in the registration subject to certain limitations.
Indemnification
The investors’ rights agreement contains customary cross-indemnification provisions, pursuant to which we are obligated to indemnify the selling holders of registrable securities in the event of either material misstatements or omissions in the applicable registration statement attributable to us or our violation of the Securities Act, and the selling stockholders are obligated to indemnify us for material misstatements or omission in the registration statement attributable to them, subject to certain limitations.
Anti-Takeover Provisions of Delaware Law and Our Charter Documents
Some provisions of Delaware law and our third amended and restated certificate of incorporation and our amended and restated bylaws that will become effective immediately prior to the closing of this offering contain provisions that could make the following transactions more difficult: acquisition of us by means of a tender offer; acquisition of us by means of a proxy contest or otherwise; or removal of our incumbent officers and directors. It is possible that these provisions could make it more difficult to accomplish or could deter transactions that stockholders may otherwise consider to be in their best interest or in our best interests, including transactions that might result in a premium over the market price for our shares.
These provisions, summarized below, are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors. We believe that the benefits of increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging these proposals because negotiation of these proposals could result in an improvement of their terms.
Section 203 of the Delaware General Corporation Law
We are subject to Section 203 of the DGCL, which prohibits persons deemed “interested stockholders” from engaging in a “business combination” with a publicly-held Delaware corporation for three years following the date these persons become interested stockholders unless the business combination is, or the transaction in which the person became an interested stockholder was, approved in a prescribed manner or another prescribed exception applies. Generally, an “interested stockholder” is a person who, together with affiliates and associates, owns, or within three years prior to the determination of interested stockholder status did own, 15% or more of a corporation’s voting stock. Generally, a “business combination” includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. The existence of this provision may have an anti-takeover effect with respect to transactions not approved
in advance by the board of directors, such as discouraging takeover attempts that might result in a premium over the market price of our common stock.
Elimination of Stockholder Action by Written Consent
Our third amended and restated certificate of incorporation, which will become effective immediately prior to the closing of this offering, will provide that all stockholder actions must be effected at a duly called meeting of stockholders and not by consent in writing. A special meeting of stockholders may be called only by a majority of our board of directors, the chair of our board of directors, or our chief executive officer.
Undesignated Preferred Stock
The ability to authorize undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of us. These and other provisions may have the effect of deterring hostile takeovers or delaying changes in control or management of our company.
Amendment of Charter Provisions
Our third amended and restated certificate of incorporation will further provide that the affirmative vote of holders of at least 662/3% of the voting power of all of the then outstanding shares of voting stock, voting as a single class, will be required to amend certain provisions of our third amended and restated certificate of incorporation, including provisions relating to the size of the board, removal of directors, special meetings, actions by written consent and cumulative voting. The affirmative vote of holders of at least 662∕3% of the voting power of all of the then outstanding shares of voting stock, voting as a single class, will be required to amend or repeal our amended and restated bylaws, although our amended and restated bylaws may be amended by a simple majority vote of our board of directors.
Classified Board; Election and Removal of Directors
Our third amended and restated certificate of incorporation will further provide that our board of directors is divided into three classes, Class I, Class II and Class III, with each class serving staggered terms, and will give our board of directors the exclusive right to expand the size of our board of directors and to elect directors to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director.
Choice of Forum
Our third amended and restated certificate of incorporation will provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, another state court located within the State of Delaware or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware) will be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of us, (ii) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, stockholder, employee or agent of ours to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, our third amended and restated certificate of incorporation or our amended and restated bylaws (in each case, as may be amended from time to time), (iv) any action asserting a claim governed by the internal affairs doctrine of the State of Delaware, or (v) any other action asserting an “internal corporate claim,” as defined in Section 115 of the DGCL, in all cases subject to the court having personal jurisdiction over all indispensable parties named as defendants.
In addition, our third amended and restated certificate of incorporation will further provide that, unless we consent in writing to the selection of an alternative forum (which consent may be given at any time, including during the pendency of litigation), the federal district courts of the United States of America shall be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. Any person or entity purchasing or otherwise acquiring or holding any interest in any of our securities will be deemed to have notice of and consented to this provision.
Limitation on Liability and Indemnification Matters
For a discussion of liability and indemnification, see “Management — Limitation on Liability and Indemnification Matters.”
Listing
We intend to apply to list our common stock on The Nasdaq Global Market under the trading symbol “CGTX”.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is .
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common stock, and a liquid trading market for our common stock may not develop or be sustained after this offering. Future sales of our common stock, including shares issued upon the exercise of outstanding options or warrants, in the public market after the closing of this offering, or the perception that those sales may occur, could adversely affect the prevailing market price for our common stock from time to time or impair our ability to raise equity capital in the future.
Based on the number of shares of common stock outstanding as of , 2021, upon the closing of this offering and assuming (i) the automatic conversion of all our preferred stock outstanding as of into an aggregate of 51,450,435 shares of our common stock upon the closing of this offering, (ii) the issuance of shares of our common stock issuable upon the exercise of warrants to purchase common stock that otherwise would expire upon the closing of this offering (assuming an initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus), (iii) the issuance of shares of our common stock issuable upon the conversion of the SAFEs upon the closing of this offering in the aggregate amount of $8.9 million (assuming an initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus), (iv) no exercise of the underwriters’ option to purchase additional shares of common stock, and (v) no exercise of outstanding options to purchase shares of our common stock, we will have outstanding an aggregate of approximately shares of common stock. All of the shares sold in this offering will be freely tradable unless purchased by our “affiliates” as such term is defined in Rule 144 under the Securities Act or purchased by existing stockholders and their affiliated entities that are subject to lock-up agreements. All remaining shares of common stock held by existing stockholders immediately prior to the closing of this offering will be “restricted securities,” as such term is defined in Rule 144. These restricted securities were issued and sold in private transactions and are eligible for public sale only if registered under the Securities Act or if they qualify for an exemption from registration under the Securities Act, including the exemptions provided by Rule 144 or Rule 701 of the Securities Act, or Rule 701, which rules are summarized below.
As a result of the lock-up agreements referred to below and the provisions of Rule 144 and Rule 701 under the Securities Act, based on the number of shares of our common stock outstanding as of , 2021, the remaining shares of our common stock will generally become for sale in the public market are as follows:
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Approximate Number of Shares
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First Date Available for Sale on the Public Markets
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Shares
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181 days after the date of this prospectus, upon expiration of the lock-up agreements referred to below, subject in some cases to applicable volume, manner of sale and other limitations under Rule 144 and Rule 701.
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We may issue shares of common stock from time to time as consideration for future acquisitions, investments or other corporate purposes.
In the event that any such acquisition, investment or other transaction is significant, the number of shares of common stock that we may issue may in turn be significant. We may also grant registration rights covering those shares of common stock issued in connection with any such acquisition and investment.
In addition, the shares of common stock reserved for future issuance under the 2017 Plan and 2021 Plan will become eligible for sale in the public market to the extent permitted by the provisions of various vesting schedules, the lock-up agreements, a registration statement under the Securities Act or an exemption from registration, including Rule 144 and Rule 701.
Rule 144
Under Rule 144, as currently in effect, once we have been subject to the public company reporting requirements of the Exchange Act for at least 90 days, and we are current in our Exchange Act reporting at the time of sale, a person (or persons whose shares are required to be aggregated) who is not deemed to have been one of our “affiliates” for purposes of Rule 144 at any time during the three months preceding a
sale and who has beneficially owned restricted securities within the meaning of Rule 144 for at least six months, including the holding period of any prior owner other than one of our “affiliates,” is entitled to sell those shares in the public market (subject to the lock-up agreement referred to below, if applicable) without complying with the manner of sale, volume limitations or notice provisions of Rule 144, but subject to compliance with the public information requirements of Rule 144. If such a person has beneficially owned the shares proposed to be sold for at least one year, including the holding period of any prior owner other than “affiliates,” then such person is entitled to sell such shares in the public market without complying with any of the requirements of Rule 144 (subject to the lock-up agreement referred to below, if applicable).
In general, under Rule 144, as currently in effect, once we have been subject to the public company reporting requirements of the Exchange Act for at least 90 days, our “affiliates,” as defined in Rule 144, who have beneficially owned the shares proposed to be sold for at least six months, are entitled to sell in the public market, upon expiration of any applicable lock-up agreements and within any three-month period, a number of those shares of our common stock that does not exceed the greater of:
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1% of the number of shares of common stock then outstanding, which will equal approximately shares of common stock immediately upon the closing of this offering (calculated as of , 2021 on the basis of the assumptions described above and assuming no exercise of the underwriter’s option to purchase additional shares and no exercise of outstanding options or warrants subsequent to , 2021); or
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the average weekly trading volume of our common stock on during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.
Such sales under Rule 144 by our “affiliates” or persons selling shares on behalf of our “affiliates” are also subject to certain manner of sale provisions, notice requirements and requirements related to the availability of current public information about us. Notwithstanding the availability of Rule 144, the holders of substantially all of our restricted securities have entered into lock-up agreements as referenced above and their restricted securities will become eligible for sale (subject to the above limitations under Rule 144) upon the expiration of the restrictions set forth in those agreements.
Rule 701
In general, under Rule 701 as currently in effect, any of our employees, directors, officers, consultants or advisors who acquired common stock from us in connection with a written compensatory stock or option plan or other written agreement in compliance with Rule 701 before the effective date of the registration statement of which this prospectus is a part (to the extent such common stock is not subject to a lock-up agreement) and who are not our “affiliates” as defined in Rule 144 during the immediately preceding 90 days, is entitled to rely on Rule 701 to resell such shares beginning 90 days after the date of this prospectus in reliance on Rule 144, but without complying with the notice, manner of sale, public information requirements or volume limitation provisions of Rule 144. Persons who are our “affiliates” may resell those shares beginning 90 days after the date of this prospectus without compliance with minimum holding period requirements under Rule 144 (subject to the terms of the lock-up agreement referred to below, if applicable).
Lock-Up Agreements
In connection with this offering, we, our directors, our executive officers and the holders of substantially all of our common stock, stock options and other securities convertible into, exercisable or exchangeable for our common stock, have agreed, subject to certain exceptions, with the underwriters not to directly or indirectly offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, or enter into any hedging, swap or other agreement or transaction that transfers any of the economic consequences of ownership of shares of our common stock or any options to purchase shares of our common stock, or any securities convertible into or exchangeable for shares of common stock, during the period from the date of this prospectus continuing through the date 180 days after the date of this prospectus, except with the prior written consent of the representative of the underwriters, and certain other limited exceptions. These agreements are described in the section titled “Underwriting.”
In addition to the restrictions contained in the lock-up agreements described above, we have entered into agreements with certain security holders, including the amended and restated investors’ rights agreement, our standard form of option agreement, our standard form of restricted stock agreement and our standard form of restricted stock purchase agreement, that contain market stand-off provisions or incorporate market stand-off provisions from our equity incentive plan imposing restrictions on the ability of such security holders to offer, sell or transfer our equity securities for a period of 180 days following the date of this prospectus.
Following the lock-up periods set forth in the agreements described above, and assuming that the representative of the underwriters do not release any parties from these agreements, all of the shares of our common stock that are restricted securities or are held by our affiliates as of the date of this prospectus will be eligible for sale in the public market in compliance with Rule 144 under the Securities Act.
Registration Rights
Upon the closing of this offering, the holders of up to approximately million shares of our common stock (which includes all of the shares of common stock issuable upon (i) the automatic conversion of our preferred stock upon the closing of this offering, (ii) the exercise of warrants that otherwise would expire upon the closing of this offering), or their transferees will be entitled to rights with respect to the registration of the resale of their shares under the Securities Act, subject to the lock-up agreements described under “Lock-Up Agreements” above. Registration of the resale of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness of the registration statement registering such shares, except for shares purchased by affiliates.
Any sales of securities by these stockholders could have a material adverse effect on the trading price of our common stock. The requisite percentage of these stockholders have waived all such stockholders’ rights to notice of this offering and to include their shares of registrable securities in this offering.
See the section titled “Description of Capital Stock — Registration Rights” for additional information. Shares covered by a registration statement will be eligible for sale on the public market upon the expiration or release from the terms of any applicable lock-up agreement.
Equity Incentive Plans
We intend to file with the SEC a registration statement on Form S-8 under the Securities Act covering the shares of common stock reserved for issuance under the 2007 Plan, the 2017 Plan and the 2021 Plan. Such registration statement is expected to be filed and become effective as soon as practicable after the closing of this offering. Accordingly, shares registered under such registration statement will be available for sale in the open market following its effective date, subject to Rule 144 volume limitations for affiliates and the lock-up agreements described above, if applicable.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO
NON-U.S. HOLDERS
The following discussion is a summary of the material U.S. federal income tax consequences to Non-U.S. Holders (as defined below) of the purchase, ownership and disposition of our common stock issued pursuant to this offering, but does not purport to be a complete analysis of all potential tax effects. The effects of other U.S. federal tax laws, such as estate and gift tax laws, and any applicable state, local or non-U.S. tax laws are not discussed. This discussion is based on the Code, Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the U.S. Internal Revenue Service, or the IRS, in each case in effect as of the date hereof. These authorities may change or be subject to differing interpretations. Any such change or differing interpretation may be applied retroactively in a manner that could adversely affect a Non-U.S. Holder of our common stock. We have not sought and will not seek any rulings from the IRS regarding the matters discussed below. There can be no assurance the IRS or a court will not take a contrary position to that discussed below regarding the tax consequences of the purchase, ownership and disposition of our common stock.
This discussion is limited to Non-U.S. Holders that hold our common stock as a “capital asset” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all U.S. federal income tax consequences relevant to a Non- U.S. Holder’s particular circumstances, including the impact of the Medicare contribution tax on net investment income. In addition, it does not address consequences relevant to Non-U.S. Holders subject to special rules, including, without limitation:
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U.S. expatriates and former citizens or long-term residents of the United States;
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persons subject to the alternative minimum tax;
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persons holding our common stock as part of a hedge, straddle or other risk reduction strategy or as part of a conversion transaction or other integrated investment;
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banks, insurance companies and other financial institutions;
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brokers, dealers or traders in securities;
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“controlled foreign corporations,” “passive foreign investment companies” and corporations that accumulate earnings to avoid U.S. federal income tax;
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partnerships or other entities or arrangements treated as partnerships for U.S. federal income tax purposes (and investors therein);
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tax-exempt organizations or governmental organizations;
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persons deemed to sell our common stock under the constructive sale provisions of the Code;
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persons who hold or receive our common stock pursuant to the exercise of any employee stock option or otherwise as compensation;
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tax-qualified retirement plans;
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“qualified foreign pension funds” and entities all of the interests of which are held by qualified foreign pension funds; and
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persons subject to special tax accounting rules as a result of any item of gross income with respect to our common stock being taken into account in an applicable financial statement.
If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our common stock, the tax treatment of a partner in the partnership will depend on the status of the partner, the activities of the partnership and certain determinations made at the partner level. Accordingly, partnerships holding our common stock and the partners in such partnerships should consult their tax advisors regarding the U.S. federal income tax consequences to them.
THIS DISCUSSION IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT TAX ADVICE. INVESTORS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP
AND DISPOSITION OF OUR COMMON STOCK ARISING UNDER THE U.S. FEDERAL ESTATE OR GIFT TAX LAWS OR UNDER THE LAWS OF ANY STATE, LOCAL OR NON-U.S. TAXING JURISDICTION OR UNDER ANY APPLICABLE INCOME TAX TREATY.
Definition of a Non-U.S. Holder
For purposes of this discussion, a “Non-U.S. Holder” is any beneficial owner of our common stock that is neither a “U.S. person” nor an entity treated as a partnership for U.S. federal income tax purposes. A U.S. person is any person that, for U.S. federal income tax purposes, is or is treated as any of the following:
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an individual who is a citizen or resident of the United States;
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a corporation or entity treated as a corporation that is created or organized under the laws of the United States, any state thereof, or the District of Columbia;
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an estate, the income of which is subject to U.S. federal income tax regardless of its source; or
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a trust that (i) is subject to the primary supervision of a U.S. court and the control of one or more “United States persons” (within the meaning of Section 7701(a)(30) of the Code), or (ii) has a valid election in effect to be treated as a United States person for U.S. federal income tax purposes.
Distributions
As described in the section titled “Dividend Policy,” we do not currently intend to pay any cash dividends on our capital stock in the foreseeable future. However, if we make distributions of cash or property on our common stock, such distributions will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Amounts not treated as dividends for U.S. federal income tax purposes will constitute a return of capital and first be applied against and reduce a Non-U.S. Holder’s adjusted tax basis in its common stock, but not below zero. Any excess will be treated as capital gain and will be treated as described below under “— Sale or Other Taxable Disposition.”
Subject to the discussions below on effectively connected income, backup withholding and the Foreign Account Tax Compliance Act, or FATCA, dividends paid to a Non-U.S. Holder of our common stock will be subject to U.S. federal withholding tax at a rate of 30% of the gross amount of the dividends (or such lower rate specified by an applicable income tax treaty, provided the Non-U.S. Holder furnishes a valid IRS Form W-8BEN or W-8BEN-E (or other applicable documentation) certifying qualification for the lower treaty rate). A Non-U.S. Holder that does not timely furnish the required documentation, but that qualifies for a reduced treaty rate, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. Non-U.S. Holders should consult their tax advisors regarding their entitlement to benefits under any applicable income tax treaty.
If dividends paid to a Non-U.S. Holder are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, the Non-U.S. Holder maintains a permanent establishment or fixed base in the United States to which such dividends are attributable), the Non-U.S. Holder will be exempt from the U.S. federal withholding tax described above. To claim the exemption, the Non-U.S. Holder must furnish to the applicable withholding agent a valid IRS Form W-8ECI, certifying that the dividends are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States.
Any such effectively connected dividends generally will be subject to U.S. federal income tax on a net income basis at the regular graduated rates. A Non-U.S. Holder that is a corporation also generally will be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on its effectively connected earnings and profits attributable to such dividends, as adjusted for certain items. Non-U.S. Holders should consult their tax advisors regarding any applicable tax treaties that may provide for different rules.
Sale or Other Taxable Disposition
Subject to the discussions below regarding backup withholding and FATCA, a Non-U.S. Holder will not be subject to U.S. federal income tax on any gain realized upon the sale or other taxable disposition of our common stock unless:
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the gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, the Non-U.S. Holder maintains a permanent establishment or fixed base in the United States to which such gain is attributable);
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the Non-U.S. Holder is a nonresident alien individual present in the United States for 183 days or more during the taxable year of the disposition and certain other requirements are met; or
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our common stock constitutes a U.S. real property interest, or USRPI, by reason of our status as a U.S. real property holding corporation, or USRPHC, for U.S. federal income tax purposes.
Gain described in the first bullet point above generally will be subject to U.S. federal income tax on a net income basis at the regular graduated rates. A Non-U.S. Holder that is a corporation also generally will be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on its effectively connected earnings and profits attributable to such gain, as adjusted for certain items.
Gain described in the third bullet point above will be subject to U.S. federal income tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty), which may be offset by U.S. source capital losses of the Non-U.S. Holder (even though the individual is not considered a resident of the United States), provided the Non-U.S. Holder has timely filed U.S. federal income tax returns with respect to such losses.
With respect to the third bullet point above, we believe we currently are not, and do not anticipate becoming, a USRPHC. However, because the determination of whether we are a USRPHC depends on the fair market value of our USRPIs relative to the fair market value of our non-U.S. real property interests and our other business assets, there can be no assurance we currently are not a USRPHC or will not become one in the future. Even if we are or were to become a USRPHC, gain arising from the sale or other taxable disposition by a Non-U.S. Holder of our common stock will not be subject to U.S. federal income tax if our common stock is “regularly traded,” as defined by applicable Treasury Regulations, on an established securities market, and such Non-U.S. Holder owned, actually and constructively, 5% or less of our common stock throughout the shorter of the five-year period ending on the date of the sale or other taxable disposition or the Non-U.S. Holder’s holding period. If we are a USRPHC and either our common stock is not regularly traded on an established securities market or a Non-U.S. Holder holds more than 5% of our common stock, actually or constructively, during the applicable testing period, such Non-U.S. Holder will generally be taxed on any gain in the same manner as gain that is effectively connected with the conduct of a U.S. trade or business, except that the branch profits tax generally will not apply.
Non-U.S. Holders should consult their tax advisors regarding any applicable income tax treaties that may provide for different rules.
Information Reporting and Backup Withholding
Payments of dividends on our common stock will not be subject to backup withholding, provided the holder either certifies its non-U.S. status by furnishing a valid IRS Form W-8BEN, W-8BEN-E or W-8ECI or otherwise establishes an exemption. However, information returns are required to be filed with the IRS in connection with any dividends on our common stock paid to the Non-U.S. Holder, regardless of whether any tax was actually withheld. In addition, proceeds of the sale or other taxable disposition of our common stock within the United States or conducted through certain U.S.-related brokers generally will not be subject to backup withholding or information reporting, if the applicable withholding agent receives the certification described above or the holder otherwise establishes an exemption. Proceeds of a disposition of our common stock conducted through a non-U.S. office of a non-U.S. broker that does not have certain enumerated relationships with the United States generally will not be subject to backup withholding or information reporting.
Copies of information returns that are filed with the IRS also may be made available under the provisions of an applicable treaty or agreement to the tax authorities of the country in which the Non-U.S. Holder resides or is established.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a Non-U.S. Holder’s U.S. federal income tax liability, provided the required information is timely furnished to the IRS.
Additional Withholding Tax on Payments Made to Foreign Accounts
Withholding taxes may be imposed under Sections 1471 to 1474 of the Code (commonly referred to as FATCA) on certain types of payments made to non-U.S. financial institutions and certain other non-U.S. entities. Specifically, a 30% withholding tax may be imposed on dividends on, or (subject to the proposed Treasury Regulations discussed below) gross proceeds from the sale or other disposition of, our common stock paid to a “foreign financial institution” or a “non-financial foreign entity” (each as defined in the Code), unless (i) the foreign financial institution undertakes certain diligence and reporting obligations, (ii) the non-financial foreign entity either certifies it does not have any “substantial United States owners” (as defined in the Code) or furnishes identifying information regarding each substantial United States owner or (iii) the foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from these rules. If the payee is a foreign financial institution and is subject to the diligence and reporting requirements in clause (i) above, it must enter into an agreement with the U.S. Department of the Treasury requiring, among other things, that it undertakes to identify accounts held by certain “specified United States persons” or “United States-owned foreign entities” (each as defined in the Code), annually report certain information about such accounts, and withhold 30% on certain payments to non-compliant foreign financial institutions and certain other account holders. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules.
Under the applicable Treasury Regulations and administrative guidance, withholding under FATCA generally applies currently to payments of dividends on our common stock. While withholding under FATCA would have applied also to payments of gross proceeds from the sale or other disposition of our common stock on or after January 1, 2021, proposed Treasury Regulations eliminate FATCA withholding on payments of gross proceeds entirely. Taxpayers generally may rely on these proposed Treasury Regulations until final Treasury Regulations are issued.
Prospective investors should consult their tax advisors regarding the potential application of withholding under FATCA to their investment in our common stock.
UNDERWRITING
B. Riley Securities, Inc. is acting as lead managing underwriter of the offering and acting as representative of the underwriters named below. We have entered into an underwriting agreement with the underwriters, dated , 2021. Subject to the terms and conditions of the underwriting agreement, we agreed to sell to the underwriters, and the underwriters agreed to purchase shares of our common stock, at the public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus.
|
Underwriters
|
|
|
Number of Shares
|
|
|
B. Riley Securities, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
The underwriters are committed to purchase all of the shares of common stock offered by us if any are taken, other than those covered by the option to purchase additional shares described below. The underwriting agreement provides that the underwriters’ obligations to purchase shares of our common stock are subject to conditions contained in the underwriting agreement. A copy of the underwriting agreement has been filed as an exhibit to the registration statement of which this prospectus forms a part.
We have been advised by B. Riley Securities, Inc. that it proposes to offer shares of our common stock directly to the public at the public offering price set forth on the cover page of this prospectus, and at this price less a concession not in excess of $ per share of common stock to other dealers. The underwriters may allow, and certain dealers may re-allow, a discount from the concession not in excess of $ per share of common stock to certain brokers and dealers. After this offering, the offering price, concessions and other selling terms may be changed by the underwriters.
None of our securities included in this offering may be offered or sold, directly or indirectly, nor may this prospectus and any other offering material or advertisements in connection with the offer and sales of any of our common stock be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons who receive this prospectus are advised to inform themselves about and to observe any restrictions relating to this offering of our common stock and the distribution of this prospectus. This prospectus is neither an offer to sell nor a solicitation of any offer to buy any of our common stock included in this offering in any jurisdiction where that would not be permitted or legal.
Each underwriter has advised us that it does not intend to confirm sales to any accounts over which it exercises discretionary authority.
Underwriting Discount and Expenses
The following table summarizes the underwriting discount to the public offering price of the shares offered pursuant to this prospectus.
|
|
|
|
Per Share
|
|
|
Total Without
Exercise of Over-
Allotment
|
|
|
Total With
Exercise of Over-
Allotment
|
|
|
Public offering price
|
|
|
|
$
|
|
|
|
|
|
$
|
|
|
|
|
|
$
|
|
|
|
|
Underwriting discounts and commissions
|
|
|
|
$
|
|
|
|
|
|
$
|
|
|
|
|
|
$
|
|
|
|
|
Proceeds, before expenses to us
|
|
|
|
$
|
|
|
|
|
|
$
|
|
|
|
|
|
$
|
|
|
|
In addition to the discount set forth in the above table, we have agreed to reimburse the underwriters up to $200,000 for certain of their fees and expenses relating to the offering. These expenses are payable by us.
Over-Allotment Option
In addition to the discount set forth in the above table, we have granted to the underwriters an option, exercisable not later than 45 days after the date of this prospectus, to purchase up to an additional 15% of
the shares of common stock firmly committed in this offering at the public offering price, less the underwriting discount, set forth on the cover page of this prospectus. The underwriters may exercise the option solely to cover over-allotments, if any, made in connection with this offering. If any additional shares of our common stock are purchased pursuant to the over-allotment option, the underwriters will offer these additional shares of our common stock on the same terms as those on which the other shares of common stock are being offered hereby.
Determination of Offering Price Listing
We intend to apply to list our common stock on The Nasdaq Global Market under the symbol “CGTX.” In order to meet the requirements for listing on that exchange, the underwriters have undertaken to sell a minimum number of shares to a minimum number of beneficial owners as required by that exchange.
Before this offering, there has been no public market for our common stock. Our lead managing underwriter, National Securities Corporation, is not obligated to make a market in our securities, and even if it chooses to make a market, can discontinue doing so at any time without notice. Neither we nor any underwriter can provide any assurance that an active and liquid trading market in our securities will develop or, if developed, that the market will continue.
The public offering price of the shares offered by this prospectus has been determined by negotiation between us and the underwriters. Among the factors considered in determining the public offering price of the shares were:
•
our history and our prospects;
•
the industry in which we operate;
•
our past and present operating results;
•
the previous experience of our executive officers; and
•
the general condition of the securities markets at the time of this offering.
The offering price stated on the cover page of this prospectus should not be considered an indication of the actual value of the shares. Upon the commencement of trading, the price of our shares will be subject to change as a result of market conditions and other factors, and we cannot assure you that the shares can be resold at or above the public offering price.
Lock-Up Agreements
We, our executive officers and directors and each holder of our common stock have agreed not to sell or transfer any common stock or securities convertible into or exchangeable or exercisable for common stock, for 180 days after the date of this prospectus, subject to specified exceptions, without first obtaining the written consent of B. Riley Securities, Inc. Specifically, these persons have agreed, with certain limited exceptions, not to directly or indirectly:
•
offer, pledge, sell, contract to sell or lend any common stock;
•
sell any option or contract to purchase any common stock;
•
purchase any option or contract to sell any common stock;
•
grant any option, right or warrant to purchase any common stock;
•
otherwise transfer or dispose of any common stock;
•
make a demand or exercise any right with respect to the registration of any common stock;
•
enter into any swap or any other agreement or any transaction that transfers, in whole or in part, the economic consequences of ownership of common stock, whether any such swap or transaction is to be settled by delivery of common stock or other securities, in cash or otherwise;
•
publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap hedge or other arrangement relating to any common stock; or
•
in the case of the Company, file or cause to be filed any registration statement (other than a registration statement on Form S-8) with the Commission relating to the offering of any shares of our capital stock or any securities convertible into or exercisable or exchangeable for shares of our capital stock.
This lock-up provision applies to common stock and to securities convertible into or exchangeable or exercisable for common stock. It also applies to common stock owned now or acquired later by the person executing the agreement or for which the person executing the agreement later acquires the power of disposition.
Indemnification
We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act relating to losses or claims resulting from material misstatements in or omissions from this prospectus, the registration statement of which this prospectus forms a part, certain free writing prospectuses that may be used in the offering and in any marketing materials used in connection with this offering and to contribute to payments the underwriters may be required to make in respect of those liabilities.
Short Positions and Penalty Bids
The underwriters may engage in over-allotment, syndicate covering transactions and penalty bids or purchases for the purpose of pegging, fixing or maintaining the price of the common stock, in accordance with Regulation M under the Exchange Act.
•
Over-allotment involves sales by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase, which creates a syndicate short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by an underwriter is not greater than the number of shares that it may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option. The underwriters may close out any short position by either exercising their over-allotment option and/or purchasing shares in the open market.
•
Syndicate covering transactions involve purchases of the common stock in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which it may purchase shares through the over-allotment option. If the underwriters sell more shares than could be covered by the over-allotment option, a naked short position, the position can only be closed out by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.
•
Penalty bids permit an underwriter to reclaim a selling concession from a syndicate member when the shares originally sold by the syndicate member are purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.
These syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of the common stock. As a result, the price of the common stock may be higher than the price that might otherwise exist in the open market. These transactions may be effected on the NASDAQ Global Market, and if commenced, they may be discontinued at any time.
Neither we nor the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the common stock. In addition, neither we nor the underwriters make any representation that the underwriters will engage in these transactions or that any transaction, once commenced, will not be discontinued without notice.
Electronic Distribution
A prospectus in electronic format may be made available on the Internet sites or through other online services maintained by the underwriters, or by their affiliates. In those cases, prospective investors may view offering terms online. Other than the prospectus in electronic format, the information on an underwriter’s website and any information contained in any other website maintained by an underwriter is not part of the prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or the underwriters in their capacity as underwriters and should not be relied upon by investors.
The underwriters’ compensation in connection with this offering is limited to the fees and expenses described above under “Underwriting Discount and Expenses.”
Other Relationships
The underwriters and certain of their affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. The underwriters and certain of their affiliates may in the future engage in investment banking and other commercial dealings in the ordinary course of business with us and our affiliates, for which it may in the future receive customary fees, commissions and expenses.
In addition, in the ordinary course of its business activities, the underwriters and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for its own account and for the accounts of its customers. Such investments and securities activities may involve securities and/or instruments of ours or our affiliates. The underwriters and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
LEGAL MATTERS
The validity of the issuance of our common stock offered in this prospectus will be passed upon for us by Troutman Pepper Hamilton Sanders LLP, Philadelphia, Pennsylvania. Certain legal matters in connection with this offering will be passed upon for the underwriters by McGuireWoods LLP, New York, New York.
EXPERTS
The consolidated financial statements of Cognition Therapeutics, Inc. at December 31, 2020 and 2019, and for each of the two years in the period ended December 31, 2020, appearing in this prospectus and registration statement have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report thereon (which contains an explanatory paragraph describing conditions that raise substantial doubt about the Company’s ability to continue as a going concern as described in Note 1 to the consolidated financial statements) appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-1, including exhibits and schedules, under the Securities Act, with respect to the shares of common stock being offered by this prospectus. This prospectus, which constitutes part of the registration statement, does not contain all of the information in the registration statement and its exhibits. For further information with respect to us and the common stock offered by this prospectus, we refer you to the registration statement and its exhibits. Statements contained in this prospectus as to the contents of any contract or any other document referred to are not necessarily complete, and in each instance, we refer you to the copy of the contract or other document filed as an exhibit to the registration statement. Each of these statements is qualified in all respects by this reference.
You may read our SEC filings, including this registration statement, over the Internet at the SEC’s website at www.sec.gov. Upon the closing of this offering, we will be subject to the information reporting requirements of the Exchange Act and we will file reports, proxy statements and other information with the SEC. These reports, proxy statements and other information will be available for review at the SEC’s website referred to above. We also maintain a website at www.cogrx.com, at which, following the closing of this offering, you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. Information contained on or accessible through our website is not a part of this prospectus or the registration statement of which it forms a part, and the inclusion of our website address in this prospectus is an inactive textual reference only. You should not consider the contents of our website in making an investment decision with respect to our common stock.
Index to Consolidated Financial Statements
As of and for the years ended December 31, 2019 and 2020
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|
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|
Page
|
|
|
|
|
|
|
|
F-2
|
|
|
|
|
|
|
|
|
F-3
|
|
|
|
|
|
|
|
|
F-4
|
|
|
|
|
|
|
|
|
F-5
|
|
|
|
|
|
|
|
|
F-6
|
|
|
|
|
|
|
|
|
F-7
|
|
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Cognition Therapeutics, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Cognition Therapeutics, Inc. and Subsidiary (the Company) as of December 31, 2019 and 2020, the related consolidated statements of operations and comprehensive loss, convertible preferred stock and stockholders’ deficit and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2020, and the results of its operations and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.
The Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations, does not expect to generate revenues or operating cash flows for the foreseeable future, and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2020.
Philadelphia, Pennsylvania
May 7, 2021
Cognition Therapeutics, Inc.
Consolidated balance sheets
Amounts in thousands, except share and per share amounts
|
|
|
|
As of December 31,
|
|
|
|
2019
|
|
|
2020
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
$
|
2,890
|
|
|
|
|
$
|
5,189
|
|
|
|
Grant receivables
|
|
|
|
|
2,662
|
|
|
|
|
|
564
|
|
|
|
Prepaid expenses
|
|
|
|
|
117
|
|
|
|
|
|
544
|
|
|
|
Other receivables
|
|
|
|
|
1,462
|
|
|
|
|
|
588
|
|
|
|
Other current assets
|
|
|
|
|
29
|
|
|
|
|
|
23
|
|
|
|
Total current assets
|
|
|
|
|
7,160
|
|
|
|
|
|
6,908
|
|
|
|
Property and equipment, net
|
|
|
|
|
299
|
|
|
|
|
|
211
|
|
|
|
Total assets
|
|
|
|
$
|
7,459
|
|
|
|
|
$
|
7,119
|
|
|
|
Liabilities, Convertible Preferred Stock, and Stockholders’ Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
|
|
2,357
|
|
|
|
|
|
2,003
|
|
|
|
Current portion of capital lease obligation
|
|
|
|
|
4
|
|
|
|
|
|
—
|
|
|
|
Accrued expenses
|
|
|
|
|
1,321
|
|
|
|
|
|
994
|
|
|
|
Other current liabilities
|
|
|
|
|
1
|
|
|
|
|
|
253
|
|
|
|
Total current liabilities
|
|
|
|
|
3,683
|
|
|
|
|
|
3,250
|
|
|
|
Paycheck protection program loan
|
|
|
|
|
—
|
|
|
|
|
|
443
|
|
|
|
Derivative liability
|
|
|
|
|
1,493
|
|
|
|
|
|
2,209
|
|
|
|
Warrant liability
|
|
|
|
|
181
|
|
|
|
|
|
—
|
|
|
|
Convertible notes, net
|
|
|
|
|
6,897
|
|
|
|
|
|
12,409
|
|
|
|
Accrued interest
|
|
|
|
|
700
|
|
|
|
|
|
1,622
|
|
|
|
Total liabilities
|
|
|
|
|
12,954
|
|
|
|
|
|
19,933
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible preferred stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A convertible preferred stock, par value $0.001 per share, 3,067,519 shares authorized at
December 31, 2019 and 2020, 2,819,027 shares issued and outstanding as of December 31,
2019 and 2020; liquidation preference of $4,766 as of December 31, 2020
|
|
|
|
|
4,413
|
|
|
|
|
|
4,616
|
|
|
|
Series A-1 convertible preferred stock, par value $0.001 per share, 3,970,776 shares authorized
at December 31, 2019 and 2020, 3,730,366 shares issued and outstanding as of
December 31, 2019 and 2020; liquidation preference of $5,572 as of December 31, 2020
|
|
|
|
|
5,160
|
|
|
|
|
|
5,398
|
|
|
|
Series A-2 convertible preferred stock, par value $0.001 per share, 3,565,063 shares authorized
at December 31, 2019 and 2020, 3,565,063 shares issued and outstanding as of
December 31, 2019 and 2020; liquidation preference of $5,997 as of December 31, 2020
|
|
|
|
|
5,552
|
|
|
|
|
|
5,809
|
|
|
|
Series B convertible preferred stock, par value $0.001 per share, 30,450,000 shares authorized at December 31, 2019 and 2020, 30,409,890 shares issued and outstanding as of December 31, 2019 and 2020; liquidation preference of $40,826 as of December 31, 2020
|
|
|
|
|
37,802
|
|
|
|
|
|
39,547
|
|
|
|
Total convertible preferred stock
|
|
|
|
|
52,927
|
|
|
|
|
|
55,370
|
|
|
|
Stockholders’ deficit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value, 58,000,000 shares authorized at December 31, 2019 and 2020; 1,519,431 and 1,742,756 shares issued and outstanding at December 31, 2019 and 2020, respectively
|
|
|
|
|
2
|
|
|
|
|
|
2
|
|
|
|
Additional paid-in capital
|
|
|
|
|
—
|
|
|
|
|
|
221
|
|
|
|
Accumulated deficit
|
|
|
|
|
(58,239)
|
|
|
|
|
|
(68,220)
|
|
|
|
Accumulated other comprehensive loss
|
|
|
|
|
(185)
|
|
|
|
|
|
(187)
|
|
|
|
Total stockholders’ deficit
|
|
|
|
|
(58,422)
|
|
|
|
|
|
(68,184)
|
|
|
|
Total liabilities, convertible preferred stock, and stockholders’ deficit
|
|
|
|
$
|
7,459
|
|
|
|
|
$
|
7,119
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
Cognition Therapeutics, Inc.
Consolidated Statements of Operations and Comprehensive Loss
Amounts in thousands, except share and per share amounts
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2019
|
|
|
2020
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
|
$
|
14,379
|
|
|
|
|
$
|
12,887
|
|
|
|
General and administrative
|
|
|
|
|
3,452
|
|
|
|
|
|
4,520
|
|
|
|
Total operating expenses
|
|
|
|
|
17,831
|
|
|
|
|
|
17,407
|
|
|
|
Loss from operations
|
|
|
|
|
(17,831)
|
|
|
|
|
|
(17,407)
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant income
|
|
|
|
|
13,164
|
|
|
|
|
|
10,855
|
|
|
|
Change in the fair value of the derivative liability
|
|
|
|
|
(231)
|
|
|
|
|
|
18
|
|
|
|
Change in the fair value of the warrant liability
|
|
|
|
|
(7)
|
|
|
|
|
|
181
|
|
|
|
Other income, net
|
|
|
|
|
1,087
|
|
|
|
|
|
394
|
|
|
|
Loss on debt extinguishment
|
|
|
|
|
—
|
|
|
|
|
|
(129)
|
|
|
|
Interest expense, net
|
|
|
|
|
(1,024)
|
|
|
|
|
|
(1,751)
|
|
|
|
Total other income (expense), net
|
|
|
|
|
12,989
|
|
|
|
|
|
9,568
|
|
|
|
Net loss
|
|
|
|
|
(4,842)
|
|
|
|
|
|
(7,839)
|
|
|
|
Cumulative preferred stock dividends
|
|
|
|
|
(3,920)
|
|
|
|
|
|
(4,234)
|
|
|
|
Net loss attributable to common stockholders
|
|
|
|
$
|
(8,762)
|
|
|
|
|
$
|
(12,073)
|
|
|
|
Unrealized loss on foreign currency translation
|
|
|
|
|
(20)
|
|
|
|
|
|
(2)
|
|
|
|
Total comprehensive loss
|
|
|
|
$
|
(4,862)
|
|
|
|
|
$
|
(7,841)
|
|
|
|
Net loss per share attributable to common stockholders, basic and
diluted
|
|
|
|
$
|
(5.77)
|
|
|
|
|
$
|
(7.35)
|
|
|
|
Weighted-average common shares outstanding, basic and diluted
|
|
|
|
|
1,519,285
|
|
|
|
|
|
1,643,514
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
Cognition Therapeutics, Inc.
Consolidated Statements of Convertible Preferred Stock and Stockholders’ Deficit
Amounts in thousands, except share amounts
|
|
|
|
Series A
Convertible
Preferred Stock
|
|
|
Series A-1
Convertible
Preferred Stock
|
|
|
Series A-2
Convertible
Preferred Stock
|
|
|
Series B
Convertible
Preferred Stock
|
|
|
|
Common Stock
|
|
|
Additional
Paid-in Capital
|
|
|
Accumulated
Deficit
|
|
|
Accumulated
Other
Comprehensive
Loss
|
|
|
Total
Stockholders’
Deficit
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Balances as of December 31,
2018
|
|
|
|
|
2,819,027
|
|
|
|
|
$
|
4,086
|
|
|
|
|
|
3,730,366
|
|
|
|
|
$
|
4,778
|
|
|
|
|
|
3,565,063
|
|
|
|
|
$
|
5,141
|
|
|
|
|
|
30,409,890
|
|
|
|
|
$
|
35,002
|
|
|
|
|
|
|
1,519,236
|
|
|
|
|
$
|
2
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
(49,838)
|
|
|
|
|
$
|
(165)
|
|
|
|
|
$
|
(50,001)
|
|
|
|
Exercise of warrants
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
195
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Equity-based compensation
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
361
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
361
|
|
|
|
Accretion of convertible preferred stock to redemption value
|
|
|
|
|
—
|
|
|
|
|
|
327
|
|
|
|
|
|
—
|
|
|
|
|
|
382
|
|
|
|
|
|
—
|
|
|
|
|
|
411
|
|
|
|
|
|
—
|
|
|
|
|
|
2,800
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(361)
|
|
|
|
|
|
(3,559)
|
|
|
|
|
|
—
|
|
|
|
|
|
(3,920)
|
|
|
|
Other comprehensive loss
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(20)
|
|
|
|
|
|
(20)
|
|
|
|
Net loss
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(4,842)
|
|
|
|
|
|
—
|
|
|
|
|
|
(4,842)
|
|
|
|
Balances as of December 31,
2019
|
|
|
|
|
2,819,027
|
|
|
|
|
|
4,413
|
|
|
|
|
|
3,730,366
|
|
|
|
|
|
5,160
|
|
|
|
|
|
3,565,063
|
|
|
|
|
|
5,552
|
|
|
|
|
|
30,409,890
|
|
|
|
|
|
37,802
|
|
|
|
|
|
|
1,519,431
|
|
|
|
|
|
2
|
|
|
|
|
|
—
|
|
|
|
|
|
(58,239)
|
|
|
|
|
|
(185)
|
|
|
|
|
|
(58,422)
|
|
|
|
Exercise of common stock
warrants
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
163,334
|
|
|
|
|
|
—
|
|
|
|
|
|
34
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
34
|
|
|
|
Exercise of stock options
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
59,991
|
|
|
|
|
|
—
|
|
|
|
|
|
13
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
13
|
|
|
|
Equity-based compensation
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
475
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
475
|
|
|
|
Accretion of convertible preferred stock to redemption value
|
|
|
|
|
—
|
|
|
|
|
|
203
|
|
|
|
|
|
—
|
|
|
|
|
|
238
|
|
|
|
|
|
—
|
|
|
|
|
|
257
|
|
|
|
|
|
—
|
|
|
|
|
|
1,745
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(301)
|
|
|
|
|
|
(2,142)
|
|
|
|
|
|
—
|
|
|
|
|
|
(2,443)
|
|
|
|
Other comprehensive loss
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(2)
|
|
|
|
|
|
(2)
|
|
|
|
Net loss
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(7,839)
|
|
|
|
|
|
—
|
|
|
|
|
|
(7,839)
|
|
|
|
Balances as of December 31,
2020
|
|
|
|
|
2,819,027
|
|
|
|
|
$
|
4,616
|
|
|
|
|
|
3,730,366
|
|
|
|
|
$
|
5,398
|
|
|
|
|
|
3,565,063
|
|
|
|
|
$
|
5,809
|
|
|
|
|
|
30,409,890
|
|
|
|
|
$
|
39,547
|
|
|
|
|
|
|
1,742,756
|
|
|
|
|
$
|
2
|
|
|
|
|
$
|
221
|
|
|
|
|
$
|
(68,220)
|
|
|
|
|
$
|
(187)
|
|
|
|
|
$
|
(68,184)
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
Cognition Therapeutics, Inc.
Consolidated Statements of Cash Flows
Amounts in thousands
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2019
|
|
|
2020
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
$
|
(4,842)
|
|
|
|
|
$
|
(7,839)
|
|
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
81
|
|
|
|
|
|
98
|
|
|
|
Amortization of debt issuance costs
|
|
|
|
|
30
|
|
|
|
|
|
54
|
|
|
|
Amortization of debt discount
|
|
|
|
|
464
|
|
|
|
|
|
782
|
|
|
|
Change in the fair value of the derivative liability
|
|
|
|
|
231
|
|
|
|
|
|
(18)
|
|
|
|
Change in the fair value of the warrant liability
|
|
|
|
|
7
|
|
|
|
|
|
(181)
|
|
|
|
Loss on debt extinguishment
|
|
|
|
|
—
|
|
|
|
|
|
129
|
|
|
|
Equity-based compensation
|
|
|
|
|
361
|
|
|
|
|
|
475
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant receivables
|
|
|
|
|
(43)
|
|
|
|
|
|
2,097
|
|
|
|
Prepaid expenses and other current assets
|
|
|
|
|
(22)
|
|
|
|
|
|
(417)
|
|
|
|
Other receivables
|
|
|
|
|
(1,075)
|
|
|
|
|
|
904
|
|
|
|
Accounts payable
|
|
|
|
|
862
|
|
|
|
|
|
(364)
|
|
|
|
Accrued expenses and interest
|
|
|
|
|
934
|
|
|
|
|
|
595
|
|
|
|
Other current liabilities
|
|
|
|
|
(86)
|
|
|
|
|
|
252
|
|
|
|
Net cash used in operating activities
|
|
|
|
|
(3,098)
|
|
|
|
|
|
(3,433)
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments for property and equipment
|
|
|
|
|
(144)
|
|
|
|
|
|
(10)
|
|
|
|
Net cash used in investing activities
|
|
|
|
|
(144)
|
|
|
|
|
|
(10)
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments on capital lease obligation
|
|
|
|
|
(50)
|
|
|
|
|
|
(4)
|
|
|
|
Proceeds from the exercise of common stock warrants
|
|
|
|
|
—
|
|
|
|
|
|
34
|
|
|
|
Proceeds from the exercise of stock options
|
|
|
|
|
—
|
|
|
|
|
|
13
|
|
|
|
Proceeds from the paycheck protection program loan
|
|
|
|
|
—
|
|
|
|
|
|
443
|
|
|
|
Proceeds from the issuance of convertible notes
|
|
|
|
|
2,878
|
|
|
|
|
|
5,372
|
|
|
|
Debt issuance costs related to convertible notes
|
|
|
|
|
(34)
|
|
|
|
|
|
(93)
|
|
|
|
Net cash provided by financing activities
|
|
|
|
|
2,794
|
|
|
|
|
|
5,765
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
|
|
(60)
|
|
|
|
|
|
(23)
|
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
|
|
(508)
|
|
|
|
|
|
2,299
|
|
|
|
Cash and cash equivalents – beginning of period
|
|
|
|
|
3,398
|
|
|
|
|
|
2,890
|
|
|
|
Cash and cash equivalents – end of period
|
|
|
|
$
|
2,980
|
|
|
|
|
$
|
5,189
|
|
|
|
Supplemental disclosures of non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment in accrued expenses
|
|
|
|
$
|
55
|
|
|
|
|
$
|
—
|
|
|
|
Non-cash accretion of convertible preferred stock to redemption value
|
|
|
|
$
|
(3,920)
|
|
|
|
|
$
|
(2,443)
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
Cognition Therapeutics, Inc.
Notes to the consolidated financial statements
Amounts in thousands, except share and per share amounts
1. Description of Business and Financial Condition
Cognition Therapeutics, Inc. and Subsidiary (hereafter “the Company”) incorporated as a Delaware corporation on August 21, 2007. The Company is a biopharmaceutical company developing disease-modifying therapies for central nervous system (CNS) disorders. The Company’s pipeline candidates were discovered using proprietary biology and chemistry platforms designed to identify novel drug targets and disease-modifying therapies that address dysregulated pathways specifically associated with neurodegenerative diseases. The Company was founded on the unique combination of biological expertise around these targets, including proprietary assays that emphasize functional responses, and proprietary medicinal chemistry intended to produce novel, high-quality small-molecule drug candidates.
On July 14, 2015, the Company formed Cognition Therapeutics PTY LTD, a wholly owned subsidiary, primarily for the purpose of conducting research and development efforts at facilities located in Australia. Assets and liabilities of the Company’s Australian subsidiary, which uses the Australian dollar as its local functional currency, are translated to United States (U.S.) dollars at year-end exchange rates. Income statement accounts are translated using the average exchange rates prevailing during the month in which income and expenses are generated. Translation adjustments are recorded to accumulated other comprehensive income (loss) (“AOCI”) within stockholders’ deficit. Gains and losses from foreign currency transactions are included in net loss as a part of other income, net.
Liquidity and Going Concern
As of December 31, 2020, the Company had an accumulated deficit of $68,220 and cash and cash equivalents of $5,189. The Company incurred net losses of $4,842 and $7,839 for the years ended December 31, 2019 and 2020, respectively. The Company has financed its operations to date primarily through government and private philanthropic grants, private placements of its convertible preferred stock, private offerings of convertible notes, and the Simple Agreement for Future Equity, or SAFEs, described in Note 17. It is not anticipated that the Company will generate commercial revenue or operating cash flows in the foreseeable future. The Company’s ability to continue as a going concern in the near term is largely dependent on the Company’s ability to raise additional funds through debt or equity transactions, grant awards or other means. The Company’s forecasted cash required to fund operations, excluding future fundraising efforts and future additional NIH Grants, indicates that the Company does not have sufficient funds to support operations through the one year period from the issuance date of these financial statements. Accordingly, there is substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these financial statements are issued.
Management’s plans to address this going concern uncertainty include raising additional financing through public or private equity offerings, debt financings, collaborations and licensing arrangements, additional grant awards, or other sources to fund its operations, however, there can be no assurance that the Company will be able to obtain such funding on terms acceptable to the Company, on a timely basis or at all. The failure of the Company to obtain sufficient funds on acceptable terms when needed would have a material adverse effect on the Company’s business, results of operations and financial condition.
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to
Cognition Therapeutics, Inc.
Notes to the consolidated financial statements
Amounts in thousands, except share and per share amounts
the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents consist primarily of interest-bearing deposits at various financial institutions. The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
Receivables
Grant Receivables
Grant receivables relate to outstanding amounts due for reimbursable expenditures of awarded grants issued by the National Institute of Health and are carried at their estimated collectible amounts. The Company expects all receivables to be collectible, and accordingly, there is no allowance for doubtful accounts required on these grant receivables.
Other Receivables
Other receivables consist of research and development tax credits from the state of Pennsylvania and the Australian research and development tax credit from the Australian Tax Authority. Historically, the Company has sold the Pennsylvania tax credits to third parties, while the Australian tax refund is paid directly to the Company by the Australian Tax Authority. Research and development tax refunds and credits are carried at their estimated collectible amounts. The Company expects all receivables to be collectible and accordingly, there is no allowance for doubtful accounts required on these other receivables.
Property and Equipment
Property and equipment is recorded at cost, less accumulated depreciation. Depreciation is computed on the straight-line basis over the estimated useful life of the asset. The Company estimates the useful life to be 5 and 6 years for equipment and furniture and fixtures, respectively. The cost of repairs and maintenance is charged to expense as incurred.
Property and equipment is evaluated for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. If expected cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of the assets. There were no indicators of impairment of long-lived assets during the years ended December 31, 2019 or 2020.
Convertible Instruments
ASC 815, Derivatives and Hedging Activities (“ASC 815”) requires companies to bifurcate certain conversion options and redemption features from their host instruments and account for them as free-standing derivative financial instruments should certain criteria be met.
Cognition Therapeutics, Inc.
Notes to the consolidated financial statements
Amounts in thousands, except share and per share amounts
The Company also follows ASC 480-10, Distinguishing Liabilities from Equity (“ASC 480-10”) when evaluating the accounting for its hybrid instruments. A financial instrument that embodies an unconditional obligation, or a financial instrument other than an outstanding share that embodies a conditional obligation, that the issuer must or may settle by issuing a variable number of its equity shares shall be classified as a liability (or an asset in some circumstances) if, at inception, the monetary value of the obligation is based solely or predominantly on any one of the following: (a) a fixed monetary amount known at inception; (b) variations in something other than the fair value of the issuer’s equity shares; or (c) variations inversely related to changes in the fair value of the issuer’s equity shares. Hybrid instruments meeting these criteria are not further evaluated for any embedded derivatives and are carried as a liability at fair value at each balance sheet date.
Debt Issuance Costs and Discounts
The Company incurred third-party costs in connection with the convertible notes as described in Note 9. These costs are classified on the balance sheet as a direct deduction from the convertible notes and amortized over the term of the agreement as interest expense using the effective interest rate method.
Discounts related to bifurcated derivatives resulting from the convertible note issuances are recorded as a reduction to the carrying value of the debt and amortized over the life of the debt using the effective interest method.
Warrants Issued in Connection with Financings
The Company generally accounts for warrants issued in connection with debt and equity financings as a component of equity, unless the warrants include specific features, such as if the warrants are exercisable for securities that are considered contingently redeemable. For warrants that are exercisable for securities that are considered contingently redeemable, the Company records the fair value of the warrants as a liability at each balance sheet date and records changes in fair value in other (income) expense in the consolidated statement of operations and comprehensive loss.
Convertible Preferred Stock
The Company has classified convertible preferred stock outside of stockholders’ deficit in the accompanying balance sheets due to the convertible preferred stock’s redemption features. Originally, the convertible preferred stock was eligible to become redeemable at the holders option at any time after March 20, 2021. This right was removed in connection with an amendment to the Company’s articles of incorporation on July 29, 2020. Pre-amendment, the convertible preferred stock was redeemable due to the passage of time, and therefore, the Company recorded changes in the redemption value and accreted the convertible preferred stock immediately to the redemption value during each period presented. These increases were affected through charges against retained earnings, if any, and then to additional paid-in capital. In the absence of additional paid-in capital, the accretion is charged to accumulated deficit. Post-amendment, the convertible preferred stock is considered to be contingently redeemable only upon the occurrence of a deemed liquidation event (Note 10). As a result, the Company ceased accreting the convertible preferred stock on July 29, 2020. To evaluate whether the changes to the terms of the preferred stock should be accounted for as a modification or extinguishment, the Company follows the qualitative approach, in which amendments to preferred shares are analyzed based on the expected economics as well as the business purpose of the amendment. The Company concluded that the amendment did not result in a significant change to the fundamental nature of the preferred stock, and accordingly, the amendment was accounted for as a modification, and there was no accounting impact for the modification.
Grant income
In 2019 and 2020, the Company generated grant income of $13,164 and $10,855 from reimbursements from the National Institute of Health (“NIH”) for aging research. The Company records grant income in
Cognition Therapeutics, Inc.
Notes to the consolidated financial statements
Amounts in thousands, except share and per share amounts
other income (expense) in the period in which the reimbursable research and development services are incurred and the right to payment is realized. The grants awarded relate to agreed upon direct and indirect costs for specific studies or clinical trials, which may include personnel and consulting costs, costs paid to contract research organizations (CROs), research institutions and/or consortiums involved in the grant, as well as facilities and administrative costs. These grants are cost plus fixed fee arrangements in which the Company is reimbursed for its eligible direct and indirect costs over time, up to the maximum amount of each specific grant award. Only costs that are allowable under the grant award, certain government regulations and the NIH’s supplemental policy and procedure manual may be claimed for reimbursement, and the reimbursements are subject to routine audits from governmental agencies from time to time.
Research and Development Costs
The Company is involved in research and development aimed at the development of treatments for a variety of diseases related to the central nervous system, with a primary focus on Alzheimer’s Disease. Research and development costs are expensed as incurred. Research and development expenses consist principally of personnel costs, including salaries, stock-based compensation, and benefits for employees, third-party license fees and other operational costs related to our research and development activities, including allocated facility-related expenses and external costs of outside vendors, and other direct and indirect costs. Non-refundable research and development costs are deferred and expensed as the related goods are delivered or services are performed. Costs for external development activities are recognized based on an evaluation of the progress to completion of specific tasks. Costs for certain research and development activities are recognized based on the pattern of performance of the individual arrangements, which may differ from the pattern of billings incurred, and are reflected in the consolidated financial statements as prepaid expenses or as accrued research and development expenses.
Income Taxes
The Company accounts for income taxes under the asset and liability method pursuant to authoritative guidance.
Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under this authoritative guidance, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. If it is more likely than not that some portion or all of a deferred tax asset will not be recognized, a valuation allowance is recognized.
The Company accounts for uncertainty in income taxes using a recognition threshold of more-likely-than-not to be sustained upon examination by the appropriate taxing authority. Measurement of the uncertainty occurs if the recognition threshold is met. The Company has determined that there were no uncertainties as of December 31, 2019 and December 31, 2020 that met the recognition threshold.
Equity-based Compensation
Following the provisions of ASC 718, Compensation — Stock Compensation, the Company recognizes compensation expense for equity-based grants using the straight-line attribution method, in which the expense is recognized ratably over the requisite service period within operating expenses based on the grant date fair value. The Company also has granted awards subject to performance-based vesting. The Company would recognize compensation expense for these awards commencing in the period in which the vesting condition becomes probable of achievement. Grant date fair value is estimated on the date of grant using the Black-Scholes option pricing model. Forfeitures are recognized in the period in which they occur.
Cognition Therapeutics, Inc.
Notes to the consolidated financial statements
Amounts in thousands, except share and per share amounts
Black-Scholes requires inputs based on certain subjective assumptions, including (i) the expected stock price volatility, (ii) the expected term of the award, (iii) the risk-free interest rate and (iv) expected dividends. Due to the lack of a public market for the Company’s common stock and lack of company-specific historical and implied volatility data, the Company has based its computation of expected volatility on the historical volatility of a representative group of public companies with similar characteristics to the Company, including stage of product development and life science industry focus. The historical volatility is calculated based on a period of time commensurate with expected term assumption. The Company uses the simplified method to calculate the expected term for stock options granted to employees whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the stock options due to its lack of sufficient historical data. The risk-free interest rate is based on U.S. Treasury securities with a maturity date commensurate with the expected term of the associated award. The expected dividend yield is assumed to be zero as the Company has never paid dividends and has no current plans to pay any dividends on its common stock.
Due to the absence of an active market for the Company’s common stock, the Company utilized methodologies in accordance with the framework of the American Institute of Certified Public Accountants Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation, to estimate the fair value of its common stock. In determining the exercise prices for stock options granted, the Company has considered the estimated fair value of the common stock as of the measurement date. The estimated fair value of the common stock has been determined at each grant date based upon a variety of factors, including the illiquid nature of the common stock, arm’s-length sales of the Company’s capital stock (including convertible preferred stock), the effect of the rights and preferences of the preferred stockholders and the prospects of a liquidity event. Among other factors are the Company’s financial position and historical financial performance, the status of technological developments within the Company’s research, the composition and ability of the current research and management team, an evaluation or benchmark of the Company’s competition and the current business climate in the marketplace. Significant changes to the key assumptions underlying the factors used could result in different fair values of common stock at each valuation date.
Concentration of Credit Risk
The Company’s financial instruments that are exposed to credit risks consist of cash and cash equivalents. The Company maintains its cash and cash equivalents in bank deposit accounts which, at times, may exceed the federally insured limit. The Company has not experienced any losses in these accounts and does not believe it is exposed to any significant credit risk related to these funds.
Fair Value of Financial Instruments
The Company applies ASC 820, Fair Value Measurement (“ASC 820”), which establishes a framework for measuring fair value and clarifies the definition of fair value within that framework. ASC 820 defines fair value as an exit price, which is the price that would be received for an asset or paid to transfer a liability in the Company’s principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value hierarchy established in ASC 820 generally requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect the assumptions that market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the entity’s own assumptions based on market data and the entity’s judgments about the assumptions that market participants would use in pricing the asset or liability and are to be developed based on the best information available in the circumstances.
The carrying value of the Company’s cash and cash equivalents, grants receivable, prepaid expense, other receivables, other current assets, accounts payable, accrued expenses and other current liabilities
Cognition Therapeutics, Inc.
Notes to the consolidated financial statements
Amounts in thousands, except share and per share amounts
approximate fair value because of the short-term maturity of these financial instruments. In addition, the Company records its warrant liability and derivative liability at fair value.
The valuation hierarchy is composed of three levels. The classification within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The levels within the valuation hierarchy are described below:
•
Level 1 — Assets and liabilities with unadjusted, quoted prices listed on active market exchanges. Inputs to the fair value measurement are observable inputs, such as quoted prices in active markets for identical assets or liabilities.
•
Level 2 — Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities with similar underlying terms, as well as direct or indirect observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals.
•
Level 3 — Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities.
Comprehensive Loss
The Company recorded $20 and $2 in other comprehensive loss related to foreign currency translation for the years ended December 31, 2019 and 2020, respectively. The Company presents comprehensive loss in a single statement within its consolidated financial statements.
Net Loss Per Share Attributable to Common Stockholders
Basic net loss attributable to common shares is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during each period. Diluted net loss attributable to common shares includes the effect, if any, from the potential exercise or conversion of securities, such as convertible preferred stock and stock options, which would result in the issuance of incremental shares of common stock. For diluted net loss per share, the weighted-average number of shares of common stock is the same for basic net loss per share due to the fact that when a net loss exists, dilutive securities are not included in the calculation as the impact is anti-dilutive. The Company’s convertible preferred stock entitles the holder to participate in dividends and earnings of the Company, and, if the Company were to recognize net income, it would have to use the two-class method to calculate earnings per share. The two-class method is not applicable during periods with a net loss, as the holders of the convertible preferred stock have no obligation to fund losses.
Segments
The Company has determined that it operates and manages one operating segment, which is the business of developing and commercializing therapeutics. The Company’s chief operating decision maker, its chief executive officer, reviews financial information on an aggregate basis for the purpose of allocating resources.
Emerging Growth Company Status
The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it is (a) no longer an emerging growth company or (b) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, these
Cognition Therapeutics, Inc.
Notes to the consolidated financial statements
Amounts in thousands, except share and per share amounts
financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
Recent Accounting Pronouncements
In February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842). ASU No. 2016-02 requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. ASU No. 2016-02 is effective for the Company for annual periods beginning after
December 15, 2021. Early adoption is permitted. The Company expects to adopt this guidance when effective and is assessing what effect the adoption of ASU 2016-02 will have on its consolidated financial statements and accompanying notes. The Company expects to record right-of-use assets and liabilities upon adoption.
In June 2018, the FASB issued ASU 2018-07, Compensation — Stock Compensation (Topic 718) Improvements to Nonemployee Share-Based Payment Accounting. The new ASU simplifies the accounting for share-based payments to non-employees by aligning it with the accounting for share-based payments to employees, with certain exceptions. The Company adopted the standard on January 1, 2020 and it did not have a material impact on the Company’s financial condition, results of operations and cash flows.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820). This standard modifies disclosure requirements related to fair value measurement and is effective for all entities for fiscal years beginning after December 15, 2019. Among other things, ASU 2018-13 requires public entities to disclose the range and weighted average used to develop significant unobservable inputs for level 3 fair value measurements, while eliminating the requirement for public entities to disclose the amount of and reasons for transfers between level 1 and level 2 of the fair value hierarchy. Implementation on a prospective or retrospective basis varies by specific disclosure requirement. The standard also allows for early adoption of any removed or modified disclosures upon issuance while delaying adoption of the additional disclosures until their effective date. The Company adopted this guidance on January 1, 2020 and the adoption did not have a material impact on its financial statements.
In August 2020, the FASB issued ASU 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU simplifies the accounting for certain convertible instruments. ASU 2020-06 will be effective for fiscal years beginning after December 15, 2021, with early adoption permitted for interim and annual reporting periods beginning after December 15, 2020. The Company is currently evaluating the impact of the pending adoption of the new standard on the Company’s consolidated financial statements.
In October 2020, the FASB issued ASU 2020-10, Codification Improvements, which updates various codification topics by clarifying or improving disclosure requirements to align with the SEC’s regulations. The Company will adopt ASU 2020-10 as of the reporting period beginning January 1, 2021. The adoption of this update is not expected to have a material effect on the Company’s financial statements.
Cognition Therapeutics, Inc.
Notes to the consolidated financial statements
Amounts in thousands, except share and per share amounts
3. Financial Instruments and Fair Value Measurements
Financial assets and liabilities measured at fair value are summarized below:
|
|
|
|
As of December 31, 2019
|
|
|
|
Quoted Priced in
Active Markets
(Level 1)
|
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Total
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
|
|
$
|
1,886
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
1,886
|
|
|
|
Total assets
|
|
|
|
$
|
1,886
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
1,886
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
1,493
|
|
|
|
|
$
|
1,493
|
|
|
|
Warrant liability
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
181
|
|
|
|
|
|
181
|
|
|
|
Total liabilities
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
1,674
|
|
|
|
|
$
|
1,674
|
|
|
|
|
|
|
As of December 31, 2020
|
|
|
|
Quoted Priced in
Active Markets
(Level 1)
|
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Total
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
|
|
$
|
2,853
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
2,853
|
|
|
|
Total assets
|
|
|
|
$
|
2,853
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
2,853
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
2,209
|
|
|
|
|
$
|
2,209
|
|
|
|
Total liabilities
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
2,209
|
|
|
|
|
$
|
2,209
|
|
|
The following table sets forth a summary of the changes in fair value of the Level 3 liabilities for the years ended December 31, 2019 and 2020:
|
|
|
|
Warrant
Liability
|
|
|
Derivative
Liability
|
|
|
Total
|
|
|
Balance at December 31, 2018
|
|
|
|
$
|
174
|
|
|
|
|
$
|
771
|
|
|
|
|
$
|
945
|
|
|
|
Change in the fair value of the warrant liability
|
|
|
|
|
7
|
|
|
|
|
|
—
|
|
|
|
|
|
7
|
|
|
|
Fair value recognized upon the issuance of Convertible Notes
|
|
|
|
|
—
|
|
|
|
|
|
491
|
|
|
|
|
|
491
|
|
|
|
Change in the fair value of the derivative liability
|
|
|
|
|
—
|
|
|
|
|
|
231
|
|
|
|
|
|
231
|
|
|
|
Balance at December 31, 2019
|
|
|
|
|
181
|
|
|
|
|
|
1,493
|
|
|
|
|
|
1,674
|
|
|
|
Change in the fair value of the warrant liability
|
|
|
|
|
(181)
|
|
|
|
|
|
—
|
|
|
|
|
|
(181)
|
|
|
|
Fair value recognized upon the issuance of Convertible Notes
|
|
|
|
|
—
|
|
|
|
|
|
734
|
|
|
|
|
|
734
|
|
|
|
Change in the fair value of the derivative liability
|
|
|
|
|
—
|
|
|
|
|
|
(18)
|
|
|
|
|
|
(18)
|
|
|
|
Total liabilities
|
|
|
|
$
|
—
|
|
|
|
|
$
|
2,209
|
|
|
|
|
$
|
2,209
|
|
|
Derivative Liability — The Company recognizes derivative liabilities as a result of the issuance of the convertible notes that contain conversion and redemption features that are required to be bifurcated. The fair value measurement of the derivative liability is classified as Level 3 under the fair value hierarchy as it has been valued using certain unobservable inputs. These inputs include: (1) probability of occurrence of
Cognition Therapeutics, Inc.
Notes to the consolidated financial statements
Amounts in thousands, except share and per share amounts
future events (such as a qualified financing or a sale), and (2) discount rate for implied return required by investor. Significant increases or decreases in any of those inputs in isolation could result in a significantly lower or higher fair value measurement.
The fair value of the derivative liability was determined by calculating the fair value of the notes with the conversion and redemption features as compared to the fair value of the notes without such features, with the difference representing the value of the conversion and redemption features, or the derivative liability. The conversion and redemption features are measured at fair value as of each reporting date and the change in the fair value for the period is recorded in the consolidated statements of operations as a change in the fair value of the derivative liability. The fair value of the derivative liability is based on Level 3 unobservable inputs. Changes in fair value are recognized as a gain or loss within other income (expense) on the consolidated statements of operations and comprehensive loss.
Warrant Liability — As of December 31, 2019 the company had 180,724 of series A-1 preferred stock warrants outstanding. The fair value of the warrant liability was reported as a long-term liability on the consolidated balance sheet. The warrants expired unexercised in October 2020 and the Company recorded a change in fair value adjustment of $181 in the consolidated statement of operations and comprehensive loss.
4. Property and Equipment
Property and equipment, net, consisted of the following:
|
|
|
|
As of December 31,
|
|
|
|
2019
|
|
|
2020
|
|
|
Equipment
|
|
|
|
$
|
977
|
|
|
|
|
$
|
987
|
|
|
|
Furniture and fixtures
|
|
|
|
|
1
|
|
|
|
|
|
1
|
|
|
|
Property and equipment, gross
|
|
|
|
|
978
|
|
|
|
|
|
988
|
|
|
|
Less: Accumulated depreciation
|
|
|
|
|
(679)
|
|
|
|
|
|
(777)
|
|
|
|
Property and equipment, net
|
|
|
|
$
|
299
|
|
|
|
|
$
|
211
|
|
|
Depreciation expense for the years ended December 31, 2019 and 2020 was $43 and $60. Amortization expense was $38 for the years ended December 31, 2019 and 2020. Equipment cost includes an asset under a capital lease totaling $190 on December 31, 2019 and December 31, 2020. Accumulated amortization of the leased equipment as of December 31, 2019 and December 31, 2020 was $114 and $152.
5. Accrued Expenses
Accrued expense consists of the following:
|
|
|
|
As of December 31,
|
|
|
|
2019
|
|
|
2020
|
|
|
Employee compensation, benefits, and related accruals
|
|
|
|
$
|
532
|
|
|
|
|
$
|
732
|
|
|
|
Consulting and contracted research
|
|
|
|
|
566
|
|
|
|
|
|
143
|
|
|
|
Professional fees
|
|
|
|
|
164
|
|
|
|
|
|
114
|
|
|
|
Other accrued
|
|
|
|
|
59
|
|
|
|
|
|
5
|
|
|
|
Total
|
|
|
|
$
|
1,321
|
|
|
|
|
$
|
994
|
|
|
Cognition Therapeutics, Inc.
Notes to the consolidated financial statements
Amounts in thousands, except share and per share amounts
6. Other Receivables
Other receivables consist of the following:
|
|
|
|
As of December 31,
|
|
|
|
2019
|
|
|
2020
|
|
|
Research and development incentive receivables
|
|
|
|
$
|
1,364
|
|
|
|
|
$
|
489
|
|
|
|
Other receivables
|
|
|
|
|
98
|
|
|
|
|
|
99
|
|
|
|
Total
|
|
|
|
$
|
1,462
|
|
|
|
|
$
|
588
|
|
|
7. Other Income Net
Other income net consists of the following:
|
|
|
|
Year Ended December 31,
|
|
|
|
2019
|
|
|
2020
|
|
|
Research and development incentive
|
|
|
|
$
|
982
|
|
|
|
|
$
|
474
|
|
|
|
Foreign currency loss
|
|
|
|
|
—
|
|
|
|
|
|
(88)
|
|
|
|
Other income, net
|
|
|
|
|
105
|
|
|
|
|
|
8
|
|
|
|
Total
|
|
|
|
$
|
1,087
|
|
|
|
|
$
|
394
|
|
|
8. Commitments and Contingencies
The Company has operating leases for its office and laboratory facilities under agreements that run through June 30, 2023. The Company entered into a capital lease agreement on December 9, 2016, as a lessee. The leased equipment has a one-dollar buyout option at the conclusion of the lease term. The agreement requires 36 total monthly lease payments of $4,338. In 2020, the capital lease has expired.
Minimum lease commitments consisted of the following as of December 31, 2020:
|
|
|
|
Operating Leases
|
|
|
2021
|
|
|
|
$
|
118
|
|
|
|
2022
|
|
|
|
|
118
|
|
|
|
2023
|
|
|
|
|
59
|
|
|
|
Total lease commitments
|
|
|
|
$
|
295
|
|
|
Rent expense was $118 and $179 for the years ended December 31, 2019 and 2020, respectively.
From time to time, the Company may be involved in disputes or regulatory inquiries that arise in the ordinary course of business. When the Company determines that a loss is both probable and reasonably estimable, a liability is recorded and disclosed if the amount is material to the financial statements taken as a whole. When a material loss contingency is only reasonably possible, the Company does not record a liability, but instead discloses the nature and the amount of the claim, and an estimate of the loss or range of loss, if such an estimate can reasonably be made.
As of December 31, 2019 and 2020, there was no litigation or contingency with at least a reasonable possibility of a material loss.
9. Debt
On March 8, 2018, the Company entered into a Convertible Note Purchase Agreement (“the Original Agreement”) with existing investors of the Company. Under the terms of the Original Agreement, the
Cognition Therapeutics, Inc.
Notes to the consolidated financial statements
Amounts in thousands, except share and per share amounts
Company agreed to issue up to $5,000 in principle Convertible Notes (the “Original Notes”). The Original Notes accrued interest at 4.0% per annum from the date of issuance with a maturity date of February 27, 2020 (subsequently extended — see below). The Company issued $2,965 in Original Notes in March and April 2018. Under the terms of the Original Agreement, the following features are included:
i.
Automatic conversion into equity securities upon the closing of an equity financing with aggregate gross proceeds of at least $10,000, at the conversion price equal to 90.0% of the lowest price per share of the equity financing securities sold (a “Automatic Conversion Upon a Qualified Financing”)
ii.
Optional conversion into equity securities upon the closing of an equity financing that does not constitute a Qualified Financing at a conversion price equal to 90.0% of the price per share of the equity financing securities sold (a “Optional Conversion Upon a Non-Qualified Financing”)
iii.
Optional conversion of the unpaid principal balance plus accrued and unpaid interest to into Series B-1 convertible preferred stock at a conversion price of $1.385 per share or redemption of the unpaid principal balance plus accrued and unpaid interest if (i) a transaction results in any person or group with over 50.0% voting power, (ii) any consolidation or merger transaction, or (iii) a sale or transfer of substantially all of the Company’s assets (“Option Conversion or Redemption”)
iv.
Automatic redemption of unpaid principal and all accrued and unpaid interest upon maturity, liquidation, dissolution, winding up, or event of default (“Automatic Redemption”)
On November 15, 2018, the Company entered into a Convertible Note Purchase Agreement (the “Additional Agreement”) with existing investors of the Company. Under the terms of the Additional Agreement, the Company agreed to issue up to an aggregate of $8,000 in principle Convertible Notes (the “Additional Notes”). In connection with the Additional Agreement, the Company amended the Original Notes (the “Amendment”). The Amendment resulted in the following changes to the Original Notes:
i.
the interest rate of the Original Notes accrue interest at 4.0% from issuance to November 15, 2018, and accrue interest at 8.0% from November 15, 2018 to maturity or conversion,
ii.
the conversion price was amended to 80.0% of the price per share in connection with conversion of the notes upon a Qualified or Non-Qualified Financing,
iii.
the holder’s option upon a sale event to receive repayment, at two times the principal plus accrued and unpaid interest, (“Optional Redemption Upon a Sales Transaction”) and
iv.
a condition that each holder of $1,000 in aggregate principal must be included in the 66 2/3% of the holders of the principal amount of the Notes to provide consent to make any further amendments or waivers.
On February 27, 2020, the Company entered into a Convertible Note Purchase Agreement (the “Second Amendment”) with existing investors of the Company. Under the terms of the Second Amendment, the Company agreed to issue up to an aggregate of $10,035 in principle Convertible Notes (the “Second Amendment Notes”). In connection with the Second Amendment, the Company amended the Original Notes and Additional Notes. The Second Amendment resulted in the following changes:
i.
extend the maturity date to June 30, 2021
ii.
add a cap for a conversion in connection with a Qualified Financing
iii.
provide for mandatory conversion of the Combined Notes into Series B-1 convertible preferred stock of the Company if the Company has not completed a Qualified Financing on or before June 30, 2021
The Company applied extinguishment accounting to the Original Notes upon execution of the Amendment in 2018 on the basis that the present value of the cash flows under the terms of the Amendment
Cognition Therapeutics, Inc.
Notes to the consolidated financial statements
Amounts in thousands, except share and per share amounts
of the Original notes were determined to be substantially different. The Company applied extinguishment accounting upon execution of the Second Amendment as the addition of the conversion features are substantive and recorded a loss on debt extinguishment of $129 in the consolidated statement of operations and comprehensive loss during 2020.
Each Additional Note and Second Amendment Note (collectively with the Original Notes, the “Convertible Notes” or the “Notes) included the features set forth above. The Company issued $2,965 Original Notes in 2018, $4,661 Additional Notes in 2018 and 2019, and $5,372 Second Amendment Notes in 2020.
The total issuance costs incurred in connection with all closings of the Convertible Notes was $205.
The Convertible Notes were considered to be a hybrid financial instrument consisting of a fixed interest rate host with certain embedded features requiring evaluation for bifurcation and separate accounting. The Company determined that the Automatic Conversion Upon a Qualified Financing, Optional Conversion Upon a Non-Qualified Financing and the Optional Redemption Upon a Sales Transaction were considered freestanding financial instruments which required bifurcation from the host debt instruments.
The resulting debt discount from the derivative liabilities was presented as a direct deduction from the carrying amount of the Convertible Notes and amortized to interest expense using the effective interest rate method.
The Convertible Notes as of December 31, 2019 and 2020 consist of the following:
|
|
|
|
2019
|
|
|
2020
|
|
|
Convertible notes principal
|
|
|
|
$
|
7,626
|
|
|
|
|
$
|
12,998
|
|
|
|
Less: unamortized note issuance costs
|
|
|
|
|
(44)
|
|
|
|
|
|
(45)
|
|
|
|
Less: debt discount
|
|
|
|
|
(685)
|
|
|
|
|
|
(544)
|
|
|
|
|
|
|
|
$
|
6,897
|
|
|
|
|
$
|
12,409
|
|
|
Interest expense on the convertible notes, including amortization of debt issuance costs, consisted of the following for the year ended December 31, 2019 and 2020:
|
|
|
|
2019
|
|
|
2020
|
|
|
Coupon interest
|
|
|
|
$
|
574
|
|
|
|
|
$
|
922
|
|
|
|
Issuance costs amortization
|
|
|
|
|
30
|
|
|
|
|
|
54
|
|
|
|
Discount amortization
|
|
|
|
|
464
|
|
|
|
|
|
782
|
|
|
|
|
|
|
|
$
|
1,068
|
|
|
|
|
$
|
1,758
|
|
|
At December 31, 2020 and 2019, the Company has classified the outstanding convertible notes, as well as accrued interest, within long term liabilities, as the convertible notes are not expected to require the use of current assets to settle the obligations within the next twelve months. In May of 2021, the convertible notes and accrued interest thereon were converted in Series B-1 convertible preferred stock (Note 17).
In April 2020, the Company received a $443 unsecured loan, bearing interest at 1.0%, pursuant to the Paycheck Protection Program (the “PPP”), a program implemented by the U.S. Small Business Administration (the “SBA”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) (the “PPP Loan”). The PPP provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loan and accrued interest are forgivable after eight weeks if the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities. The amount of loan forgiveness may be reduced if the borrower terminates employees or reduces salaries during the eight-week period. The unforgiven portion of the PPP loan is payable over two years at an
Cognition Therapeutics, Inc.
Notes to the consolidated financial statements
Amounts in thousands, except share and per share amounts
interest rate of 1.0%, with a deferral of payments for the first six months. The Company used the proceeds for purposes consistent with the PPP.
10. Preferred Stock
As of December 31, 2020, convertible preferred stock consisted of the following:
|
Class of Preferred
|
|
|
Preferred Stock
Authorized
|
|
|
Preferred Stock
Issued and
Outstanding
|
|
|
Carrying Value
|
|
|
Liquidation
Preference
|
|
|
Common Stock
Issuable Upon
Conversion
|
|
|
Series A Preferred Stock
|
|
|
|
|
3,067,519
|
|
|
|
|
|
2,819,027
|
|
|
|
|
$
|
4,616
|
|
|
|
|
$
|
4,766
|
|
|
|
|
|
2,819,027
|
|
|
|
Series A-1 Preferred Stock
|
|
|
|
|
3,970,776
|
|
|
|
|
|
3,730,366
|
|
|
|
|
|
5,398
|
|
|
|
|
|
5,572
|
|
|
|
|
|
3,730,366
|
|
|
|
Series A-2 Preferred Stock
|
|
|
|
|
3,565,063
|
|
|
|
|
|
3,565,063
|
|
|
|
|
|
5,809
|
|
|
|
|
|
5,997
|
|
|
|
|
|
3,565,063
|
|
|
|
Series B Preferred Stock
|
|
|
|
|
30,450,000
|
|
|
|
|
|
30,409,890
|
|
|
|
|
|
39,547
|
|
|
|
|
|
40,826
|
|
|
|
|
|
30,409,890
|
|
|
|
Total
|
|
|
|
|
41,053,358
|
|
|
|
|
|
40,524,346
|
|
|
|
|
$
|
55,370
|
|
|
|
|
$
|
57,161
|
|
|
|
|
|
40,524,346
|
|
|
Rights, preferences, privileges, and restrictions:
The holders of shares of Series A, A-1, A-2, B and B-1 convertible preferred stock (or collectively, the “Preferred Stock”) have the rights, preferences, privileges, and restrictions as set forth below:
Dividends:
The holders of the Preferred Stock are entitled to receive cumulative dividends when, as and if declared by the Company’s Board of Directors. Accrued dividends shall accrue only on the unreturned amount of the original issue price taking into account the payment of any mandatory dividend. As used herein, “original issue price” means $0.69 per share with respect to the Series A and A-1 preferred stock, $0.8415 per share with respect to the Series A-2 preferred Stock, and $0.923 per share with respect to the Series B preferred stock. After such time the holders receive their full preferred liquidation amount, less any and all mandatory dividends, the holders of preferred stock will not be entitled to any additional accruing dividends; provided that the holders of the preferred stock will share in all dividends and distributions declared by the Board of Directors and paid by the Company with the holders of common stock on an as if converted to common stock basis.
Voting Rights:
The holders of Preferred Stock are entitled to voting rights equal to the number of shares of common stock into which the shares of Preferred Stock can be converted. In addition, as long as there are shares of Preferred Stock outstanding, each of the holders of over 7.5% of the total Preferred Stock outstanding on a converted basis shall be entitled to designate one director of the Company to be elected by the holders of Preferred Stock. The holders of a majority of the then outstanding shares of common stock, voting together as a single class, shall be entitled to elect one director of the Company. If the holders of the Preferred Stock or common stock fail to elect a sufficient number of directors to fulfill directorships for which they are entitled to elect directors, then any directorship shall remain vacant until the holders of the Preferred Stock or common stock elect such person.
Liquidation Rights:
In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the holders of Preferred Stock have liquidation preferences, before any distribution or payment is made to holders of any common stock, in an amount per share equal to the original issue price for such Preferred Stock plus all accruing dividends (the “Preferred Liquidation Amount”). If the assets and funds to
Cognition Therapeutics, Inc.
Notes to the consolidated financial statements
Amounts in thousands, except share and per share amounts
be distributed among the holders of Preferred Stock are insufficient to permit the payment to such holders, then the entire assets and funds of the Company legally available for distribution will be distributed ratably among the holders of Preferred Stock in proportion to the Preferred Liquidation Amount each such holder is otherwise entitled to receive on each share, less any mandatory dividends.
Upon completion of the payment of the full liquidation preference of Preferred Stock less any and all mandatory dividends previously distributed, the remaining assets of the Company, if any, shall be distributed among the holders of common stock and Preferred Stock, pro rata based on the number of common shares held by each (assuming conversion of all shares of the Preferred Stock into common stock).
Conversion:
Each share of Preferred Stock is convertible into shares of common stock, at the option of the holder, at any time after date of issuance. Each share of Preferred Stock automatically converts to the number of shares of common stock determined in accordance with the conversion rate upon the closing of a public offering, at a price per share of not less than three times the highest, then applicable conversion price, resulting in offering proceeds of at least $30,000 net of underwriting discounts and commissions (“Mandatory Conversion Time”). The conversion ratio will be adjusted in the case of specified changes to the Company’s capitalization as a result of stock splits, combinations, common stock dividends and distributions, reclassifications, exchanges, substitutions, reorganizations, mergers or consolidations.
Redemption:
Prior to the July 29, 2020 amendment to the article of incorporation, Preferred Stockholders had the right to redeem shares of preferred stock on or after March 20, 2021 after receipt of written notice requesting redemption from 60% of the then outstanding shares of the preferred stock voting together as a single class on an as-converted to common stock basis at a price equal to the original issue price plus all accruing dividends. As the Preferred Stock was redeemable due to the passage of time prior to the amendment, the Company recorded changes in the redemption value and accreted the Preferred Stock immediately to its redemption value during each reporting period.
On July 29, 2020, the articles of incorporation were amended resulting in the removal of the redemption right. As the redemption option was removed in connection with the amendment, the only option for redemption is based on the occurrence of a deemed liquidation event. As the events that would trigger a deemed liquidation event are corporate transactions that are not certain to occur, the Company determined that post July 29, 2020, the Preferred Stock is no longer considered probable to become redeemable, and is instead contingently redeemable. As a result, the Company ceased the accretion of the Preferred Stock to redemption value upon execution of the amendment to the articles of incorporation.
Protective Provisions:
At any time when shares of Preferred Stock are outstanding, the Company shall not, either directly, indirectly by amendment, merger, consolidation or otherwise, do any of the following without the written consent or affirmative vote of at least 60% of the then outstanding shares of Preferred Stock, voting together as a single class on an as-converted to Common Stock basis: (i) effect the consummation of a liquidation event or any other merger or consolidation, (ii) amend, alter or repeal any provision of the Company’s certificate of incorporation of bylaws in a manner that adversely affects the powers, preferences or rights of the Preferred Stock, (iii) amend, alter, or repeal any provision of the by-laws of the Company, in a manner that affects the powers, preferences, or rights of Preferred Stock, (iv) increase or decrease the authorized number of shares of Preferred Stock or Common Stock, (v) reclassify, alter, or amend any existing security of the Company in respect to the distribution of assets on the liquidation, dissolution, or winding up of the Company or payment of dividends, if such reclassification, alteration, or amendment would render such other security senior to Preferred Stock in respect to any such right, preference, or privilege, (vi) purchase or
Cognition Therapeutics, Inc.
Notes to the consolidated financial statements
Amounts in thousands, except share and per share amounts
redeem, or declare any dividend, on any shares of capital stock of the Company other than repurchase of stock pursuant to stock restriction agreements approved by the Board of Directors that grant to the Company the right of repurchase upon termination of the service, (vii) borrow or authorize any amount of indebtedness, other than inventory financing in the ordinary course of business and any indebtedness in an amount of up to $250 in aggregate that is approved by the Board of Directors, (viii) increase or decrease the authorized number of directors of the Board of Directors (ix) effect a change in business from the discovery and development of small molecule therapeutics targeting toxic proteins that cause cognitive decline associated with Alzheimer’s disease and other neurodegenerative diseases, (x) enter into any transaction with any person other than in the ordinary course of business on an arm’s length basis, (xi) increase the number of shares of common stock reserved for issuance, (xii) make any loan except advances in ordinary course of business or advances up to $50 in aggregate approved by the Board of Directors, (xiii) hire, terminate, or change compensation in excess of $100 of any officer, director, or employee, unless approved by the Board of Directors, (xiv) own any stock or securities of any other corporation, unless approved by the Board of Directors, (xv) guarantee any indebtedness except for trade accounts of the Company or any guarantee approved by the Board of Directors, (xvi) make any investment other than investments in prime commercial paper, money market funds, certificates of deposits in any United States bank having a net worth in excess of $100,000 or obligations issued or guaranteed by the United States of America, unless approved by the Board of Directors.
11. Warrants
In conjunction with both debt and equity investments, the Company issued warrants on each of the following classes of stock: Common and Series A-1.
The following is a summary of the Company’s outstanding common stock warrants as of December 31, 2020:
|
Number of Warrants
|
|
|
Exercise
Price
|
|
|
Expiration
Date
|
|
|
163,334
|
|
|
|
$
|
0.21
|
|
|
|
May 2021
|
|
|
375,741
|
|
|
|
$
|
0.01
|
|
|
|
March 2023
|
|
|
78,194
|
|
|
|
$
|
0.01
|
|
|
|
May 2023
|
|
|
33,387
|
|
|
|
$
|
0.01
|
|
|
|
August 2023
|
|
Series A-1 Preferred Stock Warrants
The Company reviewed the classification of the warrants as liabilities or equity under the guidance of ASC 480-10, Distinguishing Liabilities from Equity, and concluded that the Series A-1 convertible preferred stock warrants should be classified as a liability. The Company re-measures the warrant liability to fair market value at the end of each reporting period. The Series A-1 preferred stock warrants expired in October 2020 and were not exercised. For the year ended December 31, 2020, the Company recorded a fair value adjustment of $181 in the consolidated statement of operations and comprehensive loss.
Common Stock Warrants
The Company’s common stock warrants are equity classified as there are no features within the warrant agreements that require liability treatment. Accordingly, the warrants are recorded as a component of equity when they are issued.
12. Common Stock
Common stockholders are entitled to dividends if and when declared by the Company’s Board of Directors subject to the rights of the preferred stockholders. As of December 31, 2020, no dividends on common stock had been declared by the Company.
Cognition Therapeutics, Inc.
Notes to the consolidated financial statements
Amounts in thousands, except share and per share amounts
The Company has reserved the following shares of common stock for conversion of preferred stock, exercise of warrants and exercise of stock options as of December 31:
|
|
|
|
2019
|
|
|
2020
|
|
|
Convertible preferred stock outstanding
|
|
|
|
|
40,524,346
|
|
|
|
|
|
40,524,346
|
|
|
|
Options issued and outstanding
|
|
|
|
|
13,245,253
|
|
|
|
|
|
14,839,637
|
|
|
|
Warrants for series A-1 preferred stock
|
|
|
|
|
180,724
|
|
|
|
|
|
—
|
|
|
|
Warrants for common stock
|
|
|
|
|
813,990
|
|
|
|
|
|
650,656
|
|
|
|
Total
|
|
|
|
|
54,764,313
|
|
|
|
|
|
56,014,639
|
|
|
13. Equity-based Compensation
On September 15, 2017, the Company’s Board of Directors (the Board) approved the 2017 Amended and Restated Equity Incentive Plan (the “Plan”), which provides for the granting of incentive stock options, non-qualified stock options and stock awards to employees, certain consultants and directors. The Board, or its designated committee, has the sole authority to select the individuals to whom awards are granted and determine the terms of each award, including the number of shares and the schedule upon which the award becomes exercisable.
The aggregate number of shares of common stock of the Company that may be issued under the Plan is 15,288,989 (taking into account shares of common stock that may become issuable pursuant to Section 3(b) of the Plan in respect of shares of common stock reserved under the Company’s Amended and Restated 2007 Equity Incentive Plan). The Plan also allows for a provision for shares granted which are cancelled, forfeited, exchanged or surrendered without having been exercised to subsequently be available for reissuance under the Plan.
The Company recorded total equity-based compensation expense in the statement of operations and comprehensive loss related to incentive stock options and nonstatutory stock options as follows:
|
|
|
|
Year Ended December 31,
|
|
|
|
2019
|
|
|
2020
|
|
|
Research and development
|
|
|
|
$
|
175
|
|
|
|
|
$
|
216
|
|
|
|
General and administrative
|
|
|
|
|
186
|
|
|
|
|
|
259
|
|
|
|
Total equity-based compensation
|
|
|
|
$
|
361
|
|
|
|
|
$
|
475
|
|
|
As of December 31, 2020, total future compensation expense related to unvested awards yet to be recognized by the Company was $1,182. Total future compensation expense related to unvested awards yet to be recognized by the Company is expected to be recognized over a weighted- average remaining vesting period of approximately 2.2 years.
The fair value of options granted was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:
|
|
|
|
Year Ended December 31,
|
|
|
|
2019
|
|
|
2020
|
|
|
Fair value of common stock
|
|
|
$0.33
|
|
|
$0.37
|
|
|
Expected volatility
|
|
|
88.92% – 97.50%
|
|
|
101.35% – 109.34%
|
|
|
Risk-free interest rate
|
|
|
1.43% – 2.50%
|
|
|
0.27% – 1.60%
|
|
|
Dividend yield
|
|
|
0.00%
|
|
|
0.00%
|
|
|
Expected term (years)
|
|
|
6.00 – 7.00
|
|
|
5.00 – 6.25
|
|
Cognition Therapeutics, Inc.
Notes to the consolidated financial statements
Amounts in thousands, except share and per share amounts
Expected Term — The expected term represents the period that the stock-based awards are expected to be outstanding. As the Company does not have sufficient historical experience for determining the expected term of the stock option awards granted, expected term has been calculated using the simplified method.
Risk-Free Interest Rate — The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the date of grant for zero-coupon U.S. Treasury constant maturity notes with terms approximately equal to the stock-based awards’ expected term.
Expected Volatility — Since the Company is privately held and does not have a trading history of common stock, the expected volatility was derived from the average historical stock volatilities of the common stock of several public companies within the industry that the Company considers to be comparable to our business over a period equivalent to the expected term of the stock-based awards.
Dividend Yield — The expected dividend yield is zero as the Company has not paid and does not anticipate paying any dividends in the foreseeable future.
Fair Value of Common Stock — The fair value of the shares of common stock underlying the stock-based awards has historically been determined by the Board of Directors with input from management. Because there has been no public market for the common stock, the Board of Directors has determined the fair value of the common stock at the time of grant of the stock-based award by considering a number of objective and subjective factors, including having contemporaneous valuations of the common stock performed by a third-party valuation specialist.
Activity for options was as follows:
|
|
|
|
Options Outstanding
|
|
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Aggregate
Intrinsic
Value
(in 000’s)
|
|
|
Weighted
Average
Remaining
Contractual Life
(in Years)
|
|
|
Balance, December 31, 2019
|
|
|
|
|
13,245,253
|
|
|
|
|
$
|
0.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
|
|
4,029,807
|
|
|
|
|
$
|
0.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercised
|
|
|
|
|
(59,991)
|
|
|
|
|
$
|
0.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options forfeited
|
|
|
|
|
(2,190,110)
|
|
|
|
|
$
|
0.26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options expired
|
|
|
|
|
(185,322)
|
|
|
|
|
$
|
0.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2020
|
|
|
|
|
14,839,637
|
|
|
|
|
$
|
0.30
|
|
|
|
|
$
|
3,511
|
|
|
|
|
|
7.8
|
|
|
|
Exercisable as of December 31, 2020
|
|
|
|
|
9,090,089
|
|
|
|
|
$
|
0.27
|
|
|
|
|
$
|
2,423
|
|
|
|
|
|
6.4
|
|
|
|
Vested and expected to vest as of December 31, 2020
|
|
|
|
|
13,710,311
|
|
|
|
|
$
|
0.30
|
|
|
|
|
$
|
3,274
|
|
|
|
|
|
7.7
|
|
|
The weighted-average grant date fair value of stock options granted was $0.23 and $0.30 during the years ended December 31, 2019 and 2020, respectively. There were 2,773,107 stock options granted at an aggregate fair value of $638 for the year ended December 31, 2019 and 4,029,807 stock options granted at an aggregate fair value of $1,210 for the year ended December 31, 2020. The total grant-date fair value of stock options vested during the years ended December 31, 2019 and 2020 was $371 and $335, respectively. There were no stock options exercised during the year ended December 31, 2019. During the year ended December 31, 2020, there were 59,991 stock options exercised with an aggregate grant date fair value of $11. The intrinsic value of stock options exercised during the year ended December 31, 2020 was $19.
The Company granted 1,129,326 option awards containing performance conditions to an executive during the year ended December 31, 2019. As of December 31, 2019, and 2020, the Company determined that the achievement of the performance targets was not probable and therefore, there was no expense
Cognition Therapeutics, Inc.
Notes to the consolidated financial statements
Amounts in thousands, except share and per share amounts
recognized for these awards during the years ended December 31, 2019 and 2020, respectively. As of December 31, 2020, total unrecognized compensation expense related to un-vested performance based awards was $254, which would be recognized commencing with the period in which the performance condition is deemed probable of achievement.
14. Net Loss per Share
The following outstanding potentially dilutive common stock equivalents have been excluded from the calculation of diluted net loss per share attributable to common stockholders for the periods presented due to their antidilutive effect:
|
|
|
|
December 31,
2019
|
|
|
December 31,
2020
|
|
|
Convertible preferred stock (as converted)
|
|
|
|
|
40,524,346
|
|
|
|
|
|
40,524,346
|
|
|
|
Options issued and outstanding
|
|
|
|
|
13,245,253
|
|
|
|
|
|
14,839,637
|
|
|
|
Warrants for series A-1 preferred stock
|
|
|
|
|
180,724
|
|
|
|
|
|
—
|
|
|
|
Warrants for common stock
|
|
|
|
|
813,990
|
|
|
|
|
|
650,656
|
|
|
|
Total
|
|
|
|
|
54,764,313
|
|
|
|
|
|
56,014,639
|
|
|
The basic and diluted net loss per share attributable to common stockholders has been prepared as follows:
|
|
|
|
December 31,
2019
|
|
|
December 31,
2020
|
|
|
Net loss
|
|
|
|
$
|
(4,842)
|
|
|
|
|
$
|
(7,839)
|
|
|
|
Cumulative preferred stock dividends
|
|
|
|
|
(3,920)
|
|
|
|
|
|
(4,234)
|
|
|
|
Net loss attributable to common stockholders
|
|
|
|
$
|
(8,762)
|
|
|
|
|
$
|
(12,073)
|
|
|
|
Weighted-average common shares outstanding-basic and diluted
|
|
|
|
|
1,519,285
|
|
|
|
|
|
1,643,514
|
|
|
|
Total
|
|
|
|
$
|
(5.77)
|
|
|
|
|
$
|
(7.35)
|
|
|
15. Retirement Plan
The Company has a 401(k) retirement plan to provide retirement and incidental benefits for its employees. Employees may contribute a percentage of their annual compensation to the 401(k) retirement plan, limited to a maximum annual amount as set periodically by the Internal Revenue Service. The Company matches employee contributions dollar for dollar up to a maximum of 4% of the employees’ compensation per person per year. All matching contributions vest immediately. Company matching contributions to the 401(k) retirement plan totaled $83 and $110 for the year ended December 31, 2019 and 2020, respectively.
16. Income Taxes
The net loss consists of the following components:
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
2019
|
|
|
2020
|
|
|
Domestic
|
|
|
|
$
|
(3,489)
|
|
|
|
|
$
|
(7,268)
|
|
|
|
Foreign
|
|
|
|
|
(1,353)
|
|
|
|
|
|
(571)
|
|
|
|
Total
|
|
|
|
$
|
(4,842)
|
|
|
|
|
$
|
(7,839)
|
|
|
Cognition Therapeutics, Inc.
Notes to the consolidated financial statements
Amounts in thousands, except share and per share amounts
During the years ended December 31, 2019 and 2020, the Company recorded no current or deferred income tax expenses or benefits as the Company has incurred losses since inception and has provided a full valuation allowance against its deferred tax assets.
Global Intangible Low-Taxed Income (“GILTI”) is the excess of a U.S. shareholders total net foreign income over a deemed return on tangible assets. In January 2018, in response to inquiries by companies, the FASB issued guidance that allows companies to elect as an accounting policy whether to treat the GILTI tax as a period cost or to recognize deferred tax assets and liabilities when basis differences exist that are expected to affect the amount of GILTI inclusion upon reversal. The Company has elected to treat GILTI as a period expense.
A reconciliation of the expected income tax (benefit) computed using the federal statutory income tax rate to the Company’s effective income tax rate is as follows:
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
2019
|
|
|
2020
|
|
|
Income tax computed at federal statutory rate
|
|
|
|
|
21.0%
|
|
|
|
|
|
21.0%
|
|
|
|
State taxes, net of federal benefit
|
|
|
|
|
6.5%
|
|
|
|
|
|
7.1%
|
|
|
|
Change in valuation allowance
|
|
|
|
|
(34.5%)
|
|
|
|
|
|
(35.8%)
|
|
|
|
R&D Credit
|
|
|
|
|
10.5%
|
|
|
|
|
|
10.7%
|
|
|
|
Interest expense
|
|
|
|
|
(2.0%)
|
|
|
|
|
|
(3.2%)
|
|
|
|
Equity-based compensation
|
|
|
|
|
(1.4%)
|
|
|
|
|
|
(1.0%)
|
|
|
|
Other
|
|
|
|
|
(0.1%)
|
|
|
|
|
|
1.2%
|
|
|
|
Effective income tax rate
|
|
|
|
|
0.0%
|
|
|
|
|
|
0.0%
|
|
|
The Company’s deferred tax assets and liabilities consist of the following:
|
|
|
|
December 31,
2019
|
|
|
December 31,
2020
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
|
|
$
|
9,902
|
|
|
|
|
$
|
11,060
|
|
|
|
Tax credit carryforwards
|
|
|
|
|
2,397
|
|
|
|
|
|
3,713
|
|
|
|
Equity-based compensation
|
|
|
|
|
74
|
|
|
|
|
|
291
|
|
|
|
Other
|
|
|
|
|
—
|
|
|
|
|
|
137
|
|
|
|
Deferred tax assets
|
|
|
|
|
12,373
|
|
|
|
|
|
15,201
|
|
|
|
Less: valuation allowance
|
|
|
|
|
(12,365)
|
|
|
|
|
|
(15,179)
|
|
|
|
Deferred tax assets after valuation allowance
|
|
|
|
|
8
|
|
|
|
|
|
22
|
|
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed assets
|
|
|
|
|
(8)
|
|
|
|
|
|
(22)
|
|
|
|
Deferred tax liabilities
|
|
|
|
|
(8)
|
|
|
|
|
|
(22)
|
|
|
|
Net deferred tax assets
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
The Company evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets as of December 31, 2019 and 2020. Management considered the Company’s cumulative net losses and concluded as of December 31, 2019 and 2020, that it was more likely than not that the Company would not realize the benefits of the deferred tax assets. Accordingly, a full valuation allowance was established against the net deferred tax assets as of December 31, 2019 and 2020. The valuation allowance
Cognition Therapeutics, Inc.
Notes to the consolidated financial statements
Amounts in thousands, except share and per share amounts
increased by $1,669 and $2,814 for the years ended December 31, 2019 and 2020, respectively, primarily as a result of operating losses generated with no corresponding financial statement benefit.
The Company has incurred net operating losses (“NOL”) since inception. As of December 31, 2020, the Company had federal net operating loss carryforwards of $37,879 that expire at various dates through 2037. Included in the federal net operating loss carryforwards of $37,879 is $11,651 that can be carried forward indefinitely. As of December 31, 2020, the Company had state net operating loss carryforwards of $37,879, available to reduce future state taxable income, which expire at various dates through 2040. As of December 31, 2020, the Company had foreign net operating loss carryforwards of $389 that can be carried forward indefinitely. As of December 31, 2020, the Company had federal research and development tax credit carryforwards of $3,713 available to reduce future federal tax liabilities.
Utilization of the Company’s net operating loss carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986 due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain shareholders or public groups in the stock of a corporation by more than 50% over a three-year period. The Company has not conducted a study to assess whether a change of control has occurred or whether there have been multiple changes of control since inception due to the significant complexity and cost associated with such a study. If the Company has experienced a change of control, as defined by Section 382, at any time since inception, utilization of the net operating loss carryforwards or research and development tax credit carryforwards would be subject to an annual limitation under Section 382, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments, as required. Any limitation may result in expiration of a portion of the net operating loss carryforwards or research and development tax credit carryforwards before utilization. Further, until a study is completed, and any limitation is known, no amounts are being presented as an uncertain tax position.
The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. There are currently no pending tax examinations. The Company’s tax years are still open under statute from inception to the present.
17. Subsequent Events
Subsequent events have been evaluated through May 7, 2021, which is the date the financial statements were issued.
On January 21, 2021, the Company received confirmation from the SBA that the PPP Loan had been forgiven in full including all interest incurred. Accordingly, the Company will recognize income for debt extinguishment pursuant to ASC 470-50-15-4 during the quarter ended March 31, 2021.
On March 25, 2021, the Company entered into simple agreements for future equity (“SAFEs”) with existing investors, pursuant to which the Company received gross proceeds in an aggregate amount equal to $8,942. Pursuant to the arrangement, all of the SAFEs were initially issued with a conversion price equal to 80% of either the common stock price upon the occurrence of an initial public offering, or the price paid for shares of preferred stock by other investors upon a subsequent private financing. Upon a change of control, investors will be entitled to receive a portion of proceeds equal to the greater of the purchase amount or the amount payable on the number of shares of common stock equal to the purchase amount divided by the liquidity price. In a liquidity or dissolution event, the investors’ right to receive cash is junior to payment of outstanding indebtedness and creditor claims, on par for other SAFEs and preferred stock, and senior to common stock. The SAFE agreements have no interest rate or maturity date, and the SAFE investors have no voting right prior to conversion.
Cognition Therapeutics, Inc.
Notes to the consolidated financial statements
Amounts in thousands, except share and per share amounts
On May 1, 2021, the holders of the convertible promissory notes agreed to an acceleration of the automatic conversion of all convertible promissory notes from June 30, 2021 to May 1, 2021 into 10,926,089 shares of our class B-1 preferred stock, at a conversion price equal to $1.385 per share.
Index to Unaudited Consolidated Financial Statements
As of March 31, 2021 and for the Three Months Ended March 31, 2020 and March 31, 2021
Cognition Therapeutics, Inc. and Subsidiary
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
|
|
|
|
December 31, 2020
|
|
|
March 31, 2021
(Unaudited)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
$
|
5,189
|
|
|
|
|
$
|
13,373
|
|
|
|
Grant receivables
|
|
|
|
|
564
|
|
|
|
|
|
1,675
|
|
|
|
Prepaid expenses
|
|
|
|
|
544
|
|
|
|
|
|
235
|
|
|
|
Other receivables
|
|
|
|
|
588
|
|
|
|
|
|
642
|
|
|
|
Other current assets
|
|
|
|
|
23
|
|
|
|
|
|
27
|
|
|
|
Total current assets
|
|
|
|
|
6,908
|
|
|
|
|
|
15,952
|
|
|
|
Deferred offering costs
|
|
|
|
|
—
|
|
|
|
|
|
372
|
|
|
|
Property and equipment, net
|
|
|
|
|
211
|
|
|
|
|
|
188
|
|
|
|
Total assets
|
|
|
|
$
|
7,119
|
|
|
|
|
$
|
16,512
|
|
|
|
Liabilities, Convertible Preferred Stock, and Stockholders’ Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
|
|
2,003
|
|
|
|
|
|
3,187
|
|
|
|
Accrued expenses
|
|
|
|
|
994
|
|
|
|
|
|
1,151
|
|
|
|
Other current liabilities
|
|
|
|
|
253
|
|
|
|
|
|
—
|
|
|
|
Total current liabilities
|
|
|
|
|
3,250
|
|
|
|
|
|
4,338
|
|
|
|
Simple Agreements for Future Equity
|
|
|
|
|
—
|
|
|
|
|
|
8,942
|
|
|
|
Paycheck protection program loan
|
|
|
|
|
443
|
|
|
|
|
|
—
|
|
|
|
Derivative liability
|
|
|
|
|
2,209
|
|
|
|
|
|
1,146
|
|
|
|
Convertible notes, net
|
|
|
|
|
12,409
|
|
|
|
|
|
12,691
|
|
|
|
Accrued interest
|
|
|
|
|
1,622
|
|
|
|
|
|
1,879
|
|
|
|
Total liabilities
|
|
|
|
|
19,933
|
|
|
|
|
|
28,996
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible preferred stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A convertible preferred stock, par value $0.001 per share, 3,067,519
shares authorized at December 31, 2020 and March 31, 2021; 2,819,027
shares issued and outstanding as of December 31, 2020 and March 31, 2021;
liquidation preference of $4,860 as of March 31, 2021
|
|
|
|
|
4,616
|
|
|
|
|
|
4,616
|
|
|
|
Series A-1 convertible preferred stock, par value $0.001 per share, 3,970,776
shares authorized at December 31, 2020 and March 31, 2021; 3,730,366
shares issued and outstanding as of December 31, 2020 and March 31, 2021;
liquidation preference of $5,682 as of March 31, 2021
|
|
|
|
|
5,398
|
|
|
|
|
|
5,398
|
|
|
|
Series A-2 convertible preferred stock, par value $0.001 per share, 3,565,063
shares authorized at December 31, 2020 and March 31, 2021; 3,565,063
shares issued and outstanding as of December 31, 2020 and March 31, 2021;
liquidation preference of $6,115 as of March 31, 2021
|
|
|
|
|
5,809
|
|
|
|
|
|
5,809
|
|
|
|
Series B convertible preferred stock, par value $0.001 per share, 30,450,000
shares authorized at December 31, 2020 and March 31, 2021; 30,409,890
shares issued and outstanding as of December 31, 2020 and March 31, 2021;
liquidation preference of $41,632 as of March 31, 2021
|
|
|
|
|
39,547
|
|
|
|
|
|
39,547
|
|
|
|
Total convertible preferred stock
|
|
|
|
|
55,370
|
|
|
|
|
|
55,370
|
|
|
|
Stockholders’ deficit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value, 58,000,000 shares authorized at December 31,
2020 and March 31, 2021; 1,742,756 and 1,809,998 shares issued and
outstanding at December 31, 2020 and March 31, 2021, respectively
|
|
|
|
|
2
|
|
|
|
|
|
2
|
|
|
|
Additional paid-in capital
|
|
|
|
|
221
|
|
|
|
|
|
333
|
|
|
|
Accumulated deficit
|
|
|
|
|
(68,220)
|
|
|
|
|
|
(67,997)
|
|
|
|
Accumulated other comprehensive loss
|
|
|
|
|
(187)
|
|
|
|
|
|
(192)
|
|
|
|
Total stockholders’ deficit
|
|
|
|
|
(68,184)
|
|
|
|
|
|
(67,854)
|
|
|
|
Total liabilities, convertible preferred stock, and stockholders’ deficit
|
|
|
|
$
|
7,119
|
|
|
|
|
$
|
16,512
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
Cognition Therapeutics, Inc. and Subsidiary
Consolidated Statements of Operations and Comprehensive (Loss) Income
(unaudited)
(in thousands, except share and per share amounts)
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
2020
|
|
|
2021
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
|
$
|
3,446
|
|
|
|
|
$
|
4,430
|
|
|
|
General and administrative
|
|
|
|
|
1,445
|
|
|
|
|
|
1,153
|
|
|
|
Total operating expenses
|
|
|
|
|
4,891
|
|
|
|
|
|
5,583
|
|
|
|
Loss from operations
|
|
|
|
|
(4,891)
|
|
|
|
|
|
(5,583)
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant income
|
|
|
|
|
2,273
|
|
|
|
|
|
4,692
|
|
|
|
Change in the fair value of the derivative liability
|
|
|
|
|
345
|
|
|
|
|
|
1,063
|
|
|
|
Change in the fair value of the warrant liability
|
|
|
|
|
30
|
|
|
|
|
|
—
|
|
|
|
Other income, net
|
|
|
|
|
142
|
|
|
|
|
|
145
|
|
|
|
(Loss) gain on debt extinguishment
|
|
|
|
|
(129)
|
|
|
|
|
|
443
|
|
|
|
Interest expense, net
|
|
|
|
|
(276)
|
|
|
|
|
|
(537)
|
|
|
|
Total other income (expense), net
|
|
|
|
|
2,385
|
|
|
|
|
|
5,806
|
|
|
|
Net (loss) income
|
|
|
|
|
(2,506)
|
|
|
|
|
|
223
|
|
|
|
Cumulative preferred stock dividends
|
|
|
|
|
(1,053)
|
|
|
|
|
|
(1,128)
|
|
|
|
Net loss attributable to common stockholders
|
|
|
|
$
|
(3,559)
|
|
|
|
|
$
|
(905)
|
|
|
|
Unrealized loss on foreign currency translation
|
|
|
|
|
(114)
|
|
|
|
|
|
(5)
|
|
|
|
Total comprehensive (loss) income
|
|
|
|
$
|
(2,620)
|
|
|
|
|
$
|
218
|
|
|
|
Net loss per share attributable to common stockholders, basic and diluted
|
|
|
|
$
|
(2.34)
|
|
|
|
|
$
|
(0.51)
|
|
|
|
Weighted-average common shares outstanding, basic and diluted
|
|
|
|
|
1,519,431
|
|
|
|
|
|
1,779,573
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
Cognition Therapeutics, Inc. and Subsidiary
Consolidated Statements of Convertible Preferred Stock and Stockholders’ Deficit
(unaudited)
(in thousands, except share amounts)
|
|
|
|
Series A
Convertible
Preferred Stock
|
|
|
Series A-1
Convertible
Preferred Stock
|
|
|
Series A-2
Convertible
Preferred Stock
|
|
|
Series B
Convertible
Preferred Stock
|
|
|
|
Common Stock
|
|
|
Additional
Paid-in
Capital
|
|
|
Accumulated
Deficit
|
|
|
Accumulated
Other
Comprehensive
Loss
|
|
|
Total
Stockholders’
Deficit
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Balances as of December 31, 2019
|
|
|
|
|
2,819,027
|
|
|
|
|
$
|
4,413
|
|
|
|
|
|
3,730,366
|
|
|
|
|
$
|
5,160
|
|
|
|
|
|
3,565,063
|
|
|
|
|
$
|
5,552
|
|
|
|
|
|
30,409,890
|
|
|
|
|
$
|
37,802
|
|
|
|
|
|
|
1,519,431
|
|
|
|
|
$
|
2
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
(58,239)
|
|
|
|
|
$
|
(185)
|
|
|
|
|
$
|
(58,422)
|
|
|
|
Equity-based compensation
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
125
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
125
|
|
|
|
Accretion of convertible preferred stock
to redemption value
|
|
|
|
|
—
|
|
|
|
|
|
88
|
|
|
|
|
|
—
|
|
|
|
|
|
102
|
|
|
|
|
|
—
|
|
|
|
|
|
111
|
|
|
|
|
|
—
|
|
|
|
|
|
752
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(125)
|
|
|
|
|
|
(928)
|
|
|
|
|
|
—
|
|
|
|
|
|
(1,053)
|
|
|
|
Other comprehensive loss
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(114)
|
|
|
|
|
|
(114)
|
|
|
|
Net loss
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(2,506)
|
|
|
|
|
|
—
|
|
|
|
|
|
(2,506)
|
|
|
|
Balances as of March 31, 2020
|
|
|
|
|
2,819,027
|
|
|
|
|
$
|
4,501
|
|
|
|
|
|
3,730,366
|
|
|
|
|
$
|
5,262
|
|
|
|
|
|
3,565,063
|
|
|
|
|
$
|
5,663
|
|
|
|
|
|
30,409,890
|
|
|
|
|
$
|
38,554
|
|
|
|
|
|
|
1,519,431
|
|
|
|
|
$
|
2
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
(61,673)
|
|
|
|
|
$
|
(299)
|
|
|
|
|
$
|
(61,970)
|
|
|
|
|
|
|
Series A
Convertible
Preferred Stock
|
|
|
Series A-1
Convertible
Preferred Stock
|
|
|
Series A-2
Convertible
Preferred Stock
|
|
|
Series B
Convertible
Preferred Stock
|
|
|
|
Common Stock
|
|
|
Additional
Paid-in
Capital
|
|
|
Accumulated
Deficit
|
|
|
Accumulated
Other
Comprehensive
Loss
|
|
|
Total
Stockholders’
Deficit
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Balances as of December 31, 2020
|
|
|
|
|
2,819,027
|
|
|
|
|
$
|
4,616
|
|
|
|
|
|
3,730,366
|
|
|
|
|
$
|
5,398
|
|
|
|
|
|
3,565,063
|
|
|
|
|
$
|
5,809
|
|
|
|
|
|
30,409,890
|
|
|
|
|
$
|
39,547
|
|
|
|
|
|
|
1,742,756
|
|
|
|
|
$
|
2
|
|
|
|
|
$
|
221
|
|
|
|
|
$
|
(68,220)
|
|
|
|
|
$
|
(187)
|
|
|
|
|
$
|
(68,184)
|
|
|
|
Exercise of stock options
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
67,242
|
|
|
|
|
|
—
|
|
|
|
|
|
14
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
14
|
|
|
|
Equity-based compensation
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
98
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
98
|
|
|
|
Other comprehensive loss
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(5)
|
|
|
|
|
|
(5)
|
|
|
|
Net income
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
223
|
|
|
|
|
|
—
|
|
|
|
|
|
223
|
|
|
|
Balances as of March 31, 2021
|
|
|
|
|
2,819,027
|
|
|
|
|
$
|
4,616
|
|
|
|
|
|
3,730,366
|
|
|
|
|
$
|
5,398
|
|
|
|
|
|
3,565,063
|
|
|
|
|
$
|
5,809
|
|
|
|
|
|
30,409,890
|
|
|
|
|
$
|
39,547
|
|
|
|
|
|
|
1,809,998
|
|
|
|
|
$
|
2
|
|
|
|
|
$
|
333
|
|
|
|
|
$
|
(67,997)
|
|
|
|
|
$
|
(192)
|
|
|
|
|
$
|
(67,854)
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
Cognition Therapeutics, Inc. and Subsidiary
Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
2020
|
|
|
2021
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
|
$
|
(2,506)
|
|
|
|
|
$
|
223
|
|
|
|
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
25
|
|
|
|
|
|
23
|
|
|
|
Amortization of debt issuance costs
|
|
|
|
|
6
|
|
|
|
|
|
22
|
|
|
|
Amortization of debt discount
|
|
|
|
|
121
|
|
|
|
|
|
260
|
|
|
|
Change in the fair value of the derivative liability
|
|
|
|
|
(345)
|
|
|
|
|
|
(1,063)
|
|
|
|
Change in the fair value of the warrant liability
|
|
|
|
|
(30)
|
|
|
|
|
|
—
|
|
|
|
Loss (gain) on debt extinguishment
|
|
|
|
|
129
|
|
|
|
|
|
(443)
|
|
|
|
Equity-based compensation
|
|
|
|
|
125
|
|
|
|
|
|
98
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant receivables
|
|
|
|
|
2,007
|
|
|
|
|
|
(1,111)
|
|
|
|
Prepaid expenses and other current assets
|
|
|
|
|
(27)
|
|
|
|
|
|
305
|
|
|
|
Other receivables
|
|
|
|
|
219
|
|
|
|
|
|
(63)
|
|
|
|
Accounts payable
|
|
|
|
|
311
|
|
|
|
|
|
953
|
|
|
|
Accrued expenses and interest
|
|
|
|
|
495
|
|
|
|
|
|
277
|
|
|
|
Other current liabilities
|
|
|
|
|
—
|
|
|
|
|
|
(253)
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
|
|
530
|
|
|
|
|
|
(772)
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments for property and equipment
|
|
|
|
|
(10)
|
|
|
|
|
|
—
|
|
|
|
Net cash used in investing activities
|
|
|
|
|
(10)
|
|
|
|
|
|
—
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments on capital lease obligation
|
|
|
|
|
(4)
|
|
|
|
|
|
—
|
|
|
|
Proceeds from the issuance of Simple Agreements for Future Equity
|
|
|
|
|
—
|
|
|
|
|
|
8,942
|
|
|
|
Proceeds from the exercise of stock options
|
|
|
|
|
—
|
|
|
|
|
|
14
|
|
|
|
Proceeds from the issuance of convertible notes
|
|
|
|
|
3,841
|
|
|
|
|
|
—
|
|
|
|
Debt issuance costs related to convertible notes
|
|
|
|
|
(55)
|
|
|
|
|
|
—
|
|
|
|
Net cash provided by financing activities
|
|
|
|
|
3,782
|
|
|
|
|
|
8,956
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
|
|
(34)
|
|
|
|
|
|
—
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
|
|
4,268
|
|
|
|
|
|
8,184
|
|
|
|
Cash and cash equivalents, beginning of period
|
|
|
|
|
2,890
|
|
|
|
|
|
5,189
|
|
|
|
Cash and cash equivalents, end of period
|
|
|
|
$
|
7,158
|
|
|
|
|
$
|
13,373
|
|
|
|
Supplemental disclosures of non-cash financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash accretion of convertible preferred stock to redemption value
|
|
|
|
$
|
1,053
|
|
|
|
|
$
|
—
|
|
|
|
Accrued issuance costs related to Simple Agreements for Future Equity
|
|
|
|
$
|
—
|
|
|
|
|
$
|
31
|
|
|
|
Deferred offering costs included in accounts payable and accrued expenses
|
|
|
|
$
|
—
|
|
|
|
|
$
|
372
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
Cognition Therapeutics, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share amounts)
1. Description of Business and Financial Condition
Cognition Therapeutics, Inc. and Subsidiary (hereafter “the Company”) incorporated as a Delaware corporation on August 21, 2007. The Company is a biopharmaceutical company developing disease modifying therapies for central nervous system (CNS) disorders. The Company’s pipeline candidates were discovered using proprietary biology and chemistry platforms designed to identify novel drug targets and disease-modifying therapies that address dysregulated pathways specifically associated with neurodegenerative diseases. The Company was founded on the unique combination of biological expertise around these targets, including proprietary assays that emphasize functional responses, and proprietary medicinal chemistry intended to produce novel, high-quality small-molecule drug candidates.
On July 14, 2015, the Company formed Cognition Therapeutics PTY LTD, a wholly owned subsidiary, primarily for the purpose of conducting research and development efforts at facilities located in Australia. Assets and liabilities of the Company’s Australian subsidiary, which uses the Australian dollar as its local functional currency, are translated to United States (U.S.) dollars at year-end exchange rates. Income statement accounts are translated using the average exchange rates prevailing during the month in which income and expenses are generated. Translation adjustments are recorded to accumulated other comprehensive income (loss) (“AOCI”) within stockholders’ deficit. Gains and losses from foreign currency transactions are included in net loss as a part of other income, net.
Liquidity and Going Concern
As of March 31, 2021, the Company had an accumulated deficit of $67,997 and cash and cash equivalents of $13,373. The Company incurred a net loss of $2,506 for the three months ended March 31, 2020 and had net income of $223 for the three months ended March 31, 2021. The Company has financed its operations to date primarily through government and private philanthropic grants, private placements of its convertible preferred stock, private offerings of convertible notes, and the Simple Agreement for Future Equity, or SAFEs, described in Note 12. It is not anticipated that the Company will generate commercial revenue or operating cash flows in the foreseeable future. The Company’s ability to continue as a going concern in the near term is largely dependent on the Company’s ability to raise additional funds through debt or equity transactions, grant awards or other means. The Company’s forecasted cash required to fund operations, excluding future fundraising efforts and future additional NIH Grants, indicates that the Company does not have sufficient funds to support operations through the one-year period from the issuance date of these financial statements. Accordingly, there is substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these financial statements are issued.
Management’s plans to address this going concern uncertainty include raising additional financing through public or private equity offerings, debt financings, collaborations and licensing arrangements, additional grant awards, or other sources to fund its operations, however, there can be no assurance that the Company will be able to obtain such funding on terms acceptable to the Company, on a timely basis or at all. The failure of the Company to obtain sufficient funds on acceptable terms when needed would have a material adverse effect on the Company’s business, results of operations and financial condition.
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.
2. Summary of Significant Accounting Policies
The Company’s significant accounting policies are disclosed in the audited financial statements for the year ended December 31, 2020, included elsewhere in this prospectus. Since the date of those financial statements, there have been no changes to its significant accounting policies.
Cognition Therapeutics, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share amounts)
Basis of Presentation
The unaudited interim financial statements have been prepared on the same basis as the audited financial statements. In the opinion of the Company’s management, the accompanying unaudited interim consolidated financial statements contain all adjustments that are necessary to present fairly the Company’s financial position as of March 31, 2021, and the statements of operations and comprehensive (loss) income, convertible preferred stock and stockholders’ deficit and cash flows for the three months ended March 31, 2020 and 2021. Such adjustments are of a normal and recurring nature. The results for the three months ended March 31, 2021 are not necessarily indicative of the results for the year ending December 31, 2021, or for any future period. These interim financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2020, and the notes thereto, which are included elsewhere in this prospectus.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents consist primarily of interest-bearing deposits at various financial institutions. The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
Receivables
Grant Receivables
Grant receivables relate to outstanding amounts due for reimbursable expenditures of awarded grants issued by the National Institute of Health and are carried at their estimated collectible amounts. The Company expects all receivables to be collectible, and accordingly, there is no allowance for doubtful accounts required on these grant receivables.
Other Receivables
Other receivables consist of research and development tax credits from the state of Pennsylvania and the Australian research and development tax credit from the Australian Tax Authority. Historically, the Company has sold the Pennsylvania tax credits to third parties, while the Australian tax refund is paid directly to the Company by the Australian Tax Authority. Research and development tax refunds and credits are carried at their estimated collectible amounts. The Company expects all receivables to be collectible and accordingly, there is no allowance for doubtful accounts required on these other receivables.
Deferred Offering Costs
The Company capitalizes certain legal, accounting and other third-party fees that are directly associated with in-process equity financings, including the initial public offering (“IPO”), as deferred costs until such financings are consummated. After consummation of the equity financing, these costs are recorded in stockholders’ deficit as a reduction of proceeds generated as a result of the offering. Should an in-process equity financing be abandoned, the deferred offering costs will be expensed immediately in the consolidated
Cognition Therapeutics, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share amounts)
statement of operations and comprehensive loss. During the three months ended March 31, 2020 and 2021, the Company incurred $0 and $372 of deferred offering costs, respectively, in connection with its IPO registration process.
Property and Equipment
Property and equipment is recorded at cost, less accumulated depreciation. Depreciation is computed on the straight-line basis over the estimated useful life of the asset. The Company estimates the useful life to be 5 and 6 years for equipment and furniture and fixtures, respectively. The cost of repairs and maintenance is charged to expense as incurred.
Property and equipment is evaluated for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. If expected cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of the assets. There were no indicators of impairment of long-lived assets during the three months ended March 31, 2020 or 2021.
Convertible Instruments
ASC 815, Derivatives and Hedging Activities (“ASC 815”) requires companies to bifurcate certain conversion options and redemption features from their host instruments and account for them as freestanding derivative financial instruments should certain criteria be met.
The Company also follows ASC 480-10, Distinguishing Liabilities from Equity (“ASC 480-10”) when evaluating the accounting for its hybrid instruments. A financial instrument that embodies an unconditional obligation, or a financial instrument other than an outstanding share that embodies a conditional obligation, that the issuer must or may settle by issuing a variable number of its equity shares shall be classified as a liability (or an asset in some circumstances) if, at inception, the monetary value of the obligation is based solely or predominantly on any one of the following: (a) a fixed monetary amount known at inception; (b) variations in something other than the fair value of the issuer’s equity shares; or (c) variations inversely related to changes in the fair value of the issuer’s equity shares. Hybrid instruments meeting these criteria are not further evaluated for any embedded derivatives and are carried as a liability at fair value at each balance sheet date.
Debt Issuance Costs and Discounts
The Company incurred third-party costs in connection with the convertible notes as described in Note 6. These costs are classified on the balance sheet as a direct deduction from the convertible notes and amortized over the term of the agreement as interest expense using the effective interest rate method.
Discounts related to bifurcated derivatives resulting from the convertible note issuances are recorded as a reduction to the carrying value of the debt and amortized over the life of the debt using the effective interest method.
Warrants Issued in Connection with Financings
The Company generally accounts for warrants issued in connection with debt and equity financings as a component of equity, unless the warrants include specific features, such as if the warrants are exercisable for securities that are considered contingently redeemable. For warrants that are exercisable for securities that are considered contingently redeemable, the Company records the fair value of the warrants as a liability at each balance sheet date and records changes in fair value in other income (expense) in the consolidated statement of operations and comprehensive loss.
Cognition Therapeutics, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share amounts)
Convertible Preferred Stock
The Company has classified convertible preferred stock outside of stockholders’ deficit in the accompanying balance sheets due to the convertible preferred stock’s redemption features. Originally, the convertible preferred stock was eligible to become redeemable at the holders’ option at any time after March 20, 2021. This right was removed in connection with an amendment to the Company’s articles of incorporation on July 29, 2020. Pre-amendment, the convertible preferred stock was redeemable due to the passage of time, and therefore, the Company recorded changes in the redemption value and accreted the convertible preferred stock immediately to the redemption value during each period presented. These increases were affected through charges against retained earnings, if any, and then to additional paid-in capital. In the absence of additional paid-in capital, the accretion is charged to accumulated deficit. Post-amendment, the convertible preferred stock is considered to be contingently redeemable only upon the occurrence of a deemed liquidation event (Note 7). As a result, the Company ceased accreting the convertible preferred stock on July 29, 2020. To evaluate whether the changes to the terms of the preferred stock should be accounted for as a modification or extinguishment, the Company follows the qualitative approach, in which amendments to preferred shares are analyzed based on the expected economics as well as the business purpose of the amendment. The Company concluded that the amendment did not result in a significant change to the fundamental nature of the preferred stock, and accordingly, the amendment was accounted for as a modification, and there was no accounting impact for the modification.
Grant income
For the three months ended March 31, 2020 and 2021, the Company generated grant income of $2,273 and $4,692 from reimbursements from the National Institute of Health (“NIH”) for aging research. The Company records grant income in other income (expense) in the period in which the reimbursable research and development services are incurred and the right to payment is realized. The grants awarded relate to agreed upon direct and indirect costs for specific studies or clinical trials, which may include personnel and consulting costs, costs paid to contract research organizations (‘‘CROs’’), research institutions and/or consortiums involved in the grant, as well as facilities and administrative costs. These grants are cost plus fixed fee arrangements in which the Company is reimbursed for its eligible direct and indirect costs over time, up to the maximum amount of each specific grant award. Only costs that are allowable under the grant award, certain government regulations and the NIH’s supplemental policy and procedure manual may be claimed for reimbursement, and the reimbursements are subject to routine audits from governmental agencies from time to time.
Research and Development Costs
The Company is involved in research and development aimed at the development of treatments for a variety of diseases related to the central nervous system, with a primary focus on Alzheimer’s Disease. Research and development costs are expensed as incurred. Research and development expenses consist principally of personnel costs, including salaries, stock-based compensation, and benefits for employees, third-party license fees and other operational costs related to our research and development activities, including allocated facility-related expenses and external costs of outside vendors, and other direct and indirect costs. Non-refundable research and development costs are deferred and expensed as the related goods are delivered or services are performed. Costs for external development activities are recognized based on an evaluation of the progress to completion of specific tasks. Costs for certain research and development activities are recognized based on the pattern of performance of the individual arrangements, which may differ from the pattern of billings incurred, and are reflected in the consolidated financial statements as prepaid expenses or as accrued research and development expenses.
Equity-based Compensation
Following the provisions of ASC 718, Compensation — Stock Compensation, the Company recognizes compensation expense for equity-based grants using the straight-line attribution method, in which the
Cognition Therapeutics, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share amounts)
expense is recognized ratably over the requisite service period within operating expenses based on the grant date fair value. The Company also has granted awards subject to performance-based vesting. The Company would recognize compensation expense for these awards commencing in the period in which the vesting condition becomes probable of achievement. Grant date fair value is estimated on the date of grant using the Black-Scholes option pricing model. Forfeitures are recognized in the period in which they occur.
Black-Scholes requires inputs based on certain subjective assumptions, including (i) the expected stock price volatility, (ii) the expected term of the award, (iii) the risk-free interest rate and (iv) expected dividends. Due to the lack of a public market for the Company’s common stock and lack of company specific historical and implied volatility data, the Company has based its computation of expected volatility on the historical volatility of a representative group of public companies with similar characteristics to the Company, including stage of product development and life science industry focus. The historical volatility is calculated based on a period of time commensurate with expected term assumption. The Company uses the simplified method to calculate the expected term for stock options granted to employees whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the stock options due to its lack of sufficient historical data. The risk-free interest rate is based on U.S. Treasury securities with a maturity date commensurate with the expected term of the associated award. The expected dividend yield is assumed to be zero as the Company has never paid dividends and has no current plans to pay any dividends on its common stock.
Due to the absence of an active market for the Company’s common stock, the Company utilized methodologies in accordance with the framework of the American Institute of Certified Public Accountants Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation, to estimate the fair value of its common stock. In determining the exercise prices for stock options granted, the Company has considered the estimated fair value of the common stock as of the measurement date. The estimated fair value of the common stock has been determined at each grant date based upon a variety of factors, including the illiquid nature of the common stock, arm’s-length sales of the Company’s capital stock (including convertible preferred stock), the effect of the rights and preferences of the preferred stockholders and the prospects of a liquidity event. Among other factors are the Company’s financial position and historical financial performance, the status of technological developments within the Company’s research, the composition and ability of the current research and management team, an evaluation or benchmark of the Company’s competition and the current business climate in the marketplace. Significant changes to the key assumptions underlying the factors used could result in different fair values of common stock at each valuation date.
Concentration of Credit Risk
The Company’s financial instruments that are exposed to credit risks consist of cash and cash equivalents. The Company maintains its cash and cash equivalents in bank deposit accounts which, at times, may exceed the federally insured limit. The Company has not experienced any losses in these accounts and does not believe it is exposed to any significant credit risk related to these funds.
Fair Value of Financial Instruments
The Company applies ASC 820, Fair Value Measurement (“ASC 820”), which establishes a framework for measuring fair value and clarifies the definition of fair value within that framework. ASC 820 defines fair value as an exit price, which is the price that would be received for an asset or paid to transfer a liability in the Company’s principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value hierarchy established in ASC 820 generally requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect the assumptions that market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of
Cognition Therapeutics, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share amounts)
the reporting entity. Unobservable inputs reflect the entity’s own assumptions based on market data and the entity’s judgments about the assumptions that market participants would use in pricing the asset or liability and are to be developed based on the best information available in the circumstances.
The carrying value of the Company’s cash and cash equivalents, grants receivable, prepaid expense, other receivables, other current assets, accounts payable, accrued expenses and other current liabilities approximate fair value because of the short-term maturity of these financial instruments. In addition, the Company records its warrant liability, derivative liability, and Simple Agreements for Future Equity at fair value.
The valuation hierarchy is composed of three levels. The classification within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The levels within the valuation hierarchy are described below:
•
Level 1 — Assets and liabilities with unadjusted, quoted prices listed on active market exchanges. Inputs to the fair value measurement are observable inputs, such as quoted prices in active markets for identical assets or liabilities.
•
Level 2 — Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities with similar underlying terms, as well as direct or indirect observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals.
•
Level 3 — Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities.
Comprehensive Loss
The Company recorded $114 and $5 in other comprehensive loss related to foreign currency translation for the three months ended March 31, 2020 and 2021, respectively. The Company presents comprehensive loss in a single statement within its consolidated financial statements.
Net Loss Per Share Attributable to Common Stockholders
Basic net loss attributable to common shares is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during each period. Diluted net loss attributable to common shares includes the effect, if any, from the potential exercise or conversion of securities, such as convertible preferred stock and stock options, which would result in the issuance of incremental shares of common stock. For diluted net loss per share, the weighted-average number of shares of common stock is the same for basic net loss per share due to the fact that when a net loss exists, dilutive securities are not included in the calculation as the impact is anti-dilutive. The Company’s convertible preferred stock entitles the holder to participate in dividends and earnings of the Company, and, if the Company were to recognize net income attributable to common stockholders, it would have to use the two-class method to calculate earnings per share. The two-class method is not applicable during periods with a net loss attributable to common stockholders, as the holders of the convertible preferred stock have no obligation to fund losses.
Segments
The Company has determined that it operates and manages one operating segment, which is the business of developing and commercializing therapeutics. The Company’s chief operating decision maker, its chief executive officer, reviews financial information on an aggregate basis for the purpose of allocating resources.
Cognition Therapeutics, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share amounts)
Emerging Growth Company Status
The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it is (a) no longer an emerging growth company or (b) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, these financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
Recent Accounting Pronouncements
In February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842). ASU No. 2016-02 requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. ASU No. 2016-02 is effective for the Company for annual periods beginning after
December 15, 2021. Early adoption is permitted. The Company expects to adopt this guidance when effective and is assessing what effect the adoption of ASU 2016-02 will have on its consolidated financial statements and accompanying notes. The Company expects to record right-of-use assets and liabilities upon adoption.
In June 2018, the FASB issued ASU 2018-07, Compensation — Stock Compensation (Topic 718) Improvements to Nonemployee Share-Based Payment Accounting. The new ASU simplifies the accounting for share-based payments to non-employees by aligning it with the accounting for share-based payments to employees, with certain exceptions. The Company adopted the standard on January 1, 2020 and it did not have a material impact on the Company’s financial condition, results of operations and cash flows.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820). This standard modifies disclosure requirements related to fair value measurement and is effective for all entities for fiscal years beginning after December 15, 2019. Among other things, ASU 2018-13 requires public entities to disclose the range and weighted average used to develop significant unobservable inputs for level 3 fair value measurements, while eliminating the requirement for public entities to disclose the amount of and reasons for transfers between level 1 and level 2 of the fair value hierarchy. Implementation on a prospective or retrospective basis varies by specific disclosure requirement. The standard also allows for early adoption of any removed or modified disclosures upon issuance while delaying adoption of the additional disclosures until their effective date. The Company adopted this guidance on January 1, 2020 and the adoption did not have a material impact on its financial statements.
In August 2020, the FASB issued ASU 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU simplifies the accounting for certain convertible instruments. ASU 2020-06 will be effective for fiscal years beginning after December 15, 2021, with early adoption permitted for interim and annual reporting periods beginning after December 15, 2020. The Company adopted ASU 2020-06 on January 1, 2021, and the adoption did not have a material impact on the Company’s consolidated financial statements and related disclosures.
In October 2020, the FASB issued ASU 2020-10, Codification Improvements, which updates various codification topics by clarifying or improving disclosure requirements to align with the SEC’s regulations. The Company adopted ASU 2020-10 on January 1, 2021. The adoption of ASU 2020-10 did not have a material impact on the Company’s consolidated financial statements and related disclosures.
Cognition Therapeutics, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share amounts)
3. Financial Instruments and Fair Value Measurements
Financial assets and liabilities measured at fair value are summarized below:
|
|
|
|
As of December 31, 2020
|
|
|
|
Quoted Priced in
Active Markets
(Level 1)
|
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Total
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
|
|
$
|
2,853
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
2,853
|
|
|
|
Total assets
|
|
|
|
$
|
2,853
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
2,853
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
2,209
|
|
|
|
|
$
|
2,209
|
|
|
|
Total liabilities
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
2,209
|
|
|
|
|
$
|
2,209
|
|
|
|
|
|
|
As of March 31, 2021
|
|
|
|
Quoted Priced in
Active Markets
(Level 1)
|
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Total
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
|
|
$
|
11,795
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
11,795
|
|
|
|
Total assets
|
|
|
|
$
|
11,795
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
11,795
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
1,146
|
|
|
|
|
$
|
1,146
|
|
|
|
Simple Agreements for Future Equity
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
8,942
|
|
|
|
|
|
8,942
|
|
|
|
Total liabilities
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
10,088
|
|
|
|
|
$
|
10,088
|
|
|
The following table sets forth a summary of the changes in fair value of the Level 3 liabilities for the three months ended March 31, 2020 and 2021:
|
|
|
|
Three Months Ended March 31, 2020
|
|
|
|
|
|
Warrant
Liability
|
|
|
Derivative
Liability
|
|
|
Total
|
|
|
Balance at December 31, 2019
|
|
|
|
$
|
181
|
|
|
|
|
$
|
1,493
|
|
|
|
|
$
|
1,674
|
|
|
|
Fair value recognized upon the issuance of Convertible Notes
|
|
|
|
|
—
|
|
|
|
|
|
525
|
|
|
|
|
|
525
|
|
|
|
Change in the fair value of the liability
|
|
|
|
|
(30)
|
|
|
|
|
|
(345)
|
|
|
|
|
|
(375)
|
|
|
|
Total liabilities
|
|
|
|
$
|
151
|
|
|
|
|
$
|
1,673
|
|
|
|
|
$
|
1,824
|
|
|
|
|
|
|
Three Months Ended March 31, 2021
|
|
|
|
|
|
SAFE
|
|
|
Derivative
Liability
|
|
|
Total
|
|
|
Balance at December 31, 2020
|
|
|
|
$
|
—
|
|
|
|
|
$
|
2,209
|
|
|
|
|
$
|
2,209
|
|
|
|
Fair value recognized upon the issuance of SAFE
|
|
|
|
|
8,942
|
|
|
|
|
|
—
|
|
|
|
|
|
8,942
|
|
|
|
Change in the fair value of the liability
|
|
|
|
|
—
|
|
|
|
|
|
(1,063)
|
|
|
|
|
|
(1,063)
|
|
|
|
Total liabilities
|
|
|
|
$
|
8,942
|
|
|
|
|
$
|
1,146
|
|
|
|
|
$
|
10,088
|
|
|
Derivative Liability — The Company recognizes derivative liabilities as a result of the issuance of the convertible notes that contain conversion and redemption features that are required to be bifurcated. The
Cognition Therapeutics, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share amounts)
fair value measurement of the derivative liability is classified as Level 3 under the fair value hierarchy as it has been valued using certain unobservable inputs. These inputs include: (1) probability of occurrence of future events (such as a qualified financing or a sale), and (2) discount rate for implied return required by investor. Significant increases or decreases in any of those inputs in isolation could result in a significantly lower or higher fair value measurement.
The fair value of the derivative liability was determined by calculating the fair value of the notes with the conversion and redemption features as compared to the fair value of the notes without such features, with the difference representing the value of the conversion and redemption features, or the derivative liability. The conversion and redemption features are measured at fair value as of each reporting date and the change in the fair value for the period is recorded in the consolidated statements of operations as a change in the fair value of the derivative liability. The fair value of the derivative liability is based on Level 3 unobservable inputs. Changes in fair value are recognized as a gain or loss within other income (expense) on the consolidated statements of operations and comprehensive loss.
Warrant Liability — The Company issued 180,724 series A-1 preferred stock warrants in December 2010. The Company recorded a change in fair value adjustment of $30 in the consolidated statement of operations and comprehensive loss for the three months ended March 31, 2020. The warrants expired unexercised in October 2020.
Simple Agreements for Future Equity — On March 25, 2021, the Company entered into simple agreements for future equity (“SAFEs”) with existing investors, pursuant to which the Company received gross proceeds in an aggregate amount equal to $8,942. As of March 31, 2021, the assumptions used in the valuation for the instrument did not materially change from the date of issuance. The inputs include: (1) probability of occurrence of future events (such as a change of control or public offering), and (2) discount rate for implied return required by investor.
4. Accrued Expenses
Accrued expense consists of the following as of:
|
|
|
|
December 31,
2020
|
|
|
March 31,
2021
|
|
|
Employee compensation, benefits, and related accruals
|
|
|
|
$
|
732
|
|
|
|
|
$
|
722
|
|
|
|
Consulting and contracted research
|
|
|
|
|
143
|
|
|
|
|
|
197
|
|
|
|
Professional fees
|
|
|
|
|
119
|
|
|
|
|
|
232
|
|
|
|
Total
|
|
|
|
$
|
994
|
|
|
|
|
$
|
1,151
|
|
|
5. Commitments and Contingencies
The Company has operating leases for its office and laboratory facilities under agreements that run through June 30, 2023.
Minimum lease commitments consisted of the following as of March 31, 2021:
|
|
|
|
Operating Leases
|
|
|
2021
|
|
|
|
$
|
89
|
|
|
|
2022
|
|
|
|
|
118
|
|
|
|
2023
|
|
|
|
|
59
|
|
|
|
Total lease commitments
|
|
|
|
$
|
266
|
|
|
Cognition Therapeutics, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share amounts)
Rent expense was $57 and $34 for the three months ended March 31, 2020 and 2021, respectively.
From time to time, the Company may be involved in disputes or regulatory inquiries that arise in the ordinary course of business. When the Company determines that a loss is both probable and reasonably estimable, a liability is recorded and disclosed if the amount is material to the financial statements taken as a whole. When a material loss contingency is only reasonably possible, the Company does not record a liability, but instead discloses the nature and the amount of the claim, and an estimate of the loss or range of loss, if such an estimate can reasonably be made.
As of December 31, 2020 and March 31, 2021, there was no litigation or contingency with at least a reasonable possibility of a material loss.
6. Debt
On March 8, 2018, the Company entered into a Convertible Note Purchase Agreement (“the Original Agreement”) with existing investors of the Company. Under the terms of the Original Agreement, the Company agreed to issue up to $5,000 in principle Convertible Notes (the “Original Notes”). The Original Notes accrued interest at 4.0% per annum from the date of issuance with a maturity date of February 27, 2020 (subsequently extended — see below). The Company issued $2,965 in Original Notes in March and April 2018. Under the terms of the Original Agreement, the following features are included:
•
Automatic conversion into equity securities upon the closing of an equity financing with aggregate gross proceeds of at least $10,000, at the conversion price equal to 90.0% of the lowest price per share of the equity financing securities sold (a “Automatic Conversion Upon a Qualified Financing”)
•
Optional conversion into equity securities upon the closing of an equity financing that does not constitute a Qualified Financing at a conversion price equal to 90.0% of the price per share of the equity financing securities sold (a “Optional Conversion Upon a Non-Qualified Financing”)
•
Optional conversion of the unpaid principal balance plus accrued and unpaid interest to into B-1 Convertible Preferred Stock at a conversion price of $1.385 per share or redemption of the unpaid principal balance plus accrued and unpaid interest if (i) a transaction results in any person or group with over 50.0% voting power, (ii) any consolidation or merger transaction, or (iii) a sale or transfer of substantially all of the Company's assets (“Option Conversion or Redemption”) Optional conversion of the unpaid principal balance plus accrued and unpaid interest to into Series B-1 convertible preferred stock at a conversion price of $1.385 per share or redemption of the unpaid principal balance plus accrued and unpaid interest if (i) a transaction results in any person or group with over 50.0% voting power, (ii) any consolidation or merger transaction, or (iii) a sale or transfer of substantially all of the Company’s assets (“Option Conversion or Redemption”)
•
Automatic redemption of unpaid principal and all accrued and unpaid interest upon maturity, liquidation, dissolution, winding up, or event of default (“Automatic Redemption”)
On November 15, 2018, the Company entered into a Convertible Note Purchase Agreement (the “Additional Agreement”) with existing investors of the Company. Under the terms of the Additional Agreement, the Company agreed to issue up to an aggregate of $8,000 in principle Convertible Notes (the “Additional Notes”). In connection with the Additional Agreement, the Company amended the Original Notes (the “Amendment”). The Amendment resulted in the following changes to the Original Notes:
•
the interest rate of the Original Notes accrue interest at 4.0% from issuance to November 15, 2018, and accrue interest at 8.0% from November 15, 2018 to maturity or conversion,
•
the conversion price was amended to 80.0% of the price per share in connection with conversion of the notes upon a Qualified or Non-Qualified Financing,
Cognition Therapeutics, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share amounts)
•
the holder’s option upon a sale event to receive repayment, at two times the principal plus accrued and unpaid interest, (“Optional Redemption Upon a Sales Transaction”) and
•
a condition that each holder of $1,000 in aggregate principal must be included in the 66 2/3% of the holders of the principal amount of the Notes to provide consent to make any further amendments or waivers.
On February 27, 2020, the Company entered into a Convertible Note Purchase Agreement (the “Second Amendment”) with existing investors of the Company. Under the terms of the Second Amendment, the Company agreed to issue up to an aggregate of $10,035 in principle Convertible Notes (the “Second Amendment Notes”). In connection with the Second Amendment, the Company amended the Original Notes and Additional Notes. The Second Amendment resulted in the following changes:
•
extend the maturity date to June 30, 2021;
•
add a cap for a conversion in connection with a Qualified Financing; and
•
provide for mandatory conversion of the Combined Notes into Series B-1 Preferred Convertible Stock of the Company if the Company has not completed a Qualified Financing on or before June 30, 2021.
The Company applied extinguishment accounting to the Original Notes upon execution of the Amendment in 2018 on the basis that the present value of the cash flows under the terms of the Amendment of the Original notes were determined to be substantially different. The Company applied extinguishment accounting upon execution of the Second Amendment as the addition of the conversion features are substantive and recorded a loss on debt extinguishment of $129 in the consolidated statement of operations and comprehensive loss for the three months ended March 31, 2020.
Each Additional Note and Second Amendment Note (collectively with the Original Notes, the “Convertible Notes” or the “Notes) included the features set forth above. The Company issued $2,965 Original Notes in 2018, $4,661 Additional Notes in 2018 and 2019, and $5,372 Second Amendment Notes in 2020.
The total issuance costs incurred in connection with all closings of the Convertible Notes was $205.
The Convertible Notes were considered to be a hybrid financial instrument consisting of a fixed interest rate host with certain embedded features requiring evaluation for bifurcation and separate accounting. The Company determined that the Automatic Conversion Upon a Qualified Financing, Optional Conversion Upon a Non-Qualified Financing and the Optional Redemption Upon a Sales Transaction were considered freestanding financial instruments which required bifurcation from the host debt instruments.
The resulting debt discount from the derivative liabilities was presented as a direct deduction from the carrying amount of the Convertible Notes and amortized to interest expense using the effective interest rate method.
The Convertible Notes as of December 31, 2020 and March 31, 2021 consist of the following:
|
|
|
|
December 31,
2020
|
|
|
March 31,
2021
|
|
|
Convertible notes principal
|
|
|
|
$
|
12,998
|
|
|
|
|
$
|
12,998
|
|
|
|
Less: unamortized note issuance costs
|
|
|
|
|
(45)
|
|
|
|
|
|
(23)
|
|
|
|
Less: debt discount
|
|
|
|
|
(544)
|
|
|
|
|
|
(284)
|
|
|
|
|
|
|
|
$
|
12,409
|
|
|
|
|
$
|
12,691
|
|
|
Cognition Therapeutics, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share amounts)
Interest expense on the convertible notes, including amortization of debt issuance costs, consisted of the following for the three months ended March 31, 2020 and 2021:
|
|
|
|
2020
|
|
|
2021
|
|
|
Coupon interest
|
|
|
|
$
|
153
|
|
|
|
|
$
|
257
|
|
|
|
Issuance costs amortization
|
|
|
|
|
6
|
|
|
|
|
|
22
|
|
|
|
Discount amortization
|
|
|
|
|
121
|
|
|
|
|
|
260
|
|
|
|
|
|
|
|
$
|
280
|
|
|
|
|
$
|
539
|
|
|
At December 31, 2020 and March 31, 2021, the Company has classified the outstanding convertible notes, as well as accrued interest, within long term liabilities, as the convertible notes are not expected to require the use of current assets to settle the obligations within the next twelve months. In May of 2021, the convertible notes and accrued interest thereon were converted in Series B-1 convertible preferred stock (Note 13). The Company determined the Series B-1 convertible preferred stock issued should be excluded from the calculation of diluted net loss per share attributable to common stockholders for the three months ended March 31, 2020 and 2021 due to the antidilutive effect on earnings per share.
In April 2020, the Company received a $443 unsecured loan, bearing interest at 1.0%, pursuant to the Paycheck Protection Program (the “PPP”), a program implemented by the U.S. Small Business Administration (the “SBA”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) (the “PPP Loan”). The PPP provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loan and accrued interest are forgivable after eight weeks if the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities. The amount of loan forgiveness may be reduced if the borrower terminates employees or reduces salaries during the eight-week period. The unforgiven portion of the PPP loan is payable over two years at an interest rate of 1.0%, with a deferral of payments for the first six months. The Company used the proceeds for purposes consistent with the PPP.
On January 21, 2021, the Company received confirmation from the SBA that the PPP Loan had been forgiven in full including all interest incurred. Accordingly, the Company recognized $443 of income for the debt extinguishment pursuant to ASC 470-50-15-4 for the three months ended March 31, 2021.
7. Preferred Stock
Convertible preferred stock consisted of the following:
As of December 31, 2020:
|
Class of Preferred
|
|
|
Preferred Stock
Authorized
|
|
|
Preferred Stock
Issued and
Outstanding
|
|
|
Carrying Value
|
|
|
Liquidation
Preference
|
|
|
Common Stock
Issuable Upon
Conversion
|
|
|
Series A Preferred Stock
|
|
|
|
|
3,067,519
|
|
|
|
|
|
2,819,027
|
|
|
|
|
$
|
4,616
|
|
|
|
|
$
|
4,766
|
|
|
|
|
|
2,819,027
|
|
|
|
Series A-1 Preferred Stock
|
|
|
|
|
3,970,776
|
|
|
|
|
|
3,730,366
|
|
|
|
|
|
5,398
|
|
|
|
|
|
5,572
|
|
|
|
|
|
3,730,366
|
|
|
|
Series A-2 Preferred Stock
|
|
|
|
|
3,565,063
|
|
|
|
|
|
3,565,063
|
|
|
|
|
|
5,809
|
|
|
|
|
|
5,997
|
|
|
|
|
|
3,565,063
|
|
|
|
Series B Preferred Stock
|
|
|
|
|
30,450,000
|
|
|
|
|
|
30,409,890
|
|
|
|
|
|
39,547
|
|
|
|
|
|
40,826
|
|
|
|
|
|
30,409,890
|
|
|
|
Total
|
|
|
|
|
41,053,358
|
|
|
|
|
|
40,524,346
|
|
|
|
|
$
|
55,370
|
|
|
|
|
$
|
57,161
|
|
|
|
|
|
40,524,346
|
|
|
Cognition Therapeutics, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share amounts)
As of March 31, 2021:
|
Class of Preferred
|
|
|
Preferred Stock
Authorized
|
|
|
Preferred Stock
Issued and
Outstanding
|
|
|
Carrying
Value
|
|
|
Liquidation
Preference
|
|
|
Common Stock
Issuable Upon
Conversion
|
|
|
Series A Preferred Stock
|
|
|
|
|
3,067,519
|
|
|
|
|
|
2,819,027
|
|
|
|
|
$
|
4,616
|
|
|
|
|
$
|
4,860
|
|
|
|
|
|
2,819,027
|
|
|
|
Series A-1 Preferred Stock
|
|
|
|
|
3,970,776
|
|
|
|
|
|
3,730,366
|
|
|
|
|
|
5,398
|
|
|
|
|
|
5,682
|
|
|
|
|
|
3,730,366
|
|
|
|
Series A-2 Preferred Stock
|
|
|
|
|
3,565,063
|
|
|
|
|
|
3,565,063
|
|
|
|
|
|
5,809
|
|
|
|
|
|
6,115
|
|
|
|
|
|
3,565,063
|
|
|
|
Series B Preferred Stock
|
|
|
|
|
30,450,000
|
|
|
|
|
|
30,409,890
|
|
|
|
|
|
39,547
|
|
|
|
|
|
41,632
|
|
|
|
|
|
30,409,890
|
|
|
|
Total
|
|
|
|
|
41,053,358
|
|
|
|
|
|
40,524,346
|
|
|
|
|
$
|
55,370
|
|
|
|
|
$
|
58,289
|
|
|
|
|
|
40,524,346
|
|
|
Rights, preferences, privileges, and restrictions:
The holders of shares of Series A, A-1, A-2, B and B-1 convertible preferred stock (or collectively, the “Preferred Stock”) have the rights, preferences, privileges, and restrictions as set forth below:
Dividends:
The holders of the Preferred Stock are entitled to receive cumulative dividends when, as and if declared by the Company’s Board of Directors. Accrued dividends shall accrue only on the unreturned amount of the original issue price taking into account the payment of any mandatory dividend. As used herein, “original issue price” means $0.69 per share with respect to the Series A and A-1 preferred stock, $0.8415 per share with respect to the Series A-2 preferred Stock, and $0.923 per share with respect to the Series B preferred stock. After such time the holders receive their full preferred liquidation amount, less any and all mandatory dividends, the holders of preferred stock will not be entitled to any additional accruing dividends; provided that the holders of the preferred stock will share in all dividends and distributions declared by the Board of Directors and paid by the Company with the holders of common stock on an as if converted to common stock basis.
Voting Rights:
The holders of Preferred Stock are entitled to voting rights equal to the number of shares of common stock into which the shares of Preferred Stock can be converted. In addition, as long as there are shares of Preferred Stock outstanding, each of the holders of over 7.5% of the total Preferred Stock outstanding on a converted basis shall be entitled to designate one director of the Company to be elected by the holders of Preferred Stock. The holders of a majority of the then outstanding shares of common stock, voting together as a single class, shall be entitled to elect one director of the Company. If the holders of the Preferred Stock or common stock fail to elect a sufficient number of directors to fulfill directorships for which they are entitled to elect directors, then any directorship shall remain vacant until the holders of the Preferred Stock or common stock elect such person.
Liquidation Rights:
In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the holders of Preferred Stock have liquidation preferences, before any distribution or payment is made to holders of any common stock, in an amount per share equal to the original issue price for such Preferred Stock plus all accruing dividends (the “Preferred Liquidation Amount”). If the assets and funds to be distributed among the holders of Preferred Stock are insufficient to permit the payment to such holders, then the entire assets and funds of the Company legally available for distribution will be distributed ratably among the holders of Preferred Stock in proportion to the Preferred Liquidation Amount each such holder is otherwise entitled to receive on each share, less any mandatory dividends.
Cognition Therapeutics, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share amounts)
Upon completion of the payment of the full liquidation preference of Preferred Stock less any and all mandatory dividends previously distributed, the remaining assets of the Company, if any, shall be distributed among the holders of common stock and Preferred Stock, pro rata based on the number of common shares held by each (assuming conversion of all shares of the Preferred Stock into common stock).
Conversion:
Each share of Preferred Stock is convertible into shares of common stock, at the option of the holder, at any time after date of issuance. Each share of Preferred Stock automatically converts to the number of shares of common stock determined in accordance with the conversion rate upon the closing of a public offering, at a price per share of not less than three times the highest, then applicable conversion price, resulting in offering proceeds of at least $30,000 net of underwriting discounts and commissions (“Mandatory Conversion Time”). The conversion ratio will be adjusted in the case of specified changes to the Company’s capitalization as a result of stock splits, combinations, common stock dividends and distributions, reclassifications, exchanges, substitutions, reorganizations, mergers or consolidations.
Redemption:
Prior to the July 29, 2020 amendment to the article of incorporation, Preferred Stockholders had the right to redeem shares of preferred stock on or after March 20, 2021 after receipt of written notice requesting redemption from 60% of the then outstanding shares of the preferred stock voting together as a single class on an as-converted to common stock basis at a price equal to the original issue price plus all accruing dividends. As the Preferred Stock was redeemable due to the passage of time prior to the amendment, the Company recorded changes in the redemption value and accreted the Preferred Stock immediately to its redemption value during each reporting period.
On July 29, 2020, the articles of incorporation were amended resulting in the removal of the redemption right. As the redemption option was removed in connection with the amendment, the only option for redemption is based on the occurrence of a deemed liquidation event. As the events that would trigger a deemed liquidation event are corporate transactions that are not certain to occur, the Company determined that post July 29, 2020, the Preferred Stock is no longer considered probable to become redeemable, and is instead contingently redeemable. As a result, the Company ceased the accretion of the Preferred Stock to redemption value upon execution of the amendment to the articles of incorporation.
Protective Provisions:
At any time when shares of Preferred Stock are outstanding, the Company shall not, either directly, indirectly by amendment, merger, consolidation or otherwise, do any of the following without the written consent or affirmative vote of at least 60% of the then outstanding shares of Preferred Stock, voting together as a single class on an as-converted to Common Stock basis: (i) effect the consummation of a liquidation event or any other merger or consolidation, (ii) amend, alter or repeal any provision of the Company’s certificate of incorporation of bylaws in a manner that adversely affects the powers, preferences or rights of the Preferred Stock, (iii) amend, alter, or repeal any provision of the by-laws of the Company, in a manner that affects the powers, preferences, or rights of Preferred Stock, (iv) increase or decrease the authorized number of shares of Preferred Stock or Common Stock, (v) reclassify, alter, or amend any existing security of the Company in respect to the distribution of assets on the liquidation, dissolution, or winding up of the Company or payment of dividends, if such reclassification, alteration, or amendment would render such other security senior to Preferred Stock in respect to any such right, preference, or privilege, (vi) purchase or redeem, or declare any dividend, on any shares of capital stock of the Company other than repurchase of stock pursuant to stock restriction agreements approved by the Board of Directors that grant to the Company the right of repurchase upon termination of the service, (vii) borrow or authorize any amount of indebtedness, other than inventory financing in the ordinary course of business and any indebtedness in an
Cognition Therapeutics, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share amounts)
amount of up to $250 in aggregate that is approved by the Board of Directors, (viii) increase or decrease the authorized number of directors of the Board of Directors (ix) effect a change in business from the discovery and development of small molecule therapeutics targeting toxic proteins that cause cognitive decline associated with Alzheimer’s disease and other neurodegenerative diseases, (x) enter into any transaction with any person other than in the ordinary course of business on an arm’s length basis, (xi) increase the number of shares of common stock reserved for issuance, (xii) make any loan except advances in ordinary course of business or advances up to $50 in aggregate approved by the Board of Directors, (xiii) hire, terminate, or change compensation in excess of $100 of any officer, director, or employee, unless approved by the Board of Directors, (xiv) own any stock or securities of any other corporation, unless approved by the Board of Directors, (xv) guarantee any indebtedness except for trade accounts of the Company or any guarantee approved by the Board of Directors, (xvi) make any investment other than investments in prime commercial paper, money market funds, certificates of deposits in any United States bank having a net worth in excess of $100,000 or obligations issued or guaranteed by the United States of America, unless approved by the Board of Directors.
8. Warrants
In conjunction with both debt and equity investments, the Company issued warrants on each of the following classes of stock: Common and Series A-1.
The following is a summary of the Company’s outstanding common stock warrants as of December 31, 2020 and March 31, 2021:
|
Number of Warrants
|
|
|
Exercise
Price
|
|
|
Expiration
Date
|
|
|
163,334
|
|
|
|
$
|
0.21
|
|
|
|
May 2021
|
|
|
375,741
|
|
|
|
$
|
0.01
|
|
|
|
March 2023
|
|
|
78,194
|
|
|
|
$
|
0.01
|
|
|
|
May 2023
|
|
|
33,387
|
|
|
|
$
|
0.01
|
|
|
|
August 2023
|
|
Series A-1 Preferred Stock Warrants
The Company reviewed the classification of the warrants as liabilities or equity under the guidance of ASC 480-10, Distinguishing Liabilities from Equity, and concluded that the Series A-1 convertible preferred stock warrants should be classified as a liability. The Company re-measures the warrant liability to fair market value at the end of each reporting period. The Series A-1 preferred stock warrants expired in October 2020 and were not exercised.
Common Stock Warrants
The Company’s common stock warrants are equity classified as there are no features within the warrant agreements that require liability treatment. Accordingly, the warrants are recorded as a component of equity when they are issued.
9. Common Stock
Common stockholders are entitled to dividends if and when declared by the Company’s Board of Directors subject to the rights of the preferred stockholders. As of December 31, 2020 and March 31, 2021, no dividends on common stock had been declared by the Company.
Cognition Therapeutics, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share amounts)
The Company has reserved the following shares of common stock for conversion of preferred stock, exercise of warrants and exercise of stock options as of:
|
|
|
|
December 31, 2020
|
|
|
March 31, 2021
|
|
|
Convertible preferred stock (as converted)
|
|
|
|
|
40,524,346
|
|
|
|
|
|
40,524,346
|
|
|
|
Options issued and outstanding
|
|
|
|
|
14,839,637
|
|
|
|
|
|
14,414,342
|
|
|
|
Warrants for common stock
|
|
|
|
|
650,656
|
|
|
|
|
|
650,656
|
|
|
|
Total
|
|
|
|
|
56,014,639
|
|
|
|
|
|
55,589,344
|
|
|
10. Equity-based Compensation
On September 15, 2017, the Company’s Board of Directors (the Board) approved the 2017 Amended and Restated Equity Incentive Plan (the “Plan”), which provides for the granting of incentive stock options, non-qualified stock options and stock awards to employees, certain consultants and directors. The Board, or its designated committee, has the sole authority to select the individuals to whom awards are granted and determine the terms of each award, including the number of shares and the schedule upon which the award becomes exercisable.
The aggregate number of shares of common stock of the Company that may be issued under the Plan is 15,288,989 (taking into account shares of common stock that may become issuable pursuant to Section 3(b) of the Plan in respect of shares of common stock reserved under the Company’s Amended and Restated 2007 Equity Incentive Plan). The Plan also allows for a provision for shares granted which are cancelled, forfeited, exchanged or surrendered without having been exercised to subsequently be available for reissuance under the Plan.
The Company recorded total equity-based compensation expense in the statement of operations and comprehensive loss related to incentive stock options and nonstatutory stock options as follows:
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2020
|
|
|
2021
|
|
|
Research and development
|
|
|
|
$
|
52
|
|
|
|
|
$
|
21
|
|
|
|
General and administrative
|
|
|
|
|
73
|
|
|
|
|
|
77
|
|
|
|
Total equity-based compensation
|
|
|
|
$
|
125
|
|
|
|
|
$
|
98
|
|
|
As of March 31, 2021, total future compensation expense related to unvested awards yet to be recognized by the Company was $1,080. Total future compensation expense related to unvested awards yet to be recognized by the Company is expected to be recognized over a weighted- average remaining vesting period of approximately 3.1 years.
Cognition Therapeutics, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share amounts)
The fair value of options granted was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2020
|
|
|
2021
|
|
|
Fair value of common stock
|
|
|
$0.37
|
|
|
$0.54
|
|
|
Expected volatility
|
|
|
104.60% – 109.34%
|
|
|
101.38% – 101.83%
|
|
|
Risk-free interest rate
|
|
|
0.38% – 1.60%
|
|
|
0.67% – 0.84%
|
|
|
Dividend yield
|
|
|
0.00%
|
|
|
0.00%
|
|
|
Expected term (years)
|
|
|
5.00 – 6.08
|
|
|
6.07 – 6.22
|
|
Expected Term — The expected term represents the period that the stock-based awards are expected to be outstanding. As the Company does not have sufficient historical experience for determining the expected term of the stock option awards granted, expected term has been calculated using the simplified method.
Risk-Free Interest Rate — The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the date of grant for zero-coupon U.S. Treasury constant maturity notes with terms approximately equal to the stock-based awards’ expected term.
Expected Volatility — Since the Company is privately held and does not have a trading history of common stock, the expected volatility was derived from the average historical stock volatilities of the common stock of several public companies within the industry that the Company considers to be comparable to our business over a period equivalent to the expected term of the stock-based awards.
Dividend Yield — The expected dividend yield is zero as the Company has not paid and does not anticipate paying any dividends in the foreseeable future.
Fair Value of Common Stock — The fair value of the shares of common stock underlying the stock-based awards has historically been determined by the Board of Directors with input from management. Because there has been no public market for the common stock, the Board of Directors has determined the fair value of the common stock at the time of grant of the stock-based award by considering a number of objective and subjective factors, including having contemporaneous valuations of the common stock performed by a third-party valuation specialist.
Activity for options was as follows:
|
|
|
|
Options Outstanding
|
|
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Aggregate
Intrinsic
Value
(in 000’s)
|
|
|
Weighted
Average
Remaining
Contractual Life
(in Years)
|
|
|
Balance, December 31, 2020
|
|
|
|
|
14,839,637
|
|
|
|
|
$
|
0.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
|
|
180,000
|
|
|
|
|
$
|
0.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercised
|
|
|
|
|
(67,242)
|
|
|
|
|
$
|
0.21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options forfeited
|
|
|
|
|
(390,215)
|
|
|
|
|
$
|
0.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options expired
|
|
|
|
|
(147,838)
|
|
|
|
|
$
|
0.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2021
|
|
|
|
|
14,414,342
|
|
|
|
|
$
|
0.31
|
|
|
|
|
$
|
3,371
|
|
|
|
|
|
7.6
|
|
|
|
Exercisable as of March 31, 2021
|
|
|
|
|
8,939,321
|
|
|
|
|
$
|
0.27
|
|
|
|
|
$
|
2,391
|
|
|
|
|
|
6.2
|
|
|
|
Vested and expected to vest as of March 31, 2021
|
|
|
|
|
13,285,016
|
|
|
|
|
$
|
0.30
|
|
|
|
|
$
|
3,134
|
|
|
|
|
|
7.5
|
|
|
Cognition Therapeutics, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share amounts)
The weighted-average grant date fair value of stock options granted was $0.29 and $0.43 during the three months ended March 31, 2020 and 2021, respectively. There were 123,000 stock options granted at an aggregate fair value of $36 for the three months ended March 31, 2020 and 180,000 stock options granted at an aggregate fair value of $77 for the three months ended March 31, 2021. The total grant-date fair value of stock options vested during the three monthss ended March 31, 2020 and 2021 was $78 and $33, respectively. There were no stock options exercised during the three months ended March 31, 2020. During the three months ended March 31, 2021, there were 67,242 stock options exercised with an aggregate grant date fair value of $11. The intrinsic value of stock options exercised during the three months ended March 31, 2021 was $22.
The Company granted 1,129,326 option awards containing performance conditions to an executive during the three months ended March 31, 2020 and 2021. As of March 31, 2020, and 2021, the Company determined that the achievement of the performance targets was not probable and therefore, there was no expense recognized for these awards during the three months ended March 31, 2020 and 2021, respectively. As of March 31, 2021, total unrecognized compensation expense related to un-vested performance-based awards was $254, which would be recognized commencing with the period in which the performance condition is deemed probable of achievement.
11. Net Loss per Share
The following outstanding potentially dilutive common stock equivalents have been excluded from the calculation of diluted net loss per share attributable to common stockholders for the periods presented due to their antidilutive effect:
|
|
|
|
December 31,
2020
|
|
|
March 31,
2021
|
|
|
Convertible preferred stock (as converted)
|
|
|
|
|
40,524,346
|
|
|
|
|
|
40,524,346
|
|
|
|
Options issued and outstanding
|
|
|
|
|
14,839,637
|
|
|
|
|
|
14,414,342
|
|
|
|
Warrants for common stock
|
|
|
|
|
650,656
|
|
|
|
|
|
650,656
|
|
|
|
Total
|
|
|
|
|
56,014,639
|
|
|
|
|
|
55,589,344
|
|
|
The basic and diluted net loss per share attributable to common stockholders has been prepared as follows:
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
2020
|
|
|
2021
|
|
|
Net (loss) income
|
|
|
|
$
|
(2,506)
|
|
|
|
|
$
|
223
|
|
|
|
Cumulative preferred stock dividends
|
|
|
|
|
(1,053)
|
|
|
|
|
|
(1,128)
|
|
|
|
Net loss attributable to common stockholders
|
|
|
|
$
|
(3,559)
|
|
|
|
|
$
|
(905)
|
|
|
|
Weighted-average common shares outstanding-basic and diluted
|
|
|
|
|
1,519,431
|
|
|
|
|
|
1,779,573
|
|
|
|
Total
|
|
|
|
$
|
(2.34)
|
|
|
|
|
$
|
(0.51)
|
|
|
12. Simple Agreements for Future Equity (SAFEs)
On March 25, 2021, the Company entered into simple agreements for future equity (“SAFEs”) with existing investors, pursuant to which the Company received gross proceeds in an aggregate amount equal to $8,942. Pursuant to the arrangement, all of the SAFEs were initially issued with a conversion price equal to 80.0% of either the common stock price upon the occurrence of an initial public offering, or the price paid for shares of preferred stock by other investors upon a subsequent private financing. Upon a change of control, investors will be entitled to receive a portion of proceeds equal to the greater of the purchase amount
Cognition Therapeutics, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except share and per share amounts)
or the amount payable on the number of shares of common stock equal to the purchase amount divided by the liquidity price. In a liquidity or dissolution event, the investors’ right to receive cash is junior to payment of outstanding indebtedness and creditor claims, on par for other SAFEs and preferred stock, and senior to common stock. The SAFE agreements have no interest rate or maturity date, and the SAFE investors have no voting right prior to conversion.
The SAFEs included a provision allowing for cash redemption upon either the occurrence of a change of control or dissolution event, the occurrence of which is outside the control of the Company. Therefore, the SAFEs are classified as marked-to-market liabilities pursuant to ASC 480, Distinguishing Liabilities from Equity.
13. Subsequent Events
Subsequent events have been evaluated for recognition and measurement purposes through June 23, 2021, which is the date the financial statements were issued. The Company further evaluated subsequent events for disclosure purposes in the financial statements through July 19, 2021.
On May 1, 2021, the holders of the convertible promissory notes agreed to an acceleration of the automatic conversion of all convertible promissory notes from June 30, 2021 to May 1, 2021 into 10,926,089 shares of our class B-1 preferred stock, at a conversion price equal to $1.385 per share.
On July 1, 2021, the Company entered into an agreement to lease 2,864 square feet of office space in Purchase, New York. The lease has a term of 89 months and is expected to commence on October 1, 2021. The annual base rent under the lease is $70 for the first lease year and is subject to annual increases of between 1.82% and 2.04%. The Company provided a security deposit in the form of Letter of Credit in the amount of $35 pursuant to the terms of the lease.
Shares
Common stock
Preliminary prospectus
, 2021
Through and including , 2021 (the 25th day after the commencement of this offering), all dealers that buy, sell or trade shares of our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other expenses of issuance and distribution.
The following table sets forth the costs and expenses, other than the underwriting discounts and commissions, payable by Cognition Therapeutics, Inc., or the Registrant, in connection with the sale of our common stock being registered. All amounts are estimates except for the SEC registration fee, FINRA filing fee and Nasdaq Stock Market listing fee.
|
Item
|
|
|
Amount
|
|
|
SEC registration fee
|
|
|
|
$
|
5,455
|
|
|
|
FINRA filing fee
|
|
|
|
|
8,000
|
|
|
|
Nasdaq Stock Market listing fee
|
|
|
|
|
*
|
|
|
|
Printing expenses
|
|
|
|
|
*
|
|
|
|
Legal fees and expenses
|
|
|
|
|
*
|
|
|
|
Accounting fees and expenses
|
|
|
|
|
*
|
|
|
|
Blue Sky, qualification fees and expenses
|
|
|
|
|
*
|
|
|
|
Transfer agent fees and expenses
|
|
|
|
|
*
|
|
|
|
Miscellaneous expenses
|
|
|
|
|
*
|
|
|
|
Total
|
|
|
|
$
|
*
|
|
|
*
To be filed by amendment.
Item 14. Indemnification of directors and officers.
As permitted by Section 102 of the Delaware General Corporation Law, our third amended and restated certificate of incorporation and amended and restated bylaws to be in effect immediately prior to the closing of this offering will limit or eliminate the personal liability of our directors for a breach of their fiduciary duty of care as a director. The duty of care generally requires that, when acting on behalf of the corporation, directors exercise an informed business judgment based on all material information reasonably available to them. Consequently, a director will not be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except for liability for:
•
any breach of the director’s duty of loyalty to us or our stockholders;
•
any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
•
any act related to unlawful stock repurchases, redemptions or other distributions or payment of dividends; or
•
any transaction from which the director derived an improper personal benefit.
These limitations of liability do not affect the availability of equitable remedies such as injunctive relief or rescission. Our third amended and restated certificate of incorporation will authorize us to indemnify our officers, directors and other agents to the fullest extent permitted under Delaware law.
As permitted by Section 145 of the Delaware General Corporation Law, our amended and restated bylaws will provide that:
•
we may indemnify our directors, officers and employees to the fullest extent permitted by the Delaware General Corporation Law, subject to limited exceptions;
•
we may advance expenses to our directors, officers and employees in connection with a legal proceeding to the fullest extent permitted by the Delaware General Corporation Law, subject to limited exceptions; and
•
the rights provided in our amended and restated bylaws are not exclusive.
Our amended and restated certificate of incorporation and our amended and restated bylaws will provide for the indemnification provisions described above and elsewhere herein. We have entered into, and intend to continue to enter into, separate indemnification agreements with our directors and officers that may be broader than the specific indemnification provisions contained in the Delaware General Corporation Law. These indemnification agreements generally require us, among other things, to indemnify our officers and directors against certain liabilities that may arise by reason of their status or service as directors or officers, other than liabilities arising from willful misconduct. These indemnification agreements also generally require us to advance any expenses incurred by the directors or officers as a result of any proceeding against them as to which they could be indemnified. These indemnification provisions and the indemnification agreements may be sufficiently broad to permit indemnification of our officers and directors for liabilities, including reimbursement of expenses incurred, arising under the Securities Act.
We have purchased and currently intend to maintain insurance on behalf of each and every person who is or was a director or officer of the company against any loss arising from any claim asserted against him or her and incurred by him or her in any such capacity, subject to certain exclusions.
The form of underwriting agreement for this initial public offering provides for indemnification by the underwriters of us and our officers and directors who sign this registration statement for specified liabilities, including matters arising under the Securities Act.
Item 15. Recent sales of unregistered securities.
Set forth below is information regarding all unregistered securities sold by us since January 1, 2018. Also included is the consideration received by us for such securities and information relating to the section of the Securities Act, or rule of the SEC, under which exemption from registration was claimed.
Convertible Notes
From March 2018 to July 2020, we issued convertible promissory notes in the aggregate principal amount of $13.0 million with an interest rate of 8.0% per annum, pursuant to note purchase agreements entered into with certain holders of our capital stock. On May 1, 2021, the holders of all of our outstanding convertible promissory notes agreed to an acceleration of the date of the automatic conversion from June 30, 2021 to May 1, 2021 for all convertible promissory notes. Accordingly, on May 1, 2021, all of our outstanding convertible promissory notes were converted into 10,926,089 shares of our Series B-1 convertible preferred stock at a conversion price equal to $1.385 per share. As of the date of this prospectus, no notes are outstanding. Pursuant to the terms of our Series B-1 convertible preferred stock all shares will automatically convert into shares of our common stock upon the closing of this offering on a one-for-one basis.
SAFE Financing
In March 2021, we entered into simple agreements for future equity, or SAFEs, with various investors, pursuant to which we received gross proceeds in an aggregate amount equal to $8.9 million. The amount invested by the investors in the SAFEs is automatically convertible into shares of our common stock upon the closing of our initial public offering at a conversion price equal to 80% of the initial public offering price.
Equity Awards
Since January 1, 2018, we have granted stock options to employees, officers, directors and consultants, covering an aggregate of 7,270,239 shares of our common stock, having a weighted average exercise price of $0.36 per share, in connection with services provided to us by such parties.
Since January 1, 2018, we have issued an aggregate of 141,848 shares of our common stock to employees, officers, directors and consultants upon their exercise of stock options, for aggregate cash consideration of approximately $0.031 million.
Unless otherwise stated, the issuances of the above securities were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act or Regulation D promulgated thereunder, or Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer not involving any public offering or pursuant to benefit plans and contracts relating to compensation as provided under Rule 701. Individuals who purchased securities as described above represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were affixed to the share certificates issued in such transactions.
None of the foregoing transactions involved any underwriters, underwriting discounts or commissions or any public offering.
Item 16. Exhibits and financial statement schedules.
(a) Exhibits.
The exhibits listed below are filed as part of this registration statement.
Exhibit
number
|
|
|
Exhibit description
|
|
|
1.1†
|
|
|
Form of Underwriting Agreement.
|
|
|
3.1
|
|
|
|
|
|
3.2
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3.3
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3.4
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3.5
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3.6†
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Form of Third Amended and Restated Certificate of Incorporation, which will become effective immediately prior to the closing of this offering.
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3.7
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3.8†
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Form of Amended and Restated Bylaws, which will become effective immediately prior to the closing of this offering.
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4.1†
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Specimen Common Stock Certificate of Registrant.
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5.1†
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Opinion of Troutman Pepper Hamilton Sanders LLP.
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10.1†•
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Form of Indemnification Agreement by and between the Registrant and its individual directors and officers.
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10.2
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10.3
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10.4
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10.5
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10.6
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Office Lease dated July 1, 2021, by and between the Registrant and 2500/2700 Westchester Avenue Owner SPE LLC.
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10.7•
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10.8•
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Exhibit
number
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Exhibit description
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10.9•
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10.10•
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10.11†•
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2021 Equity Incentive Plan.
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10.12†•
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2021 Employee Stock Purchase Plan.
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10.13•
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10.14•
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10.15•
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10.16†•
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Form of Amended and Restated Employment Agreement by and between the Registrant and Lisa Ricciardi, which will become effective immediately prior to the closing of this offering.
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10.17•
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10.18•
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10.19•
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10.20†•
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Form of Employment Agreement by and between the Registrant and James M. O’Brien, which will become effective immediately prior to the closing of this offering.
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10.21†•
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Option Agreements for Directors
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10.22†•
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Letter Agreement between the Registrant and Brett P. Monia, Ph.D.
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10.23†•
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Letter Agreement between the Registrant and Jack A. Khattar.
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10.24
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10.25
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10.26
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10.27
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10.28
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10.29
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10.30
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10.31
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10.32
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10.33
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10.34
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23.1
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23.2†
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Consent of Troutman Pepper Hamilton Sanders LLP (included in Exhibit 5.1).
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Exhibit
number
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Exhibit description
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24.1
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†
To be filed by amendment.
•
Indicates management contract or compensatory plan.
(b) Financial statement schedules.
Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the consolidated financial statements or notes thereto.
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
1.
For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective.
2.
For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
Signatures
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Purchase, State of New York on July 19, 2021.
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COGNITION THERAPEUTICS, INC.
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By:
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/s/ Lisa Ricciardi
Lisa Ricciardi
President and Chief Executive Officer
(Principal Executive Officer)
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Power of attorney
KNOW ALL BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Lisa Ricciardi and James M. O’Brien, and each of them, as his or her true and lawful attorneys-in-fact and agents, each with the full power of substitution, for him or her and in his or her name, place or stead, in any and all capacities, to sign any and all amendments to this registration statement (including post-effective amendments), and to sign any registration statement for the same offering covered by this registration statement that is to be effective upon filing pursuant to Rule 462(b) promulgated under the Securities Act, and all post-effective amendments thereto, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their, his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement on Form S-1 has been signed by the following persons in the capacities and on the dates indicated.
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Signature
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Title
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Date
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/s/ Lisa Ricciardi
Lisa Ricciardi
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Chief Executive Officer, President and Director
(Principal Executive Officer)
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July 19, 2021
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/s/ James M. O’Brien
James M. O’Brien
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Chief Financial Officer
(Principal Financial and Accounting Officer)
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July 19, 2021
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/s/ Jack A. Khattar
Jack A. Khattar
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Director (Chairman of the Board)
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July 19, 2021
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/s/ Mark H. Breedlove
Mark H. Breedlove
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Director
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July 19, 2021
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/s/ Susan Catalano, Ph.D.
Susan Catalano, Ph.D.
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Director
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July 19, 2021
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/s/ Aaron Fletcher, Ph.D.
Aaron Fletcher, Ph.D.
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Director
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July 19, 2021
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/s/ Brett P. Monia, Ph.D.
Brett P. Monia, Ph.D.
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Director
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July 19, 2021
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/s/ Stephen Sands
Stephen Sands
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Director
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July 19, 2021
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/s/ Peggy Wallace
Peggy Wallace
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Director
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July 19, 2021
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Exhibit 3.1
SECOND
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
COGNITION THERAPEUTICS, INC.
(incorporated on August 21, 2007)
COGNITION
THERAPEUTICS, INC., a corporation organized and existing under and by virtue of the provisions of the General Corporation
Law of the State of Delaware, as it may be amended from time to time (the “General Corporation Law”), hereby certifies
as follows:
1. The
name of this corporation is Cognition Therapeutics, Inc.
2. The
original Certificate of Incorporation of this corporation was filed with the Secretary of State of the State of Delaware on August 21,
2007, amended and restated on January 16, 2009 and further amended on December 17, 2010, November 30, 2011, December 20,
2012, August 6, 2013, March 19, 2014 and July 1, 2015.
3. This
Second Amended and Restated Certificate of Incorporation restates, integrates and amends the Amended and Restated Certificate of Incorporation
of this corporation, as amended.
4. This
Second Amended and Restated Certificate of Incorporation was duly adopted in accordance with the provisions of Sections 242 and 245 of
the General Corporation Law, and the stockholders of this corporation have given their consent hereto in accordance with Section 228
of the General Corporation Law.
5. The
text of this corporation’s Certificate of Incorporation is hereby amended and restated in full so as to read as follows:
First:
The name of this corporation is Cognition Therapeutics, Inc. (the “Corporation”).
Second:
The address of the registered office of the Corporation in the State of Delaware is at 2140 South DuPont Highway, in the City of Camden,
County of Kent, 19934. The registered agent in charge thereof is Paracorp Incorporated.
Third:
The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law.
Fourth:
The total number of shares of all classes of stock, that the Corporation shall have authority to issue is (i) Fifty Million Five
Hundred Thousand (50,500,000) shares of Common Stock, $.001 par value per share (“Common Stock”), and (ii) Thirty
Seven Million Two Hundred Fifty-Three Thousand Three Hundred Fifty-Eight (37,253,358) shares of Preferred Stock, $.001 par value per share.
The following is a statement of the designations
and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital
stock of the Corporation.
Three
Million Sixty-Seven Thousand Five Hundred Nineteen (3,067,519) shares of the authorized Preferred Stock of the Corporation are hereby
designated “Series A Convertible Preferred Stock” (the “Series A Preferred Stock”);
Three Million Nine Hundred Seventy Thousand Seven Hundred Seventy-Six (3,970,776) shares of the authorized Preferred Stock of the Corporation
are hereby designated “Series A-1 Convertible Preferred Stock” (the “Series A-1 Preferred Stock”);
Three Million Five Hundred Sixty-Five Thousand Sixty-Three (3,565,063) shares of the authorized Preferred Stock of the Corporation are
hereby designated “Series A-2 Convertible Preferred Stock” (the “Series A-2 Preferred Stock”);
and Twenty-Six Million Six Hundred Fifty Thousand (26,650,000) shares of the authorized Preferred Stock of the Corporation are
hereby designated “Series B Convertible Preferred Stock” (the “Series B Preferred Stock”).
The Series A Preferred Stock, the Series A-1 Preferred Stock, the Series A-2 Preferred Stock and the Series B Preferred
Stock are sometimes referred to herein collectively as the “Preferred Stock.” Unless otherwise indicated, references
to “Sections” or “Subsections” in this Part A of this Article Fourth refer to sections and subsections
of Part A of this Article Fourth.
The Preferred Stock shall have the following rights,
preferences, powers, privileges, restrictions, qualifications and limitations.
1. Dividends.
1.1. Accruing
Dividends. From and after the date of the issuance of each respective share of the
Preferred Stock, dividends at the rate of 8% per annum of the applicable Original Issue Price (as defined herein) compounded
annually shall accrue on such share of the Preferred Stock (“Accruing Dividends”). Accruing Dividends shall
accrue from day to day, whether or not declared, and shall be cumulative; provided however, (i) that such Accruing Dividends
shall be payable only in connection with a liquidation, dissolution or winding up of the Corporation under Section 2
(including, without limitation, in connection with a Deemed Liquidation Event), a Mandatory Dividend under Section 1.3, or a
redemption of the Preferred Stock under Section 6, and the Corporation shall not otherwise pay such Accruing Dividends and
(ii) in the event a Mandatory Dividend is paid under Section 1.3, Accruing Dividends shall thereafter accrue only on the
unreturned amount of the Original Issue Price after taking into account the payment of each Mandatory Dividend. As used herein,
“Original Issue Price” means $.69 per share with respect to the Series A Preferred Stock and Series A-1
Preferred Stock, $.8415 per share with respect to the Series A-2 Preferred Stock and $.923 per share with respect to the
Series B Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or
other similar recapitalization affecting such shares). After such time as the holders of the Preferred Stock receive their full
Preferred Liquidation Amount (as defined below), less any and all Mandatory Dividend(s) previously distributed with respect to
shares of the Preferred Stock, the holders of the Preferred Stock will not thereafter be entitled to any additional Accruing
Dividends; provided that the holders of the Preferred Stock
will share in all dividends and distributions declared by the Board of
Directors and paid by the Corporation with the holders of the Common Stock on an as if converted to Common Stock basis.
1.2. Common
Stock Dividends. The holders of the Preferred Stock shall be entitled to share in dividends payable
with respect to the Common Stock as if converted and the Corporation shall not declare, pay or set aside any dividends on shares of Common
Stock unless (in addition to obtaining any consents required elsewhere in this Amended and Restated Certificate of Incorporation, as amended)
each holder of the Preferred Stock then outstanding shall first receive, or simultaneously receive, in each such instance, a dividend
on each outstanding share of the Preferred Stock held by such holder as if such share of Preferred Stock had been converted into Common
Stock, in an amount at least equal to the product of (a) the dividend payable on a share of Common Stock and (b) the number
of shares of Common Stock issuable upon conversion of a share of the Preferred Stock, in each case calculated on the record date for determination
of holders entitled to receive such dividend.
1.3. Mandatory
Dividend(s).
(a) If,
prior to such time as the holders of shares of the Preferred Stock receive their full Preferred Liquidation Amount, less any and all Mandatory
Dividend(s) previously distributed with respect to shares of the Preferred Stock, the Corporation or any subsidiary of the Corporation
shall consummate a sale, license or other disposition for value of any or all of the Corporation’s intellectual property, in a single
transaction or series of related transactions unrelated to the performance by the Corporation of research and development or other services
(as determined in good faith by the Board of Directors of the Corporation, including both Preferred Directors) (a “Strategic
Event”), at the written election of the holders of at least 60% of the then outstanding shares of the Preferred Stock, voting
together as a single class on an as-converted to Common Stock basis, sent to the Corporation at least 15 days prior to the effective date
of a Strategic Event, the Corporation shall distribute to the holders of shares of the Preferred Stock up to 35% of the aggregate payments
(including, without limitation, all option and/or milestone payments and/or all success fees) received by the Corporation as consideration
in such Strategic Event as soon as reasonably practicable following receipt by the Corporation of such payments (“Mandatory Dividend”).
Such Mandatory Dividend shall be distributed to the holders of the Preferred Stock on a pari passu and an as-converted to Common Stock
basis until the aggregate amount of all Mandatory Dividends paid to the holders of the Preferred Stock equals the full Preferred Liquidation
Amount payable on the Preferred Stock held by such holders.
(b) The
Corporation shall give each holder of record of the Preferred Stock written notice of an impending Strategic Event within ten days
after the Board of Directors of the Corporation approves such Strategic Event. Such written notice shall describe the material terms
and conditions of the impending Strategic Event and the provisions of this Section 1.3, and the Corporation shall thereafter
give such holders prompt notice of any material changes. The transaction shall in no event take place sooner than 20 days after the
Corporation has given the first notice provided for herein or sooner than ten days after the Corporation has given notice of any
material changes provided for herein; provided, however, that such periods may be shortened upon the written consent of the holders
of the Preferred Stock that are entitled to such
notice rights or similar notice rights and that represent at least 60% of the then
outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis.
(c) After
such time as the holders of the Preferred Stock receive their full Preferred Liquidation Amount for their respective shares of the Preferred
Stock, less any and all Mandatory Dividend(s) previously distributed with respect to shares of the Preferred Stock, the holders of
the Preferred Stock will not thereafter be entitled to any additional Mandatory Dividends; provided that the holders of the Preferred
Stock will share in all dividends and distributions declared by the Board of Directors and paid by the Corporation with the holders of
the Common Stock on an as if converted to Common Stock basis.
1.4. Order
of Dividend Payment. No dividends or other distributions shall be declared and/or paid on any
class or series of capital stock, other than the Preferred Stock if any Mandatory Dividends have accrued and are unpaid or if any other
dividends are declared and unpaid on the Preferred Stock.
2. Liquidation
Preference.
2.1. Preferred
Liquidation Amount. In the event of any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, including, without limitation, any Deemed Liquidation Event (as defined below), each holder of shares
of the Preferred Stock then outstanding shall be entitled to receive out of the assets legally available for distribution to its stockholders,
whether from capital surplus, earnings or otherwise, on a pari passu and an as converted to Common Stock basis and prior and in preference
to any distribution to the holders of any other series or class of the capital stock of the Corporation that is junior to the Preferred
Stock, including, without limitation, the Common Stock, by reason of their ownership thereof, an amount per share of Preferred Stock then
held by such holder equal to the Preferred Liquidation Amount, less any and all Mandatory Dividend(s) previously distributed with
respect to such share of Preferred Stock. If upon the occurrence of such event, the assets and funds of the Corporation shall be insufficient
to permit the payment to such holders of Preferred Stock of the full Preferred Liquidation Amount, less any and all Mandatory Dividend(s) previously
distributed with respect to such share of Preferred Stock, required by the preceding sentence, then the entire assets and funds of the
Corporation legally available for distribution shall be distributed ratably among the holders of the Preferred Stock in proportion to
the Preferred Liquidation Amount each such holder is otherwise entitled to receive on each such share, less any and all Mandatory Dividend(s) previously
distributed with respect to each such share. “Preferred Liquidation Amount” means, with respect to a share of Preferred
Stock, the applicable Original Issue Price for such share of Preferred Stock plus all Accruing Dividends on such share of Preferred Stock
(plus any other dividends or distributions declared but not paid on such share of Preferred Stock).
2.2. Distribution
of Remaining Assets. After payment has been made to the holders of the Preferred Stock of
their full Preferred Liquidation Amount required by Section 2.1, less any and all Mandatory Dividend(s) previously
distributed with respect to each such share, the remaining assets or surplus funds of the Corporation available for distribution to
stockholders shall be distributed among the holders of the Common Stock and the holders of the
Preferred Stock pro rata based on the number of shares
of Common Stock held by each (assuming conversion of all shares of the Preferred Stock into Common Stock).
2.3. Deemed
Liquidation Events. At the option of the holders of at least 60% of the then outstanding shares
of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, the occurrence of each of the following
events shall be deemed to be a liquidation, dissolution or winding up within the meaning of this Section 2 (each, a “Deemed
Liquidation Event”):
(a) either
a transaction or series of related transactions in which any individual, corporation, partnership, trust, limited liability company, association
or other entity (each, a “Person”), or group of related Persons, acquires from the stockholders of the Corporation,
shares representing at least a majority of the outstanding voting power of the Corporation;
(b) a
sale and/or issuance (or series of sales and/or issuances) by the Corporation of securities of the Corporation representing, after the
issuance of such securities, more than fifty percent (50%) of all voting securities of the Corporation to persons other than stockholders
of the Corporation as of immediately prior to such sale(s) and/or issuance(s);
(c) a
sale, conveyance or disposition (in one or a series of related transactions) by the Corporation or any subsidiary of the Corporation of
all or substantially all of the assets of the Corporation and its subsidiaries taken as a whole;
(d) a
grant of an exclusive license or other transfer (in one or a series of related transactions) by the Corporation and/or any subsidiary
of the Corporation of a material amount of the technology or intellectual property of the Corporation and its subsidiaries taken as a
whole; or
(e) a
consolidation or merger of the Corporation with or into any other entity or entities or a reorganization of the Corporation or similar
transactions, provided, however, that a consolidation, merger, reorganization or similar transaction involving the Corporation shall not
constitute a Deemed Liquidation Event if following completion of the transaction, the holders of shares of the Corporation immediately
prior to the transaction own shares that represent a majority of the voting power of the surviving corporation.
2.4. Amount
Paid Deemed Paid or Distributed. Whenever the distribution provided for in Subsection 1.3 or
in this Section 2 shall be payable in any assets other than cash, the value of the assets to be distributed shall be the fair market
value thereof, determined as follows:
(a) Freely
traded securities:
(i) If
traded on a securities exchange, the value shall be based on the formula specified in the definitive agreements for the Deemed Liquidation
Event(s) or if no such formula exists, then the value of such securities shall be deemed to be the average of the closing prices
of the securities on such exchange or system over the 30-day period ending three days prior to the closing;
(ii) If
actively traded over-the-counter, the value shall be based on the formula specified in the definitive agreements for the Deemed Liquidation
Event(s) or if no such formula exists, then the value of such securities shall be deemed to be the average of the closing bid or
sale prices (whichever is applicable) over the 30-day period ending three days prior to the closing; and
(iii) If
there is no active public market, the value shall be the fair market value thereof, as so determined in good faith by the Board of Directors
of the Corporation (including both Preferred Directors).
(b) The
method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising
solely by virtue of a stockholder’s status as an affiliate or former affiliate) shall be to make an appropriate discount from the
market value determined as above in Subsection 2.4(a) to reflect the approximate fair market value thereof.
(c) In
the event the requirements of this Section 2 are not complied with, the Corporation shall forthwith either:
(i) cause
such closing to be postponed until such time as the requirements of this Section 2 have been complied with; or
(ii) cancel
such transaction, in which event the rights, preferences and privileges of the holders of the Preferred Stock shall revert to and be the
same as such rights, preferences and privileges existing immediately prior to the date of the first notice referred to in Subsection 2.4(d).
(d) The
Corporation shall give each holder of record of the Preferred Stock written notice of such impending transaction within ten days after
the Board of Directors of the Corporation approves such transaction or within ten days after the commencement of any involuntary proceeding,
whichever is earlier. Such written notice shall describe the material terms and conditions of the impending transaction and the provisions
of this Section 2, and the Corporation shall thereafter give such holders prompt notice of any material changes. The transaction
shall in no event take place sooner than 20 days after the Corporation has given the first notice provided for herein or sooner than ten
days after the Corporation has given notice of any material changes provided for herein; provided, however, that such periods may be shortened
upon the written consent of the holders of the Preferred Stock that are entitled to such notice rights or similar notice rights and that
represent at least 60% of the then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to
Common Stock basis.
3. Voting.
3.1. General.
On any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of
the Corporation (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of the Preferred Stock
shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of the
Preferred Stock held by such holder are convertible
as of the record date for determining stockholders
entitled to vote on such matter. Except as provided by law or by the other provisions of this Amended and Restated Certificate of Incorporation,
as amended, the holders of the Preferred Stock shall vote together with the holders of Common Stock as a single class on an as-converted
to Common Stock basis.
3.2. Election
of Directors. For as long as there are any shares of the Preferred Stock outstanding, the holders
of record of a majority of the then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to
Common Stock basis, shall be entitled to elect three directors of the Corporation (the “Preferred Directors”). The
holders of record of a majority of the then outstanding shares of Common Stock, voting together as a single class, shall be entitled to
elect one director of the Corporation. If the holders of shares of the Preferred Stock or Common Stock, as the case may be, fail to elect
a sufficient number of directors to fill all directorships for which they are entitled to elect directors pursuant to the first two sentences
of this Subsection 3.2, then any directorship not so filled shall remain vacant until such time as the holders of the Preferred Stock
or Common Stock, as the case may be, elect an individual to fill such directorship by vote or written consent in lieu of a meeting; and
no such directorship may be filled by stockholders of the Corporation other than by the stockholders of the Corporation that are entitled
to elect an individual to fill such directorship. The holders of a majority of the then outstanding shares of Common Stock and/or the
Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, shall be entitled to elect all remaining
members of the Board of Directors of the Corporation. Any director elected as provided in this Subsection 3.2 may be removed without cause,
and any vacancy caused by the resignation, death or removal of such director may be filled, by, and only by, the affirmative vote of the
holders of the shares of the class or series of capital stock entitled to elect such director or directors, given either at a special
meeting of such stockholders duly called for that purpose or pursuant to a written consent of stockholders. At any meeting held for the
purpose of electing a director, the presence in person or by proxy of the holders of a majority of the then outstanding shares of the
class or series entitled to elect such director shall constitute a quorum for the purpose of electing such director.
3.3. Preferred
Stock Protective Provisions. At any time when shares of the Preferred Stock are outstanding,
the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without
(in addition to any other vote required by law or this Amended and Restated Certificate of Incorporation, as amended) the written consent
or affirmative vote of the holders of at least 60% of the then outstanding shares of the Preferred Stock, voting together as a single
class on an as-converted to Common Stock basis, pursuant to consent given in writing or by vote at a meeting:
(a) liquidate,
dissolve or wind-up the business and affairs of the Corporation, effect any Deemed Liquidation Event or any recapitalization or reorganization
of the Corporation or other transaction in which control of the Corporation is transferred, or sell, transfer, license or encumber the
Corporation’s technology or intellectual property, or consent to any of the foregoing, other than licenses of the Corporation’s
technology or intellectual property in the ordinary course of business;
(b) amend,
alter or repeal any provision of this Amended and Restated Certificate of Incorporation of the Corporation, as amended, including, without
limitation, in a manner that affects the powers, preferences or rights of the Preferred Stock;
(c) amend,
alter or repeal any provision of the By-Laws of the Corporation, including, without limitation, in a manner that affects the powers, preferences
or rights of the Preferred Stock;
(d) increase
or decrease the authorized number of shares of the Preferred Stock or Common Stock;
(e) reclassify,
alter or amend any existing security of the Corporation in respect of the distribution of assets on the liquidation, dissolution or winding
up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render
such other security senior to or pari passu with the Preferred Stock in respect of any such right, preference or privilege (to the extent
such rights preferences or privileges are not then currently in effect);
(f) purchase
or redeem (or permit any subsidiary to purchase or redeem) or pay or declare any dividend or make any distribution on, any shares of capital
stock of the Corporation other than (i) redemptions of or dividends or distributions on the Preferred Stock as expressly authorized
herein, or (ii) repurchases of stock pursuant to stock restriction agreements or vesting agreements approved by the Board of Directors
(including the Preferred Directors) that grant to the Corporation a right of repurchase upon termination of the service or employment
of a consultant, director or employee;
(g) borrow
or guaranty or otherwise authorize any amount of indebtedness, other than (i) inventory financing in the ordinary course of business,
and (ii) any indebtedness in an amount of up to $250,000 in the aggregate that is approved by the Board of Directors, including both
Preferred Directors;
(h) increase
or decrease the authorized number of directors of the Board of Directors from seven members;
(i) effect
a change in the nature of the Corporation’s business from the discovery and development of small molecule therapeutics targeting
the toxic proteins that cause the cognitive decline associated with Alzheimer's disease and other neurodegenerative diseases;
(j) enter
into any transaction with any person or entity, including, without limitation, any of its founders, officers, directors or employees other
than in the ordinary course of business on an arm’s length basis (as determined in good faith by the Board of Directors of the Corporation
(including both Preferred Directors));
(k) increase
the number of shares of Common Stock reserved for issuance under the Corporation’s Amended and Restated 2007 Equity Incentive Plan,
as amended from time to time, or any other equity-based incentive or compensation plan;
(l) make,
or permit any subsidiary to make, any loan or advance to any person or entity, including, without limitation, any founder, officer, employee
or director of the Corporation or any subsidiary, except (i) advances in the ordinary course of business or (ii) advances up
to $50,000 in the aggregate under the terms of an employment or service arrangement approved by the Board of Directors, including both
Preferred Directors;
(m) hire,
terminate, or change the compensation in excess of $100,000 of any of its officers, directors or employees, unless such hiring, termination
or compensation is approved by the Board of Directors, including both Preferred Directors;
(n) own
any stock or other securities of any other corporation, partnership, or other entity, unless approved by the Board of Directors, including
both Preferred Directors;
(o) guarantee,
or permit any subsidiary to guarantee, any indebtedness except for (i) trade accounts of the Corporation or any subsidiary arising
in the ordinary course of business, or (ii) any guarantee approved by the Board of Directors, including both Preferred Directors;
or
(p) make
any investment other than investments in prime commercial paper, money market funds, certificates of deposit in any United States bank
having a net worth in excess of $100,000,000 or obligations issued or guaranteed by the United States of America, in each case having
a maturity not in excess of one year, unless approved by the Board of Directors, including both Preferred Directors.
4. Optional
Conversion.
The
holders of the Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):
4.1. Right
to Convert.
4.1.1 Conversion
Ratio. Each share of the Preferred Stock shall be convertible, at the option of the holder thereof,
at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully
paid and nonassessable shares of Common Stock as is determined by dividing the Original Issue Price applicable to such share of Preferred
Stock by the Conversion Price (as defined below) applicable to such share of Preferred Stock in effect at the time of conversion. The
“Conversion Price” shall initially be equal to $.69 for the Series A Preferred Stock and Series A-1 Preferred
Stock, .$8415 for the Series A-2 Preferred Stock and .$923 for the Series B Preferred Stock. Such initial Conversion Price,
and the rate at which shares of the Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided
below.
4.1.2 Termination
of Conversion Rights. In the event of a notice of redemption of any shares of the Preferred
Stock pursuant to Section 6, the Conversion Rights of the shares of Preferred Stock designated for redemption shall terminate
at the close of business on the last full day preceding the date fixed for redemption of such shares, unless the Redemption Price
(as defined below) is not fully paid on such Redemption Date (as defined
below), in which case the Conversion Rights for
such shares of Preferred Stock shall continue until the price is paid in full. The Conversion Rights shall not terminate in connection
with a Deemed Liquidation Event.
4.2. Fractional
Shares. No fractional shares of Common Stock shall be issued upon conversion of the Preferred
Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such
fraction multiplied by the fair market value of a share of Common Stock as determined in good faith by the Board of Directors of the Corporation
(including the Preferred Directors). Whether or not fractional shares would be issuable upon such conversion shall be determined on the
basis of the total number of shares of the Preferred Stock the holder is at the time converting into Common Stock and the aggregate number
of shares of Common Stock issuable upon such conversion.
4.3. Mechanics
of Conversion.
4.3.1 Notice
of Conversion. In order for a holder of the Preferred Stock to voluntarily convert shares of
the Preferred Stock into shares of Common Stock, such holder shall surrender the certificate or certificates for such shares of the Preferred
Stock (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and
agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation
on account of the alleged loss, theft or destruction of such certificate), at the office of the transfer agent for the Preferred Stock
(or at the principal office of the Corporation if the Corporation serves as its own transfer agent), together with written notice that
such holder elects to convert all or any number of the shares of the Preferred Stock represented by such certificate or certificates and,
if applicable, any event on which such conversion is contingent. Such notice shall state such holder’s name or the names of the
nominees in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. If required by the Corporation,
certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory
to the Corporation, duly executed by the registered holder or his, her or its attorney duly authorized in writing. The close of business
on the date of receipt by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of such certificates
(or lost certificate affidavit and agreement) and notice shall be the time of conversion (the “Conversion Time”), and
the shares of Common Stock issuable upon conversion of the shares represented by such certificate shall be deemed to be outstanding of
record as of such date. The Corporation shall, as soon as practicable after the Conversion Time, (a) issue and deliver to such holder
of the Preferred Stock, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable
upon such conversion in accordance with the provisions hereof and a certificate for the number (if any) of the shares of the Preferred
Stock represented by the surrendered certificate that were not converted into Common Stock, and (b) pay in cash such amount as provided
in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion.
4.3.2 Reservation
of Shares. The Corporation shall at all times when the Preferred Stock shall be outstanding,
reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Preferred
Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to
effect
the conversion of all the Preferred Stock then outstanding; and if at any time the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect the conversion of all of the then outstanding shares of the Preferred Stock, the Corporation
shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder
approval of any necessary amendment to this Amended and Restated Certificate of Incorporation, as amended. Before taking any action that
would cause an adjustment reducing the Conversion Price of any series of Preferred Stock below the then par value of the shares of Common
Stock issuable upon conversion of the Preferred Stock, the Corporation will take any corporate action that may, in the opinion of its
counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of Common Stock
at such adjusted Conversion Price.
4.3.3 Effect
of Conversion. All shares of the Preferred Stock that shall have been surrendered for conversion
as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and
terminate at the Conversion Time, except with respect to the right of the holders thereof to receive shares of Common Stock in exchange
therefor and to receive payment in lieu of any fraction of a share otherwise issuable upon such conversion as provided in Subsection 4.2.
Any shares of the Preferred Stock so converted shall be retired and cancelled and may not be reissued as shares of such series, and the
Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized
number of shares of the Preferred Stock accordingly.
4.3.4 No
Further Adjustment. Upon any such conversion, no adjustment to the Conversion Price shall be
made for any declared but unpaid dividends on the Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion.
4.3.5 Taxes.
The Corporation shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of shares
of Common Stock upon conversion of shares of the Preferred Stock pursuant to this Section 4. The Corporation shall not, however,
be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock
in a name other than that in which the shares of the Preferred Stock so converted were registered, and no such issuance or delivery shall
be made unless and until the person or entity requesting such issuance has paid to the Corporation the amount of any such tax or has established,
to the satisfaction of the Corporation, that such tax has been paid.
4.4. Adjustments
to Conversion Price for Diluting Issues.
4.4.1 Special
Definitions. For purposes of this Article Fourth, the following definitions shall apply:
(a) “Option”
shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.
(b) “Original
Issue Date” shall mean, with respect to the Series A Preferred Stock, the Series A-1 Preferred Stock, the Series A-2
Preferred Stock and the Series B Preferred Stock, the date on which the first share of such series of Preferred Stock, respectively,
was issued.
(c) “Convertible
Securities” shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into or
exchangeable for Common Stock, but excluding Options.
(d) “Additional
Shares of Common Stock” shall mean, with respect to the determination of adjustments to the Conversion Price for each series
of Preferred Stock, all shares of Common Stock issued (or, pursuant to Subsection 4.4.3, deemed to be issued) by the Corporation on or
after the Original Issue Date of such Series of Preferred Stock, other than (1) the following shares of Common Stock and (2) shares
of Common Stock deemed issued pursuant to the following Options and Convertible Securities (clauses (1) and (2), collectively, “Exempted
Securities”):
(i) shares
of Common Stock, Options or Convertible Securities issued upon the conversion of the Preferred Stock or by reason of a dividend, stock
split, split-up or other distribution on shares of Common Stock that is covered by Subsection 4.5, 4.6 or 4.7;
(ii) shares
of Common Stock or Options issued to employees or directors of, or consultants or advisors to, the Corporation or any of its subsidiaries
pursuant to a plan, agreement or arrangement approved by the Board of Directors of the Corporation, including both Preferred Directors;
(iii) shares
of Common Stock or Convertible Securities actually issued upon the exercise of Options, or shares of Common Stock actually issued upon
the conversion or exchange of Convertible Securities, in each case provided that such issuance is pursuant to the terms of such Option
or Convertible Security;
(iv) shares
of Common Stock, Options or Convertible Securities issued to banks, equipment lessors or other financial institutions, or to real property
lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction approved by the Board of Directors of the
Corporation, including both Preferred Directors, that do not exceed an aggregate of 1,000,000 shares of Common Stock;
(v) shares
of Common Stock, Options or Convertible Securities issued to suppliers or third party service providers in connection with the provision
of goods or services pursuant to transactions approved by the Board of Directors of the Corporation, including both Preferred Directors;
(vi) shares
of Common Stock, Options or Convertible Securities issued pursuant to the acquisition of another corporation (or the assets of another
corporation) by the Corporation whether by merger, reorganization or otherwise, provided, that such issuances are approved by the Board
of Directors of the Corporation, including both Preferred Directors;
(vii) shares
of Common Stock, Options or Convertible Securities issued in connection with sponsored research, collaboration, technology license, development,
marketing or other similar agreements or strategic partnerships approved by the Board of Directors of the Corporation, including both
Preferred Directors;
(viii) shares
of Common Stock issued or issuable pursuant to currently outstanding Options granted under the Corporation’s Amended and Restated
2007 Equity Incentive Plan, as amended from time to time, with such amendment as approved by the Board of Directors, including both Preferred
Directors;
(ix) shares
of Common Stock issued or issuable upon the closing of a public offering of the Corporation’s securities pursuant to the Securities
Act of 1933, as amended (the “Securities Act”), in which all shares of the Preferred Stock are automatically converted
to Common Stock pursuant to Subsection 5.1(a);
(x) shares
of Common Stock issued or issuable upon conversion of any shares of the Series B Preferred Stock issued under that certain Series B
Stock Purchase Agreement dated as of March 20, 2014, as amended, and the Series B Preferred Stock Purchase Agreement dated as
of November 16, 2016, as it may be amended, among the Corporation and the other parties listed therein;
(xi) shares
of Common Stock issued or issuable upon conversion of one or more Convertible Promissory Note(s) or upon exercise of one or more
Warrant(s) issued by the Corporation to the Alzheimer Drug Development Foundation, Inc. under that certain Agreement to Accept
Conditions for Biotechnology Grant Funding dated as of July 6, 2010;
(xii) shares
of Preferred Stock issued or issuable upon conversion of one or more Convertible Promissory Notes (and shares of Common Stock issued upon
conversion of such shares of Preferred Stock) and Common Stock Purchase Warrants (and shares of Common Stock issued upon exercise of such
Warrants) issued by the Corporation under that certain Note and Warrant Purchase Agreement, among the Corporation and the purchasers named
therein, dated as of March 11, 2016, as amended; and
(xiii) shares
of Common Stock issued or issuable upon the conversion, exercise or exchange of all other Options and Convertible Securities outstanding
as of November 16, 2016.
4.4.2 No
Adjustment of Conversion Price. No adjustment in the Conversion Price applicable to a share of
Preferred Stock shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock unless the consideration
per share (determined pursuant to Subsection 4.4.5 for an Additional Share of Common Stock issued or deemed to be issued by the Corporation)
is less than the Conversion Price for such share of Preferred Stock in effect on the date of, and immediately prior to, the issue of such
Additional Shares of Common Stock.
4.4.3 Deemed
Issue of Additional Shares of Common Stock.
(a) If
the Corporation at any time or from time to time after the Original Issue Date applicable to a series of Preferred Stock shall issue any
Options or Convertible Securities (excluding Options or Convertible Securities that are themselves Exempted Securities) or shall fix a
record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities,
then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto, assuming the satisfaction of any conditions
to exercisability, convertibility or exchangeability but without regard to any provision contained therein for a subsequent adjustment
of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion
or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of the issuance
of such Convertible Security or Option or, in case such a record date shall have been fixed, as of the close of business on such record
date.
(b) If
the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to the Conversion Price of any series
of Preferred Stock pursuant to the terms of Subsection 4.4.4, are revised as a result of an amendment to such terms or any other adjustment
pursuant to the provisions of such Option or Convertible Security (hut excluding automatic adjustments to such terms pursuant to anti-dilution
or similar provisions of such Option or Convertible Security) to provide for either (i) any increase or decrease in the number of
shares of Common Stock issuable upon the exercise, conversion and/or exchange of any such Option or Convertible Security or (ii) any
increase or decrease in the consideration payable to the Corporation upon such exercise, conversion and/or exchange, then, effective upon
such increase or decrease becoming effective, the Conversion Price of such series of Preferred Stock computed upon the original issue
of such Option or Convertible Security (or upon the occurrence of a record date with respect thereto) shall be readjusted to such Conversion
Price as would have been obtained had such revised terms been in effect upon the original date of issuance of such Option or Convertible
Security. Notwithstanding the foregoing, no readjustment pursuant to this Subsection 4.4.3(b) shall have the effect of increasing
the Conversion Price of any series of Preferred Stock to an amount that exceeds the lower of (A) such Conversion Price in effect
immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible Security, or (B) such
Conversion Price that would have resulted from any issuances of Additional Shares of Common Stock (other than deemed issuances of Additional
Shares of Common Stock as a result of the issuance of such Option or Convertible Security) between the original adjustment date and such
readjustment date.
(c) If
the terms of any Option or Convertible Security (excluding Options or Convertible Securities that are themselves Exempted
Securities), the issuance of which did not result in an adjustment to the Conversion Price of a series of Preferred Stock pursuant
to the terms of Subsection 4.4.4 (either because the consideration per share (determined pursuant to Subsection 4.4.5) of the
Additional Shares of Common Stock subject thereto was equal to or greater than such Conversion Price then in effect with respect to
such series of Preferred Stock, or because such Option or Convertible Security was issued before the Original Issue Date of such
series of Preferred Stock), are revised after Original Issue Date of such series of Preferred Stock as a result of an amendment to
such terms or any other adjustment pursuant to
the provisions of such Option or Convertible Security (but excluding automatic
adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for
either (i) any increase in the number of shares of Common Stock issuable upon the exercise, conversion or exchange of any such
Option or Convertible Security or (ii) any decrease in the consideration payable to the Corporation upon such exercise,
conversion or exchange, then such Option or Convertible Security, as so amended or adjusted, and the Additional Shares of Common
Stock subject thereto (determined in the manner provided in Subsection 4.4.3(a)) shall be deemed to have been issued effective upon
such increase or decrease becoming effective.
(d) Upon
the expiration or termination of any unexercised Option or unconverted or unexchanged Convertible Security (or portion thereof) that resulted
(either upon its original issuance or upon a revision of its terms) in an adjustment to the Conversion Price of any series of Preferred
Stock pursuant to the terms of Subsection 4.4.4, such Conversion Price shall be readjusted to the Conversion Price as would have obtained
had such Option or Convertible Security (or portion thereof) never been issued.
(e) If
the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or
the consideration payable to the Corporation upon such exercise, conversion and/or exchange, is calculable at the time such Option or
Convertible Security is issued or amended but is subject to adjustment based upon subsequent events, any adjustment to the Conversion
Price of a series of Preferred Stock provided for in this Subsection 4.4.3 shall be effected at the time of such issuance or amendment
based on such number of shares or amount of consideration without regard to any provisions for subsequent adjustments (and any subsequent
adjustments shall be treated as provided in clauses (b) and (c) of this Subsection 4.4.3). If the number of shares of Common
Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the
Corporation upon such exercise, conversion and/or exchange, cannot be calculated at all at the time such Option or Convertible Security
is issued or amended, any adjustment to the Conversion Price of a series of Preferred Stock that would result under the terms of this
Subsection 4.4.3 at the time of such issuance or amendment shall instead be effected at the time such number of shares and/or amount of
consideration is first calculable (even if subject to subsequent adjustments), assuming for purposes of calculating such adjustment to
such Conversion Price that such Issuance or amendment took place at the time such calculation can first be made.
4.4.4 Adjustment
of Conversion Price upon Issuance of Additional Shares of Common Stock. In the event the Corporation
shall at any time after the Original Issue Date applicable to a series of Preferred Stock issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to Subsection 4.4.3), without consideration or for a consideration per
share less than Conversion Price of such series of Preferred Stock in effect immediately prior to such issue, then the Conversion Price
applicable to each share of such series of Preferred Stock shall be reduced, concurrently with such issue, to a price per share (calculated
to the nearest one-hundredth of a cent) in accordance with the following formula:
CP2 = CP1* (A + B) ÷
(A + C).
For purposes of the foregoing formula, the following definitions shall
apply:
(i) “CP2”
shall mean, with respect to the determination of adjustments to the Conversion Price of any series of Preferred Stock, the Conversion
Price of such series of Preferred Stock in effect immediately after such issue of Additional Shares of Common Stock;
(ii) “CP1”
shall mean, with respect to the determination of adjustments to the Conversion Price of any series of Preferred Stock, the Conversion
Price of such series of Preferred Stock in effect immediately prior to such issue of Additional Shares of Common Stock;
(iii) “A”
shall mean the number of shares of Common Stock outstanding immediately prior to such issue of Additional Shares of Common Stock, treating
for this purpose as outstanding shares of Common Stock underlying only those Options or Convertible Securities that (x) are outstanding
immediately prior to such issue and (y) are vested or otherwise exercisable;
(iv) “B”
shall mean the number of shares of Common Stock that would have been issued if such Additional Shares of Common Stock had been issued
at a price per share equal to CP1 (determined by dividing the aggregate consideration received by the Corporation in respect
of such issue by CP1); and
(v) “C”
shall mean the number of such Additional Shares of Common Stock issued in such transaction.
4.4.5 Determination
of Consideration. For purposes of this Subsection 4.4, the consideration received by the Corporation
for the issue of any Additional Shares of Common Stock shall be computed as follows:
(a) For
cash and property, such consideration shall:
(i) insofar
as it consists of cash, be computed at the aggregate amount of cash received by the Corporation, excluding amounts paid or payable for
accrued interest;
(ii) insofar
as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good
faith by the Board of Directors of the Corporation (including both Preferred Directors); and
(iii) in
the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for
consideration that covers both, be the proportion of such consideration so received, computed as provided in clauses (i) and (ii) above,
as determined in good faith by the Board of Directors of the Corporation (including both Preferred Directors).
(b) For
Options and Convertible Securities, the consideration per share received by the Corporation for Additional Shares of Common Stock
deemed to have been
issued pursuant to Subsection 4.4.3, relating to Options and Convertible Securities, shall be determined by
dividing
(i) the
total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities,
plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Options
or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such
Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by
(ii) the
maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible
Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion
or exchange of such Convertible Securities.
4.4.6 Multiple
Closing Dates. In the event the Corporation shall issue on more than one date Additional Shares
of Common Stock that are a part of one transaction or a series of related transactions and that would result in an adjustment to the Conversion
Price of any series of Preferred Stock pursuant to the terms of Subsection 4.4.4, and such issuance dates occur within a period of no
more than 90 days from the first such issuance to the final such issuance, then, upon the final such issuance, the Conversion Price of
such series of Preferred Stock shall be readjusted to give effect to all such issuances as if they occurred on the date of the first such
issuance (and without giving effect to any additional adjustments as a result of any such subsequent issuances within such period).
4.5. Adjustment
for Stock Splits and Combinations. If the Corporation shall at any time or from time to time
on or after the Original Issue Date of any series of Preferred Stock effect a subdivision of the outstanding Common Stock, the Conversion
Price of such series of Preferred Stock in effect immediately before that subdivision shall be proportionately decreased so that the number
of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase in the
aggregate number of shares of Common Stock outstanding, If the Corporation shall at any time or from time to time after the Original
Issue Date of any series of Preferred Stock combine the outstanding shares of Common Stock, the Conversion Price of such series of Preferred
Stock in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable
on conversion of each share of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Common
Stock outstanding. Any adjustment under this Subsection 4.5 shall become effective at the close of business on the date the subdivision
or combination becomes effective.
4.6. Adjustments
for Other Dividends and Distributions. In the event the Corporation at any time or from
time to time on or after the Original Issue Date of any series of Preferred Stock shall make or issue, or fix a record date for the
determination of holders of
Common Stock entitled to receive, a dividend or other distribution
payable in securities of the Corporation or in cash or other property and the provisions of Section 1 do not apply to such dividend
or distribution, then and in each such event the holders of such series of Preferred Stock shall receive, simultaneously with the distribution
to the holders of Common Stock, a dividend or other distribution of such securities, cash or other property in an amount equal to the
amount of such securities, cash or other property as they would have received if all outstanding shares of such series of Preferred Stock
had been converted into Common Stock on the date of such event.
4.7. Adjustment
for Merger or Reorganization, etc. If there shall occur any reorganization, recapitalization,
reclassification, consolidation or merger involving the Corporation in which the Common Stock (but not the Preferred Stock) is converted
into or exchanged for securities, cash or other property (other than a transaction covered by Subsections 4.4, 4.5 or 4.6), then, following
any such reorganization, recapitalization, reclassification, consolidation or merger, each share of the Preferred Stock shall thereafter
be convertible in lieu of the Common Stock into which it was convertible prior to such event into the kind and amount of securities, cash
or other property that a holder of the number of shares of Common Stock of the Corporation issuable upon conversion of one share of the
Preferred Stock immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been
entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board
of Directors of the Corporation (including both Preferred Directors)) shall be made in the application of the provisions in this Section 4
with respect to the rights and interests thereafter of the holders of the Preferred Stock, to the end that the provisions set forth in
this Section 4 (including provisions with respect to changes in and other adjustments of the Conversion Price of each series of Preferred
Stock) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable
upon the conversion of the Preferred Stock.
4.8. Certificate
as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price
of any series of Preferred Stock pursuant to this Section 4, the Corporation at its expense shall, as promptly as reasonably practicable
but in any event not later than 30 days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish
to each holder of the Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities,
cash or other property into which the Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment
is based. The Corporation shall, as promptly as reasonably practicable after the written request at any time of any holder of the Preferred
Stock (but in any event not later than 15 days thereafter), furnish or cause to be furnished to such holder a certificate setting forth
(a) the Conversion Price of such series of Preferred Stock then in effect, and (b) the number of shares of Common Stock and
the amount, if any, of other securities, cash or property that then would be received upon the conversion of the Preferred Stock.
4.9. Notice
of Record Date. In the event:
(a) the
Corporation shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon
conversion of the Preferred Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution,
or
to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive
any other security; or
(b) of
any capital reorganization of the Corporation, any reclassification of the Common Stock of the Corporation, or any Deemed Liquidation
Event; or
(c) of
the voluntary or involuntary dissolution, liquidation or winding-up of the Corporation,
then, and in each such case, the Corporation will send or cause to
be sent to the holders of the Preferred Stock a notice specifying, as the case may be, (i) the record date for such dividend, distribution
or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is proposed to take place, and the time, if
any is to be fixed, as of which the holders of record of Common Stock (or such other capital stock or securities at the time issuable
upon the conversion of the Preferred Stock) shall be entitled to exchange their shares of Common Stock (or such other capital stock or
securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer,
dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Preferred Stock and
the Common Stock, Such notice shall be sent at least 10 days prior to the record date or effective date for the event specified in such
notice.
5. Mandatory
Conversion.
5.1. Trigger
Events. Upon the initial closing of the Corporation's first firmly underwritten public offering
of its Common Stock pursuant to a registration statement filed with the Securities and Exchange Commission (“SEC”),
and declared effective under the Securities Act, in which the Corporation’s Common Stock is listed on a national securities exchange
(other than a registration statement relating either to the sale of securities to employees of the Corporation pursuant to its stock option,
stock purchase or similar plan or an SEC Rule 145 transaction) covering the offer and sale of Common Stock for the account of the
Corporation to the public at a price per share of not less than three times the highest then applicable Conversion Price resulting in
offering proceeds to the Corporation of a least $30,000,000 net of underwriting discounts and commissions (the time of such closing is
referred to herein as the “Mandatory Conversion Time”), (i) all outstanding shares of the Preferred Stock shall
automatically be converted into shares of Common Stock, at the then effective Conversion Price and (ii) such shares may not be reissued
by the Corporation.
5.2. Procedural
Requirements. All holders of record of shares of the Preferred Stock shall be sent written
notice of the Mandatory Conversion Time and the place designated for mandatory conversion of all such shares of the Preferred Stock
pursuant to this Section 5. Such notice need not be sent in advance of the occurrence of the Mandatory Conversion Time. Upon
receipt of such notice, each holder of shares of the Preferred Stock shall surrender his, her or its certificate or certificates for
all such shares (or, if such holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit
and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the
Corporation on account of the alleged loss, theft or destruction of such
certificate)
to the Corporation at the place designated in such notice. If so required by the Corporation, certificates surrendered for conversion
shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed
by the registered holder or by his, her or its attorney duly authorized in writing. All rights with respect to the Preferred Stock converted
pursuant to Subsection 5.1, including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), will
terminate at the Mandatory Conversion Time (notwithstanding the failure of the holder or holders thereof to surrender the certificates
at or prior to such time), except only the rights of the holders thereof, upon surrender of their certificate or certificates (or lost
certificate affidavit and agreement) therefor, to receive the items provided for in the next sentence of this Subsection 5.2. As soon
as practicable after the Mandatory Conversion Time and the surrender of the certificate or certificates (or lost certificate affidavit
and agreement) for the Preferred Stock, the Corporation shall issue and deliver to such holder, or to his, her or its nominees, a certificate
or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof, together
with cash as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and
the payment of any declared but unpaid dividends on the shares of the Preferred Stock converted. Such converted Preferred Stock shall
be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action
(without the need for stockholder action) as may be necessary to reduce the authorized number of shares of the Preferred Stock accordingly.
6. Redemption.
6.1. Redemption.
Shares of the Preferred Stock shall be redeemed by the Corporation out of funds lawfully available therefor at a price equal to the
Preferred Liquidation Amount applicable to the shares of Preferred Stock, less all Mandatory Dividend(s) previously distributed
with respect to each such share (the “Redemption Price”), in three annual installments commencing not more than
60 days after receipt by the Corporation at any time on or after March 20, 2021, from the holders of at least 60% of the then
outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, of written
notice requesting redemption of all shares of the Preferred Stock. The date of each such installment shall be referred to as a
“Redemption Date.” On each Redemption Date, the Corporation shall redeem, on a pro rata basis in accordance with
the number of shares of the Preferred Stock owned by each holder, that number of outstanding shares of the Preferred Stock
determined by dividing (a) the total number of shares of the Preferred Stock outstanding immediately prior to such Redemption
Date by (b) the number of remaining Redemption Dates (including the Redemption Date to which such calculation applies);
provided, however, that Excluded Shares (as such term is defined in Subsection 6.2) shall not be redeemed and shall be excluded from
the calculations set forth in this sentence. If the Corporation does not have sufficient funds legally available to redeem on any
Redemption Date all shares of the Preferred Stock to be redeemed on such Redemption Date, the Corporation shall redeem a pro rata
portion of each holder’s redeemable shares of such capital stock out of funds legally available therefor, based on the
respective amounts that would otherwise be payable in respect of the shares to be redeemed if the legally available funds were
sufficient to redeem all such shares, and shall redeem the remaining shares to have been redeemed as soon as practicable after the
Corporation has funds legally available therefor. No other capital stock of the Corporation may be redeemed
or repurchased by the
Corporation prior to the redemption of the Preferred Stock without the approval of the holders of at least 60% of the then issued
and outstanding shares of Preferred Stock voting as a single class on an as-converted basis. The Corporation shall take all
commercially reasonable action to have funds legally available for payment of the Redemption Price.
6.2. Redemption
Notice. The Corporation shall send written notice of the mandatory redemption (the “Redemption
Notice”) to each holder of record of the Preferred Stock not less than 40 days prior to each Redemption Date. Each Redemption
Notice shall state:
(a) the
series and number of shares of the Preferred Stock held by the holder that the Corporation shall redeem on the Redemption Date specified
in the Redemption Notice;
(b) the
Redemption Date and the Redemption Price;
(c) the
date upon which the holder’s right to convert such shares terminates (as determined in accordance with Subsection 4.1); and
(d) that
the holder is to surrender to the Corporation, in the manner and at the place designated, his, her or its certificate or certificates
representing the shares of the Preferred Stock to be redeemed.
If the Corporation receives, on or prior to the 20th day after the
date of delivery of the Redemption Notice to a holder of the Preferred Stock, written notice from such holder that such holder elects
to be excluded from the redemption provided in this Section 6, then the shares of the Preferred Stock registered on the books of
the Corporation in the name of such holder at the time of the Corporation's receipt of such notice shall thereafter be “Excluded
Shares.” Excluded Shares shall not be redeemed or redeemable pursuant to this Section 6, whether on such Redemption Date
or thereafter.
6.3. Surrender
of Certificates; Payment. On or before the applicable Redemption Date, each holder of shares
of the Preferred Stock to be redeemed on such Redemption Date, unless such holder has exercised his, her or its right to convert such
shares as provided in Section 4, shall surrender the certificate or certificates representing such shares (or, if such registered
holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable
to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss,
theft or destruction of such certificate) to the Corporation, in the manner and at the place designated in the Redemption Notice, and
thereupon the Redemption Price for such shares shall be payable to the order of the person or entity whose name appears on such certificate
or certificates as the owner thereof. In the event less than all of the shares of the Preferred Stock represented by a certificate are
redeemed, a new certificate representing the unredeemed shares of the Preferred Stock shall promptly be issued to such holder.
6.4. Rights
Subsequent to Redemption. If the Redemption Notice shall have been duly given, and if on
the applicable Redemption Date the Redemption Price payable upon redemption of the shares of the Preferred Stock to be redeemed on
such Redemption Date is paid
or tendered for payment or deposited with an independent
payment agent so as to be available therefor in a timely manner, then notwithstanding that the certificates evidencing any of the shares
of the Preferred Stock so called for redemption shall not have been surrendered, dividends with respect to such shares of the Preferred
Stock shall cease to accrue after such Redemption Date and all rights with respect to such shares shall forthwith after the Redemption
Date terminate, except only the right of the holders to receive the Redemption Price without interest upon surrender of their certificate
or certificates therefor.
6.5. Redeemed
or Otherwise Acquired Shares. Any shares of the Preferred Stock that are redeemed or otherwise
acquired by the Corporation or any of its subsidiaries shall be automatically and immediately cancelled and retired and shall not be reissued,
sold or transferred. Neither the Corporation nor any of its subsidiaries may exercise any voting or other rights granted to the holders
of the Preferred Stock following redemption.
7. Waiver.
Any of the rights, powers, preferences and other terms of the Preferred Stock set forth herein may be waived on behalf of all holders
of the Preferred Stock, the Series B Preferred Stock, the Series A-2 Preferred Stock, the Series A-1 Preferred Stock or
the Series A Preferred Stock, as the case may be, by the requisite percentage (as set forth in the applicable provision(s) of
this Amended and Restated Certificate of Incorporation, as amended) of such stockholders of the Corporation that are entitled to a vote
upon or consent with respect to any such right, power, preference or other term.
8. Notices.
Any notice required or permitted by the provisions of this Article Fourth to be given to a holder of shares of the Preferred Stock
shall be mailed, postage prepaid, to the post office address last shown on the records of the Corporation, or given by electronic communication
in compliance with the provisions of the General Corporation Law, and shall be deemed sent upon such mailing or electronic transmission.
9. No
Reissuance of Preferred Stock. No share or shares of any series of the Preferred Stock acquired
by the Corporation by reason of purchase, conversion, redemption or otherwise shall be reissued, and all such shares shall be canceled,
retired and eliminated from the shares which the Corporation shall be authorized to issue. This Amended and Restated Certificate of Incorporation,
as amended, shall be appropriately amended to effect the corresponding reduction in the Corporation’s capital stock.
1. General.
The voting, dividend and liquidation rights of the holders of Common Stock are subject to and qualified by the rights, powers and preferences
of the holders of the Preferred Stock set forth herein.
2. Voting.
The holders of Common Stock are entitled to one vote for each share of Common Stock held at all meetings of stockholders (and
written actions in lieu of meetings). The number of authorized shares of Common Stock may be increased or decreased (but not below
the number of shares thereof then outstanding) by (in addition to any vote of the holders of the Preferred Stock that may be
required by the terms of this Amended and Restated Certificate of Incorporation, as amended) the affirmative vote of the holders of
shares of capital
stock of the Corporation (voting as a single class) representing a majority of the votes represented by all
outstanding shares of capital stock of the Corporation entitled to vote (the Preferred Stock voting on an as if converted to Common
Stock basis) and without a separate class vote by the holders of the Common Stock, irrespective of the provisions of
Section 242(b)(2) of the General Corporation Law.
Fifth:
Subject to any additional vote required by the Certificate of Incorporation or By-Laws, in furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly authorized to make, repeal, alter, amend and rescind any or all of the By-Laws
of the Corporation.
Sixth:
Subject to any additional vote required by the Certificate of Incorporation, the number of directors of the Corporation shall be determined
in the manner set forth in the By-Laws of the Corporation.
Seventh:
Elections of directors need not be by written ballot unless the By-Laws of the Corporation shall so provide.
Eighth:
Meetings of stockholders may be held within or without the State of Delaware, as the By-Laws of the Corporation may provide. The books
of the Corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the Board
of Directors or in the By-Laws of the Corporation.
Ninth:
To the fullest extent permitted by law, a director of the Corporation shall not be personally liable to the Corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director. If the General Corporation Law or any other law of the State of Delaware
is amended after approval by the stockholders of this Article Ninth to authorize corporate action further eliminating or limiting
the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the General Corporation Law as so amended.
Any repeal or modification of the foregoing provisions
of this Article Ninth by the stockholders of the Corporation shall not adversely affect any right or protection of a director of
the Corporation existing at the time of, or increase the liability of any director of the Corporation with respect to any acts or omissions
of such director occurring prior to, such repeal or modification.
Tenth:
To the fullest extent permitted by applicable law, the Corporation is authorized to provide indemnification of (and advancement of expenses
to) directors, officers and agents of the Corporation (and any other persons to which General Corporation Law permits the Corporation
to provide indemnification) through By-Law provisions, agreements with such agents or other persons, vote of stockholders or disinterested
directors or otherwise, in excess of the indemnification and advancement otherwise permitted by Section 145 of the General Corporation
Law.
Any amendment, repeal or modification of the foregoing
provisions of this Article Tenth shall not adversely affect any right or protection of any director, officer or other agent of the
Corporation existing at the time of such amendment, repeal or modification.
Eleventh:
The Corporation renounces any interest or expectancy of the Corporation in, or in being offered an opportunity to participate in, any
Excluded Opportunity. An “Excluded Opportunity” is any matter, transaction or interest that is presented to, or acquired,
created or developed by, or which otherwise comes into the possession of, (i) any director of the Corporation who is not an employee
of the Corporation or any of its subsidiaries, or (ii) any holder of Series A Preferred Stock or any partner, member, director,
stockholder, employee or agent of any such holder, or an Affiliate of any holder, other than someone who is an employee of the Corporation
or any of its subsidiaries (collectively, “Covered Persons”), unless such matter, transaction or interest is presented
to, or acquired, created or developed by, or otherwise comes into the possession of, a Covered Person expressly and solely in such Covered
Person’s capacity as a director of the Corporation. As used herein, “Affiliate” means, with respect to any specified
Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including
without limitation any general partner, managing member, officer or director of such Person or any venture capital fund now or hereafter
existing that is controlled by such Person, or solely in the case of Ogden CAP Associates, LLC (“Ogden”): (a) with
respect to which investment discretion is exercised by one or more general partners or managing members of, or shares the same management
company with, Ogden; or (b) any employee of Ogden or Ogden’s Affiliate who holds (or will by virtue of an immediately succeeding
transfer will hold) at least 100,000 shares of Series A Preferred Stock (subject to appropriate adjustment in the event of any stock
dividend, stock split, combination or other similar recapitalization affecting such shares).
Twelfth:
The Corporation expressly elects not to be governed by Section 203 of the General Corporation Law.
[Signature Page Follows]
IN
WITNESS WHEREOF, this Second Amended and Restated Certificate of Incorporation has been executed by a duly authorized officer
of the Corporation on this 1st day of November, 2016.
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COGNITION THERAPEUTICS, INC.
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By:
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/s/ Kenneth I. Moch
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Name: Kenneth I. Moch
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Title: President and Chief Executive Officer
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Exhibit 3.2
CERTIFICATE
OF AMENDMENT
OF
SECOND
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
COGNITION
THERAPEUTICS, INC.
Cognition Therapeutics, Inc., a corporation
organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “DGCL”),
DOES HEREBY CERTIFY THAT:
FIRST: The Board of Directors (the “Board”)
of Cognition Therapeutics, Inc. (the “Corporation”), pursuant to a meeting of the Board held on December 2, 2016,
duly adopted the following resolution setting forth a proposed amendment to the Second Amended and Restated Certificate of Incorporation
of the Corporation, declaring such amendment to be advisable and calling for consideration thereof by the stockholders of the Corporation.
The resolution setting forth the proposed amendment is as follows:
RESOLVED, that Article Fourth of the
Second Amended and Restated Certificate of Incorporation of the Company (the “Certificate”), shall be amended pursuant to
the Certificate of Amendment in the form attached as Exhibit A hereto.
SECOND: Thereafter, pursuant to a resolution of the
Board, the holders of a majority of the outstanding shares of all classes of capital stock of the Corporation, voting together as a single
class, and the holders of at least 60% of the outstanding shares of the Corporation’s Series A Convertible Preferred Stock,
Series A-1 Convertible Preferred Stock, Series A-2 Convertible Preferred Stock and Series B Convertible Preferred Stock,
voting together as a separate class, voted in favor of the amendment.
THIRD: The amendment was duly adopted in accordance
with the provisions of Section 242 of the DGCL. With respect to such adoption, written consent has been given by the stockholders
of the Corporation in accordance with the provisions of Section 228 of the DGCL and written notice has been given as provided in
Section 228 of the DGCL.
[Signature follows on next page.]
IN WITNESS WHEREOF, the Corporation has caused this
Certificate of Amendment to be signed by its duly authorized officer, this 10th day of January, 2017.
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COGNITION THERAPEUTICS, INC.
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By:
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/s/ Kenneth I. Moch
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Kenneth I. Moch
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President and Chief Executive Officer
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EXHIBIT A
FOURTH:
The total number of shares of all classes of stock that the Corporation shall have authority to issue is (i) Fifty-Six Million (56,000,000)
shares of Common Stock, $.001 par value per share (“Common Stock”), and (ii) Thirty-Nine Million Four Hundred
Twenty- Three Thousand Three Hundred Fifty-Eight (39,423,358) shares of Preferred Stock, $.001 par value per share.
The following is a statement of the designations
and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital
stock of the Corporation.
A. PREFERRED STOCK
Three Million Sixty-Seven Thousand Five Hundred Nineteen
(3,067,519) shares of the authorized Preferred Stock of the Corporation are hereby designated “Series A Convertible Preferred
Stock” (the “Series A Preferred Stock”); Three Million Nine Hundred Seventy Thousand Seven Hundred Seventy-Six
(3,970,776) shares of the authorized Preferred Stock of the Corporation are hereby designated “Series A-1 Convertible Preferred
Stock” (the “Series A-1 Preferred Stock”); Three Million Five Hundred Sixty-Five Thousand Sixty-Three
(3,565,063) shares of the authorized Preferred Stock of the Corporation are hereby designated “Series A-2 Convertible Preferred
Stock” (the “Series A-2 Preferred Stock”); and Twenty- Eight Million Eight Hundred Twenty Thousand (28,820,000)
shares of the authorized Preferred Stock of the Corporation are hereby designated “Series B Convertible Preferred Stock”
(the “Series B Preferred Stock”). The Series A Preferred Stock, the Series A-1 Preferred Stock, the
Series A-2 Preferred Stock and the Series B Preferred Stock are sometimes referred to herein collectively as the “Preferred
Stock.” Unless otherwise indicated, references to “Sections” or “Subsections” in this Part A of
this Article Fourth refer to sections and subsections of Part A of this Article Fourth.
The Preferred Stock shall have the following rights,
preferences, powers, privileges, restrictions, qualifications and limitations.
1. Dividends.
1.1. Accruing
Dividends. From and after the date of the issuance of each respective share of the
Preferred Stock, dividends at the rate of 8% per annum of the applicable Original Issue Price (as defined herein) compounded
annually shall accrue on such share of the Preferred Stock (“Accruing Dividends”). Accruing Dividends shall
accrue from day to day, whether or not declared, and shall be cumulative; provided however, (i) that such Accruing Dividends
shall be payable only in connection with a liquidation, dissolution or winding up of the Corporation under Section 2
(including, without limitation, in connection with a Deemed Liquidation Event), a Mandatory Dividend under Section 1.3, or a
redemption of the Preferred Stock under Section 6, and the Corporation shall not otherwise pay such Accruing Dividends and
(ii) in the event a Mandatory Dividend is paid under Section 1.3, Accruing Dividends shall thereafter accrue only on the
unreturned amount of the Original Issue Price after taking into
account the payment of each Mandatory Dividend. As used herein,
“Original Issue Price” means $.69 per share with respect to the Series A Preferred Stock and Series A-1
Preferred Stock, $.8415 per share with respect to the Series A-2 Preferred Stock and $.923 per share with respect to the
Series B Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or
other similar recapitalization affecting such shares). After such time as the holders of the Preferred Stock receive their full
Preferred Liquidation Amount (as defined below), less any and all Mandatory Dividend(s) previously distributed with respect to
shares of the Preferred Stock, the holders of the Preferred Stock will not thereafter be entitled to any additional Accruing
Dividends; provided that the holders of the Preferred Stock will share in all dividends and distributions declared by the Board of
Directors and paid by the Corporation with the holders of the Common Stock on an as if converted to Common Stock basis.
1.2. Common
Stock Dividends. The holders of the Preferred Stock shall be entitled to share in dividends payable
with respect to the Common Stock as if converted and the Corporation shall not declare, pay or set aside any dividends on shares of Common
Stock unless (in addition to obtaining any consents required elsewhere in this Amended and Restated Certificate of Incorporation, as amended)
each holder of the Preferred Stock then outstanding shall first receive, or simultaneously receive, in each such instance, a dividend
on each outstanding share of the Preferred Stock held by such holder as if such share of Preferred Stock had been converted into Common
Stock, in an amount at least equal to the product of (a) the dividend payable on a share of Common Stock and (b) the number
of shares of Common Stock issuable upon conversion of a share of the Preferred Stock, in each case calculated on the record date for determination
of holders entitled to receive such dividend.
1.3. Mandatory
Dividend(s).
(a) If,
prior to such time as the holders of shares of the Preferred Stock receive their full Preferred Liquidation Amount, less any and all
Mandatory Dividend(s) previously distributed with respect to shares of the Preferred Stock, the Corporation or any subsidiary
of the Corporation shall consummate a sale, license or other disposition for value of any or all of the Corporation’s
intellectual property, in a single transaction or series of related transactions unrelated to the performance by the Corporation of
research and development or other services (as determined in good faith by the Board of Directors of the Corporation, including both
Preferred Directors) (a “Strategic Event”), at the written election of the holders of at least 60% of the then
outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, sent to the
Corporation at least 15 days prior to the effective date of a Strategic Event, the Corporation shall distribute to the holders of
shares of the Preferred Stock up to 35% of the aggregate payments (including, without limitation, all option and/or milestone
payments and/or all success fees) received by the Corporation as consideration in such Strategic Event as soon as reasonably
practicable following receipt by the Corporation of such payments (“Mandatory Dividend”). Such Mandatory Dividend
shall be distributed to the holders of the Preferred Stock on a pari passu and an as-converted to Common Stock basis until the
aggregate amount of all Mandatory Dividends paid to the holders of the
Preferred Stock equals the full Preferred Liquidation Amount
payable on the Preferred Stock held by such holders.
(b) The
Corporation shall give each holder of record of the Preferred Stock written notice of an impending Strategic Event within ten days after
the Board of Directors of the Corporation approves such Strategic Event. Such written notice shall describe the material terms and conditions
of the impending Strategic Event and the provisions of this Section 1.3, and the Corporation shall thereafter give such holders prompt
notice of any material changes. The transaction shall in no event take place sooner than 20 days after the Corporation has given the first
notice provided for herein or sooner than ten days after the Corporation has given notice of any material changes provided for herein;
provided, however, that such periods may be shortened upon the written consent of the holders of the Preferred Stock that are entitled
to such notice rights or similar notice rights and that represent at least 60% of the then outstanding shares of the Preferred Stock,
voting together as a single class on an as-converted to Common Stock basis.
(c) After
such time as the holders of the Preferred Stock receive their full Preferred Liquidation Amount for their respective shares of the Preferred
Stock, less any and all Mandatory Dividend(s) previously distributed with respect to shares of the Preferred Stock, the holders of
the Preferred Stock will not thereafter be entitled to any additional Mandatory Dividends; provided that the holders of the Preferred
Stock will share in all dividends and distributions declared by the Board of Directors and paid by the Corporation with the holders of
the Common Stock on an as if converted to Common Stock basis.
1.4. Order
of Dividend Payment. No dividends or other distributions shall be declared and/or paid on any
class or series of capital stock, other than the Preferred Stock if any Mandatory Dividends have accrued and are unpaid or if any other
dividends are declared and unpaid on the Preferred Stock.
2. Liquidation
Preference.
2.1. Preferred
Liquidation Amount. In the event of any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, including, without limitation, any Deemed Liquidation Event (as defined below), each holder of shares
of the Preferred Stock then outstanding shall be entitled to receive out of the assets legally available for distribution to its stockholders,
whether from capital surplus, earnings or otherwise, on a pari passu and an as converted to Common Stock basis and prior and in preference
to any distribution to the holders of any other series or class of the capital stock of the Corporation that is junior to the Preferred
Stock, including, without limitation, the Common Stock, by reason of their ownership thereof, an amount per share of Preferred Stock
then held by such holder equal to the Preferred Liquidation Amount, less any and all Mandatory Dividend(s) previously distributed
with respect to such share of Preferred Stock. If upon the occurrence of such event, the assets and funds of the Corporation shall be
insufficient to permit the payment to such holders of Preferred Stock of the full Preferred Liquidation Amount, less any and all Mandatory
Dividend(s) previously distributed with respect to such share of Preferred Stock, required by the preceding sentence, then the entire
assets and funds of the Corporation legally available for
distribution shall be distributed ratably among the
holders of the Preferred Stock in proportion to the Preferred Liquidation Amount each such holder is otherwise entitled to receive on
each such share, less any and all Mandatory Dividend(s) previously distributed with respect to each such share. “Preferred
Liquidation Amount” means, with respect to a share of Preferred Stock, the applicable Original Issue Price for such share of
Preferred Stock plus all Accruing Dividends on such share of Preferred Stock (plus any other dividends or distributions declared but
not paid on such share of Preferred Stock).
2.2. Distribution
of Remaining Assets. After payment has been made to the holders of the Preferred Stock of their
full Preferred Liquidation Amount required by Section 2.1, less any and all Mandatory Dividend(s) previously distributed with
respect to each such share, the remaining assets or surplus funds of the Corporation available for distribution to stockholders shall
be distributed among the holders of the Common Stock and the holders of the Preferred Stock pro rata based on the number of shares of
Common Stock held by each (assuming conversion of all shares of the Preferred Stock into Common Stock).
2.3. Deemed
Liquidation Events. At the option of the holders of at least 60% of the then outstanding shares
of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, the occurrence of each of the following
events shall be deemed to be a liquidation, dissolution or winding up within the meaning of this Section 2 (each, a “Deemed
Liquidation Event”):
(a) either
a transaction or series of related transactions in which any individual, corporation, partnership, trust, limited liability company,
association or other entity (each, a “Person”), or group of related Persons, acquires from the stockholders of the
Corporation, shares representing at least a majority of the outstanding voting power of the Corporation;
(b) a
sale and/or issuance (or series of sales and/or issuances) by the Corporation of securities of the Corporation representing, after the
issuance of such securities, more than fifty percent (50%) of all voting securities of the Corporation to persons other than stockholders
of the Corporation as of immediately prior to such sale(s) and/or issuance(s);
(c) a
sale, conveyance or disposition (in one or a series of related transactions) by the Corporation or any subsidiary of the Corporation of
all or substantially all of the assets of the Corporation and its subsidiaries taken as a whole;
(d) a
grant of an exclusive license or other transfer (in one or a series of related transactions) by the Corporation and/or any subsidiary
of the Corporation of a material amount of the technology or intellectual property of the Corporation and its subsidiaries taken as a
whole; or
(e) a
consolidation or merger of the Corporation with or into any other entity or entities or a reorganization of the Corporation or
similar transactions, provided, however, that a consolidation, merger, reorganization or similar transaction involving the
Corporation shall not constitute a Deemed Liquidation Event if following completion of the
transaction, the holders of shares of the
Corporation immediately prior to the transaction own shares that represent a majority of the voting power of the surviving
corporation.
2.4. Amount
Paid Deemed Paid or Distributed. Whenever the distribution provided for in Subsection 1.3 or
in this Section 2 shall be payable in any assets other than cash, the value of the assets to be distributed shall be the fair market
value thereof, determined as follows:
(a) Freely
traded securities:
(i) If
traded on a securities exchange, the value shall be based on the formula specified in the definitive agreements for the Deemed Liquidation
Event(s) or if no such formula exists, then the value of such securities shall be deemed to be the average of the closing prices
of the securities on such exchange or system over the 30-day period ending three days prior to the closing;
(ii) If
actively traded over-the-counter, the value shall be based on the formula specified in the definitive agreements for the Deemed Liquidation
Event(s) or if no such formula exists, then the value of such securities shall be deemed to be the average of the closing bid or
sale prices (whichever is applicable) over the 30-day period ending three days prior to the closing; and
(iii) If
there is no active public market, the value shall be the fair market value thereof, as so determined in good faith by the Board of Directors
of the Corporation (including both Preferred Directors).
(b) The
method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising
solely by virtue of a stockholder’s status as an affiliate or former affiliate) shall be to make an appropriate discount from the
market value determined as above in Subsection 2.4(a) to reflect the approximate fair market value thereof.
(c) In
the event the requirements of this Section 2 are not complied with, the Corporation shall forthwith either:
(i) cause
such closing to be postponed until such time as the requirements of this Section 2 have been complied with; or
(ii) cancel
such transaction, in which event the rights, preferences and privileges of the holders of the Preferred Stock shall revert to and be the
same as such rights, preferences and privileges existing immediately prior to the date of the first notice referred to in Subsection 2.4(d).
(d) The
Corporation shall give each holder of record of the Preferred Stock written notice of such impending transaction within ten days
after the Board of Directors of the Corporation approves such transaction or within ten days after the commencement of any
involuntary proceeding, whichever is earlier. Such written notice shall describe the material terms and conditions of the impending
transaction and the provisions of this Section 2, and the Corporation shall thereafter give such holders prompt notice of any
material changes. The transaction shall in no event take place sooner than 20 days after the Corporation has given the first notice
provided for herein or sooner than ten days after the Corporation has given notice of any material changes provided for herein;
provided, however, that such periods may be shortened upon the written consent of the holders of the Preferred Stock that are
entitled to such notice rights or similar notice rights and that represent at least 60% of the then outstanding shares of the
Preferred Stock, voting together as a single class on an as-converted to Common Stock basis.
3. Voting.
3.1. General.
On any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of the
Corporation (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of the Preferred Stock shall
be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of the Preferred Stock
held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter. Except as provided
by law or by the other provisions of this Amended and Restated Certificate of Incorporation, as amended, the holders of the Preferred
Stock shall vote together with the holders of Common Stock as a single class on an as-converted to Common Stock basis.
3.2. Election
of Directors. For as long as there are any shares of the Preferred Stock outstanding, the
holders of record of a majority of the then outstanding shares of the Preferred Stock, voting together as a single class on an
as-converted to Common Stock basis, shall be entitled to elect three directors of the Corporation (the “Preferred
Directors”). The holders of record of a majority of the then outstanding shares of Common Stock, voting together as a
single class, shall be entitled to elect one director of the Corporation. If the holders of shares of the Preferred Stock or Common
Stock, as the case may be, fail to elect a sufficient number of directors to fill all directorships for which they are entitled to
elect directors pursuant to the first two sentences of this Subsection 3.2, then any directorship not so filled shall remain vacant
until such time as the holders of the Preferred Stock or Common Stock, as the case may be, elect an individual to fill such
directorship by vote or written consent in lieu of a meeting; and no such directorship may be filled by stockholders of the
Corporation other than by the stockholders of the Corporation that are entitled to elect an individual to fill such directorship.
The holders of a majority of the then outstanding shares of Common Stock and/or the Preferred Stock, voting together as a single
class on an as-converted to Common Stock basis, shall be entitled to elect all remaining members of the Board of Directors of the
Corporation. Any director elected as provided in this Subsection 3.2 may be removed without cause, and any vacancy caused by the
resignation, death or removal of such director may be filled, by, and only by, the affirmative vote of the holders of the shares of
the class or series of capital stock entitled to elect such director or directors, given either at a special meeting of such
stockholders duly called for that purpose or pursuant to a written consent of stockholders. At any meeting held for the purpose of
electing a director, the presence in person or by proxy of the holders of a majority of the then outstanding
shares of the class or
series entitled to elect such director shall constitute a quorum for the purpose of electing such director.
3.3. Preferred
Stock Protective Provisions. At any time when shares of the Preferred Stock are outstanding,
the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without
(in addition to any other vote required by law or this Amended and Restated Certificate of Incorporation, as amended) the written consent
or affirmative vote of the holders of at least 60% of the then outstanding shares of the Preferred Stock, voting together as a single
class on an as-converted to Common Stock basis, pursuant to consent given in writing or by vote at a meeting:
(a) liquidate,
dissolve or wind-up the business and affairs of the Corporation, effect any Deemed Liquidation Event or any recapitalization or reorganization
of the Corporation or other transaction in which control of the Corporation is transferred, or sell, transfer, license or encumber the
Corporation’s technology or intellectual property, or consent to any of the foregoing, other than licenses of the Corporation’s
technology or intellectual property in the ordinary course of business;
(b) amend,
alter or repeal any provision of this Amended and Restated Certificate of Incorporation of the Corporation, as amended, including, without
limitation, in a manner that affects the powers, preferences or rights of the Preferred Stock;
(c) amend,
alter or repeal any provision of the By-Laws of the Corporation, including, without limitation, in a manner that affects the powers, preferences
or rights of the Preferred Stock;
(d) increase
or decrease the authorized number of shares of the Preferred Stock or Common Stock;
(e) reclassify,
alter or amend any existing security of the Corporation in respect of the distribution of assets on the liquidation, dissolution or winding
up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render
such other security senior to or pari passu with the Preferred Stock in respect of any such right, preference or privilege (to the extent
such rights preferences or privileges are not then currently in effect);
(f) purchase
or redeem (or permit any subsidiary to purchase or redeem) or pay or declare any dividend or make any distribution on, any shares of capital
stock of the Corporation other than (i) redemptions of or dividends or distributions on the Preferred Stock as expressly authorized
herein, or (ii) repurchases of stock pursuant to stock restriction agreements or vesting agreements approved by the Board of Directors
(including the Preferred Directors) that grant to the Corporation a right of repurchase upon termination of the service or employment
of a consultant, director or employee;
(g) borrow
or guaranty or otherwise authorize any amount of indebtedness, other than (i) inventory financing in the ordinary course of
business, and (ii) any
indebtedness in an amount of up to $250,000 in the aggregate that is approved by the Board of
Directors, including both Preferred Directors;
(h) increase
or decrease the authorized number of directors of the Board of Directors from seven members;
(i) effect
a change in the nature of the Corporation’s business from the discovery and development of small molecule therapeutics targeting
the toxic proteins that cause the cognitive decline associated with Alzheimer’s disease and other neurodegenerative diseases;
(j) enter
into any transaction with any person or entity, including, without limitation, any of its founders, officers, directors or employees other
than in the ordinary course of business on an arm’s length basis (as determined in good faith by the Board of Directors of the Corporation
(including both Preferred Directors));
(k) increase
the number of shares of Common Stock reserved for issuance under the Corporation’s Amended and Restated 2007 Equity Incentive Plan,
as amended from time to time, or any other equity-based incentive or compensation plan;
(l) make,
or permit any subsidiary to make, any loan or advance to any person or entity, including, without limitation, any founder, officer, employee
or director of the Corporation or any subsidiary, except (i) advances in the ordinary course of business or (ii) advances up
to $50,000 in the aggregate under the terms of an employment or service arrangement approved by the Board of Directors, including both
Preferred Directors;
(m) hire,
terminate, or change the compensation in excess of $100,000 of any of its officers, directors or employees, unless such hiring, termination
or compensation is approved by the Board of Directors, including both Preferred Directors;
(n) own
any stock or other securities of any other corporation, partnership, or other entity, unless approved by the Board of Directors, including
both Preferred Directors;
(o) guarantee,
or permit any subsidiary to guarantee, any indebtedness except for (i) trade accounts of the Corporation or any subsidiary arising
in the ordinary course of business, or (ii) any guarantee approved by the Board of Directors, including both Preferred Directors;
or
(p) make
any investment other than investments in prime commercial paper, money market funds, certificates of deposit in any United States bank
having a net worth in excess of $100,000,000 or obligations issued or guaranteed by the United States of America, in each case having
a maturity not in excess of one year, unless approved by the Board of Directors, including both Preferred Directors.
4. Optional
Conversion.
The holders of the Preferred Stock shall have conversion
rights as follows (the “Conversion Rights”):
4.1. Right
to Convert.
4.1.1. Conversion
Ratio. Each share of the Preferred Stock shall be convertible, at the option of the holder thereof,
at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully
paid and nonassessable shares of Common Stock as is determined by dividing the Original Issue Price applicable to such share of Preferred
Stock by the Conversion Price (as defined below) applicable to such share of Preferred Stock in effect at the time of conversion. The
“Conversion Price” shall initially be equal to $.69 for the Series A Preferred Stock and Series A-1 Preferred
Stock, .$8415 for the Series A-2 Preferred Stock and .$923 for the Series B Preferred Stock. Such initial Conversion Price,
and the rate at which shares of the Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided
below.
4.1.2. Termination
of Conversion Rights. In the event of a notice of redemption of any shares of the Preferred Stock
pursuant to Section 6, the Conversion Rights of the shares of Preferred Stock designated for redemption shall terminate at the close
of business on the last full day preceding the date fixed for redemption of such shares, unless the Redemption Price (as defined below)
is not fully paid on such Redemption Date (as defined below), in which case the Conversion Rights for such shares of Preferred Stock shall
continue until the price is paid in full. The Conversion Rights shall not terminate in connection with a Deemed Liquidation Event.
4.2. Fractional
Shares. No fractional shares of Common Stock shall be issued upon conversion of the Preferred
Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such
fraction multiplied by the fair market value of a share of Common Stock as determined in good faith by the Board of Directors of the Corporation
(including the Preferred Directors). Whether or not fractional shares would be issuable upon such conversion shall be determined on the
basis of the total number of shares of the Preferred Stock the holder is at the time converting into Common Stock and the aggregate number
of shares of Common Stock issuable upon such conversion.
4.3. Mechanics
of Conversion.
4.3.1. Notice
of Conversion. In order for a holder of the Preferred Stock to voluntarily convert shares
of the Preferred Stock into shares of Common Stock, such holder shall surrender the certificate or certificates for such shares of
the Preferred Stock (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost
certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may
be made against the Corporation on account of the alleged loss, theft or destruction of such certificate), at the office of the
transfer agent for the Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer
agent),
together with written notice that such holder elects to convert all or any number of the shares of the Preferred
Stock represented by such certificate or certificates and, if applicable, any event on which such conversion is contingent. Such
notice shall state such holder’s name or the names of the nominees in which such holder wishes the certificate or certificates
for shares of Common Stock to be issued. If required by the Corporation, certificates surrendered for conversion shall be endorsed
or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the
registered holder or his, her or its attorney duly authorized in writing. The close of business on the date of receipt by the
transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of such certificates (or lost certificate
affidavit and agreement) and notice shall be the time of conversion (the “Conversion Time”), and the shares of
Common Stock issuable upon conversion of the shares represented by such certificate shall be deemed to be outstanding of record as
of such date. The Corporation shall, as soon as practicable after the Conversion Time, (a) issue and deliver to such holder of
the Preferred Stock, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock
issuable upon such conversion in accordance with the provisions hereof and a certificate for the number (if any) of the shares of
the Preferred Stock represented by the surrendered certificate that were not converted into Common Stock, and (b) pay in cash
such amount as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such
conversion.
4.3.2. Reservation
of Shares. The Corporation shall at all times when the Preferred Stock shall be outstanding,
reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Preferred
Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of
all the Preferred Stock then outstanding; and if at any time the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all of the then outstanding shares of the Preferred Stock, the Corporation shall take such corporate
action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient
for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary
amendment to this Amended and Restated Certificate of Incorporation, as amended. Before taking any action that would cause an adjustment
reducing the Conversion Price of any series of Preferred Stock below the then par value of the shares of Common Stock issuable upon conversion
of the Preferred Stock, the Corporation will take any corporate action that may, in the opinion of its counsel, be necessary in order
that the Corporation may validly and legally issue fully paid and nonassessable shares of Common Stock at such adjusted Conversion Price.
4.3.3. Effect
of Conversion. All shares of the Preferred Stock that shall have been surrendered for
conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall
immediately cease and terminate at the Conversion Time, except with respect to the right of the holders thereof to receive shares of
Common Stock in exchange therefor and to receive payment in lieu of any fraction of a share otherwise issuable upon such conversion
as provided in Subsection 4.2. Any shares of the Preferred Stock so converted shall be retired and cancelled and may not be reissued
as shares of such series, and the Corporation may thereafter take such appropriate action (without the need
for stockholder action)
as may be necessary to reduce the authorized number of shares of the Preferred Stock accordingly.
4.3.4. No
Further Adjustment. Upon any such conversion, no adjustment to the Conversion Price shall be
made for any declared but unpaid dividends on the Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion.
4.3.5. Taxes.
The Corporation shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of shares
of Common Stock upon conversion of shares of the Preferred Stock pursuant to this Section 4. The Corporation shall not, however,
be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock
in a name other than that in which the shares of the Preferred Stock so converted were registered, and no such issuance or delivery shall
be made unless and until the person or entity requesting such issuance has paid to the Corporation the amount of any such tax or has established,
to the satisfaction of the Corporation, that such tax has been paid.
4.4. Adjustments
to Conversion Price for Diluting Issues.
4.4.1. Special
Definitions. For purposes of this Article Fourth, the following definitions shall apply:
(a) “Option”
shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.
(b) “Original
Issue Date” shall mean, with respect to the Series A Preferred Stock, the Series A-1 Preferred Stock, the Series A-2
Preferred Stock and the Series B Preferred Stock, the date on which the first share of such series of Preferred Stock, respectively,
was issued.
(c) “Convertible
Securities” shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into or
exchangeable for Common Stock, but excluding Options.
(d) “Additional
Shares of Common Stock” shall mean, with respect to the determination of adjustments to the Conversion Price for each series
of Preferred Stock, all shares of Common Stock issued (or, pursuant to Subsection 4.4.3, deemed to be issued) by the Corporation on or
after the Original Issue Date of such Series of Preferred Stock, other than (1) the following shares of Common Stock and (2) shares
of Common Stock deemed issued pursuant to the following Options and Convertible Securities (clauses (1) and (2), collectively, “Exempted
Securities”):
(i) shares
of Common Stock, Options or Convertible Securities issued upon the conversion of the Preferred Stock or by reason of a dividend, stock
split, split-up or other distribution on shares of Common Stock that is covered by Subsection 4.5, 4.6 or 4.7;
(ii) shares
of Common Stock or Options issued to employees or directors of, or consultants or advisors to, the Corporation or any of its subsidiaries
pursuant to a plan, agreement or arrangement approved by the Board of Directors of the Corporation, including both Preferred Directors;
(iii) shares
of Common Stock or Convertible Securities actually issued upon the exercise of Options, or shares of Common Stock actually issued upon
the conversion or exchange of Convertible Securities, in each case provided that such issuance is pursuant to the terms of such Option
or Convertible Security;
(iv) shares
of Common Stock, Options or Convertible Securities issued to banks, equipment lessors or other financial institutions, or to real property
lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction approved by the Board of Directors of the
Corporation, including both Preferred Directors, that do not exceed an aggregate of 1,000,000 shares of Common Stock;
(v) shares
of Common Stock, Options or Convertible Securities issued to suppliers or third party service providers in connection with the provision
of goods or services pursuant to transactions approved by the Board of Directors of the Corporation, including both Preferred Directors;
(vi) shares
of Common Stock, Options or Convertible Securities issued pursuant to the acquisition of another corporation (or the assets of another
corporation) by the Corporation whether by merger, reorganization or otherwise, provided, that such issuances are approved by the Board
of Directors of the Corporation, including both Preferred Directors;
(vii) shares
of Common Stock, Options or Convertible Securities issued in connection with sponsored research, collaboration, technology license, development,
marketing or other similar agreements or strategic partnerships approved by the Board of Directors of the Corporation, including both
Preferred Directors;
(viii) shares
of Common Stock issued or issuable pursuant to currently outstanding Options granted under the Corporation’s Amended and Restated
2007 Equity Incentive Plan, as amended from time to time, with such amendment as approved by the Board of Directors, including both Preferred
Directors;
(ix) shares
of Common Stock issued or issuable upon the closing of a public offering of the Corporation’s securities pursuant to the Securities
Act of 1933, as amended (the “Securities Act”), in which all shares of
the Preferred Stock are automatically converted to Common Stock pursuant to Subsection 5.1(a);
(x) shares
of Common Stock issued or issuable upon conversion of any shares of the Series B Preferred Stock issued under that certain Series B
Stock Purchase Agreement dated as of March 20, 2014, as amended, and the Series B Preferred Stock Purchase Agreement dated as
of November 16, 2016, as it may be amended, among the Corporation and the other parties listed therein;
(xi) shares
of Common Stock issued or issuable upon conversion of one or more Convertible Promissory Note(s) or upon exercise of one or more
Warrant(s) issued by the Corporation to the Alzheimer Drug Development Foundation, Inc. under that certain Agreement to Accept
Conditions for Biotechnology Grant Funding dated as of July 6, 2010;
(xii) shares
of Preferred Stock issued or issuable upon conversion of one or more Convertible Promissory Notes (and shares of Common Stock issued upon
conversion of such shares of Preferred Stock) and Common Stock Purchase Warrants (and shares of Common Stock issued upon exercise of such
Warrants) issued by the Corporation under that certain Note and Warrant Purchase Agreement, among the Corporation and the purchasers named
therein, dated as of March 11, 2016, as amended; and
(xiii) shares
of Common Stock issued or issuable upon the conversion, exercise or exchange of all other Options and Convertible Securities outstanding
as of November 16, 2016.
4.4.2. No
Adjustment of Conversion Price. No adjustment in the Conversion Price applicable to a share of
Preferred Stock shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock unless the consideration
per share (determined pursuant to Subsection 4.4.5 for an Additional Share of Common Stock issued or deemed to be issued by the Corporation)
is less than the Conversion Price for such share of Preferred Stock in effect on the date of, and immediately prior to, the issue of such
Additional Shares of Common Stock.
4.4.3. Deemed
Issue of Additional Shares of Common Stock.
(a) If
the Corporation at any time or from time to time after the Original Issue Date applicable to a series of Preferred Stock shall issue any
Options or Convertible Securities (excluding Options or Convertible Securities that are themselves Exempted Securities) or shall fix a
record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities,
then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto, assuming the satisfaction of any conditions
to exercisability, convertibility or exchangeability but without regard to any provision contained therein for a subsequent adjustment
of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion
or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of the issuance
of such Convertible Security or Option or, in case such a record date shall have been fixed, as of the close of business on such record
date.
(b) If
the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to the Conversion Price of any
series of Preferred Stock pursuant to the terms of Subsection 4.4.4, are revised as a result of an amendment to such terms or any
other adjustment pursuant to the provisions of
such Option or Convertible Security (but excluding automatic adjustments to such
terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (i) any
increase or decrease in the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any such
Option or Convertible Security or (ii) any increase or decrease in the consideration payable to the Corporation upon such
exercise, conversion and/or exchange, then, effective upon such increase or decrease becoming effective, the Conversion Price of
such series of Preferred Stock computed upon the original issue of such Option or Convertible Security (or upon the occurrence of a
record date with respect thereto) shall be readjusted to such Conversion Price as would have been obtained had such revised terms
been in effect upon the original date of issuance of such Option or Convertible Security. Notwithstanding the foregoing, no
readjustment pursuant to this Subsection 4.4.3(b) shall have the effect of increasing the Conversion Price of any series of
Preferred Stock to an amount that exceeds the lower of (A) such Conversion Price in effect immediately prior to the original
adjustment made as a result of the issuance of such Option or Convertible Security, or (B) such Conversion Price that would
have resulted from any issuances of Additional Shares of Common Stock (other than deemed issuances of Additional Shares of Common
Stock as a result of the issuance of such Option or Convertible Security) between the original adjustment date and such readjustment
date.
(c) If
the terms of any Option or Convertible Security (excluding Options or Convertible Securities that are themselves Exempted Securities),
the issuance of which did not result in an adjustment to the Conversion Price of a series of Preferred Stock pursuant to the terms of
Subsection 4.4.4 (either because the consideration per share (determined pursuant to Subsection 4.4.5) of the Additional Shares of Common
Stock subject thereto was equal to or greater than such Conversion Price then in effect with respect to such series of Preferred Stock,
or because such Option or Convertible Security was issued before the Original Issue Date of such series of Preferred Stock), are revised
after Original Issue Date of such series of Preferred Stock as a result of an amendment to such terms or any other adjustment pursuant
to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution
or similar provisions of such Option or Convertible Security) to provide for either (i) any increase in the number of shares of Common
Stock issuable upon the exercise, conversion or exchange of any such Option or Convertible Security or (ii) any decrease in the consideration
payable to the Corporation upon such exercise, conversion or exchange, then such Option or Convertible Security, as so amended or adjusted,
and the Additional Shares of Common Stock subject thereto (determined in the manner provided in Subsection 4.4.3(a)) shall be deemed to
have been issued effective upon such increase or decrease becoming effective.
(d) Upon
the expiration or termination of any unexercised Option or unconverted or unexchanged Convertible Security (or portion thereof) that resulted
(either upon its original issuance or upon a revision of its terms) in an adjustment to the Conversion Price of any series of Preferred
Stock pursuant to the terms of Subsection 4.4.4, such Conversion Price shall be readjusted to the Conversion Price as would have obtained
had such Option or Convertible Security (or portion thereof) never been issued.
(e) If
the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or
the consideration payable to the Corporation upon such exercise, conversion and/or exchange, is calculable at the
time such Option or
Convertible Security is issued or amended but is subject to adjustment based upon subsequent events, any adjustment to the Conversion
Price of a series of Preferred Stock provided for in this Subsection 4.4.3 shall be effected at the time of such issuance or amendment
based on such number of shares or amount of consideration without regard to any provisions for subsequent adjustments (and any subsequent
adjustments shall be treated as provided in clauses (b) and (c) of this Subsection 4.4.3). If the number of shares of Common
Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the
Corporation upon such exercise, conversion and/or exchange, cannot be calculated at all at the time such Option or Convertible Security
is issued or amended, any adjustment to the Conversion Price of a series of Preferred Stock that would result under the terms of this
Subsection 4.4.3 at the time of such issuance or amendment shall instead be effected at the time such number of shares and/or amount
of consideration is first calculable (even if subject to subsequent adjustments), assuming for purposes of calculating such adjustment
to such Conversion Price that such issuance or amendment took place at the time such calculation can first be made.
4.4.4. Adjustment
of Conversion Price upon Issuance of Additional Shares of Common Stock. In the event the Corporation
shall at any time after the Original Issue Date applicable to a series of Preferred Stock issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to Subsection 4.4.3), without consideration or for a consideration per
share less than Conversion Price of such series of Preferred Stock in effect immediately prior to such issue, then the Conversion Price
applicable to each share of such series of Preferred Stock shall be reduced, concurrently with such issue, to a price per share (calculated
to the nearest one-hundredth of a cent) in accordance with the following formula:
CP2 = CP1* (A + B) ÷
(A + C).
For purposes of the foregoing formula, the following definitions shall
apply:
(i) “CP2”
shall mean, with respect to the determination of adjustments to the Conversion Price of any series of Preferred Stock, the Conversion
Price of such series of Preferred Stock in effect immediately after such issue of Additional Shares of Common Stock;
(ii) “CP1”
shall mean, with respect to the determination of adjustments to the Conversion Price of any series of Preferred Stock, the Conversion
Price of such series of Preferred Stock in effect immediately prior to such issue of Additional Shares of Common Stock;
(iii) “A”
shall mean the number of shares of Common Stock outstanding immediately prior to such issue of Additional Shares of Common Stock, treating
for this purpose as outstanding shares of Common Stock underlying only those Options or Convertible Securities that (x) are outstanding
immediately prior to such issue and (y) are vested or otherwise exercisable;
(iv) “B”
shall mean the number of shares of Common Stock that would have been issued if such Additional Shares of Common Stock had been issued
at a price per share equal to CP1 (determined by dividing the aggregate consideration received by the Corporation in respect
of such issue by CP1); and
(v) “C”
shall mean the number of such Additional Shares of Common Stock issued in such transaction.
4.4.5. Determination
of Consideration. For purposes of this Subsection 4.4, the consideration received by the Corporation
for the issue of any Additional Shares of Common Stock shall be computed as follows:
(a) For
cash and property, such consideration shall:
(i) insofar
as it consists of cash, be computed at the aggregate amount of cash received by the Corporation, excluding amounts paid or payable for
accrued interest;
(ii) insofar
as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good
faith by the Board of Directors of the Corporation (including both Preferred Directors); and
(iii) in
the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for
consideration that covers both, be the proportion of such consideration so received, computed as provided in clauses (i) and (ii) above,
as determined in good faith by the Board of Directors of the Corporation (including both Preferred Directors).
(b) For
Options and Convertible Securities, the consideration per share received by the Corporation for Additional Shares of Common Stock deemed
to have been issued pursuant to Subsection 4.4.3, relating to Options and Convertible Securities, shall be determined by dividing
(i) the
total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities,
plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Options
or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such
Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by
(ii) the
maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or
exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for
Convertible
Securities and the conversion or exchange of such Convertible Securities.
4.4.6. Multiple
Closing Dates. In the event the Corporation shall issue on more than one date Additional Shares
of Common Stock that are a part of one transaction or a series of related transactions and that would result in an adjustment to the Conversion
Price of any series of Preferred Stock pursuant to the terms of Subsection 4.4.4, and such issuance dates occur within a period of no
more than 90 days from the first such issuance to the final such issuance, then, upon the final such issuance, the Conversion Price of
such series of Preferred Stock shall be readjusted to give effect to all such issuances as if they occurred on the date of the first such
issuance (and without giving effect to any additional adjustments as a result of any such subsequent issuances within such period).
4.5. Adjustment
for Stock Splits and Combinations. If the Corporation shall at any time or from time to time
on or after the Original Issue Date of any series of Preferred Stock effect a subdivision of the outstanding Common Stock, the Conversion
Price of such series of Preferred Stock in effect immediately before that subdivision shall be proportionately decreased so that the number
of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase in the
aggregate number of shares of Common Stock outstanding. If the Corporation shall at any time or from time to time after the Original Issue
Date of any series of Preferred Stock combine the outstanding shares of Common Stock, the Conversion Price of such series of Preferred
Stock in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable
on conversion of each share of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Common
Stock outstanding. Any adjustment under this Subsection 4.5 shall become effective at the close of business on the date the subdivision
or combination becomes effective.
4.6. Adjustments
for Other Dividends and Distributions. In the event the Corporation at any time or from time
to time on or after the Original Issue Date of any series of Preferred Stock shall make or issue, or fix a record date for the determination
of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation or in cash or
other property and the provisions of Section 1 do not apply to such dividend or distribution, then and in each such event the holders
of such series of Preferred Stock shall receive, simultaneously with the distribution to the holders of Common Stock, a dividend or other
distribution of such securities, cash or other property in an amount equal to the amount of such securities, cash or other property as
they would have received if all outstanding shares of such series of Preferred Stock had been converted into Common Stock on the date
of such event.
4.7. Adjustment
for Merger or Reorganization, etc. If there shall occur any reorganization,
recapitalization, reclassification, consolidation or merger involving the Corporation in which the Common Stock (but not the
Preferred Stock) is converted into or exchanged for securities, cash or other property (other than a transaction covered by
Subsections 4.4, 4.5 or 4.6), then, following any such reorganization, recapitalization, reclassification, consolidation or merger,
each share of the Preferred Stock shall thereafter be convertible in lieu of the Common Stock into which it was convertible prior to
such event into the kind and amount
of securities, cash or other property that a holder of the number of shares of Common Stock of
the Corporation issuable upon conversion of one share of the Preferred Stock immediately prior to such reorganization,
recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction; and,
in such case, appropriate adjustment (as determined in good faith by the Board of Directors of the Corporation (including both
Preferred Directors)) shall be made in the application of the provisions in this Section 4 with respect to the rights and
interests thereafter of the holders of the Preferred Stock, to the end that the provisions set forth in this Section 4
(including provisions with respect to changes in and other adjustments of the Conversion Price of each series of Preferred Stock)
shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter
deliverable upon the conversion of the Preferred Stock.
4.8. Certificate
as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price
of any series of Preferred Stock pursuant to this Section 4, the Corporation at its expense shall, as promptly as reasonably practicable
but in any event not later than 30 days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish
to each holder of the Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities,
cash or other property into which the Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment
is based. The Corporation shall, as promptly as reasonably practicable after the written request at any time of any holder of the Preferred
Stock (but in any event not later than 15 days thereafter), furnish or cause to be furnished to such holder a certificate setting forth
(a) the Conversion Price of such series of Preferred Stock then in effect, and (b) the number of shares of Common Stock and
the amount, if any, of other securities, cash or property that then would be received upon the conversion of the Preferred Stock.
4.9. Notice
of Record Date. In the event:
(a) the
Corporation shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon conversion
of the Preferred Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any
right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security;
or
(b) of
any capital reorganization of the Corporation, any reclassification of the Common Stock of the Corporation, or any Deemed Liquidation
Event; or
(c) of
the voluntary or involuntary dissolution, liquidation or winding- up of the Corporation,
then, and in each such case, the Corporation will send or cause to
be sent to the holders of the Preferred Stock a notice specifying, as the case may be, (i) the record date for such dividend, distribution
or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is proposed to take place, and the time, if
any is to be fixed, as of which the holders of record of Common Stock (or such other capital stock or securities at the time issuable
upon the conversion of the Preferred Stock) shall be entitled to exchange their shares of Common Stock (or such other capital stock or
securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer,
dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Preferred Stock and
the Common Stock. Such notice shall be sent at least 10 days prior to the record date or effective date for the event specified in such
notice.
5. Mandatory
Conversion.
5.1. Trigger
Events. Upon the initial closing of the Corporation’s first firmly underwritten public
offering of its Common Stock pursuant to a registration statement filed with the Securities and Exchange Commission (‘‘SEC”),
and declared effective under the Securities Act, in which the Corporation’s Common Stock is listed
on a national securities exchange (other than a registration statement relating either to the sale of securities to employees of the Corporation
pursuant to its stock option, stock purchase or similar plan or an SEC Rule 145 transaction) covering the offer and sale of Common
Stock for the account of the Corporation to the public at a price per share of not less than three times the highest then applicable Conversion
Price resulting in offering proceeds to the Corporation of a least $30,000,000 net of underwriting discounts and commissions (the time
of such closing is referred to herein as the “Mandatory Conversion Time”), (i) all outstanding shares of the Preferred
Stock shall automatically be converted into shares of Common Stock, at the then effective Conversion Price and (ii) such shares may
not be reissued by the Corporation.
5.2. Procedural
Requirements. All holders of record of shares of the Preferred Stock shall be sent written
notice of the Mandatory Conversion Time and the place designated for mandatory conversion of all such shares of the Preferred Stock
pursuant to this Section 5. Such notice need not be sent in advance of the occurrence of the Mandatory Conversion Time. Upon
receipt of such notice, each holder of shares of the Preferred Stock shall surrender his, her or its certificate or certificates for
all such shares (or, if such holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit
and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the
Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation at the place designated in
such notice. If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by written
instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his,
her or its attorney duly authorized in writing. All rights with respect to the Preferred Stock converted pursuant to Subsection 5.1,
including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate at the Mandatory
Conversion Time (notwithstanding the failure of the holder or holders thereof to surrender the certificates at or prior to such
time), except only the rights of the holders thereof, upon surrender of their certificate or certificates (or lost certificate
affidavit and agreement) therefor, to receive the items provided for in the next sentence of this Subsection 5.2. As soon as
practicable after the Mandatory Conversion Time and the surrender of the certificate or certificates (or lost certificate affidavit
and agreement) for the Preferred Stock, the Corporation shall issue and deliver to such holder, or to his, her or its nominees, a
certificate or certificates
for the number of full shares of Common Stock issuable on such conversion in accordance with the
provisions hereof, together with cash as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise
issuable upon such conversion and the payment of any declared but unpaid dividends on the shares of the Preferred Stock converted.
Such converted Preferred Stock shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation
may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized
number of shares of the Preferred Stock accordingly.
6. Redemption.
6.1. Redemption.
Shares of the Preferred Stock shall be redeemed by the Corporation out of funds lawfully available therefor at a price equal to the Preferred
Liquidation Amount applicable to the shares of Preferred Stock, less all Mandatory Dividend(s) previously distributed with respect
to each such share (the “Redemption Price”), in three annual installments commencing not more than 60 days after receipt
by the Corporation at any time on or after March 20, 2021, from the holders of at least 60% of the then outstanding shares of the
Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, of written notice requesting redemption of
all shares of the Preferred Stock. The date of each such installment shall be referred to as a “Redemption Date.” On
each Redemption Date, the Corporation shall redeem, on a pro rata basis in accordance with the number of shares of the Preferred Stock
owned by each holder, that number of outstanding shares of the Preferred Stock determined by dividing (a) the total number of shares
of the Preferred Stock outstanding immediately prior to such Redemption Date by (b) the number of remaining Redemption Dates (including
the Redemption Date to which such calculation applies); provided, however, that Excluded Shares (as such term is defined in Subsection
6.2) shall not be redeemed and shall be excluded from the calculations set forth in this sentence. If the Corporation does not have sufficient
funds legally available to redeem on any Redemption Date all shares of the Preferred Stock to be redeemed on such Redemption Date, the
Corporation shall redeem a pro rata portion of each holder’s redeemable shares of such capital stock out of funds legally available
therefor, based on the respective amounts that would otherwise be payable in respect of the shares to be redeemed if the legally available
funds were sufficient to redeem all such shares, and shall redeem the remaining shares to have been redeemed as soon as practicable after
the Corporation has funds legally available therefor. No other capital stock of the Corporation may be redeemed or repurchased by the
Corporation prior to the redemption of the Preferred Stock without the approval of the holders of at least 60% of the then issued and
outstanding shares of Preferred Stock voting as a single class on an as-converted basis. The Corporation shall take all commercially reasonable
action to have funds legally available for payment of the Redemption Price.
6.2. Redemption
Notice. The Corporation shall send written notice of the mandatory redemption (the “Redemption
Notice”) to each holder of record of the Preferred Stock not less than 40 days prior to each Redemption Date. Each Redemption
Notice shall state:
(a) the
series and number of shares of the Preferred Stock held by the holder that the Corporation shall redeem on the Redemption Date specified
in the Redemption Notice;
(b) the
Redemption Date and the Redemption Price;
(c) the
date upon which the holder’s right to convert such shares terminates (as determined in accordance with Subsection 4.1); and
(d) that
the holder is to surrender to the Corporation, in the manner and at the place designated, his, her or its certificate or certificates
representing the shares of the Preferred Stock to be redeemed.
If
the Corporation receives, on or prior to the 20th day after the date of delivery of the Redemption Notice to a holder of the Preferred
Stock, written notice from such holder that such holder elects to be excluded from the redemption provided in this Section 6, then
the shares of the Preferred Stock registered on the books of the Corporation in the name of such holder at the time of the Corporation’s
receipt of such notice shall thereafter be “Excluded Shares.”
Excluded Shares shall not be redeemed or redeemable pursuant to this Section 6, whether on such Redemption Date or thereafter.
6.3. Surrender
of Certificates; Payment. On or before the applicable Redemption Date, each holder of shares
of the Preferred Stock to be redeemed on such Redemption Date, unless such holder has exercised his, her or its right to convert such
shares as provided in Section 4, shall surrender the certificate or certificates representing such shares (or, if such registered
holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable
to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss,
theft or destruction of such certificate) to the Corporation, in the manner and at the place designated in the Redemption Notice, and
thereupon the Redemption Price for such shares shall be payable to the order of the person or entity whose name appears on such certificate
or certificates as the owner thereof. In the event less than all of the shares of the Preferred Stock represented by a certificate are
redeemed, a new certificate representing the unredeemed shares of the Preferred Stock shall promptly be issued to such holder.
6.4. Rights
Subsequent to Redemption. If the Redemption Notice shall have been duly given, and if on the
applicable Redemption Date the Redemption Price payable upon redemption of the shares of the Preferred Stock to be redeemed on such Redemption
Date is paid or tendered for payment or deposited with an independent payment agent so as to be available therefor in a timely manner,
then notwithstanding that the certificates evidencing any of the shares of the Preferred Stock so called for redemption shall not have
been surrendered, dividends with respect to such shares of the Preferred Stock shall cease to accrue after such Redemption Date and all
rights with respect to such shares shall forthwith after the Redemption Date terminate, except only the right of the holders to receive
the Redemption Price without interest upon surrender of their certificate or certificates therefor.
6.5. Redeemed
or Otherwise Acquired Shares. Any shares of the Preferred Stock that are redeemed or otherwise
acquired by the Corporation or any of its subsidiaries shall be automatically and immediately cancelled and retired and shall not be reissued,
sold or transferred. Neither the Corporation nor any of its subsidiaries may exercise any voting or other rights granted to the holders
of the Preferred Stock following redemption.
7. Waiver.
Any of the rights, powers, preferences and other terms of the Preferred Stock set forth herein may be waived on behalf of all holders
of the Preferred Stock, the Series B Preferred Stock, the Series A-2 Preferred Stock, the Series A-1 Preferred Stock or
the Series A Preferred Stock, as the case may be, by the requisite percentage (as set forth in the applicable provision(s) of
this Amended and Restated Certificate of Incorporation, as amended) of such stockholders of the Corporation that are entitled to a vote
upon or consent with respect to any such right, power, preference or other term.
8. Notices.
Any notice required or permitted by the provisions of this Article Fourth to be given to a holder of shares of the Preferred Stock
shall be mailed, postage prepaid, to the post office address last shown on the records of the Corporation, or given by electronic communication
in compliance with the provisions of the General Corporation Law, and shall be deemed sent upon such mailing or electronic transmission.
9. No
Reissuance of Preferred Stock. No share or shares of any series of the Preferred Stock acquired
by the Corporation by reason of purchase, conversion, redemption or otherwise shall be reissued, and all such shares shall be canceled,
retired and eliminated from the shares which the Corporation shall be authorized to issue. This Amended and Restated Certificate of Incorporation,
as amended, shall be appropriately amended to effect the corresponding reduction in the Corporation’s capital stock.
B. COMMON STOCK
1. General.
The voting, dividend and liquidation rights of the holders of Common Stock are subject to and qualified by the rights, powers and preferences
of the holders of the Preferred Stock set forth herein.
2. Voting.
The holders of Common Stock are entitled to one vote for each share of Common Stock held at all meetings of stockholders (and written
actions in lieu of meetings). The number of authorized shares of Common Stock may be increased or decreased (but not below the number
of shares thereof then outstanding) by (in addition to any vote of the holders of the Preferred Stock that may be required by the terms
of this Amended and Restated Certificate of Incorporation, as amended) the affirmative vote of the holders of shares of capital stock
of the Corporation (voting as a single class) representing a majority of the votes represented by all outstanding shares of capital stock
of the Corporation entitled to vote (the Preferred Stock voting on an as if converted to Common Stock basis) and without a separate class
vote by the holders of the Common Stock, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law.
Exhibit 3.3
SECOND
CERTIFICATE OF AMENDMENT
OF
AMENDED
AND RESTATED CERTIFICATE OF INCORPORATION
OF
COGNITION
THERAPEUTICS, INC.
Cognition Therapeutics, Inc., a corporation
organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “DGCL”),
DOES HEREBY CERTIFY THAT:
FIRST: The Board of Directors (the “Board”)
of Cognition Therapeutics, Inc. (the “Corporation”), pursuant to a unanimous written consent of the directors dated as
of November 10, 2011, duly adopted the following resolution setting forth a proposed amendment to the Amended and Restated Certificate
of Incorporation of the Corporation, as amended, declaring such amendment to be advisable and calling for consideration thereof by the
stockholders of the Corporation. The resolution setting forth the proposed amendment is as follows:
RESOLVED, that Article Fourth of
the Amended and Restated Certificate of Incorporation, as amended, of Cognition Therapeutics, Inc. shall be amended and restated
in its entirety to provide as set forth on Exhibit A hereto.
SECOND: Thereafter, pursuant to a resolution
of the Board, the holders of a majority of the outstanding shares of all classes of capital stock of the Corporation, voting
together as a single class, and the holders of at least 60% of the outstanding shares of the Corporation’s Series A
Preferred Stock and Series A-1 Preferred Stock, voting together as a separate series, voted in favor of the amendment.
THIRD: The amendment was duly adopted in accordance
with the provisions of Section 242 of the DGCL. With respect to such adoption, written consent has been given by the stockholders
of the Corporation in accordance with the provisions of Section 228 of the DGCL and written notice has been given as provided in
Section 228 of the DGCL.
IN WITNESS WHEREOF, the Corporation has caused
this Second Certificate of Amendment to be signed by its duly authorized officer, this 30th day of November 2011.
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COGNITION THERAPEUTICS, INC.
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By:
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/s/ Harold T.
Safferstein
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Harold T. Safferstein
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President and Chief Executive Officer
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EXHIBIT A
FOURTH; The total number of shares of all
classes of stock that the Corporation shall have authority to issue is (i) Sixteen Million One Hundred Ninety Four Thousand
Four Hundred Sixty Four (16,194,464) shares of Common Stock, $.001 par value per share (“Common Stock”),
and (ii) Ten Million Six Hundred Three Thousand Three Hundred Sixty (10,603,360) shares of Preferred Stock, $.001 par value
per share.
The following is a statement of the
designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each
class of capital stock of the Corporation.
Three Million Sixty-Seven Thousand Five
Hundred Nineteen (3,067,519) shares of the authorized Preferred Stock of the Corporation are hereby designated
“Series A Convertible Preferred Stock” (the “Series A Preferred Stock”); Three
Million Nine Hundred Seventy Thousand Seven Hundred Seventy-Six (3,970,776) shares of the authorized Preferred Stock of the
Corporation are hereby designated “Series A-1 Convertible Preferred Stock” (the “Series A-1
Preferred Stock”); and Three Million Five Hundred Sixty Five Thousand Sixty Five (3,565,065) shares of the authorized
Preferred Stock of the Corporation are hereby designated “Series A-2 Convertible Preferred Stock” (the
“Series A-2 Preferred Stock”). The Series A Preferred Stock, the Series A-1 Preferred Stock
and the Series A-2 Preferred Stock, are sometimes referred to herein collectively as the “Preferred
Stock.” Unless otherwise indicated, references to “Sections” or “Subsections” in this
Part A of this Article Fourth refer to sections and subsections of Part A of this Article Fourth.
The Preferred Stock shall have the following rights,
preferences, powers, privileges, restrictions, qualifications and limitations.
1.1. Accruing
Dividends. From and after the date of the issuance of each respective share of the Preferred Stock, dividends at the rate of 8% per
annum of the applicable Original Issue Price (as defined herein) compounded annually shall accrue on such share of the Preferred Stock
(“Accruing Dividends”). Accruing Dividends shall accrue from day to day, whether or not declared, and shall be cumulative;
provided however, (i) that such Accruing Dividends shall be payable only in connection with a liquidation, dissolution or winding
up of the Corporation under Section 2 (including, without limitation, in connection with a Deemed Liquidation Event), a Mandatory
Dividend under Section 1.3, or a redemption of the Preferred Stock under Section 6, and the Corporation shall not otherwise
pay such Accruing Dividends and (ii) in the event a Mandatory Dividend is paid under Section 1.3, Accruing Dividends shall
thereafter accrue only on the unreturned amount of the Original Issue Price after taking into account the payment of each Mandatory Dividend.
As used herein, “Original Issue Price” means $.69 per share with respect to the Series A Preferred Stock and
Series A-1 Preferred Stock and $.8415 per share with respect to the Series A-2 Preferred Stock (subject to appropriate adjustment
in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares). After such time
as the holders of the Preferred Stock
receive their full
Preferred Liquidation Amount, less any and all Mandatory Dividend(s) previously distributed with respect to shares of the
Preferred Stock, the holders of the Preferred Stock will not thereafter be entitled to any additional Accruing Dividends but
will share in all dividends and distributions declared by the Board of Directors and paid by the Corporation with the
holders of the Common Stock on an as if converted to Common Stock basis.
1.2. Common
Stock Dividends. The holders of the Preferred Stock shall be entitled to share in dividends payable with respect to the Common
Stock as if converted and the Corporation shall not declare, pay or set aside any dividends on shares of Common Stock unless (in
addition to obtaining any consents required elsewhere in this Amended and Restated Certificate of Incorporation) each holder of
the Preferred Stock then outstanding shall first receive, or simultaneously receive, in each such instance, a dividend on each
outstanding share of the Preferred Stock held by such holder as if such share of Preferred Stock had been converted into
Common Stock, in an amount at least equal to the product of (a) the dividend payable on a share of Common Stock and
(b) the number of shares of Common Stock issuable upon conversion of a share of the Preferred Stock, in each case
calculated on the record date for determination of holders entitled to receive such dividend.
1.3. Mandatory
Dividend(s).
(a) If,
prior to such time as the holders of shares of the Preferred Stock receive their full Preferred Liquidation Amount (as defined below),
less any and all Mandatory Dividend(s) previously distributed with respect to shares of the Preferred Stock, the Corporation or any subsidiary
of the Corporation shall consummate a sale, license or other disposition for value of any or all of the Corporation’s intellectual
property, in a single transaction or series of related transactions unrelated to the performance by the Company of research and development
or other services (as determined in good faith by the Board of Directors of the Corporation, including both Preferred Directors) (a “Strategic
Event”), at the written election of the holders of at least 60% of the then outstanding shares of the Preferred Stock, voting
together as a single class on an as-converted to Common Stock basis, sent to the Corporation at least 15 days prior to the effective
date of a Strategic Event, the Corporation shall distribute to the holders of shares of the Preferred Stock up to 35% of the aggregate
payments (including, without limitation, all option and/or milestone payments and/or all success fees) received by the Corporation as
consideration in such Strategic Event as soon as reasonably practicable following receipt by the Corporation of such payments (“Mandatory
Dividend”). Such Mandatory Dividend shall be distributed to the holders of the Preferred Stock on a pari passu and an as-converted
to Common Stock basis until the aggregate amount of all Mandatory Dividends paid to the holders of the Preferred Stock equals the full
Preferred Liquidation Amount payable on the Preferred Stock held by such holders.
(b) The
Corporation shall give each holder of record of the Preferred Stock written notice of an impending Strategic Event within ten days after
the Board of Directors of the Corporation approves such Strategic Event. Such written notice shall describe the material terms and conditions
of the impending Strategic Event and the provisions of this Section 1.3, and the Corporation shall thereafter give such holders prompt
notice of any material changes. The transaction shall in no event take place sooner than 20 days after the Corporation has given the
first notice provided for herein or sooner than ten days after the Corporation has given notice of
any material changes provided for herein; provided, however, that such periods may be shortened upon the written consent of the holders
of the Preferred Stock that are entitled to such notice rights or similar notice rights and that represent at least 60% of the then outstanding
shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis.
(c) After such time as the holders of the Preferred Stock receive their full Preferred Liquidation Amount for their respective shares of the
Preferred Stock, less any and all Mandatory Dividend(s) previously distributed with respect to shares of the Preferred Stock, the holders
of the Preferred Stock will not thereafter be entitled to any additional Mandatory Dividends but will share in all dividends and distributions
declared by the Board of Directors and paid by the Corporation with the holders of the Common Stock on an as if converted to Common Stock
basis.
1.4. Order
of Dividend Payment. No dividends or other distributions shall be declared and/or paid on any class or series of capital stock
other than the Preferred Stock if any Mandatory Dividends have accrued and are unpaid or if any other dividends are declared and
unpaid on the Preferred Stock.
2. Liquidation
Preference.
2.1. Preferential
Payments to Holders of the Preferred Stock. In the event of any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, including, without limitation, any Deemed Liquidation Event (as defined below), each holder of
shares of the Preferred Stock then outstanding shall be entitled to receive out of the assets legally available for distribution to
its stockholders, whether from capital surplus, earnings or otherwise, on a pari passu and an as-converted to Common Stock basis and
prior and in preference to any distribution to the holders of any other series or class of the capital stock of the Corporation that
is junior to the Preferred Stock, including, without limitation, the Common Stock, by reason of their ownership thereof, an amount
per share of Preferred Stock then held by such holder equal to the Preferred Liquidation Amount (as defined below), less any and all
Mandatory Dividend(s) previously distributed with respect to such share of Preferred Stock. If upon the occurrence of such
event, the assets and funds of the Corporation shall be insufficient to permit the payment to such holders of the full Preferred
Liquidation Amount, less any and all Mandatory Dividend(s) previously distributed with respect to such share of Preferred
Stock, on the Preferred Stock required by the preceding sentence, then the entire assets and funds of the Corporation legally
available for distribution shall be distributed ratably among the holders of the Preferred Stock in proportion to the Preferred
Liquidation Amount each such holder is otherwise entitled to receive on each such share, less any and all Mandatory Dividend(s)
previously distributed with respect to each such share. “Preferred Liquidation Amount” means, with respect to a
share of Preferred Stock, the applicable Original Issue Price for such share of Preferred Stock plus all Accruing Dividends on
such share of Preferred Stock (plus any other dividends or distributions declared but not paid on such share of Preferred
Stock).
2.2. Distribution
of Remaining Assets. After payment has been made to the holders of the Preferred Stock of their full Preferred Liquidation
Amount required by Section 2.1, less any and all Mandatory Dividend(s) previously distributed with respect to each such
share, the remaining assets or surplus funds of
the Corporation available for distribution to stockholders shall be distributed among the holders of the Common Stock and the holders
of the Preferred Stock, pro rata based on the number of shares of Common Stock held by each (assuming conversion of all shares of the
Preferred Stock into Common Stock).
2.3. Deemed
Liquidation Events. At the option of the holders of at least 60% of the then outstanding shares of the Preferred Stock, voting
together as a single class on an as- converted to Common Stock basis, the occurrence of each of the following events shall
be deemed to be a liquidation, dissolution or winding up within the meaning of this Section 2 (each, a “Deemed
Liquidation Event”):
(a) either a transaction or series of related transactions in which any individual, corporation, partnership, trust, limited liability company,
association or other entity (“each, a “Person”), or group of related Persons, acquires from the stockholders of the
Corporation, shares representing at least a majority of the outstanding voting power of the Corporation;
(b) a sale and/or issuance (or series of sales and/or issuances) by the Corporation of securities of the Corporation representing, after the
issuance of such securities, more than fifty percent (50%) of all voting securities of the Corporation to persons other than stockholders
of the Corporation as of immediately prior to such sale(s) and/or issuance(s);
(c) a sale, conveyance or disposition (in one or a series of related transactions) by the Corporation or any subsidiary of the Corporation
of all or substantially all of the assets of the Corporation and its subsidiaries taken as a whole;
(d) a grant of an exclusive license or other transfer (in one or a series of related transactions) by the Corporation and/or any subsidiary
of the Corporation of a material amount of the technology or intellectual property of the Corporation and its subsidiaries taken as a
whole; or
(e) a consolidation or merger of the Corporation with or into any other entity or entities or a reorganization of the Corporation or similar
transactions, provided, however, that a consolidation, merger, reorganization or similar transaction involving the Corporation shall not
constitute a Deemed Liquidation Event if following completion of the transaction, the holders of shares of the Corporation immediately
prior to the transaction own shares that represent a majority of the voting power of the surviving corporation.
2.4. Amount
Paid Deemed Paid or Distributed. Whenever the distribution provided for in Subsection 1.3 or in this Section 2 shall be
payable in any assets other than cash, the value of the assets to be distributed shall be the fair market value thereof, determined
as follows:
(a) Freely
traded securities:
(i) If
traded on a securities exchange, the value shall be based on the formula specified in the definitive agreements for the Deemed Liquidation
Event(s) or if no such formula exists, then the value of such securities shall be deemed to be the average of the
closing prices of the securities on such exchange or system over the 30-day period ending three days prior to the closing;
(ii) If actively traded over-the-counter, the value shall be based on the formula specified in the definitive agreements for the Deemed Liquidation
Event(s) or if no such formula exists, then the value of such securities shall be deemed to be the average of the closing bid or sale
prices (whichever is applicable) over the 30-day period ending three days prior to the closing; and
(iii) If there is no active public market, the value shall be the fair market value thereof, as so determined in good faith by the Board of
Directors of the Corporation (including both Preferred Directors).
(b) The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions
arising solely by virtue of a stockholder’s status as an affiliate or former affiliate) shall be to make an appropriate discount
from the market value determined as above in Subsection 2.4(a) to reflect the approximate fair market value thereof.
(c) In the event the requirements of this Section 2 are not complied with, the Corporation shall forthwith either:
(i) cause such closing to be postponed until such time as the requirements of this Section 2 have been complied with; or
(ii) cancel such transaction, in which event the rights, preferences and privileges of the holders of the Preferred Stock shall revert to and
be the same as such rights, preferences and privileges existing immediately prior to the date of the first notice referred to in Subsection
2.4(d).
(d) The Corporation shall give each holder of record of the Preferred Stock written notice of such impending transaction within ten days after
the Board of Directors of the Corporation approves such transaction or within ten days after the commencement of any involuntary proceeding,
whichever is earlier. Such written notice shall describe the material terms and conditions of the impending transaction and the provisions
of this Section 2, and the Corporation shall thereafter give such holders prompt notice of any material changes. The transaction shall
in no event take place sooner than 20 days after the Corporation has given the first notice provided for herein or sooner than ten days
after the Corporation has given notice of any material changes provided for herein; provided, however, that such periods may be shortened
upon the written consent of the holders of the Preferred Stock that are entitled to such notice rights or similar notice rights and that
represent at least 60% of the then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to
Common Stock basis.
3. Voting.
3.1. General.
On any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders
of the Corporation (or by written
consent of stockholders in lieu of meeting), each
holder of outstanding shares of the Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares
of Common Stock into which the shares of the Preferred Stock held by such holder are convertible as of the record date for determining
stockholders entitled to vote on such matter. Except as provided by law or by the other provisions of this Amended and Restated Certificate
of Incorporation, the holders of the Preferred Stock shall vote together with the holders of Common Stock as a single class on an as-converted
to Common Stock basis.
3.2. Election
of Directors. For as long as there are any shares of the Preferred Stock outstanding, the holders of record of a majority of the
then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, shall be
entitled to elect two directors of the Corporation (the “Preferred Directors”). The holders of record of a
majority of the then outstanding shares of Common Stock, voting together as a single class, shall be entitled to elect one director
of the Corporation. If the holders of shares of the Preferred Stock or Common Stock, as the case may be, fail to elect a sufficient
number of directors to fill all directorships for which they are entitled to elect directors pursuant to the first two sentences of
this Subsection 3.2, then any directorship not so filled shall remain vacant until such time as the holders of the Preferred Stock
or Common Stock, as the case may be, elect an individual to fill such directorship by vote or written consent in lieu of a meeting;
and no such directorship may be filled by stockholders of the Corporation other than by the stockholders of the Corporation that are
entitled to elect an individual to fill such directorship. The holders of a majority of the then outstanding shares of Common Stock
and/or the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, shall be entitled to
elect all remaining members of the Board of Directors of the Corporation. Any director elected as provided in this
Subsection 3.2, may be removed without cause, and any vacancy caused by the resignation, death or removal of such
director may be filled, by, and only by, the affirmative vote of the holders of the shares of the class or series of capital
stock entitled to elect such director or directors, given either at a special meeting of such stockholders duly called for that
purpose or pursuant to a written consent of stockholders. At any meeting held for the purpose of electing a director, the
presence in person or by proxy of the holders of a majority of the then outstanding shares of the class or series entitled to
elect such director shall constitute a quorum for the purpose of electing such director.
3.3. Preferred
Stock Protective Provisions. At any time when shares of the Preferred Stock are outstanding, the Corporation shall not, either
directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other
vote required by law or this Amended and Restated Certificate of Incorporation) the written consent or affirmative vote of the
holders of at least 60% of the then outstanding shares of the Preferred Stock, voting together as a single class on an
as-converted to Common Stock basis, pursuant to consent given in writing or by vote at a meeting:
(a) liquidate, dissolve or wind-up the business and affairs of the Corporation, effect any Deemed Liquidation Event or any recapitalization
or reorganization of the Corporation or other transaction in which control of the Company is transferred, or sell, transfer, license or
encumber the Corporation’s technology or intellectual property, or consent to any of the foregoing, other than licenses of the Corporation’s
technology or intellectual property in the ordinary course of business;
(b) amend, alter or repeal any provision of this Amended and Restated Certificate of Incorporation of the Corporation, including, without
limitation, in a manner that affects the powers, preferences or rights of the Preferred Stock;
(c) amend, alter or repeal any provision of the By-Laws of the Corporation, including, without limitation, in a manner that affects the powers,
preferences or rights of the Preferred Stock;
(d) increase or decrease the authorized number of shares of the Preferred Stock or Common Stock;
(e) reclassify, alter or amend any existing security of the Corporation in respect of the distribution of assets on the liquidation, dissolution
or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment
would render such other security senior to or pari passu with the Preferred Stock in respect of any such right, preference or privilege;
(f) purchase or redeem (or permit any subsidiary to purchase or redeem) or pay or declare any dividend or make any distribution on, any shares
of capital stock of the Corporation other than (i) redemptions of or dividends or distributions on the Preferred Stock as expressly authorized
herein, or (ii) repurchases of stock pursuant to stock restriction agreements or vesting agreements approved by the Board of Directors
(including the Preferred Directors) that grant to the Corporation a right of repurchase upon termination of the service or employment
of a consultant, director or employee;
(g) borrow or guaranty or otherwise authorize any amount of indebtedness, other than (i) inventory financing in the ordinary course of business,
and (ii) any indebtedness in an amount of up to $250,000 in the aggregate that is approved by the Board of Directors, including both Preferred
Directors;
(h) increase or decrease the authorized number of directors of the Board of Directors from seven members;
(i) effect a change in the nature of the Corporation’s business from the discovery and development of small molecule therapeutics targeting
the toxic proteins that cause the cognitive decline associated with Alzheimer’s disease and other neurodegenerative diseases;
(j) enter into any transaction with any person or entity, including, without limitation, any of its founders, officers, directors or employees
other than in the ordinary course of business on an arm’s length basis (as determined in good faith by the Board of Directors of
the Corporation (including both Preferred Directors);
(k) increase the number of shares of Common Stock reserved for issuance under the Corporation’s Amended and Restated 2007 Equity Incentive
Plan, as amended from time to time, or any other equity-based incentive or compensation plan;
(l) make,
or permit any subsidiary to make, any loan or advance to any person or entity, including, without limitation, any founder, officer,
employee or director of
the Corporation or any subsidiary, except (i) advances
in the ordinary course of business or (ii) advances up to $50,000 in the aggregate under the terms of an employment or service arrangement
approved by the Board of Directors, including both Preferred Directors;
(m) hire, terminate, or change the compensation in excess of $100,000 of any of its officers, directors or employees, unless such hiring,
termination or compensation is approved by the Board of Directors, including both Preferred Directors;
(n) own any stock or other securities of any other corporation, partnership, or other entity, unless approved by the Board of Directors, including
both Preferred Directors;
(o) guarantee, or permit any subsidiary to guarantee, any indebtedness except for (i) trade accounts of the Corporation or any subsidiary
arising in the ordinary course of business, or (ii) any guarantee approved by the Board of Directors, including both Preferred Directors;
or
(p) make any investment other than investments in prime commercial paper, money market funds, certificates of deposit in any United States
bank having a net worth in excess of $100,000,000 or obligations issued or guaranteed by the United States of America, in each case having
a maturity not in excess of one year, unless approved by the Board of Directors, including both Preferred Directors.
4. Optional
Conversion.
The holders of the Preferred Stock shall have conversion
rights as follows (the “Conversion Rights”):
4.1. Right
to Convert.
4.1.1. Conversion
Ratio. Each share of the Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to
time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and nonassessable
shares of Common Stock as is determined by dividing the Original Issue Price applicable to such share of Preferred Stock by the
Conversion Price (as defined below) applicable to such share of Preferred Stock in effect at the time of conversion. The
“Conversion Price” shall initially be equal to $.69 for the Series A Preferred Stock and Series A-1
Preferred Stock and .$8415 for the Series A-2 Preferred Stock Such initial Conversion Price, and the rate at which
shares of the Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided
below.
4.1.2. Termination
of Conversion Rights. In the event of a notice of redemption of any shares of the Preferred Stock pursuant to Section 6,
the Conversion Rights of the shares designated for redemption shall terminate at the close of business on the last full day
preceding the date fixed for redemption of such shares, unless the Redemption Price (as defined below) is not fully paid on such
Redemption Date (as defined below), in which case the Conversion Rights for such shares shall continue until the price is paid
in full. The Conversion Rights shall not terminate in connection with a Deemed Liquidation Event.
4.2. Fractional
Shares. No fractional shares of Common Stock shall be issued upon conversion of the Preferred Stock. In lieu of any fractional
shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by
the fair market value of a share of Common Stock as determined in good faith by the Board of Directors of the Corporation
(including both Preferred Directors). Whether or not fractional shares would be issuable upon such conversion shall be
determined on the basis of the total number of shares of the Preferred Stock the holder is at the time converting into
Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion.
4.3. Mechanics
of Conversion.
4.3.1. Notice
of Conversion. In order for a holder of the Preferred Stock to voluntarily convert shares of the Preferred Stock into shares of
Common Stock, such holder shall surrender the certificate or certificates for such shares of the Preferred Stock (or, if such
registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement
reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on
account of the alleged loss, theft or destruction of such certificate), at the office of the transfer agent for the Preferred Stock
(or at the principal office of the Corporation if the Corporation serves as its own transfer agent), together with written notice
that such holder elects to convert all or any number of the shares of the Preferred Stock represented by such certificate or
certificates and, if applicable, any event on which such conversion is contingent Such notice shall state such holder’s
name or the names of the nominees in which such holder wishes the certificate or certificates for shares of Common Stock to
be issued. If required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written
instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or his,
her or its attorney duly authorized in writing. The close of business on the date of receipt by the transfer agent (or by
the Corporation if the Corporation serves as its own transfer agent) of such certificates (or lost certificate affidavit and
agreement) and notice shall be the time of conversion (the “Conversion Time”), and the shares of Common Stock
issuable upon conversion of the shares represented by such certificate shall be deemed to be outstanding of record as of such
date. The Corporation shall, as soon as practicable after the Conversion Time, (a) issue and deliver to such holder of
the Preferred Stock, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common
Stock issuable upon such conversion in accordance with the provisions hereof and a certificate for the number (if any) of the
shares of the Preferred Stock represented by the surrendered certificate that were not converted into Common Stock, and
(b) pay in cash such amount as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise
issuable upon such conversion.
4.3.2. Reservation
of Shares. The Corporation shall at all times when the Preferred Stock shall be outstanding, reserve and keep available out of its
authorized but unissued capital stock, for the purpose of effecting the conversion of the Preferred Stock, such number of its duly authorized
shares of Common Stock as shall from time to time be sufficient to effect the conversion of all the Preferred Stock then outstanding;
and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all
of the then outstanding shares of the Preferred Stock, the Corporation shall take such corporate action as may be necessary to increase
its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such
purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary
amendment to this Amended and Restated Certificate of Incorporation. Before taking any action that would cause an adjustment
reducing the Conversion Price of any series of Preferred Stock below the then par value of the shares of Common Stock issuable upon
conversion of the Preferred Stock, the Corporation will take any corporate action that may, in the opinion of its counsel, be
necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of Common Stock at such
adjusted Conversion Price.
4.3.3. Effect
of Conversion. All shares of the Preferred Stock that shall have been surrendered for conversion as herein provided shall no
longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the
Conversion Time, except with respect to the right of the holders thereof to receive shares of Common Stock in exchange therefor
and to receive payment in lieu of any fraction of a share otherwise issuable upon such conversion as provided in Subsection 4.2.
Any shares of the Preferred Stock so converted shall be retired and cancelled and may not be reissued as shares of such
series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be
necessary to reduce the authorized number of shares of the Preferred Stock accordingly.
4.3.4. No
Further Adjustment. Upon any such conversion, no adjustment to the Conversion Price shall be made for any declared but unpaid
dividends on the Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion.
4.3.5. Taxes.
The Corporation shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of
shares of Common Stock upon conversion of shares of the Preferred Stock pursuant to this Section 4. The Corporation shall not,
however, be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of shares
of Common Stock in a name other than that in which the shares of the Preferred Stock so converted were registered, and no such
issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Corporation the
amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid,
4.4. Adjustments
to Conversion Price for Diluting Issues.
4.4.1. Special
Definitions. For purposes of this Article Fourth, the following definitions shall apply:
(a) “Option”
shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.
(b) “Original
Issue Date” shall mean, with respect to the Series A Preferred Stock and the Series A-1 Preferred Stock, the
date on which the first share of the Series A Preferred Stock was issued and, with respect to the Series A-2 Preferred Stock,
the date on which the first share of the Series A-2 Preferred Stock was issued.
(c) “Convertible
Securities” shall mean any evidences of
indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for
Common Stock, but excluding Options.
(d) “Additional
Shares of Common Stock” shall mean, with respect
to the determination of adjustments to the Conversion Price for each series of Preferred Stock, all
shares of Common Stock issued (or, pursuant to Subsection 4.4.3, deemed to be issued) by the
Corporation on or after the Original Issue Date of such Series of Preferred Stock, other than (1)
the following shares of Common Stock and (2) shares of Common Stock deemed issued pursuant
to the following Options and Convertible Securities (clauses (1) and (2), collectively,
“Exempted Securities”):
(i) shares
of Common Stock, Options or Convertible Securities
issued upon the conversion of the Preferred Stock or by reason of a dividend, stock split, split-up
or other distribution on shares of Common Stock that is covered by Subsection 4.5, 4.6 or 4.7;
(ii) shares
of Common Stock or Options issued to employees or
directors of, or consultants or advisors to, the Corporation or any of its subsidiaries pursuant to a
plan, agreement or arrangement approved by the Board of Directors of the Corporation,
including both Preferred Directors;
(iii) shares
of Common Stock or Convertible Securities actually
issued upon the exercise of Options, or shares of Common Stock actually issued upon the
conversion or exchange of Convertible Securities, in each case provided that such issuance is
pursuant to the terms of such Option or Convertible Security;
(iv) shares
of Common Stock, Options or Convertible Securities
issued to banks, equipment lessors or other financial institutions, or to real property lessors,
pursuant to a debt financing, equipment leasing or real property leasing transaction approved by
the Board of Directors of the Corporation, including both Preferred Directors, that do not exceed
an aggregate of 1,000,000 shares of Common Stock;
(v) shares
of Common Stock, Options or Convertible Securities
issued to suppliers or third party service providers in connection with the provision of goods or
services pursuant to transactions approved by the Board of Directors of the Corporation,
including both Preferred Directors;
(vi) shares
of Common Stock, Options or Convertible Securities
issued pursuant to the acquisition of another corporation (or the assets of another corporation) by
the Corporation whether by merger, reorganization or otherwise, provided, that such issuances
are approved by the Board of Directors of the Corporation, including both Preferred Directors;
(vii) shares
of Common Stock, Options or Convertible Securities
issued in connection with sponsored research, collaboration, technology license, development,
marketing or other similar agreements or strategic partnerships approved by the Board of
Directors of the Corporation, including both Preferred Directors;
(viii) shares
of Common Stock issued or issuable pursuant to
currently outstanding Options granted under the Corporation’s Amended and Restated 2007
Equity Incentive Plan, as amended from time to time, with such amendment as approved by the
Board of Directors, including both Preferred Directors;
(ix) shares
of Common Stock issued or issuable upon the
closing of a public offering of the Corporation’s securities pursuant to the Securities Act of 1933,
as amended (the “Securities Act”), in which all shares of the Preferred Stock are automatically
converted to Common Stock pursuant to Subsection 5.1(a);
(x) shares
of Common Stock issued or issuable upon
conversion of any shares of the Series A-1 Preferred Stock issued under that certain Series A-1
Stock Purchase Agreement dated as of December 17, 2010 among the Corporation and the other
parties listed therein (the “Series A-1 Purchase Agreement”);
(xi) shares
of Common Stock issued or issuable upon
conversion of any shares of the Series A-2 Preferred Stock issued under that certain Series A-2
Stock Purchase Agreement dated as of December 1,2011 among the Corporation and the other
parties listed therein (the “Series A-2 Purchase Agreement”);
(xii) shares
of Common Stock issued or issuable upon
conversion of one or more Convertible Promissory Note(s) or upon exercise of one or more
Warrant(s) issued by the Corporation to the Alzheimer Drug Development Foundation, Inc.
under that certain Agreement to Accept Conditions for Biotechnology Grant Funding dated as of
July 6, 2010; and
(xiii) shares
of Common Stock issued or issuable upon the
conversion, exercise or exchange of all other Options and Convertible Securities outstanding as
of December 1, 2011.
4.4.2. No
Adjustment of Conversion Price. No adjustment in the Conversion Price applicable to a share of Preferred Stock shall be made as the
result of the
issuance or deemed issuance of Additional Shares of Common Stock unless the consideration per
share (determined pursuant to Subsection 4.4.5 for an Additional Share of Common Stock issued
or deemed to be issued by the Corporation) is less than the Conversion Price for such share of
Preferred Stock in effect on the date of, and immediately prior to, the issue of such Additional
Shares of Common Stock.
4.4.3. Deemed
Issue of Additional Shares of Common Stock.
(a) If
the Corporation at any time or from time to time after the Original Issue Date applicable to a Series of Preferred Stock shall issue
any Options or Convertible Securities (excluding Options or Convertible Securities that are themselves Exempted Securities) or shall
fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities,
then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto, assuming the satisfaction of any
conditions to exercisability, convertibility or exchangeability but without regard to any provision contained therein for a subsequent
adjustment of such number) issuable
upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be
Additional Shares of Common Stock issued as of the time of the issuance of such Convertible Security or Option or, in case such a
record date shall have been fixed, as of the close of business on such record date.
(b) If
the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to the Conversion Price of any series
of Preferred Stock pursuant
to the terms of Subsection 4.4.4, are revised as a result of an amendment to such terms or any
other adjustment pursuant to the provisions of such Option or Convertible Security (but
excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of
such Option or Convertible Security) to provide for either (i) any increase or decrease in the
number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of
any such Option or Convertible Security or (ii) any increase or decrease in the consideration
payable to the Corporation upon such exercise, conversion and/or exchange, then, effective upon
such increase or decrease becoming effective, the Conversion Price of such series of Preferred
Stock computed upon the original issue of such Option or Convertible Security (or upon the
occurrence of a record date with respect thereto) shall be readjusted to such Conversion Price as
would have been obtained had such revised terms been in effect upon the original date of
issuance of such Option or Convertible Security. Notwithstanding the foregoing, no
readjustment pursuant to this Subsection 4.4.3(b) shall have the effect of increasing the
Conversion Price of any series of Preferred Stock to an amount that exceeds the lower of (A)
such Conversion Price in effect immediately prior to the original adjustment made as a result of
the issuance of such Option or Convertible Security, or (B) such Conversion Price that would
have resulted from any issuances of Additional Shares of Common Stock (other than deemed
issuances of Additional Shares of Common Stock as a result of the issuance of such Option or
Convertible Security) between the original adjustment date and such readjustment date.
(c) If
the terms of any Option or Convertible Security (excluding
Options or Convertible Securities that are themselves Exempted Securities), the issuance of
which did not result in an adjustment to the Conversion Price of a series of Preferred Stock
pursuant to the terms of Subsection 4.4.4 (either because the consideration per share (determined
pursuant to Subsection 4.4.5) of the Additional Shares of Common Stock subject thereto was
equal to or greater than such Conversion Price then in effect with respect to such series of
Preferred Stock, or because such Option or Convertible Security was issued before the Original
Issue Date of such series of Preferred Stock), are revised after Original Issue Date of such series
of Preferred Stock as a result of an amendment to such terms or any other adjustment pursuant to
the provisions of such Option or Convertible Security (but excluding automatic adjustments to
such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security)
to provide for either (i) any increase in the number of shares of Common Stock issuable upon the
exercise, conversion or exchange of any such Option or Convertible Security or (ii) any decrease
in the consideration payable to the Corporation upon such exercise, conversion or exchange, then
such Option or Convertible Security, as so amended or adjusted, and the Additional Shares of
Common Stock subject thereto (determined in the manner provided in Subsection 4.4.3(a)) shall
be deemed to have been issued effective upon such increase or decrease becoming effective.
(d) Upon
the expiration or termination of any unexercised Option or unconverted or unexchanged Convertible Security (or portion thereof) that resulted
(either upon
its original issuance or upon a revision of its terms) in an adjustment to the Conversion Price of
any series of Preferred Stock pursuant to the terms of Subsection 4.4.4, such Conversion Price
shall be readjusted to the Conversion Price as would have obtained had such Option or
Convertible Security (or portion thereof) never been issued.
(e) If
the number of shares of Common Stock issuable upon the
exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration
payable to the Corporation upon such exercise, conversion and/or exchange, is calculable at the
time such Option or Convertible Security is issued or amended but is subject to adjustment based
upon subsequent events, any adjustment to the Conversion Price of a series of Preferred Stock
provided for in this Subsection 4.4.3 shall be effected at the time of such issuance or amendment
based on such number of shares or amount of consideration without regard to any provisions for
subsequent adjustments (and any subsequent adjustments shall be treated as provided in clauses
(b) and (c) of this Subsection 4.4.3). If the number of shares of Common Stock issuable upon
the exercise, conversion and/or exchange of any Option or Convertible Security, or the
consideration payable to the Corporation upon such exercise, conversion and/or exchange,
cannot be calculated at all at the time such Option or Convertible Security is issued or amended,
any adjustment to the Conversion Price of a series of Preferred Stock that would result under the
terms of this Subsection 4.4.3 at the time of such issuance or amendment shall instead be
effected at the time such number of shares and/or amount of consideration is first calculable
(even if subject to subsequent adjustments), assuming for purposes of calculating such
adjustment to such Conversion Price that such issuance or amendment took place at the time
such calculation can first be made.
4.4.4. Adjustment
of Conversion Price Upon Issuance of Additional Shares of Common Stock. In the event the Corporation shall at any time after the Original
Issue Date applicable to a series of Preferred Stock issue Additional Shares of Common Stock
(including Additional Shares of Common Stock deemed to be issued pursuant to Subsection
4.4.3), without consideration or for a consideration per share less than Conversion Price of such
Series of Preferred Stock in effect immediately prior to such issue, then the Conversion Price
applicable to each share of such series of Preferred Stock shall be reduced, concurrently with
such issue, to a price per share (calculated to the nearest one-hundredth of a cent) as follows:
(a) with
respect to the Series A Preferred Stock and the Series A-1 Preferred Stock, until the earlier to occur of (i) the receipt
by the Corporation of aggregate net
proceeds pursuant to any priced debt or equity financing after the Original Issue Date of the
Series A-1 Preferred Stock of at least five million dollars ($5,000,000) exclusive of proceeds
received in respect of any shares of Series A-1 Preferred Stock issued under the Series A-1
Purchase Agreement, but inclusive of proceeds received in respect of any shares of Series A-2
Preferred Stock issued under the Series A-2 Purchase Agreement and (ii) December 23, 2012
(the “Series A and A-1 Full Ratchet Termination Date”), equal to the consideration per share
received or deemed to have been received by the Corporation in such issuance; and
(b) with
respect to the Series A-2 Preferred Stock, until the earlier to occur of (i) the receipt by the Corporation of aggregate
net proceeds pursuant to any priced debt
or equity financing after the Original Issue Date of the Series A-2 Preferred Stock of
at least five million dollars ($5,000,000) inclusive of proceeds received in respect of any shares of Series A-2 Preferred
Stock issued under the Series A-2 Purchase Agreement, and (ii) the second anniversary of the final closing under the
Series A-2 Purchase Agreement (the “Series A-2 Full Ratchet Termination Date”), equal to the
consideration per share received or deemed to have been received by the Corporation in such issuance; and
(c) (x) after
the Series A and A-1 Full Ratchet Termination Date with respect to the Series A Preferred Stock and Series A-1 Preferred
Stock and (y) after the Series A-
2 Full Ratchet Termination Date with respect to the Series A-2 Preferred Stock, in accordance
with the following formula:
CP2 = CP1* (A + B) ÷
(A + C).
For purposes of the foregoing formula, the following definitions shall
apply:
(i) “CP2”
shall mean, with respect to the determination of
adjustments to the Conversion Price of any series of Preferred Stock, the Conversion Price of
such series of Preferred Stock in effect immediately after such issue of Additional Shares of
Common Stock;
(ii) “CP1”
shall mean, with respect to the determination of
adjustments to the Conversion Price of any series of Preferred Stock, the Conversion Price of
such Series of Preferred Stock in effect immediately prior to such issue of Additional Shares of
Common Stock;
(iii) “A”
shall mean the number of shares of Common Stock
outstanding immediately prior to such issue of Additional Shares of Common Stock, treating for
this purpose as outstanding shares of Common Stock underlying only those Options or
Convertible Securities that (x) are outstanding immediately prior to such issue and (y) are vested
or otherwise exercisable;
(iv) “B”
shall mean the number of shares of Common Stock
that would have been issued if such Additional Shares of Common Stock had been issued at a
price per share equal to CP1 (determined by dividing the aggregate consideration received by the Corporation in respect of
such issue by CP1); and
(v) “C”
shall mean the number of such Additional Shares of
Common Stock issued in such transaction.
4.4.5. Determination
of Consideration. For purposes of this Subsection
4.4, the consideration received by the Corporation for the issue of any Additional Shares of
Common Stock shall be computed as follows:
(a) For
cash and property, such consideration shall:
(i) insofar
as it consists of cash, be computed at the aggregate
amount of cash received by the Corporation, excluding amounts paid or payable for accrued
interest;
(ii) insofar
as it consists of property other than cash, be
computed at the fair market value thereof at the time of such issue, as determined in good faith
by the Board of Directors of the Corporation (including both Preferred Directors); and
(iii) in
the event Additional Shares of Common Stock are issued
together with other shares or securities or other assets of the Corporation for consideration that
covers both, be the proportion of such consideration so received, computed as provided in
clauses (i) and (ii) above, as determined in good faith by the Board of Directors of the
Corporation (including both Preferred Directors).
(b) For
Options and Convertible Securities, the consideration per share received by the Corporation for Additional Shares of Common Stock deemed
to have been
issued pursuant to Subsection 4.43, relating to Options and Convertible Securities, shall be
determined by dividing
(i) the
total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities,
plus the
minimum aggregate amount of additional consideration (as set forth in the instruments relating
thereto, without regard to any provision contained therein for a subsequent adjustment of such
consideration) payable to the Corporation upon the exercise of such Options or the conversion or
exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the
exercise of such Options for Convertible Securities and the conversion or exchange of such
Convertible Securities, by
(ii) the
maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained
therein for a
subsequent adjustment of such number) issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the conversion or
exchange of such Convertible Securities.
4.4.6. Multiple
Closing Dates. In the event the Corporation shall issue
on more than one date Additional Shares of Common Stock that are a part of one transaction or a
series of related transactions and that would result in an adjustment to the Conversion Price of
any series of Preferred Stock pursuant to the terms of Subsection 4.4.4, and such issuance dates
occur within a period of no more than 90 days from the first such issuance to the final such
issuance, then, upon the final such issuance, the Conversion Price of such series of Preferred
Stock shall be readjusted to give effect to all such issuances as if they occurred on the date of the
first such issuance (and without giving effect to any additional adjustments as a result of any
such subsequent issuances within such period).
4.5. Adjustment
for Stock Splits and Combinations. If the Corporation shall at any time or from time to time on or after the Original Issue Date
of any Series of
Preferred Stock effect a subdivision of the outstanding
Common Stock, the Conversion Price of such series of Preferred Stock in effect immediately before that subdivision shall be proportionately
decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion
to such increase in the aggregate number of shares of Common Stock outstanding. If the Corporation shall at any time or from time to
time after the Original Issue Date of any series of Preferred Stock combine the outstanding shares of Common Stock, the Conversion Price
of such series of Preferred Stock in effect immediately before the combination shall be proportionately increased so that the number
of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in the
aggregate number of shares of Common Stock outstanding. Any adjustment under this Subsection 4.5 shall become effective at the close
of business on the date the subdivision or combination becomes effective.
4.6. Adjustments
for Other Dividends and Distributions. In the event the Corporation at any time or from time to time on or after the Original Issue
Date of any Series of
Preferred Stock shall make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in securities of the
Corporation or in cash or other property and the provisions of Section 1 do not apply to such
dividend or distribution, then and in each such event the holders of such series of Preferred Stock
shall receive, simultaneously with the distribution to the holders of Common Stock, a dividend or
other distribution of such securities, cash or other property in an amount equal to the amount of
such securities, cash or other property as they would have received if all outstanding shares of
such series of Preferred Stock had been converted into Common Stock on the date of such event.
4.7. Adjustment
for Merger or Reorganization, etc. If there shall occur any reorganization, recapitalization, reclassification, consolidation
or merger involving the
Corporation in which the Common Stock (but not the Preferred Stock) is converted into or
exchanged for securities, cash or other property (other than a transaction covered by Subsections
4.4, 4.5 or 4.6), then, following any such reorganization, recapitalization, reclassification,
consolidation or merger, each share of the Preferred Stock shall thereafter be convertible in lieu
of the Common Stock into which it was convertible prior to such event into the kind and amount
of securities, cash or other property that a holder of the number of shares of Common Stock of
the Corporation issuable upon conversion of one share of the Preferred Stock immediately prior
to such reorganization, recapitalization, reclassification, consolidation or merger would have
been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment
(as determined in good faith by the Board of Directors of the Corporation (including both
Preferred Directors)) shall be made in the application of the provisions in this Section 4 with
respect to the rights and interests thereafter of the holders of the Preferred Stock, to the end that
the provisions set forth in this Section 4 (including provisions with respect to changes in and
other adjustments of the Conversion Price of each series of Preferred Stock) shall thereafter be
applicable, as nearly as reasonably may be, in relation to any securities or other property
thereafter deliverable upon the conversion of the Preferred Stock.
4.8. Certificate
as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price of any series of Preferred
Stock pursuant to this Section 4, the Corporation at its expense shall, as promptly as reasonably practicable but in any event
not later than 30 days thereafter, compute such adjustment or readjustment in accordance with the
terms hereof and furnish to each holder of the Preferred
Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property
into which the Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based. The
Corporation shall, as promptly as reasonably practicable after the written request at any time of any holder of the Preferred Stock (but
in any event not later than 15 days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (a) the
Conversion Price of such series of Preferred Stock then in effect, and (b) the number of shares of Common Stock and the amount,
if any, of other securities, cash or property that then would be received upon the conversion of the Preferred Stock.
4.9. Notice
of Record Date. In the event:
(a) the
Corporation shall take a record of the holders of its Common
Stock (or other capital stock or securities at the time issuable upon conversion of the Preferred
Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution,
or to receive any right to subscribe for or purchase any shares of capital stock of any class or any
other securities, or to receive any other security; or
(b) of
any capital reorganization of the Corporation, any
reclassification of the Common Stock of the Corporation, or any Deemed Liquidation Event; or
(c) of
the voluntary or involuntary dissolution, liquidation or winding-
up of the Corporation,
then, and in each such case, the Corporation will send or cause to
be sent to the holders of the
Preferred Stock a notice specifying, as the case may be, (i) the record date for such dividend,
distribution or right, and the amount and character of such dividend, distribution or right, or (ii)
the effective date on which such reorganization, reclassification, consolidation, merger, transfer,
dissolution, liquidation or winding-up is proposed to take place, and the time, if any is to be
fixed, as of which the holders of record of Common Stock (or such other capital stock or
securities at the time issuable upon the conversion of the Preferred Stock) shall be entitled to
exchange their shares of Common Stock (or such other capital stock or securities) for securities
or other property deliverable upon such reorganization, reclassification, consolidation, merger,
transfer, dissolution, liquidation or winding-up, and the amount per share and character of such
exchange applicable to the Preferred Stock and the Common Stock. Such notice shall be sent at
least 10 days prior to the record date or effective date for the event specified in such notice.
5. Mandatory
Conversion.
5.1. Trigger
Events. Upon the initial closing of the Corporation’s first firmly underwritten public offering of its Common Stock pursuant
to a registration statement filed with the Securities and Exchange Commission (“SEC”), and declared effective under the Securities
Act, in which the Corporation’s Common Stock is listed on a national securities exchange (other than a registration statement relating
either to the sale of securities to employees of the Corporation pursuant to its stock option, stock purchase or similar plan or an SEC
Rule 145 transaction) covering the offer and sale of Common Stock for the account of the Corporation to the public at a price per
share of not less than three times the highest then applicable Conversion
Price resulting
in offering proceeds to the Corporation of a least $25,000,000 net of underwriting discounts and commissions (the time of such
closing is referred to herein as the “Mandatory Conversion Time”), (i) all outstanding shares of the
Preferred Stock shall automatically be converted into shares of Common Stock, at the then effective Conversion Price and
(ii) such shares may not be reissued by the Corporation.
5.2. Procedural
Requirements. All holders of record of shares of the
Preferred Stock shall be sent written notice of the Mandatory Conversion Time and the place
designated for mandatory conversion of all such shares of the Preferred Stock pursuant to this
Section 5. Such notice need not be sent in advance of the occurrence of the Mandatory
Conversion Time. Upon receipt of such notice, each holder of shares of the Preferred Stock shall
surrender his, her or its certificate or certificates for all such shares (or, if such holder alleges that
such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement
reasonably acceptable to the Corporation to indemnify the Corporation against any claim that
may be made against the Corporation on account of the alleged loss, theft or destruction of such
certificate) to the Corporation at the place designated in such notice. If so required by the
Corporation, certificates surrendered for conversion shall be endorsed or accompanied by written
instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by
the registered holder or by his, her or its attorney duly authorized in writing. All rights with
respect to the Preferred Stock converted pursuant to Subsection 5.1, including the rights, if any,
to receive notices and vote (other than as a holder of Common Stock), will terminate at the
Mandatory Conversion Time (notwithstanding the failure of the holder or holders thereof to
surrender the certificates at or prior to such time), except only the rights of the holders thereof,
upon surrender of their certificate or certificates (or lost certificate affidavit and agreement)
therefor, to receive the items provided for in the next sentence of this Subsection 5.2. As soon as
practicable after the Mandatory Conversion Time and the surrender of the certificate or
certificates (or lost certificate affidavit and agreement) for the Preferred Stock, the Corporation
shall issue and deliver to such holder, or to his, her or its nominees, a certificate or certificates
for the number of full shares of Common Stock issuable on such conversion in accordance with
the provisions hereof, together with cash as provided in Subsection 4.2 in lieu of any fraction of
a share of Common Stock otherwise issuable upon such conversion and the payment of any
declared but unpaid dividends on the shares of the Preferred Stock converted. Such converted
Preferred Stock shall be retired and cancelled and may not be reissued as shares of such series,
and the Corporation may thereafter take such appropriate action (without the need for
stockholder action) as may be necessary to reduce the authorized number of shares of the
Preferred Stock accordingly.
6. Redemption.
6.1. Redemption.
Shares of the Preferred Stock shall be redeemed by the Corporation out of funds lawfully available therefor at a price equal to the
Preferred Liquidation Amount, less all Mandatory Dividend(s) previously distributed with respect to each such share (the
“Redemption Price”), in three annual installments commencing not more than 60 days after receipt by the
Corporation at any time on or after December 1, 2018, from the holders of at least 60% of the then outstanding shares of the
Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, of written notice requesting redemption
of all shares of the Preferred Stock The date of each such installment shall be referred to as a “Redemption
Date.”
On each Redemption Date, the Corporation shall
redeem, on a pro rata basis in accordance with the number of shares of the Preferred Stock owned by each holder, that number of outstanding
shares of the Preferred Stock determined by dividing (a) the total number of shares of the Preferred Stock outstanding immediately
prior to such Redemption Date by (b) the number of remaining Redemption Dates (including fee Redemption Date to which such calculation
applies); provided, however, that Excluded Shares (as such term is defined in Subsection 6.2) shall not be redeemed and shall be excluded
from the calculations set forth in this sentence. If the Corporation does not have sufficient funds legally available to redeem on any
Redemption Date all shares of the Preferred Stock to be redeemed on such Redemption Date, the Corporation shall redeem a pro rata portion
of each holder’s redeemable shares of such capital stock out of funds legally available therefor, based on the respective amounts
that would otherwise be payable in respect of the shares to be redeemed if the legally available funds were sufficient to redeem all
such shares, and shall redeem the remaining shares to have been redeemed as soon as practicable after the Corporation has funds legally
available therefor. No other capital stock of the Corporation may be redeemed or repurchased by the Corporation prior to the redemption
of the Preferred Stock without the approval of the holders of at least 60% of the then issued and outstanding shares of Preferred Stock
voting as a single class on an as-converted basis. The Corporation shall take all commercially reasonable action to have funds legally
available for payment of the Redemption Price.
6.2. Redemption
Notice. The Corporation shall send written notice of the mandatory redemption (the “Redemption Notice”) to each
holder of record of the Preferred
Stock not less than 40 days prior to each Redemption Date. Each Redemption Notice shall state:
(a) the
series and number of shares of the Preferred Stock held by the holder that the Corporation shall redeem on the Redemption Date specified
in the Redemption
Notice;
(b) the
Redemption Date and the Redemption Price;
(c) the
date upon which the holder’s right to convert such shares
terminates (as determined in accordance with Subsection 4.1); and
(d) that
the holder is to surrender to the Corporation, in the manner
and at the place designated, his, her or its certificate or certificates representing the shares of the
Preferred Stock to be redeemed.
If the Corporation receives, on or prior to the 20th day after the
date of delivery of the
Redemption Notice to a holder of the Preferred Stock, written notice from such holder that such
holder elects to be excluded from the redemption provided in this Section 6, then the shares of
the Preferred Stock registered on the books of the Corporation in the name of such holder at the
time of the Corporation’s receipt of such notice shall thereafter be “Excluded Shares.”
Excluded Shares shall not be redeemed or redeemable pursuant to this Section 6, whether on
such Redemption Date or thereafter.
6.3. Surrender
of Certificates; Payment. On or before the applicable Redemption Date, each holder of shares of the Preferred Stock to be
redeemed on such
Redemption Date, unless such holder has exercised
his, her or its right to convert such shares as provided in Section 4, shall surrender the certificate or certificates representing
such shares (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit
and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation
on account of the alleged loss, theft or destruction of such certificate) to the Corporation, in the manner and at the place designated
in the Redemption Notice, and thereupon the Redemption Price for such shares shall be payable to the order of the person or entity whose
name appears on such certificate or certificates as the owner thereof. In the event less than all of the shares of the Preferred Stock
represented by a certificate are redeemed, a new certificate representing the unredeemed shares of the Preferred Stock shall promptly
be issued to such holder.
6.4. Rights
Subsequent to Redemption. If the Redemption Notice shall have
been duly given, and if on the applicable Redemption Date the Redemption Price payable upon
redemption of the shares of the Preferred Stock to be redeemed on such Redemption Date is paid
or tendered for payment or deposited with an independent payment agent so as to be available
therefor in a timely manner, then notwithstanding that the certificates evidencing any of the
shares of the Preferred Stock so called for redemption shall not have been surrendered, dividends
with respect to such shares of the Preferred Stock shall cease to accrue after such Redemption
Date and all rights with respect to such shares shall forthwith after the Redemption Date
terminate, except only the right of the holders to receive the Redemption Price without interest
upon surrender of their certificate or certificates therefor.
6.5. Redeemed
or Otherwise Acquired Shares. Any shares of the Preferred Stock that are redeemed or otherwise acquired by the Corporation or any
of its subsidiaries shall be automatically and immediately cancelled and retired and shall not be reissued, sold or transferred. Neither
the Corporation nor any of its subsidiaries may exercise any voting or other rights granted to the holders of the Preferred Stock following
redemption.
7. Waiver.
Any of the rights, powers, preferences and other terms of the Preferred Stock set forth herein may be waived on behalf of all holders
of the Preferred Stock, the Series A-2 Preferred Stock, the Series A-1 Preferred Stock or the Series A Preferred Stock,
as the case may be, by the requisite percentage (as set forth in the applicable provision(s) of this Amended and Restated Certificate
of Incorporation) of such stockholders of the Corporation that are entitled to a vote upon or consent with respect to any such right,
power, preference or other term.
8. Notices.
Any notice required or permitted by the provisions of this Article Fourth to be given to a holder of shares of the Preferred Stock
shall be mailed, postage prepaid, to the post office address last shown on the records of the Corporation, or given by electronic communication
in compliance with the provisions of the General Corporation Law, and shall be deemed sent upon such mailing or electronic transmission.
9. No
Reissuance of Preferred Stock. No share or shares of any series of the Preferred Stock acquired by the Corporation by reason of purchase,
conversion, redemption or otherwise shall be reissued, and all such shares shall be canceled, retired and eliminated from the shares
which the Corporation shall be authorized to issue. This Amended and Restated
Certificate of Incorporation shall be
appropriately amended to effect the corresponding reduction in the Corporation’s capital stock.
B. COMMON
STOCK
1. General.
The voting, dividend and liquidation rights of the holders of Common Stock are subject to and qualified by the rights, powers and preferences
of the holders of the Preferred Stock set forth herein.
2. Voting.
The holders of Common Stock are entitled to one vote for each share of Common Stock held at all meetings of stockholders (and written
actions in lieu of meetings). The number of authorized shares of Common Stock may be increased or decreased (but not below the number
of shares thereof then outstanding) by (in addition to any vote of the holders of the Preferred Stock that may be required by the terms
of this Amended and Restated Certificate of Incorporation) the affirmative vote of the holders of shares of capital stock of the Corporation
(voting as a single class) representing a majority of the votes represented by all outstanding shares of capital stock of the Corporation
entitled to vote (the Preferred voting on an as if converted to Common Stock basis) and without a separate class vote by the holders
of the Common Stock, irrespective of the provisions of Section 242(bX2) of the General Corporation Law.
Exhibit 3.4
THIRD
CERTIFICATE OF AMENDMENT
OF
SECOND
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
COGNITION
THERAPEUTICS, INC.
Cognition Therapeutics, Inc.
(the “Corporation”), a corporation organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, as the same may be amended from time to time (“DGCL”),
DOES HEREBY CERTIFY THAT:
FIRST: That
the Board of Directors (the “Board”) of the Corporation duly adopted resolutions declaring advisable the following
amendment to the Second Amended and Restated Certificate of Incorporation of the Corporation, as amended, that was originally filed with
the Secretary of State of the State of Delaware on November 14, 2016, and that this amendment was submitted to the stockholders
of the Corporation for approval. The resolution setting forth the proposed amendment is as follows:
RESOLVED, that the
Second Amended and Restated Certificate of Incorporation of the Corporation, as amended (the “Certificate of Incorporation”),
shall be further amended pursuant to the Third Certificate of Amendment to the Certificate of Incorporation in the form attached
as Exhibit A hereto.
SECOND: Thereafter,
pursuant to a resolution of the Board, the holders of a majority of the outstanding shares of all classes of capital stock of the Corporation,
voting together as a single class, and the holders of at least 60% of the outstanding shares of the Corporation’s Series A
Convertible Preferred Stock, Series A-1 Convertible Preferred Stock, Series A-2 Convertible Preferred Stock and Series B
Convertible Preferred Stock, voting together as a separate class, voted in favor of the amendment.
THIRD: That
the foregoing amendment was duly adopted in accordance with the provisions of § 228 and § 242 of the DGCL.
[Signature follows on next page]
IN WITNESS WHEREOF, the undersigned
has caused this Third Certificate of Amendment of the Second Amended and Restated Certificate of Incorporation, as amended, to be signed
this 28th day of July, 2020.
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COGNITION THERAPEUTICS, INC.
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By:
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/s/ Lisa Ricciardi
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Name:
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Lisa Ricciardi
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Title:
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President and Chief Executive Officer
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Exhibit A
FOURTH: The
total number of shares of all classes of stock that the Corporation shall have authority to issue is (i) Fifty-Eight Million (58,000,000)
shares of common stock, par value $0.001 par value per share (“Common Stock”), and (ii) Forty-One Million Fifty-Three
Thousand Three Hundred Fifty-Eight (41,053,358) shares of preferred stock, $0,001 par value per share.
The following is a statement of the designations
and the powers, privileges, and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital
stock of the Corporation.
A. PREFERRED
STOCK
Three Million Sixty-Seven Thousand Five Hundred
Nineteen (3,067,519) shares of the authorized preferred stock of the Corporation are hereby designated as “Series A Convertible
Preferred Stock” (the “Series A Preferred Stock”); Three Million Nine Hundred Seventy Thousand Seven
Hundred Seventy- Six (3,970,776) shares of the authorized preferred stock of the Corporation are hereby designated as “Series
A-1 Convertible Preferred Stock” (the “Series A-1 Preferred Stock”); Three Million Five Hundred Sixty-Five
Thousand Sixty-Three (3,565,063) shares of the authorized preferred stock of the Corporation are hereby designated as “Series A-2
Convertible Preferred Stock” (the “Series A-2 Preferred Stock”); and Thirty Million Four Hundred Fifty
Thousand (30,450,000) shares of the authorized Preferred Stock of the Corporation are hereby designated as “Series B Convertible
Preferred Stock” (the “Series B Preferred Stock”). The Series A Preferred Stock, the Series A-1
Preferred Stock, the Series A-2 Preferred Stock and the Series B Preferred Stock are sometimes referred to herein collectively
as the “Preferred Stock.” Unless otherwise indicated, references to “Sections” or “Subsections”
in this Part A of this Article Fourth refer to sections and subsections of Part A of this Article Fourth.
The Preferred Stock shall have the following rights,
preferences, powers, privileges, restrictions, qualifications and limitations.
1. Dividends.
1.1. Accruing
Dividends. From and after the date of the issuance of each respective share of the Preferred Stock, dividends at the rate of 8%
per annum of the applicable Original Issue Price (as defined herein) compounded annually shall accrue on such share of the Preferred
Stock (“Accruing Dividends”). Accruing Dividends shall accrue from day to day, whether or not declared, and shall
be cumulative; provided however, (i) that such Accruing Dividends shall be payable only in connection with a liquidation,
dissolution or winding up of the Corporation under Section 2 (including, without limitation, in connection with a Deemed
Liquidation Event), or a Mandatory Dividend under Section 1.3, and the Corporation shall not otherwise pay such Accruing
Dividends and (ii) in the event a Mandatory Dividend is paid under Section 1.3, Accruing Dividends shall thereafter
accrue only on the unreturned amount of the Original Issue Price after taking into account the payment of each Mandatory Dividend.
As used herein, “Original Issue Price” means $0.69 per share with respect to the Series A Preferred Stock
and Series A-1 Preferred Stock, $0.8415 per share with respect to the Series A-2 Preferred Stock, and $0.923 per share
with respect to the Series B Preferred Stock (in each case, subject to appropriate adjustment in the event of any stock
dividend, stock split, combination or other similar recapitalization affecting such shares). After such time as the holders of the
Preferred Stock receive their full Preferred Liquidation Amount (as defined below), less any and all Mandatory
Dividend(s) previously distributed with respect to shares of the Preferred Stock, the holders of the Preferred Stock will not
thereafter be entitled to any additional Accruing Dividends; provided that the holders of the Preferred Stock will share in all
dividends and distributions
declared by the Board of Directors of the Corporation and paid by the Corporation with the holders of
the Common Stock on an as if converted to Common Stock basis.
1.2. Common
Stock Dividends. The holders of the Preferred Stock shall be entitled to share in dividends payable with respect to the Common
Stock as if converted and the Corporation shall not declare, pay or set aside any dividends on shares of Common Stock unless (in
addition to obtaining any consents required elsewhere in this Second Amended and Restated Certificate of Incorporation, as amended)
each holder of the Preferred Stock then outstanding shall first receive, or simultaneously receive, in each such instance, a
dividend on each outstanding share of the Preferred Stock held by such holder as if such share of Preferred Stock had been
converted into Common Stock, in an amount at least equal to the product of (a) the dividend payable on a share of Common
Stock and (b) the number of shares of Common Stock issuable upon conversion of a share of the Preferred Stock, in each case
calculated on the record date for determination of holders entitled to receive such dividend.
1.3. Mandatory
Dividend(s).
(a) If,
prior to such time as the holders of shares of the Preferred Stock receive their full Preferred Liquidation Amount, less any and all
Mandatory Dividend(s) previously distributed with respect to shares of the Preferred Stock, the Corporation or any subsidiary
of the Corporation shall consummate a sale, license or other disposition for value of any or all of the Corporation’s
intellectual property, in a single transaction or series of related transactions unrelated to the performance by the Corporation of
research and development or other services (as determined in good faith by the Board of Directors of the Corporation, including each
of the Preferred Directors) (a “Strategic Event”), at the written election of the holders of at least 60% of the
then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, sent to
the Corporation at least 15 days prior to the effective date of a Strategic Event, the Corporation shall distribute to the
holders of shares of the Preferred Stock up to 35% of the aggregate payments (including, without limitation, all option and/or
milestone payments and/or all success fees) received by the Corporation as consideration in such Strategic Event as soon as
reasonably practicable following receipt by the Corporation of such payments (“Mandatory Dividend”). Such
Mandatory Dividend shall be distributed to the holders of the Preferred Stock on a pari passu and an as-converted to
Common Stock basis until the aggregate amount of all Mandatory Dividends paid to the holders of the Preferred Stock equals the
full Preferred Liquidation Amount payable on the Preferred Stock held by such holders.
(b) The
Corporation shall give each holder of record of the Preferred Stock written notice of an impending Strategic Event within ten days
after the Board of Directors of the Corporation approves such Strategic Event. Such written notice shall describe the material
terms and conditions of the impending Strategic Event and the provisions of this Section 1.3. and the
Corporation shall thereafter give such holders prompt notice of any material changes. The transaction shall in no event take
place sooner than 20 days after the Corporation has given the first notice provided for herein or sooner than ten days after the
Corporation has given notice of any material changes provided for herein; provided, however, that such periods may be shortened
upon the written consent of the holders of the Preferred Stock that are entitled to such notice rights or similar notice rights
and that represent at least 60% of the then outstanding shares of the Preferred Stock, voting together as a single class on an
as-converted to Common Stock basis.
(c) After
such time as the holders of the Preferred Stock receive their full Preferred Liquidation Amount for their respective shares of the
Preferred Stock, less any and all Mandatory Dividend(s) previously distributed with respect to shares of the Preferred Stock,
the holders of the Preferred Stock will not thereafter be entitled to any additional Mandatory Dividends; provided that the holders
of the Preferred Stock will share in all dividends and distributions declared by the Board of Directors of the
Corporation and paid
by the Corporation with the holders of the Common Stock on an as if converted to Common Stock basis.
1.4. Order
of Dividend Payment. No dividends or other distributions shall be declared and/or paid on any class or series of capital stock,
other than the Preferred Stock if any Mandatory Dividends have accrued and are unpaid or if any other dividends are declared and
unpaid on the Preferred Stock.
2. Liquidation
Preference.
2.1. Preferred
Liquidation Amount. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, including, without limitation, any Deemed Liquidation Event (as defined below), each holder of shares of the Preferred
Stock then outstanding shall be entitled to receive out of the assets legally available for distribution to its stockholders,
whether from capital surplus, earnings or otherwise, on a pari passu and an as converted to Common Stock basis and prior and
in preference to any distribution to the holders of any other series or class of the capital stock of the Corporation that is junior
to the Preferred Stock, including, without limitation, the Common Stock, by reason of their ownership thereof, an amount per share
of Preferred Stock then held by such holder equal to the Preferred Liquidation Amount, less any and all Mandatory
Dividend(s) previously distributed with respect to such share of Preferred Stock. If upon the occurrence of such event, the
assets and funds of the Corporation shall be insufficient to permit the payment to such holders of Preferred Stock of the full
Preferred Liquidation Amount, less any and all Mandatory Dividend(s) previously distributed with respect to such share of
Preferred Stock, required by the preceding sentence, then the entire assets and funds of the Corporation legally available for
distribution shall be distributed ratably among the holders of the Preferred Stock in proportion to the Preferred Liquidation
Amount each such holder is otherwise entitled to receive on each such share, less any and all Mandatory
Dividend(s) previously distributed with respect to each such share. “Preferred Liquidation Amount” means,
with respect to a share of Preferred Stock, the applicable Original Issue Price for such share of Preferred Stock plus all
Accruing Dividends on such share of Preferred Stock (plus any other dividends or distributions declared but not paid on such
share of Preferred Stock).
2.2. Distribution
of Remaining Assets. After payment has been made to the holders of the Preferred Stock of their full Preferred Liquidation
Amount required by Section 2.1 less any and all Mandatory Dividend(s) previously distributed with respect to
each such share, the remaining assets or surplus funds of the Corporation available for distribution to stockholders shall be
distributed among the holders of the Common Stock and the holders of the Preferred Stock pro rata based on the number of
shares of Common Stock held by each (assuming conversion of all shares of the Preferred Stock into Common Stock).
2.3. Deemed
Liquidation Events. At the option of the holders of at least 60% of the then outstanding shares of the Preferred Stock, voting
together as a single class on an as-converted to Common Stock basis, the occurrence of each of the following events shall be
deemed to be a liquidation, dissolution or winding up within the meaning of this Section 2 (each, a “Deemed
Liquidation Event”):
(a) either
a transaction or series of related transactions in which any individual, corporation, partnership, trust, limited liability company,
association or other entity (each, a “Person”), or group of related Persons, acquires from the stockholders
of the Corporation, shares representing at least a majority of the outstanding voting power of the Corporation;
(b) a
sale and/or issuance (or series of sales and/or issuances) by the Corporation of securities of the Corporation representing, after
the issuance of such securities, more than
fifty percent (50%) of all voting securities of the Corporation to persons other than
stockholders of the Corporation as of immediately prior to such sale(s) and/or issuance(s);
(c) a
sale, conveyance or disposition (in one or a series of related transactions) by the Corporation or any subsidiary of the Corporation
of all or substantially all of the assets of the Corporation and its subsidiaries taken as a whole;
(d) a
grant of an exclusive license or other transfer (in one or a series of related transactions) by the Corporation and/or any
subsidiary of the Corporation of a material amount of the technology or intellectual property of the Corporation and its
subsidiaries taken as a whole; or
(e) a
consolidation or merger of the Corporation with or into any other entity or entities or a reorganization of the Corporation or
similar transactions, provided, however, that a consolidation, merger, reorganization or similar transaction involving the
Corporation shall not constitute a Deemed Liquidation Event if following completion of the transaction, the holders of shares of
the Corporation immediately prior to the transaction own shares that represent a majority of the voting power of the
surviving corporation.
2.4. Amount
Paid Deemed Paid or Distributed. Whenever the distribution provided for in Subsection 1.3 or in this Section 2
shall be payable in any assets other than cash, the value of the assets to be distributed shall be the fair market value
thereof, determined as follows:
(a) Freely
traded securities:
(i) If
traded on a securities exchange, the value shall be based on the formula specified in the definitive agreements for the Deemed
Liquidation Event(s) or if no such formula exists, then the value of such securities shall be deemed to be the average of
the closing prices of the securities on such exchange or system over the 30-day period ending three days prior to the closing;
(ii) If
actively traded over-the-counter, the value shall be based on the formula specified in the definitive agreements for the Deemed
Liquidation Event(s) or if no such formula exists, then the value of such securities shall be deemed to be the average of
the closing bid or sale prices (whichever is applicable) over the 30-day period ending three days prior to the closing; and
(iii) If
there is no active public market, the value shall be the fair market value thereof, as so determined in good faith by the Board of
Directors of the Corporation (including each of the Preferred Directors).
(b) The
method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising
solely by virtue of a stockholder’s status as an affiliate or former affiliate) shall be to make an appropriate discount from the
market value determined as above in Subsection 2.4(a) to reflect the approximate fair market value thereof.
(c) In
the event the requirements of this Section 2 are not complied with, the Corporation shall forthwith either:
(i) cause
such closing to be postponed until such time as the requirements of this Section 2 have been complied with; or
(ii) cancel
such transaction, in which event the rights, preferences and privileges of the holders of the Preferred Stock shall revert to and be
the same as such rights, preferences and privileges existing immediately prior to the date of the first notice referred to
in Subsection 2.4(d).
(d) The
Corporation shall give each holder of record of the Preferred Stock written notice of such impending transaction within ten days
after the Board of Directors of the Corporation approves such transaction or within ten days after the commencement of any
involuntary proceeding, whichever is earlier. Such written notice shall describe the material terms and conditions of the
impending transaction and the provisions of this Section 2, and the Corporation shall thereafter give such
holders prompt notice of any material changes. The transaction shall in no event take place sooner than 20 days after the
Corporation has given the first notice provided for herein or sooner than ten days after the Corporation has given notice of any
material changes provided for herein; provided, however, that such periods may be shortened upon the written consent of the
holders of the Preferred Stock that are entitled to such notice rights or similar notice rights and that represent at least 60%
of the then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock
basis.
3. Voting.
3.1. General. On
any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of the
Corporation (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of the Preferred Stock
shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of
the Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on
such matter. Except as provided by law or by the other provisions of this Second Amended and Restated Certificate of
Incorporation, as amended, the holders of the Preferred Stock shall vote together with the holders of Common Stock as a single
class on an as-converted to Common Stock basis.
3.2. Election
of Directors. For as long as there are any shares of the Preferred Stock outstanding, the holders of record of a majority of the
then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, shall be
entitled to elect three directors of the Corporation (the “Preferred Directors”). The holders of record of a
majority of the then outstanding shares of Common Stock, voting together as a single class, shall be entitled to elect one director
of the Corporation. If the holders of shares of the Preferred Stock or Common Stock, as the case may be, fail to elect a sufficient
number of directors to fill all directorships for which they are entitled to elect directors pursuant to the first two sentences of
this Subsection 3.2, then any directorship not so filled shall remain vacant until such time as the holders of the Preferred
Stock or Common Stock, as the case may be, elect an individual to fill such directorship by vote or written consent in lieu of a
meeting; and no such directorship may be filled by stockholders of the Corporation other than by the stockholders of the Corporation
that are entitled to elect an individual to fill such directorship. The holders of a majority of the then outstanding shares of
Common Stock and/or the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, shall be
entitled to elect all remaining members of the Board of Directors of the Corporation. Any director elected as provided in this Subsection
3.2 may be removed without cause, and any vacancy caused by the resignation, death or removal of such director may be filled,
by, and only by, the affirmative vote of the holders of the shares of the class or series of capital stock entitled to elect such
director or directors, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written
consent of stockholders. At any meeting held for the purpose of electing a director, the presence in person or by proxy of the
holders of a majority of the then outstanding shares of the class or series entitled to elect such director shall constitute a
quorum for the purpose of electing such director.
3.3. Preferred
Stock Protective Provisions. At any time when shares of the Preferred Stock are outstanding, the Corporation shall not, either
directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any
other vote required by law or this Second Amended and Restated Certificate of Incorporation, as amended) the written consent
or affirmative vote of the holders of at least 60% of the then outstanding shares of the Preferred Stock, voting together as
a single class on an as-converted to Common Stock basis, pursuant to consent given in writing or by vote at a meeting:
(a) liquidate,
dissolve or wind-up the business and affairs of the Corporation, effect any Deemed Liquidation Event or any recapitalization or
reorganization of the Corporation or other transaction in which control of the Corporation is transferred, or sell, transfer,
license or encumber the Corporation’s technology or intellectual property, or consent to any of the foregoing, other than
licenses of the Corporation’s technology or intellectual property in the ordinary course of business;
(b) amend,
alter or repeal any provision of this Second Amended and Restated Certificate of Incorporation of the Corporation, as amended,
including, without limitation, in a manner that affects the powers, preferences or rights of the Preferred Stock;
(c) amend,
alter or repeal any provision of the By-Laws of the Corporation, including, without limitation, in a manner that affects the powers,
preferences or rights of the Preferred Stock;
(d) increase
or decrease the authorized number of shares of the Preferred Stock or Common Stock;
(e) reclassify,
alter or amend any existing security of the Corporation in respect of the distribution of assets on the liquidation, dissolution or
winding up of the Corporation or the payment of dividends, if such reclassification, alteration or amendment would render such
other security senior to or pari passu with the Preferred Stock in respect of any such right, preference or privilege (to
the extent such rights preferences or privileges are not then currently in effect);
(f) purchase
or redeem (or permit any subsidiary to purchase or redeem) or pay or declare any dividend or make any distribution on, any shares of
capital stock of the Corporation other than repurchases of stock pursuant to stock restriction agreements or vesting agreements
approved by the Board of Directors of the Corporation (including each of the Preferred Directors) that grant to the Corporation a
right of repurchase upon termination of the service or employment of a consultant, director or employee;
(g) borrow
or guaranty or otherwise authorize any amount of indebtedness, other than (i) inventory financing in the ordinary course of
business; and (ii) any indebtedness in an amount of up to $250,000 in the aggregate that is approved by the Board of
Directors of the Corporation, including each of the Preferred Directors;
(h) increase
or decrease the authorized number of directors of the Board of Directors of the Corporation from nine members;
(i) effect
a change in the nature of the Corporation’s business from the discovery and development of small molecule therapeutics
targeting the toxic proteins that cause the cognitive decline associated with Alzheimer’s disease and other
neurodegenerative diseases;
(j) enter
into any transaction with any person or entity, including, without limitation, any of its founders, officers, directors or employees
other than in the ordinary course of business on an arm’s length basis (as determined in good faith by the Board of
Directors of the Corporation (including each of the Preferred Directors));
(k) increase
the number of shares of Common Stock reserved for issuance under the Corporation’s Amended and Restated 2017 Equity Incentive
Plan, as amended from time to time, or any other equity-based incentive or compensation plan;
(l) make,
or permit any subsidiary to make, any loan or advance to any person or entity, including, without limitation, any founder, officer,
employee or director of the Corporation or any subsidiary, except (i) advances in the ordinary course of business or
(ii) advances up to $50,000 in the aggregate under the terms of an employment or service arrangement approved by the Board
of Directors of the Corporation, including each of the Preferred Directors;
(m) hire,
terminate, or change the compensation in excess of $100,000 of any of its officers, directors or employees, unless such hiring,
termination or compensation is approved by the Board of Directors of the Corporation, including each of the Preferred
Directors;
(n) own
any stock or other securities of any other corporation, partnership, or other entity, unless approved by the Board of Directors of
the Corporation, including each of the Preferred Directors;
(o) guarantee,
or permit any subsidiary to guarantee, any indebtedness except for (i) trade accounts of the Corporation or any subsidiary
arising in the ordinary course of business, or (ii) any guarantee approved by the Board of Directors of the Corporation,
including each of the Preferred Directors; or
(p) make
any investment other than investments in prime commercial paper, money market funds, certificates of deposit in any United States
bank having a net worth in excess of $100,000,000 or obligations issued or guaranteed by the United States of America, in each case
having a maturity not in excess of one year, unless approved by the Board of Directors of the Corporation, including each of the
Preferred Directors.
4. Optional
Conversion.
The holders of the Preferred
Stock shall have conversion rights as follows (the “Conversion Rights”):
4.1. Right
to Convert.
4.1.1. Conversion
Ratio. Each share of the Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to
time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and nonassessable shares
of Common Stock as is determined by dividing the Original Issue Price applicable to such share of Preferred Stock by the Conversion Price
(as defined below) applicable to such share of Preferred Stock in effect at the time of conversion. The “Conversion Price”
shall initially be equal to $0.69 for the Series A Preferred Stock and Series A-1 Preferred Stock, $0.8415 for the Series A-2
Preferred Stock, and $0.923 for the Series B Preferred Stock. Such initial Conversion Price, and the rate at which shares of the
Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below.
4.1.2. Termination
of Conversion Rights. The Conversion Rights shall not terminate in connection with a Deemed Liquidation Event.
4.2. Fractional
Shares. No fractional shares of Common Stock shall be issued upon conversion of the Preferred Stock. In lieu of any fractional
shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the
fair market value of a share of Common Stock as determined in good faith by the Board of Directors of the Corporation (including
each of the Preferred Directors). Whether or not fractional shares would be issuable upon such conversion shall be
determined on the basis of the total number of shares of the Preferred Stock the holder is at the time converting into Common
Stock and the aggregate number of shares of Common Stock issuable upon such conversion.
4.3. Mechanics
of Conversion.
4.3.1. Notice
of Conversion. In order for a holder of the Preferred Stock to voluntarily convert shares of the Preferred Stock into shares of
Common Stock, such holder shall surrender the certificate or certificates for such shares of the Preferred Stock (or, if such
registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement
reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on
account of the alleged loss, theft or destruction of such certificate), at the office of the transfer agent for the Preferred Stock
(or at the principal office of the Corporation if the Corporation serves as its own transfer agent), together with written notice
that such holder elects to convert all or any number of the shares of the Preferred Stock represented by such certificate or
certificates and, if applicable, any event on which such conversion is contingent. Such notice shall state such holder’s name
or the names of the nominees in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. If
required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or
instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or his, her or its
attorney duly authorized in writing. The close of business on the date of receipt by the transfer agent (or by the Corporation
if the Corporation serves as its own transfer agent) of such certificates (or lost certificate affidavit and agreement) and
notice shall be the time of conversion (the “Conversion Time”), and the shares of Common Stock issuable upon
conversion of the shares represented by such certificate shall be deemed to be outstanding of record as of such date. The
Corporation shall, as soon as practicable after the Conversion Time, (a) issue and deliver to such holder of the Preferred
Stock, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable upon
such conversion in accordance with the provisions hereof and a certificate for the number (if any) of the shares of the
Preferred Stock represented by the surrendered certificate that were not converted into Common Stock, and (b) pay in cash
such amount as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such
conversion.
4.3.2. Reservation
of Shares. The Corporation shall at all times when the Preferred Stock shall be outstanding, reserve and keep available out of
its authorized but unissued capital stock, for the purpose of effecting the conversion of the Preferred Stock, such number of its
duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all the Preferred Stock
then outstanding; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all of the then outstanding shares of the Preferred Stock, the Corporation shall take such corporate action as may
be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such
purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary
amendment to this Second Amended and Restated Certificate of Incorporation, as amended. Before taking any action that would cause an
adjustment reducing the Conversion Price of any series of Preferred Stock below the then par value of the shares of Common Stock
issuable upon conversion of the Preferred Stock,
the Corporation will take any corporate action that may, in the opinion of its
counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of Common
Stock at such adjusted Conversion Price.
4.3.3. Effect
of Conversion. All shares of the Preferred Stock that shall have been surrendered for conversion as herein provided shall no
longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the
Conversion Time, except with respect to the right of the holders thereof to receive shares of Common Stock in exchange therefor
and to receive payment in lieu of any fraction of a share otherwise issuable upon such conversion as provided in Subsection
4.2. Any shares of the Preferred Stock so converted shall be retired and cancelled and may not be reissued as shares of such
series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be
necessary to reduce the authorized number of shares of the Preferred Stock accordingly.
4.3.4. No
Further Adjustment. Upon any such conversion, no adjustment to the Conversion Price shall be made for any declared but unpaid
dividends on the Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion.
4.3.5. Taxes. The
Corporation shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of shares
of Common Stock upon conversion of shares of the Preferred Stock pursuant to this Section 4. The Corporation shall
not, however, be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of
shares of Common Stock in a name other than that in which the shares of the Preferred Stock so converted were registered,
and no such issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the
Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been
paid.
4.4. Adjustments
to Conversion Price for Diluting Issues.
4.4.1. Special
Definitions. For purposes of this Article Fourth, the following definitions shall apply:
(a) “Option” shall
mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.
(b) “Original
Issue Date” shall mean, with respect to the Series A Preferred Stock, the Series A-1 Preferred Stock, the
Series A-2 Preferred Stock, and the Series B Preferred Stock, the date on which the first share of such series of
Preferred Stock, respectively, was issued.
(c) “Convertible
Securities” shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into
or exchangeable for Common Stock, but excluding Options.
(d) “Additional
Shares of Common Stock” shall mean, with respect to the determination of adjustments to the Conversion Price for each
series of Preferred Stock, all shares of Common Stock issued (or, pursuant to Subsection 4.4.3, deemed to be issued) by
the Corporation on or after the Original Issue Date of such Series of Preferred Stock, other than (1) the following
shares of Common Stock and (2) shares of Common Stock deemed issued pursuant to the following Options and Convertible
Securities (clauses (1) and (2), collectively, “Exempted Securities”):
(i) shares
of Common Stock, Options or Convertible Securities
issued upon the conversion of the Preferred Stock or by reason of a dividend,
stock split, split-up or other distribution on shares of Common Stock that is covered by Subsections 4.5, 4.6 or 4.7;
(ii) shares
of Common Stock or Options issued to employees or directors of, or consultants or advisors to, the Corporation or any of its
subsidiaries pursuant to a plan, agreement or an arrangement approved by the Board of Directors of the Corporation, including
each of the Preferred Directors:
(iii) shares
of Common Stock or Convertible Securities actually issued upon the exercise of Options, or shares of Common Stock actually issued
upon the conversion or exchange of Convertible Securities, in each case provided that such issuance is pursuant to the terms of
such Option or Convertible Security;
(iv) shares
of Common Stock, Options or Convertible Securities issued to banks, equipment lessors or other financial institutions, or to real
property lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction approved by the Board of
Directors of the Corporation, including each of the Preferred Directors, that do not exceed an aggregate of 1,000,000 shares
of Common Stock;
(v) shares
of Common Stock, Options or Convertible Securities issued to suppliers or third party service providers in connection with the
provision of goods or services pursuant to transactions approved by the Board of Directors of the Corporation, including each of
the Preferred Directors:
(vi) shares
of Common Stock, Options or Convertible Securities issued pursuant to the acquisition of another corporation (or the assets of
another corporation) by the Corporation whether by merger, reorganization or otherwise, provided, that such issuances are
approved by the Board of Directors of the Corporation, including each of the Preferred Directors;
(vii) shares
of Common Stock, Options or Convertible Securities issued in connection with sponsored research, collaboration, technology license,
development, marketing or other similar agreements or strategic partnerships approved by the Board of Directors of the
Corporation, including each of the Preferred Directors;
(viii) shares
of Common Stock issued or issuable pursuant to currently outstanding Options granted under the Corporation’s Amended and
Restated 2017 Equity Incentive Plan, as amended from time to time, with such amendment as approved by the Board of Directors of
the Corporation, including each of the Preferred Directors;
(ix) shares
of Common Stock issued or issuable upon the closing of a public offering of the Corporation’s securities pursuant to the
Securities Act of 1933, as amended (the “Securities Act”), in which all shares of the Preferred Stock are
automatically converted to Common Stock pursuant to Subsection 5.1(a);
(x) shares
of Common Stock issued or issuable upon conversion of any shares of the Series B Preferred Stock issued under that certain
Series B Stock Purchase Agreement dated as of March 20, 2014, as amended, and under that certain Series B
Preferred Stock Purchase Agreement dated as of November 16, 2016, as it may be amended, among the Corporation and the
other parties listed therein;
(xi) shares
of Common Stock issued or issuable upon exercise of one
or more Warrant(s) issued by the Corporation to the Alzheimer Drug
Development Foundation, Inc. under that certain Agreement to Accept Conditions for Biotechnology Grant Funding dated as of
July 6, 2010;
(xii) shares
of Common Stock issued upon exercise of Common Stock Purchase Warrants issued by the Corporation under that certain Note and Warrant
Purchase Agreement, among the Corporation and the purchasers named therein, dated as of March 11, 2016, as amended;
(xiii) shares
of Common Stock issued or issuable upon the conversion, exercise or exchange of all other Options and Convertible Securities
outstanding as of November 16, 2016; and
(xiv) shares
of Series B-1 Convertible Preferred Stock issued or issuable upon conversion of one or more Convertible Promissory Notes (and
shares of Common Stock issued upon conversion of such shares of Series B-1 Convertible Preferred Stock) issued by the
Corporation under (a) that certain Note Purchase Agreement, among the Corporation and the purchasers named therein, dated as of
March 8, 2018, as amended, and (b) that certain Note Purchase Agreement, among the Corporation and the purchasers
named therein, dated as of November 15, 2018, as amended.
4.4.2. No
Adjustment of Conversion Price. No adjustment in the Conversion Price applicable to a share of Preferred Stock shall be made as
the result of the issuance or deemed issuance of Additional Shares of Common Stock unless the consideration per share (determined
pursuant to Subsection 4.4.5 for an Additional Share of Common Stock issued or deemed to be issued by the Corporation) is
less than the Conversion Price for such share of Preferred Stock in effect on the date of, and immediately prior to, the issue
of such Additional Shares of Common Stock.
4.4.3. Deemed
Issue of Additional Shares of Common Stock.
(a) If
the Corporation at any time or from time to time after the Original Issue Date applicable to a series of Preferred Stock shall issue
any Options or Convertible Securities (excluding Options or Convertible Securities that are themselves Exempted Securities) or
shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or
Convertible Securities, then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto,
assuming the satisfaction of any conditions to exercisability, convertibility or exchangeability but without regard to any
provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the
case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed
to be Additional Shares of Common Stock issued as of the time of the issuance of such Convertible Security or Option or, in case
such a record date shall have been fixed, as of the close of business on such record date.
(b) If
the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to the Conversion Price of any series
of Preferred Stock pursuant to the terms of Subsection 4.4.4, are revised as a result of an amendment to such terms or any other
adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant
to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (i) any increase or decrease
in the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any such Option or Convertible Security
or (ii) any increase or decrease in the consideration payable to the Corporation upon such exercise, conversion and/or exchange,
then, effective upon such increase or decrease becoming effective, the Conversion Price of such series of Preferred Stock computed upon
the original issue of such Option or Convertible Security (or upon the occurrence of a record date with respect thereto) shall be readjusted
to such Conversion Price as would have been obtained had such revised terms been in effect upon the original date of issuance of such
Option
or Convertible Security. Notwithstanding the foregoing, no readjustment pursuant to this Subsection 4.4.3(b) shall
have the effect of increasing the Conversion Price of any series of Preferred Stock to an amount that exceeds the lower of (A) such
Conversion Price in effect immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible
Security, or (B) such Conversion Price that would have resulted from any issuances of Additional Shares of Common Stock (other than
deemed issuances of Additional Shares of Common Stock as a result of the issuance of such Option or Convertible Security) between the
original adjustment date and such readjustment date.
(c) If
the terms of any Option or Convertible Security (excluding Options or Convertible Securities that are themselves Exempted Securities),
the issuance of which did not result in an adjustment to the Conversion Price of a series of Preferred Stock pursuant to the terms of
Subsection 4.4.4 (either because the consideration per share (determined pursuant to Subsection 4.4.5) of the Additional
Shares of Common Stock subject thereto was equal to or greater than such Conversion Price then in effect with respect to such series
of Preferred Stock, or because such Option or Convertible Security was issued before the Original Issue Date of such series of Preferred
Stock), are revised after Original Issue Date of such series of Preferred Stock as a result of an amendment to such terms or any other
adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant
to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (i) any increase in the number
of shares of Common Stock issuable upon the exercise, conversion or exchange of any such Option or Convertible Security or (ii) any
decrease in the consideration payable to the Corporation upon such exercise, conversion or exchange, then such Option or Convertible
Security, as so amended or adjusted, and the Additional Shares of Common Stock subject thereto (determined in the manner provided in
Subsection 4.4.3(a)) shall be deemed to have been issued effective upon such increase or decrease becoming effective.
(d) Upon
the expiration or termination of any unexercised Option or unconverted or unexchanged Convertible Security (or portion thereof) that
resulted (either upon its original issuance or upon a revision of its terms) in an adjustment to the Conversion Price of any series of
Preferred Stock pursuant to the terms of Subsection 4.4.4, such Conversion Price shall be readjusted to the Conversion Price as
would have obtained had such Option or Convertible Security (or portion thereof) never been issued.
(e) If
the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or
the consideration payable to the Corporation upon such exercise, conversion and/or exchange, is calculable at the time such Option or
Convertible Security is issued or amended but is subject to adjustment based upon subsequent events, any adjustment to the Conversion
Price of a series of Preferred Stock provided for in this Subsection 4.4.3 shall be effected at the time of such issuance or amendment
based on such number of shares or amount of consideration without regard to any provisions for subsequent adjustments (and any subsequent
adjustments shall be treated as provided in clauses (b) and (c) of this Subsection 4.4.3). If the number of shares of
Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable
to the Corporation upon such exercise, conversion and/or exchange, cannot be calculated at all at the time such Option or Convertible
Security is issued or amended, any adjustment to the Conversion Price of a series of Preferred Stock that would result under the terms
of this Subsection 4.4.3 at the time of such issuance or amendment shall instead be effected at the time such number of shares
and/or amount of consideration is first calculable (even if subject to subsequent adjustments), assuming for purposes of calculating
such adjustment to such Conversion Price that such issuance or amendment took place at the time such calculation can first be made.
4.4.4. Adjustment
of Conversion Price upon Issuance of Additional Shares of Common Stock. In the event the Corporation shall at any time after the
Original Issue Date applicable
to a series of Preferred Stock issue Additional Shares of Common Stock (including Additional Shares
of Common Stock deemed to be issued pursuant to Subsection 4.4.3), without consideration or for a consideration per
share less than Conversion Price of such series of Preferred Stock in effect immediately prior to such issue, then the
Conversion Price applicable to each share of such series of Preferred Stock shall be reduced, concurrently with such issue, to a
price per share (calculated to the nearest one-hundredth of a cent) in accordance with the following formula:
CP2 = CP1*(A + B) ÷
(A + C).
For purposes of the foregoing formula, the following definitions shall
apply:
(i) “CP2” shall
mean, with respect to the determination of adjustments to the Conversion Price of any series of Preferred Stock, the Conversion
Price of such series of Preferred Stock in effect immediately after such issue of Additional Shares of Common Stock;
(ii) “CP1” shall
mean, with respect to the determination of adjustments to the Conversion Price of any series of Preferred Stock, the Conversion
Price of such series of Preferred Stock in effect immediately prior to such issue of Additional Shares of Common Stock;
(iii) “A” shall
mean the number of shares of Common Stock outstanding immediately prior to such issue of Additional Shares of Common Stock, treating
for this purpose as outstanding shares of Common Stock underlying only those Options or Convertible Securities that
(x) are outstanding immediately prior to such issue and (y) are vested or otherwise exercisable;
(iv) “B” shall
mean the number of shares of Common Stock that would have been issued if such Additional Shares of Common Stock had been issued at a
price per share equal to CP1 (determined by dividing the aggregate consideration received by the Corporation in
respect of such issue by CP1); and
(v) “C”
shall mean the number of such Additional Shares of Common Stock issued in such transaction.
4.4.5. Determination
of Consideration. For purposes of this Subsection 4.4, the consideration received by the Corporation for the issue of any
Additional Shares of Common Stock shall be computed as follows:
(a) For
cash and property, such consideration shall:
(i) insofar
as it consists of cash, be computed at the aggregate amount of cash received by the Corporation, excluding amounts paid or payable
for accrued interest;
(ii) insofar
as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in
good faith by the Board of Directors of the Corporation (including each of the Preferred Directors); and
(iii) in
the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation
for consideration that covers both, be the proportion of such consideration so received, computed as provided in clauses
(i) and (ii) above, as determined in good faith by the Board of Directors of the Corporation (including each of the
Preferred Directors).
(b) For
Options and Convertible Securities, the consideration per share received by the Corporation for Additional Shares of Common Stock
deemed to have been issued pursuant to Subsection 4.4.3, relating to Options and Convertible Securities, shall be
determined by dividing
(i) the
total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a subsequent adjustment of such consideration.) payable to the
Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case
of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of
such Convertible Securities, by
(ii) the
maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or
exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options
for Convertible Securities and the conversion or exchange of such Convertible Securities.
4.4.6. Multiple
Closing Dates. In the event the Corporation shall issue on more than one date Additional Shares of Common Stock that are a part
of one transaction or a series of related transactions and that would result in an adjustment to the Conversion Price of any series
of Preferred Stock pursuant to the terms of Subsection 4.4.4, and such issuance dates occur within a period of no more than
90 days from the first such issuance to the final such issuance, then, upon the final such issuance, the Conversion Price of such
series of Preferred Stock shall be readjusted to give effect to all such issuances as if they occurred on the date of the first
such issuance (and without giving effect to any additional adjustments as a result of any such subsequent issuances within such
period).
4.5. Adjustment
for Stock Splits and Combinations. If the Corporation shall at any time or from time to time on or after the Original Issue Date
of any series of Preferred Stock effect a subdivision of the outstanding Common Stock, the Conversion Price of such series of
Preferred Stock in effect immediately before that subdivision shall be proportionately decreased so that the number of
shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase
in the aggregate number of shares of Common Stock outstanding. If the Corporation shall at any time or from time to time after
the Original Issue Date of any series of Preferred Stock combine the outstanding shares of Common Stock, the Conversion Price of
such series of Preferred Stock in effect immediately before the combination shall be proportionately increased so that the
number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to
such decrease in the aggregate number of shares of Common Stock outstanding. Any adjustment under this Subsection 4.5
shall become effective at the close of business on the date the subdivision or combination becomes effective.
4.6. Adjustments
for Other Dividends and Distributions. In the event the Corporation at any time or from time to time on or after the Original Issue
Date of any series of Preferred Stock shall make or issue, or fix a record date for the determination of holders of Common Stock entitled
to receive, a dividend or other distribution payable in securities of the Corporation or in cash or other property and the provisions
of Section 1 do not apply to such dividend or distribution, then and in each such event the holders of such series of Preferred
Stock shall receive, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities,
cash or other property in an amount equal to the amount of such securities, cash or other property as they would have received if all
outstanding shares of such series of Preferred Stock had been converted into Common Stock on the date of such event.
4.7. Adjustment
for Merger or Reorganization, etc. If there shall occur any reorganization, recapitalization, reclassification,
consolidation or merger involving the Corporation in which the Common Stock (but not the Preferred Stock) is converted into or
exchanged for securities, cash or other property (other than a transaction covered by Subsections 4.4, 4.5 or 4.6),
then, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of the
Preferred Stock shall thereafter be convertible in lieu of the Common Stock into which it was convertible prior to such
event into the kind and amount of securities, cash or other property that a holder of the number of shares of Common Stock
of the Corporation issuable upon conversion of one share of the Preferred Stock immediately prior to such reorganization,
recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction;
and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors of the Corporation (including
each of the Preferred Directors)) shall be made in the application of the provisions in this Section 4 with respect
to the rights and interests thereafter of the holders of the Preferred Stock, to the end that the provisions set forth in
this Section 4 (including provisions with respect to changes in and other adjustments of the Conversion Price of
each series of Preferred Stock) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or
other property thereafter deliverable upon the conversion of the Preferred Stock.
4.8. Certificate
as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price of any series of Preferred
Stock pursuant to this Section 4, the Corporation at its expense shall, as promptly as reasonably practicable but in
any event not later than 30 days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and
furnish to each holder of the Preferred Stock a certificate setting forth such adjustment or readjustment (including the
kind and amount of securities, cash or other property into which the Preferred Stock is convertible) and showing in detail the
facts upon which such adjustment or readjustment is based. The Corporation shall, as promptly as reasonably practicable after
the written request at any time of any holder of the Preferred Stock (but in any event not later than 15 days thereafter),
furnish or cause to be furnished to such holder a certificate setting forth (a) the Conversion Price of such series of
Preferred Stock then in effect, and (b) the number of shares of Common Stock and the amount, if any, of other securities,
cash or property that then would be received upon the conversion of the Preferred Stock.
4.9. Notice
of Record Date. In the event:
(a) the
Corporation shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon
conversion of the Preferred Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution,
or to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to
receive any other security; or
(b) of
any capital reorganization of the Corporation, any reclassification of the Common Stock of the Corporation, or any Deemed
Liquidation Event; or
(c) of
the voluntary or involuntary dissolution, liquidation or winding-up of the Corporation,
then, and in each such case, the Corporation will send or cause
to be sent to the holders of the Preferred Stock a notice specifying, as the case may be, (i) the record date for such
dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective
date on. which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is
proposed to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other
capital stock or securities at the time issuable upon the conversion of the Preferred Stock) shall be entitled to exchange their
shares of Common Stock (or such other capital stock or securities)
for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up, and the amount per share
and character of such exchange applicable to the Preferred Stock and the Common Stock. Such notice shall be sent at least
ten days prior to the record date or effective date for the event specified in such notice.
5. Mandatory
Conversion.
5.1. Trigger
Events. Upon the initial closing of the Corporation’s first firmly underwritten public offering of its Common Stock
pursuant to a registration statement filed with the Securities and Exchange Commission (“SEC”), and declared
effective under the Securities Act, in which the Corporation’s Common Stock is listed on a national securities exchange (other
than a registration statement relating either to the sale of securities to employees of the Corporation pursuant to its stock
option, stock purchase or similar plan or an SEC Rule 145 transaction) covering the offer and sale of Common Stock for the
account of the Corporation to the public at a price per share of not less than three times the highest then applicable
Conversion Price resulting in offering proceeds to the Corporation of a least $30,000,000 net of underwriting discounts and
commissions (the time of such closing is referred to herein as the “Mandatory Conversion Time”), (i) all
outstanding shares of the Preferred Stock shall automatically be converted into shares of Common Stock, at the then effective
Conversion Price and (ii) such shares may not be reissued by the Corporation.
5.2. Procedural
Requirements. All holders of record of shares of the Preferred Stock shall be sent written notice of the Mandatory Conversion
Time and the place designated for mandatory conversion of all such shares of the Preferred Stock pursuant to this Section 5.
Such notice need not be sent in advance of the occurrence of the Mandatory Conversion Time. Upon receipt of such notice, each holder
of shares of the Preferred Stock shall surrender his, her or its certificate or certificates for all such shares (or, if such holder
alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable
to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged
loss, theft or destruction of such certificate) to the Corporation at the place designated in such notice. If so required by the
Corporation, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of
transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his, her or its attorney duly
authorized in writing. All rights with respect to the Preferred Stock converted pursuant to Subsection 5.1, including the
rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate at the Mandatory Conversion
Time (notwithstanding the failure of the holder or holders thereof to surrender the certificates at or prior to such time), except
only the rights of the holders thereof, upon surrender of their certificate or certificates (or lost certificate affidavit and
agreement) therefor, to receive the items provided for in the next sentence of this Subsection 5.2. As soon as practicable
after the Mandatory Conversion Time and the surrender of the certificate or certificates (or lost certificate affidavit and
agreement) for the Preferred Stock, the Corporation shall issue and deliver to such holder, or to his, her or its nominees, a
certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the
provisions hereof, together with cash as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock
otherwise issuable upon such conversion and the payment of any declared but unpaid dividends on the shares of the Preferred
Stock converted. Such converted Preferred Stock shall be retired and cancelled and may not be reissued as shares of such
series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be
necessary to reduce the authorized number of shares of the Preferred Stock accordingly.
6. Waiver .
Any of the rights, powers, preferences and other terms of the Preferred Stock set forth herein may be waived on behalf of all
holders of the Preferred Stock, the Series B Preferred Stock, the Series A-2 Preferred Stock, the Series A-1
Preferred Stock or the Series A Preferred Stock, as the case may be, by the requisite percentage (as set forth in the
applicable provision(s) of this Second Amended and
Restated Certificate of Incorporation, as amended) of such stockholders of
the Corporation that are entitled to a vote upon or consent with respect to any such right, power, preference or other term.
7. Notices.
Any notice required or permitted by the provisions of this Article Fourth to be given to a holder of shares of the Preferred
Stock shall be mailed, postage prepaid, to the post office address last shown on the records of the Corporation, or given by
electronic communication in compliance with the provisions of the General Corporation Law, and shall be deemed sent upon such
mailing or electronic transmission.
8. No
Reissuance of Preferred Stock. No share or shares of any series of the Preferred Stock acquired by the Corporation by reason of
purchase, conversion or otherwise shall be reissued, and all such shares shall be canceled, retired and eliminated from the
shares which the Corporation shall be authorized to issue. This Second Amended and Restated Certificate of Incorporation, as
amended, shall be appropriately amended to effect the corresponding reduction in the Corporation’s capital stock.
B. COMMON
STOCK
1. General.
The voting, dividend and liquidation rights of the holders of Common Stock are subject to and qualified by the rights, powers and preferences
of the holders of the Preferred Stock set forth herein.
2. Voting.
The holders of Common Stock are entitled to one vote for each share of Common Stock held at all meetings of stockholders (and
written actions in lieu of meetings). The number of authorized shares of Common Stock may be increased or decreased (but not
below the number of shares thereof then outstanding) by (in addition to any vote of the holders of the Preferred Stock that may
be required by the terms of this Second Amended and Restated Certificate of Incorporation, as amended) the affirmative vote
of the holders of shares of capital stock of the Corporation (voting as a single class) representing a majority of the votes
represented by all outstanding shares of capital stock of the Corporation entitled to vote (the Preferred Stock voting on an as
if converted to Common Stock basis) and without a separate class vote by the holders of the Common Stock, irrespective of the
provisions of Section 242(b)(2) of the General Corporation Law.
Exhibit 3.5
FOURTH
CERTIFICATE OF AMENDMENT
OF
SECOND
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
COGNITION
THERAPEUTICS, INC.
Cognition Therapeutics, Inc.
(the “Corporation”), a corporation organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, as the same may be amended from time to time (“DGCL”),
DOES HEREBY CERTIFY THAT:
FIRST: That
the Board of Directors (the “Board”) of the Corporation duly adopted resolutions declaring advisable the following
amendment to the Second Amended and Restated Certificate of Incorporation of the Corporation, as amended, that was originally filed with
the Secretary of State of the State of Delaware on November 14, 2016, and that this amendment was submitted to the stockholders of
the Corporation for approval. The resolution setting forth the proposed amendment is as follows:
RESOLVED, that the
Second Amended and Restated Certificate of Incorporation of the Corporation, as amended (the “Certificate of Incorporation”),
shall be further amended pursuant to the Fourth Certificate of Amendment to the Certificate of Incorporation in the form attached
as Exhibit A hereto.
SECOND: Thereafter,
pursuant to a resolution of the Board, the holders of a majority of the outstanding shares of all classes of capital stock of the Corporation,
voting together as a single class, and the holders of at least 60% of the outstanding shares of the Corporation’s Series A
Convertible Preferred Stock, Series A-1 Convertible Preferred Stock, Series A-2 Convertible Preferred Stock and Series B
Convertible Preferred Stock, voting together as a separate class, voted in favor of the amendment.
THIRD: That
the foregoing amendment was duly adopted in accordance with the provisions of § 228 and § 242 of the DGCL.
[Signature follows on next page]
IN WITNESS WHEREOF, the undersigned
has caused this Fourth Certificate of Amendment of the Second Amended and Restated Certificate of Incorporation, as amended, to be signed
this 27 day of April, 2021.
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COGNITION THERAPEUTICS, INC.
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By:
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/s/ Lisa Ricciardi
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Name: Lisa Ricciardi
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Title: President and Chief Executive Officer
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Exhibit A
FOURTH: The
total number of shares of all classes of stock that the Corporation shall have authority to issue is (i) Seventy Million (70,000,000)
shares of common stock, par value $0,001 par value per share (“Common Stock”), and (ii) Fifty-One Million Nine-Hundred
Eighty-One Thousand Five Hundred Thirteen (51,981,513) shares of preferred stock, $0,001 par value per share.
The following is a statement
of the designations and the powers, privileges, and rights, and the qualifications, limitations or restrictions thereof in respect of
each class of capital stock of the Corporation.
A. PREFERRED
STOCK
Three Million Sixty-Seven
Thousand Five Hundred Nineteen (3,067,519) shares of the authorized preferred stock of the Corporation are hereby designated as “Series A
Convertible Preferred Stock” (the “Series A Preferred Stock”); Three Million Nine Hundred Seventy Thousand
Seven Hundred Seventy- Six (3,970,776) shares of the authorized preferred stock of the Corporation are hereby designated as “Series A-1
Convertible Preferred Stock” (the “Series A-1 Preferred Stock”); Three Million Five Hundred Sixty-Five
Thousand Sixty-Three (3,565,063) shares of the authorized preferred stock of the Corporation are hereby designated as “Series A-2
Convertible Preferred Stock” (the “Series A-2 Preferred Stock”); Thirty Million Four Hundred Fifty Thousand
(30,450,000) shares of the authorized Preferred Stock of the Corporation are hereby designated as “Series B Convertible
Preferred Stock” (the “Series B Preferred Stock”); and Ten Million Nine Hundred Twenty-Eight Thousand
One Hundred Fifty-Five (10,928,155) shares of the authorized Preferred Stock of the Corporation are hereby designated as “Series B-1
Convertible Preferred Stock” (the “Series B-1 Preferred Stock”). The Series A Preferred Stock,
the Series A-1 Preferred Stock, the Series A-2 Preferred Stock, the Series B Preferred Stock, and the Series B- 1
Preferred Stock are sometimes referred to herein collectively as the “Preferred Stock.” Unless otherwise indicated,
references to “Sections” or “Subsections” in this Part A of this Article Fourth refer
to sections and subsections of Part A of this Article Fourth.
The Preferred Stock shall have
the following rights, preferences, powers, privileges, restrictions, qualifications and limitations.
1. Dividends.
1.1. Accruing
Dividends. From and after the date of the issuance of each respective share of the Preferred Stock, dividends at the rate of 8% per
annum of the applicable Original Issue Price (as defined herein) compounded annually shall accrue on such share of the Preferred Stock
(“Accruing Dividends”). Accruing Dividends shall accrue from day to day, whether or not declared, and shall be cumulative;
provided however, (i) that such Accruing Dividends shall be payable only in connection with a liquidation, dissolution or winding
up of the Corporation under Section 2 (including, without limitation, in connection with a Deemed Liquidation Event), or a
Mandatory Dividend under Section 1.3, and the Corporation shall not otherwise pay such Accruing Dividends and (ii) in
the event a Mandatory Dividend is paid under Section 1.3, Accruing Dividends shall thereafter accrue only on the unreturned
amount of the Original Issue Price after taking into account the payment of each Mandatory Dividend. As used herein, “Original
Issue Price” means $0.69 per share with respect to the Series A Preferred Stock and Series A-1 Preferred Stock, $0.8415
per share with respect to the Series A-2 Preferred Stock, $0,923 per share with respect to the Series B Preferred Stock, and
$1,385 per share with respect to the Series B-1 Preferred Stock (in each case, subject to appropriate adjustment in the event of
any stock dividend, stock split, combination or other similar recapitalization affecting such shares). After such time as the holders
of the Preferred Stock receive their full Preferred Liquidation Amount (as defined below), less any and all Mandatory Dividend(s)
previously
distributed with respect to shares of the Preferred Stock, the holders of the Preferred Stock will not thereafter be entitled to any additional
Accruing Dividends; provided that the holders of the Preferred Stock will share in all dividends and distributions declared by the Board
of Directors of the Corporation and paid by the Corporation with the holders of the Common Stock on an as if converted to Common Stock
basis.
1.2. Common
Stock Dividends. The holders of the Preferred Stock shall be entitled to share in dividends payable with respect to the Common
Stock as if converted and the Corporation shall not declare, pay or set aside any dividends on shares of Common Stock unless (in
addition to obtaining any consents required elsewhere in this Second Amended and Restated Certificate of Incorporation, as amended)
each holder of the Preferred Stock then outstanding shall first receive, or simultaneously receive, in each such instance, a
dividend on each outstanding share of the Preferred Stock held by such holder as if such share of Preferred Stock had been converted
into Common Stock, in an amount at least equal to the product of (a) the dividend payable on a share of Common Stock and
(b) the number of shares of Common Stock issuable upon conversion of a share of the Preferred Stock, in each case calculated on
the record date for determination of holders entitled to receive such dividend.
1.3. Mandatory
Dividend(s).
(a) If,
prior to such time as the holders of shares of the Preferred Stock receive their full Preferred Liquidation Amount, less any and all Mandatory
Dividend(s) previously distributed with respect to shares of the Preferred Stock, the Corporation or any subsidiary of the Corporation
shall consummate a sale, license or other disposition for value of any or all of the Corporation’s intellectual property, in a single
transaction or series of related transactions unrelated to the performance by the Corporation of research and development or other services
(as determined in good faith by the Board of Directors of the Corporation, including each of the Preferred
Directors) (a “Strategic Event”), at the written election of the holders of at least 60% of the then outstanding
shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, sent to the Corporation at
least 15 days prior to the effective date of a Strategic Event, the Corporation shall distribute to the holders of shares of the Preferred
Stock up to 35% of the aggregate payments (including, without limitation, all option and/or milestone payments and/or all success fees)
received by the Corporation as consideration in such Strategic Event as soon as reasonably practicable following receipt by the Corporation
of such payments (“Mandatory Dividend”). Such Mandatory Dividend shall be distributed to the holders of the Preferred
Stock on a pari passu and an as-converted to Common Stock basis until the aggregate amount of all Mandatory Dividends paid to the
holders of the Preferred Stock equals the full Preferred Liquidation Amount payable on the Preferred Stock held by such holders.
(b) The
Corporation shall give each holder of record of the Preferred Stock written notice of an impending Strategic Event within ten days after
the Board of Directors of the Corporation approves such Strategic Event. Such written notice shall describe the material terms and conditions
of the impending Strategic Event and the provisions of this Section 1.3, and the Corporation shall thereafter give such holders
prompt notice of any material changes. The transaction shall in no event take place sooner than 20 days after the Corporation has given
the first notice provided for herein or sooner than ten days after the Corporation has given notice of any material changes provided for
herein; provided, however, that such periods may be shortened upon the written consent of the holders of the Preferred Stock that are
entitled to such notice rights or similar notice rights and that represent at least 60% of the then outstanding shares of the Preferred
Stock, voting together as a single class on an as-converted to Common Stock basis.
(c) After
such time as the holders of the Preferred Stock receive their full Preferred Liquidation Amount for their respective shares of the Preferred
Stock, less any and all Mandatory
Dividend(s) previously distributed with respect to shares of the Preferred Stock, the holders of
the Preferred Stock will not thereafter be entitled to any additional Mandatory Dividends; provided that the holders of the Preferred
Stock will share in all dividends and distributions declared by the Board of Directors of the Corporation and paid by the Corporation
with the holders of the Common Stock on an as if converted to Common Stock basis.
1.4. Order
of Dividend Payment. No dividends or other distributions shall be declared and/or paid on any class or series of capital stock, other
than the Preferred Stock if any Mandatory Dividends have accrued and are unpaid or if any other dividends are declared and unpaid on the
Preferred Stock.
2. Liquidation
Preference.
2.1. Preferred
Liquidation Amount. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary,
including, without limitation, any Deemed Liquidation Event (as defined below), each holder of shares of the Preferred Stock then outstanding
shall be entitled to receive out of the assets legally available for distribution to its stockholders, whether from capital surplus, earnings
or otherwise, on a pari passu and an as converted to Common Stock basis and prior and in preference to any distribution to the
holders of any other series or class of the capital stock of the Corporation that is junior to the Preferred Stock, including, without
limitation, the Common Stock, by reason of their ownership thereof, an amount per share of Preferred Stock then held by such holder equal
to the Preferred Liquidation Amount, less any and all Mandatory Dividend(s) previously distributed with respect to such share of
Preferred Stock. If upon the occurrence of such event, the assets and funds of the Corporation shall be insufficient to permit the payment
to such holders of Preferred Stock of the full Preferred Liquidation Amount, less any and all Mandatory Dividend(s) previously distributed
with respect to such share of Preferred Stock, required by the preceding sentence, then the entire assets and funds of the Corporation
legally available for distribution shall be distributed ratably among the holders of the Preferred Stock in proportion to the Preferred
Liquidation Amount each such holder is otherwise entitled to receive on each such share, less any and all Mandatory Dividend(s) previously
distributed with respect to each such share. “Preferred Liquidation Amount” means, with respect to a share of Preferred
Stock, the applicable Original Issue Price for such share of Preferred Stock plus all Accruing Dividends on such share of Preferred Stock
(plus any other dividends or distributions declared but not paid on such share of Preferred Stock).
2.2. Distribution
of Remaining Assets. After payment has been made to the holders of the Preferred Stock of their full Preferred Liquidation Amount
required by Section 2.1, less any and all Mandatory Dividend(s) previously distributed with respect to each such share,
the remaining assets or surplus funds of the Corporation available for distribution to stockholders shall be distributed among the holders
of the Common Stock and the holders of the Preferred Stock pro rata based on the number of shares of Common Stock held by each (assuming
conversion of all shares of the Preferred Stock into Common Stock).
2.3. Deemed
Liquidation Events. At the option of the holders of at least 60% of the then outstanding shares of the Preferred Stock, voting together
as a single class on an as-converted to Common Stock basis, the occurrence of each of the following events shall be deemed to be a liquidation,
dissolution or winding up within the meaning of this Section 2 (each, a “Deemed Liquidation Event”):
(a) either
a transaction or series of related transactions in which any individual, corporation, partnership, trust, limited liability company, association
or other entity (each, a “Person”), or group of related Persons, acquires from the stockholders of the Corporation,
shares representing at least a majority of the outstanding voting power of the Corporation;
(b) a
sale and/or issuance (or series of sales and/or issuances) by the Corporation of securities of the Corporation representing, after the
issuance of such securities, more than fifty percent (50%) of all voting securities of the Corporation to persons other than stockholders
of the Corporation as of immediately prior to such sale(s) and/or issuance(s);
(c) a
sale, conveyance or disposition (in one or a series of related transactions) by the Corporation or any subsidiary of the Corporation of
all or substantially all of the assets of the Corporation and its subsidiaries taken as a whole;
(d) a
grant of an exclusive license or other transfer (in one or a series of related transactions) by the Corporation and/or any subsidiary
of the Corporation of a material amount of the technology or intellectual property of the Corporation and its subsidiaries taken as a
whole; or
(e) a
consolidation or merger of the Corporation with or into any other entity or entities or a reorganization of the Corporation or similar
transactions, provided, however, that a consolidation, merger, reorganization or similar transaction involving the Corporation shall not
constitute a Deemed Liquidation Event if following completion of the transaction, the holders of shares of the Corporation immediately
prior to the transaction own shares that represent a majority of the voting power of the surviving corporation.
2.4. Amount
Paid Deemed Paid or Distributed. Whenever the distribution provided for in Subsection 1.3 or in this Section 2
shall be payable in any assets other than cash, the value of the assets to be distributed shall be the fair market value thereof, determined
as follows:
(a) Freely
traded securities:
(i) If
traded on a securities exchange, the value shall be based on the formula specified in the definitive agreements for the Deemed
Liquidation Event(s) or if no such formula exists, then the value of such securities shall be deemed to be the average of the
closing prices of the securities on such exchange or system over the 30-day period ending three days prior to the closing;
(ii) If
actively traded over-the-counter, the value shall be based on the formula specified in the definitive agreements for the Deemed
Liquidation Event(s) or if no such formula exists, then the value of such securities shall be deemed to be the average of the
closing bid or sale prices (whichever is applicable) over the 30-day period ending three days prior to the closing; and
(iii) If
there is no active public market, the value shall be the fair market value thereof, as so determined in good faith by the Board of Directors
of the Corporation (including each of the Preferred Directors).
(b) The
method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions
arising solely by virtue of a stockholder’s status as an affiliate or former affiliate) shall be to make an appropriate
discount from the market value determined as above in Subsection 2.4(a) to reflect the approximate fair market value
thereof.
(c) In
the event the requirements of this Section 2 are not complied with, the Corporation shall forthwith either:
(i) cause
such closing to be postponed until such time as the requirements of this Section 2 have been complied with; or
(ii) cancel
such transaction, in which event the rights, preferences and privileges of the holders of the Preferred Stock shall revert to and be
the same as such rights, preferences and privileges existing immediately prior to the date of the first notice referred to
in Subsection 2.4(d).
(d) The
Corporation shall give each holder of record of the Preferred Stock written notice of such impending transaction within ten days
after the Board of Directors of the Corporation approves such transaction or within ten days after the commencement of any
involuntary proceeding, whichever is earlier. Such written notice shall describe the material terms and conditions of the impending
transaction and the provisions of this Section 2, and the Corporation shall thereafter give such holders prompt notice
of any material changes. The transaction shall in no event take place sooner than 20 days after the Corporation has given the first
notice provided for herein or sooner than ten days after the Corporation has given notice of any material changes provided for
herein; provided, however, that such periods may be shortened upon the written consent of the holders of the Preferred Stock that
are entitled to such notice rights or similar notice rights and that represent at least 60% of the then outstanding shares of the
Preferred Stock, voting together as a single class on an as-converted to Common Stock basis.
3. Voting.
3.1. General.
On any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of
the Corporation (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of the Preferred Stock shall
be entitled
to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of the Preferred Stock held by such
holder are convertible as of the record date for determining stockholders entitled to vote on such matter. Except as provided by law or
by the other provisions of this Second Amended and Restated Certificate of Incorporation, as amended, the holders of the Preferred Stock
shall vote together with the holders of Common Stock as a single class on an as-converted to Common Stock basis.
3.2. Election
of Directors. For as long as there are any shares of the Preferred Stock outstanding, the holders of record of a majority of the then
outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, shall be entitled
to elect three directors of the Corporation (the “Preferred Directors”). The holders of record of a majority of the
then outstanding shares of Common Stock, voting together as a single class, shall be entitled to elect one director of the Corporation.
If the holders of shares of the Preferred Stock or Common Stock, as the case may be, fail to elect a sufficient number of directors to
fill all directorships for which they are entitled to elect directors pursuant to the first two sentences of this Subsection 3.2,
then any directorship not so filled shall remain vacant until such time as the holders of the Preferred Stock or Common Stock, as the
case may be, elect an individual to fill such directorship by vote or written consent in lieu of a meeting; and no such directorship may
be filled by stockholders of the Corporation other than by the stockholders of the Corporation that are entitled to elect an individual
to fill such directorship. The holders of a majority of the then outstanding shares of Common Stock and/or the Preferred Stock, voting
together as a single class on an as-converted to Common Stock basis, shall be entitled to elect all remaining members of the Board of
Directors of the Corporation. Any director elected as provided in this Subsection 3.2 may be removed without cause, and any vacancy
caused by the resignation, death or removal of such director may be filled, by, and only by, the affirmative vote of the holders of the
shares of the class or series of capital stock entitled to elect such director or directors, given either at a special meeting of such
stockholders duly called for that purpose or pursuant to a written consent of stockholders. At any meeting held for the purpose of electing
a director,
the presence in person or by proxy of the holders of a majority of the then outstanding shares of the class or series entitled
to elect such director shall constitute a quorum for the purpose of electing such director.
3.3. Preferred
Stock Protective Provisions. At any time when shares of the Preferred Stock are outstanding, the Corporation shall not, either directly
or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required
by law or this Second Amended and Restated Certificate of Incorporation, as amended) the written consent or affirmative vote of the holders
of at least 60% of the then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted to Common
Stock basis, pursuant to consent given in writing or by vote at a meeting:
(a) liquidate,
dissolve or wind-up the business and affairs of the Corporation, effect any Deemed Liquidation Event or any recapitalization or reorganization
of the Corporation or other transaction in which control of the Corporation is transferred, or sell, transfer, license or encumber the
Corporation’s technology or intellectual property, or consent to any of the foregoing, other than licenses of the Corporation’s
technology or intellectual property in the ordinary course of business;
(b) amend,
alter or repeal any provision of this Second Amended and Restated Certificate of Incorporation of the Corporation, as amended, including,
without limitation, in a manner that affects the powers, preferences or rights of the Preferred Stock;
(c) amend,
alter or repeal any provision of the By-Laws of the Corporation, including, without limitation, in a manner that affects the powers, preferences
or rights of the Preferred Stock;
(d) increase
or decrease the authorized number of shares of the Preferred Stock or Common Stock;
(e) reclassify,
alter or amend any existing security of the Corporation in respect of the distribution of assets on the liquidation, dissolution or winding
up of the Corporation or the payment of dividends, if such reclassification, alteration or amendment would render such other security
senior to or pari passu with the Preferred Stock in respect of any such right, preference or privilege (to the extent such rights
preferences or privileges are not then currently in effect);
(f) purchase
or redeem (or permit any subsidiary to purchase or redeem) or pay or declare any dividend or make any distribution on, any shares of capital
stock of the Corporation other than repurchases of stock pursuant to stock restriction agreements or vesting agreements approved by the
Board of Directors of the Corporation (including each of the Preferred Directors) that grant to the Corporation a right of repurchase
upon termination of the service or employment of a consultant, director or employee;
(g) borrow
or guaranty or otherwise authorize any amount of indebtedness, other than (i) inventory financing in the ordinary course of business;
and (ii) any indebtedness in an amount of up to $250,000 in the aggregate that is approved by the Board of Directors of the Corporation,
including each of the Preferred Directors;
(h) increase
or decrease the authorized number of directors of the Board of Directors of the Corporation from nine members;
(i) effect
a change in the nature of the Corporation’s business from the discovery and development of small molecule therapeutics targeting
the toxic proteins that cause the cognitive decline associated with Alzheimer’s disease and other neurodegenerative diseases;
(j) enter
into any transaction with any person or entity, including, without limitation, any of its founders, officers, directors or employees other
than in the ordinary course of business on an arm’s length basis (as determined in good faith by the Board of Directors of the Corporation
(including each of the Preferred Directors));
(k) increase
the number of shares of Common Stock reserved for issuance under the Corporation’s Amended and Restated 2017 Equity Incentive Plan,
as amended from time to time, or any other equity-based incentive or compensation plan;
(l) make,
or permit any subsidiary to make, any loan or advance to any person or entity, including, without limitation, any founder, officer, employee
or director of the Corporation or any subsidiary, except (i) advances in the ordinary course of business or (ii) advances up
to $50,000 in the aggregate under the terms of an employment or service arrangement approved by the Board of Directors of the Corporation,
including each of the Preferred Directors;
(m) hire,
terminate, or change the compensation in excess of $175,000 of any of its officers, directors or employees, unless such hiring, termination
or compensation is approved by the Board of Directors of the Corporation, including each of the Preferred Directors;
(n) own
any stock or other securities of any other corporation, partnership, or other entity, unless approved by the Board of Directors of the
Corporation, including each of the Preferred Directors;
(o) guarantee,
or permit any subsidiary to guarantee, any indebtedness except for (i) trade accounts of the Corporation or any subsidiary arising
in the ordinary course of business, or (ii) any guarantee approved by the Board of Directors of the Corporation, including each of
the Preferred Directors; or
(p) make
any investment other than investments in prime commercial paper, money market funds, certificates of deposit in any United States bank
having a net worth in excess of $100,000,000 or obligations issued or guaranteed by the United States of America, in each case having
a maturity not in excess of one year, unless approved by the Board of Directors of the Corporation, including each of the Preferred Directors.
4. Optional
Conversion.
The holders of the Preferred
Stock shall have conversion rights as follows (the “Conversion Rights”):
4.1. Right
to Convert.
4.1.1. Conversion
Ratio. Each share of the Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time,
and without the payment of additional consideration by the holder thereof, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing the Original Issue Price applicable to such share of Preferred Stock by the Conversion Price
(as defined below) applicable to such share of Preferred Stock in effect at the time of conversion. The “Conversion Price”
shall initially be equal to $0.69 for the Series A Preferred Stock and
Series A-1 Preferred Stock, $0.8415 for the Series A-2
Preferred Stock, $0.923 for the Series B Preferred Stock, and $1.385 for the Series B-1 Preferred Stock. Such initial Conversion
Price, and the rate at which shares of the Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment
as provided below.
4.1.2. Termination
of Conversion Rights. The Conversion Rights shall not terminate in connection with a Deemed Liquidation Event.
4.2. Fractional
Shares. No fractional shares of Common Stock shall be issued upon conversion of the Preferred Stock. In lieu of any fractional shares
to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the fair market value
of a share of Common Stock as determined in good faith by the Board of Directors of the Corporation (including each of the Preferred Directors).
Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares
of the Preferred Stock the holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable
upon such conversion.
4.3. Mechanics
of Conversion.
4.3.1. Notice
of Conversion. In order for a holder of the Preferred Stock to voluntarily convert shares of the Preferred Stock into shares of Common
Stock, such holder shall surrender the certificate or certificates for such shares of the Preferred Stock (or, if such registered holder
alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to
the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss,
theft or destruction of such certificate), at the office of the transfer agent for the Preferred Stock (or at the principal office of
the Corporation if the Corporation serves as its own transfer agent), together with written notice that such holder elects to convert
all or any number of the shares of the Preferred Stock represented by such certificate or certificates and, if applicable, any event on
which such conversion is contingent. Such notice shall state such holder’s name or the names of the nominees in which such holder
wishes the certificate or certificates for shares of Common Stock to be issued. If required by the Corporation, certificates surrendered
for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation,
duly executed by the registered holder or his, her or its attorney duly authorized in writing. The close of business on the date of receipt
by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of such certificates (or lost certificate
affidavit and agreement) and notice shall be the time of conversion (the “Conversion Time”), and the shares of Common
Stock issuable upon conversion of the shares represented by such certificate shall be deemed to be outstanding of record as of such date.
The Corporation shall, as soon as practicable after the Conversion Time, (a) issue and deliver to such holder of the Preferred Stock,
or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion
in accordance with the provisions hereof and a certificate for the number (if any) of the shares of the Preferred Stock represented by
the surrendered certificate that were not converted into Common Stock, and (b) pay in cash such amount as provided in Subsection
4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion.
4.3.2. Reservation
of Shares. The Corporation shall at all times when the Preferred Stock shall be outstanding, reserve and keep available out of its
authorized but unissued capital stock, for the purpose of effecting the conversion of the Preferred Stock, such number of its duly authorized
shares of Common Stock as shall from time to time be sufficient to effect the conversion of all the Preferred Stock then outstanding;
and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all
of the then outstanding shares of the Preferred Stock, the Corporation shall take such corporate action as may be necessary to increase
its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without
limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to this Second Amended and
Restated Certificate of Incorporation, as amended. Before taking any action that would cause an adjustment reducing the Conversion Price
of any series of Preferred Stock below the then par value of the shares of Common Stock issuable upon conversion of the Preferred Stock,
the Corporation will take any corporate action that may, in the opinion of its counsel, be necessary in order that the Corporation may
validly and legally issue fully paid and nonassessable shares of Common Stock at such adjusted Conversion Price.
4.3.3. Effect
of Conversion. All shares of the Preferred Stock that shall have been surrendered for conversion as herein provided shall no longer
be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the Conversion Time, except
with respect to the right of the holders thereof to receive shares of Common Stock in exchange therefor and to receive payment in lieu
of any fraction of a share otherwise issuable upon such conversion as provided in Subsection 4.2. Any shares of the Preferred Stock
so converted shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take
such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of the
Preferred Stock accordingly.
4.3.4. No
Further Adjustment. Upon any such conversion, no adjustment to the Conversion Price shall be made for any declared but unpaid dividends
on the Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion.
4.3.5. Taxes.
The Corporation shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of
shares of Common Stock upon conversion of shares of the Preferred Stock pursuant to this Section 4. The Corporation shall
not, however, be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of shares
of Common Stock in a name other than that in which the shares of the Preferred Stock so converted were registered, and no such issuance
or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Corporation the amount of any
such tax or has established, to the satisfaction of the Corporation, that such tax has been paid.
4.4. Adjustments
to Conversion Price for Diluting Issues.
4.4.1. Special
Definitions. For purposes of this Article Fourth, the following definitions shall apply:
(a) “Option”
shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.
(b) “Original
Issue Date” shall mean, with respect to the Series A Preferred Stock, the Series A-1 Preferred Stock, the Series A-2
Preferred Stock, the Series B Preferred Stock, and the Series B-1 Preferred Stock, the date on which the first share of such
series of Preferred Stock, respectively, was issued.
(c) “Convertible
Securities” shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into or
exchangeable for Common Stock, but excluding Options.
(d) “Additional
Shares of Common Stock” shall mean, with respect to the determination of adjustments to the Conversion Price for each series
of Preferred Stock, all shares of
Common Stock issued (or,
pursuant to Subsection 4.4.3, deemed to be issued) by the Corporation on or after the Original Issue Date of such Series of
Preferred Stock, other than (1) the following shares of Common Stock and (2) shares of Common Stock deemed issued pursuant
to the following Options and Convertible Securities (clauses (1) and (2), collectively, “Exempted Securities”):
(i) shares
of Common Stock, Options or Convertible Securities issued upon the conversion of the Preferred Stock or by reason of a dividend, stock
split, split-up or other distribution on shares of Common Stock that is covered by Subsections 4.5, 4.6 or 4.7;
(ii) shares
of Common Stock or Options issued to employees or directors of, or consultants or advisors to, the Corporation or any of its subsidiaries
pursuant to a plan, agreement or an arrangement approved by the Board of Directors of the Corporation, including each of the Preferred
Directors;
(iii) shares
of Common Stock or Convertible Securities actually issued upon the exercise of Options, or shares of Common Stock actually issued upon
the conversion or exchange of Convertible Securities, in each case provided that such issuance is pursuant to the terms of such Option
or Convertible Security;
(iv) shares
of Common Stock, Options or Convertible Securities issued to banks, equipment lessors or other financial institutions, or to real property
lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction approved by the Board of Directors of the
Corporation, including each of the Preferred Directors, that do not exceed an aggregate of 1,000,000 shares of Common Stock;
(v) shares
of Common Stock, Options or Convertible Securities issued to suppliers or third party service providers in connection with the provision
of goods or services pursuant to transactions approved by the Board of Directors of the Corporation, including each of the Preferred Directors;
(vi) shares
of Common Stock, Options or Convertible Securities issued pursuant to the acquisition of another corporation (or the assets of another
corporation) by the Corporation whether by merger, reorganization or otherwise, provided, that such issuances are approved by the Board
of Directors of the Corporation, including each of the Preferred Directors;
(vii) shares
of Common Stock, Options or Convertible Securities issued in connection with sponsored research, collaboration, technology license, development,
marketing or other similar agreements or strategic partnerships approved by the Board of Directors of the Corporation, including each
of the Preferred Directors;
(viii) shares
of Common Stock issued or issuable pursuant to currently outstanding Options granted under the Corporation’s Amended and Restated
2017 Equity Incentive Plan, as amended from time to time, with such amendment as approved by the Board of Directors of the Corporation,
including each of the Preferred Directors;
(ix) shares
of Common Stock issued or issuable upon the closing of a public offering of the Corporation’s securities pursuant to the Securities
Act of 1933, as amended (the “Securities Act”), in which all shares of the Preferred Stock are automatically converted
to Common Stock pursuant to Subsection 5.1(a);
(x) shares
of Common Stock issued or issuable upon conversion of
any shares of the Series B Preferred Stock issued under that certain
Series B Stock Purchase Agreement dated as of March 20, 2014, as amended, and under that certain Series B Preferred
Stock Purchase Agreement dated as of November 16, 2016, as it may be amended, among the Corporation and the other parties
listed therein;
(xi) shares
of Common Stock issued or issuable upon exercise of one or more Warrant(s) issued by the Corporation to the Alzheimer Drug Development
Foundation, Inc. under that certain Agreement to Accept Conditions for Biotechnology Grant Funding dated as of July 6, 2010;
(xii) shares
of Common Stock issued upon exercise of Common Stock Purchase Warrants issued by the Corporation under that certain Note and Warrant Purchase
Agreement, among the Corporation and the purchasers named therein, dated as of March 11, 2016, as amended;
(xiii) shares
of Common Stock issued or issuable upon the conversion, exercise or exchange of all other Options and Convertible Securities outstanding
as of November 16, 2016; and
(xiv) shares
of Series B-1 Preferred Stock issued or issuable upon conversion of one or more Convertible Promissory Notes (and shares of Common
Stock issued upon conversion of such shares of Series B-1 Preferred Stock) issued by the Corporation under (a) that certain
Note Purchase Agreement, among the Corporation and the purchasers named therein, dated as of March 8, 2018, as amended, and (b) that
certain Note Purchase Agreement, among the Corporation and the purchasers named therein, dated as of November 15, 2018, as amended.
4.4.2. No
Adjustment of Conversion Price. No adjustment in the Conversion Price applicable to a share of Preferred Stock shall be made as the
result of the issuance or deemed issuance of Additional Shares of Common Stock unless the consideration per share (determined pursuant
to Subsection 4.4.5 for an Additional Share of Common Stock issued or deemed to be issued by the Corporation) is less than the Conversion
Price for such share of Preferred Stock in effect on the date of, and immediately prior to, the issue of such Additional Shares of Common
Stock.
4.4.3. Deemed
Issue of Additional Shares of Common Stock.
(a) If
the Corporation at any time or from time to time after the Original Issue Date applicable to a series of Preferred Stock shall issue any
Options or Convertible Securities (excluding Options or Convertible Securities that are themselves Exempted Securities) or shall fix a
record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities,
then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto, assuming the satisfaction of any conditions
to exercisability, convertibility or exchangeability but without regard to any provision contained therein for a subsequent adjustment
of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion
or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of the issuance
of such Convertible Security or Option or, in case such a record date shall have been fixed, as of the close of business on such record
date.
(b) If
the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to the Conversion Price of any series
of Preferred Stock pursuant to the terms of Subsection 4.4.4. are revised as a result of an amendment to such terms or any other
adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant
to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (i) any increase or decrease
in the number of shares of Common Stock issuable upon the exercise,
conversion and/or exchange
of any such Option or Convertible Security or (ii) any increase or decrease in the consideration payable to the Corporation upon
such exercise, conversion and/or exchange, then, effective upon such increase or decrease becoming effective, the Conversion Price of
such series of Preferred Stock computed upon the original issue of such Option or Convertible Security (or upon the occurrence of a record
date with respect thereto) shall be readjusted to such Conversion Price as would have been obtained had such revised terms been in effect
upon the original date of issuance of such Option or Convertible Security. Notwithstanding the foregoing, no readjustment pursuant to
this Subsection 4.4.3(b) shall have the effect of increasing the Conversion Price of any series of Preferred Stock to an
amount that exceeds the lower of (A) such Conversion Price in effect immediately prior to the original adjustment made as a result
of the issuance of such Option or Convertible Security, or (B) such Conversion Price that would have resulted from any issuances
of Additional Shares of Common Stock (other than deemed issuances of Additional Shares of Common Stock as a result of the issuance of
such Option or Convertible Security) between the original adjustment date and such readjustment date.
(c) If
the terms of any Option or Convertible Security (excluding Options or Convertible Securities that are themselves Exempted Securities),
the issuance of which did not result in an adjustment to the Conversion Price of a series of Preferred Stock pursuant to the terms of
Subsection 4.4.4 (either because the consideration per share (determined pursuant to Subsection 4.4.5) of the Additional
Shares of Common Stock subject thereto was equal to or greater than such Conversion Price then in effect with respect to such series of
Preferred Stock, or because such Option or Convertible Security was issued before the Original Issue Date of such series of Preferred
Stock), are revised after Original Issue Date of such series of Preferred Stock as a result of an amendment to such terms or any other
adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant
to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (i) any increase in the number
of shares of Common Stock issuable upon the exercise, conversion or exchange of any such Option or Convertible Security or (ii) any
decrease in the consideration payable to the Corporation upon such exercise, conversion or exchange, then such Option or Convertible Security,
as so amended or adjusted, and the Additional Shares of Common Stock subject thereto (determined in the manner provided in Subsection
4.4.3(a)) shall be deemed to have been issued effective upon such increase or decrease becoming effective.
(d) Upon
the expiration or termination of any unexercised Option or unconverted or unexchanged Convertible Security (or portion thereof) that resulted
(either upon its original issuance or upon a revision of its terms) in an adjustment to the Conversion Price of any series of Preferred
Stock pursuant to the terms of Subsection 4.4.4, such Conversion Price shall be readjusted to the Conversion Price as would have
obtained had such Option or Convertible Security (or portion thereof) never been issued.
(e) If
the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or
the consideration payable to the Corporation upon such exercise, conversion and/or exchange, is calculable at the time such Option or
Convertible Security is issued or amended but is subject to adjustment based upon subsequent events, any adjustment to the Conversion
Price of a series of Preferred Stock provided for in this Subsection 4.4.3 shall be effected at the time of such issuance or amendment
based on such number of shares or amount of consideration without regard to any provisions for subsequent adjustments (and any subsequent
adjustments shall be treated as provided in clauses (b) and (c) of this Subsection 4.4.3). If the number of shares of
Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable
to the Corporation upon such exercise, conversion and/or exchange, cannot be calculated at all at the time such Option or Convertible
Security is issued or amended, any adjustment to the Conversion Price of a series of Preferred Stock that would result under the terms
of this Subsection 4.4.3 at the time of such issuance or amendment shall instead be effected at the time such number
of shares and/or amount of consideration is first
calculable (even if subject to subsequent adjustments), assuming for purposes of calculating such adjustment to such Conversion Price
that such issuance or amendment took place at the time such calculation can first be made.
4.4.4. Adjustment
of Conversion Price upon Issuance of Additional Shares of Common Stock. In the event the Corporation shall at any time after the Original
Issue Date applicable to a series of Preferred Stock issue Additional Shares of Common Stock (including Additional Shares of Common Stock
deemed to be issued pursuant to Subsection 4.4,3), without consideration or for a consideration per share less than Conversion
Price of such series of Preferred Stock in effect immediately prior to such issue, then the Conversion Price applicable to each share
of such series of Preferred Stock shall be reduced, concurrently with such issue, to a price per share (calculated to the nearest one-hundredth
of a cent) in accordance with the following formula:
CP2
= CP1* (A+ B) ÷ (A+
C).
For purposes of the foregoing formula, the following
definitions shall apply:
(i) “CP2”
shall mean, with respect to the determination of adjustments to the Conversion Price of any series of Preferred Stock, the Conversion
Price of such series of Preferred Stock in effect immediately after such issue of Additional Shares of Common Stock;
(ii) “CP1”
shall mean, with respect to the determination of adjustments to the Conversion Price of any series of Preferred Stock, the Conversion
Price of such series of Preferred Stock in effect immediately prior to such issue of Additional Shares of Common Stock;
(iii) “A”
shall mean the number of shares of Common Stock outstanding immediately prior to such issue of Additional Shares of Common Stock,
treating for this purpose as outstanding shares of Common Stock underlying only those Options or Convertible Securities that (x) are
outstanding immediately prior to such issue and (y) are vested or otherwise exercisable;
(iv) “B”
shall mean the number of shares of Common Stock that would have been issued if such Additional
Shares of Common Stock had been issued at a price per share equal to CP1 (determined by dividing the aggregate consideration
received by the Corporation in respect of such issue by CP1); and
(v) “C”
shall mean the number of such Additional Shares of Common Stock issued in such transaction.
4.4.5. Determination
of Consideration. For purposes of this Subsection 4.4, the consideration received by the Corporation for the issue of any Additional
Shares of Common Stock shall be computed as follows:
(a) For
cash and property, such consideration shall:
(i) insofar
as it consists of cash, be computed at the aggregate amount of cash received by the Corporation, excluding amounts paid or payable for
accrued interest;
(ii) insofar
as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in
good faith by the Board of Directors of the Corporation (including each of the Preferred Directors); and
(iii) in
the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for
consideration that covers both, be the proportion of such consideration so received, computed as provided in clauses (i) and (ii) above,
as determined in good faith by the Board of Directors of the Corporation (including each of the Preferred Directors).
(b) For
Options and Convertible Securities, the consideration per share received by the Corporation for Additional Shares of Common Stock deemed
to have been issued pursuant to Subsection 4.4.3, relating to Options and Convertible Securities, shall be determined by dividing
(i) the
total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities,
plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such consideration.) payable to the Corporation upon the exercise of such
Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise
of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by
(ii) the
maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible
Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion
or exchange of such Convertible Securities.
4.4.6. Multiple
Closing Dates. In the event the Corporation shall issue on more than one date Additional Shares of Common Stock that are a part of
one transaction or a series of related transactions and that would result in an adjustment to the Conversion Price of any series of Preferred
Stock pursuant to the terms of Subsection 4.4.4, and such issuance dates occur within a period of no more than 90 days from the
first such issuance to the final such issuance, then, upon the final such issuance, the Conversion Price of such series of Preferred Stock
shall be readjusted to give effect to all such issuances as if they occurred on the date of the first such issuance (and without giving
effect to any additional adjustments as a result of any such subsequent issuances within such period).
4.5. Adjustment
for Stock Splits and Combinations. If the Corporation shall at any time or from time to time on or after the Original Issue Date
of any series of Preferred Stock effect a subdivision of the outstanding Common Stock, the Conversion Price of such series of Preferred
Stock in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Common Stock issuable
on conversion of each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Common
Stock outstanding. If the Corporation shall at any time or from time to time after the Original Issue Date of any series of Preferred
Stock combine the outstanding shares of Common Stock, the Conversion Price of such series of Preferred Stock in effect immediately before
the combination shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share
of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding. Any adjustment
under this Subsection 4.5 shall become effective at the close of business on the date the subdivision or combination becomes effective.
4.6. Adjustments
for Other Dividends and Distributions. In the event the Corporation at any time or from time to time on or after the Original Issue
Date of any series of Preferred Stock shall make or issue, or fix a record date for the determination of holders of Common Stock entitled
to receive, a dividend or other distribution payable in securities of the Corporation or in cash or other
property and the provisions
of Section 1 do not apply to such dividend or distribution, then and in each such event the holders of such series of Preferred
Stock shall receive, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities,
cash or other property in an amount equal to the amount of such securities, cash or other property as they would have received if all
outstanding shares of such series of Preferred Stock had been converted into Common Stock on the date of such event.
4.7. Adjustment
for Merger or Reorganization, etc. If there shall occur any reorganization, recapitalization, reclassification,
consolidation or merger involving the Corporation in which the Common Stock (but not the Preferred Stock) is converted into or
exchanged for securities, cash or other property (other than a transaction covered by Subsections 4.4, 4.5 or 4.6),
then, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of the Preferred
Stock shall thereafter be convertible in lieu of the Common Stock into which it was convertible prior to such event into the kind
and amount of securities, cash or other property that a holder of the number of shares of Common Stock of the Corporation issuable
upon conversion of one share of the Preferred Stock immediately prior to such reorganization, recapitalization, reclassification,
consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment
(as determined in good faith by the Board of Directors of the Corporation (including each of the Preferred Directors)) shall be made
in the application of the provisions in this Section 4 with respect to the rights and interests thereafter of the
holders of the Preferred Stock, to the end that the provisions set forth in this Section 4 (including provisions with
respect to changes in and other adjustments of the Conversion Price of each series of Preferred Stock) shall thereafter be
applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the
conversion of the Preferred Stock.
4.8. Certificate
as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price of any series of Preferred Stock
pursuant to this Section 4, the Corporation at its expense shall, as promptly as reasonably practicable but in any event not
later than 30 days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder
of the Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash
or other property into which the Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment
is based. The Corporation shall, as promptly as reasonably practicable after the written request at any time of any holder of the Preferred
Stock (but in any event not later than 15 days thereafter), furnish or cause to be furnished to such holder a certificate setting forth
(a) the Conversion Price of such series of Preferred Stock then in effect, and (b) the number of shares of Common Stock and
the amount, if any, of other securities, cash or property that then would be received upon the conversion of the Preferred Stock.
4.9. Notice
of Record Date. In the event:
(a) the
Corporation shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon conversion
of the Preferred Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any
right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security;
or
(b) of
any capital reorganization of the Corporation, any reclassification of the Common Stock of the Corporation, or any Deemed Liquidation
Event; or
(c) of
the voluntary or involuntary dissolution, liquidation or winding-up of the Corporation,
then, and in each such case, the Corporation
will send or cause to be sent to the holders of the Preferred Stock a notice specifying, as the case may be, (i) the record
date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or
(ii) the effective date on. which such reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation or winding-up is proposed to take place, and the time, if any is to be fixed, as of which the holders of record of
Common Stock (or such other capital stock or securities at the time issuable upon the conversion of the Preferred Stock) shall be
entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up, and
the amount per share and character of such exchange applicable to the Preferred Stock and the Common Stock. Such notice shall be
sent at least ten days prior to the record date or effective date for the event specified in such notice.
5. Mandatory
Conversion.
5.1. Trigger
Events. Upon the initial closing of the Corporation’s first firmly underwritten public offering of its Common Stock pursuant
to a registration statement filed with the Securities and Exchange Commission (“SEC”), and declared effective under
the Securities Act, in which the Corporation’s Common Stock is listed on a national securities exchange (other than a registration
statement relating either to the sale of securities to employees of the Corporation pursuant to its stock option, stock purchase or similar
plan or an SEC Rule 145 transaction) covering the offer and sale of Common Stock for the account of the Corporation to the public
at a price per share of not less than three times the highest then applicable Conversion Price resulting in offering proceeds to the Corporation
of a least $30,000,000 net of underwriting discounts and commissions (the time of such closing is referred to herein as the “Mandatory
Conversion Time”), (i) all outstanding shares of the Preferred Stock shall automatically be converted into shares of Common
Stock, at the then effective Conversion Price and (ii) such shares may not be reissued by the Corporation.
5.2. Procedural
Requirements. All holders of record of shares of the Preferred Stock shall be sent written notice of the Mandatory Conversion
Time and the place designated for mandatory conversion of all such shares of the Preferred Stock pursuant to this Section 5.
Such notice need not be sent in advance of the occurrence of the Mandatory Conversion Time. Upon receipt of such notice, each holder
of shares of the Preferred Stock shall surrender his, her or its certificate or certificates for all such shares (or, if such holder
alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable
to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged
loss, theft or destruction of such certificate) to the Corporation at the place designated in such notice. If so required by the
Corporation, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of
transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his, her or its attorney duly
authorized in writing. All rights with respect to the Preferred Stock converted pursuant to Subsection 5.1, including the
rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate at the Mandatory Conversion
Time (notwithstanding the failure of the holder or holders thereof to surrender the certificates at or prior to such time), except
only the rights of the holders thereof, upon surrender of their certificate or certificates (or lost certificate affidavit and
agreement) therefor, to receive the items provided for in the next sentence of this Subsection 5.2. As soon as practicable
after the Mandatory Conversion Time and the surrender of the certificate or certificates (or lost certificate affidavit and
agreement) for the Preferred Stock, the Corporation shall issue and deliver to such holder, or to his, her or its nominees, a
certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the
provisions hereof, together with cash as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock
otherwise issuable upon such conversion and the payment of any declared but unpaid dividends on the shares of the Preferred Stock
converted. Such converted Preferred Stock shall be retired and cancelled and may not be reissued as shares of such series,
and the Corporation may thereafter take such appropriate action
(without the need for stockholder action) as may be necessary to reduce the authorized number of shares of the Preferred Stock accordingly.
6. Waiver.
Any of the rights, powers, preferences and other terms of the Preferred Stock set forth herein may be waived on behalf of all holders
of the Preferred Stock, the Series B-1 Preferred Stock, the Series B Preferred Stock, the Series A-2 Preferred Stock, the
Series A-1 Preferred Stock or the Series A Preferred Stock, as the case may be, by the requisite percentage (as set forth in
the applicable provision(s) of this Second Amended and Restated Certificate of Incorporation, as amended) of such stockholders of
the Corporation that are entitled to a vote upon or consent with respect to any such right, power, preference or other term.
7. Notices.
Any notice required or permitted by the provisions of this Article Fourth to be given to a holder of shares of the Preferred
Stock shall be mailed, postage prepaid, to the post office address last shown on the records of the Corporation, or given by electronic
communication in compliance with the provisions of the General Corporation Law, and shall be deemed sent upon such mailing or electronic
transmission.
8. No
Reissuance of Preferred Stock. No share or shares of any series of the Preferred Stock acquired by the Corporation by reason of purchase,
conversion or otherwise shall be reissued, and all such shares shall be canceled, retired and eliminated from the shares which the Corporation
shall be authorized to issue. This Second Amended and Restated Certificate of Incorporation, as amended, shall be appropriately amended
to effect the corresponding reduction in the Corporation’s capital stock.
B. COMMON
STOCK
1. General.
The voting, dividend and liquidation rights of the holders of Common Stock are subject to and qualified by the rights, powers and
preferences of the holders of the Preferred Stock set forth herein.
2. Voting.
The holders of Common Stock are entitled to one vote for each share of Common Stock held at all meetings of stockholders (and written
actions in lieu of meetings). The number of authorized shares of Common Stock may be increased or decreased (but not below the number
of shares thereof then outstanding) by (in addition to any vote of the holders of the Preferred Stock that may be required by the terms
of this Second Amended and Restated Certificate of Incorporation, as amended) the affirmative vote of the holders of shares of capital
stock of the Corporation (voting as a single class) representing a majority of the votes represented by all outstanding shares of capital
stock of the Corporation entitled to vote (the Preferred Stock voting on an as if converted to Common Stock basis) and without a separate
class vote by the holders of the Common Stock, irrespective of the provisions of Section 242(b)(2) of the General Corporation
Law.
Exhibit 3.7
BY-LAWS
OF
COGNITION THERAPEUTICS, INC.
Article 1
OFFICES
Section 1.1. The
Corporation shall have and maintain in the State of Delaware a registered office which may, but need not be, the same as its place
of business.
Section 1.2. The
Corporation may also have offices at such other places as the Board of Directors may from time to time determine or the business of
the Corporation may require.
Article 2
STOCKHOLDERS
Section 2.1. All
meetings of the stockholders shall be held at such place, either within or without the State of Delaware, and at such date and time
as may be designated by the Board of Directors and as shall be specified in the notice of the meeting or in a duly executed
waiver of notice thereof.
Section 2.2. An
annual meeting of the stockholders, for the election of directors and for the transaction of such other business as may properly be
brought before the meeting, shall be held at such place, date and time as the Board of Directors may designate and as shall
be specified in the notice of the meeting or in a duly executed waiver of notice thereof. In the absence of such a
designation by the Board of Directors, the Annual Meeting of Stockholders shall be held during the month of May each year
on a date to be determined from year to year by the Board of Directors.
Section 2.3. Special
meetings of the stockholders, for any purpose or purposes, may be called by the Board of Directors, the Chief Executive Officer or
the President and shall be called by the President or the Secretary at the request in writing of: (i) any director of the
Corporation then in office or (ii) stockholders entitled to cast at least a majority of the votes that all stockholders
are entitled to cast at the particular meeting. Such request shall state the purpose or purposes of the proposed meeting.
Business transacted at all special meetings shall be confined to the purposes stated in the notice thereof.
Section 2.4. Written
notice of any annual or special meeting of stockholders shall be mailed to each stockholder entitled to vote thereat at such
stockholder’s address as it appears on the records of the Corporation, not fewer than ten nor more than sixty days before
the date of such meeting. Such notice shall be deemed to be given when deposited in the United States mail, postage prepaid,
directed to each stockholder at such stockholder’s address as it last appears on the records of the Corporation. Such
notice shall state the place, date and hour of the meeting, and, in the case of a special meeting, shall state the purpose or
purposes for which the meeting is called.
Section 2.5. At
any meeting of the stockholders, the holders of a majority of all of the issued and outstanding shares of stock entitled to vote at the
meeting, present in person or by proxy, shall constitute a quorum for all purposes, except to the extent that the presence of a
larger number of stockholders may be required
by law, by the Certificate of Incorporation of the Corporation or by these By-laws. If a quorum shall fail to be present or represented
at any meeting, the chairman of the meeting or the holders of a majority of the shares of the stock entitled to vote who are present,
in person or by proxy, may adjourn the meeting to another place, date or time. When a meeting is so adjourned, written notice need not
be given of the adjourned meeting if the place, date and time thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than thirty days after the date for which the meeting was originally
noticed, or if a new record date is fixed for the adjourned meeting, written notice of the place, date, and time of the adjourned meeting
shall be given in conformity herewith. At any adjourned meeting, any business may be transacted that might have been transacted at the
original meeting.
Section 2.6. At
any meeting of the stockholders, every stockholder entitled to vote may vote in person or by proxy authorized by an instrument in
writing or any complete and reliable copy, facsimile telecommunication or other reproduction of the writing executed by such
stockholder or by an authorized officer, director, employee or agent of such stockholder, to the extent permitted by law, and
submitted to the Secretary at or before such meeting, but no proxy shall be voted or acted upon after three years from its date,
unless the proxy provides for a longer period. Except as otherwise provided herein, in the Certificate of Incorporation or as
required by law, each stockholder shall have one vote for each share of stock entitled to vote that is registered in his or
her name on the record date for the meeting. Neither the election of directors nor any other voting need be by written ballot,
except upon demand therefor by the Board of Directors or the officer of the Corporation presiding at the meeting of stockholders
where the vote is to be taken. When a quorum exists at any meeting, the vote of the holders of a majority of the stock
having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the
question is one for which, by express provision of law or of the Certificate of Incorporation of the Corporation or of these
By-laws, a different vote is required.
Section 2.7. At
least ten days before every meeting of stockholders, the officer who has charge of the stock ledger of the Corporation shall prepare
a complete list of the stockholders entitled to vote at such meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination
of any stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least ten days
prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced
and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder of the
Corporation who is present. The stock ledger of the Corporation shall be the only evidence as to the identities of the
stockholders entitled to examine the list of stockholders required by this Section 2.7 or to vote in person or by proxy at
any meeting of stockholders.
Section 2.8. The
Board of Directors shall appoint either one or three inspectors of election, in advance of any meeting of stockholders, to act at such
meeting of the stockholders or any adjournment thereof. Inspectors of election need not be stockholders, and no person who is a candidate
for corporate office shall act as an inspector of election. If three inspectors of
election are appointed, such inspectors
of election shall act by majority vote. Each inspector of election shall sign an oath faithfully to execute the duties of inspector with
strict impartiality and to the best of the inspector’s ability and shall do all acts as are necessary and proper to conduct the
election or vote and all such other acts as may be prescribed by law with fairness to all stockholders. Such inspectors of election shall
make a written report of any matter determined by them and shall execute a certificate as to any fact found by them.
Section 2.9. The
chairman of any meeting of the stockholders shall determine the order
of business and the procedure to be followed at such meeting, including such regulation of the
manner of voting and the conduct of discussion as the chairman shall deem to be fair and equitable.
Section 2.10. The
stockholders may participate in any meeting by means of conference telephone or similar communications equipment by means of which all
persons participating in
the meeting can hear one another, and such participation shall constitute presence in person at
such meeting.
Section 2.11. Unless
otherwise required by the Certificate of Incorporation, any action
required or permitted to be taken at any meeting of the stockholders may be taken without a
meeting, without prior notice and without a vote, if a written consent setting forth the action so
taken shall be signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Prompt notice of the taking of any
corporate action without a meeting by less than unanimous written consent shall be given in
conformity herewith to those stockholders who have not consented thereto in writing.
Article 3
BOARD OF DIRECTORS
Section 3.1. The
business and affairs of the Corporation shall be managed by or under
the direction of a Board of Directors. In addition to the powers expressly conferred upon the
Board of Directors by these By-laws, the Board of Directors may exercise all powers of the
Corporation and perform all lawful acts as are not required to be exercised or performed by the stockholders pursuant to law, the Certificate
of Incorporation of the Corporation or these By-
laws. The Board of Directors may designate a director to serve as Chairman of the Board, who
shall preside at all meetings of the Board of Directors. The Chairman of the Board shall serve for
such term and shall exercise such powers and perform such duties as shall be determined from
time to time by the Board of Directors.
Section 3.2. Directors
shall be natural persons who need not be stockholders of the Corporation. The initial number of directors shall be three. Except as
may otherwise be provided in the Certificate of Incorporation, the specific number of directors shall thereafter be designated from
time to time exclusively by the Board of Directors. Each director shall be elected for a term of one year and until his or her
successor is duly elected and qualified, subject, however, to such director’s prior death, resignation, retirement,
disqualification or removal from office. Except as otherwise provided in the Certificate of Incorporation or any agreement to which
the Company is subject or by which it is bound, whenever the authorized number of directors is increased between annual meetings of
the stockholders, a majority of the directors
then in office shall have the power to elect such
new directors, who shall serve until the next annual meeting of stockholders and until their successors are duly elected and qualified.
Any decrease in the authorized number of directors shall not become effective until the expiration of the term of the directors then in
office unless, at the time of such decrease, there shall be vacancies on the Board of Directors that are being eliminated by such decrease.
Section 3.3. Except
as otherwise provided in the Certificate of Incorporation or any agreement to which the Company is subject or by which it is bound, any
vacancy on the Board of Directors occurring by reason of death, resignation, disqualification, removal or other cause may
be filled by a majority of the directors then in office, although less than a quorum, and each
director elected to fill a vacancy shall serve for the unexpired term of his or her predecessor and
until such director’s successor is duly elected and qualified.
Section 3.4. The
organizational meeting of each newly elected Board of Directors may
be held immediately following the stockholders meeting at which such directors were duly
elected without the necessity of notice to such directors or at such time and place as may be fixed
by notice or a duly executed waiver of notice thereof.
Section 3.5. Regular
meetings of the Board of Directors shall be held without call or
notice at such time and place as shall from time to time be fixed by the Board of Directors.
Section 3.6. Special
meetings of the Board of Directors may be called by the Chief
Executive Officer, by the President or by the Secretary or upon the written request of any
director of the Corporation then in office. Notice of the place, time and date of each such special
meeting shall be given to each director by whom it is not waived by mailing written notice to
each director not less than two days before the meeting or by giving notice in person or by
telephone, telegram or facsimile transmission not less than twenty-four hours before the meeting.
Notice of special meetings of the Board of Directors need not state the purpose thereof, except as
otherwise expressly provided by law, by the Certificate of Incorporation or by these By-laws.
Any and all business may be transacted at a special meeting, unless otherwise indicated in the
notice thereof or provided by law, by the Certificate of Incorporation or by these By-laws.
Section 3.7. Members
of the Board of Directors or any committee thereof may
participate in any meeting of the Board of Directors or such committee, as the case may be, by
means of conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear one another, and such participation shall constitute
presence in person at such meeting.
Section 3.8. At
any meeting of the Board of Directors, the presence of a majority of the
total number of directors shall constitute a quorum for the transaction of business, and the vote of
a majority of the directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors, unless otherwise provided by law, by the Certificate of Incorporation of
the Corporation or by these By-laws. If a quorum shall not be present at any meeting of the
Board of Directors, a majority of the directors present may adjourn the meeting to any place, date
or time, without notice other than announcement at the meeting, until a quorum shall be present.
Section 3.9. Unless
otherwise provided by law, by the Certificate of Incorporation or
these By-laws, any action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting if all members of the
Board of Directors or such committee, as the case may be, consent thereto in writing and such
consent is filed with the minutes of proceedings of the Board of Directors or committee thereof.
Section 3.10. Directors,
in addition to expenses of attendance, shall be allowed such compensation for their services as directors, including, without limitation,
their services as
members of committees of the Board of Directors, as may be fixed from time to time by the
Board of Directors; provided, that nothing contained in these By-laws shall be construed to
preclude any director from serving the Corporation in any other capacity and receiving
compensation therefor.
Section 3.11. A
member of the Board of Directors or of any committee thereof shall, in
the performance of his or her duties, be fully protected in relying in good faith upon the books of
account or reports made to the Corporation by any of its officers, or by an independent certified
public accountant, or by an appraiser selected with reasonable care by the Board of Directors or
by any committee thereof, or in relying in good faith upon other records of the Corporation.
Article 4
COMMITTEES
Section 4.1. The
Board of Directors, by a vote of a majority of the whole Board of
Directors, may from time to time designate committees of the Board of Directors, with such
lawfully delegable powers and duties as it thereby confers, to serve at the pleasure of the Board
of Directors and shall, for those committees and any others provided for herein, appoint at least
three directors to serve as members and may designate, if it desires, one or more directors as
alternate members who may replace any absent or disqualified member at any meeting of the
committee. Any committee so designated may exercise the power and authority of the Board of
Directors to declare a dividend or to authorize the issuance of stock if the resolution that
designates the committee or a supplemental resolution of the Board of Directors shall so provide.
The Board of Directors may, from time to time, suspend, alter, continue or terminate any
committee or the powers and functions thereof.
Section 4.2. The
Board of Directors may appoint committees consisting of officers or
other persons, with chairmanships, vice chairmanships and secretaryships and such duties and
powers as the Board of Directors may from time to time designate and prescribe. The Board of
Directors may from time to time suspend, alter, continue or terminate any of such committees or
the powers and functions thereof.
Section 4.3. Any
action that may be taken by a committee at a meeting may be taken
without a meeting if all members thereof consent thereto in writing and such writing is filed with
the minutes of the proceedings of such committee.
Section 4.4. Each
committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as otherwise provided by
law, by the Certificate of Incorporation or by these By-laws. Adequate provision shall be made
for notice to all members of any committee of all meetings of that committee.
Article 5
OFFICERS
Section 5.1. The
officers of the Corporation shall consist of a Chief Executive Officer,
a President, a Secretary and a Treasurer. Officers shall be appointed from time to time by the
Board of Directors. No officer except the Chief Executive Officer need be a member of the
Board of Directors. Any number of offices may be held by the same person.
Section 5.2. The
Board of Directors may appoint one or more Vice Presidents and such
other officers, including assistant officers, and agents as it shall deem necessary, who shall hold
their offices for such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board of Directors.
Section 5.3. Each
officer shall hold office until his or her successor is duly elected and qualified or until his or her earlier death, resignation, retirement
or removal. Any officer
appointed by the Board of Directors may be removed at any time by the Board of Directors
without prejudice to his or her contract rights. If the office of any officer becomes vacant for any
reason, such vacancy shall be filled by the Board of Directors. Any officer appointed to fill such
a vacancy shall hold office until his or her successor is duly elected and qualified or until his or
her earlier death, resignation, retirement or removal.
Section 5.4. The
Board of Directors may from time to time delegate the powers or
duties of any officer to any other officers or agents, notwithstanding any provision of these By-laws.
Section 5.5. The
Chief Executive Officer shall have general management, direction and control of the business and affairs of the Corporation, subject to
the direction of the Board of
Directors. The Chief Executive Officer shall preside at all meetings of the stockholders and, if
no Chairman of the Board shall be designated, of the Board of Directors. Unless otherwise
directed by the Board of Directors from time to time, the Chief Executive Officer shall have the
power to vote and otherwise act on behalf of the Corporation, in person or by proxy, at any
meeting of stockholders of or with respect to any action of stockholders of any other corporation
in which the Corporation may hold securities and otherwise to exercise any and all rights and
powers which the Corporation may possess by reason of its ownership of securities in such other
corporation.
Section 5.6. The
President shall be the chief operating officer of the Corporation and
shall have such powers and perform such duties as may from time to time be assigned to the
President by the Chief Executive Officer or the Board of Directors. In the absence or disability
of the Chief Executive Officer, the President shall be the chief executive officer of the
Corporation, and, as such, shall have the functions, authority and duties provided for the Chief
Executive Officer.
Section 5.7. Each
Vice President shall have such powers and perform such duties as
may be delegated to such Vice President by the Board of Directors or by the Chief Executive
Officer.
Section 5.8. The
Secretary shall attend all meetings of the Board of Directors and of the stockholders and shall record all votes and the minutes of
all proceedings at such meetings in
a book to be kept for that purpose and shall perform
such other duties as the Board of Directors may from time to time prescribe. The Secretary shall perform the preceding duties for any
committee of the Board of Directors upon the request of the Board of Directors or such committee. The Secretary shall give or cause to
be given notice of all meetings of the stockholders and the Board of Directors. The Secretary shall have charge of the seal of the Corporation,
and, where required, shall have the authority to affix such seal to any instrument. In the absence or disability of the Secretary, any
Assistant Secretary shall perform the duties and exercise the powers of the Secretary.
Section 5.9. The
Treasurer shall have the custody of the Corporation’s funds and
securities and shall deposit all monies and other valuable effects in the name and to the credit of
the Corporation, in such depositories as may be designated by the Board of Directors. The
Treasurer shall make such disbursements of the Corporation’s funds as are authorized by the
Board of Directors or by the President, taking proper vouchers for such disbursements, and shall
render to the Board of Directors an account of all such transactions and of the financial condition
of the Corporation, at such times as the Board of Directors may require. The Treasurer shall also
perform such other duties as the Board of Directors may from time to time prescribe. In the
absence or disability of the Treasurer, any Assistant Treasurer shall perform the duties and
exercise the powers of the Treasurer.
Article 6
INDEMNIFICATION
Section 6.1. The
Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter
be amended, any person (an “Indemnitee”) who was or is made or is threatened to be made a party or is otherwise involved in
any action, suit or proceeding, whether civil, criminal, administrative or investigative (a
“proceeding”), by reason of the fact that such person, or a person for whom he or she is the legal representative, is or was
a director or officer of the Corporation or, while a director or officer of
the Corporation, is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or
nonprofit entity, including service with respect to employee benefit plans, against all liability and
loss suffered and expenses (including attorneys’ fees) reasonably incurred by such Indemnitee.
Notwithstanding the preceding sentence, except as otherwise provided in Section 6.3, the
Corporation shall be required to indemnify an Indemnitee in connection with a proceeding (or
part thereof) commenced by such Indemnitee only if the commencement of such proceeding (or
part thereof) by the Indemnitee was authorized by the Board of Directors.
Section 6.2. The
Corporation shall pay the expenses (including attorneys’ fees)
incurred by an Indemnitee in defending any proceeding in advance of its final disposition,
provided, however, that, to the extent required by law, such payment of expenses in advance of
the final disposition of the proceeding shall be made only upon receipt of an undertaking by the
Indemnitee to repay all amounts advanced if it should be ultimately determined that the
Indemnitee is not entitled to be indemnified under this Article 6 or otherwise.
Section 6.3. If
a claim for indemnification or payment of expenses under this Article 6 is not paid in full within sixty days after a written
claim therefor by the Indemnitee has been received by the Corporation, the Indemnitee may file suit to recover the unpaid amount of
such
claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such
action the Corporation shall have the burden of proving that the Indemnitee is not entitled to the requested indemnification or
payment of expenses under applicable law.
Section 6.4. The
rights conferred on any Indemnitee by this Article 6 shall not be
exclusive of any other rights which such Indemnitee may have or hereafter acquire under any
statute, provision of the Certificate of Incorporation, these By-laws, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 6.5. The
Corporation’s obligation, if any, to indemnify or to advance expenses
to any Indemnitee who was or is serving at its request as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, enterprise or nonprofit entity shall be
reduced by any amount such Indemnitee may collect as indemnification or advancement of
expenses from such other corporation, partnership, joint venture, trust, enterprise or nonprofit
entity.
Section 6.6. Any
repeal or modification of the foregoing provisions of this Article 6
shall not adversely affect any right or protection hereunder of any Indemnitee in respect of any
act or omission occurring prior to the time of such repeal or modification.
Section 6.7. This
Article 6 shall not limit the right of the Corporation, to the extent and
in the manner permitted by law, to indemnify and to advance expenses to persons other than
Indemnitees when and as authorized by appropriate corporate action.
Section 6.8. Any
provisions of the Certificate of Incorporation that provide more
favorable indemnification rights than those set forth in this Article 6 to the Indemnitees shall take precedence over the provisions
of this Article 6.
Article 7
STOCK
Section 7.1. The
certificates representing shares of stock of the Corporation shall be numbered and shall be entered in the books of the Corporation as
they are issued. Each
stockholder shall be entitled to a certificate exhibiting such stockholder’s name and the number
of shares held by such stockholder, which certificate shall be signed by the Chief Executive
Officer or the President or any Vice President, and by the Treasurer or the Secretary or any
Assistant Secretary. Any or all of the signatures on such certificate may be a facsimile. In case
any officer, transfer agent or registrar who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before
such certificate is issued, such certificate may be issued by the Corporation with the same effect
as if such person were such officer, transfer agent or registrar at the date of issue.
Section 7.2. Transfers
of stock shall be made only upon the transfer books of the
Corporation maintained in an office of the Corporation or by transfer agents designated to
transfer shares of the stock of the Corporation, and only by the person named in the certificate or
by such person’s attorney, lawfully constituted in writing, and upon surrender of the certificate
therefor.
Section 7.3. In
order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express
consent to corporate action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall not be more than
sixty nor less than ten days before the date of such meeting nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that
the Board of Directors may fix a new record date for the adjourned meeting.
Section 7.4. The
Corporation shall be entitled to treat the holder of record of any share
or shares of stock as the holder in fact thereof and accordingly shall not be bound to recognize
any equitable or other claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, save as expressly provided by the
laws of the State of Delaware.
Section 7.5. The
Board of Directors may authorize the issuance of a new certificate representing shares of stock in place of any certificate previously
issued by the Corporation and
alleged to have been lost, stolen or destroyed, pursuant to such regulations as the Board of
Directors may establish concerning proof or advertisement of such alleged loss, theft or
destruction and concerning the giving of a satisfactory bond or bonds sufficient to indemnify the
Corporation against any claim that may be made against it on account of the alleged loss, theft or
destruction of any such certificate.
Section 7.6. The
issue, transfer, conversion and registration of certificates of stock of
the Corporation shall be governed by such other regulations as the Board of Directors may from
time to time establish.
Article 8
NOTICES
Section 8.1. Whenever
notice is required to be given to any director, committee
member, officer, stockholder, employee or agent, whether pursuant to law, the Certificate of
Incorporation or these By-laws, it shall not be construed to mean personal notice, but such notice
may be given, in the case of stockholders, in writing, by depositing the same in the mail, postage
prepaid, or by overnight carrier addressed to such stockholder at such stockholder’s last known
address as the same appears on the books of the Corporation, and, in the case of directors,
committee members, officers, employees and agents, by telephone, or by mail, postage prepaid,
or by prepaid telegram at his or her last known address as the same appears on the books of the
Corporation. All notices shall be deemed to be given when mailed, telegraphed or telephoned.
Section 8.2. Whenever
notice is required to be given to any stockholder, director, committee member, officer, employee or agent, whether pursuant to law,
the Certificate of Incorporation or these By-laws, a written waiver thereof, signed by the person entitled to notice, whether before
or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except as otherwise provided by law. Neither the business to be transacted at, nor the purpose of,
any regular or
special meeting of the stockholders, directors, or members of a committee of directors need be specified in any
written waiver of notice unless so required by the Certificate of Incorporation of the Corporation or by these By-laws.
Article 9
MISCELLANEOUS
Section 9.1. Any
officer of the Corporation shall, if required by the Board of Directors,
give the Corporation a bond for the faithful performance of the duties of his or her office, and for
the restoration to the Corporation of all corporate books, papers, vouchers, money and property
of whatever kind in his or her possession or under his or her control. Such bond shall be for a
sum and with such surety or sureties as the Board of Directors may require.
Section 9.2. The
corporate seal shall be in the charge of the Secretary and shall have
inscribed thereon the name of the Corporation and the words “Incorporated 2007 Delaware.” If
and when so directed by the Board of Directors or a committee thereof, the Secretary may have
duplicates of such seal made and deposited for use with other officers of the Corporation. It shall
not be necessary to the validity of any instrument executed by any authorized officer or officers
of the Corporation that the execution of such instrument be evidenced by the corporate seal.
Section 9.3. The
fiscal year of the Corporation shall be as determined by the Board of Directors.
Section 9.4. All
checks or demands for money and notes of the Corporation shall be
signed by such officer or officers as the Board of Directors may from time to time designate.
Section 9.5. The
Board of Directors shall determine from time to time whether, when
and under what conditions and regulations, the books and records of the Corporation (except
such as may by statute be specifically open to inspection) shall be open to the inspection of the
stockholders, and the stockholders’ rights in this respect are and shall be restricted and limited
accordingly.
Section 9.6. Facsimile
signatures of any officer of the Corporation may be used at such
time and in such manner as authorized by the Board of Directors or a committee thereof.
Article 10
AMENDMENT
Section 10.1. These
By-laws may be amended, suspended or repealed and new By-laws
may be adopted in a manner consistent with law: (a) if authorized by the Certificate of
Incorporation, by the affirmative vote of a majority of the directors then in office, at any meeting
of the Board of Directors, or (b) by the affirmative vote of the stockholders at any stockholders
meeting called and maintained in accordance with Article 2 of these By-laws; provided,
however, that a brief description of such proposed amendment, suspension or repeal and/or
adoption of new By-laws is contained in the notice of such meeting of the Board of Directors or
of such annual or special meeting of the stockholders.
Adopted as of August 21, 2007
Exhibit 10.2
Execution Copy
COGNITION
THERAPEUTICS, INC.
THIRD
AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
March 20, 2014
TABLE OF CONTENTS
(continued)
TABLE
OF CONTENTS
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Page
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1.
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Definitions
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1
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2.
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Registration Rights
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4
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2.1.
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Demand Registration
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4
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2.2.
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Company Registration
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6
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2.3.
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Underwriting Requirements
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6
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2.4.
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Obligations of the Company
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8
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2.5.
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Furnish Information
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9
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2.6.
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Expenses of Registration
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9
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2.7.
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Delay of Registration
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10
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2.8.
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Indemnification
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10
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2.9.
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Reports Under Exchange Act
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12
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2.10.
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Limitations on Subsequent Registration
Rights
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13
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2.11.
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“Market Standoff’ Agreement
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13
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2.12.
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Restrictions on Transfer
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13
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2.13.
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Termination of Registration Rights
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15
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3.
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Information Rights
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15
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3.1.
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Delivery of Financial Statements
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15
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3.2.
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Inspection
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16
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3.3.
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Termination of Information Rights
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17
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3.4.
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Confidentiality
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17
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4.
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Rights to Future Stock
Issuances
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17
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4.1.
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Right of First Offer
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17
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4.2.
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Termination; Waiver
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18
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5.
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Additional Covenants
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19
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5.1.
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Employee Stock
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19
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5.2.
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Qualified Small Business Stock
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20
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5.3.
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Board Matters; Director Compensation
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20
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5.4.
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Successor Indemnification
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20
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5.5.
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Termination of Covenants
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20
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6.
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Miscellaneous
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20
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6.1.
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Successors and Assigns; Assignment
of Rights
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20
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6.2.
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Governing Law
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21
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6.3.
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Counterparts; Electronic Transmission
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21
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6.4.
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Titles and Subtitles
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21
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6.5.
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Notices
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21
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6.6.
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Amendments and Waivers
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22
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TABLE OF CONTENTS
(continued)
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6.7.
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Severability
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22
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6.8.
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Aggregation of Stock
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22
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6.9.
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Additional Investors
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23
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6.10.
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Entire Agreement
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23
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6.11.
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Delays or Omissions
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23
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6.12.
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Acknowledgment
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23
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6.13.
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Dispute Resolution
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23
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6.14.
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WAIVER OF JURY TRIAL
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23
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SCHEDULE
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Schedule A
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Schedule of Investors
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COGNITION
THERAPEUTICS, INC.
THIRD
AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
THIS THIRD AMENDED AND RESTATED INVESTORS’
RIGHTS AGREEMENT is made as of the 20th day of March, 2014, by and among Cognition Therapeutics, Inc., a Delaware corporation (the
“Company”), and each of the investors listed on Schedule A hereto, each of whom is referred to in this Agreement as
an “Investor” and any Additional Purchaser (as defined in the Purchase Agreement) that becomes a party to this Agreement
in accordance with Section 6.9.
RECITALS
The Company and certain of the Investors are parties
to a Second Amended and Restated Investors’ Rights Agreement, dated as of December 5, 2011 (the “Rights Agreement”).
The Company and certain of the Investors are purchasing
shares of the Company’s Series B Convertible Preferred Stock, par value $.001 per share (the “Series B Preferred
Stock”), pursuant to the Series B Preferred Stock Purchase Agreement of even date herewith (the “Purchase Agreement”).
In order to induce the Company to enter into the
Purchase Agreement and to induce the Investors to invest funds in the Company pursuant to the Purchase Agreement, the Company and the
undersigned Investors, which include the holders of at least 60% of the Registrable Securities (as set forth in the Rights Agreement),
hereby agree to enter into this Agreement in order to amend and restate the Rights Agreement in accordance with Section 6.6 of the
Rights Agreement and to govern the rights of the Investors to cause the Company to register shares of Common Stock issuable to the Investors
upon conversion of the Company’s Series A Convertible Preferred Stock, par value $.001 per share (the “Series A
Preferred Stock”), Series A-1 Convertible Preferred Stock, par value $.001 per share (the “Series A-1 Preferred
Stock”), Series A-2 Convertible Preferred Stock, par value $.001 per share (the “Series A-2 Preferred Stock”),
and Series B Preferred Stock (together with the Series A Preferred Stock , Series A-1 Preferred Stock and Series A-2
Preferred Stock, the “Preferred Stock”), to receive certain information from the Company, and to participate in future equity
offerings by the Company, and to govern certain other matters as set forth in this Agreement.
NOW, THEREFORE, the parties, intending to be legally
bound, hereby agree as follows:
1. Definitions.
For purposes of this Agreement:
“Affiliate” means, with respect
to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such
Person, including, without limitation, any general partner, managing member, officer or director of such Person or any venture capital
fund now or hereafter existing that is controlled by any such Person, or any partner or retired partner of any Person that is a partnership,
or any member or former member of any Person that is a limited liability company, or solely in the case of Ogden CAP Associates, LLC
(“Ogden”): (a) with respect to which investment discretion is exercised by one or more
general partners or managing members of, or shares the same management
company with, Ogden; or (b) any employee of Ogden or Ogden’s Affiliate who holds (or will by virtue of an immediately succeeding
transfer will hold) at least 100,000 shares of Preferred Stock (subject to appropriate adjustment in the event of any stock dividend,
stock split, combination or other similar recapitalization affecting such shares).
“Common Stock” means shares
of the Company’s common stock, par value $.001 per share.
“Damages” means any loss, damage,
or liability (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act, or other federal
or state law, insofar as such loss, damage, or liability (or any action in respect thereof) arises out of or is based upon (a) any
untrue statement or alleged untrue statement of a material fact contained in any registration statement of the Company, including any
preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (b) an omission or alleged
omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading;
or (c) any violation or alleged violation by the indemnifying party (or any of its agents or Affiliates) of the Securities Act,
the Exchange Act, any state securities law, or any rule or regulation promulgated under the Securities Act, the Exchange Act, or
any state securities law.
“Derivative Securities” means
any securities or rights convertible into, or exercisable or exchangeable for (in each case, directly or indirectly), Common Stock, including
options and warrants.
“Exchange Act” means the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Excluded Registration” means
(a) a registration relating to the sale of securities to employees of the Company or a subsidiary pursuant to a stock option, stock
purchase, or similar plan; (b) a registration relating to an SEC Rule 145 transaction; (c) a registration on any form
that does not include substantially the same information as would be required to be included in a registration statement covering the
sale of the Registrable Securities; or (d) a registration in which the only Common Stock being registered is Common Stock issuable
upon conversion of debt securities that are also being registered.
“Form S-1” means such
form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities Act subsequently
adopted by the SEC.
“Form S-2” means such
form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities Act subsequently
adopted by the SEC.
“Form S-3” means such
form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted
by the SEC that permits incorporation of substantial information by reference to other documents filed by the Company with the SEC.
“GAAP” means generally accepted
accounting principles in the United States.
“Holder” means any holder of
Registrable Securities who is a party to this Agreement.
“Immediate Family Member” means
a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother- in-law, sister-in-law, including adoptive relationships, of a natural person referred to herein.
“Initiating Holders” means,
collectively, Holders who properly initiate a registration request under this Agreement.
“IPO” means the Company’s
first underwritten public offering of its Common Stock pursuant to a registration statement filed with the SEC under the Securities Act.
“Key Employee” means any executive-level
employee (including division director and vice president-level positions) as well as any employee who, either alone or in concert with
others, develops, invents, programs, or designs any Company Intellectual Property (as defined in the Purchase Agreement).
“Major Investor” means any
Investor that, individually or together with such Investor’s Affiliates, holds shares representing an investment of at least $100,000
in the Preferred Stock.
“New Securities” means, collectively,
equity securities of the Company, whether or not currently authorized, as well as rights, options, or warrants to purchase such equity
securities, or securities of any type whatsoever that are, or may become, convertible or exchangeable into or exercisable for such equity
securities.
“Person” means any individual,
corporation, partnership, trust, limited liability company, association or other entity.
“Preferred Director” means
any director of the Company that the holders of record of the Preferred Stock are entitled to elect pursuant to the Certificate (as defined
in Section 5.4).
“Registrable Securities” means
(a) the Common Stock issuable or issued upon conversion of the Preferred Stock; (b) any Common Stock, or any Common Stock issued
or issuable (directly or indirectly) upon conversion and/or exercise of any other securities of the Company, acquired by the Investors
after the date hereof; and (c) any Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right, or
other security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares
referenced in clause (a) or (b) above; excluding in all cases, however, any Registrable Securities sold by a Person in a transaction
in which the applicable rights under this Agreement are not assigned pursuant to Section 6.1, and excluding for purposes of Section 2
any shares for which registration rights have terminated pursuant to Section 2.13.
“Registrable Securities then outstanding”
means the number of shares determined by adding the number of shares of outstanding Common Stock that are Registrable Securities and
the number of shares of Common Stock issuable (directly or indirectly)
pursuant to then exercisable and/or convertible securities that are Registrable Securities.
“Restricted Securities” means
the securities of the Company required to bear the legend set forth in Section 2.12(a).
“Right of First Refusal and Co-Sale Agreement”
means the Third Amended and Restated Right of First Refusal and Co-Sale Agreement among the Company, the Investors and certain other
stockholders of the Company, dated as of the date of the Initial Closing (as defined in the Purchase Agreement).
“SEC” means the Securities
and Exchange Commission.
“SEC Rule 144” means Rule 144
promulgated by the SEC under the Securities Act.
“SEC Rule 144(k)” means
Rule 144(k) promulgated by the SEC under the Securities Act.
“SEC Rule 145” means Rule 145
promulgated by the SEC under the Securities Act.
“Securities Act” means the
Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Selling Expenses” means all
underwriting discounts, selling commissions, and stock transfer taxes applicable to the sale of Registrable Securities, and fees and
disbursements of counsel for any Holder, except for the fees and disbursements of the Selling Holder Counsel (as defined in Section 2.6)
borne and paid by the Company as provided in Section 2.6.
“Stock Plan” means the Company’s
Amended and Restated 2007 Equity Incentive Plan, as amended from time to time.
“Voting Agreement” means the
Third Amended and Restated Voting Agreement among the Company, the Investors and certain other stockholders of the Company, dated as
of the date of the Initial Closing.
2.
Registration Rights. The Company covenants and agrees as follows:
2.1. Demand
Registration.
(a) If
at any time after the earlier of (i) five years after the date of this Agreement and (ii) 180 days after the effective date
of the registration statement for the IPO, the Company receives a request from Holders of at least 20% of the Registrable Securities
then outstanding that the Company file a Form S-1 registration statement covering the registration of at least 20% of the Registrable
Securities then outstanding (or a proportionately lower percentage if the anticipated aggregate offering price, net of Selling Expenses,
would exceed $5,000,000), then the Company shall (A) within 10 days after the date such request is given, give notice thereof (the
“Demand Notice”) to all Holders other than the Initiating Holders; and (B) as soon as practicable, and in any
event within 60 days after the date such request is given by the
Initiating Holders, file a Form S-1 registration statement under
the Securities Act covering all Registrable Securities that the Initiating Holders requested to be registered and any additional Registrable
Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the
Company within 20 days of the date the Demand Notice is given, and in each case, subject to the limitations of Sections 2.1(c), 2.1(d),
2.l(f) and 2.3.
(b) If
at any time when it is eligible to use a Form S-3 registration statement, the Company receives a request from Holders of at least
10% of the Registrable Securities then outstanding that the Company file a Form S-3 registration statement with respect to the Registrable
Securities then outstanding of such Holders having an anticipated aggregate offering price, net of Selling Expenses, of at least $1,000,000,
then the Company shall (i) within 10 days after the date such request is given, give a Demand Notice to all Holders other than the
Initiating Holders; and (ii) as soon as practicable, and in any event within 45 days after the date such request is given by the
Initiating Holders, file a Form S-3 registration statement under the Securities Act covering all Registrable Securities requested
to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within 20 days
of the date the Demand Notice is given, and in each case, subject to the limitations of Sections 2.l(c), 2.l(e), 2.l(f) and 2.3.
(c) Notwithstanding
the foregoing obligations, if the Company furnishes to Holders requesting a registration pursuant to this Section 2.1 a certificate
signed by the Company’s chief executive officer stating that in the good faith judgment of the Company’s Board of Directors
it would be materially detrimental to the Company and its stockholders for such registration statement to either become effective or
remain effective for as long as such registration statement otherwise would be required to remain effective, because such action would
(1) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company;
(2) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential;
or (3) render the Company unable to comply with requirements under the Securities Act or Exchange Act, then the Company shall have
the right to defer taking action with respect to such filing for a period of not more. than 180 days after the request of the Initiating
Holders is given; provided, however, that the Company may not invoke this right more than once in any 12-month period; and provided further
that the Company shall not register any securities for its own account or that of any other stockholder during such 180-day period other
than an Excluded Registration.
(d) The
Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 2.1(a): (i) during
the period that is 60 days before the Company’s good faith estimate of the date of filing of, and ending on a date that is 180
days after the effective date of, a Company-initiated registration, provided, that the Company is actively employing in good faith commercially
reasonable efforts to cause such registration statement to become effective; (ii) after the Company has effected two registrations
pursuant to Section 2.1(a); or (iii) if the Initiating Holders propose to dispose of shares of Registrable Securities that
may be immediately registered on Form S-3 pursuant to a request made in accordance with Section 2.l(b).
(e) The
Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 2.1(b): (i) during
the period that is 30 days before the Company’s good faith estimate of the date of filing of, and ending on a date that is 90 days
after the effective date of, a Company-initiated registration, provided, that the Company is actively employing in good faith commercially
reasonable efforts to cause such registration statement to become effective; or (ii) if the Company has effected two registrations
pursuant to Section 2.1 (b) within the 12-month period immediately preceding the date of such request.
(f) A
registration shall not be counted as “effected” for purposes of Sections 2.l(d) and 2. l(e) until such time as
the applicable registration statement has been declared effective by the SEC, unless the Initiating Holders withdraw their request for
such registration, elect not to pay the registration expenses therefor, and forfeit their right to one demand registration statement
pursuant to Section 2.6, in which case such withdrawn registration statement shall be counted as “effected” for purposes
of Sections 2.1(d) and 2.1(e). Solely for purposes of Sections 2.1(d) and 2.1(e), a registration shall not be counted as “effected”
if, as a result of an exercise of the underwriter’s cutback provisions in Section 2.3(a), fewer than 100% of the total number
of Registrable Securities that Holders have requested to be included in such registration statement are actually included.
2.2. Company
Registration. If the Company proposes to register (including, for this purpose, a registration effected by the Company for stockholders
other than the Holders) any of its Common Stock or other securities under the Securities Act in connection with the public offering of
such securities solely for cash (other than in an Excluded Registration), the Company shall, at such time, promptly give each Holder
notice of such registration. Upon the request of each Holder given within 20 days after such notice is given by the Company, the Company
shall, subject to the provisions of Section 2.3, cause to be registered all of the Registrable Securities that each such Holder
has requested to be included in such registration. The Company shall have the right to terminate or withdraw any registration initiated
by it under this Section 2.2 before the effective date of such registration, whether or not any Holder has elected to include Registrable
Securities in such registration. The expenses (other than Selling Expenses) of such withdrawn registration shall be borne by the Company
in accordance with Section 2.6.
2.3. Underwriting
Requirements.
(a) If,
pursuant to Section 2.1, the Initiating Holders intend to distribute the Registrable Securities covered by their request by means
of an underwriting, they shall so advise the Company as a part of their request made pursuant to Section 2.1, and the Company shall
include such information in the Demand Notice. The underwriters will be selected by the Company and shall be reasonably acceptable to
a majority in interest of the Initiating Holders (based on the relative number of Registrable Securities owned by the Initiating Holders
that are included in such registration). In such event, the right of any Holder to include such Holder’s Registrable Securities
in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s
Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company as provided in Section 2.4(e)) enter into an underwriting agreement in customary
form with the underwriters
selected for such underwriting. Notwithstanding any other provision of this Section 2.3, if the underwriters
advise the Initiating Holders in writing that marketing factors require a limitation on the number of shares to be underwritten, then
the Initiating Holders shall so advise all Holders of Registrable Securities that otherwise would be underwritten pursuant hereto, and
the number of Registrable Securities that may be included in the underwriting shall be allocated among such Holders of Registrable Securities,
including the Initiating Holders, in proportion (as nearly as practicable) to the number of Registrable Securities owned by each Holder
or in such other proportion as shall mutually be agreed to by all such selling Holders; provided, however, that the number of Registrable
Securities held by the Holders to be included in such underwriting shall not be reduced unless all other securities are first entirely
excluded from the underwriting. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters
may round the number of shares allocated to any Holder to the nearest 100 shares.
(b) In
connection with any offering involving an underwriting of shares of the Company’s capital stock pursuant to Section 2.2, the
Company shall not be required to include any of the Holders’ Registrable Securities in such underwriting unless the Holders accept
the terms of the underwriting as agreed upon between the Company and its underwriters, and then only in such quantity as the underwriters
in their sole discretion determine will not jeopardize the success of the offering by the Company. If the total number of securities,
including Registrable Securities, requested by stockholders to be included in such offering exceeds the number of securities to be sold
(other than by the Company) that the underwriters in their reasonable discretion determine is compatible with the success of the offering,
then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities,
which the underwriters and the Company in their sole discretion determine will not jeopardize the success of the offering. If the underwriters
determine that less than all of the Registrable Securities requested to be registered can be included in such offering, then the Registrable
Securities that are included in such offering shall be allocated among the selling Holders in proportion (as nearly as practicable to)
the number of Registrable Securities owned by each selling Holder or in such other proportions as shall mutually be agreed to by all
such selling Holders. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters
may round the number of shares allocated to any Holder to the nearest 100 shares.
(c) For
purposes of the provision in Section 2.3(a) or 2.3(b) concerning apportionment, for any selling Holder that is a partnership,
limited liability company, or corporation, the partners, members, retired partners, retired members, stockholders, and Affiliates of
such Holder, or the estates and Immediate Family Members of any such partners, retired partners, members, and retired members and any
trusts for the benefit of any of the foregoing Persons, shall be deemed to be a single “selling Holder,” and any pro rata
reduction with respect to such “selling Holder” shall be based upon the aggregate number of Registrable Securities owned
by all Persons included in such “selling Holder,” as defined in this sentence. Notwithstanding the foregoing (including,
without limitation, Sections 2.3(a) and (b)), the number of Registrable Securities included in such registration and underwriting
shall not be reduced below 30% of the securities included in such registration unless such offering is the IPO, in which case the selling
stockholders may be excluded entirely if the underwriters make the determination described above and no securities other than those of
the Company are included in
such registration. No Registrable Securities or other securities excluded from the underwriting by reason
of this Section 2.3 shall be included in such registration statement.
(d) Without
limiting the generality of the foregoing, in the event that the underwriters in any offering under Section 2.1 or 2.2 request approval
of a modification of the provisions set forth in Section 2.1, 2.2 or 2.3 from the Investors, the Investors’ approval of such
modification shall not be unreasonably withheld.
2.4. Obligations
of the Company. Whenever required under this Section 2 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) prepare
and file with the SEC a registration statement with respect to such Registrable Securities and use its commercially reasonable efforts
to cause such registration statement to become effective and, upon the request of the Holders of at least 60% of the Registrable Securities
registered thereunder, keep such registration statement effective for a period of up to 120 days or, if earlier, until the distribution
contemplated in the registration statement has been completed; provided, however, that (i) such 120-day period shall be extended
for a period of time equal to the period the Holder refrains, at the request of an underwriter of Common Stock (or other securities)
of the Company, from selling any securities included in such registration, and (ii) in the case of any registration of Registrable
Securities on Form S-3 that are intended to be offered on a continuous or delayed basis, subject to compliance with applicable SEC
rules, such 120-day period shall be extended, if necessary, to keep the registration statement effective until all such Registrable Securities
are sold;
(b) prepare
and file with the SEC such amendments and supplements to such registration statement, and the prospectus used in connection with such
registration statement, as may be necessary to comply with the Securities Act in order to enable the disposition of all securities covered
by such registration statement;
(c) furnish
to the selling Holders such numbers of copies of a prospectus, including a preliminary prospectus, as required by the Securities Act,
and such other documents as the Holders may reasonably request in order to facilitate their disposition of their Registrable Securities;
(d) use
its commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities
or blue-sky laws of such jurisdictions as shall be reasonably requested by the selling Holders; provided that the Company shall not be
required to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the
Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;
(e) in
the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary
form, with the underwriters of such offering;
(f) use
commercially reasonable efforts to cause all such Registrable Securities covered by such registration statement to be listed on a national
securities exchange or trading system and each securities exchange and trading system (if any) on which similar securities issued by
the Company are then listed;
(g) provide
a transfer agent and registrar for all Registrable Securities registered pursuant to this Agreement and provide a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of such registration;
(h) promptly
make available for inspection by the selling Holders, any underwriter participating in any disposition pursuant to such registration
statement, and any attorney or accountant or other agent retained by any such underwriter or selected by the selling Holders, subject
to reasonable confidentiality obligations, all financial and other records, pertinent corporate documents, and properties of the Company,
and cause the Company’s officers, directors, employees, and independent accountants to supply all information reasonably requested
by any such seller, underwriter, attorney, accountant, or agent, in each case, as necessary or advisable to verify the accuracy
of the information in such registration statement and to conduct appropriate due diligence in connection therewith;
(i) notify
each selling Holder, promptly after the Company receives notice thereof, of the time when such registration statement has been declared
effective or a supplement to any prospectus forming a part of such registration statement has been filed; and
(j) after
such registration statement becomes effective, notify each selling Holder of any request by the SEC that the Company amend or supplement
such registration statement or prospectus.
2.5. Furnish
Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 2
with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding
itself, the Registrable Securities held by it, and the intended method of disposition of such securities as is reasonably required to
effect the registration of such Holder’s Registrable Securities.
2.6. Expenses
of Registration. All expenses (other than Selling Expenses) incurred in connection with registrations, filings, or qualifications
pursuant to this Section 2, including all registration, filing, and qualification fees; printers’ and accounting fees; fees
and disbursements of counsel for the Company; and the reasonable fees and disbursements of one counsel for the selling Holders (“Selling
Holder Counsel”), shall be borne and paid by the Company; provided, however, that the Company shall not be required to pay
for any expenses of any registration proceeding begun pursuant to Section 2.1 if the registration request is subsequently withdrawn
at the request of the Holders of at least 60% of the Registrable Securities to be registered (in which case all selling Holders shall
bear such expenses pro rata based upon the number of Registrable Securities that were to be included in the withdrawn registration),
unless the Holders of at least 60% of the Registrable Securities agree to forfeit their right to one registration pursuant to Section 2.l(a) or
2.l(b), as the case may be; provided further that if, at the time of such withdrawal, the Holders shall have learned of a material adverse
change in the condition, business, or prospects of the Company from that known to the Holders at the time of their request and have withdrawn
the request with reasonable promptness after learning of such information then the Holders shall not be required to pay any of such expenses
and shall not forfeit their right to one registration pursuant to Section 2.l(a) or 2.l(b). All Selling Expenses relating to
Registrable Securities registered pursuant to this Section 2 shall be borne and paid by the Holders pro rata on the basis of the
number of Registrable Securities registered on their behalf.
2.7. Delay
of Registration. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any registration
pursuant to this Agreement as the result of any controversy that might arise with respect to the interpretation or implementation of
this Section 2.
2.8. Indemnification.
If any Registrable Securities are included in a registration statement under this Section 2:
(a) To
the extent permitted by law, the Company will indemnify and hold harmless each selling Holder, and the partners, members, officers, directors,
and stockholders of each such Holder; legal counsel and accountants for each such Holder; any underwriter (as defined in the Securities
Act) for each such Holder; and each Person, if any, who controls such Holder or underwriter within the meaning of the Securities Act
or the Exchange Act, against any Damages, and the Company will pay to each such Holder, underwriter, controlling Person, or other aforementioned
Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding
from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 2.8(a) shall
not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Company,
which consent shall not be unreasonably withheld, nor shall the Company be liable for any Damages to the extent that they arise out of
or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of
any such Holder, underwriter, controlling Person, or other aforementioned Person expressly for use in connection with such registration.
(b) To
the extent permitted by law, each selling Holder, severally and not jointly, will indemnify and hold harmless the Company, and each of
its directors, each of its officers who has signed the registration statement, each Person (if any), who controls the Company within
the meaning of the Securities Act, legal counsel and accountants for the Company, any underwriter (as defined in the Securities Act),
any other Holder selling securities in such registration statement, and any controlling Person of any such underwriter or other Holder,
against any Damages, in each case only to the extent that such Damages arise out of or are based upon actions or omissions made in reliance
upon and in conformity with written information furnished by or on behalf of such selling Holder expressly for use in connection with
such registration; and each such selling Holder will pay to the Company and each other aforementioned Person any legal or other expenses
reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such
expenses are incurred; provided, however, that the indemnity agreement contained in this Section 2.8(b) shall not apply to
amounts paid in settlement of any such claim or proceeding if
such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; and provided further that in no event shall the aggregate amounts payable by any Holder by way of
indemnity or contribution under Sections 2.8(b) and 2.8(d) exceed the proceeds from the offering received by such Holder (net
of any Selling Expenses paid by such Holder), except in the case of fraud or willful misconduct by such Holder.
(c) Promptly
after receipt by an indemnified party under this Section 2.8 of notice of the commencement of any action (including any governmental
action) for which a party may be entitled to indemnification hereunder, such indemnified party will, if a claim in respect thereof is
to be made against any indemnifying party under this Section 2.8, give the indemnifying party notice of the commencement thereof.
The indemnifying party shall have the right to participate in such action and, to the extent the indemnifying party so desires, participate
jointly with any other indemnifying party to which notice has been given, and to assume the defense thereof with counsel mutually satisfactory
to the parties; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without
conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying
party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other party represented by such counsel in such action. The failure
to give notice to the indemnifying party within a reasonable time of the commencement of any such action shall relieve such indemnifying
party of any liability to the indemnified party under this Section 2.8, to the extent that such failure materially prejudices the
indemnifying party’s ability to defend such action. The failure to give notice to the indemnifying party will not relieve it of
any liability that it may have to any indemnified party otherwise than under this Section 2.8.
(d) To
provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any party
otherwise entitled to indemnification hereunder makes a claim for indemnification pursuant to this Section 2.8 but it is judicially
determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be enforced in such case, notwithstanding the fact that this Section 2.8
provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any party
hereto for which indemnification is provided under this Section 2.8, then, and in each such case, such parties will contribute to
the aggregate losses, claims, damages, liabilities, or expenses to which they may be subject (after contribution from others) in such
proportion as is appropriate to reflect the relative fault of each of the indemnifying party and the indemnified party in connection
with the statements, omissions, or other actions that resulted in such loss, claim, damage, liability, or expense, as well as to reflect
any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined
by reference to, among other things, whether the untrue or allegedly untrue statement of a material fact, or the omission or alleged
omission of a material fact, relates to information supplied by the indemnifying party or by the indemnified party and the parties’
relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission; provided, however,
that, in any such case, (A) no Holder will be required to contribute any amount in excess of the public offering price of all such
Registrable Securities offered and sold by such Holder pursuant to such registration statement, and (B) no Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation; and provided further that in no event shall a Holder’s liability pursuant
to this Section 2.8(d), when combined with the amounts paid or payable by such Holder pursuant to Section 2.8(b), exceed the
proceeds from the offering received by such Holder (net of any Selling Expenses) paid by such Holder), except in the case of willful
misconduct or fraud by such Holder.
(e) Notwithstanding
the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered
into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) Unless
otherwise superseded by an underwriting agreement entered into in connection with the underwritten public offering, the obligations of
the Company and Holders under this Section 2.8 shall survive the completion of any offering of Registrable Securities in a registration
under this Section 2, and otherwise shall survive the termination of this Agreement.
2.9. Reports
Under Exchange Act. With a view to making available to the Holders the benefits of SEC Rule 144 and any other rule or regulation
of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a
registration on Form S-3, the Company shall:
(a) make
and keep available adequate current public information, as those terms are understood and defined in SEC Rule 144, at all times
after the effective date of the registration statement filed by the Company for the IPO;
(b) use
commercially reasonable efforts to file with the SEC in a timely manner all reports and other documents required of the Company under
the Securities Act and the Exchange Act (at any time after the Company has become subject to such reporting requirements); and
(c) furnish
to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) to the extent accurate, a written
statement by the Company that it has complied with the reporting requirements of SEC Rule 144 (at any time after 90 days after the
effective date of the registration statement filed by the Company for the IPO), the Securities Act, and the Exchange Act (at any time
after the Company has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold
pursuant to Form S-3 (at any time after the Company so qualifies); (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the Company; and (iii) such other information as may be reasonably
requested in availing any Holder of any rule or regulation of the SEC that permits the selling of any such securities without registration
(at any time after the Company has become subject to the reporting requirements under the Exchange Act) or pursuant to Form S-3
(at any time after the Company so qualifies to use such form).
2.10. Limitations
on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not, without the prior written consent
of the Holders of at least 60% of the Registrable Securities then outstanding, enter into any agreement with any holder or prospective
holder of any securities of the Company which would give such holder or prospective holder any registration rights; provided that this
limitation shall not apply to any additional Investor who becomes a party to this Agreement in accordance with Section 6.9.
2.11. “Market
Standoff” Agreement. Each Holder hereby agrees that it will not, without the prior written consent of the managing underwriter,
during the period commencing on the date of the final prospectus relating to the registration by the Company for its own behalf of shares
of its Common Stock or any other equity securities under the Securities Act on a registration statement on Form S-1, Form S-2,
or Form S-3, and ending on the date specified by the Company and the managing underwriter (such period not to exceed (a) 180
days in the case of the IPO, which period may be extended upon the request of the managing underwriter, to the extent required by any
NASD rules, for an additional period of up to 15 days if the Company issues or proposes to issue an earnings or other public release
within 15 days of the expiration of the 180-day lockup period, or (b) 90 days in the case of any registration other than the IPO,
which period may be extended upon the request of the managing underwriter, to the extent required by any NASD rules, for an additional
period of up to 15 days if the Company issues or proposes to issue an earnings or other public release within 15 days of the expiration
of the 90-day lockup period), (i) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase
any option or contract to sell, grant any option, right, or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly,
any shares of Common Stock or any securities convertible into or exercisable or exchangeable (directly or indirectly) for Common Stock,
whether such shares or any such securities are then owned by the Holder or are thereafter acquired, or (ii) enter into any swap
or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such securities,
whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or other securities,
in cash, or otherwise. The foregoing provisions of this Section 2.11 shall not apply to the sale of any shares to an underwriter
pursuant to an underwriting agreement, and shall be applicable to the Holders only if all officers, directors and all stockholders individually
owning more than one percent of the Company’s outstanding Common Stock (after giving effect to conversion into Common Stock of
all outstanding Preferred Stock) are subject to the same restrictions. The underwriters in connection with such registration are intended
third party beneficiaries of this Section 2.11 and shall have the right, power, and authority to enforce the provisions hereof as
though they were a party hereto. Each Holder further agrees to execute such agreements as may be reasonably requested by the underwriters
in connection with such registration that are consistent with this Section 2.11 or that are necessary to give further effect thereto.
Any discretionary waiver or termination of the restrictions of any or all of such agreements by the Company or the underwriters shall
apply pro rata to all Holders subject to such agreements, based on the number of shares subject to such agreements.
2.12. Restrictions
on Transfer. The Preferred Stock and the Registrable Securities shall not be sold, pledged, or otherwise transferred, and the Company
shall not recognize and shall issue stop-transfer instructions to its transfer agent with respect to any such sale, pledge, or transfer,
except upon the conditions specified in this Agreement, which
conditions are intended to ensure compliance with the provisions of the
Securities Act. A transferring Holder will cause any proposed purchaser, pledgee, or transferee of the Preferred Stock and the Registrable
Securities held by such Holder to agree to take and hold such securities subject to the provisions and upon the conditions specified
in this Agreement.
(a) Each
certificate or instrument representing (i) the Preferred Stock, (ii) the Registrable Securities, and (iii) any other securities
issued in respect of the securities referenced in clauses (i) and (ii), upon any stock split, stock dividend, recapitalization,
merger, consolidation, or similar event, shall (unless otherwise permitted by the provisions of Section 2.12(b)) be stamped or
otherwise imprinted with a legend substantially in the following form:
“THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD, PLEDGED, OR TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR A VALID EXEMPTION FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.
THE SECURITIES REPRESENTED HEREBY MAY BE TRANSFERRED
ONLY IN ACCORDANCE WITH THE TERMS OF AN INVESTORS’ RIGHTS AGREEMENT BETWEEN THE COMPANYAND THE STOCKHOLDER, AS MAY BE AMENDED
FROM TIME TO TIME, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.”
The Holders consent to the Company making a notation
in its records and giving instructions to any transfer agent of the Restricted Securities in order to implement the restrictions on transfer
set forth in this Section 2.12.
(b) The
holder of each certificate representing Restricted Securities, by acceptance thereof, agrees to comply in all respects with the provisions
of this Section 2. Before any proposed sale, pledge, or transfer of any Restricted Securities, unless there is in effect a registration
statement under the Securities Act covering the proposed transaction, the Holder thereof shall give notice to the Company of such Holder’s
intention to effect such sale, pledge, or transfer. Each such notice shall describe the manner and circumstances of the proposed sale,
pledge, or transfer in sufficient detail and, if reasonably requested by the Company, shall be accompanied at such Holder’s expense
by either (i) a written opinion of legal counsel who shall, and whose legal opinion shall, be reasonably satisfactory to the Company,
addressed to the Company, to the effect that the proposed transaction may be effected without registration under the Securities Act;
(ii) a “no action” letter from the SEC to the effect that the proposed sale, pledge, or transfer of such Restricted
Securities without registration will not result in a recommendation by the staff of the SEC that action be taken with respect thereto;
or (iii) any other evidence reasonably satisfactory to counsel to the Company to the effect that the proposed sale, pledge, or transfer
of the Restricted Securities may be effected without registration under the Securities Act, whereupon the Holder of such Restricted Securities
shall be entitled to sell, pledge, or transfer such Restricted Securities in accordance with the terms of the notice given by the Holder
to the Company. The Company will not require such a legal opinion or “no action” letter (A) in any transaction in compliance
with SEC Rule 144 or (B) in any transaction in which such Holder distributes Restricted Securities to an Affiliate of such
Holder for no consideration;
provided that each transferee agrees in writing to be subject to the terms of this Section 2.12. Each
certificate or instrument evidencing the Restricted Securities transferred as above provided shall bear, except if such transfer is made
pursuant to SEC Rule 144, the appropriate restrictive legend set forth in Section 2.12(a), except that such certificate shall
not bear such restrictive legend if, in the opinion of counsel for such Holder and the Company, such legend is not required in order
to establish compliance with any provisions of the Securities Act.
2.13. Termination
of Registration Rights. The right of any Holder to request registration or inclusion of Registrable Securities in any registration
pursuant to Section 2.1 or Section 2.2 shall terminate upon the earliest to occur of:
(a) the
closing of a Deemed Liquidation Event, as such term is defined in the Certificate; and
(b) as
to particular Registrable Securities owned by such Holder, when such Registrable Securities could be sold without restriction under SEC
Rule 144(k); and
(c) the
four-year anniversary of the IPO.
3. Information
Rights.
3.1. Delivery
of Financial Statements.
(a) The
Company shall deliver to each Major Investor, in a format specified by Golden Seeds LLC, or any successor entity thereto:
(i) as
soon as practicable, but in any event within 90 days after the end of each fiscal year of the Company, (A) a balance sheet as of
the end of such year, (B) statements of income and of cash flows for such year, and a comparison between (1) the actual amounts
as of and for such fiscal year and (2) the comparable amounts for the prior year and as included in the Budget (as defined in Section 3.1(v))
for such year, with an explanation of any material differences between such amounts and a schedule as to the sources and applications
of funds for such year, and (C) a statement of stockholders’ equity as of the end of such year, all such financial statements
audited and certified by independent public accountants of nationally recognized standing selected by the Company, copies of which shall
also be provided to ClearMomentum, Inc. (“ClearMomentum”) or any successor thereof, as specified by Golden Seeds
LLC and subject to Section 3.4;
(ii) as
soon as practicable, but in any event within 60 days after the end of each of the first three quarters of each fiscal year of the Company,
(A) unaudited statements of income and of cash flows for such fiscal quarter, and a comparison between (1) the actual amounts
as of and for such fiscal quarter and (2) the comparable amounts for such fiscal quarter as included in the Budget for the applicable
fiscal year and (B) an unaudited balance sheet and a statement of stockholders’ equity as of the end of such fiscal quarter,
all prepared in accordance with GAAP (except that such financial statements may (A) be subject to normal year-end audit adjustments
and (B) not contain all notes thereto that may be required in accordance with GAAP), copies of which shall also be provided to ClearMomentum
or any
successor thereof, as specified by Golden Seeds LLC or any successor entity thereto and subject to Section 3.4;
(iii) such
other information relating to the financial condition, business, prospects, or corporate affairs of the Company as determined by the
Board of Directors;
(iv) as
soon as practicable, but in any event within 45 days of the end of each month, (A) an unaudited income statement and statement of
cash flows for such month, and a comparison between (1) the actual amounts as of and for such month and (2) the comparable
amounts for such month as included in the Budget for the applicable fiscal year and (B) an unaudited balance sheet and statement
of stockholders’ equity as of the end of such month, all prepared in accordance with GAAP (except that such financial statements
may (A) be subject to normal year-end audit adjustments and (B) not contain all notes thereto that may be required in accordance
with GAAP);
(v) as
soon as practicable, but in any event 30 days before the end of each fiscal year, a budget and business plan for the next fiscal year
(collectively, the “Budget”), which shall include, without limitation, forecasts of the Company’s revenues,
expenses and cash position on a month-to-month basis, balance sheets, income statements, and statements of cash flow for such months
and, promptly after prepared, any other budgets or revised budgets prepared by the Company; and
(vi) as
soon as practicable, but in any event within 45 days of the end of each month, and upon the final closing under the Purchase Agreement
and upon each closing of future financings by the Company, the Company’s capitalization table in a format specified by Golden Seeds
LLC or any successor entity thereto, a copy of which shall also be provided to ClearMomentum or any successor thereof, as specified by
Golden Seeds LLC or any successor entity thereto and subject to Section 3.4.
(b) If,
for any period, the Company has any subsidiary whose accounts are consolidated with those of the Company, then in respect of such period
the financial statements delivered pursuant to the foregoing sections shall be the consolidated and consolidating financial statements
of the Company and all such consolidated subsidiaries.
(c) Notwithstanding
anything else in this Section 3.1 to the contrary, the Company may cease providing the information set forth in this Section 3.1
during the period starting with the date 60 days before the Company’s good-faith estimate of the date of filing of a registration
statement if it reasonably concludes it must do so to comply with the SEC rules applicable to such registration statement and related
offering; provided that the Company’s covenants under this Section 3.1 shall be reinstated at such time as the Company is
no longer actively employing its commercially reasonable efforts to cause such registration statement to become effective.
3.2. Inspection.
The Company shall permit each Major Investor (provided that such Major Investor is not a competitor of the Company), at such Major
Investor’s expense, to visit and inspect the Company’s properties; examine its books of account and records; and
discuss
the Company’s affairs, finances, and accounts with its officers, during normal business hours of the Company as may be reasonably
requested by the Major Investor upon reasonable advance notice.
3.3. Termination
of Information Rights. The covenants set forth in Sections 3.1 and 3.2 shall terminate and be of no further force or effect (a) immediately
before the consummation of the IPO, (b) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or
15(d) of the Exchange Act, or (c) upon a Deemed Liquidation Event, as such term is defined in the Certificate, whichever event
occurs first.
3.4. Confidentiality.
Each Investor agrees that such Investor will keep confidential and will not disclose, divulge, or use for any purpose (other than
to monitor its investment in the Company) any confidential information obtained from the Company (including notice of the Company’s
intention to file a registration statement), unless such confidential information (a) is known or becomes known to the public in
general (other than as a result of a breach of this Section 3.4 by such Investor), (b) is or has been independently developed
or conceived by the Investor without use of the Company’s confidential information, or (c) is or has been made known or disclosed
to the Investor by a third party without a breach of any obligation of confidentiality such third party may have to the Company; provided,
however, that an Investor may disclose confidential information (i) to its attorneys, accountants, consultants, and other professionals
to the extent necessary to obtain their services in connection with monitoring its investment in the Company, if such professionals agree
to be bound by the provisions of this Section 3.4; (ii) to any prospective purchaser of any Registrable Securities from such
Investor, if such prospective purchaser agrees to be bound by the provisions of this Section 3.4; (iii) to any existing or
prospective Affiliate, partner, member, stockholder, or wholly owned subsidiary of such Investor in the ordinary course of business,
if such prospective purchaser agrees to be bound by the provisions of this Section 3.4; or (iv) as may otherwise be required
by law, provided that the Investor promptly notifies the Company of such disclosure and takes reasonable steps to minimize the extent
of any such required disclosure. For the avoidance of doubt, each Investor shall be responsible for any breach of this Section 3.4
by any other Person to which it is permitted to disclose any Confidential Information pursuant to this Section 3.4.
4. Rights
to Future Stock Issuances.
4.1. Right
of First Offer. Subject to the terms and conditions of this Section 4.1 and applicable securities laws, if the Company proposes
to offer or sell any New Securities, the Company shall first offer such New Securities to each Investor.
(a) The
Company shall give notice (the “Offer Notice”) to each Investor, stating (i) its bona fide intention to offer
such New Securities, (ii) the number of such New Securities to be offered, and (iii) the price and terms, if any, upon which
it proposes to offer such New Securities.
(b) By
notification to the Company within 20 days after the Offer . Notice is given, each Investor may elect to purchase or otherwise acquire,
at the price and on the terms specified in the Offer Notice, up to that portion of such New Securities which equals the proportion that
the Common Stock issued and held, or issuable (directly or indirectly) upon
conversion and/or exercise, as applicable, of the Preferred
Stock and any other Derivative Securities then held, by such Investor bears to the total Common Stock of the Company then issued and
outstanding (assuming full conversion and/or exercise, as applicable, of all the Preferred Stock and other Derivative Securities, and
the full issuance of all shares reserved for issuance under the Stock Plan). At the expiration of such 20-day period, the Company shall
promptly notify each Investor that elects to purchase or acquire all the shares available to it (each, a “Fully Exercising Investor”)
of any other Investor’s failure to do likewise. During the 10-day period commencing after the Company has given such notice, each
Fully Exercising Investor may, by giving notice to the Company, elect to purchase or acquire, in addition to the number of shares specified
above, up to that portion of the New Securities for which Investors were entitled to subscribe but that were not subscribed for by the
Investors which is equal to the proportion that the Common Stock issued and held, or issuable (directly or indirectly) upon conversion
and/or exercise, as applicable, of the Preferred Stock and any other Derivative Securities then held, by such Fully Exercising Investor
bears to the Common Stock issued and held, or issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of the
Preferred Stock and any other Derivative Securities then held, by all Fully Exercising Investors who wish to purchase such unsubscribed
shares. The closing of any sale pursuant to this Section 4.1(b) shall occur within the later of 90 days of the date that the
Offer Notice is given and the date of initial sale of New Securities pursuant to Section 4.1(c).
(c) If
all New Securities referred to in the Offer Notice are not elected to be purchased or acquired as provided in Section 4.1(b), the
Company may, during the 90-day period following the expiration of the periods provided in Section 4.1(b), offer and sell the remaining
unsubscribed portion of such New Securities to any Person or Persons at a price not less than, and upon terms no more favorable to the
offeree than, those specified in the Offer Notice. If the Company does not enter into an agreement for the sale of the New Securities
within such period, or if such agreement is not consummated within 60 days of the execution thereof, the right provided hereunder shall
be deemed to be revived and such New Securities shall not be offered unless first reoffered to the Investors in accordance with this
Section 4.1.
(d) The
right of first offer in this Section 4.1 shall not be applicable to (i) Exempted Securities (as defined in the Certificate);
(ii) shares of Common Stock issued in the IPO; and (iii) the issuance of shares of the Series B Preferred Stock to Additional
Purchasers pursuant to Section 1.2 of the Purchase Agreement.
4.2. Termination;
Waiver.
(a) The
covenants set forth in Section 4.1 shall terminate and be of no further force or effect (i) immediately before the consummation
of the IPO, (ii) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d)
of the Exchange Act, or (iii) upon a Deemed Liquidation Event, as such term is defined in the Certificate, whichever event occurs
first and, as to each Investor, in accordance with Section 4.1(e).
(b) Except
with respect to Pittsburgh Life Sciences Greenhouse and Innovations Works, Inc., the covenants set forth in Section 4.1 shall
terminate and be of no further force or effect with respect to any Investor who is not a Fully Exercising Investor and
such non-Fully
Exercising Investor shall never again be afforded such pre-emptive rights with respect to any New Securities. The provisions of Section 4.1
shall not terminate with respect to Pittsburgh Life Sciences Greenhouse and Innovations Works, Inc. notwithstanding any failure
of Pittsburgh Life Sciences Greenhouse or Innovations Works, Inc., as applicable, to be a Fully Exercising Investor.
(c) The
right of first offer set forth in Section 4.1 may be waived as to all Investors upon the written agreement of the holders of at
least 60% of the Preferred Stock held by all Investors.
5. Additional
Covenants.
5.1. Employee
Stock. Unless otherwise approved by either (x) the Board of Directors, including both Preferred Directors or (y) the Compensation
Committee provided that a Preferred Director is a member thereof, stock options under the Stock Plan to purchase shares of the Company’s
capital stock granted to employees and consultants of the Company after the date hereof shall vest as provided in this Section 5.1.
In the case of employees and consultants who join the Company after December 17, 2010, such stock options shall vest over a four-year
period, with the first 12.5% of the shares underlying such stock options vesting following six months of continued employment or service,
and the remaining shares vesting in equal monthly installments over the following 42 months. In the case of employees and consultants
of the Company employed or engaged by the Company as of December 17, 2010, such stock options shall vest over a four-year period,
with the shares underlying such stock options vesting in equal monthly installments beginning on the first day of the month following
the grant date. Upon issuance of any shares under the Stock Plan, the Company will require the holders to enter into the Voting Agreement
and the Right of First Refusal and Co-Sale Agreement. In addition, unless otherwise approved by the Board of Directors, including both
Preferred Directors, the Company shall have the right to repurchase vested shares at cost upon termination of employment of a holder
of restricted stock. Without limiting the generality of the foregoing, upon a Deemed Liquidation Event, as such term is defined in the
Certificate, all options to purchase capital stock of the Company held by employees and Key Holders (as defined in the Voting Agreement)
will vest as specified by the Board of Directors of the Company (or as may be approved by the stockholders of the Company to the extent
such approval is required), which may approve the acceleration of the vesting of such options under the respective option agreements
between the Company and the Key Employees; provided that such accelerated vesting does not give rise to adverse tax consequences for
the Company, including, without limitation, the lack of deductibility of compensation payments.
5.2. Qualified
Small Business Stock. The Company shall use commercially reasonable efforts to cause the shares of the Preferred Stock issued pursuant
to the Purchase Agreement, the Series A-1 Preferred Stock Purchase Agreement dated as of December 17, 2010 among the Company
and each of the investors listed on Schedule A thereto and the Series A-2 Preferred Stock Purchase Agreement dated as of December 5,
2011 among the Company and each of the investors listed on Schedule A thereto, as well as any shares into which such shares are converted,
within the meaning of Section 1202(f) of the Internal Revenue Code (the “Code”), to constitute “qualified
small business stock” as defined in Section 1202(c) of the Code; provided, however, that such requirement shall not be
applicable if the Board of Directors of the
Company determines, in its good-faith business judgment,
that such qualification is inconsistent with the best interests of the Company. The Company shall submit to its stockholders (including
the Investors) and to the Internal Revenue Service any reports that may be required under Section 1202(d)(1)(C) of the Code
and the regulations promulgated thereunder. In addition, within twenty (20) business days after any Investor’s written request
therefor, the Company shall, at its option, either (a) deliver to such Investor a written statement indicating whether (and what
portion of) such Investor’s interest in the Company constitutes “qualified small business stock” as defined in Section 1202(c) of
the Code, or (b) deliver to such Investor such factual information in the Company’s possession as is reasonably necessary
to enable such Investor to determine whether (and what portion of) such Investor’s interest in the Company constitutes “qualified
small business stock” as defined in Section 1202(c) of the Code.
5.3. Board
Matters; Director Compensation. Until otherwise determined by the vote of a majority of the directors then in office, the Board of
Directors shall meet at least monthly alternating between in-person meetings and conference calls. The Company shall reimburse the nonemployee
directors for all reasonable out-of-pocket travel expenses incurred (consistent with the Company’s travel policy) in connection
with attending meetings of the Board of Directors.
5.4. Successor
Indemnification. If the Company or any of its successors or assignees consolidates with or merges into any other Person and is not
the continuing or surviving corporation or entity of such consolidation or merger, then to the extent necessary, proper provision shall
be made so that the successors and assignees of the Company assume the obligations of the Company with respect to indemnification of
members of the Board of Directors as in effect immediately before such transaction, whether such obligations are contained in the Company’s
By-Laws, its Amended and Restated Certificate of Incorporation, as amended from time to time (the “Certificate”),
or elsewhere, as the case may be. Additionally, the Company shall require and cause any successor (whether direct or indirect by purchase,
merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company, by
written agreement to expressly assume the Company’s obligations with respect to indemnification of members of the Board of Directors.
5.5. Termination
of Covenants. The covenants set forth in this Section 5, except for Section 5.4, shall terminate and be of no further force
or effect (a) immediately before the consummation of the IPO, (b) when the Company first becomes subject to the periodic reporting
requirements of Section 12(g) or 15(d) of the Exchange Act, or (c) upon a Deemed Liquidation Event, as such term
is defined in the Certificate, whichever event occurs first.
6. Miscellaneous.
6.1. Successors
and Assigns; Assignment of Rights. The rights under this Agreement may be assigned (but only with all related obligations) by any
of the Investors to any of their respective Affiliates or any transferee who holds (or will by virtue of an immediately succeeding transfer
will hold) at least 10% of any series of the then outstanding shares of the Preferred Stock; provided, however, that (a) the Company
is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee and the Registrable
Securities with respect to which such rights are being transferred; and (b) such
transferee agrees in a written instrument delivered
to the Company to be bound by and subject to the terms and conditions of this Agreement, including the provisions of Section 2.11.
The terms and conditions of this Agreement inure to the benefit of and are binding upon the respective successors and permitted assignees
of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or
their respective successors and permitted assignees any rights, remedies, obligations or liabilities under or by reason of this Agreement,
except as expressly provided herein. Golden Seeds LLC (and any successor-in-interest thereof whether by consolidation, merger or otherwise)
is an intended third party beneficiary of this Agreement and the parties acknowledge and agree that Golden Seeds LLC (and any successor-in-interest),
as an intended third party beneficiary, has an independent and right to enforce the terms of this Agreement.
6.2. Governing
Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the
laws that might otherwise govern under applicable principles of conflicts of law.
6.3. Counterparts;
Electronic Transmission. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument. A facsimile or electronic transmission of a scanned copy of a signed
counterpart signature page hereto shall be deemed to be an originally executed copy for purposes of this Agreement.
6.4. Titles
and Subtitles. The titles and subtitles used in this Agreement are for convenience only and are not to be considered in construing
or interpreting this Agreement.
6.5. Notices.
All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively
given upon the earlier of actual receipt or (a) personal delivery to the party to be notified, (b) when sent, if sent by confirmed
electronic mail or facsimile transmission during normal business hours of the recipient, and if not sent during normal business hours,
then on the recipient’s next business day, (c) five days after having been sent by registered or certified mail, return receipt
requested, postage prepaid, or (d) one business day after the business day of deposit with a nationally recognized overnight courier,
freight prepaid, specifying next business day delivery, with written verification of receipt. All communications to be sent to the Investors
shall be sent at their addresses as set forth on Schedule A hereto, or to such email address, facsimile number or address as subsequently
modified by written notice given in accordance with this Section 6.5. All communications to be sent to the Company shall be sent
to the address set forth below in this Section 6.5, or to such email address, facsimile number or address as subsequently modified
by written notice given in accordance with this Section 6.5:
Cognition Therapeutics, Inc.
2403 Sidney Street, Suite 261
Pittsburgh, PA 15203
Attention: Chief Executive Officer and President
Facsimile: (412) 481-2216
With a copy to:
Duane Morris LLP
30 South 17th Street
Philadelphia, PA 19103-4196
Attention: Kathleen M. Shay
Facsimile: 215-689-4382
6.6. Amendments
and Waivers. Except as set forth in Section 4.2(c), any term of this Agreement may be amended and the observance of any term
of this Agreement may be waived (either generally or in a particular instance, and either retroactively or prospectively) only with the
written consent of the Company and the holders of at least 60% of the Registrable Securities then outstanding; and provided further that
any provision hereof may be waived by any waiving party on such party’s own behalf, without the consent of any other party. Notwithstanding
the foregoing, this Agreement may not be amended or terminated and the observance of any term hereof may not be waived with respect to
any Investor without the written consent of such Investor, unless such amendment, termination, or waiver applies to all Investors in
the same fashion (it being agreed that, subject to Section 4.2(c), a waiver of the provisions of Section 4 with respect to
a particular transaction shall be deemed to apply to all Investors in the same fashion if such waiver does so by its terms, notwithstanding
the fact that certain Investors may nonetheless, by agreement with the Company, purchase securities in such transaction). The Company
shall give prompt notice of any amendment or termination hereof or waiver hereunder to any party hereto that did not consent in writing
to such amendment, termination, or waiver. Any amendment, termination, or waiver effected in accordance with this Section 6.6 shall
be binding on all parties hereto, regardless of whether any such party has consented thereto. No waivers of or exceptions to any term,
condition, or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing
waiver of any such term, condition, or provision. Notwithstanding the foregoing, Schedule A hereto may be amended by the Company
from time to time to add or modify information regarding Investors without the consent of the other parties hereto.
6.7. Severability.
In case any one or more of the provisions contained in this Agreement is for any reason held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement, and such invalid,
illegal, or unenforceable provision shall be reformed and construed so that it will be valid, legal, and enforceable to the maximum extent
permitted by law.
6.8. Aggregation
of Stock. All shares of Registrable Securities held or acquired by Affiliates shall be aggregated together for the purpose of determining
the availability of any rights under this Agreement and such Affiliated persons may apportion such rights as among themselves in any
manner they deem appropriate.
6.9. Additional
Investors. Notwithstanding anything to the contrary contained herein, if the Company issues additional shares of the Series B
Preferred Stock after the date hereof, any purchaser of such shares of the Series B Preferred Stock may become a party to this Agreement
by executing and delivering an additional counterpart signature page to this Agreement, and thereafter shall be deemed an “Investor”
for all purposes hereunder. No action or consent by the Investors shall be required for such joinder to this Agreement by such additional
Investor, so long as such additional Investor has agreed in writing to be bound by all of the obligations as an “Investor”
hereunder.
6.10. Entire
Agreement. This Agreement amends and restates the Rights Agreement. This Agreement (including any Schedules hereto) constitutes the
full and entire understanding and agreement among the parties with respect to the subject matter hereof, and any other written or oral
agreement relating to the subject matter hereof existing between the parties is expressly canceled.
6.11. Delays
or Omissions. No delay or omission to exercise any right, power, or remedy accruing to any party under this Agreement, upon any breach
or default of any other party under this Agreement, shall impair any such right, power, or remedy of such nonbreaching or nondefaulting
party, nor shall it be construed to be a waiver of or acquiescence to any such breach or default, or to any similar breach or default
thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore
or thereafter occurring. All remedies, whether under this Agreement or by law or otherwise afforded to any party, shall be cumulative
and not alternative.
6.12. Acknowledgment.
The Company acknowledges that the Investors are in the business of venture capital investing and therefore review the business plans
and related proprietary information of many enterprises, including enterprises which may have products or services which compete directly
or indirectly with those of the Company. Nothing in this Agreement shall preclude or in any way restrict the Investors from investing
or participating in any particular enterprise whether or not such enterprise has products or services which compete with those of the
Company.
6.13. Dispute
Resolution. The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the state courts of Delaware
and to the jurisdiction of the United States District Court for the District of Delaware for the purpose of any suit, action or other
proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out
of or based upon this Agreement except in the state courts of Delaware or the United States District Court for the District of Delaware,
and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding,
any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from
attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action
or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court.
6.14. WAIVER
OF JURY TRIAL. EACH PARTY HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT, THE OTHER TRANSACTION
DOCUMENTS, THE SECURITIES OR THE SUBJECT MATTER HEREOF OR THEREOF. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY
AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT
LIMITATION, CONTRACT CLAIMS, TORT CLAIMS (INCLUDING NEGLIGENCE), BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.
THIS SECTION HAS BEEN FULLY DISCUSSED BY EACH OF THE PARTIES HERETO AND THESE PROVISIONS WILL NOT BE SUBJECT TO ANY EXCEPTIONS.
EACH PARTY HERETO HEREBY FURTHER WARRANTS AND REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT SUCH
PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
[SIGNATURE
PAGE FOLLOWS]
SCHEDULE
A
INVESTORS
Name and Address
Dean K. & Margo L. Allen Family Trust
25412 Nellie Gail Road
Laguna Hills, CA 92653-6307
Attn: Dean K. Allen, Trustee
Angel Capital Entrepreneur Fund 1, LLC
1430 Glencoe Drive
Arcadia, CA 91006
Audrey’s Kitchen L.P.
371 Pearce Mill Road
Wexford, PA 15090
Attn: Alicia McGinnis
Breedlove Family Limited 220 7th Avenue
Beaver Falls, PA 15010
Attn: Mark H. Breedlove
Howell A. Breedlove
2015 Blairmont Drive
Pittsburgh, PA 15241
CogRX-A, LLC
2119 S. Villa Drive
Gibsonia, PA 15044
Attn: Alan M. Breedlove
The Connors Family Trust
6085 Greenbrier Drive
Huntington Beach, CA 92648
Daniel H. Cosgriff Trust
1900 Preston Road
Box 267-304 Plano, TX 75093
Downing Family Trust
Dated October 27, 1993
4899 County Road 222
Durango, CO 81303
Attn: Michael R. Downing, Ph.D.
Name and Address
Golden Seeds Advisors Fund LP
750 Lexington Avenue, 6th Floor
New York, NY 10022
Attn: Lauren Kane
Golden Seeds Cognition Therapeutics LLC
750 Lexington Avenue, 6th Floor
New York, NY 10022
Attn: Lauren Kane
Golden Seeds Advisors Fund 2 LP
750 Lexington Avenue, 6th Floor
New York, NY 10022
Attn: Lauren Kane
Golden Seeds Fund LP
750 Lexington Avenue, 6th Floor
New York, NY 10022
Attn: Lauren Kane
Golden Seeds Fund 2 LP
750 Lexington Avenue, 6th Floor
New York, NY 10022
Attn: Lauren Kane
Franz F. Hefti, Ph.D.
121 Boulderwood Drive
Bernardsville, NJ 07924
Innovation Works, Inc.
Suite 250
2000 Technology Drive
Pittsburgh, PA 15219
Attn: Deborah Walker
Johnson Family Trust
646 Vista Lane
Laguna Beach, CA 92651
Attn: Seth R. Johnson, Trustee
Name and Address
R & B Kleiest Living Trust
Robert A. Kleist, Trustee
7 Cherbourg
Newport Beach, CA 92660
M5Invest Partners
764 Mt. Moro Road
Villanova, PA 19085
Attn: Howard Morgan
John M. Murphy
34022 Capistrano By The Sea
Dana Point, CA 92629-2937
Michael J. Napoli, Jr.
928 N. Croft Avenue #102
Los Angeles, CA 90069
Ogden CAP Associates, LLC
390 Park Avenue
New York, NY 10022
Attn: Robert Gailus
Pittsburgh Life Sciences Greenhouse
2425 Sidney Street
Pittsburgh, PA 15203
Molly B. Schmid
650 W. 9th Street
Claremont, CA 91711
Setzer Family Trust U/D/T 02-02-98
1483 Northridge Drive
Prescott, AZ 86301
Attn: Edwin P. Setzer, Trustee
Sudek Family Trust
25 Coronado Pointe
Laguna Niguel, CA 92677
Attn: Richard Sudek, Trustee
Name and Address
TMC Investment Company, Inc.
TMC Investment Company, Inc.
c/o Stonewood Capital Management, Inc.
Three Gateway Center, 13 East
Pittsburgh, PA 15222
Attn: John H. Tippins
Eli Glezer
13 746 Durango Drive
Del Mar, CA 92014
PLSG Accelerator Fund, LLC
2425 Sidney Street
Pittsburgh, PA 15203
Paul M. Work
501 Marigold Ave.
Corona Del Mar, CA 92625-2408
David Schick
4126 Parva Ave.
Los Angeles, CA 90027
The Eastlack Family Living Trust
c/o Robert Eastlack, Trustee
5265 Amber View Pt.
San Diego, CA 92130
Richard and Anne Hallock Family Trust Dated
June 19, 1995
11500 San Vicente Blvd, #406
Los Angeles, CA 90049
Michael and Ella Doka Family Trust Dated
July 2nd, 1997
7 Endicott
Coto De Caza, CA 92679
Richard S. Falk, Jr.
6921 Neptune Place
La Jolla, CA 92037
Name and Address
Gary Kostow
14820 Caminito Lorren
Del Mar, CA 92014
Frank and Rona Singer Family Trust
3552 Venture Drive
Huntington Beach, CA 92649
John Previs
2570 Windgate Road
Bethel Park, Pa 15102-2731
Susan Uchitelle And Benjamin Uchitelle, As
Joint Tenants With Right Of Survivorship
41 Crestwood Dr.
Clayton, MO 63105
Scott And Christina Worley, JTE
171 El Pueblo Way
Palm Beach, FL 33480
Donald R. Rady Trust dated November 26,
1992, Donald R. Rady, Trustor and Trustee
1919 Grand Ave., Suite 2f
San Diego CA 92109
Francis L. Sterling Trust dated 9/11/1997 as
Amended
65 Easton Lane
Moreland Hills, OH 44022
Deutsch Family Investment Partnership
2 Bridle Court
Oyster Bay Cove, New York 11771
Delta G. Corporation
22 Wedgewood Lane
Pittsburgh PA 15215
Kramer-Fabre Living Trust
2880 Torito Rd.
Santa Barbara, CA 93108
IN WITNESS
WHEREOF, the parties have executed this Third Amended and Restated Investors’ Rights Agreement as of the date first written
above.
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COMPANY:
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By:
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Name:
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Title:
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INVESTOR:
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By:
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Name:
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Title:
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[SIGNATURE PAGE TO THIRD AMENDED AND RESTATED
INVESTORS’ RIGHTS AGREEMENT]
Exhibit 10.3
FIRST
AMENDMENT TO
THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
THIS FIRST AMENDMENT (the
“First Amendment”) to that certain Third Amended and Restated Investors’ Rights Agreement dated as of March 20,
2014, among Cognition Therapeutics, Inc., a Delaware corporation (the “Company”) and its stockholders party thereto
(the “Investors’ Rights Agreement”), is entered into as of March 23, 2020, by and among the Company and
the undersigned stockholders of the Company constituting the holders of at least 60% of the Registrable Securities (as defined in the
Investors’ Rights Agreement) then outstanding (the “Required Investors”). All capitalized terms used but not
defined in this First Amendment shall have the meanings assigned to them in the Investors’ Rights Agreement.
Recitals
WHEREAS, the Company
and the Required Investors desire to amend the Investors’ Rights Agreement to remove the ability of the holders of at least 20%
of the Registrable Securities then outstanding to demand registration of the Company’s securities on a Form S-1 prior to 180
days after the effective date of an IPO;
WHEREAS, pursuant to
Section 6.6 of the Investors’ Rights Agreement, with certain exceptions not relevant to this First Amendment, any term of the
Investors’ Rights Agreement may be amended with the written consent of the Company and the Required Investors; and
WHEREAS, accordingly,
the Company and the Required Investors are entering into this First Amendment to make such amendments to the Investors’ Rights Agreement.
Agreement
NOW, THEREFORE, in
consideration of the promises and covenants set forth herein, and intending to be legally bound hereby, the parties hereto agree as follows:
1. Amendment
to Section 2.1(a) of the Investors’ Rights Agreement. Section 2.1(a) of the Investors’ Rights Agreement
is hereby amended and restated in its entirety to provide as follows:
Section 2.1 Demand
Registration.
(a) If
at any time after 180 days after the effective date of the registration statement for the IPO, the Company receives a request from Holders
of at least 20% of the Registrable Securities then outstanding (or a proportionately lower percentage if the anticipated aggregate offering
price, net of Selling Expenses, would exceed $5,000,000), then the Company shall (A) within 10 days after the date such request is
given, give notice thereof (the “Demand Notice”) to all Holders other than the Initiating Holders; and (B) as
soon as practicable and in any event within 60 days after the date such request is given by the Initiating Holders, file a Form S-1
registration statement under the Securities Act covering all Registrable Securities that the Initiating Holders requested to be registered
and any additional Registrable Securities
requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within
20 days of the date the Demand Notice is given, and in each case, subject to the limitations of Sections 2.1(c), 2.1(d), 2.1(f) and
2.3.
2. Effect
of First Amendment. The parties acknowledge and agree that all of the terms, provisions, covenants and conditions of the Investors’
Rights Agreement shall hereafter continue in full force and effect in accordance with the terms thereof, except to the extent expressly
modified, amended or revised herein; provided, however, that if any term or provision of this First Amendment shall conflict with or otherwise
be inconsistent with any term or provision of the Investors’ Rights Agreement, the terms and provisions of this First Amendment
shall prevail.
3. Governing
Law. This First Amendment shall be governed by and construed under the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law.
4. Effectiveness;
Counterparts; Electronic Transmission. In accordance with Section 6.6 of the Investors’ Rights Agreement, this First Amendment
shall become effective upon the execution of this First Amendment by the Company and the Required Investors. This First Amendment may
be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and
the same instrument. This First Amendment may, upon execution by a party, be transmitted by electronic or facsimile transmission with
the same effect as if such party had delivered an executed original counterpart of this First Amendment.
[Signature Page Follows]
IN WITNESS WHEREOF, the undersigned have executed
this First Amendment to the Third Amended and Restated Investors’ Rights Agreement as of the date set forth above.
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REQUIRED
INVESTORS:
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Individuals
Sign Below
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Date:
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, 2020
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Signature
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Name:
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Corporations,
Trusts, Partnerships,
Limited Liability Companies, Retirement
Plans, Retirement Accounts or Other
Entities Sign Below:
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Date:
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, 2020
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Name
of Stockholder (please print)
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[Signature
Page to the First Amendment o the
Third Amended and Restated Investors’ Rights Agreement]
Exhibit 10.4
OFFICE
LEASE AGREEMENT
between
RJ
EQUITIES LP
(Landlord)
and
COGNITITION
THERAPEUTICS, INC.
(Tenant)
Dated: July 1, 2017
TABLE
OF CONTENTS
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Article 1.
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BASIC
TERMS
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1
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Article 2.
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PREMISES
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2
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Article 3.
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TERM
AND COMMENCEMENT
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3
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Article 4.
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CONSTRUCTION OF
PREMISES
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3
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Article 5.
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BASE
RENT
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3
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Article 6.
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RENT
ESCALATION
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4
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Article 7.
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LATE
PAYMENT
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7
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Article 8.
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USE OF PREMISES
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7
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Article 9.
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COMMON
AREAS/PARKING
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8
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Article 10.
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ALTERATIONS
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8
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Article 11.
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MECHANIC’S
LIENS
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9
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Article 12.
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CONDITION OF PREMISES
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9
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Article 13.
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UTILITIES
AND SERVICES
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9
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Article 14.
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ASSIGNMENT
AND SUBLETTING
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10
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Article 15.
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RIGHTS
RESERVED BY LANDLORD
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11
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Article 16.
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REPAIRS
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11
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Article 17.
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INDEMNIFICATION
AND INSURANCE
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12
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Article 18.
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LANDLORD’S
LIABILITY
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13
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Article 19.
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COMPLIANCE
WITH INSURANCE REQUIREMENTS
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14
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Article 20.
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FIRE
OR OTHER CASUALTY
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14
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Article 21.
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SUBORDINATION
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14
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Article 22.
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CONDEMNATION
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15
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Article 23.
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ESTOPPEL
CERTIFICATES
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15
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Article 24.
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DEFAULT
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15
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Article 25.
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PROVISIONS
RELATED TO LANDLORD’S REMEDIES
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16
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Article 26.
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LANDLORD’S
DEFAULT; RIGHT TO CURE
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18
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Article 27.
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WAIVER
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18
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Article 28.
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UTILITY
DEREGULATION
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19
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Article 29.
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TELECOMMUNICATIONS
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19
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Article 30.
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SURRENDER
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ARTICLE 31.
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QUIET
ENJOYMENT
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20
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ARTICLE 32.
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HOLDING OVER
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20
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ARTICLE 33.
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ENVIRONMENTAL COVENANTS,
REPRESENTATIONS AND WARRANTIES
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21
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ARTICLE 34.
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TENANT’S COMPLIANCE
WITH LAWS
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22
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ARTICLE 35.
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DISABILITIES ACT
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22
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ARTICLE 36.
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NOTICE
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ARTICLE 37.
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BROKERS
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ARTICLE 38.
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FORCE MAJEURE
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ARTICLE 39.
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TRANSFER OF LANDLORD’S
INTEREST
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ARTICLE 40.
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SUCCESSORS
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ARTICLE 41.
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GOVERNING LAW
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24
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ARTICLE 42.
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SEPARABILITY
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24
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ARTICLE 43.
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CAPTIONS
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24
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ARTICLE 44.
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GENDER
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ARTICLE 45.
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EXECUTION; COUNTERPARTS
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24
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ARTICLE 46.
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ENTIRE AGREEMENT
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25
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ARTICLE 47.
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AUTHORITY
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25
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ARTICLE 48.
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SECURITY DEPOSIT
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25
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ARTICLE 49.
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OFAC CERTIFICATION
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25
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EXHIBIT “A”
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DIAGRAM OF DEVELOPMENT
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28
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EXHIBIT “B”
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OUTLINE OF PREMISES
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29
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EXHIBIT “C”
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RULES AND REGULATIONS
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31
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EXHIBIT “D”
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INTENTIONALLY OMITTED
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32
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EXHIBIT “E”
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ESTOPPEL CERTIFICATE
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33
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EXHIBIT “F”
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SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
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36
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OFFICE LEASE AGREEMENT
This Office Lease Agreement
(the “Lease”) is made this day of July, 2017, by and between RJ EQUITIES LP, a Pennsylvania limited partnership (“Landlord”)
and COGNITION THERAPEUTICS, INC., a Delaware corporation (“Tenant”).
Article
1. BASIC TERMS
For the purposes of this Lease, the following
terms shall have the meanings set forth below:
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(a)
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Landlord:
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RJ EQUITIES LP, a
Pennsylvania limited partnership
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(b)
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Tenant:
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COGNITION THERAPEUTICS, INC.,
a Delaware corporation
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(c)
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Premises:
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Suite 242 located on the
second floor of the commercial building (the “Building”) situated at 2403 Sidney Street, Pittsburgh, PA 15203 (the “Development”)
and as outlined on the Diagram of Development attached hereto as Exhibit “A”. The Premises contains approximately
1,754 rentable square feet as depicted on the floor plan attached hereto as Exhibit “B”.
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(d)
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Commencement Date:
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July 1, 2017
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(e)
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Lease Term:
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Three (3) years
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(f)
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Termination Date:
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June 30, 2020
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(g)
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Extension Term:
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Intentionally omitted.
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(h)
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Base Rent:
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$29,818.00 per year / $2,484.83
per month
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(i)
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Base Year for Real Estate Taxes:
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2017.
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(j)
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Base Year for Operating Costs:
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2017.
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(k)
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Approximate rentable area of the Premises:
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1,754.
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(1)
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Approximate rentable area of the Building:
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221,000.
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(m)
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Tenant’s Proportionate Share:
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0.79%.
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(n)
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Security Deposit:
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N/A.
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(o)
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Permitted Uses:
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Office use
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(p)
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Notification Addresses:
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Landlord:
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RJ Equities LP
2403 Sidney Street, Suite 200
Pittsburgh, PA 15203
Attn: Ronald J. Tarquinio
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Tenant:
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Cognition Therapeutics, Inc.
2403 Sidney Street, Suite 261
Pittsburgh, PA 15203
Attn: President
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Article
2. PREMISES
(a)
Office Space. Landlord, for and in consideration of the Rent (as defined below) to be paid and the covenants and agreements
to be performed by Tenant, as hereinafter set forth, does hereby lease, demise and let unto Tenant the Premises, together with a non-exclusive
license (in common with others), to use the common areas of the Building and the Development. Landlord reserves unto itself, however,
the use of the roof, exterior walls and the area above and beneath the Premises, together with the right to install, maintain, use, repair
and replace exterior windows and doors, pipes, ducts, conduits, wires and structural elements leading through the Premises in locations
and in such a manner which shall not materially or adversely interfere with Tenant’s use or occupancy thereof.
(b)
Office Furniture. Landlord herby grants a license to Tenant to use those certain existing cubicles, desks, filing cabinets, chairs
and other furniture and equipment which are currently in the Premises as of the date hereof (collectively, the “Office Furniture”).
Tenant hereby acknowledges and agrees that: (i) title and ownership of the Office Furniture shall at all times remain with Landlord,
and (ii) Tenant shall maintain and repair (and replace, if necessary) the Office Furniture during the Lease Term. Upon the expiration
or earlier termination of the Lease Term, Tenant shall return all Office Furniture in substantially the same condition as delivered to
Tenant as of the Commencement Date, normal wear and tear and damage from casualty excepted. TENANT HEREBY TAKES THE OFFICE FURNITURE
IN ITS “AS-IS, WHERE IS” CONDITION “WITH ALL FAULTS” AND SPECIFICALLY AND EXPRESSLY WITHOUT ANY WARRANTIES, REPRESENTATIONS
OR GUARANTEES, EITHER EXPRESS OR IMPLIED, AS TO ITS CONDITION, FITNESS FOR ANY PARTICULAR PURPOSE, MERCHANTABILITY, OR ANY OTHER WARRANTY
OF ANY KIND, NATURE, OR TYPE WHATSOEVER FROM OR ON BEHALF OF LANDLORD.
Article
3. TERM AND COMMENCEMENT
(a)
Term and Confirmation. The term of this Lease shall commence on the Commencement Date set forth in Article 1(d) and
end on the Termination Date set forth in Article 1(f), unless extended or sooner terminated as provided herein, subject to adjustment
as provided below and the other provisions hereof. If the Commencement Date is postponed as provided below, the Termination Date set
forth in Article 1 shall be adjusted accordingly. Tenant shall execute a confirmation of the Commencement Date and other factual
matters in such form as Landlord may reasonably request within ten (10) days after requested by Landlord following the Commencement
Date; any failure to respond within such time shall be deemed an acceptance of the matters as set forth in Landlord’s confirmation.
If Tenant disagrees with Landlord’s adjustment of the Commencement Date, Tenant shall pay Rent and perform all other obligations
commencing on the date as determined by Landlord, subject to refund or credit when the matter is resolved.
(b)
Commencement Delays. The Commencement Date, Rent and Tenant’s other obligations shall be postponed to the extent Tenant
is unable to occupy the Premises because Landlord fails to deliver possession of the Premises for any other reason, including holding
over by prior occupants. If Landlord so fails for a ninety (90) day initial grace period, Tenant shall have the right to terminate this
Lease by notice within ten (10) days. Any such delay in the Commencement Date shall not subject Landlord to liability for loss or
damage resulting therefrom, and Tenant’s sole recourse with respect thereto shall be the postponement of Rent or termination of
this Lease in accordance with the preceding sentence.
Article
4. CONSTRUCTION OF PREMISES
Tenant confirms that (1) it
has inspected the Premises and accepts the same in its existing “AS IS” condition, and (2) no repair, work, alterations
or remodeling of the Premises is required to be done by Landlord as a condition of this Lease.
Article
5. BASE RENT
(a) Base
Rent. Tenant shall pay to Landlord Base Rent, payable in advance without demand on the first day of each calendar month throughout
the Term; provided, that Tenant shall pay Base Rent for the first full calendar month for which Base Rent shall be due (and any initial
partial month) when Tenant executes and delivers this Lease.
(b) Additional
Rent. Whenever under the terms of this Lease any sum of money is required to be paid by Tenant to Landlord in addition to the Base
Rent herein reserved, and said additional amount so to be paid is not designated as “additional rent”, then said amount shall
nevertheless, at the option of Landlord, be deemed “additional rent” and collectible as such, but nothing herein contained
shall be deemed to suspend or delay the payment of any sum at the time the same becomes due and payable hereunder, or limit any other
remedy of Landlord. Nonpayment of additional rent beyond the expiration of applicable notice and/or cure periods shall constitute a default
under this Lease to the same extent, and shall entitle the Landlord to the same remedies, as nonpayment of Base Rent. Where no time limit
for payment is otherwise stated in the specific Lease provision applicable thereto, any such obligation shall be due and payable within
fifteen (15) days following Tenant’s receipt of a written statement showing in reasonable detail the basis for the amount claimed.
Base Rent and additional rent are sometimes hereinafter referred to as “Rent”.
(c)
Payments. All payments of Rent shall be paid when due without any deduction, recoupment, set-off or counterclaim (except as otherwise
set forth in this Lease) at the principal office of
the
Landlord or at such other place as Landlord may from time to time direct. No delay by Landlord in providing a statement for Rent shall
be deemed a default by Landlord or a waiver of Landlord’s right to require payment of Tenant’s obligations for any Rent due
under the terms of this Lease.
Article
6. RENT ESCALATION
(a)
Real Estate Tax Increases, Commencing on January 1, 2018, and thereafter through the term of this Lease, Tenant shall pay
to Landlord, as additional rent, Tenant’s Proportionate Share of the amount by which Real Estate Taxes incurred by Landlord during
any calendar year following the Base Year for Real Estate Taxes shall exceed the Real Estate Taxes incurred by Landlord during such Base
Year.
“Real Estate
Taxes” shall be deemed to mean the aggregate amount of taxes and assessments levied, assessed or imposed upon the
Development in which the Premises are located. For purposes hereof, Real Estate Taxes shall include, without limitation, real
estate taxes, sewer rents, water rents, assessments (special or otherwise), transit taxes, any tax or excise on rentals or
any other tax (however described) on account of rental received for use and occupancy of all or any part of the Premises,
whether such taxes are imposed by the United States of America, the Commonwealth of Pennsylvania, the county in which the
Premises is located or any local governmental municipality, authority or agency, or any other political subdivision of any
of the foregoing. Real Estate Taxes shall also include all reasonable costs and expenses (including, without limitation, legal
fees and court costs) incurred in connection with the protest or the reduction of any of the aforesaid taxes and or assessments,
up to an amount equal to the reduction of any of the aforesaid taxes resulting from such protest. If at any time during the
term hereof, a tax or excise on rents or any other tax, however described, is levied or assessed by any governmental authority
on account of the rents hereunder or the interest of Landlord or Landlord’s beneficiaries under this Lease, then such
additional tax shall be included in Real Estate Taxes. Further, any tax assessed or levied by any governmental authority in
lieu of the foregoing Real Estate Taxes shall also be included. For the purpose of determining Real Estate Taxes for any given
calendar year, the amount to be paid for such calendar year shall be (a) with respect to assessments, the amount of the
installments (and any interest) due and payable during such calendar year and (b) with respect to all other Real Estate
Taxes, the amount due and payable during such calendar year, but only to the extent properly allocable to such calendar year.
Notwithstanding anything in this Lease to the contrary, “Real Estate Taxes” shall not include (i) any capital
stock, net income, profit tax, succession, transfer, franchise, gift, estate or inheritance tax, (ii) any transfer tax or
recording charge resulting from a transfer of the Development or the Building or any interest in the Development or the Building or
(iii) any penalties, interest or fines incurred by Landlord due to nonpayment or late payment of taxes.
(b)
Operating Cost Increases. Commencing on January 1, 2018, and thereafter through the term of this Lease, Tenant shall pay
to Landlord, as additional rent, Tenant’s Proportionate Share of the amount by which Operating Costs incurred by Landlord during
any calendar year following the Base Year for Operating Costs shall exceed the Operating Costs incurred by Landlord during such Base
Year.
“Operating Costs”
shall be deemed to mean all costs and expenses of any kind or nature incurred by Landlord in any calendar year in operating, policing,
protecting, lighting, heating, air conditioning, insuring, repairing and maintaining the Building, other structures and improvements
and the land constituting or supporting the Development, all in accordance with accepted principles of sound management of similar properties,
and shall include (without limitation) all costs and expenses of operation, replacement, replacement and maintenance, including by way
of illustration and not limitation: personal property taxes and any tax in addition to or in lieu thereof, assessed against Landlord
or to be collected by
Landlord; utilities; supplies; materials; tools; insurance (including, but not limited to, commercial general liability,
casualty, business interruption, rent loss insurance and flood and earthquake insurance); licenses, permits and inspection fees; cost
of services of independent contractors (including property management fees); any tax, assessment, cost or fee incurred by Landlord in
connection with the Development from any neighborhood improvement district or similar program or initiative; cost of compensation (including
employment taxes and fringe benefits) of all persons who perform regular and recurring duties connected with day-to-day operation, maintenance
and repair of the Development, its equipment and the component interior and exterior common areas, ceilings, floors, walks, stairs, stairwells,
elevators, loading docks, trash compactor, malls and landscaped areas including janitorial, gardening, security, parking, operating engineer,
painting, plumbing, electrical, carpentry, heating, ventilation, air conditioning, window washing, signage and advertising; rental expense
or a reasonable allowance for depreciation of personal property used in such maintenance, operation and repair of the Development; those
variable costs, expenses and disbursements which Landlord reasonably determines Landlord would have incurred had the Development been
100% occupied at all times during such calendar year; and amortization of Permitted Capital Expenditures (as hereinafter defined).
Notwithstanding anything
in this Lease to the contrary, “Operating Costs” shall not include the following: costs to benefit, or relating to, a specific
tenant, such as legal and other related expenses associated with the negotiation or enforcement of leases, and any penalties or damages
from such lawsuits; costs associated with the financing or refinancing of debt or selling of the Building, the Development or any interest
therein, such as points, broker’s fees and attorney’s fees; executive salaries and compensation of employees of Landlord
above the grade of regional property manager; repairs and/or replacements which are covered by insurance claim or condemnation proceeds;
leasing commissions, legal fees, tenant allowances or fit outs (including permit, license and inspection fees), advertising costs, space
planning costs and promotional material; costs incurred by Landlord in connection with the original construction of the Building or the
correction of latent defects in construction of the Building; depreciation and amortization (except for amortization of Permitted Capital
Expenditures); costs paid to subsidiaries or affiliates of Landlord, to the extent that the costs exceed the reasonable costs that would
have been paid had the services, supplies or materials been provided by unaffiliated parties on a reasonable basis; interest on debt
or amortization payments on any mortgage or deeds of trust or any other borrowings and any ground rent; ground rents or rentals payable
by Landlord pursuant to any over-lease or any compensation paid to clerks, attendants or other persons in commercial concessions operated
by Landlord; costs incurred in managing or operating any “pay for” parking facilities within the Development; expenses resulting
from the gross negligence or willful misconduct of Landlord or its agents, employees or contractors; any fines or fees for Landlord’s
failure to comply with governmental, quasi-governmental, or regulatory agencies’ rules and regulations, or any costs or expenses
incurred by Landlord due to violation by Landlord, or Landlord’s agents, contractors or employees, of either the payment terms
and conditions of any lease or, service contract or other agreement covering the Development or Landlord’s obligations as owner
of the Development; costs for sculpture, decorations, painting or other objects of art in excess of amounts typically spent for such
items in office buildings of comparable quality in the competitive area of the Building; costs of any political, charitable or civic
contribution or donations; Capital Items, except for Permitted Capital Expenditures; costs that are properly chargeable to particular
tenants in the Development, including, without limitation, costs and expenses for providing heating and air conditioning service outside
of normal business hours and damages to the Development or any part thereof caused by the act or neglect of another tenant; costs relating
to utilities or other services to tenant spaces for which Tenant pays for such utilities or other services directly; costs properly attributable
(applying generally accepted accounting principles) to other calendar years; costs paid by Landlord if and to the extent such costs are
incurred by Landlord for any work or service furnished to any other tenant in the Development (other than Tenant) to a materially greater
extent and in a materially more favorable manner than furnished generally to the remaining tenants in the Project (including Tenant);
costs incurred with respect to preparation of income tax returns; and costs incurred in
cleaning up any environment hazard or condition in violation of any environmental law.
“Permitted Capital Expenditures” means capital expenditures and capital repairs and replacements (“Capital
Items”), provided such Capital Items (x) are necessitated by a change in law or regulation occurring after the
Commencement Date; or (y) are reasonably intended to have cost-saving benefits over the Term of the Lease. The foregoing
provision is for definitional purposes only and shall not be construed to impose any obligation upon Landlord to incur such
expenses. No item of Operating Cost shall be included more than once in any given time period and no item of expense charged to
Tenant as an Operating Cost shall be charged to Tenant as Real Estate Taxes or any other type of chargeable expense or cost. The
property management fees incurred by Landlord shall only be chargeable to Tenant to the extent such property management fees do not
exceed the property management fees incurred by other buildings of similar size and quality and located within the geographic area
in which the Development is located.
(c) Method
of Payment. Within sixty (60) days after the end of each calendar year (including the last calendar year of the term of this
Lease), Landlord shall furnish Tenant a written statement showing in reasonable detail Landlord’s Real Estate Taxes and
Operating Costs for the Base Year and the preceding calendar year and showing Tenant’s Proportionate Share of the amount of
any increase in such Real Estate Taxes and/or Operating Costs over the amount thereof for the respective Base Year. Coincidentally
with the monthly rent payment due following Tenant’s receipt of such statement, Tenant shall pay to Landlord an amount equal
to the sum of (1) Tenant’s Proportionate Share of the increase in Real Estate Taxes and Operating Costs for the preceding
calendar year over the amount thereof for the applicable Base Year; and (2) one-twelfth (1/12th) of such increases for the
current calendar year multiplied by the number of rent payments (including the current one) then elapsed in such calendar year.
Thereafter such one-twelfth (l/12th) amount shall be paid monthly with the Base Rent until subsequently adjusted in accordance with
the terms of this Article.
(d)
Tenant’s Proportionate Share. “Tenant’s Proportionate Share” of Taxes and Operating Costs shall be the
percentages set forth in Article 1, but if the rentable area of the Premises or Building shall change, Tenant’s Proportionate
Share shall thereupon become the rentable area of the Premises divided by the rentable area of the Building, subject at all times to
adjustment as provided in this Article. Tenant acknowledges that the “rentable area of the Premises” under this Lease includes
the usable area, without deduction for columns or projections, multiplied by a load or conversion factor, to reflect a share of certain
areas, which may include lobbies, corridors, mechanical, utility, janitorial, boiler and service rooms and closets, restrooms, and other
public, common and service areas. Except as provided expressly to the contrary herein, the “rentable area of the Building”
shall include all rentable area of all space leased or available for lease at the Building, which Landlord may reasonably re-determine
from time to time, to reflect re-configurations, additions or modifications to the Building.
(e)
Tax Refunds, Protest Costs, and Expense Adjustments For Prior Years. Landlord shall each year: (i) credit against Real Estate
Taxes any refunds received during such year, (ii) include in Real Estate Taxes any additional amount paid during such year, involving
an adjustment to Real Estate Taxes for a prior year, due to error by the taxing authority, supplemental assessment, or other reason,
(iii) include, in either Real Estate Taxes or Operating Costs, any fees for attorneys, consultants and experts, and other costs
paid during such year in attempting to protest, appeal or otherwise seek to reduce or minimize Real Estate Taxes, by the terms of this
Article, (iv) credit against Operating Costs the cost of any item previously included in Operating Costs, to the extent that Landlord
receives reimbursement from insurance proceeds or a third party during such year (excluding tenant payments for Real Estate Taxes and
Operating Expenses), and (v) make any other appropriate changes to reflect adjustments to Real Estate Taxes or Operating Expenses
for prior years.
(f)
Payments After Lease Term Ends. Tenant’s obligations to pay Tenant’s Proportionate Share of Real
Estate Taxes and Operating Costs (or any other amounts) accruing during, or relating to, the
period prior to expiration
or earlier termination of this Lease shall survive the expiration or termination of this Lease for a period of two (2) years. Tenant
shall pay the full amount of such estimate and any additional amount due after the actual amounts are determined, in each case within
thirty (30) days after Landlord sends a statement therefore. If the actual amount is less than the amount Tenant pays as an estimate,
Landlord shall refund the difference within thirty (30) days after such determination is made.
(g)
Audit Rights. In the event of any dispute as to the amount of Tenant’s Proportionate Share of Operating Costs
and Real Property Taxes, Tenant may, by prior written notice (“Audit Notice”) given ninety (90) days following receipt of
a Landlord’s reconciliation statement (“Audit Period”), audit Landlord’s accounting records with respect to Operating
Expenses and Real Property Taxes relative to the year to which such statement relates. The audit shall be conducted by Tenant, or an
accounting firm engaged by Tenant and reasonably satisfactory to Landlord (billing hourly and not on a contingency fee basis) (“Third
Party Auditor”), and shall be conducted at the office of Landlord at which its records are kept or, at Landlord’s election,
the office of Landlord’s property manager (if any). The audit shall be conducted at reasonable times during normal business hours.
In no event will Landlord or its property manager be required to (i) photocopy any accounting records or other items or contracts,
(ii) create any ledgers or schedules not already in existence, (iii) incur any costs or expenses relative to such inspection,
or (iv) perform any other tasks other than making available such accounting records as aforesaid. Neither Tenant nor its auditor
may leave the office of Landlord with originals of any materials supplied by Landlord. Tenant must pay Tenant’s Proportionate Share
of Operating Costs and Real Property Taxes when due pursuant to the terms of this Lease and may not withhold payment of Operating Costs,
Real Property Taxes or any other Rent pending results of the audit or during a dispute regarding Operating Costs and Real Property Taxes.
The audit must be completed within ninety (90) days of the date of Tenant’s Audit Notice and the results of such audit shall be
delivered to Landlord within forty-five (45) days of the date of Tenant’s Audit Notice. If Tenant does not substantially comply
with any of the aforementioned time frames, then the Landlord’s statement will be conclusively binding on Tenant. If such audit
or review correctly reveals that Landlord has overcharged Tenant, then within thirty (30) days after the results of such audit are made
available to Landlord, the amount of such overcharge shall be deducted from the installments of Tenant’s Share of Operating Costs
and Real Property Taxes next becoming due. If the audit reveals that Tenant was undercharged, then within thirty (30) days after the
results of the audit are made available to Tenant, Tenant agrees to reimburse Landlord the amount of such undercharge. Tenant agrees
to keep the results of the audit confidential and will cause its agents, employees and contractors to keep such results confidential.
To that end, Landlord may require Tenant and its auditor to execute a commercially reasonable confidentiality agreement provided by Landlord.
Article
7. LATE PAYMENT
A late charge of five (5%) percent shall be due
and payable forthwith on the amount of Base Rent and additional rent not received by Landlord from Tenant on or before the tenth (10th)
day after such payment was due. In addition, Tenant shall pay interest at the Lease Interest Rate (as defined below) on any sum which
is not paid when due, interest to run from the due date until such sum is paid. The “Lease Interest Rate” means four (4) percentage
points per annum above the prime rate per annum announced from time to time by PNC Bank, N.A, or its successors.
Article
8. USE OF
PREMISES
Tenant shall occupy and use the Premises
only for the Permitted Uses set forth in Article 1. Tenant shall not occupy or use the Premises for any other purpose or
business without the prior written consent of Landlord. Landlord has promulgated reasonable Rules and Regulations
(“Rules and
Regulations”), which are attached hereto, made part hereof and marked as Exhibit “C”.
Tenant acknowledges receipt of and shall observe and comply with such Rules and Regulations. Tenant further acknowledges that
Landlord, in Landlord’s reasonable discretion, may from time to time adopt, amend, establish, modify, proscribe or restate
such rules and regulations with regard to the operation of the Premises, the Building, and common areas of the Development;
provided that such rules and regulations are generally applicable to all tenants, do not materially increase the financial
burdens of Tenant and do not materially adversely affect Tenant’s rights under this Lease. In the event of any conflict
between the provisions of such rules and regulations and this Lease, the provisions of this Lease shall control.
Article
9. COMMON AREAS/PARKING
All parking areas, driveways, alleys, public
corridors and fire escapes, and other areas, facilities and improvements as may be approved by Landlord from time to time for the general
use, in common, of Tenant and other tenants, their employees, agents, invitees and licensees, shall at all times be subject to the exclusive
control and management of Landlord, and Landlord shall have the right from time to time to establish, modify and enforce reasonable rules and
regulations with respect to all such areas, facilities and improvements.
Landlord reserves the right to designate certain
parking areas for non-exclusive permitted parking for tenant’s employees, for general visitor parking, and for other designated
uses. Landlord agrees to enforce its parking regulations for the mutual benefit of Landlord and tenants of the Development. Except for
claims resulting from Landlord’s intentional or grossly negligent acts, Landlord shall not be responsible or liable for damage
or loss sustained to motor vehicles (including any contents) parked in the Development.
Article
10. ALTERATIONS
(a)
Tenant shall not make any alterations, improvements or additions to the Premises or attach any fixtures or equipment
thereto, without the Landlord’s prior written approval, not to be unreasonably withheld. All alterations, improvements or additions
made to the Premises or the attachment of any fixtures or equipment thereto shall be performed at Tenant’s sole cost and expense.
Tenant may affix pictures and shelving to the walls without Landlord’s consent.
(b) All
alterations, improvements or additions to the Premises made by Tenant shall be deemed to have been attached to the Premises and to
have become the property of Landlord upon such attachment, and upon expiration of this Lease or renewal term thereof, Tenant
shall not remove any of such alterations, improvements or additions; provided, however, that Landlord may designate by written
notice to Tenant at the time Tenant requests consent those alterations and additions which shall be removed by Tenant at the
expiration or termination of this Lease, and Tenant shall properly remove the same and repair any damage to the Premises caused
by such removal. Notwithstanding anything in this Lease to the contrary, all furniture, trade fixtures and equipment installed by or
for Tenant may be removed by Tenant at any time.
(c)
In performing such alterations, improvements or additions, or in the removal thereof, Tenant shall use due care
to cause as little damage or injury as possible to the Premises and the Building and shall repair all damage or injury that may occur
to the Premises or the Building as a result thereof.
(d)
Tenant agrees in doing any such work in or about the Premises to engage only such labor as will not conflict with or cause
strikes or other labor disturbances among the Development service employees of Landlord. Any contractors employed by Tenant shall be
subject to Landlord’s prior written
approval, not to be unreasonably withheld. All such contractors shall be required
to carry worker’s compensation insurance, commercial general liability insurance and property damage insurance in amounts, form
and content, and with companies reasonably satisfactory to Landlord.
(e)
Prior to the commencement by Tenant of any work as set forth in this Article, Tenant shall obtain, at Tenant’s
sole cost and expense, all necessary permits, authorizations and licenses required by the various governmental authorities having jurisdiction
over the Premises.
Article
11. MECHANIC’S LIENS
If any mechanics’ or other lien shall be
filed against the Premises or the Development purporting to be for labor or material furnished or to be furnished at the request of Tenant,
then Tenant shall at its expense cause such lien to be discharged by payment, bond or otherwise within thirty (30) days after notice
of filing thereof. As an alternative to causing the lien to be discharged of record, Tenant shall have the right to contest the validity
of any lien or claim if Tenant shall first have posted a bond or other security reasonably satisfactory to Landlord (such as an undertaking
with Landlord’s title company to insure that, upon final determination of the validity of such lien or claim, Tenant shall immediately
pay any judgment rendered against Tenant). If Tenant shall fail to take such action within such thirty (30) day period, Landlord may
cause such lien to be discharged by payment, bond or otherwise, without investigation as to the validity thereof or as to any offsets
or defenses thereto and Tenant shall, upon demand, reimburse Landlord for all amounts paid and costs incurred including reasonable attorney’s
fees, in having such lien discharged of record. Tenant shall indemnify and hold Landlord harmless from and against any and all claims,
costs, damages, liabilities and expenses (including reasonable attorney’s fees) which may be brought or imposed against or incurred
by Landlord by reason of any such lien or its discharge.
Article
12. CONDITION OF PREMISES
Tenant acknowledges and agrees that, except
as expressly set forth in this Lease, there have been no representations or warranties made by or on behalf of Landlord with respect
to the Building, the Office Furniture, Premises or the Development or with respect to the suitability of any of them for the
conduct of Tenant’s business. The taking of possession of the Premises by Tenant shall conclusively establish that the
Premises were at such time in satisfactory condition, order and repair, subject to latent defects which a reasonable inspection of
the Premises would not disclose.
Article
13. UTILITIES AND SERVICES
(a)
Utilities: Separately metered electric and gas service shall be made available to the Premises. Tenant shall
pay for the cost of such utility services directly to the utility provider or to the Landlord, as the case may be.
(b)
Building Services: Landlord shall provide the following to the Premises, the Building or the Development,
as applicable:
1)
Water and sewage for the Permitted Use;
2)
Replacement standard light globes and/or standard fluorescent tubes and ballasts in
the standard ceiling lighting fixtures;
3)
HVAC, including maintenance of HVAC equipment and systems;
4)
Passenger and freight elevator service and maintenance and repair;
5)
Hot and cold water for drinking, lavatory and toilet purposes at those points of supply
provided for nonexclusive general use of tenants of the Building, and points of supply in the Premises installed by or with Landlord’s
consent for the exclusive use of Tenant;
6)
Maintenance and repair of interior common areas of the Building, including the public
restrooms in the Building; and
7)
Maintenance and repair of exterior common areas of the Development, including but not
limited to cleaning of outside exterior windows and doors, snow removal and landscaping.
(c) Landlord
does not warrant that the utilities or services provided for in this Article shall be free from slow-down, interruption or
stoppage pursuant to voluntary agreement by and between Landlord and governmental bodies and regulatory agencies, or caused
by the maintenance, repair, substitution, renewal, replacement or improvements of any of the equipment involved in the
furnishing of any such utilities or services or caused by strikes, lockouts, labor controversies, fuel shortages, accidents,
acts of God or the elements or any other cause beyond the reasonable control of Landlord; and specifically, no such slow-down,
interruption or stoppage of any of such services shall be construed as an eviction, actual or constructive, of Tenant,
nor shall same cause any abatement of Base Rent or additional rent payable hereunder or in any manner or for any purpose relieve
Tenant from any of Tenant’s obligations hereunder, unless same shall make a material portion of the Premises untenantable
for a period of three (3) consecutive business days at which point Base Rent shall be abated until such time as the Premises
are no longer untenantable, and in no event shall Landlord be liable for damages to persons or property or be in default hereunder
as a result of such interruption or stoppage of service. Should said disruption of service or utilities cause significant
interference with Tenant’s business for a period of sixty (60) days, Tenant shall have the right to terminate this Lease by
written notice to Landlord. Landlord shall provide Tenant with reasonable advance notice of any anticipated interruptions in utility
or Building services, and Landlord shall use reasonable efforts to minimize disruption of Tenant’s use and occupancy in
connection therewith.
Article
14. ASSIGNMENT AND SUBLETTING
Tenant shall not assign this Lease or sublet
the Premises, (whether by operation of law or voluntary agreement) in whole or in part, without the Landlord’s prior written consent,
not to be unreasonably withheld. In case of any assignment or subletting, Tenant shall remain primarily liable on this Lease and shall
not be released from the performance of any of the terms, covenants and conditions hereof.
Notwithstanding the foregoing, Tenant may assign
this Lease, or sublet the Premises or any portion thereof to an affiliate controlling, controlled by or under common control with Tenant,
without Landlord consent, but with notice thereof to Landlord. Tenant may sublet all or a portion of the Premises without prior consent
to third parties and entities related to Tenant either through affiliated or commercial relationships for office use. Any license, assignment,
subleasing or other occupancy agreement shall be subject to all terms, covenants and conditions of this Lease and no license, assignment,
subleasing or other occupancy agreement shall relieve Tenant of any liability hereunder. Upon Landlord’s request, Tenant shall
provide Landlord with copies of all reasonable documentation related to any license, assignment, sublease, or other occupancy agreement
and Tenant shall require any permitted licensee, assignee, sublicensee, or other
occupant to obtain and maintain commercially reasonable
insurance naming Landlord as additional insured. Tenant shall provide copies evidencing such insurance to Landlord upon Landlord’s
request.
Article
15. RIGHTS RESERVED BY LANDLORD
Except to the extent expressly limited herein,
Landlord reserves full rights to control the Development, the Building and the Premises (which rights may be exercised without subjecting
Landlord to claims for constructive eviction, abatement of Rent, damages or other claims of any kind), including more particularly, but
without limitation, the following rights for Landlord, its employees or agents; provided however, Landlord shall use commercially reasonable
efforts to exercise such rights in a manner that will first attempt to minimize interference with Tenant’s use and occupancy of
the Premises:
(a) Access
to Premises. To enter the Premises in order to inspect, supply cleaning service or other services to be provided Tenant
hereunder, show the Premises to current and prospective lenders, insurers, purchasers, tenants, brokers and governmental
authorities, and perform any work or take any other actions reserved to Landlord under this Lease or applicable laws. However,
Landlord shall: (i) provide reasonable advance written or oral notice to Tenant’s on-site manager or other appropriate
person (except in emergencies), (ii) take reasonable steps to minimize any significant disruption to Tenant’s business,
and following completion of any work, return Tenant’s leasehold improvements, fixtures, property and equipment to the original
locations and condition to the fullest extent reasonably possible, and (iii) take reasonable steps to avoid materially changing
the configuration or reducing the square footage of the Premises, unless required by laws or other causes beyond Landlord’s
reasonable control (and in the event of any permanent reduction, the Rent and other rights and obligations of the parties based on
the square footage of the Premises shall be proportionately reduced). Tenant shall not place partitions, furniture or other
obstructions in the Premises which may prevent or impair Landlord’s access to the systems and equipment for the Building or
the systems and equipment for the Premises. If Tenant requests that any such access occur before or after Landlord’s regular
business hours and Landlord approves, Tenant shall pay all overtime and other additional costs in connection therewith.
(b)
Changes to the Development. To: (i) paint and decorate, (ii) perform repairs or maintenance, and
(iii) make replacements, restorations, renovations, alterations, additions and improvements, structural or otherwise in and to the
Development or any part thereof, including any adjacent building, structure, facility, land, street or alley, or change the uses thereof
(including changes, reductions or additions of corridors, entrances, doors, lobbies, parking facilities and other areas, structural support
columns and shear walls, utility lines, pipes, duct work, cables, installations, docks, walks, elevators, stairs, solar tint windows
or film, planters, sculptures, displays, and other amenities and features therein, and changes relating to the connection with or entrance
into or use of the Building or any other adjoining or adjacent building or buildings, now existing or hereafter constructed). In connection
with such matters, Landlord may among other things erect scaffolding, barricades and other structures, open ceilings, close entry ways,
restrooms, elevators, stairways, corridors, parking and other areas and facilities, and take such other actions as Landlord deems appropriate.
Article
16. REPAIRS
(a)
Subject to the provisions of Article 6 hereof, Landlord shall perform all maintenance and make all repairs or replacement
necessary to maintain the structural, plumbing, HVAC and electrical systems (including replacement of light bulbs, ballasts and fixtures),
exterior doors and windows, roof, exterior walls, demising walls and floor (but excluding interior ceiling, wall and floor finishes),
common areas and utility lines and connections servicing the Premises, the Building or the Development in good
order and condition.
Landlord shall commence such repairs as promptly as the circumstances reasonably permit and thereafter shall diligently pursue the same
to completion with reasonable promptness. Notwithstanding anything contained in this Lease to the contrary, Tenant shall be responsible,
at its sole cost and expense, for any maintenance, repairs and replacements made by the Landlord which are necessitated by the negligent
acts, misuse or willful misconduct of Tenant, its agents, contractors, employees or invitees.
(b)
Except as the Landlord is obligated for repairs as provided hereinabove, Tenant shall make at Tenant’s sole
cost and expense, all repairs necessary to maintain the Premises and shall keep the Premises and the fixtures therein in neat, clean,
safe and orderly condition. In addition, and notwithstanding anything contained in this Lease to the contrary, the Tenant shall, at its
sole cost and expense, maintain, repair and replace all lab equipment contained in the lab space portion of the Premises, including without
limitation all water treatment systems and vacuum equipment. If the Tenant refuses or neglects to make such repairs, or fails to diligently
prosecute the same to completion, after written notice from Landlord of the need therefore, Landlord may make such repairs at the expense
of Tenant and such expense, along with a fifteen (15%) percent service charge, shall be collectible as additional rent.
(c)
Landlord shall not be liable by reason of any injury to or interference with Tenant’s business arising from
the making of any repairs in accordance with this Article 16 in or to the Premises or the Building and Development or to any appurtenances
or equipment therein; provided that Landlord shall interfere as little as reasonably practicable with the conduct of Tenant’s business
in the performance of the foregoing. There shall be no abatement of Rent because of such repairs, except as provided in Article 20
hereof.
Article
17. INDEMNIFICATION AND INSURANCE
(a)
Indemnification.
(i)
Tenant shall indemnify, hold harmless and defend Landlord from and against any and
all costs, expenses (including reasonable counsel fees), liabilities, losses, damages, suits, actions, fines, penalties, claims or demands
of any kind and asserted by or on behalf of any person or governmental authority, arising out of or in any way connected with, and Landlord
shall not be liable to Tenant on account of, (i) any failure by Tenant to perform any of the agreements, terms, covenants or conditions
of this Lease required to be performed by Tenant, (ii) any failure by Tenant to comply with any statutes, ordinances, regulations
or orders of any governmental authority applicable to Tenant’s occupancy and use of the Premises, or (iii) any accident, death
or personal injury, or damage to or loss or theft of property, which shall occur in or about the Premises, except to the extent caused
by the negligence or willful misconduct of Landlord, its agents, employees or contractors.
(ii)
Landlord shall indemnify, hold harmless and defend Tenant from and against any and
all costs, expenses (including reasonable counsel fees), liabilities, losses, damages, suits, actions, fines, penalties, claims or demands
of any kind and asserted by or on behalf of any person or governmental authority, arising out of or in any way connected with, (i) any
failure by Landlord to perform any of the agreements, terms, covenants or conditions of this Lease required to be performed by Landlord,
or (ii) the negligence or willful misconduct of Landlord or its agents, employees or contractors.
(b) Required
Insurance. Tenant shall maintain at its expense during the term with respect to the Premises and Tenant’s use thereof and of
the Building:
(i)
Worker’s compensation insurance in the amounts required by statute, and Employer
Liability Insurance in at least the following amounts: (a) Bodily Injury by Accident - $500,000 per accident, (b) Bodily Injury
by Disease - $500,000 per employee and (c) Aggregate Limit - $1,000,000 per policy year.
(ii)
Property Damage Insurance for the protection of Tenant and Landlord, as their interest
may appear, covering all risks of physical loss to Tenant’s alterations or improvements, personal property, business records, fixtures
and equipment in amounts not less than the full insurable replacement cost of such property and full insurable value of such other interests
of Tenant, such policies to be in form reasonably satisfactory to Landlord.
(iii)
Commercial general liability insurance in form reasonably satisfactory to Landlord
with limits of at least the following amounts: (a) death or bodily injury - $2,000,000, (b) property damage or destruction
(including loss of use thereof) - $2,000,000 per policy year. Such policy shall include endorsements: (1) for contractual liability
covering Tenant’s indemnity obligations under this Lease, and (2) for adding Landlord, Landlord’s mortgagee, the management
company for the Development, and other parties designated by Landlord, as additional insureds.
(c)
Certificates, Subrogation and Other Matters. Tenant shall provide Landlord with certificates evidencing the
coverage required hereunder prior to the Commencement Date, or Tenant’s entry to the Premises for construction of improvements
or any other purpose (whichever first occurs). Such certificates shall state that such insurance coverage may not be changed, canceled
or non-renewed without at least thirty (30) days’ prior written notice to Landlord. Tenant shall provide renewal certificates to
Landlord at least ten (10) days prior to expiration of such policies. Tenant’s insurance policies shall be primary to all
policies of Landlord and any other additional insureds (whose policies shall be deemed excess and noncontributory). All insurance required
hereunder shall be provided by responsible insurers licensed in the Commonwealth of Pennsylvania, and shall have a general policy holder’s
rating of at least A and a financial rating of at least X in the then current edition of Best’s Insurance Reports. The parties
mutually hereby waive all rights and claims against each other for all losses covered by their respective insurance policies, and waive
all rights of subrogation for their respective insurers. The parties agree that their respective insurance policies are now, or shall
be, endorsed such that said waiver of subrogation shall not affect the right of the insured to recover thereunder. Landlord disclaims
any representations as to whether the foregoing coverages will be adequate to protect Tenant.
(d)
Landlord Insurance. At all times during the Lease Term, Landlord agrees to maintain in force and effect (i) all-risk
fire and extended coverage insurance on the Building, and (ii) commercial general liability insurance with limits and deductibles
consistent with those maintained by owners of similarly situated buildings in the vicinity of the Building.
Article
18. LANDLORD’S LIABILITY
Except for claims arising from the negligent
acts or willful misconduct of Landlord or its agents, employees or contractors, Tenant waives all claims against Landlord and Landlord’s
partners, members, agents and employees for injury or death to persons, damage to property or any other interest of Tenant sustained
by Tenant or a party claiming by or through Tenant resulting from: (a) any defect in or failure of structural, plumbing, sprinkling,
electrical, heating or air conditioning systems or equipment, or any other systems and equipment of the Premises or the Building or from
the drains, pipes, plumbing or sewer; (b) broken glass; (c) any acts or omissions of the other tenants or occupants of the
Building or of nearby buildings; (d) any acts or omissions of other persons; (e) damage or loss sustained to motor vehicles
(including any contents) parked at or operating within the Development, from any cause; and (f) theft, Act of God, public enemy,
injunction, riot, strike, insurrection, war, court order, or any order of any governmental authorities having jurisdiction over the Premises.
Article
19. COMPLIANCE WITH INSURANCE REQUIREMENTS
Tenant agrees that Tenant will not do or suffer to be done, any act,
matter or thing, objectionable to the fire insurance companies whereby the fire insurance or any other insurance now in force or hereafter
to be placed on the Premises or any part thereof, or on the Building of which the Premises may be a part, shall become void or suspended,
or whereby the same shall be rated as a more hazardous risk than at the date when Tenant receives possession hereunder. In case of a
breach of this covenant, in addition to all other remedies of Landlord hereunder, Tenant agrees to pay to Landlord as additional rent,
any and all increases in premiums on insurance carried by Landlord on the Premises or any part thereof, or on the Building of which the
Premises may be a part, caused in any way by the occupancy of Tenant. Notwithstanding the foregoing, Landlord acknowledges that the Permitted
Use shall not constitute a breach of this Article 19.
Article
20. FIRE OR OTHER CASUALTY
(a) If
the Building and/or Premises are damaged by fire or any other cause to such extent that the same cannot be restored, as reasonably estimated
by Landlord, within one hundred twenty (120) days after the date of such damage or destruction, then Landlord shall, no later than the
sixtieth (60th) day following the damage, give Tenant notice of Landlord’s election either to (a) restore the Building and
Premises or (b) terminate this Lease. In the event Landlord elects to terminate this Lease, the Lease shall terminate on the earlier
of the date of such notice or the date upon which Tenant surrenders possession of the Premises. In such event, the Rent and other charges
due hereunder shall be apportioned as of the date of such casualty, and any Rent paid for any period beyond said date shall be repaid
to Tenant. If the time of restoration as estimated by Landlord shall be less than one hundred twenty (120) days, or if Landlord does
not elect to terminate this Lease, as hereinabove provided, Landlord shall restore the Building and the Premises, and Tenant shall have
not right to terminate this Lease except as herein provided. Tenant shall, in such event, restore fixtures and improvements owned by
Tenant to the original condition. Notwithstanding the foregoing, however, if the time of restoration as reasonably estimated by Landlord
exceeds one hundred twenty (120) days, Tenant shall have the right to terminate this Lease upon written notice given to Landlord within
thirty (30) days after the date of Landlord’s notice of the estimated restoration period. Landlord shall deliver notice of the
estimated restoration period within sixty (60) days after the date of the casualty.
(b) In
any such case in which use of the Premises is affected by any damage thereto, there shall be an abatement or an equitable reduction in
Rent, depending on the period for which, and the extent to which, the Premises is not reasonably usable for the purposes for which it
is leased hereunder. If the damage results from the fault of Tenant, or Tenant’s agents, servants, visitors or licensees, Tenant
shall not be entitled to any abatement or reduction of Rent up to the amount of the deductible paid by Landlord.
Article
21. SUBORDINATION
This Lease shall be subject and subordinate to
the lien of any mortgage, or renewals, modifications, consolidations, replacements or extensions thereof, which now or hereafter may
affect the Premises. Tenant shall, at Landlord’s request, execute such agreements and other instruments as Landlord or any mortgagee
of the Premises reasonably shall deem necessary or desirable to subordinate this Lease to the lien of any
present or future mortgage,
mortgages or construction loans against the Premises. The subordination of this Lease shall be subject to any current or future mortgage
holder(s) agreement not to disturb Tenant’s occupancy so long as Tenant is not then in default of this Lease. Tenant specifically
approves and, upon Landlord’s request, agrees to execute an Estoppel Certificate and a Subordination, Nondisturbance and Attornment
Agreement substantially in the forms attached hereto as Exhibits “E” and “F”, respectively.
Article
22. CONDEMNATION
(a) In
the event the Premises, or any part thereof, shall be taken or condemned permanently or temporarily for any public or quasi-public use
or purpose by any competent authority in appropriation proceedings or by any right of eminent domain, the entire compensation award therefore,
including leasehold, reversion and fee, shall belong to the Landlord without any deduction therefrom for any present or future estate
of Tenant. Tenant shall, however, be entitled to claim, prove and receive in such condemnation proceedings such award as may be allowed
for fixtures and other equipment installed by it, and for moving expenses, but only if such award shall be in addition to the award to
Landlord.
(b) If
the entire Building shall be so taken by virtue of eminent domain, this Lease shall terminate on the date when title vests pursuant to
such taking, and the Rent and other charges hereunder shall be apportioned as of said date, and any Rent paid for any period beyond said
date shall be repaid to Tenant.
(c) If
more than twenty percent (20%) of the floor area comprising the Premises shall be so taken, or if a portion of the Building or
Development is taken which materially interferes with Tenant’s use of the Premises, either party shall have the right to
cancel and terminate this Lease as of the date of such taking, upon giving notice to the other party within thirty (30) days
after notice to Tenant from Landlord or the condemning authority that such Premises are to be appropriated or taken. In the event
that this Lease is not terminated as herein provided, this Lease shall continue, with an equitable and proportionate adjustment,
effective on the date of taking, in Rent and other charges due hereunder based upon the reduction in floor area.
Article
23. ESTOPPEL CERTIFICATES
Tenant shall, at any time and from time to time,
upon thirty (30) days written request by Landlord, execute, acknowledge and deliver to Landlord a statement in writing duly executed
by Tenant (i) certifying that this Lease is in full force and effect without modification or amendment (or, if there have been any
modifications or amendments, that this Lease is in full force and effect as modified and amended and setting forth in full all modifications
and amendments), (ii) certifying the dates to which Base Rent and additional rent have been paid, and (iii) either certifying
that to the knowledge of Tenant no default exists under this Lease or specifying each such default, and (iv) certifying such other
matters as Landlord and/or any lender may reasonably request; it being the intention and agreement of Landlord and Tenant that any such
statement by Tenant may.be relied upon by a prospective purchaser or a prospective mortgagee of the Building, or current mortgagee of
the Building, or by others, in any matter affecting the Premises.
Article
24. DEFAULT
The occurrence of any of
the following events shall constitute a default by Tenant under this Lease:
(a) Failure
of Tenant to take possession of the Premises within thirty (30) days following the Commencement Date;
(b) A
failure by Tenant to pay any installment of Base Rent hereunder within seven (7) days after the due date or a failure to pay any
such other sum herein required to be paid by Tenant within thirty (30) days after written notice thereof;
(c) An
abandonment of the Premises by Tenant;
(d) An
assignment of this Lease or subletting of the Premises in violation of this Lease;
(e) A
failure by Tenant to pay, when due, any installment of Rent hereunder on two (2) or more occasions within any period of twelve (12)
consecutive months;
(f) The
failure by Tenant to maintain insurance as required by the provisions of Article 17 hereof;
(g) A
failure by Tenant to observe and perform any other material provision or covenant of this Lease to be observed or performed by Tenant,
where such failure continues for thirty (30) days after written notice thereof from Landlord to Tenant;
(h) The
filing of a petition by or against Tenant for adjudication as a bankrupt or insolvent or for reorganization or for the appointment pursuant
to any local, state or federal bankruptcy or insolvency law of a receiver or trustee of Tenant’s property; or an assignment by
Tenant for the benefit of creditors; or the taking possession of the property of Tenant by any local, state or federal governmental officer
or agency or court-appointed official for the dissolution or liquidation of Tenant or for the operating, either temporary or permanently,
of Tenant’s business, provided, however, that if any such action is commenced against Tenant the same shall not constitute a default
if Tenant causes the same to be dismissed within sixty (60) days after the filing of same; or
(i) A
default or breach by Tenant beyond the expiration of applicable notice and/or cure periods under any other lease with Landlord in connection
with the Building.
Article
25. PROVISIONS RELATED TO LANDLORD’S REMEDIES
(a) Remedies.
Upon the occurrence of any event of default set forth above and the expiration of any applicable notice and grace period, Landlord shall
have the rights and remedies hereinafter set forth to the extent permitted by law, which shall be distinct, separate and cumulative with
and in addition to any other right or remedy allowed under law or any other provision of this Lease:
(1) Landlord
may terminate this Lease and Tenant’s right of possession, reenter and repossess the Premises by detainer suit, summary proceedings
or other lawful means, and recover from Tenant: (i) any unpaid Rent as of the termination date; (ii) the amount by which: (a) any
unpaid Rent which would have accrued after the termination date during the balance of the term exceeds (b) the reasonable rental
value of the Premises under a lease substantially similar to this Lease, taking into account among other things the condition of the
Premises, market conditions and the period of time the Premises may reasonably remain vacant before Landlord is able to re-lease the
same to a suitable replacement tenant, and Costs of Reletting (as defined in Paragraph (g) below) that Landlord may incur in order
to enter such replacement lease, (iii) any other amounts necessary to compensate Landlord for all damages proximately caused by
Tenant’s failure to perform its obligations under this Lease, but excluding consequential, indirect
or special damages. For purposes
of computing the amount of rent herein that would have accrued after the termination date, Tenant’s obligations for Real Estate
Taxes and Operating Costs shall be projected based upon the average rate of increase in such items from the Commencement Date through
the termination date (or if such period shall be less than three years, then based on Landlord’s reasonable estimates). The amounts
computed in accordance with the foregoing subclauses (a) and (b) shall both be discounted in accordance with accepted financial
practice at the rate of four (4%) percent per annum to the then present value.
(2) Landlord
may terminate Tenant’s right of possession, reenter and repossess the Premises by detainer suit, summary proceedings or other
lawful means, without terminating this Lease, and recover from Tenant: (i) any unpaid Rent as of the date possession is
terminated, (ii) any unpaid rent which thereafter accrues during the term from the date possession is terminated through
the time of judgment (or which may have accrued from the time of any earlier judgment obtained by Landlord), less any consideration
received from replacement tenants as further described and applied pursuant to Paragraph (g) below, and (iii) any other
amounts necessary to compensate Landlord for all damages proximately caused by Tenant’s failure to perform its obligations
under this Lease, including all Costs of Reletting, but excluding consequential, indirect or special damages. Tenant shall pay any
such amounts to Landlord as the same accrue or after the same have accrued from time to time upon demand. At any time after
terminating Tenant’s right to possession as provided herein, Landlord may terminate this Lease as provided in clause
(1) above by notice to Tenant, and Landlord may pursue such other remedies as may be available to Landlord under this Lease or
applicable law.
(b) Reletting.
If this Lease or Tenant’s right to possession is terminated or Tenant abandons the Premises, Landlord may: (i) enter and secure
the Premises, change the locks, install barricades, remove any improvements, fixtures or other property of Tenant therein, perform any
decorating, remodeling, repairs, alterations, improvements or additions and take such other actions as Landlord shall determine in Landlord’s
sole discretion to prevent damage or deterioration to the Premises or prepare the same for reletting, and (ii) relet all or any
portion of the Premises (separately or as part of a larger space), for any rent, use or period of time (which may extend beyond the term
hereof), and upon any other terms as Landlord shall determine in Landlord’s sole discretion, directly or as Tenant’s agent.
The consideration received from such reletting shall be applied pursuant to the terms of Paragraph (g) hereof, and if such consideration,
as so applied, is not sufficient to cover all Rent and damages to which Landlord may be entitled hereunder, Tenant shall pay any deficiency
to Landlord as the same accrues or after the same has accrued from time to time upon demand, subject to the other provisions hereof.
(c) Specific
Performance. Landlord shall at all times have the right without prior demand or notice except as required by applicable law to: (i) seek
any declaratory, injunctive or other equitable relief, and specifically enforce this Lease or restrain or enjoin a violation of any provision
hereof, and Tenant hereby waives any right to require that Landlord post a bond or other security in connection therewith, and (ii) sue
for and collect any unpaid Rent which has accrued.
(d) Returned
Checks. If Landlord receives two (2) or more checks from Tenant which are returned by Tenant’s bank for insufficient funds,
Landlord may require that all checks thereafter be bank certified or cashier’s checks (without limiting Landlord’s other
remedies). All bank service charges resulting from any returned checks shall be borne by Tenant.
(e) Landlord’s
Cure of Tenant Defaults. If Tenant fails to perform any obligation under this Lease for five (5) days after notice thereof by
Landlord (except that no notice shall be required in emergencies), Landlord shall have the right (but not the duty), to perform such
obligation on behalf and for the account of Tenant. In such event, Tenant shall reimburse Landlord upon demand, as additional rent, for
all expenses reasonably incurred by Landlord in performing such obligation together with an amount equal
to fifteen (15%) percent thereof
for Landlord’s overhead, and interest thereon at the Lease Interest Rate from the date of demand. Landlord’s performance
of Tenant’s obligations hereunder shall not be deemed a waiver or release of Tenant therefrom.
(f) Intentionally
Omitted.
(g) Other
Matters. No re-entry or repossession, repairs, changes, alterations and additions, reletting, or any other action or omission by
Landlord shall be construed as an election by Landlord to terminate this Lease or Tenant’s right to possession, nor shall the same
operate to release Tenant in whole or in part from any of Tenant’s obligations hereunder, unless express notice of such intention
is sent by Landlord to Tenant. Landlord may bring suits for amounts owed by Tenant hereunder or any portions thereof, as the same accrue
or after the same have accrued, and no suit or recovery of any portion due hereunder shall be deemed a waiver of Landlord’s right
to collect all amounts to which Landlord is entitled hereunder, nor shall the same serve as any defense to any subsequent suit brought
for any amount not therefor reduced to judgment. Landlord may pursue one or more remedies against Tenant and need not make an election
of remedies except as required by applicable law. All rent and other consideration paid by any replacement tenants shall be applied at
Landlord’s option: (i) first, to the Costs of Reletting, (ii) second, to the payment of all costs of enforcing this Lease
against Tenant or any guarantor, (iii) third, to the payment of all interest and service charges accruing hereunder, (iv) fourth,
to the payment of Rent theretofore accrued, and (v) with the residue, if any, to be held by Landlord and applied to the payment
of Rent and other obligations of Tenant as the same become due (and with any remaining residue to be retained by Landlord). “Costs
of Reletting” shall include without limitation, all costs and expenses incurred by Landlord for any repairs or other matters described
in Paragraph (b) above, brokerage commissions, advertising costs, attorneys’ fees, any economic incentives given to enter
leases with replacement tenants, and costs of collecting rent from replacement tenants. Landlord shall be under no obligation to observe
or perform any provision of this Lease on its part to be observed or performed which accrues while Tenant is in default hereunder. The
times set forth herein for the curing of defaults by Tenant are of the essence of this Lease.
Article
26. LANDLORD’S DEFAULT; RIGHT TO CURE
(a) If
Landlord shall fail to perform any obligation under this Lease required to be performed by Landlord, Landlord shall not be deemed to
be in default hereunder nor subject to any claims for damages of any kind, unless such failure shall have continued for a period of thirty
(30) days after written notice thereof by Tenant (provided, if the nature of Landlord’s failure is such that more time is reasonably
required in order to cure, Landlord shall not be in default if Landlord commences to cure within such thirty (30) day period and thereafter
diligently seeks to cure such failure to completion).
(b) Upon
the occurrence of any event of default by Landlord after the expiration of any applicable cure and grace period, Tenant shall have all
rights and remedies to the extent permitted by law or in equity, which be distinct, separate and cumulative to the extent permitted by
law.
Article
27. WAIVER
The failure or delay on the part of Landlord
or Tenant to enforce or exercise at any time any of the provisions, rights or remedies in the Lease shall in no way be construed to be
a waiver thereof, nor in any way to affect the validity of this Lease or any part hereof, or the right of the Landlord or Tenant to thereafter
enforce each and every such provision, right or remedy. No waiver of any breach of this Lease shall be held to be a waiver of any other
or subsequent breach. The receipt by Landlord of lesser amount than the Rent
due at a time when the rent is in default under this Lease
shall not be construed as a waiver of such default. The receipt by Landlord of a lesser amount than the Rent due shall not be construed
to be other than a payment on account of the Rent then due, nor shall any statement on Tenant’s check or any letter accompanying
Tenant’s check be deemed an accord and satisfaction and Landlord may accept such payment without prejudice to Landlord’s
right to recover the balance of the rent due or to pursue any other remedies provided in this Lease. No act or thing done by Landlord
or Landlord’s agents or employees during the term of this Lease shall be deemed an acceptance of a surrender of the Premises, and
no agreement to accept such a surrender shall be valid unless in writing and signed by Landlord.
Article
28. UTILITY DEREGULATION
Landlord has advised Tenant that various utility
companies (each to be referred to herein as a “Current Service Provider”) are the utility companies selected by Landlord
to provide service for the Development. Notwithstanding the foregoing, if permitted by law, Landlord shall have the right at any time
and from time to time during the term of this Lease to either contract for service from a different company or companies providing service
(each such company shall hereinafter be referred to as an “Alternate Service Provider”) or continue to contract for service
from the Current Service Provider.
Tenant shall cooperate with Landlord, the Current
Service Providers, and any Alternate Service Provider as reasonably necessary, and shall allow Landlord, the Current Service Providers,
and any Alternate Service Provider reasonable access to the Building’s lines, feeders, risers, wiring, and other machinery within
the Premises.
Unless caused by the willful misconduct or negligence
of Landlord, its agents or employees, Landlord shall in no way be liable or responsible for any loss, damage, or expense that Tenant
may sustain or incur by reason of any failure, interference, disruption, or defect in the supply of utility services furnished to the
Premises, or of any change in the quality or character of the utility services supplied by the Current Service Providers or any Alternate
Service Provider, and no such change, failure, defect, unavailability, or unsuitability shall constitute an actual or constructive eviction,
in whole or in part, or entitle Tenant to any abatement or diminution of rent, or relieve Tenant from any of its obligations under this
Lease.
Article
29. TELECOMMUNICATIONS
(a) Telephone
Lines. Subject to Landlord’s continuing right of supervision and approval (not to be unreasonably withheld), and the other
provisions hereof, Landlord shall: (i) install telephone lines (“Lines”) connecting the Premises to Landlord’s
terminal block on the floor or floors on which the Premises are located, or (ii) use such Lines as may currently exist and already
connect the Premises to such terminal block. Landlord’s predecessor or independent contractor has heretofore connected such terminal
block through riser system Lines to Landlord’s main distribution frame (“MDF”) for the Property. Landlord disclaims
any representations, warranties or understandings concerning the capacity, design or suitability of Landlord’s riser Lines, MDF
or related equipment. If there is, or will be, more than one tenant on any floor, at any time, Landlord may allocate, and periodically
reallocate, connections to the terminal block based on the proportion of square feet each tenant occupies on such floor, or the type
of business operations or requirements of such tenants, in Landlord’s reasonable discretion. Landlord may arrange for an independent
contractor to review Tenant’s request for approval hereunder, monitor or supervise Tenant’s installation, connection and
disconnection of Lines, and provide other such services, or Landlord may provide the same.
(b) Installation.
Landlord shall install Tenant’s Lines and make connections and disconnection at the terminal blocks as described above, and Landlord
shall use an experienced and qualified contractor.
(c) Limitation
of Liability. Unless due solely to Landlord’s intentional misconduct or negligent acts, Landlord shall have no liability for
damages arising, and Landlord does not warrant that the Tenant’s use of the Lines will be free, from the following (collectively
called “Line Problems”): (i) any eavesdropping, wire-tapping or theft of long distance access codes by unauthorized
parties, (ii) any failure of the Lines to satisfy Tenant’s requirements, or (iii) any capacitance, attenuation, cross-talk
or other problems with the Lines, any misdesignation of the Lines in the MDF room or wire closets, or any shortages, failures, variations,
interruptions, disconnections, loss or damage caused by or in connection with the installation, maintenance, replacement, use or removal
of any other Lines or equipment at the Development by or for other tenants at the Development, by any failure of the environmental conditions
at or the power supply for the Development to conform to any requirements of the Lines or any other problems associated with any Lines
or by any other cause. Unless due solely to Landlord’s willful misconduct or negligent acts, under no circumstances shall any Line
Problems be deemed an actual or constructive eviction of Tenant, render Landlord liable to Tenant for abatement of any rent or other
charges under the Lease, or relieve Tenant from performance of Tenant’s obligations under the Lease. Landlord in no event shall
be liable for damages by reason of loss of profits, business interruption or other consequential damage arising from any Line Problems.
Article
30. SURRENDER
The Lease shall terminate and Tenant shall
deliver up and surrender possession of the Premises on the last day of the term hereof, and Tenant waives the right to any notice of
termination or notice to quit and Tenant hereby waives all right to any such notice as may be provided under any laws now or
hereafter in effect in Pennsylvania, including but not limited to the Landlord and Tenant Act of 1951, as amended. Tenant
covenants that upon the expiration or sooner termination of this Lease Tenant shall deliver up and surrender possession of the
Premises in the same condition in which Tenant has agreed to keep the same during the continuance of this Lease and in accordance
with the terms hereof, ordinary wear and tear and damage from casualty or condemnation excepted.
Article
31. QUIET ENJOYMENT
Landlord covenants and agrees that Tenant, upon paying the Rent herein
provided for and observing and keeping the covenants, agreements and conditions on its part to be kept, shall lawfully and quietly hold,
occupy and enjoy the Premises during the Lease without hindrance or interruption by Landlord or anyone claiming by, through or under
Landlord.
Article
32. HOLDING OVER
Unless Landlord expressly agrees otherwise in
writing, Tenant shall pay Landlord 150% of the amount of Rent then applicable prorated on a per diem basis for each day Tenant shall
fail to vacate or surrender possession of the Premises or any part thereof after expiration or earlier termination of this Lease as required
under Article 30, together with all damages sustained by Landlord on account thereof. Tenant shall pay such amounts on demand, and,
in the absence of demand, monthly in advance. The foregoing provisions, and Landlord’s acceptance of any such amounts, shall not
serve as permission for Tenant to hold-over, nor serve to extend the term (although Tenant shall remain a tenant at sufferance bound
to comply with all provisions of this Lease until Tenant properly vacates the Premises.
Article
33. ENVIRONMENTAL COVENANTS, REPRESENTATIONS AND WARRANTIES
(a) Tenant
shall comply with all laws, regulations, ordinances and other governmental standards applicable to Tenant’s use of the Premises
with respect to hazardous waste, hazardous substances and any and all other environmental matters. Furthermore, Tenant shall procure
and maintain all licenses and permits required by such applicable laws, ordinances or regulations. Tenant covenants and agrees that it
shall not release, emit, or discharge at or from the Premises any hazardous or toxic substances consisting of any hazardous or toxic
chemical, waste, byproduct, pollutants, contamination, compound, product or substance, including, without limitation, asbestos, polychlorinated
byphenyls, petroleum (including crude oil or any fraction thereof), and any material the exposure to, or manufacture, possession, presence,
use, generation, storage, transportation, treatment, release, disposal, abatement, cleanup, removal, remediation or handling of which,
is prohibited, controlled or regulated by federal, state, regional, county, local, governmental, public or private statute, law, regulation,
ordinance, order, consent decree, judgment, permit, license, code, covenant, deed restrictions, common law, treaty, convention or other
requirement, pertaining to protection of the environmental, health or safety of persons, natural resources, conservation, wildlife, waste
management, any hazardous material activity, and pollution (including, without limitation, regulation of releases and disposals to air,
land, water and ground water). These requirements include, without limitation, the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. 9601 et seq., Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 and Solid and Hazardous Waste Amendments of 1984, 42 U.S.C.
6901 et seq., Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C. 1251, et seq., Clean Air Act
of 1966, as amended, 42 U.S.C. 7401 et seq., Toxic Substances Control Act of 1976, 15 U.S.C. 2601 et seq., Occupational Safety and Health
Act of 1970, as amended, 29 U.S.C. 651 et seq., Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. 11001 et seq.,
National Environmental Policy Act of 1975, 42 U.S.C. 300(f) et seq., and any similar or implementing Pennsylvania laws, and all
amendments, rules, regulations, guidance documents and publications promulgated thereunder.
(b) In
the event Tenant receives any notice of the happening of: (1) any event arising from Tenant’s use or occupancy of the Premises
involving an emission, spill, release or discharge at or from the Premises into or upon (i) the air; (ii) soils (whether on
the Premises or neighboring property) or any improvements located thereon; (iii) surface water or ground water; (iv) the sewer
system servicing the Premises, except as allowed under current law, regulation or permit, of any regulated quantities of toxic or hazardous
substances or wastes (intended hereby and hereafter to include any and all such materials listed in any federal, state or local law,
code and ordinances and all rules and regulations promulgated thereunder, as hazardous) (any of which is hereinafter referred to
as “Hazardous Discharge”); or (2) any complaint, order, directive, claim, citation or notice by any governmental authority
or any other person or entity arising from Tenant’s use or occupancy of the Premises with respect to (i) air emissions; (ii) spills,
releases or discharges to soils or any improvements located thereon, surface water, ground water or the sewer, septic system or waste
treatment, storage or disposal system servicing the Premises; (iii) solid or liquid waste disposal; (iv) the use, generation,
storage, transportation or disposal of toxic or hazardous substances or wastes; or (v) any other environmental, health or safety
matter relating to any of Tenant’s activity upon the Premises, including any improvements located thereon or neighboring property
(any of which is hereinafter referred to as an “Environmental Complaint”), then Tenant shall give immediate notice of same
to Landlord, detailing all relevant facts and circumstances. Tenant shall, upon receipt of notice of a Hazardous Discharge or Environmental
Complaint, and at its sole cost and expense, promptly and completely take all actions necessary to remove, resolve or minimize the impact
of such Hazardous Discharge or Environmental Complaint on or from the Premises, and restore the affected property to its prior condition.
Without limitation on the
foregoing, and in the event Tenant fails to take the actions set forth herein, Landlord shall have the right, but not the obligation,
to enter onto the Premises and take any actions as it
deems necessary or advisable to clean up, remove, resolve or minimize the impact
or otherwise deal with any Hazardous Discharge or Environmental Complaint upon Landlord’s receipt of any notice from any person
or entity asserting the happening of a Hazardous Discharge or Environmental Complaint on or from or pertaining to the Premises and arising
from Tenant’s use or occupancy of the Premises. All reasonable costs and expenses incurred by Landlord in the exercise of any such
rights shall be deemed to be additional rent hereunder and shall be immediately payable by Tenant to Landlord upon demand.
(c) Tenant,
its successors and assigns, shall forever indemnify, defend and hold harmless Landlord, its partners, members, directors, officers, employees
and agents, and successors and assigns from and against all damages, punitive damages, liabilities, losses, demands, claims, cost recovery
actions, lawsuit, administrative proceedings, orders, response costs, compliance costs, investigation expenses, consultant fees, attorneys’
fees and litigation expenses, arising from Tenant’s use of the Premises, including (1) possession, use and storage of any
hazardous material at the Premises; (2) the operation of any applicable environmental law against the Tenant, Landlord or the Premises,
based on Tenant’s activities during the term of this Lease; or (3) the violation at the Premises or by the Tenant of any applicable
environmental law. Tenant and its successors or assigns shall pay all costs and expenses incurred by Landlord, its successors and assigns,
to enforce the provisions of this indemnification, including, without limitation, reasonable attorneys’ fees and litigation expenses.
This indemnification shall survive the termination of this Lease.
(d) As
between Landlord and Tenant, Landlord shall be responsible for (i) the remediation of any hazardous materials or substances located
on the Development, the Building, or any part thereof (including the Premises), existing as of the Commencement Date (except to the extent
caused by Tenant or its agents, employees or contractors), (ii) any violations of environmental laws existing as of the Commencement
Date (except to the extent caused by Tenant or its agents, employees or contractors), (iii) the remediation of any hazardous materials
or substances located on the Development, the Building, or any part thereof (including the Premises), existing as of the Commencement
Date after the Commencement Date to the extent caused by Landlord or its agents, employees or contractors, or (iv) any violations
of environmental laws arising on or after the Commencement Date to the extent caused by Landlord or its agents, employees or contractors.
(e) Landlord
represents and warrants to Tenant, to the best of its knowledge, as of the Commencement Date, it has received no written notice from
any applicable governmental authority regarding the existence of hazardous materials on or about the Premises or the Development.
Article
34. TENANT’S COMPLIANCE WITH LAWS
Tenant shall comply with all governmental laws,
ordinances and regulations applicable to Tenant’s occupancy and use of the Premises.
Article
35. DISABILITIES ACT
Tenant shall comply, at Tenant’s sole cost
and expense, with the Americans with Disabilities Act of 1990 and similar state and local laws and ordinances, as well as all regulations
issued thereunder, but only if the need for compliance is caused in whole or material part by reason of the specific nature of Tenant’s
business operations in the Premises or specific accommodation to Tenant’s employees. Except as set forth in the preceding sentence,
Landlord shall cause the common areas of the Development to comply, at Landlord’s sole cost, or at another tenant’s sole
cost, or as an Operating Cost subject to pass-through hereunder, with the Americans with Disabilities Act of 1990 and similar state
and local laws and ordinances, as well as all regulations issued
thereunder. Tenant shall promptly advise Landlord in writing, and provide Landlord with copies of any notice received by Tenant
alleging violation of any such law, regulation or ordinance relating to the Premises or the Building or any use thereof or activity
therein, or any governmental or regulatory action or investigation instituted or threatened regarding noncompliance with any such
law, regulation or ordinance.
Article
36. NOTICE
Wherever
in this Lease it shall be required or permitted that notice or demand be given or served by either party to this Lease to or on the other
party, such notice or demand shall be deemed to have been duly given or served if in writing and either personally served or forwarded
by Federal Express or comparable delivery service or by registered or certified mail, charges prepaid, and addressed as set forth in
Article 1 to the applicable Notification Addresses.
Each
such mailed notice shall be deemed to have been given to or served upon the party to which addressed (i) on the date of delivery
if personally served, (ii) one business day after the date the same is deposited with the express service, or (iii) three business
days after the date the same is deposited with the postal service, properly addressed in the manner above provided. Either party hereto
may change the address to which such notices shall be delivered or mailed by giving written notice of such change to the other party
hereto, as herein provided.
Article
37. BROKERS
Each
party represents and warrants to the other that TARQUINCoRE, LLC has acted as the only broker or agent in connection with the finding
and negotiation of this Lease. Landlord shall be responsible for payment of commissions or fees due such brokers in accordance with the
terms of Landlord’s written listing agreement with such agent. Each party agrees to indemnify and hold harmless the other from
and against any claims, suits, liabilities and expenses incurred by or assessed by reason of any undisclosed brokerage or agency arrangement.
Article
38. FORCE MAJEURE
Neither
party shall be required to perform any term, condition or covenant of this Lease as long as such performance is delayed or prevented
by force majeure, which shall mean Acts of God, strikes, lockouts, material or labor restrictions imposed by governmental authority,
civil riot, floods and other causes not reasonably within the control of such party and which, by the exercise of due diligence, such
party is unable, wholly or in part, to prevent or overcome; provided, however, that such party shall be required to commence and thereafter
diligently prosecute performance of completion to the extent reasonably permitted under the circumstances. Notwithstanding anything herein
to the contrary, the foregoing shall not excuse either party from the payment of any monies due pursuant to the terms of this Lease.
Article
39. TRANSFER OF LANDLORD’S
INTEREST
Landlord’s
obligations hereunder shall be binding upon Landlord only for the period of time that Landlord is in ownership of the Building; and,
upon termination of that ownership, Tenant, except as to any obligations which have then matured or relate to an event occurring prior
to the transfer, any breach
occurring prior to the transfer, or any tort or fraud committed prior to the transfer, shall look solely
to Landlord’s successor in interest in the Building for the satisfaction of each and every obligation of Landlord hereunder. Tenant
agrees to attorn to any transferee of Landlord.
Article
40. SUCCESSORS
The
respective rights and obligations provided in this Lease shall bind and shall inure to the benefit of the parties hereto and their respective
successors and assigns, provided, however, that no rights shall inure to the benefit of any successors of Tenant whenever, by the express
terms of this Lease, Landlord’s written consent for the transfer to such successor is required under Article 14 hereof, unless
Landlord shall have granted such consent.
Article
41. GOVERNING LAW
This
Lease shall be construed, governed and enforced in accordance with the laws of the Commonwealth of Pennsylvania and the exclusive venue
for any action shall be in the Court of Common Pleas of Allegheny County, Pennsylvania.
Article
42. SEPARABILITY
If
any provisions of this Lease shall be held to be invalid, void or unenforceable, the remaining provisions hereof shall in no way be affected
or impaired and such remaining provisions shall remain in full force and effect.
Article
43. CAPTIONS
Any
headings preceding the text of the several paragraphs and subparagraphs hereof are inserted solely for convenience of reference and shall
not constitute a part of this Lease, nor shall they affect its meaning, construction or effect.
Article
44. GENDER
As
used in this Lease, the word “person” shall mean and include, where appropriate, any individual, corporation, partnership
or other entity; the plural shall be substituted for the singular, and the singular for the plural, where appropriate; and words of any
gender shall mean to include any other gender.
Article
45. EXECUTION; COUNTERPARTS
This
Lease shall become effective when it has been signed by a duly authorized officer or representative of each of the parties and delivered
to the other party. This Lease may be executed in any number of counterparts, each of which when taken together shall be deemed to be
one and the same instrument. The parties acknowledge and agree that notwithstanding any law or presumption to the contrary, the exchange
of copies of this Lease and signature pages by electronic transmission shall constitute effective execution and delivery of this
Lease for all purposes, and signatures of the parties hereto transmitted electronically shall be deemed to be their original signature
for all purposes.
Article
46. ENTIRE AGREEMENT
This
Lease, including the Exhibits hereto, contains all the agreements, conditions, understandings, representations and warranties made between
the parties hereto with respect to the subject matter hereof, and may not be modified orally or in any manner other than by an agreement
in writing signed by both parties hereto or their respective successors in interest.
Article
47. AUTHORITY
If
Tenant is a corporation, association, partnership or similar legal entity, the Tenant represents and warrants that the individual signing
this Lease is duly authorized to execute and deliver this Lease on behalf of such entity in accordance with the duly adopted authorizing
instruments of such entity which have been adopted or approved in accordance with all legal requirements and the internal bylaws, agreements,
or other organizing documents of the entity, and that this Lease is binding upon such entity in accordance with its terms.
If
Landlord is a corporation, association, partnership or similar legal entity, The Landlord represents and warrants that the individual
signing this Lease is duly authorized to execute and deliver this Lease on behalf of such entity in accordance with the duly adopted
authorizing instruments of such entity which have been adopted or approved in accordance with all legal requirements and the internal
bylaws, agreements, or other organizing documents of the entity, and that this Lease is binding upon such entity in accordance with its
terms.
Article
48. SECURITY DEPOSIT
Upon
execution of this Lease, Tenant shall deposit with Landlord the Security Deposit in the amount set forth in Article 1. The Security
Deposit shall be held by Landlord as security for the full and faithful performance by Tenant of all of the terms, covenants and provisions
of this Lease during the term hereof. In no event shall Landlord be obligated to pay, or Tenant is entitled to receive, any interest
or other earnings on the security deposit. Landlord shall not be obligated to hold the Security Deposit in trust or in a separate account
but may freely commingle the security deposit with Landlord’s other funds.
In
the event Tenant fails to keep and perform any of the terms, covenants or provisions of this Lease, then Landlord, at Landlord’s
option, may appropriate and apply the Security Deposit, or so much thereof as may be necessary to pay any Rent or other sums due hereunder
for which Tenant shall be in default of payment. Tenant, upon notice from Landlord, immediately shall remit to Landlord an amount sufficient
to restore this Security Deposit to the amount required to be maintained in accordance with this Article. Upon Tenant’s full and
complete performance and compliance with all of the terms, covenants and provisions of this Lease during the lease term, upon the expiration
of the term and Tenant’s proper surrender of the Premises, the Security Deposit shall be returned to Tenant.
In
the event of a sale of the Building, Landlord may deliver the Security Deposit to the purchaser, and upon such delivery, Landlord shall
be discharged from any further liability with respect to the Security Deposit.
Article
49. OFAC
CERTIFICATION
Tenant
certifies that: (i) it is not acting, directly or indirectly, for or on behalf of any person, group, entity, or nation named by
any Executive Order or the United States Treasury Department as a terrorist, “Specially
Designated National and
Blocked Person,” or other banned or blocked person, entity, nation, or transaction pursuant to any law, order, rule, or regulation
that is enforced or administered by the Office of Foreign Assets Control; and (ii) it is not engaged in this transaction, directly
or indirectly on behalf of, or instigating or facilitating this transaction, directly or indirectly on behalf of, any such person, group,
entity, or nation.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF, the parties, intending to be legally bound, have executed this Lease as of the day and year first written above.
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ATTEST:
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COGNITION
THERAPEUTICS, INC.
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/s/
Anita Marocci
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By:
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/s/
Harold Safferstein
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Name:
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Harold
Safferstein
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Title:
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SVP
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By:
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RD
Equities, LLC, its General Partner
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/s/
Anita Marocci
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By:
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/s/
Ronald J. Tarquinio
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Name:
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Ronald
J. Tarquinio
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Title:
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Member
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Exhibit “A”
Diagram
of Development
Exhibit “B”
Outline
of Premises
RPC
Executive Office Suites Floor Plan
Exhibit “C”
Rules and
Regulations
GENERAL:
1. OBSTRUCTIONS:
The
streets, driveways, parking lots, sidewalks, entrances, passages and other common areas provided by Landlord shall not be obstructed
by Tenant, its employees, agents, representatives, vendors and guests or used for any other purpose than ingress and egress.
2. BATHROOMS:
The
bathrooms, toilet rooms and other plumbing apparatus shall not be used for any other purposes other than those for which they are constructed.
3. GENERAL
PROHIBITIONS:
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·
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No
cooking, grilling, smoking, gas or other type of flame in the common areas;
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No
animals or birds are permitted anywhere on the premises;
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No
use of the premises as sleeping rooms;
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No
loitering or congregating in the entrances or hallways;
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·
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No
making improper loud noises or disturbances of any kind;
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·
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Doing
anything to unreasonably disturb or disrupt other tenants in the complex;
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·
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Doing
anything to change, damage or destroy the landscaping around the premises;
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4. SMOKING:
The
complex’s buildings are maintained as smoke free environments. This means no smoking in the building. Smoking is
permitted outside of the buildings where several smoking boxes are provided in four designated areas for cigarette butts. Please use
the smoking boxes for your butts, not the grounds or parking areas.
5. DOORS:
Exterior
doors are not to be held open. Holding or propping these doors open for 30 seconds or more will sound off an alarm and automatically
notify police.
PARKING:
To
insure that adequate parking spaces are available for our tenants, a specific number of parking passes are provided to each tenant for
a specific parking zone. The passes are to be placed on the rear view mirror of each vehicle and can be transferred from one vehicle
to another. The parking lots are patrolled daily. Vehicles that lack a parking pass or are parked in the wrong zone will be considered
in violation of the parking regulations. Violations are handled as follows:
First
Violation: A yellow sticker will be placed under the windshield wiper;
Second
Violation: An adhesive yellow sticker will be placed on the windshield;
Third
Violation: The police will be called and the car will be towed, at the owner’s expense.
These
rules and regulations are subject to change from time to time at the discretion of the Landlord.
Exhibit “D”
Intentionally
Omitted
Exhibit “E”
ESTOPPEL
CERTIFICATE
{See
Attached Form of Estoppel}
TENANT
ESTOPPEL
Ladies
and Gentlemen:
The
undersigned certifies to (together with its successors and assigns, the “Bank”) and the Landlord (as defined
below) as of the date hereof as follows:
1.
It is the tenant under a certain Office Lease Agreement dated July , 2017 (the “Lease”) with RJ Equities, LP, a
Pennsylvania limited partnership,as landlord (together with its successors and assigns, “Landlord”), and the
undersigned, as tenant (“Tenant”), for premises located at and known as Suite 242 located on the second floor of the
commercial building situated at 2403 Sidney Street, Pittsburgh, PA 15203 (the “Leased Premises”).
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2.
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The Lease is
in full force and effect. There are no amendments, modifications or supplements to the Lease except the following (if none, indicate
“None”):
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3.
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The Lease does
not contain any provisions regarding options to purchase and/or lease additional space, rights of first refusal to purchase and/
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or lease additional space or any similar provisions regarding acquisition of ownership interests or additional leases space in the
building. If such provisions
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are contained in the Lease please specify:
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4.
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The
term of the Lease commenced on July I, 2017 and terminates on June 30, 2020. Tenant has taken possession of the Leased Premises.
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5. The
monthly base rent payments currently payable pursuant to the Lease are in the amount of $2,484.83. Rent has been paid through_______.
In addition to the monthly base rent payments, the following amounts are also payable on a monthly basis for the following purposes,
all of which have been paid through (if
none, indicate “None”):
6. All
improvements, if any, required to be made by Landlord under the Lease have been completed and accepted by Tenant. Landlord has not agreed
to grant Tenant any free rent or rent rebate or to make any contribution to tenant improvements.
7. Tenant
will deliver to the Bank a copy of all notices Tenant serves on or receive from Landlord.
8. No
advance rent has been paid, and to Tenant’s knowledge, Tenant has no unsatisfied claims against Landlord, no uncured default exists
under the Lease, and no event has occurred that but for the giving of notice would constitute a default.
9. No
cancellation, modification, assignment, renewal, extension, or amendment of the Lease or prepayment of more than one month’s rent
shall be made without the Bank’s written consent and approval.
10. Tenant
has all licenses and permits which Tenant must have to operate its business from the Leased Premises, and all are current and have not
been revoked. Since taking possession of the Leased Premises, Tenant has not received any notice that the Leased Premises or Tenant’s
use of the Leased Premises violates any applicable law, regulation, ordinance or directive of any governmental authority or agency or
insurance company.
11. The
amount of the security deposit is $0.00.
The
undersigned individual hereby certifies that he or she is duly authorized to sign, acknowledge and deliver this letter on behalf of Tenant.
The statements herein contained may be relied upon by the Bank and the Landlord and their respective successors and assigns.
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Very
truly yours,
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Cognition
Therapeutics, Inc.
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EXHIBIT “F”
SUBORDINATION,
NON-DISTURBANCE AND ATTORNMENT AGREEMENT
{See
Attached Form of SNDA}
SUBORDINATION,
NON-DISTURBANCE
AND ATTORNMENT AGREEMENT
This Subordination,
Non-Disturbance and Attornment Agreement (this “Agreement”) is made as of the ________ day of ______, 20____, among
(the “Lender”), having a place of business at ____________, RJ Equities LP (the “Landlord” or “Borrower”), a
Pennsylvania limited partnership having a place of business at 2403 Sidney Street, Suite 200, Pittsburgh, PA 15203, and
Cognition Therapeutics, Inc. (the “Tenant”), having a place of business at 2403 Sidney Street, Suite 261,
Pittsburgh, PA 15203.
Introductory Provisions
A. Lender is relying on
this Agreement as an inducement to Lender in making and maintaining a loan (the “Loan”) secured by, among other things, a
Mortgage and Security Agreement dated as of (the “Mortgage”) given by Borrower covering property commonly known
as and numbered 2403 Sidney Street, Pittsburgh, PA 15203 (the “Property”). Lender is also the “Assignee” under
an Assignment of Leases, Rents and Profits (the “Assignment”) dated as of from Borrower with respect to the Property.
B. Tenant
is the tenant under that certain lease (the “Lease”) dated July __, 2017, made with Landlord covering certain
premises (the “Premises”) at the Property as more particularly described in the Lease.
C. Lender
requires, as a condition to the making and maintaining of the Loan, that the Mortgage be and remain superior to the Lease and that its
rights under the Assignment be recognized.
D. Tenant
requires as a condition to the Lease being subordinate to the Mortgage that its rights under the Lease be recognized.
E. Lender,
Landlord, and Tenant desire to confirm their understanding with respect to the Mortgage and the Lease.
NOW, THEREFORE, in consideration
of the foregoing, the mutual covenants and agreements contained in this Agreement, and other valuable consideration, the receipt and
adequacy of which are hereby acknowledged, and with the understanding by Tenant that Lender shall rely hereon in making and maintaining
the Loan, Lender, Landlord, and Tenant agree as follows:
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1.
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Subordination. The Lease and the rights
of Tenant thereunder is subordinate and inferior to the Mortgage and any amendment, renewal,
substitution, extension or replacement thereof and each advance made thereunder as though
the Mortgage, and each such amendment, renewal, substitution, extension or replacement were
executed and recorded, and the advance made, before the execution of the Lease.
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2.
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Non-Disturbance. So long as Tenant is
not in default (beyond any notice and/or cure period expressed in the Lease within which
Tenant may cure such default) in the payment of rent or in the performance or observance
of any of the terms, covenants or conditions of the Lease on Tenant’s part to be performed
or observed: (a) Tenant’s occupancy of the Premises shall not be disturbed by
Lender in the exercise of any of its rights under the Mortgage during the term of the Lease,
or any extensions or renewals thereof made in accordance with the terms of the Lease, and
(b) Lender will not join Tenant as a party defendant in any action or proceeding for
the purpose of terminating Tenant’s interest and estate under the Lease because of
any default under the Mortgage.
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3.
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Attornment and Certificates. In the
event Lender succeeds to the interest of Borrower as Landlord under the Lease, or if the
Property or the Premises are sold pursuant to the power of sale under the Mortgage, Tenant
shall attorn to Lender, or a purchaser upon any such foreclosure sale, and shall recognize
Lender, or such purchaser, thereafter as the Landlord under the Lease. Such attornment shall
be effective and self-operative without the execution of any further instrument. Tenant agrees,
however, to execute and deliver at any time and from time to time, upon the request of any
holder(s) of any of the indebtedness or other obligations secured by the Mortgage, or
upon request of any such purchaser, (a) any instrument or certificate which, in the
reasonable judgment of such holder(s), or such purchaser, may be necessary or appropriate
in any such foreclosure proceeding or otherwise to evidence such attornment and (b) an
instrument or certificate regarding the status of the Lease, consisting of statements, if
true (and if not true, specifying in what respect): (i) that the Lease is in full force
and effect, (ii) the date through which rentals have been paid, (iii) the duration
and date of the commencement of the term of the Lease, (iv) the nature of any amendments
or modifications to the Lease, (v) that to Tenant’s knowledge no default, or state
of facts, which with the passage of time or notice, or both, would constitute a default,
exists on the part of either party to the Lease, and (vi) the dates on which payments
of additional rent, if any, are due under the Lease.
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4.
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Limitations. If Lender exercises any
of its rights under the Assignment or the Mortgage, or if Lender shall succeed to the interest
of Landlord under the Lease in any manner, or if any purchaser acquires the Property, or
the Premises, upon or after any foreclosure of the Mortgage, or any deed in lieu thereof,
Lender or such purchaser, as the case may be, shall have the same remedies by entry, action
or otherwise in the event of any default by Tenant (beyond any notice and/or cure period
expressed in the Lease within which Tenant may cure such default) in the payment of rent
or in the performance or observance of any of the terms, covenants and conditions of the
Lease on Tenant’s part to be paid, performed or observed that Landlord had or would
have had if Lender or such purchaser had not succeeded to the interest of the present Landlord.
From and after any such attornment, Lender or such purchaser shall be bound to Tenant under
all the terms, covenants and conditions of the Lease, and Tenant shall, from and after such
attornment to Lender, or to such purchaser, have the same remedies against Lender, or such
purchaser, for the breach of an agreement contained in the Lease that Tenant might have had
under the Lease against Landlord, if Lender or such purchaser had not succeeded to the interest
of Landlord; provided, however, that Lender or such purchaser shall only be bound
during the period of its ownership, and that in the case of the exercise by Lender of its
rights under the Mortgage, or the Assignment, or any combination thereof, or a foreclosure,
or deed in lieu of foreclosure, all Tenant claims shall be satisfied only out of the interest,
if any, of Lender, or such purchaser, in the Property, and Lender and such purchaser shall
not be: (a) liable for any act or omission of any prior landlord (including Landlord);
or (b) liable for or incur any obligation with respect to the construction of the Property
or any improvements of the Premises or the Property; or (c) subject to any offsets or
defenses which Tenant might have against any prior landlord (including Landlord), or (d) bound
by any rent or additional rent which Tenant might have paid for more than the then current
rental period to any prior landlord (including Landlord); or (e) bound by any amendment
or modification of the Lease, or any consent to any assignment or sublease, made without
Lender’s prior written consent; or (f) bound by or responsible for any security
deposit not actually received by Lender; or (g) liable for any obligation with respect
to any breach of warranties or representations of any nature under the Lease or otherwise,
including without limitation, any warranties or representations respecting use, compliance
with zoning, Landlord’s title, Landlord’s authority, habitability and/or fitness
for any purpose, or possession; or (h) liable for consequential damages.
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5.
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Rights Reserved. Nothing herein contained
is intended, nor shall it be construed, to abridge or adversely affect any right or remedy
of: (a) Landlord under the Lease, or any subsequent Landlord,
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against Tenant in the
event of any default by Tenant (beyond any notice and/or cure period expressed in the Lease
within which Tenant may cure such default) in the payment of rent or in the performance of
observance of any of the terms, covenants or conditions of the Lease on Tenant’s part
to be performed or observed; or (b) Tenant to pursue claims under the Lease against
any prior landlord (including Landlord) in the event of any default by prior landlord whether
or not such claim is barred against Lender or a subsequent purchaser.
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6.
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Notice and Right to Cure. Tenant agrees
to provide Lender with a copy of each notice of default given to Landlord under the Lease
at the same time such notice of default is given to Landlord. In the event of any default
by Landlord under the Lease, Tenant will take no action to terminate the Lease unless the
default remains uncured for a period of sixty (60) days after written notice thereof shall
have been given, postage prepaid, to Landlord at Landlord’s address, and to Lender
at the address provided in Section 7 below; provided, however, that if any such
default is such that it reasonably cannot be cured within such sixty (60) day period, such
period shall be extended for such additional period of time as shall be reasonably necessary
(including, without limitation, a reasonable period of time to obtain possession of the Property
and to foreclose the Mortgage), if Lender gives Tenant written notice within such sixty (60)
day period of Lender’s election to undertake the cure of the default and if curative
action (including, without limitation, action to obtain possession and foreclosure) is instituted
within thirty (30) days thereafter and is thereafter diligently pursued. Notwithstanding
the foregoing, Lender shall have no obligation to cure any default under the Lease.
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7.
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Notices. Any notice or communication required or permitted hereunder shall be in writing, and
shall be given or delivered: (a) by United States mail, registered or certified, postage fully prepaid, return receipt
requested, or (b) by recognized courier service or recognized overnight delivery service; and in any event addressed to the
party for which it is intended at its address set forth below:
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To Lender:
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To Landlord:
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RJ Equities LP
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2403 Sidney Street, Suite 200
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Pittsburgh, PA 15203
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Attention: Ronald J. Tarquinio
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To Tenant:
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Cognition Therapeutics, Inc.
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2403 Sidney Street, Suite 261
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Pittsburgh, PA 15203
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Attn: President
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or such other address as such party may have previously
specified by notice given or delivered in accordance with the foregoing. Any such notice shall be deemed to have been given and received
on the date delivered or tendered for delivery during normal business hours as herein provided.
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8.
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No Oral Change. This Agreement may not
be modified orally or in any manner other than by an agreement in writing signed by the parties
hereto or their respective successors in interest.
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9.
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Payment of Rent To Lender. Tenant acknowledges
that it has notice that the Lease and the rent and all sums due thereunder have been assigned
to Lender as part of the security for the obligations
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secured by the Mortgage. In the event
Lender notifies Tenant of a default under the Loan and demands that Tenant pay its rent and
all other sums due under the Lease to Lender, Tenant agrees that it will honor such demand
and pay its rent and all other sums due under the Lease to Lender, or Lender’s designated
agent, until otherwise notified in writing by Lender. Landlord unconditionally authorizes
and directs Tenant to make rent payments directly to Lender following receipt of such notice
without any obligation to further inquire as to whether or not any default exists under the
Mortgage or the Assignment and that Landlord shall have no right or claim against Tenant
for or by reason of any payments of rent or other charges made by Tenant to Lender following
receipt of such notice.
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10.
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No Amendment or Cancellation of Lease.
So long as the Mortgage remains undischarged of record, Tenant shall not amend, modify, cancel
or terminate the Lease, or consent to an amendment, modification, cancellation or termination
of the Lease, or agree to subordinate the Lease to any other mortgage, without Lender’s
prior written consent in each instance; provided however, the foregoing shall not be construed
to require Lender’s consent for Tenant to exercise any right to terminate expressly
granted in the Lease.
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11.
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Options. With respect to any options
for additional space provided to Tenant under the Lease, Lender agrees to recognize the same
if Tenant is entitled thereto under the Lease after the date on which Lender succeeds as
landlord under the Lease by virtue of foreclosure or deed in lieu of foreclosure or Lender
takes possession of the Premises; provided, however, Lender shall not be responsible
for any acts of any prior landlord (including Landlord) under the Lease, or the act of any
tenant, subtenant or other party which prevents Lender from complying with the provisions
hereof and Tenant shall have no right to cancel the Lease or to make any claims against Lender
on account thereof.
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12.
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Captions. Captions and headings of
sections are not parts of this Agreement and shall not be deemed to affect the meaning or
construction of any of the provisions of this Agreement.
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13.
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Counterparts. This Agreement may be
executed in several counterparts each of which when executed and delivered is an original,
but all of which together shall constitute one instrument.
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14.
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Governing Law. This Agreement shall
be governed by and construed in accordance with the laws of the state where the Property
is located.
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15.
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Parties Bound. The provisions of this
Agreement shall be binding upon and inure to the benefit of Tenant, Lender and Landlord and
their respective successors and assigns; provided, however, reference to successors
and assigns of Tenant shall not constitute a consent by Landlord or Lender to an assignment
or sublease by Tenant, but has reference only to those instances in which such consent is
not required pursuant to the Lease or for which such consent has been given.
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[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties
hereto have caused this Agreement to be duly executed as of the date first above written.
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ATTEST:
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COGNITION THERAPEUTICS, INC.
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/s/ Anita Marocci
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By:
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/s/ Harold Safferstein
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Name: Harold Safferstein
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Title: SVP
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ATTEST:
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RJ EQUITIES LP
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/s/ Anita Marocci
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By:
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RD Equities, LLC, its General Partner
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By:
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/s/ Ronald J. Tarquinio
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Name: Ronald J. Tarquinio
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Title: Member
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ATTEST:
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LENDER:
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STATE OF
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)
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) ss:
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COUNTY OF
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)
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The foregoing instrument
was acknowledged before me this____day of____________, 20_____, 20_______, by___________________of_______, a______, on behalf of the corporation.
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Notary Public
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My Commission Expires:
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STATE OF
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)
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) ss:
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COUNTY OF
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)
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The foregoing instrument
was acknowledged before me this____day of___________, 20_____, 20_______, by__________________of_______, a______, on behalf of the corporation.
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Notary Public
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My Commission Expires:
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STATE OF
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)
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) ss:
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COUNTY OF
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)
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The foregoing instrument
was acknowledged before me this____day of____________, 20_____, 20_______, by__________________of_______, a______, on behalf of the corporation.
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Notary Public
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My Commission Expires:
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Exhibit 10.5
FIRST
AMENDMENT TO OFFICE LEASE AGREEMENT
This First Amendment to Office Lease Agreement
(“Amendment”) is made this 1st day of July, 2017, and is by and between RJ EQUITIES LP, a Pennsylvania limited
partnership (“Landlord”), and COGNITION THERAPEUTICS, INC., a Delaware corporation (“Tenant”).
Article I-
AMENDMENT OF BASIC TERMS
The parties, intending to be legally bound, do
hereby agree to the amendment, ratification and restatement of certain terms of the Lease (as defined below) as follows:
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a)
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Lease:
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That certain Office Lease Agreement dated January 20, 2015, as amended by this Amendment.
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b)
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Premises:
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Suites 261, 263, and certain shared lab space all of which is located
on the second floor of the commercial building (the “Building”) situated at 2403 Sidney Street, Pittsburgh, PA 15203 (the
“Development”), and all as more particularly described in the Lease.
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c)
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Term:
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The term of the Lease is hereby extended from February 1, 2018,
until June 30, 2020 (the “Extended Term”). Any reference in the Lease to the Termination Date shall hereafter mean June 30,
2020.
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d)
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Base Rent:
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Base Rent during the Extended Term shall be Seven Thousand One Hundred Three and 17/100ths Dollars ($7,103.17) per month.
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e)
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Options:
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The parties hereby acknowledge and agree that Article 3(c) of
the Lease is hereby deleted in its entirety-the intent being that Tenant shall have no further extension options to extend the term of
the Lease.
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f)
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Defaults:
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The parties acknowledge and agree that the following shall constitute
a default under the Lease: “a default or breach by Tenant beyond the expiration of applicable notice and/or cure periods under any
other lease with Landlord in connection with the Building”.
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g)
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Sublease:
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Landlord has consented to the subleasing by Tenant, as sublessor,
to Sharp Edge Labs, Inc. (the “Sublessee”) of a portion of the lab space comprising the Premises, upon the condition
that neither anything contained in the sublease nor Landlord’s consent thereto shall (i) release Tenant
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from any of its liabilities and obligations to Landlord under the Lease,
(ii) constitute a novation, (iii) increase or modify Landlord’s obligations under the Lease, or (iv) create any rights
or remedies in Sublessee under the Lease itself. It is understood and agreed that Landlord shall have no obligation or liability under
the terms of the sublease.
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Article II
- TENANT REPRESENTATION
By the execution of this Amendment, Tenant represents
and warrants to Landlord as follows as of the date hereof:
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a)
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That the Lease is in full force and effect and that, to Tenant’s knowledge, there are no Landlord defaults and that the Lease
has not been assigned, modified, supplemented or amended (except as expressly set forth above).
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b)
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That there are no defenses or offsets against the Landlord’s enforcement of the Lease that may be claimed by Tenant.
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Article III
- MISCELLANEOUS
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a)
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Landlord and Tenant each represents and warrants to the other that it has had no dealings, negotiations or consultations with respect
to the Premises, this Amendment or the transactions contemplated under the Lease with any broker or finder, except that Landlord was represented
by TARQUINCoRE LLC (the “Broker”). Landlord shall pay all commissions and fees, if any, due to Broker in connection with this
Amendment.
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b)
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Except as expressly modified by this Amendment, all other terms and provisions of the Lease shall remain in full force and effect.
Tenant accepts the Premises in its current “as- is, where-is” condition. All capitalized terms used herein shall have the
meaning ascribed to such term in the Lease unless otherwise defined herein. This Amendment supersedes any prior discussions, proposals,
negotiations and discussions between the parties and the Lease, as amended hereby, contains all of the agreements, conditions, understandings,
representations and warranties made between the parties hereto with respect to the subject matter hereof.
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c)
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This Amendment may be executed in any number of counterparts, each of which when taken together shall be deemed to be one and the
same instrument. The parties acknowledge and agree that notwithstanding any law or presumption to the contrary, the exchange of copies
of this Amendment and signature pages by electronic transmission shall constitute effective execution and delivery of this Amendment
for all purposes, and signatures of the parties hereto transmitted electronically shall be deemed to be their original signature for all
purposes.
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d)
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Landlord and Tenant each represents and warrants to the other that the individual signing this Amendment on behalf of such party is
duly authorized to execute and deliver this Amendment on behalf of such entity in accordance with the duly adopted authorizing instruments
of such entity which have been adopted or approved in accordance with all legal requirements and the internal bylaws, agreements, or other
organizing documents of the entity, and that this Amendment is binding upon such entity in accordance with its terms.
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e)
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Each party shall indemnify and hold the other harmless from and against all liability, cost and expense, including attorney's fees
and court costs, arising out of any misrepresentation or breach of warranty made in this Amendment.
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{remainder
of page intentionally left blank}
Witness the due execution of this Amendment the date first set forth
above.
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ATTEST:
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COGNITION THERAPEUTICS, INC.
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By:
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/s/ Harold T. Safferstein
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By:
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/s/ Anita Marcocci
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Name: Harold T. Safferstein
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Anita Marcocci
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Title: SVP
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WITNESS:
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RJ EQUITIES LP
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By:
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RD Equities, LLC, its General Partner
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By:
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/s/ Anita Marcocci
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By:
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/s/ Ronald J. Tarquinio
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Anita Marcocci
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Name: Ronald J. Tarquinio
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Title: Managing Member
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Exhibit 10.6
LEASE AGREEMENT
BETWEEN
2500/2700
WESTCHESTER AVENUE OWNER SPE LLC,
a Delaware Limited Liability Company,
LANDLORD,
-AND-
COGNITION
THERAPEUTICS, INC.,
a Delaware Corporation,
TENANT
Dated
July 1, 2021
Prepared by:
Robert A. Klausner, Esq.
Fox Rothschild LLP
49 Market Street
Morristown, New Jersey 07960
TABLE OF CONTENTS
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ARTICLE 1 DEFINITIONS
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5
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ARTICLE 2 DEMISE, TERM
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5
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ARTICLE 3 BASIC RENT; ADDITIONAL RENT
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7
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ARTICLE 4 REAL ESTATE TAXES
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8
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ARTICLE 5 OPERATING EXPENSES
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11
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ARTICLE 6 ELECTRICITY
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12
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ARTICLE 7 MAINTENANCE; ALTERATIONS; REMOVAL OF TRADE FIXTURES
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15
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ARTICLE 8 USE OF PREMISES
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17
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ARTICLE 9 LANDLORD’S SERVICES
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18
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ARTICLE 10 COMPLIANCE WITH REQUIREMENTS
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21
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ARTICLE 11 COMPLIANCE WITH ENVIRONMENTAL LAWS
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22
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ARTICLE 12 DISCHARGE OF LIENS
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23
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ARTICLE 13 PERMITTED CONTESTS
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23
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ARTICLE 14 INSURANCE; INDEMNIFICATION
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24
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ARTICLE 15 ESTOPPEL CERTIFICATES
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27
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ARTICLE 16 ASSIGNMENT AND SUBLETTING
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28
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ARTICLE 17 CASUALTY
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33
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ARTICLE 18 CONDEMNATION
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34
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ARTICLE 19 EVENTS OF DEFAULT
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35
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ARTICLE 20 CONDITIONAL LIMITATIONS, REMEDIES
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37
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ARTICLE 21 ACCESS; RESERVATION OF EASEMENTS
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40
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ARTICLE 22 ACCORD AND SATISFACTION
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41
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ARTICLE 23 SUBORDINATION
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41
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ARTICLE 24 TENANT’S REMOVAL
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42
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ARTICLE 25 BROKERS
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43
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ARTICLE 26 NOTICES
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43
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ARTICLE 27 NONRECOURSE
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43
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ARTICLE 28 SECURITY DEPOSIT
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44
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ARTICLE 29 MISCELLANEOUS
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46
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ARTICLE 30 USA PATRIOT ACT
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49
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ARTICLE 31 EARLY TERMINATION OPTION
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49
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Schedule A
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Premises
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Schedule B
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Confirmation of Commencement Agreement
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Schedule C
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Janitorial Services
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Schedule D
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Finish Work
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Schedule D-1
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Preliminary Plans
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Schedule E
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Rules and Regulations
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Schedule F
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Form of Letter of Credit
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Appendix I
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Definitions
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LEASE
AGREEMENT
This
LEASE AGREEMENT (this “Lease”) is dated July 1, 2021
and is between 2500/2700 WESTCHESTER AVENUE OWNER SPE LLC, a Delaware limited liability company (“Landlord”),
and COGNITION THERAPEUTICS, INC., a Delaware corporation (“Tenant”).
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BASIC LEASE PROVISIONS
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(1) Building:
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2500 Westchester Avenue
Purchase, New York 10577
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(2) Premises:
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2,864 rentable square feet on the second floor of the Building, commonly known as Suite 215, as shown on Schedule A attached hereto.
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From and after the date hereof until the date which is five (5) business days following the Commencement Date hereunder (the “License Period”), Tenant shall have a license to use Suite 113 located on the first (1st) floor of the Building (the “Temporary Space”) for a monthly charge of $1,256.67 (the “Monthly License Fee”), provided that Tenant shall not be required to pay the Monthly License Fee for the portion of the License Period from and after the Commencement Date.
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(3) Term:
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Seven (7) years and five (5) months.
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(4) Estimated Commencement Date:
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Approximately one hundred twenty (120) days after full Lease execution and delivery.
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(5) Expiration Date:
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11:59 PM on the day immediately preceding the seven (7) year and five (5) month anniversary of the Commencement Date (provided that, if the Term ends on a date other than the last day of a calendar month, then the Term shall extend to the last day of the month in which the seven (7) year and five (5) month anniversary of the Commencement Date occurs), or such earlier date upon which the Term may expire or be terminated as set forth in this Lease.
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Period or Months of Term
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Annual
Rate Per
Square Foot
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Annual Basic
Rent
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Monthly Basic
Rent
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Commencement Date through the end of Month 12:
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$
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24.50
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$
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70,168.00
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$
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5,847.33
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Months 13 through 24:
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$
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25.00
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$
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71,600.00
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$
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5,966.67
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Months 25 through 36:
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$
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25.50
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$
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73,032.00
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$
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6,086.00
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Months 37 through 48:
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$
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26.00
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$
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74,464.00
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$
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6,205.33
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Months 49 through 60:
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$
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26.50
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$
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75,896.00
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$
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6,324.67
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Months 61 through 72:
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$
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27.00
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$
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77,328.00
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$
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6,444.00
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Months 73 through 84:
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$
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27.50
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$
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78,760.00
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$
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6,563.33
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Months 85 through 89:
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$
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28.00
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$
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80,192.00
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$
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6,682.67
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Notwithstanding the foregoing, provided that no Event of
Default has occurred, the Basic Rent with respect to the period beginning on the Commencement Date and ending on the day immediately preceding
the five (5) month anniversary of the Commencement Date will be abated. For the avoidance of doubt, the rent abatement period set
forth in the immediately preceding sentence shall not apply to the payment of any Additional Rent, including, without limitation, Tenant’s
payment of the Minimum Electric Energy Charge.
If the Commencement Date is any day other
than the first day of a calendar month, then the Monthly Installment of Basic Rent payable by Tenant for the first partial month shall
be prorated at the same rental rate payable for the first (1st) Monthly Installment listed above, and “Month 1” of the rent
grid set forth above shall be deemed to be the first full calendar month following immediately thereafter.
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(7) Tenant’s Proportionate Share:
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1.73%.
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(8) Base Tax Period:
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Calendar year 2022 with respect to Taxes imposed on a calendar year basis, and the 2021/2022 fiscal tax year with respect to Taxes imposed on a fiscal year basis.
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(9) Base Operating Expense Period:
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Calendar year 2022.
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(10) Minimum Electric Energy Charge:
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$3.00 per square foot per year, for a total of $8,592.00 per year due and payable in equal monthly installments of $716.00, together with Basic Rent and subject to increase as provided in Section 6.1. Tenant shall pay the first monthly installment upon possession and thereafter in advance on the first day of each month.
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(11) Parking Spaces:
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Nine (9) unassigned parking spaces, at no cost or expense to Tenant.
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(12) Security:
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$35,084.00 in the form of a letter of credit pursuant to Article 28.
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(13) Permitted Use:
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Executive, administrative and general offices and any lawfully permitted ancillary use.
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(14) Brokers:
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CBRE, Inc., as Landlord’s broker and RM Friedland LLC, as Tenant’s Broker.
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(15) Enumeration of Schedules / Appendix:
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Schedules A, B, C, D, E and F and Appendix I attached hereto are incorporated into this Lease.
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(16) Governing Law:
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This Lease is governed by the laws of the State of New York.
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(17) Landlord’s Notice Address:
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2500/2700 Westchester Avenue Owner SPE LLC
c/o Senlac Ridge Partners
707 Westchester Avenue
White Plains, NY 10604
Attention: Property Management
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With copies to:
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Columbia FundSub Management Co.
315 Park Avenue South
New York, NY 10010
Attention: Stephen Smith
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And
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Senlac Property Management LLC
53 Maple Avenue
Morristown, New Jersey 07960
Attention: Property Management
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And
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Senlac Property Management LLC
53 Maple Avenue
Morristown, New Jersey 07960
Attention: General Counsel
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(18) Landlord’s Address for Payment of Rent:
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If by check through the United States Postal Service:
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2500/2700 Westchester Avenue Owner SPE LLC
PO Box 782452
Philadelphia, PA 19178-2452
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If by check via overnight delivery service:
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2500/2700 Westchester Avenue Owner SPE LLC
LOCKBOX# 782452
WELLS FARGO BANK MAC Y1372-045
401 MARKET STREET
PHILADELPHIA, PA 19106
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If by wire or ACH:
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2500/2700 Westchester Avenue Owner SPE LLC
Bank: Wells Fargo Bank, N.A.
City & State: San Francisco, CA
ABA Number: 121000248
Account Number: 4807068812
Account Name: 2500/2700 Westchester Avenue
Owner SPE LLC FBO Goldman
Sachs Mortgage Company
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(19) Tenant’s Notice Address:
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Prior to the Commencement Date:
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Cognition Therapeutics, Inc.
20 Hollowtree Ridge Road Darien, CT 06820
Attention: Jim O’Brien, CFO
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with a required copy to:
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Troutman Pepper Hamilton Sanders LLP
Attention: Rachael M. Bushey, Esquire
3000 Two Logan Square
Eighteenth and Arch Streets
Philadelphia, PA 19103
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From and after the Commencement Date:
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At the Premises
Attention: Jim O’Brien, CFO
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with a required copy to:
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Troutman Pepper Hamilton Sanders LLP
Attention: Rachael M. Bushey, Esquire
3000 Two Logan Square
Eighteenth and Arch Streets
Philadelphia, PA 19103
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ARTICLE 1
DEFINITIONS
1.1 Capitalized
Terms. Capitalized terms used in this Lease but not otherwise defined have the meanings set forth in Appendix I.
ARTICLE 2
DEMISE, TERM
2.1 Demise
of Premises. Landlord hereby leases and demises to Tenant, and Tenant hereby hires and takes from Landlord, upon the terms and conditions
set forth herein, the Premises for the Term. Landlord and Tenant hereby agree that for all purposes of this Lease, the Premises contains
2,864 rentable square feet, and that neither the Premises nor the Building shall be remeasured by the parties for purposes of recalculating
Basic Rent or Tenant’s Proportionate Share. Notwithstanding the foregoing, from and after the date hereof until the date which
is five business days following the Commencement Date hereunder, Landlord hereby licenses to Tenant the Temporary Space for the Monthly
License Fee per month, to be used solely as temporary office space. Landlord shall deliver the Temporary Space in good working order,
and Tenant agrees to occupy the Temporary Space in its current “as is” condition, and all provisions of this Lease shall
apply to the Temporary Space, except for the payment of Basic Rent and Additional Rent (excluding the Monthly License Fee, provided that
Tenant shall not be required to pay the Monthly License Fee for the portion of the License Period from and after the Commencement Date)
and any maintenance and repair obligation of Tenant (excluding any maintenance or repair required due to any damage to the Temporary
Space caused by Tenant or its agents, employees or contractors). Any Monthly License Fee due and payable for a period of time less than
a full month shall be equitably prorated.
(a) Tenant
and Tenant’s Visitors shall have the non-exclusive right to use, in common with all other tenants of the Property, in a proper
and lawful manner, the Common Areas, subject to the Rules and Regulations.
2.2 Term.
(a) Term.
The Term of this Lease will commence on the Commencement Date and end on the Expiration Date.
(b) Commencement
Date. The “Commencement Date” will be the earlier to occur of (i) the date Tenant takes occupancy
of the Premises for the purposes of conducting its business, and (ii) the date that the Finish Work is Substantially Completed.
Landlord shall provide to Tenant written notice that the Finish Work is Substantially Completed five (5) days prior to such Substantial
Completion date.
(c) Substantial
Completion. “Substantially Completed” or “Substantial Completion” means that
(i) Landlord has completed the Finish Work in accordance with the Working Plans, except for (x) minor details of construction
that will not unreasonably interfere with Tenant’s use of the Premises (collectively, “Punch List Items”),
and (y) any part of the Finish Work that is not completed solely due to a Tenant Delay; and (ii) Landlord has obtained all
necessary legal approvals in order to obtain a valid temporary or permanent certificate of occupancy for the Premises or, alternatively,
Landlord has completed all Finish Work necessary to entitle Landlord to the issuance of a temporary or permanent certificate of occupancy
other than any Finish Work that is not completed solely due to a Tenant Delay. Landlord shall use commercially reasonable efforts to
complete all Punch List Items within sixty (60) days after the Commencement Date. A “Tenant Delay” will be
deemed to have occurred if the completion of the Finish Work is delayed due to any act or omission by Tenant or Tenant’s Visitors,
which continues following Tenant’s receipt of written notice from Landlord of such delay, including, but not limited to, delays
due to changes in or additions to the Finish Work requested by Tenant, delays in submission of information or estimates by Tenant beyond
the time periods required by this Lease, delays in Tenant giving authorizations or approvals beyond the time periods required by this
Lease, or delays due to the postponement of any work at the request of Tenant or selection of any long-lead items, provided that Landlord
shall provide written notice to Tenant that any such item is a long-lead item upon Tenant’s selection of such item and Tenant shall
have a reasonable opportunity to select an alternate item.
(d) AS
IS. Except as otherwise expressly set forth in this Lease, Tenant acknowledges that neither Landlord nor any employee, agent or representative
of Landlord has made any express or implied representations or warranties with respect to the physical condition of the Property, Building
or the Premises, the fitness or quality thereof or any other matter or thing whatsoever with respect to the Property, Building or the
Premises or any portion thereof, and that Tenant is not relying upon any such representation or warranty in entering into this Lease.
Tenant has inspected, or has had the opportunity to inspect, the Building and the Premises and is thoroughly acquainted with their respective
condition and, except as otherwise expressly set forth in this Lease, agrees to take the same “AS IS”, except for the Finish
Work which Landlord has agreed to complete pursuant to the terms of Section 2.6.
2.3 Occupancy
of Premises. Tenant’s occupancy of the Premises will be deemed to conclusively establish that the Finish Work is Substantially
Completed and that the Premises are in satisfactory condition as of the date of such occupancy, unless, within fifteen (15) days of such
occupancy, Tenant delivers to Landlord a written notice specifically identifying all unsatisfactory conditions.
2.4 Commencement
Date Agreement. When the Commencement Date occurs, Landlord and Tenant shall enter into an agreement in the form annexed hereto as
Schedule B memorializing the Commencement Date and Expiration Date of this Lease.
2.5 Move-In
Day. Tenant may move into the Premises at any time on or after the Commencement Date, provided that (i) the move is conducted
outside of Building Hours, (ii) Tenant’s move in date is approved by Landlord at least one week in advance, such approval
not to be unreasonably withheld, conditioned or delayed, and (iii) Tenant’s move is in compliance with Landlord’s Rules and
Regulations as described in Schedule E, including, but not limited to, Building protection, overtime supervision and insurance
requirements. Tenant shall be responsible for any damage caused to the Premises, the Building and/or the Property by Tenant or its moving
contractors.
2.6 Finish
Work. Landlord shall construct the Finish Work in the manner and as provided in Schedule D attached hereto.
2.7 Section 223-a
of the New York Real Property Law. Tenant expressly waives any right to rescind this Lease under Section 223-a of the New York
Real Property Law (or under any present or future statute of similar import) and further expressly waives the right to recover any damages
which may result from Landlord’s failure to timely deliver possession of the Premises to Tenant. Tenant agrees that the provisions
of this Section are intended to constitute “an express provision to the contrary” within the meaning of said Section 223-a.
ARTICLE 3
BASIC RENT; ADDITIONAL RENT
3.1 Basic
Rent. Tenant shall pay the Basic Rent to Landlord in lawful money of the United States of America in equal monthly installments,
in advance without notice, on the Rent Payment Dates, commencing on the Commencement Date, except that Tenant shall pay the first installment
of Basic Rent upon Tenant’s execution and delivery of this Lease, such installment to be applied against Basic Rent due for the
sixth (6th) month following the Commencement Date. If the Commencement Date is not a Rent Payment Date, the Basic Rent for the month
in which the Commencement Date occurs will be prorated and Tenant shall pay such prorated amount to Landlord on the Commencement Date.
3.2 Additional
Rent. In addition to the Basic Rent, Tenant shall pay and discharge when due, as additional rent (“Additional Rent”),
all other amounts, liabilities and obligations which Tenant herein agrees to pay to Landlord, together with all interest, penalties and
costs which may be added thereto pursuant to the terms of this Lease.
3.3 Late
Charge. If any installment of Basic Rent or Additional Rent is not paid when due, Tenant shall pay to Landlord, on demand, a late
charge equal to five percent (5%) of the amount unpaid, provided that the first (1st) time in each calendar year that Tenant
fails to pay any installment of Basic Rent or Additional Rent when due, Landlord shall provide Tenant with a written notice of such failure
and Tenant shall have five (5) days following its receipt of such notice to pay such installment before such late charge, and the
interest set forth below, shall be applied to such overdue amount. The late charge is not intended as a penalty but is intended to compensate
Landlord for the extra expense Landlord will incur to send out late notices and handle other matters resulting from the late payment.
In addition, any installment or installments of Basic Rent or Additional Rent that are not paid within five (5) days after the date
when due, will bear interest at the lesser of: (i) six (6) percentage points over the Prime Rate, or (ii) the highest legal
rate permitted by law. Any interest due as set forth in the preceding sentence shall be calculated from the due date of the delinquent
payment until the date of payment, which interest will be deemed Additional Rent and shall be payable by Tenant upon demand by Landlord.
3.4 Prorating
Rent. If any Lease Year consists of a period of less than twelve (12) full calendar months, payments of Basic Rent and Additional
Rent, will be prorated on the basis of a thirty (30) day month or 360-day year, unless otherwise provided.
3.5 No
Abatement or Set-off. Except as herein provided, Tenant shall pay to Landlord, at Landlord’s address for notices hereunder,
or such other place as Landlord may from time to time designate in writing, without any offset, set-off, counterclaim, deduction, defense,
abatement, suspension, deferment or diminution of any kind (i) the Basic Rent, without notice or demand, (ii) Additional Rent,
and (iii) all other sums payable by Tenant hereunder. Except as otherwise expressly provided herein, this Lease will not terminate,
nor will Tenant have any right to terminate or avoid this Lease or be entitled to the abatement of any Basic Rent, Additional Rent or
other sums payable hereunder or any reduction thereof, nor will the obligations and liabilities of Tenant hereunder be in any way affected
for any reason. Except as otherwise expressly set forth in this Lease, the obligations of Tenant hereunder are separate and independent
covenants and agreements.
3.6 Invoices.
If Landlord issues monthly or other periodic rent billing statements to Tenant, the issuance or non-issuance of such statements will
not affect Tenant’s obligation to pay Basic Rent and the Additional Rent set forth in Sections 4.3 and 5.3, all of which are due
and payable on the Rent Payment Dates.
3.7 Restrictions on Rent.
If any of the rents shall be or become uncollectible, reduced, restricted or required to be refunded because of any Legal Requirements,
Tenant shall enter into such commercially reasonable agreement(s) and take such other commercially reasonable steps (without additional
expense to Tenant) as Landlord may reasonably request and as may be legally permissible (including, without limitation, an escrow of
the balance of the rents otherwise payable hereunder, but only as and when the same would otherwise be due hereunder in the absence of
such Legal Requirements, with the amount of such rents to be held in an interest bearing account), to permit Landlord to collect the
maximum rents due under this Lease which from time to time during the continuance of such legal rent restriction as may be legally permissible.
The interest accrued on any such amounts held in escrow shall be payable to the party entitled to receive same. Upon the termination
of such Legal Requirement: (a) the rents shall become and thereafter be payable in accordance with the amounts reserved herein for
the periods following such termination; and (b) Tenant shall pay to Landlord, to the maximum extent legally permissible, an amount
equal to: (i) the rents which would have been paid pursuant to this Lease but for such Legal Requirement; less (ii) the rents
and payments in lieu of rents paid by Tenant during the period such Legal Requirements were in effect. Nothing contained in this Article shall
reduce or delay Tenant’s obligation to pay Additional Rent otherwise due hereunder.
ARTICLE 4
REAL ESTATE TAXES
4.1 Taxes.
Commencing on the first (1st) day following the expiration of the Base Tax Period, Tenant shall pay to Landlord Tenant’s
Proportionate Share of the amount by which the Taxes for any Tax Year during the Term exceed the Base Taxes; provided, however, that
if any special assessments may be paid in installments, Landlord may elect to pay same over the longest period allowed by law. “Tax
Year” means each full or partial twelve (12) month period commencing on the first (1st) day of July of each year,
or such other period of twelve (12) months as may be duly adopted as the fiscal years for real estate tax purposes in any tax jurisdiction
in which the Building may be situated. Tenant acknowledges that there may be multiple components of Taxes (such as City, County, Town,
Village and School), that may result in multiple Tax Years and multiple Monthly Tax Payments (as defined below) within each Lease Year.
Tenant’s Proportionate Share of the Taxes for less than a full Tax Year will be prorated.
4.2 Landlord’s
Tax Statements. As soon as reasonably possible after the first day of each Tax Year following the Tax Year in which the applicable
Base Tax Period occurs and thereafter as soon as reasonably practical after the end of each succeeding Tax Year, Landlord shall determine
or estimate the amount by which the Taxes for the relevant Tax Year in question will exceed the Base Taxes (the “Projected
Taxes”) and shall submit such information to Tenant in a written statement (“Landlord’s Tax Statement”).
Landlord shall use reasonable efforts to issue Landlord’s Tax Statement within one hundred twenty (120) days following the end
of each Tax Year. Landlord’s failure to render Landlord’s Tax Statement for any Tax Year will not prejudice Landlord’s
right to thereafter render Landlord’s Tax Statement with respect to such Tax Year or with respect to any other Tax Year, nor will
the rendering of any Landlord’s Tax Statement prejudice Landlord’s right to thereafter render a revised Landlord’s
Tax Statement for the applicable Tax Year.
4.3 Monthly
Tax Payment. From and after the Commencement Date, commencing on the First Rent Payment Date following the submission of a Landlord’s
Tax Statement and continuing thereafter on each successive Rent Payment Date until Landlord renders the next Landlord’s Tax Statement,
Tenant shall pay to Landlord on account of its obligation under Section 4.1, a sum (the “Monthly Tax Payment”)
equal to one-twelfth (1/12) of Tenant’s Proportionate Share of the Projected Taxes for such Tax Year. Tenant’s first Monthly
Tax Payment after receipt of a Landlord’s Tax Statement shall be accompanied by the payment of an amount equal to the product of
the number of full months, if any, within the Tax Year which have elapsed prior to such first Monthly Tax Payment, times the Monthly
Tax Payment; minus any Additional Rent already paid by Tenant on account of its obligation under Section 4.1 for such Tax Year.
From time to time during any Tax Year, but no more than twice in any Tax Year, Landlord may revise a Landlord’s Tax Statement and
adjust Tenant’s Monthly Tax Payment to reflect Landlord’s revised estimate, in which event Tenant shall pay, along with the
next monthly payment due, the difference (if any) between the aggregate amount of Tenant’s Monthly Tax Payments theretofore made
on account of its obligation under Section 4.1 for such Tax Year, and the amount which would have been payable by Tenant during
such Tax Year had Landlord billed Tenant for the revised Monthly Tax Payment for such prior elapsed months during such Tax Year. Thereafter,
Tenant shall pay the revised monthly estimate in accordance with the provisions of this Section 4.3.
4.4 Reconciliation.
Landlord shall use reasonable efforts to deliver to Tenant within one hundred twenty (120) days after the end of each Tax Year, Landlord’s
final determination of the amount by which the Taxes for the Tax Year in question exceed the Base Taxes and shall submit such information
(together with a copy of the relevant Tax invoice) to Tenant in a written statement (“Landlord’s Final Tax Statement”).
Each Landlord’s Final Tax Statement must reconcile the payments actually made by Tenant in the Tax Year in question with Tenant’s
Proportionate Share of the amount by which actual Taxes imposed for the period covered thereby exceed Base Taxes. Any balance due to
Landlord shall be paid by Tenant within thirty (30) days after Tenant’s receipt of Landlord’s Final Tax Statement; any surplus
due to Tenant shall be applied by Landlord against the next accruing monthly installment(s) of Additional Rent due under this Article 4.
If the Term has expired or has been terminated, Tenant shall pay the balance due to Landlord or, alternatively, Landlord shall refund
the surplus to Tenant, whichever the case may be, within thirty (30) days after Tenant’s receipt of Landlord’s Final Tax
Statement; provided, however, that, if the Term terminated as a result of an Event of Default by Tenant, then Landlord will have the
right to retain such surplus to the extent Tenant owes Landlord any Basic Rent or Additional Rent.
4.5 Refund
of Taxes. Landlord will have the right, but not the obligation, to seek to obtain a lowering of the assessed valuation of the Property.
Landlord may employ whatever individuals and firms Landlord, in its sole, reasonable judgment, deems necessary to undertake such endeavor.
Tenant, at no cost or expense to Tenant, shall reasonably cooperate with Landlord and its representatives in all such endeavors. If Landlord
receives a refund of Taxes in respect of a Tax Year and if Tenant paid Additional Rent based on the Taxes paid prior to the refund, Landlord
shall first deduct from such tax refund any expenses, including, but not limited to, reasonable attorneys’ fees and appraisal fees,
incurred in obtaining such tax refund, and out of the remaining balance of such tax refund, Landlord shall credit Tenant’s Proportionate
Share of such refund against the next accruing monthly installment(s) of Additional Rent, or if the Term has expired, Landlord shall
pay to Tenant Tenant’s Proportionate Share of such refund within thirty (30) days after receipt thereof by Landlord; provided,
however, that (i) if the Term terminated as a result of an Event of Default by Tenant, Landlord will have the right to retain Tenant’s
Proportionate Share of the refund to the extent Tenant owes Landlord any Basic Rent or Additional Rent, and (ii) Tenant’s
Proportionate Share of such refund will in no event exceed the amount of Additional Rent actually paid by Tenant on account of the Taxes
for the Tax Year in question. Any out-of-pocket expenses actually incurred by Landlord in contesting the validity or the amount of the
assessed valuation of the Property or any Taxes, to the extent not offset by a tax refund, will, for the purpose of computing the Additional
Rent due Landlord or any credit due to Tenant hereunder, be included as an item of Taxes for the tax year in which such contest is finally
determined. Notwithstanding anything to the contrary contained in this Lease, Tenant will have no right to contest or appeal the validity
of any Taxes or the assessed valuation of the Property.
4.6 Payment
Pending Appeal. While proceedings for the reduction in assessed valuation for any year are pending, the computation and payment of
Tenant’s Proportionate Share of Taxes will be based upon the original assessments for such Tax Year.
4.7 Taxes
on Tenant’s Improvements. Tenant shall also pay to Landlord, upon demand, the amount of all increases in Taxes and/or all assessments
or impositions made, levied or assessed against or imposed upon the Property or any part thereof which are attributable to additions
or improvements in, on or about the Premises made by or on behalf of Tenant or which in whole or in part belong to, or were paid by,
Tenant, except for the Finish Work. For the avoidance of doubt, in no event shall any such assessments or impositions be included for
purposes of determining Taxes for the Base Period.
4.8 Survival.
In no event will any adjustment in Tenant’s obligation to pay Additional Rent under this Article 4 result in a decrease
in the Basic Rent. Tenant’s obligation to pay Additional Rent, and Landlord’s obligation to credit and/or refund to Tenant
any amount, pursuant to the provisions of this Article 4, will survive the Expiration Date or earlier termination of this Lease.
4.9 Bills
and Statements. The provisions of Section 29.3 apply to Landlord’s Tax Statement.
4.10 Rent
Tax. If an excise, transaction, sales, or privilege tax or other tax or imposition (other than Federal, state or local income or
estate taxes) is levied or assessed against Landlord or the Property on account of or measured by, in whole or in part, the Basic Rent
and/or Additional Rent expressly reserved hereunder as a substitute for or in addition to, in whole or in part, Taxes or if any assessments
and/or taxes are levied or assessed against Landlord or the Property on account of or as a result of the operation and/or existence of
Tenant’s business, then Tenant shall pay to Landlord within thirty (30) days following written demand: (i) the amount of such
excise, transaction, sales or privilege tax or other tax or imposition lawfully assessed or imposed as a result of Landlord’s interests
in this Lease or of the Basic Rent and/or Additional Rent accruing under this Lease; and (ii) the amount of any assessments and/or
taxes levied or assessed against Landlord or the Property on account of or as a result of the operation and/or existence of Tenant’s
business in the Property.
ARTICLE 5
OPERATING EXPENSES
5.1 Operating
Expenses. Commencing on the first (1st) day following the expiration of the Base Operating Expense Period, Tenant shall pay to Landlord,
Tenant’s Proportionate Share of the amount by which Landlord’s Operating Expenses for any Lease Year during the Term exceeds
the Base Operating Expenses. Tenant’s Proportionate Share of Landlord’s Operating Expenses for less than a full Lease Year
will be prorated.
5.2 Landlord’s Expense Statement.
As soon as reasonably possible after the first day of the Lease Year following the Lease Year in which the Base Operating Expense Period
occurs and thereafter as soon as practical after each succeeding Lease Year during the Term, Landlord shall determine or estimate the
amount by which Landlord’s Operating Expenses for the Lease Year in question will exceed the Base Operating Expenses (“Landlord’s
Estimated Operating Expenses”) and shall submit such information to Tenant in a written statement (“Landlord’s
Expense Statement”). Landlord shall use reasonable efforts to issue Landlord’s Expense Statement within one hundred
twenty (120) days following the end of each Lease Year. Landlord’s failure to render Landlord’s Expense Statement for any
Lease Year will not prejudice Landlord’s right to thereafter render Landlord’s Expense Statement with respect to such Lease
Year or with respect to any other Lease Year, nor will the rendering of any Landlord’s Expense Statement prejudice Landlord’s
right to thereafter render a revised Landlord’s Expense Statement for the applicable Lease Year.
5.3 Monthly
Expense Payment. From and after the Commencement Date, commencing on the First Rent Payment Date following the submission of Landlord’s
Expense Statement and continuing thereafter on each successive Rent Payment Date until Landlord renders the next Landlord’s Expense
Statement, Tenant shall pay to Landlord on account of its obligation under Section 5.1, a sum (the “Monthly Expense
Payment”) equal to one-twelfth (1/12) of Tenant’s Proportionate Share of Landlord’s Estimated Operating Expenses
for such Lease Year. Tenant’s first Monthly Expense Payment after receipt of Landlord’s Expense Statement shall be accompanied
by the payment of an amount equal to the product of the number of full months, if any, within the Lease Year which have elapsed prior
to such first Monthly Expense Payment, times the Monthly Expense Payment; minus any Additional Rent already paid by Tenant on account
of its obligation under Section 5.1 for such Lease Year. From time to time during any Lease Year, but no more than twice per Lease
Year, Landlord may revise the Landlord’s Expense Statement and adjust Tenant’s Monthly Expense Payment to reflect Landlord’s
revised estimate, in which event Tenant shall pay, along with the next monthly payment due, the difference (if any) between the aggregate
amount of Tenant’s Monthly Expense Payments theretofore made on account of its obligation under Section 5.1 for such Lease
Year, and the amount which would have been payable by Tenant during such Lease Year had Landlord billed Tenant for the revised Monthly
Expense Payment for such prior elapsed months during such Lease Year. Thereafter, Tenant shall pay the revised monthly estimate in accordance
with the provisions of this Section 5.3.
5.4 Reconciliation.
Landlord shall use reasonable efforts to deliver to Tenant, within one hundred twenty (120) days after the end of each Lease Year,
Landlord’s final determination of the amount by which the Landlord’s Operating Expenses for the Lease Year in question exceed
the Base Operating Expenses and shall submit such information to Tenant in a written statement (the “Annual Expense Reconciliation”).
Each Annual Expense Reconciliation must reconcile the aggregate of all Monthly Expense Payments made by Tenant in the Lease Year in question
with Tenant’s Proportionate Share of the amount by which actual Landlord’s Operating Expenses for the period covered thereby
exceed Base Operating Expenses. Any balance due to Landlord shall be paid by Tenant within thirty (30) days after Tenant’s receipt
of the Annual Expense Reconciliation; any surplus due to Tenant shall be applied by Landlord against the next accruing monthly installment(s) of
Additional Rent due under this Article 5. If the Term has expired or has been terminated, Tenant shall pay the balance due to Landlord
or, alternatively, Landlord shall refund the surplus to Tenant, whichever the case may be, within thirty (30) days after Tenant’s
receipt of the Annual Expense Reconciliation; provided, however, that if the Term terminated as a result of an Event of Default by Tenant,
then Landlord will have the right to retain such surplus to the extent Tenant owes Landlord any Basic Rent or Additional Rent.
5.5 Audit.
For forty-five (45) days following Landlord’s delivery to Tenant of the Annual Expense Reconciliation, Tenant will have the
right, during normal business hours and upon no less than five (5) days prior written notice to Landlord, to examine Landlord’s
books and records for the purpose of confirming the Annual Expense Reconciliation. Tenant will be deemed to have accepted the Annual
Expense Reconciliation unless, within thirty (30) days after Tenant’s examination of Landlord’s books and records, Tenant
delivers an objection notice to Landlord specifying in detail why Tenant believes such Annual Expense Reconciliation is incorrect. Notwithstanding
anything to the contrary contained in this Section 5.5, Tenant will not be permitted to examine Landlord’s books and records
or to dispute any Annual Expense Reconciliation unless (i) Tenant has paid to Landlord all amounts due as shown on such Annual Expense
Reconciliation, and (ii) Tenant has signed a confidentiality agreement acceptable to Landlord. Tenant shall not engage the services
of any legal counsel or other professional consultant who charges for its services on a so-called contingency fee basis for the purpose
of reviewing Landlord’s books and records. If (i) such audit discloses any overcharge to Tenant, (ii) Landlord disputes
such findings, and (iii) any such dispute is not settled by Landlord and Tenant within thirty (30) days after the dispute arises,
or such longer period to which they may mutually agree, then such dispute may, at the option of either party, be submitted to arbitration
in accordance with Section 29.18 of this Lease. If Tenant’s audit discloses any overcharge to Tenant and Landlord agrees with
such findings, or, in the event of a dispute, the arbitrator rules in favor of Tenant, then the amount overcharged to Tenant shall
be applied against the next accruing monthly installment(s) of Additional Rent due under this Article 5. If the Term has expired
or has been terminated, Landlord shall refund the surplus to Tenant within thirty (30) days after receipt of Tenant’s audit results.
In addition, if the amount of such overcharge is ten percent (10%) or more in excess of the amount actually owed by Tenant, then, in
addition to refunding to Tenant the amount of any such overcharges so disclosed, Landlord shall also pay to Tenant the reasonable out-of-pocket
cost of Tenant’s audit actually incurred, not to exceed $5,000.00.
5.6 Survival.
In no event will any adjustment in Tenant’s obligation to pay Additional Rent under this Article 5 result in a decrease
in Basic Rent. Tenant’s obligation to pay Additional Rent, and Landlord’s obligation to credit and/or refund to Tenant any
amount, pursuant to this Article 5 will survive the Expiration Date or the earlier termination of this Lease.
5.7 Operating
Expenses With Respect to Tenant. Tenant shall also pay to Landlord, upon demand, the amount of any increase in Landlord’s Operating
Expenses which is attributable to Tenant’s use or manner of use of the Premises, to activities conducted on or about the Premises
by Tenant or on behalf of Tenant or to any additions, improvements or alterations to the Premises made by or on behalf of Tenant.
5.8 Bills
and Statements. The provisions of Section 29.3 apply to Landlord’s Expense Statement.
ARTICLE 6
ELECTRICITY
6.1 Cost
of Electricity. Tenant shall pay to Landlord on each Rent Payment Date, in advance, the Minimum Electric Energy Charge. The Minimum
Electric Energy Charge represents Landlord’s estimate of the annual cost of providing electric current to the Premises. If Landlord’s
electric rates increase, the Minimum Electric Energy Charge will be proportionately increased. In addition, the Minimum Electric Energy
Charge will be increased if, based upon a survey of the electrical current and power load requirements in the Premises, Landlord’s
electrical consultant reasonably determines that the actual cost of the electric current used in the Premises exceeds the Minimum Electric
Energy Charge. Landlord’s consultant shall determine the proper cost of electricity consumed in the Premises based upon the costs
and charges then in effect for the Building. The Minimum Electric Energy Charge will be adjusted retroactively to the date of the survey.
Within thirty (30) days following the completion of such survey, Landlord shall deliver a copy of the survey to Tenant, together with
a statement setting forth the new Minimum Electric Energy Charge and the Survey Adjustment Amount. The “Survey Adjustment
Amount” means (i) the new Minimum Electric Energy Charge applicable to the period from the date of the survey until
the next Rent Payment Date, less (ii) the total Minimum Electric Energy Charge actually paid by Tenant for the same period. Tenant
shall pay the Survey Adjustment Amount to Landlord on the next Rent Payment Date. Notwithstanding anything to the contrary contained herein,
in no event will Tenant be entitled to a refund or credit of any kind against the Minimum Electric Charge paid or payable by Tenant, it
being understood and agreed that the Minimum Electric Energy Charge is a minimum charge. If Tenant installs any high electrical usage
equipment, Landlord reserves the right to place an electrical check meter on such equipment, as well as any other equipment used in conjunction
therewith, at Tenant’s sole cost and expense. Tenant shall pay the charges for electrical energy consumed by such high electrical
usage equipment in addition to all other sums due under this Lease. At the option of Landlord, Tenant agrees to purchase from Landlord,
all light bulbs, fluorescent lighting fixtures, starters, ballasts, lenses and grills used in the Premises, and to pay to Landlord the
costs of installing the same.
6.2 Tenant
Not To Exceed Capacity. Tenant’s use of electric energy in the Premises shall be limited to such electric energy reasonably
required in connection with the Permitted Use and occupancy of the Premises for ordinary lighting and the operation of typical small
business machines (including copying machines and personal computers), and peripheral equipment such as printers, telephone switching
equipment and facsimile transmission machines and shall not at any time exceed four (4) watts per square foot (exclusive of electricity
for HVAC). In order to ensure that such capacity is not exceeded and to avert possible adverse effect upon the Building electric service,
Tenant shall not, without Landlord’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed,
connect any fixtures, appliances or equipment to the Building electric distribution system or make any alteration or addition to the
electric system serving the Premises. Any changes requested by Tenant must be sent in writing to Landlord, and if, in the reasonable
judgment of Landlord, such changes will not cause or create a dangerous or hazardous condition or damage or injury to the Building, or
entail excessive or unreasonable alterations or repairs, or interfere with or disturb other tenants or occupants of the Building and/or
the service then or thereafter to be supplied to tenants or occupants, Landlord will, at the sole cost and expense of Tenant, make such
changes. Tenant shall pay Landlord for such costs and expenses within thirty (30) days of Tenant’s receipt of an invoice therefor.
6.3 Electric
Meters. Landlord reserves the right to install, at its sole cost and expense, separate meters, submeters, check meters or other measuring
devices to measure the electricity consumed in the Premises and in such event the Minimum Electric Energy Charge will be based on actual
usage. If direct meters are installed, Tenant shall be responsible for payment of all charges directly to the utility company, such charges
to include, without limitation, usage charges, meter reading charges and demand factors. If submeters or check meters are installed,
Tenant shall pay to Landlord, as Additional Rent, within thirty (30) days after receipt of Landlord’s bill therefor, an amount
equal to the average actual cost of electrical service per kwh payable by Landlord for the Building times Tenant’s consumption
of electrical service in the Premises as shown on said meter(s), plus an administration fee of five percent (5%) to defray the cost to
Landlord of the meter readings and associated processing costs. Bills for such electrical usage shall be rendered by Landlord at such
times as Landlord may elect and the amounts shown on such bills shall be paid by Tenant as Additional Rent within thirty (30) days after
receipt of such bills. Landlord shall be responsible for maintaining and repairing the submeters.
6.4 Utility
Deregulation. If permitted by law and provided that such service providers charge competitive market rates, Landlord will have the
right to choose the service providers that deliver electricity to the Premises. Tenant shall reasonably cooperate with Landlord and such
service providers, at no cost or expense to Tenant, including granting reasonable access to the electric lines, feeders, risers, wiring,
and any other machinery within the Premises. If the law prohibits Landlord from choosing the service providers that deliver electricity
to the Premises, then Tenant’s choice of such service providers is subject to Landlord’s prior written consent, such consent
not to be unreasonably withheld, conditioned or delayed, and no such service provider will be permitted to deliver service to or otherwise
affect the Building’s electric system without such consent.
6.5 Landlord
Not Liable. Except as otherwise expressly set forth in this Lease, Landlord will not be responsible for any loss, damage or expenses,
and Tenant will not be entitled to any rent abatement, diminution, setoff, or any other relief from its obligations hereunder, on account
of any change in the quantity or character of the electric service or any cessation or interruption of the supply of electricity to the
Premises. Notwithstanding anything to the contrary in this Section 6.5, in the event any such cessation or interruption of the supply
of electricity to the Premises is caused by the gross negligence or willful acts of Landlord and such cessation or interruption shall
continue for five (5) consecutive business days and Tenant shall not, as a result thereof, be able to use the Premises for the conduct
of its business, the Basic Rent shall be abated for the portion of the Premises affected thereby, for the period from the sixth (6th)
business day to the date such failure, delay or inability is cured. The remedies set forth in this Section 6.5 are the sole remedies
of Tenant with respect to a cessation or interruption of the supply of electricity, and in no event shall Tenant have a claim of constructive
eviction as a result of such cessation or interruption.
ARTICLE 7
MAINTENANCE; ALTERATIONS; REMOVAL OF TRADE FIXTURES
7.1 Tenant’s
Maintenance. Tenant shall, at its sole cost and expense, keep the Premises in good order and condition (except for ordinary wear
and tear, casualty, condemnation, and failure by Landlord to perform its obligations under this Lease) and, except as provided in Section 7.2,
shall make all non-structural repairs, alterations, renewals and replacements and shall take such other action as may be necessary or
appropriate to keep and maintain the Premises in good order and condition. Except as expressly provided in this Lease, Landlord will
not be obligated to maintain, alter or repair the Premises. All repairs made by Tenant must be at least equal in quality to the original
work.
7.2 Landlord’s
Repairs. Landlord shall make all repairs and replacements to the foundation, the bearing walls, the structural columns and beams,
the exterior walls, the exterior of the Building, the exterior windows and the roof of the Building, all mechanical, electrical, plumbing,
HVAC systems within the Building (other than supplemental HVAC units and the duct distribution systems within the Premises and exclusively
serving the Premises) and Common Areas; provided, however, that if such repairs and replacements (including repairs and replacements
with respect to the Property) are necessitated by the intentional acts or gross negligence of Tenant or Tenant’s Visitors, then,
subject to any applicable waiver of subrogation, Tenant shall reimburse Landlord, within thirty (30) days following written demand, for
the reasonable cost thereof. The costs and expenses incurred by Landlord in connection with such repairs and replacements will be included
in Landlord’s Operating Expenses to the extent permitted by the terms of this Lease. All maintenance and repair, and each addition,
improvement or alteration, performed by or on behalf of Landlord must be completed as soon as commercially reasonable in a good and workmanlike
manner, and in compliance with all applicable Legal Requirements and Insurance Requirements.
7.3 Requirements
for Tenant’s Maintenance. All maintenance and repair, and each addition, improvement or alteration, performed by or on behalf
of Tenant must be (a) completed expeditiously in a good and workmanlike manner, and in compliance with all applicable Legal Requirements
and Insurance Requirements, (b) completed free and clear of all Liens, and (c) performed in a manner and by contractors reasonably
approved by Landlord to the extent such work involves any work to any electrical, mechanical, plumbing or other system of the Building,
any work to the outside of the Building, any work to the roof of the Building or any work to any structural element of the Building.
7.4 (a) Permitted
Alterations. Provided an Event of Default does not exist, Tenant shall have the right to, subject to Legal Requirements, upon
prior written notice to Landlord and submission to Landlord of plans and specifications therefor, make interior, non-structural
additions, improvements or alterations to the Premises having an aggregate cost not to exceed $10,000.00, so long as the same do not
(i) require a building permit, (ii) affect, alter, interfere with or disrupt any of the electrical, mechanical, plumbing
or other system of the Building, (iii) affect the outside appearance of the Building, (iv) affect the roof of the
Building, or (v) affect any structural element of the Building.
(b) Landlord’s
Consent to Alterations. Tenant shall not make any addition, improvement or alteration outside the Premises to the Property or
Building. In addition, Tenant shall not make any addition, improvement or alteration of the Premises having an aggregate cost in
excess of $10,000.00 or (i) requiring a building permit, (ii) affecting, altering, interfering with or disrupting any
electrical, mechanical, plumbing or other system of the Building, or (iii) affecting the outside appearance of the Building,
the roof of the Building, the ingress to or the egress from the Premises and/or any structural element of the Building (such work,
“Major Work”), unless Tenant submits to Landlord detailed plans and specifications therefor and Landlord
approves such plans and specifications in writing (which approval will be at Landlord’s sole and absolute discretion). Tenant
shall reimburse Landlord within thirty (30) days following written demand, for its actual third party costs for reviewing any plans
for the Major Work.
(c) Contractors for Major Work. Notwithstanding anything
contained in the Lease to the contrary, Landlord reserves the right to require Tenant to use Landlord’s designated engineers
and contractors in connection with any Major Work.
7.5 (a) Surrender
of Alterations. Each addition, improvement and alteration to the Premises (each a “Tenant Improvement”)
will, upon installation, become the property of Landlord and be deemed to be a part of the Building unless Landlord, by written notice
to Tenant at the time it approves such Tenant Improvement, elects to relinquish Landlord’s right to such Tenant Improvement. If
Landlord elects to relinquish its right to any Tenant Improvement, Tenant shall insure such Tenant Improvement in accordance with Section 14.1(a)(ii),
and, prior to the Expiration Date, remove such Tenant Improvement and promptly repair any damage to the Premises or the Building caused
by the installation or removal of such Tenant Improvement and restore the Premises to the condition existing prior to the installation
of such Tenant Improvement, ordinary wear and tear excepted. Notwithstanding the foregoing, in no event shall Tenant be required to remove
any Finish Work and Tenant shall not be required to remove any Tenant Improvement unless Landlord notifies Tenant in writing of such
removal requirement at the time it consents to or approves of such Tenant Improvement.
(b) Removal
of Improvements. Tenant may install in, and remove from, the Premises any trade equipment, machinery and personal property belonging
to Tenant (such trade equipment, machinery and personal property will not become the property of Landlord), provided that (i) Tenant
shall repair all damage caused by such installation or removal; (ii) Tenant shall not install any equipment, machinery or other
items on the roof of the Building or make any openings in the roof; and (iii) Tenant shall not install any equipment, machinery
or other items on the floor, walls or ceiling of the Premises that exceed the load bearing capacity or compromise the structural integrity
of the floor, walls or ceiling of the Premises.
ARTICLE 8
USE OF PREMISES
8.1 Permitted
Use. Tenant shall not use or permit the use of the Premises for any purpose other than the Permitted Use specified in the Basic Lease
Provisions.
8.2 Prohibited
Uses. Tenant shall not use or permit the use of the Premises in any manner or for any purpose or do, bring or keep anything, or permit
anything to be done, brought or kept in the Premises that (a) violates any Legal Requirement or Insurance Requirement, (b) could
overload the electrical or mechanical systems of the Building or exceed the design criteria, the structural integrity, character, appearance
or fair market value of the Building, (c) in the reasonable judgment of Landlord, may impair or interfere with the proper and economic
heating or air conditioning of the Building; or (d) in the reasonable judgment of Landlord, may interfere with the use or occupancy
of any portion of the Building outside of the Premises by Landlord or any other tenant or occupant of the Building.
8.3 Dispensing
Food. Tenant shall not have the right to permit the dispensing, preparation, or serving of any beverages or food in the Premises
from the kitchenette area of the Premises. Tenant shall only be permitted to warm food using a microwave oven in the kitchenette area,
and in no event shall Tenant otherwise cook any food in such area.
8.4 Parking.
(a) Provided
an Event of Default is not continuing, during the term of this Lease, Tenant and its employees, agents and contractors shall be permitted
to park up to the number of normal sized passenger vehicles (which includes SUVs) indicated in the Basic Lease Provisions in the parking
area of the Property. During the Term, Tenant and/or Tenant’s Visitors shall not: (i) use more parking spaces than the number
indicated in the Basic Lease Provisions; (ii) park in spaces designated for the exclusive use of other parties, (iii) park
outside of marked parking spaces, (iv) store or park vehicles overnight, (v) maintain, repair or clean any vehicle in the parking
area, and (vi) violate any other parking rules and regulations promulgated in writing by Landlord. For each violation of any
of the foregoing, Landlord shall (in addition to any other remedy available hereunder) be permitted to charge Tenant a $50.00 fee. If
the number of parking spaces in the parking area of the Property is reduced by circumstances beyond the reasonable control of Landlord,
the number of spaces indicated in the Basic Lease Provisions will be reduced proportionately.
(b) Landlord
will have no liability for any damage to vehicles on the Property or for any loss of property from within such vehicles, or for any injury
suffered by Tenant’s employees or Tenant’s Visitors, except to the extent such loss, damage or injury is caused by Landlord’s
gross negligence or willful misconduct, or that of its agents, employees or contractors. Tenant shall advise its employees, Tenant’s
Visitors, and any subtenant’s employees of the requirements of this Section 8.4 and Tenant shall be responsible for compliance
by such parties with such requirements. If Tenant or Tenant’s Visitors park illegally or in areas designated for use by others,
or in driveways, fire lanes or areas not striped for general parking or otherwise violate any parking rules and regulations promulgated
in writing by Landlord, then Landlord may, at Tenant’s sole cost and expense, or the cost of the driver or owner of such vehicles,
tow such vehicles away from the Property and/or attach violation notices to such vehicles. Any amount due from Tenant pursuant to this
Article will be deemed Additional Rent and Tenant shall pay such amounts to Landlord upon demand. Landlord reserves the right, from
time to time, to assign and re-assign to Tenant and other tenants of the Building specific parking spaces, and Tenant agrees to be bound
thereby, provided that in no event shall the number of parking spaces Tenant has the right to use be materially reduced. Nothing contained
herein shall be deemed to impose any obligation on Landlord to police the parking area.
8.5 Permits,
Licenses and Authorizations. Tenant shall obtain and maintain in full force and effect, at its sole cost and expense, all permits,
licenses or authorizations of any nature required under any Legal Requirement in connection with the operation of Tenant’s business
at the Premises.
ARTICLE 9
LANDLORD’S SERVICES
9.1 Landlord’s
Services. Landlord shall furnish to Tenant the services set forth in this Article 9. Tenant acknowledges that Landlord is required
to furnish air cooling, heat, ventilation, building maintenance and other facilities and services (collectively “Building
Services”) only during Building Hours as provided below. If Tenant desires air cooling, heat and ventilation outside Building
Hours (such period referred to herein as “Extra Hours”), Landlord will provide air cooling, heat and ventilation
to Tenant during such Extra Hours provided that: (i) Tenant pays to Landlord a special charge (“Extra Hours Charge”),
and (ii) Tenant’s request for Extra Hours air cooling, heat and ventilation is received by Landlord twenty four (24) hours
in advance of the commencement of such Extra Hours air cooling, heat and ventilation. The Extra Hours Charge will be a standard hourly
rate determined by Landlord from time to time. The initial Extra Hours Charge will be $150.00 per hour. Tenant shall pay the Extra Hours
Charge to Landlord within thirty (30) days after receipt of a statement therefor.
9.2 Elevators.
Tenant will have the nonexclusive right to use passenger elevators in the Building, if applicable, to obtain access to the Premises at
all times, except during reasonable closures for breakdowns, repairs, or maintenance. Landlord will have no liability for any such closures.
If the Building has a freight elevator, Tenant may use it only during times approved in advance by Landlord.
9.3 Heating,
Air Cooling and Ventilation. Landlord shall furnish heat when and as required by law and air cooling as appropriate for the season
during Building Hours when, in the reasonable judgment of Landlord, it is required for the comfortable occupancy of the Premises. Notwithstanding
the foregoing, if, at Tenant’s request, Landlord consents to Tenant’s installation of auxiliary or supplemental air cooling
which may only be supplied by an air-cooled split system, Tenant shall pay Landlord for the electricity consumed by such units as measured
by submeters installed at Tenant’s sole cost and expense. Tenant shall also be solely responsible for all maintenance and other
operational costs of such supplemental units. Landlord shall provide ventilation for the Premises during Building Hours. Tenant shall
cooperate fully with Landlord and abide by all regulations and requirements that Landlord reasonably prescribes in writing for the proper
functioning and protection of its heating, air cooling and ventilation systems. Tenant shall not construct any partitions or other obstructions
that unreasonably interfere with Landlord’s access to Landlord’s mechanical installations, including, but not limited to,
air cooling, fans, ventilating and machine rooms and electrical closets, and ceiling and plenum installations. Tenant, its agents, employees
and contractors shall not enter any enclosures containing Landlord’s mechanical installations or tamper, adjust, touch or otherwise
affect such mechanical installations. Tenant shall keep all windows in the Premises closed when the air cooling system is in operation.
9.4 Water. Landlord shall furnish adequate hot and cold water at
standard Building temperatures to the Building for drinking, lavatory and cleaning purposes, the cost of which shall be included in
Landlord’s Operating Expenses.
9.5 Common
Area Maintenance. Landlord shall furnish electrical lighting, cleaning, and maintenance, repair and replacements of the Common Areas
of the Building and the Property and shall keep restroom supplies in stock for all restrooms located in the Common Areas of the Building
and the Property.
9.6 Building
Directory/Suite Signage.
(a) At
Tenant’s request, Landlord shall include Tenant’s name in the main Building directory and on the floor directory of the Premises,
if any. Tenant shall promptly reimburse Landlord for the cost of any changes made to such listing at Tenant’s request.
(b) Landlord
shall install, at Landlord’s sole cost and expense, Building standard suite entry signage listing Tenant’s name. If Tenant
requests suite signage different than Landlord’s Building standard suite signage, then (i) such suite signage shall be subject
to Landlord’s approval which shall not be unreasonably withheld, conditioned, denied or delayed, and (ii) Tenant, at its sole
cost and expense, shall be responsible for all costs incurred in connection with the design, construction, installation, maintenance
and repair, compliance with laws, and removal of the suite signage (including the restoration of the area of the Building upon which
the suite signage was located to the condition it was in immediately prior to the installation of such suite signage).
9.7 (a) Office
Cleaning. Landlord shall provide the janitorial services described on Schedule C attached hereto (“Janitorial
Services”), provided the Premises are kept in reasonable order by Tenant. Janitorial Services will not be provided on Saturdays,
Sundays or Building Holidays.
(b) Special
Cleaning Services. If Tenant requests special or more frequent cleaning and janitorial services (“Special Cleaning Services”),
Landlord may, upon reasonable advance notice by Tenant, elect to furnish such Special Cleaning Services and Tenant shall pay to Landlord,
within thirty (30) days of being billed therefor, the out-of-pocket costs incurred by Landlord in providing such Special Cleaning Services.
Special Cleaning Services include, but are not limited to the following: (i) excessive cleaning of permitted eating facilities (if
any), including the removal of excessive garbage therefrom, (ii) cleaning of computer centers, including peripheral areas, (iii) cleaning
of special equipment areas, kitchen areas, private toilets and locker rooms, medical centers and large scale duplicating rooms (if any),
(iv) cleaning of areas of special security, such as storage units, (v) consumable supplies for private toilet rooms, (vi) cleaning
of light fixtures, (vii) cleaning or shampooing of carpeting and the cleaning, waxing, refinishing and buffing of non-carpeted areas,
(viii) stain removal, (ix) painting, (x) removal of any refuse in excess of the amount ordinarily accumulated in routine
office occupancy, as reasonably determined by Landlord.
9.8 Performance
of Janitorial Services. Tenant shall grant Landlord’s cleaning personnel and contractors access to the Premises from and after
5:30 PM on weekdays and at any time on Saturdays, Sundays and Building Holidays for the purpose of performing the Janitorial Services.
Tenant shall not unreasonably hinder the performance of the Janitorial Services and, if Tenant does unreasonably hinder the performance
of the Janitorial Services, Landlord will have no liability to Tenant on account thereof. Tenant shall supply adequate waste receptacles,
cabinets and bookcases to prevent unreasonable hardship to Landlord in discharging its obligations regarding Janitorial Services. If
any Legal Requirement requires trash to be separated into different components before carting (e.g., office paper, computer paper,
newspaper, cans and bottles), Tenant shall comply with such requirements and Landlord shall supply adequate receptacles for each such
component at Landlord’s sole expense.
9.9 Telecommunications.
Subject to the Rules and Regulations of Landlord and any applicable telecommunications provider, Tenant will have access to the
existing telecommunications system in the Building. Tenant hereby acknowledges that the telecommunications system has been installed
and is operated by a third-party provider, not Landlord. Landlord makes no representations or warranties with respect to the telecommunications
system. Tenant acknowledges that telecommunications service may be suspended or reduced by reason of repairs, alterations, improvements,
accidents, or other causes beyond the reasonable control of Landlord. Any such interruption or suspension of services will not be deemed
an eviction or disturbance of Tenant’s use and possession of the Premises, nor render Landlord liable to Tenant for damages by
abatement of rent or otherwise, nor relieve Tenant of any of its obligations under this Lease. Tenant shall contract directly with the
company providing telecommunications services to the Premises. Tenant shall pay all charges for telecommunications services before any
interest or penalties are added thereto and shall furnish to Landlord, upon request, satisfactory proof of payment.
9.10 Interruption
of Services. Landlord reserves the right to suspend the Building Services on account of fire, storm, explosion, strike, lockout,
labor dispute, casualty or accident, acts of God, riot, war, terrorism, interference by civil or military authorities, or any other cause
beyond Landlord’s control or for emergency, inspection, cleaning, repairs, replacement, alterations or improvements that Landlord
reasonably deems necessary. Landlord shall use reasonable efforts to restore any Building Services suspended pursuant to this Section 9.9.
Landlord will not be liable to Tenant for any costs, expenses or damages incurred by Tenant as a result of any failure to furnish any
Building Services and such failure will not (i) be construed as a constructive eviction or eviction of Tenant, (ii) excuse
Tenant from the performance of any of its obligations hereunder, or (iii) entitle Tenant to any abatement or offset against Basic
Rent or Additional Rent. In addition, no deduction from Basic Rent or Additional Rent will be permitted on account of any Building Services
not used by Tenant. Notwithstanding anything to the contrary contained in this Section 9.9, if (A) the suspension of Building
Services results from Landlord’s gross negligence or willful misconduct, (B) such suspension continues for five (5) consecutive
business days, and (C) as a result of such suspension, Tenant shall not be able to operate within the Premises in whole or in part,
then beginning on the sixth (6th) business day until such time that the services are no longer suspended or curtailed, Tenant shall be
entitled to an abatement of Basic Rent for the portion of the Premises which is rendered untenantable as a result of such suspension.
The remedies set forth in this Section 9.9 are the sole remedies of Tenant with respect to a suspension of services, and in no event
shall Tenant have a claim of constructive eviction as a result of such interruption of services.
9.11 Energy
Conservation. Tenant shall comply with all mandatory energy conservation controls and requirements imposed or instituted by the federal,
state or local governments and applicable to office buildings, or as may be required to operate the Building as an office building comparable
to equivalent facilities in the county in which the Property is located. These controls and requirements may include, without being limited
to, controls on the permitted range of temperature settings in office buildings and curtailment of the volume of energy consumed or the
hours of operation of the Building. Any terms or conditions of this Lease that conflict with such controls and requirements will be suspended
for the duration of such controls and requirements. Compliance with such controls and requirements will not be considered an eviction,
actual or constructive, of Tenant from the Premises and will not entitle Tenant to terminate this Lease or to an abatement of any Basic
Rent or Additional Rent.
ARTICLE 10
COMPLIANCE WITH REQUIREMENTS
10.1 Compliance.
Tenant shall (i) comply with all Legal Requirements and Insurance Requirements applicable to the Premises and Tenant’s use
thereof, and (ii) maintain and comply with all permits, licenses and other authorizations required by any governmental authority
for Tenant’s use of the Premises and for the proper operation, maintenance and repair of the Premises, subject to Landlord’s
obligation to obtain a Certificate of Occupancy for the Premises. Landlord shall, at no cost to Landlord, join in any application for
any permit or authorization with respect to Legal Requirements if such joinder is necessary. Notwithstanding anything to the contrary
in this Section 10.1, in no event shall Tenant be required to make any capital improvements unless same are required as a result
of Tenant’s particular use of the Premises (as opposed to the use of the Premises for general office use) and such capital improvements
are not of general application to other occupants. For any capital improvements that Tenant is required to make, Landlord shall make
such capital improvements and Tenant shall reimburse Landlord for the costs and expenses incurred by Landlord in connection with making
such capital improvements within ten (10) days after receipt of written demand therefor, together with invoice(s) evidencing
such costs and expenses.
10.2 Increases
in Insurance Premiums. Tenant shall not do, or cause to be done, anything in or to the Premises, or keep anything in the Premises
that increases the cost of any insurance maintained by Landlord. Tenant shall, within thirty (30) days following written demand, pay
to Landlord any such increase in insurance premiums and any other costs incurred by Landlord as result of the gross negligence or willful
action of Tenant or Tenant’s Visitors.
ARTICLE 11
COMPLIANCE WITH ENVIRONMENTAL LAWS
11.1 Environmental
Laws. Tenant shall comply, at its sole cost and expense, with all Environmental Laws applicable to Tenant’s use and occupancy
of the Premises; provided, however, that the provisions of this Article 11 will not obligate Tenant to comply with the Environmental
Laws if such compliance is required solely as a result of the occurrence of a spill, discharge or other event before the Commencement
Date, or if such spill, discharge or other event was not caused by the act, negligence or omission of Tenant or Tenant’s Visitors.
11.2 Copies
of Environmental Documents. Tenant shall deliver promptly to Landlord a true and complete copy of any written correspondence, notice,
report, sampling, test, finding, declaration, submission, order, complaint, citation or any other instrument, document, agreement and/or
information submitted by Tenant to, or received by Tenant from, any governmental entity, department or agency in connection with any
Environmental Law relating to or affecting the Premises.
11.3 Hazardous
Substances. Tenant shall not cause or permit any Hazardous Substance to be kept in the Premises, except for de minimis quantities
of cleaning supplies, medicines and other materials used by Tenant in the ordinary course of its business and in accordance with all
Legal Requirements. Tenant shall not otherwise engage in, or cause or permit any other person or entity to engage in, any activity, operation
or business in the Premises that involves the generation, manufacture, refining, transportation, treatment, storage, handling or disposal
of Hazardous Substances.
11.4 (a) Discharge.
If a spill or discharge of a Hazardous Substance occurs on or from the Premises during the Term, Tenant shall, upon Tenant becoming aware
of such spill or discharge, give Landlord immediate oral and written notice of such spill and/or discharge, setting forth in reasonable
detail all relevant facts, including, without limitation, a copy of (i) any written notice of a violation, or a potential or alleged
violation, of any Environmental Law received by Tenant or any subtenant or other occupant of the Premises; (ii) any inquiry, investigation,
enforcement, cleanup, removal, or other action instituted or threatened against Tenant or any subtenant or other occupant of the Premises;
(iii) any claim instituted or threatened against Tenant or any subtenant or other occupant of the Premises; and (iv) any written
notice of the restriction, suspension, or loss of any environmental operating permit by Tenant or any subtenant or other occupant of
the Premises. If a spill or discharge arises out of or relates to Tenant’s use and occupancy of the Premises, or if a spill or
discharge is caused by the act, negligence or omission of Tenant or Tenant’s Visitors, then Tenant shall pay all costs and expenses
relating to compliance with applicable Environmental Laws (including, without limitation, the costs and expenses of site investigations
and the removal and remediation of such Hazardous Substance).
(b) Landlord’s
Cleanup Rights. Without relieving Tenant of its obligations under this Lease and without waiving any default by Tenant under this
Lease, Landlord will have the right, but not the obligation, to take such action as Landlord deems necessary or advisable to cleanup,
remove, resolve or minimize the impact of or otherwise deal with any spill or discharge of any Hazardous Substance on or from the Premises.
If a spill or discharge arises out of or relates to Tenant’s use and occupancy of the Premises, or if a spill or discharge is caused
by the act, negligence or omission of Tenant or Tenant’s Visitors, then Tenant shall, on demand, pay to Landlord all costs and
expenses incurred by Landlord in connection with any action taken in connection therewith by Landlord.
11.5 Failure
to Comply. In connection with this Article 11, if Tenant fails to fully comply with the applicable provisions of any Environmental
Law prior to the Expiration Date, to the extent the Premises are not able to be occupied as a result of such failure, Tenant will be
deemed to be a holdover tenant and shall pay rent at the rate set forth in Section 24.3 and shall continue to diligently pursue
compliance with such Environmental Law. Upon Tenant’s full compliance with such Environmental Law, Tenant shall deliver possession
of the Premises to Landlord in accordance with the provisions of this Lease and such holdover rent shall be adjusted as of said date.
11.6 Notices.
If Landlord has given to Tenant the name and address of any holder of an Underlying Encumbrance, Tenant agrees to send to said holder
a photocopy of those items given to Landlord pursuant to the provisions of Section 11.2.
11.7 Survival.
Tenant’s obligations under this Article 11, which accrue during the Term hereof, shall survive the expiration or earlier termination
of this Lease.
ARTICLE 12
DISCHARGE OF LIENS
Within thirty (30) days after
receipt of notice thereof, Tenant shall discharge any Lien on the Premises, the Basic Rent, Additional Rent or any other sums payable
under this Lease caused by or arising out of Tenant’s acts or Tenant’s failure to perform any obligation under this Lease.
ARTICLE 13
PERMITTED CONTESTS
Tenant may, by appropriate
proceedings, contest the amount, validity or application of any Legal Requirement which Tenant is obligated to comply with or any Lien
which Tenant is obligated to discharge, provided that (a) such proceedings suspend the collection thereof, (b) no part of the
Premises, Basic Rent or Additional Rent or any other sum payable hereunder is subject to loss, sale or forfeiture during such proceedings,
(c) Landlord is not subject to any civil or criminal liability for failure to pay or perform, as the case may be, (d) Tenant
furnishes such security as may be required in the proceedings or reasonably requested by Landlord, (e) such proceedings do not affect
the payment of Basic Rent, Additional Rent or any other sum payable to Landlord hereunder or prevent Tenant from using the Premises for
its intended purposes, and (f) Tenant notifies Landlord of such proceedings not less than ten (10) days prior to the commencement
thereof and describes such proceedings in reasonable detail. Tenant shall conduct all such contests in good faith and with due diligence
and shall, promptly after the determination of such contest, pay all amounts required to be paid by Tenant.
ARTICLE 14
INSURANCE; INDEMNIFICATION
14.1 (a) Tenant’s
Insurance. Tenant shall obtain, and shall keep in full force and effect, the following insurance, with insurers that are authorized
to do business in the State of New York and are rated at least A (Class X) in Best’s Key Rating Guide:
(i) Commercial
General Liability Insurance which shall include premises liability, contractual liability, damage to rented premises, personal &
advertising injury and products/completed operations coverage. Policy shall insure against claims for bodily injury, personal injury,
death or property damage occurring on, in or about the Premises with limits of not less than $1,000,000.00 per occurrence and $2,000,000.00
in the aggregate. If the policy covers other locations owned or leased by Tenant, then such policy must include an aggregate limit per
location endorsement.
(ii) Special
Form (“All Risk”) Property, insuring all equipment, trade fixtures, inventory, fixtures or personal property or any
Tenant Improvements which are the responsibility of Tenant located on or in the Premises with an agreed amount endorsement and equal
to the full replacement cost value of such property. Tenant acknowledges that Landlord will not carry insurance of any kind on Tenant’s
equipment, trade fixtures, inventory, fixtures or personal property or any Tenant Improvements which are the responsibility of Tenant,
and Landlord shall not be obligated to repair any damage thereto or replace the same.
(iii) Workers’
Compensation Insurance as required by applicable laws of the State in which the Premises is located, including Employers’ Liability
Insurance with limits of not less than: (x) $100,000 per accident; (y) $500,000 disease policy limit; and (z) $100,000
disease, each employee. Such insurance shall include a waiver of subrogation in favor of Landlord.
(iv) Business
Interruption Insurance with limits of not less than the amount necessary to cover continuing expenses including rents and extra expenses
for at least one (1) year.
(v) Excess
or Umbrella Liability Insurance with limits of not less than Two Million Dollars ($2,000,000.00) per occurrence and in the aggregate
providing coverage in excess of, and follow-form to, the primary commercial general liability and employer’s liability insurance
required herein.
(vi) Such
other insurance as Landlord reasonably deems necessary and prudent or as may be required by any Lender or Master Landlord.
(vii) In
addition to the aforementioned insurances, and during any such time as any alterations or work is being performed at the Premises (except
that work being performed by Landlord or on behalf of Landlord) Tenant, at its sole cost and expense, shall carry, or shall cause to
be carried by applicable contractors and subcontractors, and shall deliver to Landlord at least ten (10) days prior to commencement
of any such alteration or work, evidence of insurance with respect to (A) workers’ compensation insurance covering all persons
employed in connection with the proposed alteration or work in statutory limits, (B) general/excess liability insurance, in an amount
commensurate with the work to be performed but not less than Two Million Dollars ($2,000,000) per occurrence and in the aggregate, for
ongoing and completed operations insuring against bodily injury and property damage and naming all additional insured parties as outlined
below and required of Tenant and shall include a waiver of subrogation in favor of such parties, (C) builders risk insurance, to
the extent such alterations or work may require, on a completed value form including permission to occupy, covering all physical loss
or damages, in an amount and kind reasonably satisfactory to Landlord, and (D) such other insurance, in such amounts, as Landlord
deems reasonably necessary to protect Landlord’s interest in the Premises from any act or omission of Tenant’s contractors
or subcontractors.
(b) Policy Requirements. The policies of insurance required to be
maintained by Tenant pursuant to this Section 14.1 must be written as primary policy coverage and not contributing with, or in
excess of, any coverage carried by Landlord. All policies must name Tenant as the named insured party and (except for worker’s
compensation and property insurance) all policies shall name as additional insureds for on-going and completed operations, Landlord,
Senlac Ridge Partners, LLC, Senlac Property Management, LLC, Columbia FundSub Management, LLC, Columbia Real Estate Management, LLC,
Columbia Property Trust, Inc., the holder(s) of any mortgage(s) encumbering the Premises, and all of their respective
affiliates, members, officers, employees, agents and representatives, managing agents, and other designees of Landlord and its
successors as the interest of such designees shall appear. Upon request by Landlord, Tenant shall deliver a copy of its policies of
insurance to Landlord for review. In addition Tenant agrees and shall provide thirty (30) days’ prior written notice of
suspension, cancellation, termination, or non-renewal of coverage to Landlord. Tenant shall not self-insure for any insurance
coverage required to be carried by Tenant under this Lease. The deductible for any insurance policy required hereunder must not
exceed $10,000. Tenant shall have the right to provide the insurance coverage required under this Lease through a blanket policy,
provided such blanket policy expressly affords coverage to the Premises and to Landlord as required by this Lease.
(c) Certificates
of Insurance. Prior to the Commencement Date, Tenant shall deliver to Landlord certificates of insurance evidencing all insurance
Tenant is obligated to carry under this Lease. Within ten (10) days prior to the expiration of any such insurance, Tenant shall
deliver to Landlord certificates of insurance evidencing the renewal of such insurance. Tenant’s certificates of insurance must
be on: (i) ACORD Form 28 with respect to property insurance; and (ii) ACORD Form 25 with respect to liability insurance
or, in each case, on successor forms approved by Landlord, and in any event state as the certificate holder: Compliance Services Corporation,
on behalf of Senlac Ridge Partners, LLC, LLC, P.O. Box 2750, Montgomery Village, MD 20886.
(d) No
Separate Insurance. Tenant shall not obtain or carry separate property insurance concurrent in form or contributing in the event
of loss with that required by Section 14.1(a)(ii) unless Landlord and Tenant are named as insureds therein.
(e) Tenant’s
Failure to Maintain Insurance. If Tenant fails to maintain the insurance required by this Lease, Landlord may, but shall not be obligated
to, obtain, and pay the premiums for, such insurance. Upon demand, Tenant shall pay to Landlord all amounts paid by Landlord pursuant
to this Section 14.1(e).
14.2 Waiver
of Subrogation. Landlord and Tenant agree to have all property insurance policies which are required to be carried by either of them
hereunder provide or endorsed to provide that the insurer waives all rights of subrogation which such insurer might have against the
other party and Landlord’s mortgagee, if any. By this clause, the parties intend and hereby agree that the risk of loss or damage
to property shall be borne by the parties’ insurance carriers. It is hereby agreed that Landlord and Tenant shall look solely to,
and seek recovery from, only their respective insurance carriers in the event a loss is sustained for which property insurance is carried
or is required to be carried under this Lease. Without limiting any release or waiver of liability or recovery contained in any other
Section of this Lease but rather in confirmation and furtherance thereof, Landlord waives all claims for recovery from Tenant, and
Tenant waives all claims for recovery from Landlord, and their respective agents, partners and employees, for any loss or damage to any
of its property insured under the insurance policies required hereunder.
14.3 Indemnification.
Tenant hereby indemnifies, and shall pay, protect and hold harmless Landlord from and against all liabilities, losses, claims, demands,
costs, expenses (including reasonable attorneys’ fees and expenses) and judgments of any nature, (except to the extent Landlord
is compensated by insurance maintained by Landlord or Tenant hereunder and except for such of the foregoing as arise from the gross negligence
or willful misconduct of Landlord, its agents, contractors, servants or employees), arising, or alleged to arise, from or in connection
with (i) any injury to, or the death of, any person or loss or damage to property on or about the Premises during the Term, (ii) any
violation of any Legal Requirement or Insurance Requirement by Tenant or Tenant’s Visitors, (iii) performance of any labor
or services or the furnishing of any materials or other property in respect of the Premises by or on behalf of Tenant, (iv) Tenant’s
occupancy of the Premises, (including, but not limited to, statutory liability and liability under workers’ compensation laws),
(v) any breach or default in the performance of any obligation on Tenant’s part to be performed under the terms of this Lease,
and (vi) any act or omission of Tenant or Tenant’s Visitors. Tenant shall, at its sole cost and expense, defend any action,
suit or proceeding brought against Landlord by reason of any such occurrence with independent counsel selected by Tenant and reasonably
acceptable to Landlord. The obligations of Tenant under this Section 14.3 will survive the expiration or earlier termination of
this Lease.
14.4 No
Claims.
(a) Notwithstanding
anything to the contrary contained in this Lease, Tenant shall not make any claim against Landlord for (i) any damage to, or loss
of, any property of Tenant or any other person, (ii) business interruption or special, consequential, indirect or punitive damages,
or (iii) any acts or omissions of any other tenants in the Building or on the Property. Tenant hereby waives all claims against
Landlord with respect to the foregoing. The provisions of this Section 14.4(a) will survive the expiration or earlier termination
of this Lease.
(b) Notwithstanding
anything to the contrary contained in this Lease, Landlord shall not make any claim against Tenant for (i) any damage to, or loss
of, any property of Landlord or any other person, or (ii) except as contemplated in Section 24.3, business interruption or
special, consequential, indirect or punitive damages. Landlord hereby waives all claims against Tenant with respect to the foregoing.
The provisions of this Section 14.4(b) will survive the expiration or earlier termination of this Lease.
ARTICLE 15
ESTOPPEL CERTIFICATES
15.1 Estoppel
Certificates. Upon not less than ten (10) days’ prior notice by Landlord, Tenant shall execute and deliver to Landlord
a statement certifying to Landlord (i) the Commencement Date, (ii) the Expiration Date, (iii) the dates of any amendments
or modifications to this Lease, (iv) that this Lease was properly executed and is in full force and effect without amendment or
modification, or, alternatively, that this Lease and all amendments and modifications have been properly executed and are in full force
and effect, (v) the current annual Basic Rent, the current monthly installments of Basic Rent and the date on which Tenant’s
obligation to pay Basic Rent commenced, (vi) the current monthly installment of Additional Rent for Taxes and Landlord’s Operating
Expenses, (vii) the date to which Basic Rent and Additional Rent have been paid, (viii) the amount of the security deposit,
if any, (ix) if applicable, that all work to be done to the Premises by Landlord has been completed in accordance with this Lease
and has been accepted by Tenant, except as specifically provided in the estoppel certificate, (x) that no installment of Basic Rent
or Additional Rent has been paid more than thirty (30) days in advance, except as specifically provided in the estoppel certificate,
(xi) that Tenant is not in arrears in the payment of any Basic Rent or Additional Rent, except as specifically provided in the estoppel
certificate, (xii) that, to the best of Tenant’s knowledge, neither party to this Lease is in default in the keeping, observance
or performance of any covenant, agreement, provision or condition contained in this Lease and no event has occurred which, with the giving
of notice or the passage of time, or both, would result in a default by either party, except as specifically provided in the estoppel
certificate, (xiii) that, to the best of Tenant’s knowledge, Tenant has no existing defenses, offsets, liens, claims or credits
against the Basic Rent or Additional Rent or against enforcement of this Lease by Landlord, except as specifically provided in the estoppel
certificate, (xiv) that Tenant has not been granted any options or rights of first refusal to extend the Term, to lease additional
space, to terminate this Lease before the Expiration Date or to purchase the Premises, except as specifically provided in this Lease,
(xv) that Tenant has not received any written notice of violation of any Legal Requirement or Insurance Requirement relating to
the Building or the Premises, except as specifically provided in the estoppel certificate, (xvi) that Tenant has not assigned this
Lease or sublet all or any portion of the Premises, except as specifically provided in the estoppel certificate, (xvii) that, to
the best of Tenant’s knowledge, no Hazardous Substances have been generated, manufactured, refined, transported, treated, stored,
handled, disposed or spilled on or about the Premises in violation of any Legal Requirements by or on behalf of Tenant, except as specifically
provided in the estoppel certificate, and (xviii) such other matters as reasonably requested by Landlord. Tenant hereby acknowledges
and agrees that such statement may also be relied upon by any mortgagee, or any prospective purchaser, tenant, subtenant, mortgagee or
assignee of any mortgage, of the Property or any part thereof.
15.2 Tenant’s
Failure to Execute Estoppel Certificate. If Tenant fails or otherwise refuses to execute an estoppel certificate in accordance with
Section 15.1, then Landlord shall have the right to deliver to Tenant a notice in accordance with the terms of this Lease stating
that Tenant has failed to timely deliver the estoppel certificate pursuant to Section 15.1, together with a fully completed estoppel
certificate. If Tenant fails to deliver to Landlord an executed estoppel certificate satisfying the criteria set forth in Section 15.1
within ten (10) days after the delivery of such notice, then Tenant shall be deemed to be estopped from raising any claims which
are contrary to the statements set forth in the estoppel certificate delivered by Landlord.
ARTICLE 16
ASSIGNMENT AND SUBLETTING
16.1 Prohibition.
Except as otherwise expressly provided in this Article 16, Tenant shall not sell, assign, transfer, hypothecate, mortgage, encumber,
grant concessions or licenses, sublet, or otherwise dispose of any interest in this Lease or the Premises, by operation of law or otherwise,
without Landlord’s prior written consent, which consent Landlord shall not unreasonably withhold, condition or delay. Any consent
granted by Landlord in any instance will not be construed to constitute a consent with respect to any other instance or request. If the
Premises or any part thereof are sublet, used, or occupied by anyone other than Tenant, or if this Lease is assigned by Tenant, Landlord
will have the right to collect rent from the assignee, subtenant, user or occupant, but no such assignment, subletting, use, occupancy
or collection will be deemed (i) a waiver of any of Landlord’s rights or Tenant’s obligations under this Article 16,
(ii) the acceptance of such assignee, subtenant, user or occupant as tenant, or (iii) a release of Tenant from the performance
of any its obligations under this Lease.
16.2 Tenant’s
Notice. If Tenant desires to sublet the Premises or assign this Lease, Tenant shall submit to Landlord a check in the amount of $1,500.00
to defray Landlord’s legal review and other associated processing costs and a written notice (“Tenant’s Notice”)
setting forth in reasonable detail:
(a) the
name and address of the proposed subtenant or assignee;
(b) the
terms and conditions of the proposed subletting or assignment (including the proposed commencement date of the sublease or the effective
date of the assignment, which must be at least thirty (30) days after Tenant’s Notice is delivered to Landlord), including a draft
of the proposed sublease or assignment agreement;
(c) the
nature and character of the business of the proposed subtenant or assignee and the proposed use of the Premises;
(d) banking,
financial, and other credit information relating to the proposed subtenant or assignee in reasonably sufficient detail to enable Landlord
to determine the proposed subtenant’s or assignee’s financial responsibility; and
(e) in
the case of a subletting, complete plans and specifications for any work to be done in the Premises to be sublet.
16.3 Landlord’s
Response. Within thirty (30) days after Landlord’s receipt of Tenant’s Notice, Landlord shall notify Tenant whether Landlord
(i) consents to the proposed sublet or assignment, (ii) does not consent to the proposed sublet or assignment, or (iii) elects
to exercise its recapture right, as described in Section 16.5. Landlord will have the right to withhold its consent to the proposed
sublease or assignment if (1) the proposed assignee’s or subtenant’s financial condition is not, in the reasonable judgment
of Landlord, comparable to that of Tenant on the date this Lease was executed or as of the effective date of the assignment or sublease,
whichever is greater, (2) the quantity or location of the space proposed to be sublet is inappropriate in the reasonable judgment
of Landlord, (3) the proposed sublease or assignment would be to an existing tenant, subtenant or other occupant of the Building
(or to any subsidiary or affiliate of the foregoing) who has toured space in the Building or with whom Landlord has exchanged correspondence
regarding the leasing of space in the Building during the six (6) month period prior to Landlord’s receipt of Tenant’s
Notice, and Landlord has comparable space in the Building available for lease, (4) the proposed sublease or assignment would be
to any prospective tenant (or to a subsidiary or affiliate thereof) with whom Landlord has negotiated for the leasing of space in the
Building or any other building owned by Landlord or an affiliate of Landlord during the six (6) month period prior to Landlord’s
receipt of Tenant’s Notice and Landlord has comparable space in the Building available for Lease, (5) the business of the
proposed subtenant or assignee or use of the Premises is not compatible with the type of occupancy of the Building, or such business
or use will create increased use of the facilities of the Building, or (6) the proposed subtenant or assignee will, in Landlord’s
reasonable judgment, demean the character of the Building. As a condition to Landlord’s consent under this Section 16.3, Landlord
shall have obtained the consent to such proposed subletting or assignment from the holder of any Underlying Encumbrance if Landlord is
required to obtain such party’s consent to such subletting or assignment under the terms of any such Underlying Encumbrance.
16.4 Requirements.
In addition to the foregoing requirements,
(a) no
assignment or sublease will be permitted if, at the effective date of such assignment or sublease, an Event of Default exists;
(b) no
assignment or sublease will be permitted unless Tenant agrees, at the time of the proposed assignment or sublease and in Tenant’s
Notice, to pay to Landlord, immediately upon receipt thereof, fifty percent (50%) of all Net Rental Proceeds;
(c) Tenant
shall not publicly advertise in any publication, flyer or mass electronic communication any sublease or assignment at a rate that is
below the then market rate being charged by Landlord for space of like availability and quantity; and
(d) Tenant
shall pay Landlord within thirty (30) days after demand, as Additional Rent, not to exceed $2,500.00 all reasonable costs and expenses
incurred or paid by Landlord in connection with any proposed assignment or subletting, including, without limitation, the costs of making
investigations as to the acceptability of the proposed assignee or sublessee and any reasonable legal fees and expenses incurred in connection
with the review of the proposed assignment or sublease and all of the documents and other information related thereto (which costs and
expenses Tenant covenants and agrees to pay regardless of whether Landlord consents to the proposed assignment or sublease) less the
$1,500.00 previously delivered to Landlord pursuant to Section 16.2.
16.5 Recapture If
Tenant proposes to assign this Lease, or sublease a portion of the Premises affecting, collectively with all other subleases then in
effect, more than fifty percent (50%) of the rentable square footage of the Premises, then Landlord will have the right, exercisable
by written notice (the “Recapture Notice”) to Tenant within thirty (30) days after receipt of
Tenant’s Notice, to recapture the space described in Tenant’s Notice (the “Recapture Space”).
The Recapture Notice will cancel and terminate this Lease with respect to the Recapture Space as of the date stated in
Tenant’s Notice for the commencement of the proposed assignment or sublease and Tenant shall surrender possession of the
Recapture Space as of such date. Thereafter, the Basic Rent and Additional Rent will be equitably adjusted based upon the square
footage of the Premises then remaining, after deducting the square footage attributable to the Recapture Space.
(b) Landlord’s
Exercise. If Landlord elects to exercise its recapture right and the Recapture Space is less than the entire Premises, then Landlord,
at its sole expense, will have the right to make any alterations to the Premises required, in Landlord’s reasonable judgment, to
make such Recapture Space a self-contained rental unit. Landlord shall perform all such work, if any, with as little inconvenience to
Tenant’s business as is reasonably possible; provided, however, that (i) Landlord will not be required to perform such work
after normal business hours or on weekends, and (ii) Landlord will not be deemed guilty of an eviction, partial eviction, constructive
eviction or disturbance of Tenant’s use or possession of the Premises on account of such work and will not be liable to Tenant
on account of same.
16.6 Sublease
Requirements. In addition to the foregoing requirements, each sublease must contain the following provisions:
(a) The
sublease must be subject and subordinate to all of the terms and conditions of this Lease.
(b) At
Landlord’s option, if this Lease terminates prior to the expiration of the sublease, the subtenant must make full and complete
attornment to Landlord for the balance of the term of the sublease. Such attornment must be evidenced by an agreement in form and substance
satisfactory to Landlord executed and delivered by subtenant within five (5) days after Landlord’s request therefor.
(c) The
term of the sublease must not extend beyond a date which is one day prior to the Expiration Date.
(d) The
subtenant will not be permitted to further sublet all or any portion of the subleased space or to assign its sublease without Landlord’s
prior written consent.
(e) The
subtenant must waive the provisions of any law that gives the subtenant any right to terminate the sublease or to surrender possession
of the subleased premises if Landlord brings any proceedings to terminate this Lease.
16.7 Permitted
Transfers. Notwithstanding anything to the contrary contained in this Article 16, any sublease or assignment to a Tenant Affiliate
or Successor Entity will not require Landlord’s consent and will not be subject to Sections 16.1 (first sentence only), 16.2(d),
16.3, 16.4(b), 16.5 and 16.16, but all other provisions of this Article 16 will apply to such sublease or assignment. Tenant shall
furnish Landlord with a copy of such sublease or assignment within five (5) days after execution thereof. “Tenant Affiliate”
means any corporation or other entity controlled by, under common control with or which controls the original Tenant named in this Lease
or in which original Tenant named in this Lease, directly or indirectly, has a fifty percent (50%) or greater voting or ownership interest.
“Successor Entity” means (i) a corporation or other business entity into which or with which Tenant, its
successors or assigns, is merged or consolidated, in accordance with applicable statutory provisions for the merger or consolidation
of corporations or other business entities provided that by operation of law or by effective provisions contained in instruments of merger
or consolidation, the liabilities of the corporations or other business entities participating in such merger or consolidation are assumed
by the corporation or other business entity surviving such merger or consolidation, or (ii) an individual, corporation or other
business entity acquiring all or substantially all of the stock of Tenant, or all or substantially all of the assets of Tenant, and assuming
the obligations of Tenant under this Lease, or (iii) any corporate successor or other business entity successor to a successor corporation
becoming such by either of the methods described in subdivision (i) and (ii) above. If, as of the effective day of an assignment
to a Successor Entity, the net worth of such Successor Entity or any guarantor of the obligations under this Lease is less than Tenant’s
net worth as of the date of this Lease or as of the day immediately prior to the date of the deemed assignment, whichever is greater,
and Landlord, in its reasonable discretion, determines that additional security is needed from the Successor Entity, then the Successor
Entity shall post such security as Landlord reasonably requires in the form required pursuant to Article 28 hereof.
16.8 Events
Constituting Assignment. Each of the following events will be deemed to be an assignment of this Lease and will require the prior
written consent of Landlord in compliance with this Article 16 (including the delivery of a Tenant’s Notice):
(a) any
assignment or transfer of this Lease by operation of law;
(b) any
hypothecation, pledge, or collateral assignment of this Lease;
(c) any
involuntary assignment or transfer of this Lease in connection with bankruptcy, insolvency, receivership, or similar proceeding;
(d) except
as expressly set forth in Section 16.7, any assignment, transfer, disposition, sale or acquisition of a controlling interest in
Tenant to or by any person, entity, or group of related persons or affiliated entities, whether in a single transaction or in a series
of related or unrelated transactions; or
(e) except
as expressly set forth in Section 16.7, any issuance of an interest or interests in Tenant (whether stock, partnership interests,
or otherwise) to any person, entity, or group of related persons or affiliated entities, whether in a single transaction or in a series
of related or unrelated transactions, which results in such person, entity, or group holding a controlling interest in Tenant. For purposes
of the immediately foregoing, a “controlling interest” of Tenant means 25% or more of the aggregate issued and outstanding
equitable interests (whether stock, partnership interests, membership interests or otherwise) of Tenant or the ability to control the
management of Tenant.
16.9 Assumption.
It is a further condition to the effectiveness of any assignment otherwise complying with this Article 16 that the assignee execute,
acknowledge, and deliver to Landlord an agreement in form and substance satisfactory to Landlord whereby the assignee assumes all obligations
of Tenant under this Lease and agrees that the provisions of this Article 16 will continue to be binding upon it with respect to
all future assignments and deemed assignments of this Lease.
16.10 Tenant
Remains Liable. Notwithstanding whether notice is given to Landlord or the consent or approval of Landlord is requested or obtained,
no assignment of this Lease or any sublease of all or any portion of the Premises will release or discharge Tenant or any successor tenant
thereto from any liability under this Lease and such party(ies) will continue to remain primarily liable under this Lease for the payment
of all Basic Rent and Additional Rent and for the performance of all other obligations to be performed by Tenant under this Lease. Following
an Event of Default by any Tenant or a sublessee in the performance of any of the terms hereof, Landlord may proceed directly against
Tenant and/or any successor tenant thereto without the necessity of commencing or exhausting any or all remedies against Tenant. In the
event of an assignment of this Lease by Tenant, Tenant shall deliver to Landlord a separate and independent agreement in form reasonably
satisfactory to both Landlord and Tenant which confirms that Tenant is unconditionally bound by the provisions of this Section 16.10
and expressly provides that the liabilities of Tenant under this Lease shall continue and remain in full force and effect as if the Lease
has not been terminated notwithstanding that this Lease is (i) disaffirmed, rejected or terminated in, or by reason of, any proceeding
of the types described in Sections 19.1(d), (e) or (f) of this Lease, or in any similar proceeding respecting the then Tenant
under this Lease, or (ii) terminated by reason of an Event of Default.
16.11 Permits
and Approvals. Tenant will be responsible for obtaining all required permits and approvals in connection with any assignment of this
Lease or any subletting of the Premises. Tenant shall deliver copies of all such permits and approvals to Landlord prior to the commencement
of any construction work, if construction work is to be done in connection with such sublease or assignment. Tenant shall, within thirty
(30) days following a written demand, reimburse Landlord for all costs, including, but not limited to, reasonable attorneys’ fees
and disbursements, incurred by Landlord in reviewing any proposed assignment of this Lease, any proposed sublease of the Premises, and
any permits, approvals, and applications in connection with any construction to be performed in the Premises.
16.12 Deadline
for Consummation of Assignment or Sublease. If Landlord consents to any proposed assignment or sublease and Tenant fails to consummate
such assignment or sublease within ninety (90) days after Landlord gives such consent, Tenant will be required to again comply with all
of the provisions this Article 16 before assigning this Lease or subletting any part of the Premises. Within ten (10) days
after the execution of any sublease or assignment, Tenant shall deliver to Landlord a fully-executed copy of such sublease or assignment.
16.13 No
Liability. Under no circumstances will Landlord be liable to Tenant for any failure or refusal to grant its consent to any proposed
assignment or sublease. Tenant shall not claim any money damages by way of setoff, counterclaim or defense, based on any claim that Landlord
unreasonably withheld its consent to any proposed sublease or assignment. Tenant’s sole and exclusive remedy will be an action
for specific performance, injunction or declaratory judgment.
16.14 Indemnification.
If Landlord withholds its consent to any proposed assignment or sublease, Tenant shall defend, indemnify, and hold Landlord harmless
from and against all liability, damages, costs, fees, expenses, penalties, and charges (including, but not limited to, reasonable attorneys’
fees and disbursements) arising out of any claims made by any brokers or other persons claiming a commission or similar compensation
in connection with the proposed assignment or sublease.
16.15 (a) Bankruptcy.
Notwithstanding anything to the contrary contained in this Lease, if this Lease is assigned to any person or entity pursuant to the provisions
of the Bankruptcy Code, all consideration payable in connection with such assignment shall be paid to Landlord and will be and remain
the exclusive property of Landlord and will not constitute property of Tenant or of the estate of Tenant within the meaning of the Bankruptcy
Code. All consideration constituting Landlord’s property under the preceding sentence not paid to Landlord shall be held in trust
for the benefit of Landlord and be promptly paid to or turned over to Landlord.
(b) Adequate
Assurance. If Tenant proposes to assign this Lease pursuant to the provisions of the Bankruptcy Code to any person or entity who
has made a bona fide offer to accept an assignment of this Lease on terms acceptable to Tenant, then Tenant shall deliver to Landlord
written notice of such proposed assignment setting forth (i) the name and address of such person or entity, (ii) all of the
terms and conditions of such offer, and (iii) the adequate assurance to be provided by Tenant to assure such person’s or entity’s
future performance under this Lease, including, without limitation, the assurance referred to in Section 365(b)(3) of the Bankruptcy
Code, or any such successor or substitute legislation or rule thereto, shall be given to Landlord by Tenant no later than twenty
(20) days after receipt by Tenant, but in any event no later than ten (10) days prior to the date Tenant makes application to a
court of competent jurisdiction for authority and approval to enter into such assignment and assumption. For the purposes of clause (iii) above,
“adequate assurance” means the deposit of cash security in an amount equal to the Basic Rent and Additional Rent payable
under this Lease for the next succeeding twelve (12) months (which annual Additional Rent shall be reasonably estimated by Landlord).
Landlord will thereupon have the right, exercisable by written notice to Tenant given at any time prior to the effective date of the
proposed assignment, to accept an assignment of this Lease upon the same terms and conditions and for the same consideration, if any,
as the bona fide offer made by such entity or person for the assignment of this Lease. Any person or entity to which this Lease is assigned
pursuant to the provisions of the Bankruptcy Code will be deemed without further act or deed to have assumed all of the obligations arising
under this Lease on or after the date of such assignment. Any such assignee shall, upon demand, execute and deliver to Landlord an instrument
confirming such assumption.
16.16 Landlord’s
Right to Negotiate. After Landlord recaptures the Recapture Space, Landlord will have the right to (i) negotiate directly with
any proposed subtenant or assignee of Tenant, and (ii) enter into a direct lease with any proposed subtenant or assignee of Tenant
for any space in the Building, including the space covered by the proposed sublease or assignment, on such terms and conditions as are
mutually acceptable to Landlord and the proposed subtenant or assignee.
ARTICLE 17
CASUALTY
17.1 Notice. If
any part of the Premises is damaged, Tenant shall promptly notify Landlord in writing, after Tenant becomes aware of such damage, of
the extent of such damage.
17.2 Premises
Not Untenantable. If the Premises are damaged, but no portion thereof is rendered untenantable, and this Lease is not terminated
pursuant to Sections 17.4 or 17.5, Landlord shall, at its own expense, cause the Restoration to be completed as soon as reasonably practicable
and the Basic Rent and Additional Rent will not abate.
17.3 Premises
Untenantable. If the Premises are damaged and rendered partially or wholly untenantable, and this Lease is not terminated pursuant
to Section 17.4 or 17.5, Landlord shall, at its own expense, cause the Restoration to be completed as soon as reasonably practicable,
and the Basic Rent and Additional Rent will be equitably abated with respect to the portion of the Premises rendered untenantable.
17.4 Termination.
(a) If
the Building is damaged and, in Landlord’s reasonable judgment, the total cost of Restoration will equal or exceed thirty percent
(30%) or more of the full insurable value of the Building, then Landlord will have the right to terminate this Lease by delivering a
written termination notice to Tenant within sixty (60) days after the occurrence of such casualty. If Landlord exercises its right to
terminate this Lease pursuant to this Section 17.4, all Basic Rent and Additional Rent will be prorated as of the date such casualty.
(b) If
the Premises and/or the Building are damaged and, in Landlord’s sole judgment, Restoration cannot be completed within three hundred
sixty five (365) days following the date of such damage or a material portion of the Premises is damaged and rendered untenantable during
the final year of the Term, Landlord and Tenant will each have the right to terminate this Lease by delivering a written termination
notice to the other party within sixty (60) days after the occurrence of such casualty (or, with respect to Tenant, within sixty (60)
days after Landlord notifies Tenant that it will take more than three hundred sixty five (365) days to complete Restoration). If either
Landlord or Tenant exercises its right to terminate this Lease pursuant to this Section 17.4, all Basic Rent and Additional Rent
will be prorated as of the date of such casualty. If the Restoration is not completed within three hundred sixty five (365) days from
the date of such casualty, Tenant shall have the right to terminate this Lease at any time following the expiration of such three hundred
sixty five (365) day period but prior to the completion of such Restoration, and all Basic Rent and Additional Rent will be prorated
as of the date of such casualty.
17.5 Restoration.
If the Net Award received by Landlord plus the amount of Landlord’s deductible is not adequate to complete Restoration or if the
holder of any Underlying Encumbrance elects to retain the Net Award, Landlord will have the right to terminate this Lease by delivering
a written termination notice to Tenant within sixty (60) days after the amount of such Net Award is ascertained or the date on which
the holder of any Underlying Encumbrance notifies Landlord that it has elected to retain the Net Award. If Landlord exercises its right
to terminate this Lease pursuant to this Section 17.5, all Basic Rent and Additional Rent will be prorated as of the date of such
casualty. Landlord will have no Restoration obligation if the damage to the Building results in the termination of any underlying ground
lease.
17.6 Section 227
of the New York Real Property Law. This Lease shall be considered an express agreement governing any case of damage to or destruction
of the Building or any part thereof by fire or other casualty, and Section 227 of the Real Property Law of the State of New York
providing for such a contingency in the absence of such an express agreement, and any other law of like import now or hereafter enacted,
shall not apply.
ARTICLE 18
CONDEMNATION
18.1 Taking.
Tenant hereby irrevocably assigns to Landlord any award or payment to which Tenant becomes entitled by reason of any Taking of all or
any part of the Premises, except that Tenant will be entitled to any award or payment for the Taking of Tenant’s trade fixtures
or personal property or for relocation or moving expenses, provided the amount of the Net Award payable to Landlord with respect to the
fee interest is not diminished. All amounts payable pursuant to any agreement with any condemning authority made in settlement of or
under threat of any condemnation or other eminent domain proceeding will be deemed to be an award made in such proceeding. Tenant agrees
that this Lease will control the rights of Landlord and Tenant with respect to any Net Award and any contrary provision of any present
or future law is hereby waived.
18.2 Entire
Premises. In the event of a Taking of the entire Premises, the Term will terminate as of the date when possession is taken by the
condemning authority and all Basic Rent and Additional Rent will be prorated as of such date.
18.3 Portion
of Premises. In the event of a Taking of thirty percent (30%) or more of the Premises, if Tenant determines in good faith that the
Taking will have a permanent, material, adverse effect on Tenant’s operations at the Premises, Tenant may, at any time either prior
to or within sixty (60) days after the date the condemning authority takes possession of the applicable portion of the Premises, elect
to terminate this Lease by delivering a written termination notice to Landlord and such termination shall be effective as of the date
of such Taking. If Tenant fails to exercise such termination option, or if such option does not apply to a Taking, (i) Landlord
shall, subject to any Excusable Delay and Section 18.4, cause Restoration to be completed as soon as reasonably practicable, but
in no event later than ninety (90) days after the date the condemning authority takes possession of the applicable portion of the Premises,
and (ii) the Basic Rent and Additional Rent thereafter payable will be equitably prorated based upon the square footage of the Building
actually taken.
18.4 Restoration.
If (a) the Net Award is inadequate to complete Restoration, or (b) in the case of a Taking of thirty percent (30%) or more
of the Premises, Tenant has not elected to terminate this Lease pursuant to Section 18.3 hereof, then Landlord may elect either
to complete such Restoration or terminate this Lease by delivering a written termination notice to Tenant within sixty (60) days after
the later of (i) the date the amount of the Net Award is ascertained, or (ii) the expiration of the sixty (60) day period during
which Tenant may terminate this Lease pursuant to Section 18.3. If Landlord terminates this Lease pursuant to this Section 18.4,
all Basic Rent and Additional Rent will be apportioned as of the date the condemning authority takes possession of the Premises. Landlord’s
obligation to perform Restoration is subject to the Net Award being made available to Landlord by any Lender or Master Landlord whose
interest may be superior to Landlord.
ARTICLE 19
EVENTS OF DEFAULT
19.1 Events
of Default. Any of the following occurrences, conditions or acts are an “Event of Default” under this Lease:
(a) Tenant
fails to pay any Basic Rent, Additional Rent or other amount payable by Tenant hereunder within five (5) days of the date such payment
is due, provided that the first time in any twelve (12) month period that Tenant so fails to make such payment when due, Landlord shall
provide Tenant with a written notice of such failure and Tenant shall have five (5) days from its receipt of such notice to cure
such failure.
(b) Tenant
vacates the Premises for a period in excess of sixty (60) days without the payment of Rent; provided, however, that if Tenant is required
to vacate the entire Premises as a result of a casualty, an Event of Default will not be deemed to have occurred unless Tenant fails to
take actual occupancy of the Premises within ninety (90) days after the Restoration has been substantially completed.
(c) Tenant
abandons the Premises for a period of thirty (30) consecutive days or more without the payment of Rent.
(d) Tenant
or any guarantor of Tenant’s obligations hereunder (“Guarantor”) files a petition in bankruptcy pursuant
to the Bankruptcy Code or under any similar federal or state law, or is adjudicated a bankrupt or becomes insolvent, or commits any act
of bankruptcy as defined in any such law, or takes any action in furtherance of any of the foregoing.
(e) A
petition or answer is filed proposing the adjudication of Tenant or any Guarantor as a bankrupt pursuant to the Bankruptcy Code or any
similar federal or state law, and (i) Tenant or such Guarantor consents to the filing thereof, or (ii) such petition or answer
is not discharged within sixty (60) days after the filing thereof.
(f) A
receiver, trustee or liquidator (or other similar official) of Tenant or any Guarantor or of all or substantially all of its business
or assets or of the estate or interest of Tenant in the Premises is appointed and not be discharged within sixty (60) days thereafter
or if Tenant or such Guarantor consents to or acquiesces in such appointment.
(g) The
estate or interest of Tenant in the Premises is levied upon or attached in any proceeding and such process is not vacated or discharged
within sixty (60) days after such levy or attachment.
(h) Tenant
uses or permits the use of the Premises for any purpose other than expressly specified in Section 8.1.
(i) Tenant
fails to comply with any of the provisions of Article 11.
(j) Tenant
fails to discharge any Lien within the time period set forth in Article 12.
(k) Tenant
fails to maintain the insurance required by Article 14, or Tenant fails to deliver to Landlord the insurance certificates required
by Article 14 within the time periods set forth in Section 14.1(c).
(l) Tenant
fails to deliver to Landlord the estoppel certificate required by Article 15 within the time period set forth therein.
(m) Tenant
assigns this Lease or sublets all or any portion of the Premises without complying with all the provisions of Article 16.
(n) Tenant
fails to deliver to Landlord the subordination agreement required by Section 23.1 within the time period set forth therein.
(o) Tenant
fails to comply with any Legal Requirement or Insurance Requirement in violation of this Lease, and such failure continues for a period
of ten (10) days after Landlord gives notice to Tenant specifying such default and demanding that the same be cured.
(p) Tenant
defaults in the performance of any of the covenants or obligations set forth in Section 8.4(a) and such default continues for
a period of forty-eight (48) hours after Landlord gives telephonic or written notice to Tenant specifying such default and demanding that
the same be cured.
(q) Tenant
defaults in the observance or performance of any provision of this Lease other than those provisions contemplated by clauses (a) through
(p) of this Section 19.1 and such default continues for thirty (30) days after Landlord gives notice to Tenant specifying such
default and demanding that the same be cured.
(r) Any
Guarantor defaults under the terms and conditions of any guaranty delivered to Landlord and such default continues beyond any applicable
cure periods contained therein, or if any of the representations and/or warranties made by any Guarantor are untrue or materially misleading
as of the date of the guaranty is delivered to Landlord.
If
the same default shall occur two (2) or more times in any consecutive twelve (12) month period, regardless if any such default is
cured within the applicable notice and cure period, then there shall be deemed to be an Event of Default as of the third (3rd)
occurrence of such default, and Landlord shall have the right to exercise any remedies it may have at law or in equity or under this Lease.
Notwithstanding anything contained
in this Section 19.1 to the contrary, in the event of an Emergency, each provision of this Section 19.1 regarding the time period
within which to correct a non-monetary default will be deemed to be “as soon as possible” with diligent, continuous prosecution
of corrective action. “Emergency” means a condition or potential condition that requires immediate action to
(i) preserve the safety of persons or property, (ii) prevent the interruption or suspension of services reasonably deemed critical
by Landlord to the operation of the Building, or (iii) avoid or correct a violation of any Legal Requirement.
ARTICLE 20
CONDITIONAL LIMITATIONS, REMEDIES
20.1 Termination.
This Lease and the Term and estate hereby granted are subject to the limitation that, whenever an Event of Default has occurred and is
continuing, Landlord will have the right, notwithstanding the fact that Landlord may have some other remedy hereunder or at law or in
equity, to terminate this Lease on a date specified in a written termination notice delivered to Tenant, which date must be at least
five (5) days after the date Tenant receives such termination notice. Upon the date specified in Landlord’s termination notice,
this Lease and the estate hereby granted will terminate with the same force and effect as if the date specified in Landlord’s notice
was the Expiration Date.
20.2 Remedies.
(a) Upon
any termination of this Lease pursuant to this Article 20, or as required or permitted by law, Tenant shall immediately quit and
surrender the Premises to Landlord, and Landlord may, enter upon, re-enter, possess and repossess the same, but only through summary
proceedings if Tenant remains in possession of the Premises, and again have, repossess and enjoy the same as if this Lease had not been
made, and in any such event Tenant and no person claiming through or under Tenant by virtue of any law or an order of any court will
be entitled to possession or to remain in possession of the Premises but shall immediately quit and surrender the Premises.
(b) If
Landlord terminates this Lease pursuant to this Article 20, Tenant will remain liable for (i) the sum of (x) all Basic
Rent, Additional Rent and other amounts payable by Tenant hereunder, as same come due under the Lease, until the date this Lease would
have expired had such termination not occurred, and (y) all reasonable expenses incurred by Landlord in re-entering the Premises,
repossessing the same, making good any default of Tenant, painting, altering or dividing the Premises, putting the same in proper repair,
reletting the same (including any and all reasonable attorneys’ fees and disbursements and reasonable brokerage fees incurred in
so doing), removing and storing any property left in the Premises following such termination, and any and all reasonable expenses which
Landlord may incur during the occupancy of any new tenant (other than expenses of a type that are Landlord’s responsibility under
the terms of this Lease); less (ii) the net proceeds of any reletting actually received by Landlord. Tenant agrees to pay to Landlord
the difference between items (i) and (ii) above with respect to each month during the period that would have constituted the
balance of the Term, at the end of such month. Any suit brought by Landlord to enforce collection of such difference for any one month
will not prejudice Landlord’s right to enforce the collection of any difference for any subsequent month. Tenant’s liability
under this Section 20.2(b) will survive the institution of summary proceedings and the issuance of any warrant thereunder.
(c) If
Landlord terminates this Lease pursuant to Article 20, Landlord will have the right, to require Tenant to pay to Landlord, on demand,
as liquidated and agreed final damages in lieu of Tenant’s liability under Section 20.2(b), an amount equal to the difference
(discounted to the date of such demand at an annual rate of interest equal to the then-current yield on actively traded United States
Treasury bills or United States Treasury notes having a maturity substantially comparable to the remaining term of this Lease as of the
date of such termination, as published in the Federal Reserve Statistical Release for the week before the date of such termination) between
(i) the Basic Rent and Additional Rent, computed on the basis of the then current annual rate of Basic Rent and Additional Rent and
all fixed and determinable increases in Basic Rent, which would have been payable from the date of such demand to the date when this Lease
would have expired if it had not been terminated, and (ii) the then fair rental value of the Premises for the same period less the
costs of reletting expenses, including the cost to paint, alter or divide the space, put the same in proper repair, reasonable attorneys’
fees and disbursements, reasonable brokerage fees. Upon payment of such liquidated and agreed final damages, Tenant will be released from
all further liability under this Lease with respect to the period after the date of such demand, except for those obligations that expressly
survive the termination of this Lease. If, after the Event of Default giving rise to the termination of this Lease, but before presentation
of proof of such liquidated damages, the Premises, or any part thereof, are relet by Landlord for a term of one year or more, the amount
of rent reserved upon such reletting will be deemed to be the fair rental value for the part of the Premises relet during the term of
such reletting.
20.3 Liquidated
Damages. Nothing herein contained will limit or prejudice the right of Landlord, in any bankruptcy or insolvency proceeding, to prove
for and obtain as liquidated damages by reason of such termination an amount equal to the maximum allowed by any bankruptcy or insolvency
proceedings, or to prove for and obtain as liquidated damages by reason of such termination, an amount equal to the maximum allowed by
any statute or rule of law whether such amount is greater or less than the excess referred to above.
20.4 Abandonment.
If Tenant abandons the Premises, Landlord may, at its option and for so long as Landlord does not terminate Tenant’s right to possession
of the Premises, enforce all of its rights and remedies under this Lease, including the right to recover all Basic Rent, Additional Rent
and other payments as they become due hereunder. Additionally, Landlord will be entitled to recover from Tenant all costs of maintenance
and preservation of the Premises, and all costs, including attorneys’ and receiver’s fees, incurred in connection with the
appointment of or performance by a receiver to protect the Premises and Landlord’s interest under this Lease.
20.5 Indemnity
Survives. Nothing herein will be deemed to affect Landlord’s indemnification rights under Section 14.3.
20.6 Attorneys’
Fees. If either party brings an action or other proceeding to enforce or interpret any of the terms of this Lease, the non-prevailing
party shall pay the reasonable attorneys’ fees and costs incurred by the prevailing party in such action or proceeding.
20.7 Landlord’s
Cure Rights. If Tenant is in default of any of its obligations under this Lease, Landlord may, without waiving such default, perform
such obligations for the account and at the expense of Tenant (a) immediately and without notice in the case of Emergency or with
respect to the imposition of any Lien against all or any portion of the Premises, and (b) in any other case, if such default continues
after thirty (30) days from the date Landlord delivers a written notice to Tenant stating Landlord’s intention to perform such
obligation for the account and at the expense of Tenant. Upon Landlord’s demand, Tenant shall pay to Landlord an amount equal to
one hundred ten percent (110%) of all of the actual costs and expenses incurred by Landlord in performing any obligations of Tenant under
this Lease.
20.8 Remedies
Not Exclusive; No Waiver. Except as otherwise provided in this Article 20, no remedy or election hereunder will be deemed exclusive
but will, wherever possible, be cumulative with all other remedies herein provided or permitted at law or in equity. No provision of
this Lease will be deemed to have been waived by Landlord unless a written waiver from Landlord has first been obtained and, without
limiting the generality of the foregoing, no acceptance of Basic Rent or Additional Rent subsequent to any default and no condoning,
excusing or overlooking by Landlord on previous occasions of any default or any earlier written waiver will be taken to operate as a
waiver by Landlord or in any way defeat or otherwise affect the rights and remedies of Landlord hereunder.
20.9 Mitigation.
Notwithstanding anything to the contrary set forth in this Lease, Landlord shall use commercially reasonable efforts to mitigate its
damages caused by an Event of Default to the extent required by Legal Requirements.
ARTICLE 21
ACCESS; RESERVATION OF EASEMENTS
21.1 Landlord’s
Access.
(a) Landlord
and Landlord’s agents and representatives and parties designated by Landlord as having an interest in the Property will have the
right, at all reasonable hours, on no less than one (1) business days’ advance written notice, and in the presence of a representative
of Tenant, to enter the Premises to: (1) examine the Premises; (2) make repairs and alterations that, in Landlord’s sole
reasonable judgment, are necessary for the safety and preservation of the Premises and the Building; (3) erect, maintain, repair
or replace wires, cables, ducts, pipes, conduits, vents or plumbing equipment; (4) show the Premises to prospective new tenants
during the last twelve (12) months of the Term; and (5) show the Premises to any mortgagees or prospective purchasers of the Premises.
Landlord shall give Tenant three (3) business days prior written notice before commencing any non-emergency repair or alteration.
Landlord shall use commercially reasonable efforts to minimize any interference with Tenant’s use and occupancy of the Premises
for the Permitted Use in connection with any such entrance.
(b) Landlord
will have the right, at any time, to (1) change the arrangement and/or location of public entrances, passageways, doors, doorways,
corridors, elevators, stairs, toilets or any other public parts of the Building; (2) make repairs, alterations or improvements to
any portion of the Building; (3) designate portions of the Building and the Property as Common Areas and change such designations
from time to time in Landlord’s sole discretion, (4) change the name and/or number of the Building; and (5) change lawns,
sidewalks, driveways, parking areas and/or streets adjacent to or around the Building. Landlord shall use commercially reasonable efforts
to minimize any interference with Tenant’s use and occupancy of the Premises for the Permitted Use in connection with its exercise
of any such rights.
21.2 Emergency
Access. Landlord may enter upon the Premises at any time in case of emergency without prior notice to Tenant.
21.3 No
Liability. Landlord, in exercising any of its rights under this Article 21, will not be deemed guilty of an eviction, partial
eviction, constructive eviction or disturbance of Tenant’s use or possession of the Premises and will not be liable to Tenant for
same.
21.4 Minimum
Inconvenience. All work performed by Landlord in the Premises pursuant to this Article 21 shall be performed with as little
inconvenience to Tenant’s business as is reasonably possible.
21.5 Locks.
Tenant shall not change any locks or install any additional locks on doors entering the Premises without immediately giving to Landlord
a key to such lock. If, in an emergency, Landlord is unable to gain entry to the Premises by the unlocking the entry doors thereto, Landlord
will have the right to forcibly enter the Premises and, in such event, Landlord will have no liability to Tenant for any damage caused
thereby. Tenant will be solely responsible for any damage caused by Tenant’s failure to give Landlord a key to any lock installed
by Tenant.
21.6 Reservation
of Rights. Landlord reserves the right to make changes, alterations, additions (including separate structures), improvements, repairs
and replacements to (i) those portions of the Premises that Landlord is obligated to maintain and repair pursuant to Section 7.2,
(ii) the Building and the Property, and (iii) fixtures and equipment in the Building, in each case as Landlord reasonably deems
necessary; provided, however, that Landlord shall not unreasonably obstruct access to the Premises or unreasonably interfere with Tenant’s
use of the Premises. Nothing contained in this Article 21 will be deemed to relieve Tenant of any obligation to make any repair,
replacement or improvement or comply with any applicable Legal Requirements.
ARTICLE 22
ACCORD AND SATISFACTION
No payment by Tenant or receipt
by Landlord of a lesser amount than the rent herein stipulated will be deemed to be other than on account of the earliest stipulated rent.
No endorsement or statement on any check or any letter accompanying any payment of rent will be deemed an accord and satisfaction and
Landlord may accept any such check or payment without prejudice to Landlord’s right to recover the balance of such rent or pursue
any other remedy provided in this Lease.
ARTICLE 23
SUBORDINATION
23.1 Subordination.
This Lease and the term and estate hereby granted are subject and subordinate to the lien of each mortgage which now or at any time hereafter
affects all or any portion of the Premises or Landlord’s interest therein and to all ground or master leases which now or at any
time hereafter affect all or any portion of the Property (any such mortgage, ground lease or master lease being referred to herein as
an “Underlying Encumbrance”). The subordination of this Lease and the term and estate hereby granted to an
Underlying Encumbrance will be self-operative and no further instrument will be required to effect any such subordination; provided,
however, that, upon not less than ten (10) days’ prior notice by Landlord, Tenant shall execute, acknowledge and deliver to
Landlord any and all commercially reasonable instruments that may be necessary or proper to effect such subordination or to confirm or
evidence the same.
23.2 Conveyance
by Landlord. If all or any portion of Landlord’s estate in the Property is sold or conveyed to any person, firm or corporation
upon the exercise of any remedy provided in any mortgage or by law or equity, such person, firm or corporation (a) will not be liable
for any act or omission of Landlord under this Lease occurring prior to such sale or conveyance (except to the extent such act or omission
is continuing in nature and continues to occur following such sale or conveyance), (b) will not be subject to any offset, defense
or counterclaim accruing prior to such sale or conveyance, (c) will not be bound by any payment prior to such sale or conveyance
of Basic Rent, Additional Rent or other payments for more than one month in advance (except for any unapplied security deposit and except
to the extent such payment is actually received by such person, firm or corporation), and (d) will be liable for the keeping, observance
and performance of the other covenants, agreements, terms, provisions and conditions to be kept, observed and performed by Landlord under
this Lease only during the period such person, firm or corporation holds such interest.
23.3 Cure
Rights. In the event of a casualty or an act or omission by Landlord that gives Tenant the right to terminate this Lease or to claim
a partial or total eviction, Tenant shall not exercise any such right or make any such claim until (i) Tenant has delivered written
notice of such casualty, act or omission to the holder of each Underlying Encumbrance, and (ii) the holder of each Underlying Encumbrance
has had a reasonable opportunity to, with reasonable diligence, remedy such casualty act or omission. Landlord shall provide Tenant with
the name and current address of the holder of each Underlying Encumbrance.
23.4 Reasonable
Modifications. If, in connection with obtaining financing for the Property or refinancing any mortgage encumbering the Property,
the prospective Lender or Master Landlord requests reasonable modifications to this Lease as a condition precedent to such financing
or refinancing, then Tenant shall not unreasonably withhold, delay or condition its consent to such modifications, provided that such
modifications do not (i) increase the Basic Rent or Additional Rent, (ii) increase the security deposit, (iii) reduce
the Term, (iv) affect the termination, extension or expansion options, (v) materially and adversely affect the leasehold interest
created by this Lease, or (vi) materially and adversely affect the manner in which Tenant’s operations are conducted at the
Premises.
ARTICLE 24
TENANT’S REMOVAL
24.1 Surrender.
Upon the expiration or earlier termination of this Lease, Tenant shall surrender the Premises to Landlord broom clean in the condition
required to be maintained under Article 7. Any personal property remaining in the Premises after the expiration or earlier termination
of this Lease will be deemed to have been abandoned by Tenant and Landlord will have the right to retain such property as its own or
dispose of such property at Tenant’s sole cost and expense.
24.2 Landlord’s
Early Entry. If, at any time during the last six (6) months of the Term, Tenant has vacated the entire Premises in connection
with the conduct of its business, Landlord may elect, at its option, to enter such part of the Premises to alter and/or redecorate the
same. Tenant hereby irrevocably grants to Landlord a license to enter such part of the Premises to perform such alterations and/or redecorations.
Landlord’s exercise of its rights under this Section 24.2 will not relieve Tenant from any of its obligation under this Lease.
24.3 Holding
Over. If Tenant, or any assignee or subtenant of Tenant, holds over possession of the Premises beyond the expiration or earlier termination
of this Lease, such holding over will not be deemed to extend the Term or renew this Lease but such holding over will continue upon the
terms, covenants and conditions of this Lease except that the charge for use and occupancy of the Premises for each calendar month or
portion thereof that Tenant or such assignee or subtenant holds over will be a liquidated sum equal to one and one-half (1½) times
the Basic Rent and Additional Rent payable for the month immediately preceding the expiration or earlier termination of this Lease for
the first thirty (30) days of such holding over, and thereafter, two (2) times the Basic Rent and Additional Rent payable for the
month immediately preceding the expiration or earlier termination of this Lease. The parties recognize and agree that the damage to Landlord
resulting from any failure by Tenant or any assignee or subtenant of Tenant to timely surrender possession of the Premises will exceed
the amount of the monthly Basic Rent and Additional Rent and will be impossible to accurately measure. If the Premises are not surrendered
upon the expiration or earlier termination of this Lease, Tenant shall indemnify, defend and hold harmless Landlord against any and all
losses and liabilities resulting therefrom, including, without limitation, any claims made by any succeeding tenant founded upon such
delay, so long as (i) Landlord has notified Tenant that Landlord has executed a lease or other occupancy agreement for all or any
portion of the Premises, and (ii) a holdover by Tenant continues for the longer of sixty (60) days after the date this Lease expires
or thirty (30) days after Landlord delivers to Tenant notice of such executed lease. Nothing contained in this Lease will be construed
as a consent by Landlord to the occupancy or possession of the Premises beyond the expiration or earlier termination of this Lease. Tenant
shall, at its sole cost and expense, take all actions required to remove any assignee or subtenant of Tenant, or other party claiming
rights to the Premises under or through Tenant upon the expiration or earlier termination of the Term. Nothing contained in this Section shall
preclude Landlord from commencing and prosecuting a holdover or summary eviction proceeding and this provision shall be deemed to be
an agreement expressly “providing otherwise” within the meaning of Section 232-c of the Real Property Law of the State
of New York. The provisions of this Article 24 will survive the expiration or earlier termination of this Lease.
ARTICLE 25
BROKERS
Tenant and Landlord each represents
and warrants to the other that it has not had any dealings or entered into any agreements with any person, entity, realtor, broker, agent
or finder in connection with the negotiation of this Lease other than the Brokers. Tenant and Landlord shall each indemnify and hold harmless
the other from and against any loss, claim, damage, expense (including costs of suit and reasonable attorneys’ fees) or liability
for any compensation, commission or charges claimed by any other realtor, broker, agent or finder claiming to have dealt with such indemnifying
party in connection with this Lease. Landlord shall pay the commission, if any, due to the Brokers pursuant to a separate agreement. The
provisions of this Article 25 will survive the expiration or sooner termination of this Lease.
ARTICLE 26
NOTICES
Every notice or other communication
required or contemplated by this Lease shall be in writing and sent by: (i) certified or registered mail, postage prepaid, return
receipt requested, or (ii) nationally recognized overnight courier, such as Federal Express or UPS, in each case addressed to the
intended recipient at the address set forth in the Basic Lease Provisions or at such other address as the intended recipient previously
designated by written notice to the other party. Any notice delivered by the attorney for Landlord or Tenant shall be deemed to be delivered
by Tenant or Landlord, as the case may be.
ARTICLE 27
NONRECOURSE
Tenant will have no recourse
against any individual or entity comprising Landlord, including, without limitation, the members, partners, directors, trustees, and officers
of Landlord, in connection with the occupancy and/or use of the Premises by Tenant and Tenant’s Visitors; rather, Tenant agrees
to look solely to Landlord’s interest and estate in the Building and the Property for the satisfaction of Tenant’s remedies
arising out of or related to this Lease.
ARTICLE 28
SECURITY DEPOSIT
28.1 Security.
(a) Concurrently
with the execution of this Lease, Tenant shall deposit with Landlord an unconditional “evergreen” letter of credit in an
amount equal to the Security set forth in the Basic Lease Provisions and in substantially the form set forth in Schedule F attached
hereto from a recognized commercial banking institution located in the City of New York and having a net worth of at least $500,000,000.00.
The letter of credit (or any renewal thereof) shall not expire before the date that is sixty (60) days after the Expiration Date or earlier
termination of this Lease, provided, that, if Tenant is unable to obtain a letter of credit expiring as of such date, then (i) the
letter of credit with the “evergreen” renewals shall have a term of at least one (1) year, and (ii) Tenant shall
deliver to Landlord a new letter of credit satisfying the provisions of this Section 28.1(a) at least sixty (60) days prior
to the final expiration date of the expiring letter of credit and, if Tenant fails to timely provide Landlord with such replacement letter
of credit, Landlord will have the right to cash the letter of credit and retain the proceeds as security hereunder. The letter of credit
will be held by Landlord as security for the full and faithful performance of Tenant’s obligations under this Lease. The letter
of credit must be payable upon sight draft, together with a certification from Landlord that Tenant is in default under this Lease. If
(i) any Basic Rent, Additional Rent or other sum payable by Tenant to Landlord is not paid when due, or (ii) Landlord makes
any payments on behalf of Tenant, or (iii) Tenant fails to perform any of its obligations under this Lease, then, in each case,
Landlord will have the right, without prejudice to any other remedy Landlord may have, to draw down such letter of credit to compensate
or reimburse Landlord, as the case may be, toward the payment of Basic Rent, Additional Rent or other such sum payable hereunder, or
other loss or damage sustained by Landlord on account of Tenant’s default. The Security will not be deemed to be (x) a limitation
on Landlord’s damages or other rights and remedies available under this Lease or at law or equity, (y) a payment of liquidated
damages, or (z) an advance of the Basic Rent or Additional Rent. If Landlord uses, applies, or retains all or any portion of the
Security, Tenant shall immediately restore the Security to its original amount. If the letter of credit requires renewal, Tenant shall
furnish to Landlord evidence of such renewal at least thirty (30) days prior to the expiration date of the letter of credit. If Tenant
fails to timely provide Landlord with such evidence of renewal, Landlord will have the right to cash the letter of credit and to retain
the proceeds as security hereunder. In such event, the Security shall be held by Landlord in an interest bearing account pursuant to
the provisions of Section 7-103 of General Obligations Law of the State of New York, with interest thereon to belong to Tenant,
except in the event of a default, and paid to Tenant upon the Expiration Date or earlier termination of this Lease, unless sooner applied
to a default. Tenant shall not assign, pledge, hypothecate, mortgage or otherwise encumber the Security. If, as of the three (3) year
and five (5) month anniversary of the Commencement Date Tenant (i) has not defaulted in the payment of any Basic Rent or Additional
Rent during the Term, and (ii) has not otherwise defaulted in the performance of any material non-monetary obligation hereunder,
then Tenant shall have the right to reduce the letter of credit required hereunder to $17,542.00. If Tenant qualifies for the reduction
in Security pursuant to the immediately preceding sentence, Tenant shall either deliver to Landlord an amendment to the then existing
letter of credit evidencing such reduction or Tenant shall deliver to Landlord a new letter of credit in such reduced amount and otherwise
satisfying the requirements set forth in Section 28.1. Upon Tenant’s deposit with Landlord of such new letter of credit, Landlord
shall promptly return the letter of credit then held by Landlord to Tenant. For the avoidance of doubt, a letter of credit in the form
attached hereto as Schedule F shall satisfy the requirements of this Article 28.
(b) If
at any time during the Term (as the same may be extended) Landlord determines that the financial condition of the issuer of the then
current letter of credit is such that Landlord’s ability to draw upon such letter of credit is, or in the future may be, impaired,
restricted, refused or otherwise adversely affected, then Tenant shall, within ten (10) business days of Landlord’s written
request to Tenant, obtain a replacement letter of credit in substitution for the then current letter of credit in the form and amount
required herein from an issuer acceptable to Landlord in Landlord’s reasonable discretion. If Tenant fails to timely provide Landlord
with such replacement letter of credit, Landlord will have the right to cash the letter of credit and to retain the proceeds as security
hereunder. In addition, if at any time during the Term (as the same may be extended) a receiver is appointed for any issuer of a letter
of credit held by Landlord hereunder, Landlord will have the right to cash such letter of credit and to retain the proceeds as security
hereunder.
28.2 Increase
in Security. If Tenant is in default under this Lease more than two (2) times during any twelve (12) month period, irrespective
of whether such default is cured, then, without limiting Landlord’s other rights and remedies provided for in this Lease or at
law or equity, the Security will automatically be increased to an amount equal to the greater of: (i) one hundred fifty percent
(150%) of the original Security, and (ii) three (3) months then current Basic Rent. Tenant shall pay the amount of such increase
in the Security to Landlord upon demand.
28.3 Return
of Security. So long as Tenant is not in default in the performance of any of its obligations under this Lease, any part of the Security
not used, applied, or retained by Landlord shall be returned to Tenant within sixty (60) days after the end of the Term, subject to Landlord’s
final inspection of the Premises. Notwithstanding the foregoing, if Landlord, in its sole discretion, has sufficient evidence that the
Security has been assigned to an assignee of this Lease, then Landlord shall return the Security to such assignee and, upon such return,
will be released from all liability with respect to the Security.
28.4 Bankruptcy.
In the event of bankruptcy or other debtor-creditor proceeding against Tenant, the Security will be deemed to be applied first to the
payment of rent and other charges due Landlord for all periods prior to filing of such proceedings.
28.5 Transfer
of Security. In the event of any transfer of title to the Property or the Building or any assignment of Landlord’s interest
under this Lease, Landlord will have the right to transfer the Security to such transferee, provided that Landlord gives Tenant the name
and address of such transferee. Following any such transfer of the Security, Landlord will be automatically released from all liability
for the return of the Security. The provisions of this Section 28.5 will apply to every transfer of the Security to a new transferee.
ARTICLE 29
MISCELLANEOUS
29.1 Miscellaneous.
This Lease may not be amended except by an instrument in writing signed on behalf of both parties. If any provision of this Lease is
held unenforceable by a court of competent jurisdiction, all other provisions of this Lease will remain effective. If any provision of
this Lease is held unenforceable only in part or degree, it will remain effective to the extent not held unenforceable. This Lease will
bind and benefit both parties’ permitted successors and assigns. The table of contents and the article and section headings contained
in this Lease are for convenience of reference only and will not limit or otherwise affect the meaning of any provision of this Lease.
This Lease may be executed in counterparts, each of which is an original and all of which together constitute one and the same instrument.
29.2 No
Surrender. No act or thing done by Landlord or Landlord’s agents during the Term will be deemed an acceptance of a surrender
of the Premises prior to the Expiration Date or earlier termination of this Lease, and no agreement to accept such surrender will be
valid unless in writing and signed by Landlord. No employee of Landlord or Landlord’s agents will have any authority to accept
the keys to the Premises prior to the Expiration Date or the earlier termination of this Lease and the delivery of keys to any employee
of Landlord or Landlord’s agents will not operate as an acceptance of a termination of this Lease or an acceptance of a surrender
of the Premises.
29.3 Statements
and Bills. Landlord’s failure to prepare and deliver to Tenant any statement, notice or bill will in no way cause Landlord
to forfeit or surrender its rights to collect any amounts due and owing to Landlord.
29.4 Intentionally
Deleted.
29.5 Tenant’s
Financials. Tenant shall keep proper books and records of account in accordance with generally accepted accounting principles consistently
applied. Tenant shall deliver to Landlord, within one hundred eighty (180) days after the close of each Tenant’s fiscal year, a
balance sheet and statement of income and expense for such year (which statement must separately set forth the expenses of the Premises).
In addition, Tenant shall provide Landlord, within ten (10) days of Landlord’s request, such other information with respect
to Tenant as Landlord may reasonably request from time to time. All financial statements must include a complete comparison with the
figures for the preceding year and must be certified by (a) the chief financial officer of Tenant, or (b) if prepared by any
accounting firm, by such accounting firm.
29.6 No
Offer. The submission of this Lease to Tenant for examination does not constitute an offer to lease the Premises on the terms set
forth herein. This Lease will become effective only upon the execution and delivery of the Lease by Landlord and Tenant.
29.7 Access.
Subject to all applicable Legal Requirements and to Landlord’s Rules and Regulations, Tenant shall be permitted keyed access
to the Premises twenty-four (24) hours per day, seven (7) days per week.
29.8 Rules and
Regulations. Tenant, for itself and for Tenant’s Visitors, covenants to comply with the Rules and Regulations attached
hereto as Schedule E. Landlord will have the right to amend the Rules and Regulations from time to time, in writing,
and Tenant, on behalf of itself and Tenant’s Visitors, agrees to comply with such amendments after deliveries of copies thereof
to Tenant or the posting of copies thereof in a prominent place in the Building. In case of any conflict or inconsistency between the
provisions of this Lease and any Rules and Regulations, the provisions of this Lease shall control.
29.9 Authority.
Tenant and Landlord each represents and warrants to the other: (i) the execution and delivery of, the consummation of the transactions
contemplated by and the performance of all its obligations under, this Lease by the representing party have been duly and validly authorized
by its general partners, to the extent required by its partnership agreement and applicable law, if the representing party is a partnership
or, if the representing party is a limited liability company, by its manager, representative(s) or members to the extent required
by its operating agreement and applicable law or, if the representing party is a corporation, by its board of directors, if necessary,
and by its stockholders, if necessary, at meetings duly called and held on proper notice for that purpose at which there were respective
quorums present and voting throughout; (ii) no other approval, partnership, corporate, governmental or otherwise, is required to
authorize any of the foregoing or to give effect to the representing party’s execution and delivery of this Lease; and (iii) the
individual (or individuals) who executes and delivers this Lease on behalf of the representing party is authorized to do so.
29.10 Liability
of Landlord. The Term “Landlord” as used in this Lease, so far as the covenants and agreements on the part
of Landlord are concerned, shall be limited to mean and include only the owner (or lessee, as applicable) or Mortgagee(s) in possession
of the Property at the time in question of the landlord’s interest in this Lease. Landlord may sell its fee ownership or leasehold
interest in the Building or the Property, and/or transfer or assign its rights under this Lease. In the event of any sale of such interest
or transfer of such rights and upon the assumption, in writing, of the obligations of Landlord under this Lease by such assignee or transferee,
Landlord herein named (and in case of any subsequent transfer, the then assignor) shall be automatically freed and relieved from and
after the date of such transfer of all liability in respect of the performance of any of Landlord’s covenants and agreements thereafter
accruing, and such transferee shall thereafter be automatically bound by all of such covenants and agreements, subject, however, to the
terms of this Lease; it being intended that Landlord’s covenants and agreements shall be binding on Landlord, its successors and
assigns, only during and in respect of their successive periods of such ownership.
29.11 Waiver
of Stay. Tenant expressly waives, for itself and for any person claiming through or under Tenant, any rights which Tenant or any
such person may have under the provisions of Section 2201 of the New York Civil Practice Law and Rules and of any similar or
successor law then in force, in connection with any holdover proceedings or other action or proceeding regarding this Lease, Tenant’s
rights as a tenant of the Building, or Tenant’s possession of the Premises.
29.12 Requests
for Consent. Except as otherwise expressly set forth in this Lease, Tenant shall pay to Landlord, within thirty (30) days after demand
therefor, as Additional Rent, all reasonable, actual out-of-pocket fees, charges or other expenses Landlord actually incurs (including
its reasonable legal fees and expenses) arising out of any request for consent or approval of any matter hereunder.
29.13 Window
Cleaning. Tenant shall not clean, nor require, permit, suffer or allow any window in the Premises to be cleaned, from the outside
in violation of Section 202 of the New York Labor Law (or any successor statute thereto) or any other Legal Requirement.
29.14 Drafting
Ambiguity. The parties acknowledge that this Lease has been reviewed by respective counsel and all terms have been considered and
negotiated independently. Consequently, any rule that ambiguities shall be interpreted against the drafter shall not apply and there
shall be no presumption favoring one party or the other in the interpretation of this Lease. Furthermore, no prior draft of this Lease
shall be used or considered in the interpretation of this Lease.
29.15 Counterparts.
This Lease may be executed in any number of counterparts with the same effect as if all parties hereto had signed the same document.
Notwithstanding any law or presumption to the contrary, this Lease may be executed electronically or by pdf and each party has the right
to rely upon an electronic or pdf counterpart of this Lease signed by the other party to the same extent as if such party had received
an original counterpart, and such counterpart of this Lease shall be deemed valid and binding and admissible by either party against
the other as if same were an original ink signature.
29.16 Force
Majeure. Neither party shall be held responsible for delays in the performance of its non-monetary obligations hereunder when caused
by strikes, lockouts, labor disputes, acts of God, pandemic, epidemic, inability to obtain labor or materials or reasonable substitutes
therefor, governmental restrictions, governmental regulations, governmental controls, delay in issuance of permits, enemy or hostile
governmental action, civil commotion, fire or other casualty, and other causes beyond the reasonable control of such party.
29.17 Quiet
Enjoyment. Tenant, upon payment of the rent herein reserved and upon the due performance and observance of all the covenants, conditions
and agreements herein contained on Tenant’s part to be performed and observed, shall and may at all times during the Term peaceably
and quietly have, hold and enjoy the Premises without any manner of suit, trouble or hindrance of and from any person claiming by, through
or under Landlord subject to the terms of the Lease including, but not limited to, Article 23.
29.18 Arbitration.
In any case in which it is provided by the terms of this Lease that any matter be determined by arbitration, the same shall be settled
by arbitration in the County seat of the County in which the Property is located in accordance with the Rules of the American Arbitration
Association (or its successor then existing) by a panel of three arbitrators. The determination in such arbitration proceeding shall
be conclusive upon the parties, and judgment upon any award or decision may be entered in any court having jurisdiction thereof. The
costs, fees, and expenses of the arbitrator or arbitrators, and/or the American Arbitration Association shall be shared equally by the
parties thereto provided that Landlord and Tenant shall each pay their respective legal fees. This Section 29.18 shall survive termination
or expiration of this Lease.
29.19 Subordination
of Landlord’s Lien. Landlord shall, upon the written request of Tenant’s lender, subordinate all statutory and contractual
liens which it may be entitled to assert against any of Tenant’s property, provided Tenant’s lender enters into a Landlord’s
lien subordination agreement on Landlord’s form of such agreement.
ARTICLE 30
USA PATRIOT ACT
Tenant and Landlord each represents,
warrants and covenants that neither it nor any of its partners, officers, directors, members or shareholders (i) is listed on the
Specially Designated Nationals and Blocked Persons List maintained by the Office of Foreign Asset Control, Department of the Treasury
(“OFAC”) pursuant to Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 25, 2001) (“Order”)
and all applicable provisions of Title III of the USA Patriot Act (Public Law No. 107-56 (October 26, 2001)); (ii) is listed
on the Denied Persons List and Entity List maintained by the United States Department of Commerce; (iii) is listed on the List of
Terrorists and List of Disbarred Parties maintained by the United States Department of State, (iv) is listed on any list or qualification
of “Designated Nationals” as defined in the Cuban Assets Control Regulations 31 C.F.R. Part 515; (v) is listed on
any other publicly available list of terrorists, terrorist organizations or narcotics traffickers maintained by the United States Department
of State, the United States Department of Commerce or any other governmental authority or pursuant to the Order, the rules and regulations
of OFAC (including without limitation the Trading with the Enemy Act, 50 U.S.C. App. 1-44; the International Emergency Economic Powers
Act, 50 U.S.C. §§ 1701-06; the unrepealed provision of the Iraq Sanctions Act, Publ. L. No. 101-513; the United Nations
Participation Act, 22 U.S.C. § 2349 as-9; The Cuban Democracy Act, 22 U.S.C. §§ 6001-10; The Cuban Liberty and Democratic
Solidarity Act, 18 U.S.C. §§ 2332d and 233; and The Foreign Narcotic Kingpin Designation Act, Publ. L. No. 106-120 and
107-108, all as may be amended from time to time); or any other applicable requirements contained in any enabling legislation or other
Executive Orders in respect of the Order (the Order and such other rules, regulations, legislation or orders are collectively called the
“Orders”); (vi) is engaged in activities prohibited in the Orders; or (vii) has been convicted, pleaded
nolo contendere, indicted, arraigned or custodially detained on charges involving money laundering or predicate crimes to money laundering,
drug trafficking, terrorist-related activities or other money laundering predicate crimes or in connection with the Bank Secrecy Act (31
U.S.C. §§ 5311 et. seq.).
ARTICLE 31
EARLY TERMINATION OPTION
31.1 Early
Termination Option. Tenant shall have the one time right to terminate this Lease effective as of the five (5) year and five (5) month
anniversary of the Commencement Date (the “Early Termination Date”) by delivering notice thereof to Landlord
(the “Early Termination Notice”) no later than the four (4) year and five (5) month anniversary of
the Commencement Date (time being of the essence with respect to the giving of such notice). Tenant’s right to terminate this Lease
is contingent upon (a) timely delivery of the Early Termination Notice, (b) Tenant not being in default of any monetary obligation
or any material non-monetary obligation under this Lease as of the date of the giving of the Early Termination Notice or as of the Early
Termination Date, and (c) Tenant delivering to Landlord, at the same time Tenant delivers to Landlord the Early Termination Notice,
a payment in an amount equal to $84,159.15 (the “Early Termination Payment”). The failure of Tenant to timely
give Landlord the Early Termination Notice and/or the Early Termination Payment shall render any Early Termination Notice delivered to
Landlord null and void and this Lease shall continue in full force and effect pursuant to the terms hereof. If Tenant properly terminates
the Lease pursuant to the provisions of this Article 31, the Lease shall expire at midnight on the Early Termination Date as if such
date was the date set forth in the Lease as the Expiration Date.
[Remainder of page left blank intentionally.]
IN
WITNESS WHEREOF, the parties have executed this Lease as of the date first above written.
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WITNESS:
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Landlord:
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2500/2700 WESTCHESTER AVENUE OWNER SPE LLC, a Delaware limited liability company
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By:
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Name: Stephen J. Cusma
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Title: Vice President/Secretary
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WITNESS:
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Tenant:
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COGNITION THERAPEUTICS, INC., a Delaware corporation
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By:
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Name: Lisa Ricciardi
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Title: President/CEO
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SCHEDULE
A
PREMISES
SCHEDULE
B
CONFIRMATION
OF COMMENCEMENT AGREEMENT
This
CONFIRMATION AGREEMENT (this “Agreement”) is dated ,
20 and is between 2500/2700 WESTCHESTER AVENUE OWNER SPE
LLC, a Delaware limited liability company (“Landlord”), and COGNITION THERAPEUTICS, INC., a
Delaware corporation (“Tenant”).
WITNESSETH
WHEREAS,
Landlord and Tenant entered into that certain Lease Agreement dated [ ],
20__ (the “Lease”) covering certain premises in the building located at 2500 Westchester Avenue, Purchase, New
York 10577, as more particularly described in the Lease, and
WHEREAS, Landlord and Tenant
wish to set forth their agreements as to the commencement of the term of the Lease:
NOW THEREFORE, in consideration
of the foregoing, the parties agree as follows:
1. Capitalized
terms used herein but not defined have the meanings ascribed to them in the Lease.
2. The
Commencement Date is ,
20__.
3. The
Expiration Date is , 20__.
4. Basic
Rent shall be payable as follows:
From 20__
through 20__, $[ ]
per
annum due and payable, in advance, on or before the first day of each month in equal monthly installments of $[ ].
From 20__
through 20__, $[ ]
per
annum due and payable, in advance, on or before the first day of each month in equal monthly installments of $[ ]
per month.
From 20__
through 20__, $[ ]
per annum due and payable, in advance, on or before the first day of each month in equal monthly
installments of $[ ]
per month.
From _20__
through 20__, $[ ]
per annum due and payable, in advance, on or before the first day of each month in equal monthly
installments of $[ ]
per month.
5. The
Early Termination Payment payable pursuant to Article 31 of the Lease is an amount equal to $84,159.15.
IN WITNESS WHEREOF, the parties
have executed this Agreement as of the date first above written.
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WITNESS:
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Landlord:
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2500/2700 WESTCHESTER AVENUE
OWNER SPE LLC, a Delaware limited
liability company
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By:
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Name: Stephen J. Cusma
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Title: Vice President/Secretary
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WITNESS:
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Tenant:
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COGNITION THERAPEUTICS, INC., a
Delaware corporation
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By:
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Name: Lisa Ricciardi
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Title: President/CEO
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END
SCHEDULE C
JANITORIAL SERVICES
1. Landlord
shall perform the following general office cleaning services between the hours of 6:00 and 7:00 AM., Monday through Friday, of each week
(with the exception of Holidays) and said cleaning shall not be rescheduled by Tenant’s overtime or extraordinary use of the Building
or Premises.
A. Empty
all wastepaper baskets.
B. Sweep
and/or dust-mop all hard surfaced flooring.
C. Carpet
sweep all areas requiring same. Said areas to be vacuumed clean twice weekly; conduct spot cleaning where necessary.
D. Deposit
all wastepaper from baskets in plastic bags (to be supplied by Contractor), placing same in locations as shall be designated convenient
for the removal thereof. Landlord shall not be responsible for the removal of large boxes, wooden pallets or excessive amounts of waste
paper, office equipment of any kind including, but not limited to, cpu’s, monitors, copiers and facsimile machines. Tenant shall
cooperate with recycling programs in effect, or which may be instituted at a later date.
E. Within
pantry area, if any, wipe down countertops and table tops daily and remove ordinary amounts of trash therefrom.
F. Hand
dust all desks, chairs, worktables, office furniture and equipment within normal arms reach, provided free of paperwork.
G. Damp
dust and wipe clean all glass tops, desks and tables (removing all finger marks and smudges from same).
H. Wipe
clean of finger marks and maintain all brass and other bright work.
I. Wash
and clean tops of water coolers and fountains and floors and wall areas surrounding same.
J. Wisk
brush all fabric covered furniture monthly.
K. Instruct
all employees to notify their supervisor, who in turn shall notify the proper designated representative of the Building, of any irregularity
found in any office during the nightly tour of office cleaning.
L. After
cleaning, all electric lamps are to be extinguished, office windows closed, office doors closed and Premises to be left in a neat and
orderly condition.
M. Ledges,
mouldings, venetian blinds and other high dusting once per year.
N. Clean
inside of exterior windows once per year, provided window sills are free of articles and access is not restricted by Tenant.
END
SCHEDULE D
FINISH WORK
1. Landlord
shall provide the Premises in “AS IS” condition, subject to Landlord performing, through its general contractor (“General
Contractor”), at Landlord’s sole cost and expense), the work (the “Finish Work”)
as shown on the schematic plan attached as Schedule D-1 hereto (the “Preliminary Plans”) and as
described on Schedule D-2 attached hereto and in accordance with the Working Plans (as defined below). Landlord shall cause
the General Contractor to construct the Finish Work in a good and workmanlike manner and in compliance with all applicable laws and regulations
using building standard construction materials.
2. (a) As
soon as reasonably possible after the date of execution of this Lease, Landlord shall deliver to Tenant four (4) sets of working
plans and specifications prepared in conformity with the Preliminary Plans, which working plans and specifications must include, without
being limited to, a list of the types and quality of materials to be used in constructing the Finish Work, including Tenant’s selection
of Landlord’s standard finishes, if any. Tenant shall notify Landlord if anything on the working plans is not consistent with the
Preliminary Plans within five (5) business days after Tenant’s receipt thereof. If Tenant notifies Landlord of any such inconsistency
(such notice, an “Objection Notice”), Landlord shall make necessary revisions and resubmit the same to Tenant
within seven (7) days of Landlord’s receipt of the Objection Notice. Tenant shall point out any further inconsistencies of
such revised working plans and specifications within three (3) business days after Landlord submits the same to Tenant. Tenant’s
approval will be evidenced by endorsement to that effect on one set of the working plans and specifications and the return of such signed
set to Landlord. The working plans and specifications approved by Tenant are hereinafter referred to as the “Working Plans”.
If Tenant fails to take any action within the time periods specified in this Schedule D, such delay (beyond the applicable
time period set forth herein) will be accounted for as a Tenant Delay.
(b) If
Tenant desires any changes to the Working Plans, Tenant shall submit such proposed changes to Landlord. Within five (5) business
days after receipt of any proposed changes from Tenant, Landlord shall approve or reject such changes and, if rejecting such changes,
shall state the reasons for such rejection. Landlord shall, upon granting of any approval for any changes, notify Tenant of (i) the
amount of additional cost arising therefrom, if any, including, without limitation, the cost to revise any plans and specifications (all
such additional costs being referred to herein as “Additional Construction Cost”), which Additional Construction
Cost Tenant shall pay to Landlord upon demand, and (ii) Landlord’s estimate of the amount of additional time (the “Estimated
Time Delay”), if any, required by Landlord to implement and complete such changes, which Estimated Time Delay will be accounted
for as a Tenant Delay. Tenant reserves the right to approve the Additional Construction Cost and Estimated Time Delay within three (3) days
of the date Landlord provides the same to Tenant. If Tenant fails to notify Landlord in writing within such three (3) day period
that Tenant does not approve the Additional Construction Cost and Estimated Time Delay, then Tenant will be deemed to have withdrawn its
request for such changes. Any delays in constructing the Finish Work associated with changes requested by Tenant, whether or not those
changes are ultimately made by Landlord, will be a accounted for as a Tenant Delay. In the event of a rejection by Landlord of any proposed
changes, Tenant may revise such changes and re-submit them pursuant hereto. If any changes are approved by Landlord, Landlord, at Tenant’s
sole cost and expense, shall cause the Working Plans to be modified to incorporate such changes. All change order requests and information
pertaining thereto shall be conveyed to Landlord by Tenant’s designated representative in this regard.
3. (a) Without
Landlord’s prior written consent, Tenant shall not perform any work in or to the Premises or move any of its furniture, equipment
or property into the Premises until Landlord has Substantially Completed the Finish Work. If Landlord consents to same, Tenant shall
pay for any labor or security personnel required to be employed by Landlord in connection with the performance of work by Tenant and
any standby labor, if required, by any union labor and otherwise comply with union requirements, if any, applicable thereto.
SCHEDULE D-1
PRELIMINARY PLANS
SCHEDULE D-2
DESCRIPTION OF FINISH WORK
Senlac Ridge Partners
53 Maple Avenue│ Morristown NJ 07960
BUILDING STANDARD
CONSTRUCTION
WITHOUT LIMITING LOCAL CODE
REQUIREMENTS, THE FOLLOWING SHALL BE
INCORPORATED INTO TENANT’S WORK
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1)
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Building Standard Millwork:
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a)
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Landlord shall furish and install twelve (12) lineal feet of building standard plastic laminate countertops with upper and lower
cabinets at the new pantry. Building standard finish selections by Wilsonart. Interior finishes to be white melamine.
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b)
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Landlord shall furnish and install five (5) lineal feet of building standard plastic laminate
shelves with aluminum coat rod at the reception closet.
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c)
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Landlord shall furnish and install five (5) lineal feet of building standard plastic laminate countertop
with leg supports at the new phone room.
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2)
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Building Standard Doors:
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a)
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Landlord shall furnish and install nine (9) new custom 3’-0 x 8’-0” prefinished stained solid core
Oak veneer doors with hollow metal frame and ADA compliant cylindrical passage lever set hardware, to match existing
.
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3)
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Building Standard Carpentry:
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a)
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Landlord shall furnish and install one hundred sixty (160) lineal feet of thru the ceiling high partition walls consisting: of
3-l /2” metal stud at 16” on center, with fiberglass insulation and one layer of 5/8” gypsum board on each side throughout the
demised premises.
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b)
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Landlord shall furnish and install sixty eight (68) lineal feet of full height partition walls extending to the underside of the
deck consisting: of 3- l /2” metal stud at 16'” on center, with fiberglass insulation and one layer of 5/8” gypsum
board on each side.
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c)
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Landlord shall furnish and install fire rated blocking for four (4) tenant provided televisions.
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d)
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All convector links where demising walls are terminated shall be packed solid with sound attenuation
blankets.
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4)
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Building Standard Glass and Glazing
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a)
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Landlord shall furnish and install five (5) sidelight at 8’ high, by ½”
thick, by 2’ wide-butt glazed sidelight at the conference room, by 7’ wide-butt glazed sidelight at office #4, by 5’ wide-butt
glazed sidelight at office #3 and #2, and by 8’ wide-butt glazed sidelight at office # 1..
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b)
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Landlord shall furnish and install one (1) Glass Herculite type door at the suite entry. New glass
door to have stainless steel 4” wide top and bottom rails, with locking ladder pull.
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c)
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Landlord shall furnish and install one (1) Glass Herculite type doors with 12” “C-Pull” type handle, no lock –at the Conference room.
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Cognition Therapeutics
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d)
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Landlord shall furnish and install 3’
wide window film at all new interior sidelights. Style to be selected by tenant from
buildings standards.
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5)
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Building Standard Hardware &
Keying:
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a)
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Landlord shall “key” the new lockset to be installed on the new entry door, IT room,
storage room, phone room, and shared office
New interior doors, seven (7) to have building standard ADA compliant Schlage AL series, cylindrical lock leverset hardware, to
match existing.
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b)
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Any upgraded entry/exit locks, inclusive
of card access systems, existing or new shall be the Tenant's responsibility. Building standard
keyway is Schlage® E 101. 6 pin
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6)
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Building Standard Ceilings:
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a)
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Landlord shall furnish and install two thousand three hundred twenty (2320) square feet of new
building standard 15/l6” acoustical ceiling grid and two thousand three hundred twenty (2320) square feet of new building
standard acoustical ceiling tile- Certainteed Sand Micro. or equal-thru out the demised premises.
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7)
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Building Standard Floor Coverings:
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a)
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Landlord shall furnish and install two hundred ninety (290) square yards of new building standard 2x2
carpet tile by Mohawk or Shaw. Tenant to select from building standards.
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b)
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Landlord shall furnish and install two hundred eighty (280) square feet of Mannington Essentials, vinyl
composite tile (VCT) in the new pantry.
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c)
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Landlord shall furnish and install six hundred two (602) lineal feet of a building standard 4” vinyl
cove wall base.
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8)
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Building Standard Wall Finishes:
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a)
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Landlord shall paint the entire demised premises with one (1) coat of primer and two (2) coats of finish paint, exclusive of the acoustical ceiling
tiles and grid, and areas of existing wallcovering, with Sherwin Williams or Benjamin Moore building standard paint in flat finish. Tenant
to select color.
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b)
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All doorframes and perimeter heating covers shall be painted the same color as the walls with oil based
paint in a semi-gloss finish.
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9)
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Building Standard Fire Sprinkler
System:
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a)
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Landlord shall provide new and modify the existing fire sprinkler system to provide sprinkler coverage
to accommodate the new layout for all normal office installations and in accordance with the IBC of New York State and any other governing
codes.
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b)
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Landlord shall furnish and install concealed sprinkler heads with white cover caps.
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10)
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Building Standard Plumbing:
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a)
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Landlord shall furnish and install one (1) new building standard stainless steel ADA compliant sink manufactured by Elkay (model#
GECR-25213. 25”x22'”x5”), or tenant approved equal, with a new building
standard American Standard single lever faucet (Model # 4175.500 ) and all necessary water
and waste piping at the new pantry area.
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b)
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Landlord shall furnish and install one (1) new Insta Hot water heater and a wastewater ejector pumps
by Liberty, model 404.
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c)
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Landlord shall furnish and install one (1) water connections for tenant-supplied coffee makers, and
one (1) for tenant supplied refrigerator with ice maker.
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d)
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All plumbing shall comply with handicapped accessible standards.
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11)
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Building Standard HVAC (Heating,
Ventilation and Air Couditioning):
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a)
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Landlord shall relocate one ( l ) existing VAV box with DDC controls thru out the demised suite. Components
to be DDC type VAV boxes and will be controlled by the Building Management System.
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Cognition Therapeutics
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b)
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Landlord shall provide and install fourteen (14) ceiling diffusers and thirteen (13) building standard air returns to accommodate new office layout.
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c)
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Heating is provided by a continuous hot water convector loop along the perimeter of the building, and is to remain.
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12)
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Building
Standard Lighting:
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a)
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Landlord shall furnish and install thirty (30) new building standard 2 x 4 LED lighting fixtures to accommodate the new layout of the demised premises. As required per plan.
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b)
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Landlord shall furnish and install four (4) new building standard 2 x 4 LED lighting fixtures with emergency lights to accommodate the new layout of the demised premises. As required per plan.
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c)
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Initial bulbs will be supplied by the Landlord; all subsequent replacements by the Landlord will be at the Tenant's expense.
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14)
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Building
Standard Outlets:
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a)
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Landlord shall furnish and install thirteen (13) duplex convenience wall outlets, nine (9) double duplex convenience wall outlets, and four (4) duplex TV outlets, throughout the demised premises at the area on new office construction. As required per plan.
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b)
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Landlord shall furnish and install three (3) new GFI 120v wall outlets.
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c)
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Landlord shall furnish and install four (4) new-dedicated 120v wall outlets.
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d)
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Landlord shall furnish and Install one (1) new core drill with flush mounted duplex receptacle at the conference room.
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e)
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Landlord shall furnish and install two (2) furniture wall feed.
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f)
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All receptacle devices will
be building standard white Decora.
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15)
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Building
Standard Switches:
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a)
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Landlord shall furnish and install nine (9) new building standard occupancy sensor light switches and two (2) building standard single pole light switches throughout the demised premises. As required per plan.
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b)
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All switching devices are to be building standard white Decora.
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16)
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Fire
and Life Safety:
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a)
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Landlord shall furnish and install a Fire and Life Safety system in conjunction with local building and life safety codes.
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17)
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Tenant
Telephone/Data Systems:
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a)
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Cabling by tenant's vendor.
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b)
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Landlord shall furnish and install fifteen (15) Tele/Data back box eliminators with draglines, as required per the plan.
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c)
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Tenant will be solely responsible for any telephone/data work and all associated requirements including permits and drawings. Work to be done in conjunction with the general contractor's schedule.
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d)
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Telephone/data wiring must be plenum rated and be hung in accordance with local building codes
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e)
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At Tenants request, Landlord may provide Tenant with pricing for Tenant's telephone equipment and data wiring. All pricing will be considered a tenant extra work order (TEWO) and will be at Tenant 's sole expense.
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a)
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Landlord shall furnish and install thirteen (13) new 5'x5' mini blinds as necessary.
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Cognition Therapeutics
|
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19)
|
Tenant
Structural Steel Reinforcement:
|
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a)
|
In any and all instances where additional structural support is required or is in question. Landlord shall be notified and will retain the services of a licensed engineer, at tenant’s expense, to determine such requirements. Tenant shall be responsible for the cost of any additional structural support that is required for any of tenant’s furniture, files, equipment or other specialty items.
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20)
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Tenant
Substitutions:
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a)
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Tenant may substitute like items for building standard items; however, no credits for the building standard item will be given against the cost of items substituted.
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b)
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No credit will be given for items not utilized by the Tenant.
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21)
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Tenant
Furniture/Electrical needs:
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a)
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Furniture shown on the exhibit plan is for reference only. Tenant is responsible for coordination and layout of all furniture, furniture components and installation including ADA code compliance.
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b)
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Tenant is responsible for all costs related to moving, relocating, and dismantling of furniture, fixtures, and equipment.
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c)
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Tenant is responsible for all costs related to electrical requirements of furniture wiring, including supply of the furniture whips. The Landlord is responsible to supply and connect power to the Tenants workstations.
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a)
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Tenant
will be solely responsible for all appliances and all office equipment for the tenant’s space. Items not described in these
specifications are considered non-standard work items, falling outside of the scope of the
standard build-out. If requested by Tenant during the Landlord’s Initial Construction, these items of work will be performed exclusively
by Landlord at the sole cost and expense of Tenant. Landlord will present Tenant with a Tenant Extra Work Order (“TEWO”),
setting forth the specifications and cost of the subject item. Tenant will have three (3) days from receipt of the TEWO in which
to elect to have the subject item of work performed. Election is made by
Tenant through execution and delivery of the subject TEWO to Landlord, together with payment by Tenant of one-half (50%) of the cost of
the subject item. Failure by Tenant to make election (in the manner described in the preceding sentence) within the aforementioned three
(3) day period shall be construed as an election by Tenant to forego the subject TEWO. During Tenants TEWO review period, Landlord
will continue to execute the Landlord’s Initial Construction in accordance with the lease. Tenant must pay the entire balance of any signed
and delivered TEWO upon completion of the subject work. Tenant acknowledges and agrees that substantial completion of the Landlord’s
Initial Work is not contingent upon the completion of any TEWO’s and that TEWO’s by their nature may not be complete upon substantial
completion, as defined in the lease. Tenant further acknowledges that TEWO’s may result in a tenant delay, as defined in the lease.
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a)
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Tenant is not responsible for any requested overtime supervision or after hour’s work-related costs including building personnel or third-party contractors acting on landlord’s behalf.
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-END -
Cognition Therapeutics
SCHEDULE E
RULES AND REGULATIONS
In the event of any conflict
between the terms and provisions of the Lease and these Rules and Regulations, the terms and provisions of the Lease shall control.
1. The
rights of Tenant in the entrances, corridors, elevators and escalators of the Building are limited to ingress to and egress from the Premises
for the Tenant and Tenant’s Visitors, and Tenant shall not use, or permit the use of, the entrances, corridors, escalators or elevators
for any other purpose. Fire exits and stairways are for emergency use only, and they shall not be used for any other purposes by Tenant
and Tenant’s Visitors. Tenant shall not encumber or obstruct, or permit the encumbrance or obstruction of any of the sidewalks,
plazas, entrances, corridors, escalators, elevators, fire exits or stairways of the Building. Landlord reserves the right to control and
operate the public portions of the Building and the Property and the public facilities, as well as facilities furnished for the common
use of the tenants, in such manner as Landlord, in its sole and absolute discretion, deems best for the benefit of the tenants generally.
2. The
cost of repairing any damage to the public portions of the Building and the Property or the public facilities or to any facilities used
in common with other tenants, caused by Tenant or Tenant’s Visitors shall be paid by Tenant.
3. Landlord
may refuse admission to the Building outside of ordinary business hours to any person not known to the watchman in charge, if any, or
not having a pass issued by Landlord or not properly identified, and may require all persons admitted to or leaving the Building outside
of ordinary business hours to register. Any person whose presence in the Building or the Property at any time shall, in the sole judgment
of Landlord, be prejudicial to the safety, character, reputation and interests of the Building, the Property or its tenants may be denied
access to the Building or the Property or may be ejected therefrom. In case of invasion, riot, public excitement or other commotion, Landlord
may prevent all access to the Building and the Property during the continuance of the same, by closing the doors or otherwise, for the
safety of the tenants and protection of property at the Property. Landlord may require any person leaving the Building with any package
or other object to exhibit a pass from Tenant, but the establishment and enforcement of such requirement shall not impose any responsibility
on Landlord for the protection of Tenant against the removal of property from the Premises. Landlord shall, in no way, be liable to Tenant
for damages or loss under the provisions of this rule.
4. No
awnings or other protections over or around the windows shall be installed by Tenant, and only such window blinds as are supplied or permitted
by Landlord shall be used in the Premises.
5. There
shall not be used in any space, or in the public halls or public portions of the Building, either by Tenant or Tenant’s Visitors,
in the delivery or receipt of mail, parcels, merchandise, any hand trucks, except those equipped with rubber tires and side guards which
have been approved by Landlord. Landlord may refuse admission to the Building to any person not complying with this requirement. No hand
trucks will be allowed in passenger elevators.
6. All
entrance doors in the Premises shall be locked when the Premises are not in use. Entrance doors shall not be left open at any time. All
window blinds in the Premises shall be lowered when reasonably required because of the position of the sun, during the operation of the
Building air cooling system to cool or ventilate the Premises.
7. No
noise, including the playing of any musical instruments, radio or television, which in the sole judgment of Landlord, might disturb other
tenants in the Building shall be made or permitted by Tenant, and no cooling shall be done in the Premises, except as expressly approved
in writing by Landlord. Nothing shall be done or permitted in the Premises, and nothing shall be brought into or kept in the Premises,
which would impair or interfere with any of the Building Services or the proper and economic heating, cleaning or other servicing of the
Building or the Premises or the use or enjoyment by any other tenant of any other premises, nor shall there be installed by Tenant any
ventilating, air cooling, electrical or other equipment of any kind which, in the sole judgment of Landlord, might cause any such impairment
or interference. No dangerous, flammable, combustible or explosive object or material shall be brought into the Building or the Property
by Tenant or with permission of Tenant.
8. Tenant
shall not allow any cooking or food odors (if cooking is so permitted under its lease) to emanate from the Premises into other portions
of the Building. Tenant agrees that it shall use, at its cost, a pest extermination contractor at such times or regular intervals as shall
be necessary to prevent or eliminate infestation or otherwise as Landlord may reasonably require. Said extermination contractor shall
be duly licensed and shall be approved in advance by Landlord.
9. No
acids, vapors, coffee grinds, foreign substances or other materials shall be discharged or permitted to be discharged into the plumbing
waste lines, vents or flues of the Building, which may obstruct or damage them. The water and wash closets and other plumbing fixtures
in or servicing the Premises shall not be used for any purpose other than the purpose for which they were designed or constructed, and
no sweeping, rubbish, rags, acids, coffee or other foreign substances shall be deposited therein. All damages to facilities within the
Premises or to any Building facilities resulting from any misuse of the fixtures shall be borne by Tenant if Tenant or Tenant’s
Visitors caused the same.
10. No
signs, advertisements, notices or other lettering shall be exhibited, inscribed, painted or affixed by Tenant on any part of the outside
of the Premises without the prior written consent of Landlord. In the event of the violation of the foregoing by Tenant, Landlord may
remove the same without any liability and may charge the expense incurred by such removal to Tenant.
11. Tenant
shall not engage or pay any employees in the Building, except those actually working for Tenant or occupant in the Building, nor advertise
for laborers giving an address at the Building.
12. The
requirements of Tenant will be attended to only upon application at the office of the Building Manager. Employees of Landlord or of Landlord’s
managing agent shall not perform any work or do anything outside of the regular duties, unless under special instructions from the office
of Landlord.
13. Tenant
shall, at its expense, provide reasonable artificial light in the Premises for Landlord’s agents, contractors and employees while
performing janitorial or other cleaning services and making repairs or alterations in the Premises.
14. Tenant’s
Visitors shall not loiter nor shall they smoke in or around the hallways, stairways, elevators, entryways, vestibules, roof, restrooms,
basement areas, loading docks, lobbies or any other part of the Building used in common by the occupants thereof.
15. Except
as expressly provided in the Lease, Tenant shall not mark, paint, drill into, or in any way deface any part of the Premises. No boring,
cutting or stringing of wires shall be permitted, except with the prior written consent of Landlord, and as Landlord may direct. Tenant
shall not lay linoleum, or other similar floor covering so that the same shall come in direct contact with the floor of the Premises and,
if linoleum or other similar floor covering is desired to be used, an interlining of builder’s deadening felt shall be first affixed
to the floor by a paste or other material, soluble in water. The use of cement or other similar adhesive material is expressly prohibited.
16. No
additional locks and bolts of any kind shall be placed on any of the doors or windows by Tenant, nor shall any changes be made in existing
locks and mechanisms thereof. Tenant must, upon the termination of its tenancy, restore to Landlord all keys of stores, offices and toilet
rooms, either furnished to, or otherwise procured by, such tenant, and in the event of the loss of any keys so furnished, such tenant
shall pay to Landlord the cost thereof.
17. No
contract of any kind with any supplier of toilet articles, waxing, rug shampooing, venetian blind washing, furniture polishing, lamp servicing,
cleaning of electrical fixtures, removal of waste paper, rubbish or garbage, or other like service shall be entered into by Tenant, nor
shall any vending machine of any kind be installed in the Building without the prior written consent of Landlord.
18. Landlord
shall have the right to prescribe the weight, size and position of all safes and other bulky or heavy equipment and all freight brought
into the Building or the Property by Tenant and the time of moving the same in and out of the Building or the Property. All such moving
shall be done under the supervision of Landlord. Landlord will not be responsible for loss of or damage to any such equipment or freight
from any cause; but all damage done to the Building or Property by moving or maintaining any such equipment or freight shall be repaired
at the expense of such tenant. All safes shall stand on a base of such size as shall be designated by Landlord. Landlord reserves the
right to inspect all freight to be brought into the Building and to exclude from the Building all freight which violates any of these
Rules and Regulations or the Lease of which these Rules and Regulations are a part.
19. No
machinery of any kind or articles of unusual weight or size will be allowed in the Building, without the prior written consent of Landlord.
Business machines and mechanical equipment shall be placed and maintained by tenant, at tenant’s expense, in settings sufficient,
in Landlord’s judgment, to absorb and prevent vibration, noise and annoyance to other tenants.
20. No
bicycles, vehicles or animals (other than service animals) of any kind shall be brought into or kept in or about the Property.
21. Canvassing,
soliciting and peddling in the Building and/or on the Property are prohibited, and Tenant shall cooperate to prevent the same.
22. Landlord
hereby reserves to itself any and all rights not granted to Tenant hereunder, including, but not limited to, the following rights which
are reserved to Landlord for its purposes in operating the Property: (a) the exclusive right to the use of the name of the Property
for all purposes, except that Tenant may use the name of the Property in its business address and for no other purpose; (b) the right
to change the name or address of the Property, without incurring any liability to tenant for so doing; (c) the right to install and
maintain a sign or signs on the exterior of the Property; (d) the exclusive right to use or dispose of the use of the roof of the
Building; (e) the exclusive right to limit the space on the directory of the Property to be allotted to Tenant; and (f) the
right to grant to anyone the exclusive right to conduct any particular business or undertaking in the Property.
23. If
tenant desires Building services outside of Building Hours that requires Building personnel to be on the Property, or if tenant conducts
other activities that requires Building personnel supervision outside of Building Hours, then Landlord may charge tenant a supervisory
fee which will be a standard hourly rate determined by Landlord from time to time. Tenant shall pay such supervisory fee to Landlord within
thirty (30) days after receipt of a statement therefor.
24. Tenant
agrees that it will, at any time and from time to time as requested by Landlord, furnish Landlord with the owners’ names and the
license plate numbers of any vehicle of tenant’s or of tenant’s agents, servants, employees, subtenants, contractors and licensees.
END
SCHEDULE
F
FORM OF LETTER OF CREDIT
DRAFT
THIS
DRAFT LC IS PROVIDED TO YOU AT YOUR REQUEST AND THERE IS NO OBLIGATION ON OUR PART DESPITE OUR ASSISTANCE IN THE PREPARATION OF
THIS DRAFT LC. THE DRAFT LC IS NOT TO BE CONSTRUED AS EVIDENCE OF COMMITMENT ON OUR PART TO ISSUE OR ADVISE SUCH LC'S IN THE FUTURE.
******************************************
NOTE:
THIS IS SUGGESTED LANGUAGE ONLY, AND ALL CONDITIONS MAY NOT APPLY TO THE APPLICANT'S LEASE TRANSACTION.
==========================================================
DATE:
[DATE]
IRREVOCABLE
STANDBY LETTER OF CREDIT REFERENCE NO.: [NUMBER]
TO:
2500/2700
Westchester Avenue Owner SPE LLC
c/o
Senlac Ridge Partners, LLC
53
Maple Avenue
Morristown,
NJ 07960
DEAR
SIR/MADAM.
WE
HEREBY ISSUE OUR IRREVOCABLE STANDBY LETTER OF CREDIT IN YOUR FAVOR.
|
BENEFICIARY:
|
2500/2700
Westchester Avenue Owner SPE LLC
|
|
|
c/o
Senlac Ridge Partners, LLC
|
|
|
53
Maple Avenue
|
|
|
Morristown,
NJ 07960
|
|
|
|
|
ACCOUNT
PARTY:
|
[NAME
AND ADDRESS]
|
|
|
|
|
DATE
OF EXPIRY:
|
[EXPIRY
DATE]
|
|
|
|
|
PLACE
OF EXPIRY:
|
OUR
COUNTER
|
|
|
|
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AMOUNT:
|
$35,084.00
|
WE
HEREBY ISSUE THIS LETTER OF CREDIT FOR THE ACCOUNT OF OBLIGOR, **NAME AND FULL ADDRESS INCLUDING CITY AND STATE** ON BEHALF OF APPLICANT,
**NAME**.
FUNDS
UNDER THIS LETTER OF CREDIT ARE AVAILABLE UPON PRESENTATION OF BENEFICIARY'S SIGNED AND DATED STATEMENT READING AS FOLLOWS:
·'THIS
DRAW IN THE AMOUNT OF ________ U.S. DOLLARS ($_______ UNDER YOUR IRREVOCABLE STANDBY LETTER OF CREDIT NO._________ REPRESENTS FUNDS DUE
AND OWING TO US UNDER THAT CERTAIN LEASE DATED [DATE], INCLUDING ANY AMENDMENTS AND RESTATEMENTS THERETO, BETWEEN TENANT AND [BENEFICIARY
NAME], AS LANDLORD (THE "LEASE") FOR PREMISES LOCATED AT [PROPERTY ADDRESS]. WE HEREBY DEMAND THE AMOUNT OF USD________ UNDER
JPMORGAN CHASE BANK, N.A. LETTER OF CREDIT NO. XXXXXX".
OR
“WE
ARE IN RECEIPT OF NOTICE FROM JPMORGAN CHASE BANK, N.A. THAT THIS LETTER OF CREDIT WILL NOT BE EXTENDED BEYOND (CURRENT EXPIRY DATE)
AND (APPLICANT NAME) HAS FAILED TO SUPPLY ACCEPTABLE REPLACEMENT SECURITY WITHIN THE TIME FRAME SPECIFIED IN THAT CERTAIN LEASE DATED
[DATE], INCLUDING ANY AMENDMENTS AND RESTATEMENTS THERETO BETWEEN [APPLICANT NAME] AS TENAT AND [BENEFICIARY NAME], AS LANDLORD
(THE " LEASE") FOR PREMISES LOCATED AT (PROPERTY ADDRESS). WE HEREBY DEMAND THE AMOUNT OF USD-------------- UNDER JPMORGAN
CHASE BANK, N.A. LETTER OF CREDIT NO. XXXXXX”.
Page 1
of 3
DRAFT
THIS DRAFT LC IS PROVIDED TO
YOU AT YOUR REQUEST AND THERE IS NO OBLIGATION ON OUR PART DESPITE OUR ASSISTANCE IN THE PREPARATION OF THIS DRAFT LC. THE DRAFT
LC IS NOT TO BE CONSTRUED AS EVIDENCE OF COMMITMENT ON OUR PART TO ISSUE OR ADVISE SUCH LC'S IN THE FUTURE.
IT IS A CONDITION OF THIS LETTER OF CREDIT THAT IT SHALL BE DEEMED
AUTOMATICALLY EXTENDED "WITHOUT AMENDMENT FOR ONE YEAR FROM THE PRESENT OR ANY FUTURE EXPIRATION DATE, UNLESS AT LEAST SIXTY (60)
DAYS PRIOR TO THIS OR ANY FUTURE EXPIRATION DATE WE SHALL SEND NOTICE TO YOU BY REGISTERED MAIL, RETURN RECEIPT REQUESTED, OR BY HAND-DELIVERED
COURIER THAT WE ELECT NOT TO CONSIDER THIS LETTER OF CREDIT EXTENDED FOR ANY SUCH ADDITIONAL PERIOD. THIS LETTER OF CREDIT WILL NOT
BE AUTOMATICALLY EXTENDED BEYOND [ --- INSERT DATE ---) (THE " FINAL EXPIRATION DATE").
PARTIAL AND MULTIPLE DRAWINGS ARE PERMITTED.
THIS LETTER OF CREDIT IS TRANSFERABLE, BUT ONLY IN ITS ENTIRETY,
AND MAY BE SUCCESSIVELY TRANSFERRED. TRANSFER OF THIS LETTER OF CREDIT SHALL BE EFFECTED BY US UPON YOUR SUBMISSION OF THIS
ORIGINAL LETTER OF CREDIT, INCLUDING ALL AMENDMENTS, IF ANY, ACCOMPANIED BY OUR TRANSFER REQUEST FORM DULY COMPLETED
AND SIGNED, ALONG WITH PAYMENT OF OUR TRANSFER CHARGES AS INDICATED THEREIN. IF YOU WISH TO TRANSFER THE LETTER OF CREDIT, PLEASE
CONTACT US FOR THE FORM WHICH WE SHALL PROVIDE TO YOU UPON YOUR REQUEST. IN ANY EVENT, THIS LETTER OF CREDIT MAY NOT BE
TRANSFERRED TO ANY PERSON OR ENTITY LISTED IN OR OTHERWISE SUBJECT TO, ANY SANCTION OR EMBARGO UNDER ANY APPLICABLE RESTRICTIONS.
CHARGES AND FEES RELATED TO SUCH TRANSFER WILL BE FOR THE ACCOUNT OF THE APPLICANT.
NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, DRAWINGS PRESENTED
BY FACSIMILE ("FAX") TO FAX NUMBER [NUMBER], OR ALTERNATELY TO FAX NUMBER [NUMBER] ARE ACCEPTABLE, UNDER TELEPHONE PRE-ADVICE
TO [NUMBER], OR ALTERNATELY TO 1-800-634-1969, PROVIDED THAT SUCH FAX PRESENTATION IS RECEIVED ON OR BEFORE THE EXPIRY DATE ON THIS INSTRUMENT
IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THIS LETTER OF CREDIT, IT BEING UNDERSTOOD THAT ANY SUCH FAX PRESENTATION SHALL
BE CONSIDERED THE SOLE OPERATIVE INSTRUMENT OF DRAWING. IN THE EVENT OF PRESENTATION BY FAX, THE ORIGINAL DOCUMENTS SHOULD NOT
ALSO BE PRESENTED.
THIS LETTER OF CREDIT MAY BE CANCELLED PRIOR TO EXPIRATION PROVIDED
THE ORIGINAL LETTER OF CREDIT (AND AMENDMENTS, IF ANY) ARE RETURNED TO JPMORGAN CHASE BANK, N.A, TAMPA, FL WITH A STATEMENT
SIGNED BY THE BENEFICIARY STATING THAT THE ATTACHED LETTER OF CREDIT IS NO LONGER REQUIRED AND IS BEING RETURNED TO THE ISSUING BANK
FOR CANCELLATION.
WE ENGAGE WITH YOU THAT PRESENTATIONS MADE UNDER AND IN CONFORMITY
WITH THE TERMS AND CONDITIONS OF THIS CREDIT WILL BE DULY HONORED ON PRESENTATION IF PRESENTED ON OR BEFORE THE EXPIRATION AT OUR COUNTERS
AT JPMORGAN CHASE BANK, N .A., C/O JPMORGAN TREASURY SERVICES, 10420 HIGHLAND MANOR DR., 4TH FL TAMPA, FL- 33610.
ALL PAYMENTS DUE HEREUNDER SHALL BE MADE BY WIRE TRANSFER TO THE
BENEFICIARY'S ACCOUNT PER THEIR INSTRUCTIONS. ALL DOCUMENTS PRESENTED MUST BE IN ENGLISH.
******************************************************************************************************
IF THE UNDERLYING OBLIGATION
FALLS UNDER ONE OF THE CATEGORIES SPECIFIED IN BANKS COMPLIANCE DIRECTIVES, THE FOLLOWING CLAUSE WILL BE ADDED.
******************************************************************************************************
Page 2 of 3
DRAFT
THIS DRAFT LC IS PROVIDED TO YOU AT
YOUR REQUEST AND THERE IS NO OBLIGATION ON OUR PART DESPITE OUR ASSISTANCE IN THE PREPARATION OF THIS DRAFT LC. THE DRAFT LC IS NOT
TO BE CONSTRUED AS EVIDENCE OF COMMITMENT ON OUR PART TO ISSUE OR ADVISE SUCH LC'S IN THE FUTURE.
******************************************
WE
MUST COMPLY WITH ALL SANCTIONS, EMBARGO AND OTHER LAWS AND REGULATIONS OF THE U.S. AND OF OTHER APPLICABLE JURISDICTIONS TO THE EXTENT
THEY DO NOT CONFLICT WITH SUCH U.S. LAWS AND REGULATIONS ("APPLICABLE RESTRICTIONS"). SHOULD DOCUMENTS BE PRESENTED
INVOLVING ANY COUNTRY, ENTITY, VESSEL OR INDIVIDUAL LISTED IN OR OTHERWISE SUBJECT TO ANY APPLICABLE RESTRICTION, WE SHALL NOT BE LIABLE
FOR ANY DELAY OR FAILURE TO PAY, PROCESS OR RETURN SUCH DOCUMENTS OR FOR ANY RELATED DISCLOSURE OF INFORMATION.
************************************************************
EXCEPT
AS OTHERWISE EXPRESSLY STATED HEREIN, THIS CREDIT IS SUBJECT TO THE INTERNATIONAL STANDBY PRACTICES, ICC PUBLICATION NO. 590 (THE
"ISP98").
PLEASE ADDRESS ALL CORRESPONDENCE REGARDING THIS LETTER OF CREDIT TO
JPMORGAN CHASE BANK, N.A., C/O JPMORGAN TREASURY SERVICES, 10420 HIGHLAND MANOR DR., 4TH FL TAMPA, FL 33610 INCLUDING THE LETTER OF CREDIT
NUMBER MENTIONED ABOVE. FOR TELEPHONE ASSISTANCE, PLEASE CONTACT THE STANDBY CLIENT SERVICE UNIT AT 1-800-634-1969, OR 1-8 13-432-1210,
AND HAVE THIS LETTER OF CREDIT NUMBER AVAILABLE.
|
|
VERY TRULY YOURS,
|
|
|
JPMORGAN CHASE BANK, N.A.
|
|
|
|
|
|
|
|
|
AUTHORIZED SIGNER
|
WE HEREBY AGREE WITH THE FORMAT/LANGUAGE OF THE ABOVE DRAFTED LETTER
OF CREDIT, AND WE REQUEST JPMORGAN CHASE BANK, N.A. TO ISSUE THE LETTER OF CREDIT AS ABOVE DRAFTED.
Page 3 of 3
APPENDIX I
DEFINITIONS
As used in this Lease, the
following terms have the following meanings:
Additional
Construction Cost: defined in Schedule D.
Additional
Rent: defined in Section 3.2.
Annual
Expense Reconciliation: defined in Section 5.4.
Bankruptcy
Code: Title 11 of the United States Code, as amended, and all rules and regulations promulgated pursuant thereto.
Base
Operating Expenses: Landlord’s Operating Expenses for the Base Operating Expense Period.
Base
Operating Expense Period: defined in the Basic Lease Provisions.
Base Tax Period: defined
in the Basic Lease Provisions.
Base
Taxes: those Taxes levied, assessed or imposed which are allocated to the Property for the Base Tax Period.
Basic
Rent: defined in the Basic Lease Provisions. Brokers: defined in the Basic Lease Provisions Building: defined in the Basic
Lease Provisions.
Building
Communications: defined in Article 26.
Building
Holidays: all federal or state designated holidays or the contract holidays of the AFL-CIO, Local 30.
Building
Hours: 8:00 AM to 6:00 PM, Monday through Friday, except for Building Holidays.
Building
Services: defined in Section 9.1.
Commencement Date:
defined in Section 2.2(b).
Common
Areas: those areas of the project, wherever located, which have been designated and improved from time to time for the common
use by or for the benefit of more than one occupant of the project or which are used in connection with the maintenance or operation of
the project, including, without limitation, all parking areas, roadways, curbs, sidewalks, medians, landscaped areas and planters; all
porch and lobby areas; corridors; hallways; passageways; public restrooms; security stations; storage, equipment, machine, meter, mechanical,
plumbing, computer, telephone and electrical rooms, stations, conduit, shafts, raceways and the like; common lounges, kitchen areas, conference
and meeting rooms (including furniture, fixtures and equipment appurtenant thereto); stairs, ramps, elevators, truck serviceways; loading
areas; trash disposal facilities; and with respect to all the foregoing, all equipment and appurtenances thereto; but excluding all portions
of the project which are designated and intended for the use by a single occupant. The definition of Common Areas shall not be construed
as a representation or warranty that any such areas are or from time to time will be available.
Early
Termination Notice: defined in Section 31.1.
Early
Termination Option: defined in Section 31.1.
Early
Termination Payment: defined in Section 31.1.
Emergency:
defined in Section 19.1.
Environmental
Laws: all current and future statutes, regulations, codes and ordinances of any governmental entity, authority, agency and/or
department relating to (i) air emissions, (ii) water discharges, (iii) noise emissions, (iv) air, water or ground
pollution or (v) any other environmental or health matter.
Estimated
Commencement Date: defined in the Basic Lease Provisions.
Estimated
Time Delay: defined in Schedule D.
Event
of Default: defined in Section 19.1.
Excusable
Delay: any delay caused by governmental action, or lack thereof; shortages or unavailability of materials; labor disputes (including,
but not limited to, strikes, slow downs, job actions, picketing and/or secondary boycotts); fire, explosion or other casualty; delays
in transportation; delays due to adverse weather conditions, acts of God; directives or requests by any governmental entity, authority,
agency or department; any court or administrative orders or regulations; adjustments of insurance; acts of declared or undeclared war,
warlike conditions in this or any foreign country, acts of terrorism, public disorder, riot or civil commotion; or by anything else beyond
the reasonable control of Landlord, including delays caused directly or indirectly by an act or a failure to act by Tenant or Tenant’s
Visitors.
Expiration
Date: defined in Basic Lease Provisions.
Extra Hours: defined
in Section 9.1.
Extra
Hours Charge: defined in Section 9.1.
Finish Work: defined
in Schedule D.
General
Contractor: defined in Schedule D.
Guarantor:
defined in Section 19.1(d).
Hazardous
Substances: (a) “hazardous wastes” as defined by the Resource, Conservation and Recovery Act of 1976 (42 U.S.C.
Section 6901 et seq.), as amended, and regulations promulgated thereunder; (b) any “hazardous, toxic or dangerous waste,
substance or material” specifically defined as such in (or for purposes of) the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 (42 U.S. C. Section 9601 et seq.), as amended and regulations promulgated thereunder; and (c) any
hazardous, radioactive, toxic or dangerous chemical, biological or other waste, substance or material as defined in any so-called “superfund”
or “superlien” law or any other federal, state or local statute, law, ordinance, code, rule, regulation, order or decree now
or hereafter in effect regulating, relating to or imposing liability or standards of conduct concerning such waste, substance or material,
including, without limiting the generality of the foregoing, asbestos, radon, urea, formaldehyde, polychlorinated biphenyls, and petroleum
products including gasoline, fuel oil, crude oil and various constituents of such products.
Insurance
Requirements: all terms of any insurance policy maintained by Landlord with respect to the Property and all requirements of
the National Board of Fire Underwriters (or any other body exercising similar function) applicable to or affecting all or any part of
the Premises.
Janitorial
Services: defined in Section 9.7(a).
Land:
defined in the Basic Lease Provisions.
Landlord:
the party defined as such in the first paragraph of this Lease, including at any time after the date hereof, the then owner of Landlord’s
interest in the Premises.
Landlord’s
Estimated Operating Expenses: defined in Section 5.2.
Landlord’s
Expense Statement: defined in Section 5.2.
Landlord’s
Final Tax Statement: defined in Section 4.4.
Landlord’s
Operating Expenses: the total costs incurred by Landlord for operating, maintaining, repairing, replacing and managing the
Property and all improvements, fixtures and equipment from time to time constituting the Building, Common Areas, and the Property and
an allocable amount of the shared expenses with other buildings. The cost incurred by Landlord in operating and maintaining the Building
and the Property include, but are not limited to: (a) management fees, or if there is no managing agent or if the managing agent
is affiliated with Landlord, the fees that would customarily be charged by an independent first class managing agent not to exceed five
percent (5%) of the total gross revenue of the Property; (b) the costs of operating, cleaning, maintaining, repairing, restoring
and replacing (except to the extent proceeds of insurance or condemnation awards are available therefor), or otherwise providing the following:
heating, ventilating and air-cooling equipment and systems (including any energy management and building management systems); elevator
systems and equipment; all parking areas, roadways, curbs, sidewalks, medians, planters (including repairs and resurfacing thereof); utility
supply systems, drainage and sanitary sewerage systems, water supply lines, wells, emergency generators, fire sprinkler and fire suppression
systems, security and alarm systems and services (including maintenance, repairs and replacements thereof); maintenance and repair of
vehicles and other tools and equipment (used exclusively at the Property); laundry and towel service; Property identification signs, public
address systems; the roof, walls, windows, doors, ceilings and floors of the Building; sweeping, cleaning, snow and ice removal (including,
but not limited to, snow and ice removal from the roof of the Building and the roof of any other building on the Property), provided,
however, such cost of such snow and ice removal shall be the average of the five (5) immediately preceding calendar years (to the
extent Landlord is able to calculate such average); line painting of all parking areas and roadways; landscaping services (including replacement
of trees, shrubs, and other plantings); Janitorial Services and window cleaning; supplies; removal of garbage and other refuse; painting,
redecorating or other work which is standard for or periodically performed in the Building; providing on and off site traffic direction
and parking control; the cost of repair of any casualty to the extent not covered by insurance; total compensation and benefits (including
premiums for workmen’s compensation and other insurance and taxes, including social security taxes and payroll taxes, which may
be levied against Landlord in respect of such compensation and benefits) paid to or on behalf of personnel employed at the Property; licenses,
permit and inspection fees; parking area surcharges or levies; and rent paid for the leasing of any equipment used in the operation, maintenance
and repair contemplated herein; any taxes now or hereafter imposed upon Landlord with respect to operating expenses as contemplated herein;
accounting and legal fees; personal property taxes, except to the extent included in Taxes; any sales, use or service taxes incurred in
connection with the operation of the Property, except to the extent included in Taxes; seasonal decorations and promotional events for
the Building or Property, the net amount incurred by Landlord in connection with the operating or maintaining of any specialty use or
service such as a gym or cafeteria, (c) all utility and energy costs, including any fuel surcharges or adjustments with respect thereto,
incurred for water, sewer, or other utilities and heating, ventilating and air conditioning for the Building and Property (not separately
billed to a tenant in the Building), (d) the cost of premiums and other charges for fire, other casualty, rent and liability insurance
covering the Property and any other insurance covering the Property and the Building, and (e) capital improvements amortized over
the useful life of such improvement (but, in each Lease Year there shall be included only the amortized portion of such capital improvements).
The above definition of Landlord’s Operating Expenses shall not be construed as a representation or warranty that items of equipment,
facilities or services listed therein are or from time to time will be in existence or available at the Property. Landlord’s Operating
Expenses shall not include: (i) brokerage fees and/or commissions, advertising expenses and expenses for leasing and renovating space
for tenants; (ii) the costs incurred in connection with furnishing electricity to the Premises or any space in the Building leased
to other tenants, ventilation or air-cooling for Tenant or other tenants of the Building; (iii) compensation and benefits payable
to employees not directly attributable to the Property, (iv) capital expenses attributable to tenant fit-up expenses or for painting,
redecorating or other work which Landlord, at its sole expense is required to perform exclusively for Tenant or for any other tenant in
leased areas of the Building; (v) off-site improvements unrelated to operation of the Property; (iv) capital expenses attributable
to the expansion of Building and the Property; (vii) any capital improvements that are not amortized over the useful life of the
improvement; (viii) expenses for repairs or other work occasioned by fire, windstorm or other casualty to the extent of insurance
proceeds received by Landlord; (ix) legal expenses in negotiating and enforcing the terms of any tenant lease; (x) interest
and amortization payments on any mortgage or mortgages, and rental under any ground or underlying lease or leases; (xi) expenses
for restoration of the Building required as a result of a condemnation; (xii) costs incurred in performing work or furnishing services
for any tenant (including Tenant), whether at such tenant’s or Landlord’s expense, to the extent that such work or special
service is in excess of any work or service that Landlord is obligated to furnish to Tenant at Landlord’s expense; (xiii) debt
service under mortgages or ground rent under ground leases; (xiv) salaries of Landlord’s or its manager’s executive personnel;
(xv) court costs and legal fees incurred to enforce the obligations of tenants under leases of portions of the Property; (xvi) auditing
fees, other than those in connection with the maintenance and operation of the Premises and the Property or in connection with the preparation
of Landlord’s statements for Operating Expenses; (xvii) costs or expenses for removal, containment, encapsulation, or disposal
of hazardous waste, toxic materials, asbestos or any other form of contamination not caused by Tenant and repair or cleaning of areas
affected by same; (xviii) costs incurred in connection with a transfer or disposition of all or any part of the Property or any interest
therein or in Landlord or any entity comprising Landlord; (xix) any expense arising by reason of the negligence or other tortious
conduct of Landlord or Landlord’s employees, agents or contractors; (xx) any costs representing an amount paid to a person,
firm, corporation or other entity related to Landlord which is in excess of the amount that would have been paid in the absence of such
relationship; and (xxi) costs and expenses for which Landlord is reimbursed by any third party. In determining Landlord’s Operating
Expenses, including Base Operating Expenses, for any Lease Year during which less than ninety-five percent (95%) of the rentable square
feet of the Building was occupied by tenants for more than sixty (60) days during such Lease Year, the actual Operating Expenses for such
Lease Year shall be increased on the basis of variable (but not fixed) Operating Expenses, to the amount which normally would have been
incurred for such Lease Year had such occupancy of the Building been ninety-five percent (95%) throughout such Lease Year. Excluded from
Landlord’s Operating Expenses for the purposes of determining Base Operating Expenses (but included in Landlord’s Operating
Expenses for all other purposes) are (x) costs or expenses described in the first sentence of this definition which arise out of
or on account of any new or amended law, statute, ordinance or other Legal Requirement which is promulgated after the date of this Lease,
and (y) incremental amount of costs or expenses described in the first sentence of this definition which arise out of or on account
of any unusual or unexpected event or circumstances above the typically budgeted amount for such costs. For the purposes of clause (y) of
the preceding sentence, “unusual or unexpected event or circumstances” shall include, without limitation, severe or unusual
weather conditions, fire or other damage or destruction, strikes or other labor disruptions, shortages or unavailability of materials
or supplies, or any other event or circumstance which would not customarily be budgeted for as part of the routine operation, maintenance,
repair and management of property comparable to the Premises.
Landlord’s
Tax Statement: defined in Section 4.2.
Lease
Year: each calendar year, or partial calendar year, during the Term.
Legal
Requirements: all statutes, codes, ordinances, regulations, rules, orders, directives and requirements of any governmental
entity, authority, agency, bureau, board, office, commission and/or department (or official thereof), and including covenants and restrictions
of record, which now or at any time hereafter may be applicable to the Property or any part thereof, including, but not limited to, all
Environmental Laws.
Lender:
the holder of any mortgage or deed of trust which may now or hereafter encumber the Property.
License
Period: defined in the Basic Lease Provisions.
Lien:
any mortgage, pledge, lien, charge, encumbrance or security interest of any kind, including any inchoate mechanic’s or materialmen’s
lien.
Major
Work: defined in Section 7.4(b).
Master
Landlord: the landlord under any ground lease or lease of all or any portion of the Property, subject to the space leases,
which may now or hereafter affect all or any portion of the Property. Landlord represents and warrants to Tenant that, as of the date
hereof, there is no Master Landlord.
Minimum
Electric Energy Charge: defined in the Basic Lease Provisions.
Monthly
Expense Payment: defined in Section 5.3.
Monthly
License Fee: defined in the Basic Lease Provisions.
Monthly
Tax Payment: defined in Section 4.3.
Net
Award: any insurance proceeds or condemnation award payable in connection with any damage, destruction or Taking, less any
expenses incurred by Landlord in recovering such amount.
Net
Rental Proceeds: in the case of a sublease, the amount by which the aggregate of all rents, additional charges or other consideration
payable under a sublease to Tenant by the subtenant (including sums paid for the sale or rental of Tenant’s fixtures, leasehold
improvements, equipment, furniture or other personal property) exceeds the sum of (i) the Basic Rent plus all amounts payable by
Tenant pursuant to the provisions hereof during the term of the sublease in respect of the subleased space, (ii) actual brokerage
commissions, providing same are at prevailing rates, due and owing to a real estate brokerage firm, (iii) reasonable legal fees incurred
by Tenant in connection with the sublease, (iv) free rent granted to the subtenant, (v) cost of work incurred by Tenant in preparing
the premises for the sublease and (vi) the then net unamortized or undepreciated cost of the fixtures, leasehold improvements, equipment,
furniture or other personal property included in the subletting; and in the case of an assignment, the amount by which all sums and other
considerations paid to Tenant by the assignee of this Lease for or by reason of such assignment (including sums paid for the sale of Tenant’s
fixtures, leasehold improvements, equipment, furniture or other personal property) exceeds the sum of (i) actual brokerage commissions,
provided same are at prevailing rates due and owing to a real estate brokerage firm, and, (ii) the then net unamortized or undepreciated
cost of the fixtures, leasehold improvements, equipment, furniture or other personal property sold to the assignee.
Objection
Notice: defined in Schedule D.
OFAC:
defined in Article 30.
Order
or Orders: defined in Article 30.
Permitted
Use: defined in the Basic Lease Provisions.
Preliminary Plans:
defined in Schedule D.
Premises:
defined in the Basic Lease Provisions.
Prime
Rate: the prime commercial lending rate publicly announced from time to time by Citibank N.A. or its successor bank.
Projected
Taxes: defined in Section 4.2.
Property:
the property upon which the Building is constructed, including all parking areas, roads, walkways and other common areas used by or for
the enjoyment of Tenant and all other tenants of the Building, the Building, all accessory buildings and improvements.
Punch
List Items: defined in Section 2.2(c). Recapture Notice: defined in Section 16.5(a). Recapture Space: defined in
Section 16.5(a).
Rent
Payment Date: the first day of each consecutive calendar month during the Term.
Restoration:
the restoration, replacement or rebuilding of the Building (excluding any alterations, additions and improvements installed by Tenant
and any trade fixtures and personal property owned by Tenant) or any portion thereof as nearly as practicable to its value, condition
and character immediately prior to any damage, destruction or Taking.
Security:
defined in the Basic Lease Provisions. Special Cleaning Services: defined in Section 9.7(b).
Substantially
Completed or Substantial Completion: defined in Section 2.2(c). Successor Entity: defined in Section 16.7.
Survey
Adjustment Amount: defined in Section 6.1.
Taking:
a taking of all or any part of the Property, or any interest therein or right accruing thereto, as the result of, or in lieu of, or in
anticipation of, the exercise of the right of condemnation or eminent domain pursuant to any law, general or special, or by reason of
the temporary requisition of the use or occupancy of the Property or any part thereof, by any governmental authority, civil or military.
Tax
Year: defined in Section 4.1.
Taxes:
with respect to each governmental authority levying or imposing the same, all taxes and assessments as finally determined (general, special,
betterment, ordinary or extraordinary, foreseen and unforeseen) allocated to the Property from time to time, including, without limitation,
taxes on the payment of rent, water and sewer rents and charges, and all franchise, income, profit or other taxes, fees and charges, however
designated, which, due to a future change in the method of taxation, may be levied or imposed on Landlord in substitution in whole or
in part for, or in lieu of, or in addition to, any tax which would otherwise constitute Taxes, as heretofore defined. Taxes shall include
so-called “payments in lieu of taxes” and any similar payments to any governmental authority or otherwise in lieu of real
estate taxes. Nothing contained in this Lease shall require Tenant to pay any estate, inheritance, gift, succession, corporate franchise,
income gross receipts or capital stock tax of Landlord or any penalties or interest for the late payment of Taxes by Landlord, nor shall
any of same be deemed Taxes, except as provided in the immediately preceding sentence.
Temporary
Space: defined in the Basic Lease Provisions.
Tenant:
the party defined as such in the first paragraph of this Lease. Tenant Affiliate: defined in Section 16.7.
Tenant
Delay: defined in Section 2.2(c). Tenant Improvement: defined in Section 7.5(a). Tenant’s Notice: defined in
Section 16.2.
Tenant’s
Proportionate Share: defined in Basic Lease Provisions.
Tenant’s
Visitors: Tenant’s agents, servants, employees, subtenants, contractors, invitees, licensees and all other persons invited
by Tenant onto the Property and/or into the Premises as guests or doing lawful business with Tenant.
Term:
defined in Basic Lease Provisions.
Underlying
Encumbrance: defined in Section 23.1.
Working
Plans: defined in Schedule D.
Exhibit 10.7
Effective Date: October 1, 2007
Amended and Restated: January 16, 2009
Amended and Restated: December 14, 2010
Amended and Restated: March 25, 2011
Amended and Restated: November 27, 2011
Amended and Restated: March 20, 2014
Amended and Restated: February 22, 2016
Amended and Restated: October 28, 2016
Amended and Restated: January 10, 2017
COGNITION THERAPEUTICS, INC.
AMENDED AND RESTATED
2007 EQUITY INCENTIVE PLAN
The purpose of the Cognition Therapeutics, Inc.
Amended and Restated 2007 Equity Incentive Plan (this “Plan”) is to provide (i) designated employees of Cognition Therapeutics, Inc.
(the “Company”) and its parents and subsidiaries, (ii) certain consultants and advisors who perform services for the
Company or its parents or subsidiaries and (iii) non-employee members of the Board of Directors of the Company (the “Board”)
with the opportunity to receive grants of incentive stock options, nonqualified stock options and stock awards. The Company believes that
the Plan will encourage the participants to contribute materially to the growth of the Company, thereby benefitting the Company’s
stockholders, and will align the economic interests of the participants with those of the stockholders.
1. Administration.
(a) Committee.
This Plan shall be administered and interpreted by the Board or by a committee consisting of
members of the Board, which shall be appointed by the Board. After an initial public offering of the Company’s stock as described
in Section 17(b) (a “Public Offering”), this Plan shall be administered by a committee of Board members, which may
consist of “outside directors” as defined under section 162(m) of the Internal Revenue Code of 1986, as amended (the
“Code”), and related Treasury regulations, and “non-employee directors” as defined under Rule 16b-3 under
the Securities Exchange Act of 1934, as amended (the “Exchange Act”). However, the Board may ratify or approve any grants
as it deems appropriate, and the Board shall approve and administer all grants made to non-employee directors. The committee may delegate
authority to one or more subcommittees as it deems appropriate. To the extent that a committee or subcommittee administers this Plan,
references in this Plan to the “Board” shall be deemed to refer to the committee or subcommittee.
(b) Board
Authority. The Board shall have the sole authority to (i) determine the individuals
to whom grants shall be made under this Plan, (ii) determine the type, size and terms of the grants to be made to each such individual,
(iii) determine the time when the grants will be made and the duration of any applicable exercise or restriction period, including
the criteria for exercisability and the acceleration of exercisability, (iv) amend the terms of any previously issued grant, and
(v) deal with any other matters arising under this Plan.
(c) Board
Determinations. The Board shall have full power and authority to administer and interpret
this Plan, to make factual determinations and to adopt or amend such rules, regulations, agreements and instruments for implementing this
Plan and for the conduct of its business as it deems necessary or advisable, in its sole discretion. The Board’s interpretations
of this Plan and all determinations made by the Board pursuant to the powers vested in it hereunder shall be conclusive and binding on
all persons having any interest in this Plan or in any awards granted hereunder. All powers of the Board shall be executed in its sole
discretion, in the best interest of the Company, not as a fiduciary, and in keeping with the objectives of this Plan and need not be uniform
as to similarly situated individuals.
2. Grants.
Awards under this Plan may consist of grants of incentive stock options as described in Section 5
(“Incentive Stock Options”), nonqualified stock options as described in Section 5 (“Nonqualified Stock Options”)
(Incentive Stock Options and Nonqualified Stock Options are collectively referred to as “Options”) and stock awards as described
in Section 6 (“Stock Awards”) (hereinafter collectively referred to as “Grants”). All Grants shall be subject
to the terms and conditions set forth herein and to such other terms and conditions consistent with this Plan as the Board deems appropriate
and as are specified in writing by the Board to the individual in a grant instrument or an amendment to the grant instrument (the “Grant
Instrument”). All Grants shall be made conditional upon the Grantee’s acknowledgement, in writing or by acceptance of the
Grant, that all decisions and determinations of the Board shall be final and binding on the Grantee, his or her beneficiaries and any
other person having or claiming an interest under such Grant. The Board shall approve the form and provisions of each Grant Instrument.
Grants under a particular Section of this Plan need not be uniform as among the grantees.
3. Shares
Subject to This Plan.
(a) Shares
Authorized. Subject to adjustment as described below, the aggregate number of shares of common
stock of the Company (“Company Stock”) that may be issued under this Plan is 11,189,392 shares, all of which may be issued
as incentive stock options. After a Public Offering, the maximum aggregate number of shares of Company Stock that shall be subject to
Grants made under this Plan to any individual during any calendar year shall be 3,900,000 shares, subject to adjustment as described below.
Shares issued under this Plan may be authorized but unissued shares of Company Stock or reacquired shares of Company Stock, including
shares purchased by the Company on the open market for purposes of this Plan. If and to the extent Options granted under this Plan terminate,
expire, or are canceled, forfeited, exchanged or surrendered without having been exercised or if any Stock Awards (including restricted
Stock Awards received upon the exercise of Options) are forfeited, the shares subject to such Grants shall again be available for purposes
of this Plan.
(b) Adjustments.
If there is any change in the number or kind of shares of Company Stock
outstanding (i) by reason of a stock dividend, spinoff, recapitalization, stock split, or combination or exchange of shares, (ii) by
reason of a merger, reorganization or consolidation, (iii) by reason of a reclassification or
change in par value, or (iv) by reason of any other extraordinary or unusual event affecting the outstanding Company Stock as a class
without the Company’s receipt of consideration, or if the value of outstanding shares of Company Stock is substantially reduced
as a result of a spinoff or the Company’s payment of an extraordinary
dividend or distribution, the maximum number of shares of
Company Stock available for Grants, the maximum number of shares of Company Stock that any individual participating in this Plan may be
granted in any year, the number of shares covered by outstanding Grants, the kind of shares issued under this Plan, and the price per
share of such Grants may be appropriately adjusted by the Board to reflect any increase or decrease in the number of, or change in the
kind or value of, issued shares of Company Stock to preclude, to the extent practicable, the enlargement or dilution of rights and benefits
under such Grants; provided, however, that any fractional shares resulting from such adjustment shall be eliminated. Any adjustments determined
by the Board shall be final, binding and conclusive.
4. Eligibility
for Participation.
(a) Eligible
Persons. All employees of the Company and its parents or subsidiaries (“Employees”),
including Employees who are officers or members of the Board, and members of the Board who are not Employees (“Non-Employee Directors”)
shall be eligible to participate in this Plan. Consultants and advisors who perform services for the Company or any of its parents or
subsidiaries (“Key Advisors”) shall be eligible to participate in this Plan if the Key Advisors render bona fide services
to the Company or its parents or subsidiaries, the services are not in connection with the offer and sale of securities in a capital-raising
transaction, and the Key Advisors do not directly or indirectly promote or maintain a market for the Company’s securities.
(b) Selection
of Grantees. The Board shall select the Employees, Non-Employee Directors and Key Advisors
to receive Grants and shall determine the number of shares of Company Stock subject to a particular Grant in such manner as the Board
determines. Employees, Key Advisors and Non-Employee Directors who receive Grants under this Plan shall hereinafter be referred to as
“Grantees.”
5. Granting
of Options.
(a) Number
of Shares. The Board shall determine the number of shares of Company Stock that will be subject
to each Grant of Options to Employees, Non-Employee Directors and Key Advisors.
(b) Type
of Option and Price.
(i) The
Board may grant Incentive Stock Options that are intended to qualify as “incentive stock options” within the meaning of section
422 of the Code or Nonqualified Stock Options that are not intended so to qualify or any combination of Incentive Stock Options and Nonqualified
Stock Options, all in accordance with the terms and conditions set forth herein. Incentive Stock Options may be granted only to employees
of the Company or its parents or subsidiaries, as defined in Section 424 of the Code. Nonqualified Stock Options may be granted to
Employees, Non-Employee Directors and Key Advisors.
(ii) The
purchase price (the “Exercise Price”) of Company Stock subject to an Option shall be determined by the Board and may be equal
to or greater than the Fair Market Value (as defined below) of a share of Company Stock on the date the Option is granted; provided,
however, that (x) the Exercise Price of an Incentive Stock Option shall be equal to, or
greater than, the Fair Market Value of a share of Company Stock on
the date the Incentive Stock Option is granted and (y) an Incentive Stock Option may not be granted to an Employee who, at the time
of grant, owns stock possessing more than ten percent of the total combined voting power of all classes of stock of the Company or any
parent or subsidiary of the Company, unless the Exercise Price per share is not less than 110% of the Fair Market Value of Company Stock
on the date of grant.
(iii) If
the Company Stock is publicly traded, then the Fair Market Value per share shall be determined as follows: (x) if the principal trading
market for the Company Stock is a national securities exchange or the Nasdaq National Market, the last reported sale price thereof on
the relevant date or (if there were no trades on that date) the latest preceding date upon which a sale was reported, or (y) if the
Company Stock is not principally traded on such exchange or market, the mean between the last reported “bid” and “asked”
prices of Company Stock on the relevant date, as reported on Nasdaq or, if not so reported, as reported by the National Daily Quotation
Bureau, Inc. or as reported in a customary financial reporting service, as applicable and as the Board determines. If the Company
Stock is not publicly traded or, if publicly traded, is not subject to reported transactions or “bid” or “asked”
quotations as set forth above, the Fair Market Value per share shall be as determined by the Board.
(c) Option
Term. The Board shall determine the term of each Option. The term of any Option shall not
exceed ten years from the date of grant. However, an Incentive Stock Option that is granted to an Employee who, at the time of grant,
owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company, or any parent or subsidiary
of the Company, may not have a term that exceeds five years from the date of grant.
(d) Exercisability
of Options.
(i) Options
shall become exercisable in accordance with such terms and conditions, consistent with this Plan, as may be determined by the Board and
specified in the Grant Instrument. The Board may accelerate the exercisability of any or all outstanding Options at any time for any reason.
(ii) The
Board may provide in a Grant Instrument that the Grantee may elect to exercise part or all of an Option before it otherwise has become
exercisable. Any shares so purchased shall be restricted shares and shall be subject to a repurchase right in favor of the Company during
a specified restriction period, with the repurchase price equal to the lesser of (i) the Exercise Price or (ii) the Fair Market
Value of such shares at the time of repurchase, or such other restrictions as the Board deems appropriate.
(e) Grants
to Non-Exempt Employees. Notwithstanding the foregoing, Options granted to persons who are
non-exempt employees under the Fair Labor Standards Act of 1938, as amended, shall have an Exercise Price not less than the Fair Market
Value of the Company Stock on the date of grant, and may not be exercisable for at least six months after the date of grant (except that
such Options may become exercisable, as determined by the Board, upon the Grantee’s death, Disability or retirement, or upon a Change
of Control or other circumstances permitted by applicable regulations).
(f) Termination
of Employment, Disability or Death.
(i) Except
as provided below, an Option may only be exercised while the Grantee is employed by, or providing service to, the Employer (as defined
below) as an Employee, Key Advisor or member of the Board. In the event that a Grantee ceases to be employed by, or provide service to,
the Employer for any reason other than Disability, death, or termination for Cause, any Option which is otherwise exercisable by the Grantee
shall terminate unless exercised within 90 days after the date on which the Grantee ceases to be employed by, or provide service to, the
Employer (or within such other period of time as may be specified by the Board), but in any event no later than the date of expiration
of the Option term. Except as otherwise provided by the Board, any of the Grantee’s Options that are not otherwise exercisable as
of the date on which the Grantee ceases to be employed by, or provide service to, the Employer shall terminate as of such date.
(ii) In
the event the Grantee ceases to be employed by, or provide service to, the Employer on account of a termination for Cause by the Employer,
any Option held by the Grantee shall terminate as of the date the Grantee ceases to be employed by, or provide service to, the Employer.
In addition, notwithstanding any other provisions of this Section 5, if the Board determines that the Grantee has engaged in conduct
that constitutes Cause at any time while the Grantee is employed by, or providing service to, the Employer or after the Grantee’s
termination of employment or service, any Option held by the Grantee shall immediately terminate, and the Grantee shall automatically
forfeit all shares underlying any exercised portion of an Option for which the Company has not yet delivered the share certificates, upon
refund by the Company of the Exercise Price paid by the Grantee for such shares. Upon any exercise of an Option, the Company may withhold
delivery of share certificates pending resolution of an inquiry that could lead to a finding resulting in a forfeiture.
(iii) In
the event the Grantee ceases to be employed by, or provide service to, the Employer because the Grantee is Disabled, any Option which
is otherwise exercisable by the Grantee shall terminate unless exercised within one year after the date on which the Grantee ceases to
be employed by, or provide service to, the Employer (or within such other period of time as may be specified by the Board), but in any
event no later than the date of expiration of the Option term. Except as otherwise provided by the Board, any of the Grantee’s Options
which are not otherwise exercisable as of the date on which the Grantee ceases to be employed by, or provide service to, the Employer
shall terminate as of such date.
(iv) If
the Grantee dies while employed by, or providing service to, the Employer or within 90 days after the date on which the Grantee ceases
to be employed or provide service on account of a termination specified in Section 5(f)(i) above (or within such other period
of time as may be specified by the Board), any Option that is otherwise exercisable by the Grantee shall terminate unless exercised within
one year after the date on which the Grantee ceases to be employed by, or provide service to, the Employer (or within such other period
of time as may be specified by the Board), but in any event no later than the date of expiration of the Option term. Except as otherwise
provided by the Board, any of the Grantee’s Options that are not otherwise exercisable as of the date on which the Grantee ceases
to be employed by, or provide service to, the Employer shall terminate as of such date.
(v) For
purposes of this Section 5(f) and Section 6:
(A) The
term “Employer” shall include the Company and its parent and subsidiary corporations or other entities, as appropriate and
as determined by the Board.
(B) “Employed
by, or provide service to, the Employer” shall mean employment or service as an Employee, Key Advisor or member of the Board (so
that, for purposes of exercising Options and satisfying conditions with respect to Stock Awards, a Grantee shall not be considered to
have terminated employment or service until the Grantee ceases to be an Employee, Key Advisor or member of the Board), unless the Board
determines otherwise.
(C) “Disability”
shall mean a Grantee’s becoming disabled within the meaning of section 22(e)(3) of the Code, within the meaning of the Employer’s
long-term disability plan applicable to the Grantee, or as otherwise determined by the Board.
(D) “Cause”
shall mean, except to the extent specified otherwise by the Board, a finding by the Board that the Grantee (i) has breached his or
her employment or service contract with the Employer, (ii) has engaged in disloyalty to the Company, including, without limitation,
fraud, embezzlement, theft, commission of a felony or proven dishonesty, (iii) has disclosed trade secrets or confidential information
of the Employer to persons not entitled to receive such information, (iv) has breached any written noncompetition or nonsolicitation
agreement between the Grantee and the Employer or (v) has engaged in such other behavior detrimental to the interests of the Employer
as the Board determines.
(g) Exercise
of Options. A Grantee may exercise an Option that has become exercisable, in whole or in
part, by delivering a notice of exercise to the Company with payment of the Exercise Price. The Grantee shall pay the Exercise Price for
an Option as specified by the Board (w) in cash, (x) with the approval of the Board, by delivering shares of Company Stock owned
by the Grantee (including Company Stock acquired in connection with the exercise of an Option, subject to such restrictions as the Board
deems appropriate) and having a Fair Market Value on the date of exercise equal to the Exercise Price or by attestation (on a form prescribed
by the Board) to ownership of shares of Company Stock having a Fair Market Value on the date of exercise equal to the Exercise Price,
(y) after a Public Offering, payment through a broker in accordance with procedures permitted by Regulation T of the Federal Reserve
Board, or (z) by such other method as the Board may approve. The Board may authorize loans by the Company to Grantees in connection
with the exercise of an Option, upon such terms and conditions as the Board, in its sole discretion, deems appropriate. Shares of Company
Stock used to exercise an Option shall have been held by the Grantee for the requisite period of time to avoid adverse accounting consequences
to the Company with respect to the Option. The Grantee shall pay the Exercise Price and the amount of any withholding tax due (pursuant
to Section 7) at the time of exercise.
(h) Limits
on Incentive Stock Options. Each Incentive Stock Option shall provide that, if the aggregate
Fair Market Value of the stock on the date of the grant with respect to which Incentive Stock Options are exercisable for the first time
by a Grantee during any calendar
year, under this Plan or any other stock option plan of the Company or a parent or subsidiary, exceeds
$100,000, then the Option, as to the excess, shall be treated as a Nonqualified Stock Option. An Incentive Stock Option shall not be granted
to any person who is not an Employee of the Company or a parent or subsidiary (within the meaning of section 424(f) of the Code)
of the Company.
6. Stock
Awards. The Board may issue shares of Company Stock to an Employee, Non-Employee Director
or Key Advisor under a Stock Award, upon such terms as the Board deems appropriate. The following provisions are applicable to Stock Awards:
(a) General
Requirements. Shares of Company Stock issued pursuant to Stock Awards may be issued for consideration
or for no consideration, and subject to restrictions or no restrictions, as determined by the Board. The Board may establish conditions
under which restrictions on Stock Awards shall lapse over a period of time or according to such other criteria as the Board deems appropriate.
The period of time during which the Stock Award will remain subject to restrictions will be designated in the Grant Instrument as the
“Restriction Period.”
(b) Number
of Shares. The Board shall determine the number of shares of Company Stock to be issued pursuant
to a Stock Award and the restrictions applicable to such shares.
(c) Requirement
of Employment or Service. If the Grantee ceases to be employed by, or provide service to,
the Employer (as defined in Section 5(f)) during a period designated in the Grant Instrument as the Restriction Period, or if other
specified conditions are not met, the Stock Award shall terminate as to all shares covered by the award as to which the restrictions have
not lapsed, and those shares of Company Stock must be immediately returned to the Company. The Board may, however, provide for complete
or partial exceptions to this requirement as it deems appropriate.
(d) Restrictions
on Transfer and Legend on Stock Certificate. During the Restriction Period, a Grantee may
not sell, assign, transfer, pledge or otherwise dispose of the shares of the Stock Award except to a successor under Section 8(a).
Each certificate for Stock Awards shall contain a legend giving appropriate notice of the restrictions in the Grant. The Grantee shall
be entitled to have the legend removed from the stock certificate covering the shares subject to restrictions when all restrictions on
such shares have lapsed. The Board may determine that the Company will not issue certificates for Stock Awards until all restrictions
on such shares have lapsed, or that the Company will retain possession of certificates for Stock Awards until all restrictions on such
shares have lapsed.
(e) Right
to Vote and to Receive Dividends. During the Restriction Period, the Grantee shall have the
right to vote shares subject to Stock Awards and to receive any dividends or other distributions paid on such shares, subject to any restrictions
deemed appropriate by the Board.
(f) Lapse
of Restrictions. All restrictions imposed on Stock Awards shall lapse upon the expiration
of the applicable Restriction Period and the satisfaction of all conditions imposed by the Board. The Board may determine, as to any or
all Stock Awards, that the restrictions shall lapse without regard to any Restriction Period.
7. Withholding
of Taxes.
(a) Required
Withholding. All Grants under this Plan shall be subject to applicable federal (including
FICA), state and local tax withholding requirements. The Employer may require that the Grantee or other person receiving or exercising
Grants pay to the Employer the amount of any federal, state or local taxes that the Employer is required to withhold with respect to such
Grants, or the Employer may deduct from other wages paid by the Employer the amount of any withholding taxes due with respect to such
Grants.
(b) Election
to Withhold Shares. If the Board so permits, a Grantee may elect to satisfy the Employer’s
income tax withholding obligation with respect to a Grant by having shares withheld up to an amount that does not exceed the Grantee’s
minimum applicable withholding tax rate for federal (including FICA), state and local tax liabilities. The election must be in a form
and manner prescribed by the Board and may be subject to the prior approval of the Board.
8. Transferability
of Grants.
(a) Nontransferability
of Grants. Except as provided below, only the Grantee may exercise rights under a Grant during
the Grantee’s lifetime. A Grantee may not transfer those rights except (i) by will or by the laws of descent and distribution
or (ii) with respect to Grants other than Incentive Stock Options, if permitted in any specific case by the Board, pursuant to a
domestic relations order or otherwise as permitted by the Board. When a Grantee dies, the personal representative or other person entitled
to succeed to the rights of the Grantee may exercise such rights. Any such successor must furnish proof satisfactory to the Company of
his or her right to receive the Grant under the Grantee’s will or under the applicable laws of descent and distribution.
(b) Transfer
of Nonqualified Stock Options. Notwithstanding the foregoing, the Board may provide, in a
Grant Instrument, that a Grantee may transfer Nonqualified Stock Options to family members, or one or more trusts or other entities for
the benefit of or owned by family members, consistent with applicable securities laws, according to such terms as the Board may determine;
provided that the Grantee receives no consideration for the transfer of an Option and the transferred Option shall continue to be subject
to the same terms and conditions as were applicable to the Option immediately before the transfer.
9. Right
of First Refusal; Repurchase Right.
(a) Offer.
Prior to a Public Offering, if at any time an individual desires to sell, encumber, or otherwise
dispose of shares of Company Stock that were distributed to him or her under this Plan and that are transferable, the individual may do
so only pursuant to a bona fide written offer, and the individual shall first offer the shares to the Company by giving the Company written
notice disclosing: (i) the name of the proposed transferee of the Company Stock; (ii) the certificate number and number of shares
of Company Stock proposed to be transferred or encumbered; (iii) the proposed price; (iv) all other terms of the proposed transfer;
and (v) a written copy of the proposed offer. Within 60 days after receipt of such notice, the Company shall have the option to purchase
all or part of such Company Stock at the price and on
the terms described in the written notice; provided that the Company may pay such
price in installments over a period not to exceed four years, at the discretion of the Board.
(b) Sale.
In the event the Company (or a stockholder, as described below) does not exercise the option
to purchase Company Stock, as provided above, the individual shall have the right to sell, encumber, or otherwise dispose of the shares
of Company Stock described in subsection (a) at the price and on the terms of the transfer set forth in the written notice to the
Company, provided such transfer is effected within 15 days after the expiration of the option period. If the transfer is not effected
within such period, the Company must again be given an option to purchase, as provided above.
(c) Assignment
of Rights. The Board, in its sole discretion, may waive the Company’s right of first
refusal and repurchase right under this Section 9. If the Company’s right of first refusal or repurchase right is so waived,
the Board may, in its sole discretion, assign such right to the remaining stockholders of the Company in the same proportion that each
stockholder’s stock ownership bears to the stock ownership of all the stockholders of the Company, as determined by the Board. To
the extent that a stockholder has been given such right and does not purchase his or her allotment, the other stockholders shall have
the right to purchase such allotment on the same basis.
(d) Purchase
by the Company. Prior to a Public Offering, if a Grantee ceases to be employed by, or provide
service to, the Employer, the Company shall have the right to purchase all or part of any Company Stock distributed to him or her under
this Plan at its then current Fair Market Value (as defined in Section 5(b)) (or at such other price as may be established in the
Grant Instrument); provided, however, that such repurchase shall be made in accordance with applicable accounting rules to avoid
adverse accounting treatment.
(e) Public
Offering. On and after a Public Offering, the Company shall have no further right to purchase
shares of Company Stock under this Section 9.
(f) Stockholders
Agreement. Notwithstanding the provisions of this Section 9, if the Board requires that
a Grantee execute a Stockholders Agreement (or other agreement containing first refusal or repurchase rights) with respect to any Company
Stock distributed pursuant to this Plan, such Grantee shall execute such Stockholders Agreement (or other such agreement) as a condition
to retaining his or her rights to such Company Stock. If such Stockholders Agreement (or other such agreement) contains a right of first
refusal or repurchase right, the provisions of this Section 9 shall not apply to such Company Stock for as long as those provisions
of the Stockholders Agreement (or other agreement) are in effect, unless the Board determines otherwise.
10. Change
of Control of the Company.
(a) Definitions.
As used in this Plan, a “Change of Control”
shall mean:
(i) any
merger or consolidation in which voting securities of the Company possessing more than 50% of the total combined voting power of the Company’s
outstanding
securities are Transferred to a person or persons different from the person holding those securities immediately prior to
such transaction and the composition of the Board following such transaction is such that the directors of the Company prior to the transaction
constitute less than 50% of the Board membership following the transaction;
(ii) any
acquisition, directly or indirectly, by a person or related group of persons (other than the Company or a person that directly or indirectly
controls, is controlled by, or is under common control with, the Company) of beneficial ownership of voting securities of the Company
possessing more than 50% of the total combined voting power of the Company’s outstanding securities; provided, however, that, no
Change of Control shall be deemed to occur by reason of the acquisition of shares of the Company’s capital stock by an investor
in the Company in a capital-raising transaction;
(iii) any
acquisition, directly or indirectly, by a person or related group of persons of the right to appoint a majority of the directors of the
Company or otherwise directly or indirectly control the management, affairs and business of the Company;
(iv) any
sale transfer or other disposition of all or substantially all of the assets of the Company; or
(v) a
complete liquidation or dissolution of the Company.
As used in this Section 10, “Transfer”
shall include any sale, exchange, assignment, gift, bequest, disposition, mortgage, charge, pledge, encumbrance, grant of a security interest
or other arrangement by which possession, legal title or beneficial ownership passes from one Person to another, or to the same Person
in a different capacity, whether or not voluntarily and whether or not for value, and including without limitation any merger or amalgamation
and any agreement to effect any of the foregoing.
(b) Assumption
of Grants. Upon a Change of Control where the Company is not the surviving corporation (or
survives only as a subsidiary of another corporation), unless the Board determines otherwise, all outstanding Options that are not exercised
shall be assumed by, or replaced with comparable options by the surviving corporation (or a parent or subsidiary of the surviving corporation),
and outstanding Stock Awards shall be converted to Stock Awards of the surviving corporation (or a parent or subsidiary of the surviving
corporation).
(c) Other
Alternatives. Notwithstanding the foregoing, in the event of a Change of Control, the Board
may take any of the following actions with respect to any or all outstanding Grants: the Board may (i) determine that outstanding
Options shall accelerate and become exercisable, in whole or in part, upon the Change of Control or upon such other event as the Board
determines, (ii) determine that the restrictions and conditions on outstanding Stock Awards shall lapse, in whole or in part, upon
the Change of Control or upon such other event as the Board determines, (iii) require that Grantees surrender their outstanding Options
in exchange for a payment by the Company, in cash or stock as determined by the Board, in an amount equal to the amount by which the then
Fair Market Value of the shares of Company Stock subject to the Grantee’s unexercised Options exceeds the Exercise Price of the
Options or (iv) after giving Grantees an opportunity to exercise their outstanding Options, terminate any or all unexercised
Options
at such time as the Board deems appropriate. Such surrender or termination shall take place as of the date of the Change of Control or
such other date as the Board may specify. The Board shall have no obligation to take any of the foregoing actions, and, in the absence
of any such actions, outstanding Options and Stock Awards shall continue in effect according to their terms (subject to any assumption
pursuant to subsection (b)).
11. Requirements
for Issuance of Shares.
(a) Stockholders
Agreement/Voting Agreement. The Board may require that a Grantee execute a stockholders agreement
and/or a voting agreement, in each case, with such terms as the Board deems appropriate, with respect to any Company Stock issued pursuant
to this Plan.
(b) Limitations
on Issuance of Shares. No Company Stock shall be issued in connection with any Grant hereunder
unless and until all legal requirements applicable to the issuance of such Company Stock have been complied with to the satisfaction of
the Board. The Board shall have the right to condition any Grant made to any Grantee hereunder on such Grantee’s undertaking in
writing to comply with such restrictions on his or her subsequent disposition of such shares of Company Stock as the Board shall deem
necessary or advisable, and certificates representing such shares may be legended to reflect any such restrictions. Certificates representing
shares of Company Stock issued under this Plan will be subject to such stop-transfer orders and other restrictions as may be required
by applicable laws, regulations and interpretations, including any requirement that a legend be placed thereon.
(c) Lock-Up
Period. If so requested by the Company or any representative of the underwriters (the “Managing
Underwriter”) in connection with any underwritten offering of securities of the Company under the Securities Act of 1933, as amended
(the “Securities Act”), a Grantee (including any successor or assigns) shall not sell or otherwise transfer any shares or
other securities of the Company during the 30-day period preceding and the 180-day period following the effective date of a registration
statement of the Company filed under the Securities Act for such underwriting (or such shorter period as may be requested by the Managing
Underwriter and agreed to by the Company) (the “Market Standoff Period”). If so requested, the Grantee shall enter into a
separate written agreement to such effect in form and substance requested by the Company or the Managing Underwriter. The Company may
impose stoptransfer instructions with respect to securities subject to the foregoing restrictions until the end of such Market Standoff
Period. Notwithstanding the foregoing, the Company may require that a Grantee execute a Stockholders Agreement or other agreement containing
lock-up provisions. If such Stockholders Agreement or other agreement contains any lock-up or market standoff provisions that differ from
the provisions of this Section 11(c), for as long as the provisions of such other agreement are in effect, the provisions of this
Section 11(c) shall not apply to such Company Stock, unless the Board determines otherwise.
12. Amendment
and Termination of This Plan.
(a) Amendment.
The Board may amend or terminate this Plan at any time; provided, however, that the Board shall
not amend this Plan without stockholder approval if such
approval is required in order to comply with the Code or other applicable laws,
or, after a Public Offering, to comply with applicable stock exchange requirements.
(b) Termination
of This Plan. This Plan shall terminate on the day immediately preceding the tenth anniversary
of its effective date, unless this Plan is terminated earlier by the Board or is extended by the Board with the approval of the stockholders.
(c) Termination
and Amendment of Outstanding Grants. A termination or amendment of this Plan that occurs
after a Grant is made shall not materially impair the rights of a Grantee unless the Grantee consents or unless the Board acts under Section 18(b).
The termination of this Plan shall not impair the power and authority of the Board with respect to an outstanding Grant. Whether or not
this Plan has terminated, an outstanding Grant may be terminated or amended under Section 18(b) or may be amended by agreement
of the Company and the Grantee consistent with this Plan.
(d) Governing
Document. This Plan shall be the controlling document. No other statements, representations,
explanatory materials or examples, oral or written, may amend this Plan in any manner. This Plan shall be binding upon and enforceable
against the Company and its successors and assigns.
13. Funding
of This Plan. This Plan shall be unfunded. The Company shall not be required to establish
any special or separate fund or to make any other segregation of assets to assure the payment of any Grants under this Plan. In no event
shall interest be paid or accrued on any Grant, including unpaid installments of Grants.
14. Rights
of Participants. Nothing in this Plan shall entitle any Employee, Key Advisor, Non-Employee
Director or other person to any claim or right to be granted a Grant under this Plan. Neither this Plan nor any action taken hereunder
shall be construed as giving any individual any rights to be retained by or in the employ of the Employer or any other employment rights.
15. No
Fractional Shares. No fractional shares of Company Stock shall be issued or delivered pursuant
to this Plan or any Grant. The Board shall determine whether cash, other awards or other property shall be issued or paid in lieu of such
fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated.
16. Headings.
Section headings are for reference only. In the event of a conflict between a title and
the content of a Section, the content of the Section shall control.
17. Effective
Date of this Plan.
(a) Effective
Date. The 2007 Equity Incentive Plan of the Company was originally effective as of October 1,
2007. This Plan shall be effective as of January 10, 2017.
(b) Public
Offering. The provisions of this Plan that refer to a Public Offering, or that refer to,
or are applicable to persons subject to, section 16 of the Exchange Act or section 162(m) of the Code, shall be effective, if at
all, upon the initial registration of the Company
Stock under section 12(g) of the Exchange Act, and shall remain
effective thereafter for as long as such stock is so registered.
18. Miscellaneous.
(a) Grants
in Connection with Corporate Transactions and Otherwise. Nothing contained in this Plan shall
be construed to (i) limit the right of the Board to make Grants under this Plan in connection with the acquisition, by purchase,
lease, merger, consolidation or otherwise, of the business or assets of any corporation, firm or association, including Grants to employees
thereof who become Employees, or for other proper corporate purposes, or (ii) limit the right of the Company to grant stock options
or make other awards outside of this Plan. Without limiting the foregoing, the Board may make a Grant to an employee of another corporation
who becomes an Employee by reason of a corporate merger, consolidation, acquisition of stock or property, reorganization or liquidation
involving the Company, the Parent or any of their subsidiaries in substitution for a stock option or Stock Awards grant made by such corporation.
The terms and conditions of the substitute grants may vary from the terms and conditions required by this Plan and from those of the substituted
stock incentives. The Board shall prescribe the provisions of the substitute grants.
(b) Compliance
with Law. This Plan, the exercise of Options and the obligations of the Company to issue
shares of Company Stock under Grants shall be subject to all applicable laws and to approvals by any governmental or regulatory agency
as may be required. With respect to persons subject to section 16 of the Exchange Act, after a Public Offering it is the intent of the
Company that this Plan and all transactions under this Plan comply with all applicable provisions of Rule 16b-3 or its successors
under the Exchange Act. In addition, it is the intent of the Company that this Plan and applicable Grants under this Plan comply with
the applicable provisions of section 162(m) of the Code, after a Public Offering, and section 422 of the Code. To the extent that
any legal requirement of section 16 of the Exchange Act or section 162(m) or 422 of the Code as set forth in this Plan ceases to
be required under section 16 of the Exchange Act or section 162(m) or 422 of the Code, that Plan provision shall cease to apply.
The Board may revoke any Grant if it is contrary to law or modify a Grant to bring it into compliance with any valid and mandatory government
regulation. The Board may also adopt rules regarding the withholding of taxes on payments to Grantees. The Board may, in its sole
discretion, agree to limit its authority under this Section.
(c) Employees
Subject to Taxation Outside the United States. With respect to Grantees who are subject to
taxation in countries other than the United States, the Board may make Grants on such terms and conditions as the Board deems appropriate
to comply with the laws of the applicable countries, and the Board may create such procedures, addenda and subplans and make such modifications
as may be necessary or advisable to comply with such laws.
(d) Governing
Law. The validity, construction, interpretation and effect of this Plan and Grant Instruments
issued under this Plan shall be governed and construed by and determined in accordance with the laws of the State of Delaware, without
giving effect to the conflict of laws provisions thereof.
Exhibit 10.8
Effective Date: September 20, 2017
COGNITION
THERAPEUTICS, INC.
2017
EQUITY INCENTIVE PLAN
The purpose of the Cognition Therapeutics, Inc.
2017 Equity Incentive Plan (this “Plan”) is to provide (i) designated employees of Cognition Therapeutics, Inc.
(the “Company”) and its parents and subsidiaries, (ii) certain consultants and advisors who perform services for the
Company or its parents or subsidiaries and (iii) non-employee members of the Board of Directors of the Company (the “Board”)
with the opportunity to receive grants of incentive stock options, nonqualified stock options and stock awards. The Company believes that
this Plan will encourage the participants to contribute materially to the growth of the Company, thereby benefitting the Company's stockholders,
and will align the economic interests of the participants with those of the stockholders.
This Plan is intended as the successor to the Company's
Amended and Restated 2007 Equity Incentive Plan (the “Prior Plan”). Following the effective date of this Plan set forth above
(the “Effective Date”), no additional grants of options or stock awards shall be granted under the Prior Plan. Any shares
remaining available for issuance pursuant to the exercise of options or settlement of stock awards under the Prior Plan shall become available
for issuance under this Plan pursuant to Grants (as defined in Section 2) granted hereunder, as provided in Section 3(a). Any
shares subject to outstanding stock options or stock awards granted under the Prior Plan that expire or terminate or are repurchased by
the Company for any reason prior to exercise, settlement or vesting shall become available for issuance under this Plan pursuant to stock
options and stock awards granted hereunder. All outstanding stock options and stock awards granted under the Prior Plan shall remain subject
to the terms of the Prior Plan with respect to which they were originally granted.
1. Administration.
(a) Committee.
This Plan shall be administered and interpreted by the Board or by a committee consisting of
members of the Board, which shall be appointed by the Board. After an initial public offering of the Company's stock as described in Section 17(b) (a
“Public Offering”), this Plan shall be administered by a committee of Board members, which may consist of “outside directors”
as defined under section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and related Treasury regulations,
and “non-employee directors” as defined under Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”). However, the Board may ratify or approve any grants as it deems appropriate, and the Board shall approve and administer all
grants made to non-employee directors. The committee may delegate authority to one or more subcommittees as it deems appropriate. To the
extent that a committee or subcommittee administers this Plan, references in this Plan to the “Board” shall be deemed to refer
to the committee or subcommittee; provided, however, that the Board of Directors itself may, at any time, exercise any and all rights
and authority granted by it to a committee or subcommittee.
(b) Board
Authority. The Board shall have the sole authority to (i) determine the individuals
to whom grants shall be made under this Plan, (ii) determine the type, size and terms of the grants to be made to each such individual,
(iii) determine the time when the grants will be made and the duration of any applicable exercise or restriction period, including
the criteria for exercisability and the acceleration of exercisability, (iv) amend the terms of any previously issued grant, and
(v) deal with any other matters arising under this Plan.
(c) Board
Determinations. The Board shall have full power and authority to administer and interpret
this Plan, to make factual determinations and to adopt or amend such rules, regulations, agreements and instruments for implementing this
Plan and for the conduct of its business as it deems necessary or advisable, in its sole discretion. The Board's interpretations of this
Plan and all determinations made by the Board pursuant to the powers vested in it hereunder shall be conclusive and binding on all persons
having any interest in this Plan or in any awards granted hereunder. All powers of the Board shall be executed in its sole discretion,
in the best interest of the Company, not as a fiduciary, and in keeping with the objectives of this Plan and need not be uniform as to
similarly situated individuals.
(d) Delegation
to Officers. To the extent permitted by applicable law, the Board may delegate to one or
more officers of the Company the power to grant Options and Stock Awards (as each such term is defined in Section 2) to employees
or officers of the Company or any of its present or future subsidiary corporations and to exercise such other powers under this Plan as
the Board may determine, provided that the Board shall fix the terms of the Options and Stock Awards to be granted by such officers (including
the exercise price of such Options, and the consideration, if any, for the Stock Awards, which may include a formula by which the exercise
price or purchase price, if any, will be determined) and the maximum number of shares subject to Options and Stock Awards that the officers
may grant; provided further, however, that no officer shall be authorized to grant any Options or Stock Awards to himself or herself.
2. Grants.
Awards under this Plan may consist of grants of incentive stock options as described in Section 5
(“Incentive Stock Options”), nonqualified stock options as described in Section 5 (“Nonqualified Stock Options”)
(Incentive Stock Options and Nonqualified Stock Options are collectively referred to as “Options”) and stock awards as described
in Section 6 (“Stock Awards”) (hereinafter collectively referred to as “Grants”). All Grants shall be subject
to the terms and conditions set forth herein and to such other terms and conditions consistent with this Plan as the Board deems appropriate
and as are specified in writing by the Board to the individual in a grant instrument or an amendment to the grant instrument (the “Grant
Instrument”). All Grants shall be made conditional upon the Grantee's acknowledgement, in writing or by acceptance of the Grant,
that all decisions and determinations of the Board shall be final and binding on the Grantee, his or her beneficiaries and any other person
having or claiming an interest under such Grant. The Board shall approve the form and provisions of each Grant Instrument. Grants under
a particular Section of this Plan need not be uniform as among the grantees.
3. Shares
Subject to This Plan.
(a) Shares
Reserved. Subject to adjustment as described below, the aggregate number of shares of
common stock of the Company (“Company Stock”) that may be issued
under this Plan is equal to (i) the 798,908 shares
remaining available for issuance under the Prior Plan as of the Effective Date, and (ii) the number of shares that may be added
to this Plan pursuant to Section 3(b) (collectively the “Share Reserve”), each of which may be granted as an
Incentive Stock Option, up to the maximum limit set forth in Section 3(d) below. After a Public Offering, the maximum
aggregate number of shares of Company Stock that shall be subject to Grants made under this Plan to (i) any employee during any
calendar year shall be 3,900,000 shares and (ii) any non-employee member of the Board during any calendar year shall be 600,000
shares, subject to adjustment as described below. Shares issued under this Plan may be authorized but unissued shares of Company
Stock or reacquired shares of Company Stock, including shares purchased by the Company on the open market for purposes of this
Plan.
(b) Additions
to the Share Reserve. The Share Reserve also shall be increased from time to time by a number
of shares equal to the number of shares of Company Stock that (i) are issuable pursuant to options outstanding under the Prior Plan
as of the Effective Date and (ii) but for the termination of the Prior Plan as of the Effective Date, would otherwise have reverted
to the share reserve of the Prior Plan pursuant to the provisions thereof.
(c) Reversion
of Shares to the Share Reserve. If and to the extent Options granted under this Plan terminate,
expire, or are canceled, forfeited, exchanged or surrendered without having been exercised or if any Stock Awards (including restricted
Stock Awards received upon the exercise of Options) are forfeited, the shares subject to such Grants shall again be available for purposes
of this Plan.
(d) Incentive
Stock Option Limit. Notwithstanding anything to the contrary in this Section 3, subject
to the provisions of Section 3(e) relating to capitalization adjustments, the aggregate maximum number of shares of Company
Stock that may be issued pursuant to the exercise of Incentive Stock Options shall be 798,908 shares of Company Stock plus the amount
of any increase in the number of shares that may be available for issuance pursuant to Grants pursuant to Section 3(b), but in no
event shall greater than 11,189,392 shares of Company Stock be issued as Incentive Stock Options (the “Maximum Incentive Stock Option
Limit”). Any additional shares added to the Plan pursuant to the Share Reserve in excess of the Maximum Incentive Stock Option Limit
shall not be issued as Incentive Stock Options but may be issued as Nonqualified Stock Options or Stock Awards.
(e) Adjustments. If
there is any change in the number or kind of shares of Company Stock outstanding (i) by reason of a stock dividend, spinoff,
recapitalization, stock split, or combination or exchange of shares, (ii) by reason of a merger, reorganization or
consolidation, (iii) by reason of a reclassification or change in par value, or (iv) by reason of any other extraordinary
or unusual event affecting the outstanding Company Stock as a class without the Company's receipt of consideration, or if the value
of outstanding shares of Company Stock is substantially reduced as a result of a spinoff or the Company's payment of an
extraordinary dividend or distribution, the maximum number of shares of Company Stock available for Grants, the maximum number of
shares of Company Stock that any individual participating in this Plan may be granted in any year, the number of shares covered by
outstanding Grants, the kind of shares issued under this Plan, and the price per share of such Grants shall be appropriately
adjusted by the Board to reflect any increase or decrease in the number of, or change in the kind or value of, issued shares of
Company Stock to preclude, to the extent practicable, the
enlargement or dilution of rights and benefits under such Grants;
provided, however, that any fractional shares resulting from such adjustment shall be eliminated. Any adjustments determined by the
Board shall be final, binding and conclusive.
4. Eligibility
for Participation.
(a) Eligible
Persons. All employees of the Company and its parents or subsidiaries (“Employees”),
including Employees who are officers or members of the Board, and members of the Board who are not Employees (“Non-Employee Directors”)
shall be eligible to participate in this Plan. Consultants and advisors who perform services for the Company or any of its parents or
subsidiaries (“Key Advisors”) shall be eligible to participate in this Plan if the Key Advisors render bona fide services
to the Company or its parents or subsidiaries, the services are not in connection with the offer and sale of securities in a capital-raising
transaction, and the Key Advisors do not directly or indirectly promote or maintain a market for the Company's securities.
(b) Selection
of Grantees. The Board shall select the Employees, Non-Employee Directors and Key Advisors
to receive Grants and shall determine the number of shares of Company Stock subject to a particular Grant in such manner as the Board
determines. Employees, Key Advisors and Non-Employee Directors who receive Grants under this Plan shall hereinafter be referred to as
“Grantees.”
5. Granting
of Options.
(a) Number
of Shares. The Board shall determine the number of shares of Company Stock that will be subject
to each Grant of Options to Employees, Non-Employee Directors and Key Advisors.
(b) Type
of Option and Price.
(i) The
Board may grant Incentive Stock Options that are intended to qualify as “incentive stock options” within the meaning of section
422 of the Code or Nonqualified Stock Options that are not intended so to qualify or any combination of Incentive Stock Options and Nonqualified
Stock Options, all in accordance with the terms and conditions set forth herein. Incentive Stock Options may be granted only to employees
of the Company or its parents or subsidiaries, as defined in section 424 of the Code. Nonqualified Stock Options may be granted to Employees,
Non-Employee Directors and Key Advisors. The date of grant of an Option shall be the date on which the Board makes the determination to
grant such Option unless a later date is otherwise specified by the Board.
(ii) The
purchase price (the “Exercise Price”) of Company Stock subject to an Option shall be determined by the Board and may be
equal to or greater than the Fair Market Value (as defined below) of a share of Company Stock on the date the Option is granted;
provided, however, that (x) the Exercise Price of an Incentive Stock Option shall be equal to, or greater than, the Fair Market
Value of a share of Company Stock on the date the Incentive Stock Option is granted and (y) an Incentive Stock Option may not
be granted to an Employee who, at the time of grant, owns stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or any parent or subsidiary of the Company, unless the
Exercise Price per share is not less than
110% of the Fair Market Value of Company Stock on the date of grant.
(iii) If
the Company Stock is publicly traded, then the Fair Market Value per share shall be determined as follows: (x) if the principal trading
market for the Company Stock is a national securities exchange, the last reported sale price thereof on the relevant date or (if there
were no trades on that date) the latest preceding date upon which a sale was reported, or (y) if the Company Stock is not principally
traded on such exchange or market, the mean between the last reported “bid” and “asked” prices of Company Stock
on the relevant date, as reported by the National Daily Quotation Bureau, Inc. or as reported in a customary financial reporting
service, as applicable and as the Board determines. If the Company Stock is not publicly traded or, if publicly traded, is not subject
to reported transactions or “bid” or “asked” quotations as set forth above, the Fair Market Value per share shall
be as determined by the Board.
(c) Option
Term. The Board shall determine the term of each Option. The term of any Option shall not
exceed ten years from the date of grant. However, an Incentive Stock Option that is granted to an Employee who, at the time of grant,
owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company, or any parent or subsidiary
of the Company, may not have a term that exceeds five years from the date of grant.
(d) Exercisability
of Options.
(i) Options
shall become exercisable in accordance with such terms and conditions, consistent with this Plan, as may be determined by the Board and
specified in the Grant Instrument. The Board may accelerate the exercisability of any or all outstanding Options at any time for any reason.
(ii) The
Board may provide in a Grant Instrument that the Grantee may elect to exercise part or all of an Option before it otherwise has become
exercisable. Any shares so purchased shall be restricted shares and shall be subject to a repurchase right in favor of the Company during
a specified restriction period, with the repurchase price equal to the lesser of (i) the Exercise Price or (ii) the Fair Market
Value of such shares at the time of repurchase, or such other restrictions as the Board deems appropriate.
(e) Grants
to Non-Exempt Employees. Notwithstanding the foregoing, Options granted to persons who are
non-exempt employees under the Fair Labor Standards Act of 1938, as amended, shall have an Exercise Price not less than the Fair Market
Value of the Company Stock on the date of grant, and may not be exercisable for at least six months after the date of grant (except that
such Options may become exercisable, as determined by the Board, upon the Grantee's death, Disability or retirement, or upon a Change
of Control or other circumstances permitted by applicable regulations).
(f) Termination
of Employment, Disability or Death.
(i) Except
as provided below, an Option may only be exercised while the Grantee is employed by, or providing service to, the Employer (as
defined below) as an Employee, Key Advisor or member of the Board. In the event that a Grantee ceases to be
employed by, or provide
service to, the Employer for any reason other than Disability, death, or termination for Cause, any Option which is otherwise
exercisable by the Grantee shall terminate unless exercised within three months after the date on which the Grantee ceases to be
employed by, or provide service to, the Employer (or within such other period of time as may be specified by the Board), but in any
event no later than the date of expiration of the Option term. Except as otherwise provided by the Board, any of the Grantee's
Options that are not otherwise exercisable as of the date on which the Grantee ceases to be employed by, or provide service to, the
Employer shall terminate as of such date.
(ii) In
the event the Grantee ceases to be employed by, or provide service to, the Employer on account of a termination for Cause by the Employer,
any Option held by the Grantee shall terminate as of the date the Grantee ceases to be employed by, or provide service to, the Employer.
In addition, notwithstanding any other provisions of this Section 5, if the Board determines that the Grantee has engaged in conduct
that constitutes Cause at any time while the Grantee is employed by, or providing service to, the Employer or after the Grantee's termination
of employment or service, any Option held by the Grantee shall immediately terminate, and the Grantee shall automatically forfeit all
shares underlying any exercised portion of an Option for which the Company has not yet delivered the share certificates, upon refund by
the Company of the Exercise Price paid by the Grantee for such shares. Upon any exercise of an Option, the Company may withhold delivery
of share certificates pending resolution of an inquiry that could lead to a finding resulting in a forfeiture.
(iii) In
the event the Grantee ceases to be employed by, or provide service to, the Employer because the Grantee is Disabled, any Option which
is otherwise exercisable by the Grantee shall terminate unless exercised within one year after the date on which the Grantee ceases to
be employed by, or provide service to, the Employer (or within such other period of time as may be specified by the Board), but in any
event no later than the date of expiration of the Option term. Except as otherwise provided by the Board, any of the Grantee's Options
which are not otherwise exercisable as of the date on which the Grantee ceases to be employed by, or provide service to, the Employer
shall terminate as of such date.
(iv) If
the Grantee dies while employed by, or providing service to, the Employer or within three months after the date on which the Grantee ceases
to be employed or provide service on account of a termination specified in Section 5(f)(i) (or within such other period of time
as may be specified by the Board), any Option that is otherwise exercisable by the Grantee shall terminate unless exercised within one
year after the date on which the Grantee ceases to be employed by, or provide service to, the Employer (or within such other period of
time as may be specified by the Board), but in any event no later than the date of expiration of the Option term. Except as otherwise
provided by the Board, any of the Grantee's Options that are not otherwise exercisable as of the date on which the Grantee ceases to be
employed by, or provide service to, the Employer shall terminate as of such date.
(v) For
purposes of this Section 5(f) and Section 6:
(A) The
term “Employer” shall include the Company and its parent and subsidiary corporations or other entities, as appropriate and
as determined by the Board.
(B) “Employed
by, or provide service to, the Employer” shall mean employment or service as an Employee, Key Advisor or member of the Board (so
that, for purposes of exercising Options and satisfying conditions with respect to Stock Awards, a Grantee shall not be considered to
have terminated employment or service until the Grantee ceases to be an Employee, Key Advisor or member of the Board), unless the Board
determines otherwise.
(C) “Disability”
shall mean a Grantee's becoming disabled within the meaning of section 22(e)(3) of the Code, within the meaning of the Employer's
long-term disability plan applicable to the Grantee, or as otherwise determined by the Board.
(D) “Cause”
shall mean, except to the extent specified otherwise by the Board, a finding by the Board that the Grantee (i) has breached his or
her employment or service contract with the Employer, (ii) has engaged in disloyalty to the Company, including, without limitation,
fraud, embezzlement, theft, commission of a felony or proven dishonesty, (iii) has disclosed trade secrets or confidential information
of the Employer to persons not entitled to receive such information, (iv) has breached any written noncompetition or nonsolicitation
agreement between the Grantee and the Employer or (v) has engaged in such other behavior detrimental to the interests of the Employer
as the Board determines.
(g) Exercise
of Options. A Grantee may exercise an Option that has become exercisable, in whole or in
part, by delivering a notice of exercise to the Company with payment of the Exercise Price: provided, however, that the Committee shall
have the power to permit: (i) the exercise of unvested Options, or portions thereof, for the purchase of shares of restricted Common
Stock subject to a repurchase right in favor of the Company, with the repurchase price being equal to the lesser of (x) the original
purchase price or (y) the Fair Market Value of the shares on the date of repurchase, or to any other restrictions as the Committee
deems to be appropriate, and (ii) the acceleration of previously established exercise terms, in each case upon such circumstances
and subject to such terms and conditions as the Committee shall determine. The Grantee shall pay the Exercise Price for an Option as specified
by the Board (I) in cash, (II) with the approval of the Board, by delivering shares of Company Stock owned by the Grantee (including
Company Stock acquired in connection with the exercise of an Option, subject to such restrictions as the Board deems appropriate) and
having a Fair Market Value on the date of exercise equal to the Exercise Price or by attestation (on a form prescribed by the Board) to
ownership of shares of Company Stock having a Fair Market Value on the date of exercise equal to the Exercise Price, (III) after
a Public Offering, payment through a broker in accordance with procedures permitted by Regulation T of the Federal Reserve Board, or (IV) by
such other method as the Board may approve. The Board may authorize loans by the Company to Grantees in connection with the exercise of
an Option, upon such terms and conditions as the Board, in its sole discretion, deems appropriate. Shares of Company Stock used to exercise
an Option shall have been held by the Grantee for the requisite period of time to avoid adverse accounting consequences to the Company
with respect to the Option. The Grantee shall pay the Exercise Price and the amount of any withholding tax due (pursuant to Section 7)
at the time of exercise.
(h) Limits
on Incentive Stock Options. Each Incentive Stock Option shall provide that, if the
aggregate Fair Market Value of the stock on the date of the grant with respect to
which Incentive
Stock Options are exercisable for the first time by a Grantee during any calendar year, under this Plan or any other stock option plan
of the Company or a parent or subsidiary, exceeds $100,000, then the Option, as to the excess, shall be treated as a Nonqualified Stock
Option. An Incentive Stock Option shall not be granted to any person who is not an Employee of the Company or a parent or subsidiary
(within the meaning of section 424(f) of the Code) of the Company.
6. Stock
Awards. The Board may issue shares of Company Stock to an Employee, Non-Employee Director
or Key Advisor under a Stock Award, upon such terms as the Board deems appropriate. The following provisions are applicable to Stock Awards:
(a) General
Requirements. Shares of Company Stock issued pursuant to Stock Awards may be issued for consideration
or for no consideration, and subject to restrictions or no restrictions, as determined by the Board. The Board may establish conditions
under which restrictions on Stock Awards shall lapse over a period of time or according to such other criteria as the Board deems appropriate.
The period of time during which the Stock Award will remain subject to restrictions will be designated in the Grant Instrument as the
“Restriction Period.”
(b) Number
of Shares. The Board shall determine the number of shares of Company Stock to be issued pursuant
to a Stock Award and the restrictions applicable to such shares.
(c) Requirement
of Employment or Service. If the Grantee ceases to be employed by, or provide service to,
the Employer (as defined in Section 5(f)) during a period designated in the Grant Instrument as the Restriction Period, or if other
specified conditions are not met, the Stock Award shall terminate as to all shares covered by the award as to which the restrictions have
not lapsed, and those shares of Company Stock must be immediately returned to the Company. The Board may, however, provide for complete
or partial exceptions to this requirement as it deems appropriate.
(d) Restrictions
on Transfer and Legend on Stock Certificate. During the Restriction Period, a Grantee may
not sell, assign, transfer, pledge or otherwise dispose of the shares of the Stock Award except to a successor under Section 8(a).
Each certificate for Stock Awards shall contain a legend giving appropriate notice of the restrictions in the Grant. The Grantee shall
be entitled to have the legend removed from the stock certificate covering the shares subject to restrictions when all restrictions on
such shares have lapsed. The Board may determine that the Company will not issue certificates for Stock Awards until all restrictions
on such shares have lapsed, or that the Company will retain possession of certificates for Stock Awards until all restrictions on such
shares have lapsed.
(e) Right
to Vote and to Receive Dividends. During the Restriction Period, the Grantee shall have the
right to vote shares subject to Stock Awards and to receive any dividends or other distributions paid on such shares, subject to any restrictions
deemed appropriate by the Board.
(f) Lapse
of Restrictions. All restrictions imposed on Stock Awards shall lapse upon the
expiration of the applicable Restriction Period and the satisfaction of all conditions
imposed by the Board. The Board may
determine, as to any or all Stock Awards, that the restrictions shall lapse without regard to any Restriction Period.
7. Withholding
of Taxes.
(a) Required
Withholding. All Grants under this Plan shall be subject to applicable federal (including
FICA), state and local tax withholding requirements. The Employer may require that the Grantee or other person receiving or exercising
Grants pay to the Employer the amount of any federal, state or local taxes that the Employer is required to withhold with respect to such
Grants, or the Employer may deduct from other wages paid by the Employer the amount of any withholding taxes due with respect to such
Grants.
(b) Election
to Withhold Shares. If the Board so permits, a Grantee may elect to satisfy the Employer's
income tax withholding obligation with respect to a Grant by having shares withheld up to an amount that does not exceed the Grantee's
minimum applicable withholding tax rate for federal (including FICA), state and local tax liabilities. The election must be in a form
and manner prescribed by the Board and may be subject to the prior approval of the Board.
8. Transferability
of Grants.
(a) Nontransferability
of Grants. Except as provided below, only the Grantee may exercise rights under a Grant during
the Grantee's lifetime. A Grantee may not transfer those rights except (i) by will or by the laws of descent and distribution or
(ii) with respect to Grants other than Incentive Stock Options, if permitted in any specific case by the Board, pursuant to a domestic
relations order or otherwise as permitted by the Board. When a Grantee dies, the personal representative or other person entitled to succeed
to the rights of the Grantee may exercise such rights. Any such successor must furnish proof satisfactory to the Company of his or her
right to receive the Grant under the Grantee's will or under the applicable laws of descent and distribution.
(b) Transfer
of Nonqualified Stock Options. Notwithstanding the foregoing, the Board may provide, in a
Grant Instrument, that a Grantee may transfer Nonqualified Stock Options to family members, or one or more trusts or other entities for
the benefit of or owned by family members, consistent with applicable securities laws, according to such terms as the Board may determine;
provided that the Grantee receives no consideration for the transfer of an Option and the transferred Option shall continue to be subject
to the same terms and conditions as were applicable to the Option immediately before the transfer.
9. Right
of First Refusal; Repurchase Right.
(a) Offer. Prior
to a Public Offering, if at any time an individual desires to sell, encumber, or otherwise dispose of shares of Company Stock that
were distributed to him or her under this Plan and that are transferable, the individual may do so only pursuant to a bona fide
written offer, and the individual shall first offer the shares to the Company by giving the Company written notice disclosing:
(i) the name of the proposed transferee of the Company Stock; (ii) the certificate number and number of shares of Company
Stock proposed to be transferred or encumbered; (iii) the proposed price; (iv) all other terms of the proposed transfer;
and (v) a written copy of the proposed offer. Within 60 days after receipt of such notice, the Company shall have the option to
purchase all or part of such Company Stock at the price and on the terms described in the written notice; provided that the Company
may pay such price in installments over a period not to exceed four years, at the discretion of the Board.
(b) Sale.
In the event the Company (or a stockholder, as described below) does not exercise the option
to purchase Company Stock, as provided above, the individual shall have the right to sell, encumber, or otherwise dispose of the shares
of Company Stock described in Section 9(a) at the price and on the terms of the transfer set forth in the written notice to
the Company, provided such transfer is effected within 15 days after the expiration of the option period. If the transfer is not effected
within such period, the Company must again be given an option to purchase, as provided above.
(c) Assignment
of Rights. The Board, in its sole discretion, may waive the Company's right of first refusal
and repurchase right under this Section 9. If the Company's right of first refusal or repurchase right is so waived, the Board may,
in its sole discretion, assign such right to the remaining stockholders of the Company in the same proportion that each stockholder's
stock ownership bears to the stock ownership of all the stockholders of the Company, as determined by the Board. To the extent that a
stockholder has been given such right and does not purchase his or her allotment, the other stockholders shall have the right to purchase
such allotment on the same basis.
(d) Purchase
by the Company. Prior to a Public Offering, if a Grantee ceases to be employed by, or provide
service to, the Employer, the Company shall have the right to purchase all or part of any Company Stock distributed to him or her under
this Plan at its then current Fair Market Value (as defined in Section 5(b)) (or at such other price as may be established in the
Grant Instrument); provided, however, that such repurchase shall be made in accordance with applicable accounting rules to avoid
adverse accounting treatment.
(e) Public
Offering. On and after a Public Offering, the Company shall have no further right to purchase
shares of Company Stock under this Section 9.
(f) Stockholders
Agreement. Notwithstanding the provisions of this Section 9, if the Board requires that
a Grantee execute a Stockholders Agreement (or other agreement containing first refusal or repurchase rights) with respect to any Company
Stock distributed pursuant to this Plan, such Grantee shall execute such Stockholders Agreement (or other such agreement) as a condition
to retaining his or her rights to such Company Stock. If such Stockholders Agreement (or other such agreement) contains a right of first
refusal or repurchase right, the provisions of this Section 9 shall not apply to such Company Stock for as long as those provisions
of the Stockholders Agreement (or other agreement) are in effect, unless the Board determines otherwise.
10. Change
of Control of the Company.
(a) Definitions.
As used in this Plan, a “Change of Control”
shall mean:
(i) any
merger or consolidation in which voting securities of the Company possessing more than 50% of the total combined voting power of the Company's
outstanding securities are Transferred to a person or persons different from the person holding those securities immediately prior to
such transaction and the composition of the Board following such transaction is such that the directors of the Company prior to the transaction
constitute less than 50% of the Board membership following the transaction;
(ii) any
acquisition, directly or indirectly, by a person or related group of persons (other than the Company or a person that directly or indirectly
controls, is controlled by, or is under common control with, the Company) of beneficial ownership of voting securities of the Company
possessing more than 50% of the total combined voting power of the Company's outstanding securities; provided, however, that, no Change
of Control shall be deemed to occur by reason of the acquisition of shares of the Company's capital stock by an investor in the Company
in a capital-raising transaction;
(iii) any
acquisition, directly or indirectly, by a person or related group of persons of the right to appoint a majority of the directors of the
Company or otherwise directly or indirectly control the management, affairs and business of the Company;
(iv) any
sale, transfer or other disposition of all or substantially all of the assets of the Company; or
(v) a
complete liquidation or dissolution of the Company.
As used in this Section 10, “Transfer”
shall include any sale, exchange, assignment, gift, bequest, disposition, mortgage, charge, pledge, encumbrance, grant of a security interest
or other arrangement by which possession, legal title or beneficial ownership passes from one Person to another, or to the same Person
in a different capacity, whether or not voluntarily and whether or not for value, and including without limitation any merger or amalgamation
and any agreement to effect any of the foregoing.
(b) Assumption
of Grants. Upon a Change of Control where the Company is not the surviving corporation (or
survives only as a subsidiary of another corporation), unless the Board determines otherwise, all outstanding Options that are not exercised
shall be assumed by, or replaced with comparable options by the surviving corporation (or a parent or subsidiary of the surviving corporation),
and outstanding Stock Awards shall be converted to Stock Awards of the surviving corporation (or a parent or subsidiary of the surviving
corporation).
(c) Other
Alternatives. Notwithstanding the foregoing, in the event of a Change of Control, the
Board may take any of the following actions with respect to any or all outstanding Grants: the Board may (i) determine that
outstanding Options shall accelerate and become exercisable, in whole or in part, upon the Change of Control or upon such other
event as the Board determines, (ii) determine that the restrictions and conditions on outstanding Stock Awards shall lapse, in
whole or in part, upon the Change of Control or upon such other event as the Board determines, (iii) require that Grantees
surrender their outstanding Options in exchange for a payment by the Company, in cash or stock as determined by the Board, in an
amount equal to the amount by which the then Fair Market Value of the shares of Company Stock subject to
the Grantee's unexercised
Options exceeds the Exercise Price of the Options or (iv) after giving Grantees an opportunity to exercise their outstanding
Options, terminate any or all unexercised Options at such time as the Board deems appropriate. Such surrender or termination shall
take place as of the date of the Change of Control or such other date as the Board may specify. The Board shall have no obligation
to take any of the foregoing actions, and, in the absence of any such actions, outstanding Options and Stock Awards shall continue
in effect according to their terms (subject to any assumption pursuant to subsection (b)).
11. Requirements
for Issuance of Shares.
(a) Stockholders
Agreement/Voting Agreement. The Board may require that a Grantee execute a stockholders agreement
and/or a voting agreement, in each case, with such terms as the Board deems appropriate, with respect to any Company Stock issued pursuant
to this Plan.
(b) Limitations
on Issuance of Shares. No Company Stock shall be issued in connection with any Grant hereunder
unless and until all legal requirements applicable to the issuance of such Company Stock have been complied with to the satisfaction of
the Board. The Board shall have the right to condition any Grant made to any Grantee hereunder on such Grantee's undertaking in writing
to comply with such restrictions on his or her subsequent disposition of such shares of Company Stock as the Board shall deem necessary
or advisable, and certificates representing such shares may be legended to reflect any such restrictions. Certificates representing shares
of Company Stock issued under this Plan will be subject to such stop-transfer orders and other restrictions as may be required by applicable
laws, regulations and interpretations, including any requirement that a legend be placed thereon.
(c) Lock-Up
Period. If so requested by the Company or any representative of the underwriters (the “Managing
Underwriter”) in connection with any underwritten offering of securities of the Company under the Securities Act of 1933, as amended
(the “Securities Act”), a Grantee (including any successor or assigns) shall not sell or otherwise transfer any shares or
other securities of the Company during the 30-day period preceding and the 180-day period following the effective date of a registration
statement of the Company filed under the Securities Act for such underwriting (or such shorter period as may be requested by the Managing
Underwriter and agreed to by the Company) (the “Market Standoff Period”). If so requested, the Grantee shall enter into a
separate written agreement to such effect in form and substance requested by the Company or the Managing Underwriter. The Company may
impose stoptransfer instructions with respect to securities subject to the foregoing restrictions until the end of such Market Standoff
Period. Notwithstanding the foregoing, the Company may require that a Grantee execute a Stockholders Agreement or other agreement containing
lock-up provisions. If such Stockholders Agreement or other agreement contains any lock-up or market standoff provisions that differ from
the provisions of this Section 11(c), for as long as the provisions of such other agreement are in effect, the provisions of this
Section 11(c) shall not apply to such Company Stock, unless the Board determines otherwise.
12. Amendment
and Termination of This Plan.
(a) Amendment.
The Board may amend or terminate this Plan at any time; provided, however, that the Board shall
not amend this Plan without stockholder approval if such approval is required in order to comply with the Code or other applicable laws,
or, after a Public Offering, to comply with applicable stock exchange requirements.
(b) Termination
of This Plan. This Plan shall terminate on the day immediately preceding the tenth anniversary
of the Effective Date, unless this Plan is terminated earlier by the Board or is extended by the Board with the approval of the stockholders.
(c) Termination
and Amendment of Outstanding Grants. A termination or amendment of this Plan that occurs
after a Grant is made shall not materially impair the rights of a Grantee unless the Grantee consents or unless the Board acts under Section 18(b).
The termination of this Plan shall not impair the power and authority of the Board with respect to an outstanding Grant. Whether or not
this Plan has terminated, an outstanding Grant may be terminated or amended under Section 18(b) or may be amended by agreement
of the Company and the Grantee consistent with this Plan.
(d) Governing
Document. This Plan shall be the controlling document. No other statements, representations,
explanatory materials or examples, oral or written, may amend this Plan in any manner. This Plan shall be binding upon and enforceable
against the Company and its successors and assigns.
13. Funding
of This Plan. This Plan shall be unfunded. The Company shall not be required to establish
any special or separate fund or to make any other segregation of assets to assure the payment of any Grants under this Plan. In no event
shall interest be paid or accrued on any Grant, including unpaid installments of Grants.
14. Rights
of Participants. Nothing in this Plan shall entitle any Employee, Key Advisor, Non-Employee
Director or other person to any claim or right to be granted a Grant under this Plan. Neither this Plan nor any action taken hereunder
shall be construed as giving any individual any rights to be retained by or in the employ of the Employer or any other employment rights.
15. No
Fractional Shares. No fractional shares of Company Stock shall be issued or delivered pursuant
to this Plan or any Grant. The Board shall determine whether cash, other awards or other property shall be issued or paid in lieu of such
fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated.
16. Headings.
Section headings are for reference only. In the event of a conflict between a title and
the content of a Section, the content of the Section shall control.
17. Effective
Date of This Plan.
(a) Effective
Date. This Plan shall be effective on the Effective Date set forth on the first page above.
(b) Public
Offering. The provisions of this Plan that refer to a Public Offering, or that refer to,
or are applicable to persons subject to, section 16 of the Exchange Act or section 162(m) of the Code, shall be effective, if at
all, upon the initial registration of the Company Stock under section 12(b) or 12(g) of the Exchange Act, and shall remain effective
thereafter for as long as such stock is so registered.
18. Miscellaneous.
(a) Grants
in Connection with Corporate Transactions and Otherwise. Nothing contained in this Plan shall
be construed to (i) limit the right of the Board to make Grants under this Plan in connection with the acquisition, by purchase,
lease, merger, consolidation or otherwise, of the business or assets of any corporation, firm or association, including Grants to employees
thereof who become Employees, or for other proper corporate purposes, or (ii) limit the right of the Company to grant stock options
or make other awards outside of this Plan. Without limiting the foregoing, the Board may make a Grant to an employee of another corporation
who becomes an Employee by reason of a corporate merger, consolidation, acquisition of stock or property, reorganization or liquidation
involving the Company, the Parent or any of their subsidiaries in substitution for a stock option or Stock Awards grant made by such corporation.
The terms and conditions of the substitute grants may vary from the terms and conditions required by this Plan and from those of the substituted
stock incentives. The Board shall prescribe the provisions of the substitute grants.
(b) Compliance
with Law. This Plan, the exercise of Options and the obligations of the Company to issue
shares of Company Stock under Grants shall be subject to all applicable laws and to approvals by any governmental or regulatory agency
as may be required. With respect to persons subject to section 16 of the Exchange Act, after a Public Offering it is the intent of the
Company that this Plan and all transactions under this Plan comply with all applicable provisions of Rule 16b-3 or its successors
under the Exchange Act. In addition, it is the intent of the Company that this Plan and applicable Grants under this Plan comply with
the applicable provisions of section 162(m) of the Code, after a Public Offering, and section 422 of the Code. To the extent that
any legal requirement of section 16 of the Exchange Act or section 162(m) or 422 of the Code as set forth in this Plan ceases to
be required under section 16 of the Exchange Act or section 162(m) or 422 of the Code, that Plan provision shall cease to apply.
The Board may revoke any Grant if it is contrary to law or modify a Grant to bring it into compliance with any valid and mandatory government
regulation. The Board may also adopt rules regarding the withholding of taxes on payments to Grantees. The Board may, in its sole
discretion, agree to limit its authority under this Section.
(c) Employees
Subject to Taxation Outside the United States. With respect to Grantees who are subject
to taxation in countries other than the United States, the Board may make Grants on such terms and conditions as the Board deems
appropriate to comply with the laws of the applicable countries, and the Board may create such procedures, addenda and subplans and
make such modifications as may be necessary or advisable to comply with such laws.
(d) Governing
Law. The validity, construction, interpretation and effect of this Plan and Grant
Instruments issued under this Plan shall be governed and construed by and determined
in accordance with the laws of the State of
Delaware, without giving effect to the conflict of laws provisions thereof.
Exhibit 10.9
AMENDMENT
TO
THE COGNITION THERAPEUTICS, INC.
2017 EQUITY INCENTIVE PLAN
WHEREAS, Cognition Therapeutics, Inc.
(the “Company”) has adopted the Cognition Therapeutics, Inc. 2017 Equity Incentive Plan (the “Plan”);
WHEREAS, Section 12(a) of
the Plan permits the Board of Directors of the Company (the “Board”) to amend the Plan from time to time;
WHEREAS, pursuant to Section 3
of the Plan, a total of 798,908 shares of Common Stock of the Company, par value $.001 per share (“Common Stock”),
plus any share of Common Stock that would otherwise revert to the share reserve of the Company’s Amended and Restated 2007 Equity
Incentive Plan, have been reserved for issuance under the Plan;
WHEREAS, the Company desires
to increase the number of shares issuable under the Plan by 2,000,000 shares of Common Stock.
NOW, THEREFORE, the following
amendments and modifications are hereby made a part of the Plan subject to, and effective as of the date of, the approval of shareholders
of the Plan as amended:
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1.
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Section 3(a) of the Plan is hereby amended by revising the first sentence of such section in
its entirety to read as follows:
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“Subject to adjustment as described
below, the aggregate number of shares of common stock of the Company (“Company Stock”) that may be issued under this Plan
is equal to (i) 2,798,908 and (ii) the number of shares that may be added to this Plan pursuant to Section 3(b) (collectively
the “Share Reserve”), each of which may be granted as an Incentive Stock Option, up to the maximum limit set forth in Section 3(d) below.”
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2.
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Section 3(d) of the Plan is hereby amended by revising the first sentence of such section in
its entirety to read as follows:
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“Notwithstanding anything to
the contrary in this Section 3, subject to the provisions of Section 3(e) relating to capitalization adjustments, the aggregate
maximum number of shares of Company Stock that may be issued pursuant to the exercise of Incentive Stock Options shall be 2,798,908 shares
of Company Stock plus the amount of any increase in the number of shares that may be available for issuance pursuant to Grants pursuant
to Section 3(h), but in no event shall greater than 13,189,392 shares of Company Stock be issued as Incentive Stock Options (the
“Maximum Incentive Stock Option Limit”).”
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3.
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In all other respects, the Plan, as amended, is hereby ratified and confirmed and shall remain in full
force and effect.
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Exhibit 10.10
AMENDMENT
TO
THE COGNITION THERAPEUTICS, INC.
2017 EQUITY INCENTIVE PLAN
WHEREAS, Cognition Therapeutics, Inc.
(the “Company”) has adopted the Cognition Therapeutics, Inc. 2017 Equity Incentive Plan (the “Plan”);
WHEREAS, Section 12(a) of
the Plan permits the Board of Directors of the Company (the “Board”) to amend the Plan from time to time;
WHEREAS, pursuant to Section 3
of the Plan, as amended, a total of 2,798,908 shares of Common Stock of the Company, par value $.001 per share (“Common Stock”),
plus any share of Common Stock that would otherwise revert to the share reserve of the Company’s Amended and Restated 2007 Equity
Incentive Plan, have been reserved for issuance under the Plan;
WHEREAS, the Company desires
to increase the number of shares issuable under the Plan by 1,224,597 shares of Common Stock.
NOW, THEREFORE, the following
amendments and modifications are hereby made a part of the Plan subject to, and effective as of the date of, the approval of shareholders
of the Plan as amended:
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1.
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Section 3(a) of the Plan is hereby amended by revising the first sentence of such section in
its entirety to read as follows:
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“Subject to adjustment as described
below, the aggregate number of shares of common stock of the Company (“Company Stock”) that may be issued under this Plan
is equal to (i) 4,023,505 and (ii) the number of shares that may be added to this Plan pursuant to Section 3(b) (collectively
the “Share Reserve”), each of which may be granted as an Incentive Stock Option, up to the maximum limit set forth in Section 3(d) below.”
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2.
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Section 3(d) of the Plan is hereby amended by revising the first sentence of such section in
its entirety to read as follows:
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“Notwithstanding anything to
the contrary in this Section 3, subject to the provisions of Section 3(e) relating to capitalization adjustments, the aggregate
maximum number of shares of Company Stock that may be issued pursuant to the exercise of Incentive Stock Options shall be 4,203,505 shares
of Company Stock plus the amount of any increase in the number of shares that may be available for issuance pursuant to Grants pursuant
to Section 3(h), but in no event shall greater than 14,413,989 shares of Company Stock be issued as Incentive Stock Options (the
“Maximum Incentive Stock Option Limit”).”
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3.
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In all other respects, the Plan, as amended, is hereby ratified and confirmed and shall remain in full
force and effect.
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Exhibit 10.13
COGNITION THERAPEUTICS, INC. 2021 EQUITY INCENTIVE
PLAN
RESTRICTED STOCK UNIT GRANT NOTICE AND
AWARD AGREEMENT
Cognition
Therapeutics, Inc., a Delaware corporation (the “Company”), pursuant to its 2021 Equity Incentive Plan (the “Plan”),
hereby grants to the individual listed below (“Participant”) the number of restricted stock units set forth below (the
“Restricted Stock Units”). The Restricted Stock Units described in this Restricted Stock Unit Grant Notice (the “Grant
Notice”) are subject to the terms and conditions set forth in the Award Agreement attached hereto as Exhibit A (the
“Agreement”) and the Plan, each of which is incorporated herein by reference. Unless otherwise defined herein, capitalized
terms used in this Grant Notice and the Agreement will have the meanings defined in the Plan.
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Participant:
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[_________]
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Grant Date:
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[_________]
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Total Number of Restricted Stock Units:
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[_________]
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Vesting Schedule:
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[_________]
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By signing
below, Participant agrees to be bound by the terms and conditions of the Plan, the Agreement and this Grant Notice. This document may
be executed, including by electronic means, in multiple counterparts, each of which will be deemed an original, and all of which together
will be deemed a single instrument.
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COGNITION THERAPEUTICS, INC.
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participant
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Name:
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Name:
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Title:
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EXHIBIT A
TO RESTRICTED STOCK
Unit GRANT NOTICE
AWARD AGREEMENT
1. Award
of Restricted Stock Units. Effective as of the Grant Date set forth in the Grant Notice, the Company has granted to Participant the
number of Restricted Stock Units set forth in the Grant Notice, subject to the restrictions and on the terms and conditions set forth
in the Grant Notice, the Plan and this Agreement. Each Restricted Stock Unit represents the right to receive one Share at the times and
subject to the conditions set forth herein.
2. Vesting
of Restricted Stock Units.
a. Subject
to the continued service of Participant with the Company through the relevant vesting dates, the Restricted Stock Units will become vested
in such amounts and at such times as set forth in the Grant Notice.
b. Solely
for purposes of this Agreement, service with the Company will be deemed to include service with an Affiliate of the Company (for only
so long as such entity remains an Affiliate of the Company).
c. Upon
Participant’s death during his or her continuous service with the Company, any Restricted Stock Units that are outstanding and
unvested immediately prior to Participant’s death will remain outstanding for ninety (90) days, during which time the Committee
may, in its sole discretion, vest all or a portion of such Restricted Stock Units. If the Committee decides to vest any Restricted Stock
Units under this Section 2.c it may condition such vesting on the execution by the Participant’s estate and/or beneficiaries of
a general release of claims against the Company and its affiliates, in such form as the Company may prescribe (a “Release”).
Upon the ninetieth (90th) day following Participant’s death, any portion of the unvested Restricted Stock Units that the Committee
has not determined to vest in accordance with this Section 2.c will be forfeited.
d. Unless
otherwise provided in the Grant Notice or in Participant’s employment agreement, upon the cessation of Participant’s service
with the Company for any reason other than as described in Section 2.c above, any unvested Restricted Stock Units will be forfeited automatically.
3. Settlement.
a. Shares
will be issued in respect of vested Restricted Stock Units within sixty (60) days following the applicable vesting date or event. For
avoidance of doubt, this settlement timing is intended to comply with the “short-term deferral” exemption from Section 409A
of the Code.
b. The
Restricted Stock Units will not confer on Participant any rights as a stockholder of the Company until Shares are actually issued in
settlement of such Restricted Stock Units.
c. Notwithstanding
the foregoing, to the extent provided in Prop. Treas. Reg. § 1.409A-1(b)(4)(ii) or any successor provision, the Company may delay
settlement of Restricted Stock Units if it reasonably determines that such settlement would violate federal securities laws or any other
applicable law.
4. Non-Transferability
of Restricted Stock Units. Restricted Stock Units may not be sold, pledged, assigned, hypothecated, gifted, transferred or disposed
of in any manner, either voluntarily or involuntarily, other than by will or by the laws of descent and distribution.
5. Section
409A. The grant of Restricted Stock Units is intended to be exempt from Section 409A of the Code and should be interpreted accordingly.
Nonetheless, the Company does not guarantee the tax treatment of the Restricted Stock Units.
6. No
Continuation of Service. Neither the Plan nor this Agreement will confer upon Participant any right to continue in the employment
or service of the Company or any of its Affiliates, or limit in any respect the right of the Company or its Affiliates to discharge Participant
at any time, for any reason.
7. The
Plan. Participant has received a copy of the Plan, has read the Plan and is familiar with its terms, and hereby accepts the Award
subject to the terms and provisions of the Plan. Pursuant to the Plan, the Committee is authorized to interpret the Plan and to adopt
rules and regulations not inconsistent with the Plan as it deems appropriate. Participant hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Committee with respect to questions arising under the Plan, the Grant Notice or this
Agreement.
8. Company
Policies. Participant agrees, in consideration for the grant of the Restricted Stock Units, to be subject to any policies of the
Company and its Affiliates regarding clawbacks, securities trading, and hedging or pledging of securities that may be in effect from
time to time, or as may otherwise be required by applicable law, regulation or exchange listing standard.
9. Entire
Agreement. The Grant Notice and this Agreement, together with the Plan, represent the entire agreement between the parties with respect
to the subject matter hereof and supersede any prior agreement, written or otherwise, relating to the subject matter hereof.
10. Amendment.
This Agreement may only be amended by a writing signed by each of the parties hereto; provided that the Company may amend this Agreement
without Participant’s consent, if the amendment does not materially impair Participant’s rights hereunder.
11. Governing
Law. This Agreement will be construed in accordance with the laws of the State of Delaware, without regard to the application of
the principles of conflicts of laws.
12. Headings.
The headings in this Agreement are for convenience only. They form no part of the Agreement and will not affect its interpretation.
13. Tax
Withholding. Participant acknowledges that the issuance of Shares hereunder will give rise to taxable income subject to required
withholding. In accordance with Section 15 of the Plan, the obligations of the Company hereunder are conditioned on the Participant timely
paying, or otherwise making arrangements satisfactory to the Company regarding the timely satisfaction of, such required withholding.
14. Electronic
Delivery of Documents. Participant authorizes the Company to deliver electronically any prospectuses or other documentation related
to the Option and any other compensation or benefit plan or arrangement in effect from time to time (including, without limitation, reports,
proxy statements or other documents that are required to be delivered to participants in such arrangements pursuant to federal or state
laws, rules or regulations). For this purpose, electronic delivery will include, without limitation, delivery by means of e-mail or e-mail
notification that such documentation is available on the Company’s Intranet site. Upon written request, the Company will provide
to Participant a paper copy of any document also delivered to Participant electronically. The authorization described in this paragraph
may be revoked by Participant at any time by written notice to the Company.
Exhibit 10.14
COGNITION THERAPEUTICS, INC. 2021 EQUITY INCENTIVE
PLAN
STOCK OPTION GRANT NOTICE AND
AWARD AGREEMENT
Cognition
Therapeutics, Inc., a Delaware corporation (the “Company”), pursuant to its 2021 Equity Incentive Plan (the “Plan”),
hereby grants to the individual listed below (“Participant”) an option to purchase the number of Shares set forth
below (the “Option”). The Option described in this Stock Option Grant Notice (the “Grant Notice”)
is subject to the terms and conditions set forth in the Award Agreement attached hereto as Exhibit A (the “Agreement”)
and the Plan, each of which is incorporated herein by reference. Unless otherwise defined herein, capitalized terms used in this Grant
Notice and the Agreement will have the meanings defined in the Plan.
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Participant:
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[_________]
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Grant Date:
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[_________]
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Exercise Price Per Share:
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[_________]
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Total Number of Shares Subject to Option:
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[_________]
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Expiration Date:
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[_________]
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Type of Option:
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¨
Incentive Stock Option (to the extent permitted by 422(d) of the Code)
¨
Non-Qualified Stock Option
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Vesting Schedule:
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[_________]
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By signing
below, Participant agrees to be bound by the terms and conditions of the Plan, the Agreement and this Grant Notice. This document may
be executed, including by electronic means, in multiple counterparts, each of which will be deemed an original, and all of which together
will be deemed a single instrument.
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COGNITION
THERAPEUTICS, INC.
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participant
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Name:
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Name:
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Title:
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EXHIBIT A
TO STOCK OPTION
GRANT NOTICE
AWARD AGREEMENT
1. Award
of Option. Effective as of the Grant Date set forth in the Grant Notice, the Company has granted to Participant the Option to purchase
part or all of the aggregate number of Shares set forth in the Grant Notice, subject to the terms and conditions set forth in the Grant
Notice, the Plan and this Agreement.
2. Term
of Option. The Option may not be exercised later than the Expiration Date set forth in the Grant Notice, subject to earlier termination
in accordance with the Plan and this Agreement.
3. Option
Exercise Price. The exercise price per Share of the Option (the “Exercise Price”) is set forth in the Grant Notice.
4. Vesting
and Exercise of Option. Subject to the continued service of Participant with the Company through the relevant vesting dates, the
Option shall become vested and exercisable in such amounts and at such times as set forth in the Grant Notice. In addition:
a. Effect
of Termination of Service due to Death on the Option. Upon Participant’s death during his or her continuous service with the
Company, any portion of the Option that is outstanding and unvested immediately prior to Participant’s death will remain outstanding
for ninety (90) days, during which time the Committee may, in its sole discretion, vest all or a portion of such Option. If the Committee
decides to vest all or any portion of such Option under this Section 4.a, it may condition such vesting on the execution by Participant’s
estate and/or beneficiaries of a general release of claims against the Company and its affiliates in such form as the Company may prescribe
(each, a “Release”). Upon the ninetieth (90th) day following Participant’s death, any portion of the unvested
Option that the Committee has not determined to vest in accordance with this Section 4.a will be forfeited.
b. Effect
of Termination of Service on the Option. Unless otherwise provided in the Grant Notice, the termination or survival of the Option
will be determined in accordance with Section 7 of the Plan.
c. Service
with Affiliates. Solely for purposes of this Agreement, service with the Company will be deemed to include service with an Affiliate
of the Company (for only so long as such entity remains an Affiliate of the Company).
d. Effect
of Termination of Service on the Option. Unless otherwise provided in the Grant Notice, this Agreement or in Participant’s
employment agreement, the termination or survival of the Option will be determined in accordance with Section 7 of the Plan.
e. Method
of Exercise. Participant may exercise the Option only to the extent it is vested. To exercise the Option, Participant must deliver
a payment of the Exercise Price, any required tax withholding and written notice of exercise to the Company in accordance with Section
5(d) of the Plan. Such notice must also be accompanied by any further documents or instruments the Company deems necessary or desirable
to carry out the purposes or intent of this Agreement.
f. Partial
Exercise. The Option may be exercised in whole or in part, provided, however, that any exercise may apply only with a whole
number of Shares.
g. Restrictions on Exercise. The Option may not be exercised, and any purported exercise will be void, if the issuance of
Shares upon such exercise would constitute a violation of any law, regulation or exchange listing requirement. The Committee may from
time to time modify the terms of the Option or impose additional conditions on the exercise of the Option as it deems necessary or appropriate
to facilitate compliance with any law, regulation or exchange listing requirement.
h. Rights
as Stockholder. The Option will not confer upon Participant any of the rights or privileges of a stockholder in the Company unless
and until Participant is issued Shares following Participant’s exercise of the Option.
5. Non-Transferability of Option. The Option may not be sold, pledged, assigned, hypothecated, gifted, transferred or disposed
of in any manner, either voluntarily or involuntarily, other than by will or by the laws of descent and distribution.
6. Adjustments.
The Exercise Price, as well as the number and kind of shares subject to the Option, are subject to adjustment in accordance with Section
3(e) of the Plan.
7. No
Continuation of Service. Neither the Plan nor this Agreement will confer upon Participant any right to continue in the employment
or service of the Company or any of its Affiliates, or limit in any respect the right of the Company or its Affiliates to discharge Participant
at any time, for any reason.
8. Withholding.
Participant acknowledges that the exercise of the Option will give rise to taxable income subject to required withholding. In accordance
with Section 15 of the Plan, the obligations of the Company hereunder are conditioned on Participant timely paying, or otherwise making
arrangements satisfactory to the Company regarding the timely satisfaction of, such required withholding.
9. The
Plan. Participant has received a copy of the Plan, has read the Plan and is familiar with its terms, and hereby accepts the Option
subject to the terms and provisions of the Plan. Pursuant to the Plan, the Committee is authorized to interpret the Plan and to adopt
rules and regulations not inconsistent with the Plan as it deems appropriate. Participant hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Committee with respect to questions arising under the Plan, the Grant Notice or this
Agreement.
10. Company
Policies. Participant agrees, in consideration for the grant of the Restricted Stock, to be subject to any policies of the Company
and its Affiliates regarding clawbacks, securities trading, and hedging or pledging of securities that may be in effect from time to
time, or as may otherwise be required by applicable law, regulation or exchange listing standard.
11. Entire
Agreement. The Grant Notice and this Agreement, together with the Plan, represent the entire agreement between the parties with respect
to the subject matter hereof and supersede any prior agreement, written or otherwise, relating to the subject matter hereof.
12. Amendment.
This Agreement may only be amended by a writing signed by each of the parties hereto; provided that the Company may amend this Agreement
without Participant’s consent, if the amendment does not materially impair Participant’s rights hereunder or as otherwise
permitted in Section 4(f), above.
13. Governing Law. This Agreement will be construed in accordance with the laws and judicial decisions of the State of Delaware,
without regard to the application of the principles of conflicts of laws.
14. Headings.
The headings in this Agreement are for convenience only. They form no part of the Agreement and will not affect its interpretation.
15. Incentive
Stock Options.
a. If
the Option is designated as an Incentive Stock Option, Participant acknowledges that nonetheless a portion of the Option may not qualify
(or may cease to qualify) as an “incentive stock option” under the Code due to limitations set forth in Section 422(d) of
the Code or otherwise. To the extent the Option does not qualify for treatment as an “incentive stock option” under the Code,
it will be treated as a non-qualified stock option. The Company does not guarantee any particular tax treatment for the Option or the
Shares subject to the Option.
b. If
the Option is designated as an Incentive Stock Option, Participant shall give prompt written notice to the Company of any disposition
or other transfer of any Shares acquired under the Option, if such disposition or transfer is made (i) within two years from the Grant
Date, or (ii) within one year after the transfer of such Shares to Participant. Such notice shall specify the date of such disposition
or other transfer and the amount realized, in cash, other property, assumption of indebtedness or other consideration, by Participant
in such disposition or other transfer.
16. Electronic
Delivery of Documents. Participant authorizes the Company to deliver electronically any prospectuses or other documentation related
to the Option and any other compensation or benefit plan or arrangement in effect from time to time (including, without limitation, reports,
proxy statements or other documents that are required to be delivered to participants in such arrangements pursuant to federal or state
laws, rules or regulations). For this purpose, electronic delivery will include, without limitation, delivery by means of e-mail or e-mail
notification that such documentation is available on the Company’s Intranet site. Upon written request, the Company will provide
to Participant a paper copy of any document also delivered to Participant electronically. The authorization described in this paragraph
may be revoked by Participant at any time by written notice to the Company.
Exhibit 10.15
Execution Version
EMPLOYMENT
AGREEMENT
EMPLOYMENT AGREEMENT effective as of June 1,
2020 (this “Agreement”) between Cognition Therapeutics, Inc. (the “Company”), a Delaware corporation, and
Lisa Ricciardi (the “Executive”).
Background:
Executive and the Company entered into an employment
agreement dated March 30, 2020 (the “Interim CEO Contract”) for Executive to serve as Interim Chief Executive Officer
of the Company for a term specified therein.
The parties desire to terminate the Interim CEO Contract
and enter into this Agreement to provide for the employment of the Executive by the Company as CEO and for certain other matters in collection
with such employment, all as set forth more fully in this Agreement. Certain capitalized terms used in this Agreement have the respective
meanings given to them in Exhibit A hereto.
Terms:
NOW, THEREFORE, in consideration of the premises
and covenants set forth herein, and intending to be legally bound hereby, the parties to this Agreement hereby agree as follows:
1. Termination
of Interim CEO Contract; Position and Duties; Board Seat.
(a) Termination
of Interim CEO Contract. The parties acknowledge and agree that the Interim CEO Contract shall terminate on the Effective Date and
all matters related to Executive’s employment shall be governed by this Agreement.
(b) Position
and Duties. The Company agrees that the Executive shall be employed by the Company to serve as Chief Executive Officer and President
of the Company. The Executive shall report directly to the Board of Directors of the Company (the “Board”). The Executive
agrees to be so employed by the Company and agrees to devote substantially all of her business time, attention, skill and efforts to perform services for the Company and to faithfully and diligently discharge and fulfill
her duties hereunder to the best of her abilities. In so doing, the Executive shall perform such executive, managerial, administrative
and financial functions as are required to develop the Company’s business and to perform other duties assigned to the Executive
by the Board that are consistent with the Executive’s title as Chief Executive Officer and President. The Executive shall perform
her duties hereunder primarily at the Company’s principal offices, currently located in Pittsburgh, Pennsylvania. In the performance
of her duties, the Executive shall travel to such other places at the Company’s expense at such times as the needs of the Company
may from time-to-time dictate or be desirable.
(c) Other
Activities. Notwithstanding Section 1(a), nothing shall preclude the Executive from engaging in professional, education, religious,
civic, charitable or similar types of activities, community affairs and/or managing her personal investments and affairs,
provided that
these activities do not interfere or conflict with the performance of her duties and responsibilities hereunder. The Executive may continue
to serve on up to five boards of directors of other enterprises.
(d) Board
Seat. Promptly after the date hereof, the Executive will be nominated for election to a seat on the Board, which the Executive shall
occupy for as long as the Executive continues to serve as Chief Executive Officer. The Executive will automatically be deemed to have
resigned the Executive’s position as a member of the Board if the Executive resigns or is terminated as the Chief Executive Officer
for any reason, and, without limiting the foregoing, the Executive agrees to submit the Executive’s written resignation in such
event upon the Company’s request.
2. Term.
The Executive’s employment under this Agreement shall commence on the Commencement Date and shall end when terminated pursuant to
Section 4.
3. Compensation.
(a) Base
Salary. The Executive shall initially be paid an annual salary at the rate of $386,000 (the “Base Salary”), payable in accordance with the Company’s payroll practices and policies in
effect from time to time and subject to applicable withholding of income taxes, social security taxes and other such payroll deductions
as are required by law or applicable employee benefit programs; provided, however, Executive’s Base Salary shall be evaluated when similarly situated executives
are evaluated for raises. Notwithstanding the above, Executive’s Base Salary shall be increased to $425,000 upon a successful raise
of an additional $50,000,000 in the Series C at a share price of $1.25 per share or higher. The Board shall review the Executive’s
Base Salary for annual increases beyond the set increase noted above.
(b) Cash
Bonus. With respect to each fiscal year of the Company during the continued full-time employment of the Executive hereunder,
commencing with the 2020 fiscal year, the Executive will be eligible to an annual performance bonus (the “Cash Bonus”)
in an amount up to 40% of the Executive’s Base Salary; provided, however, that the Cash Bonus for the 2020 fiscal year shall
be prorated based on the portion of such fiscal year during with the Executive is actually employed by the Company pursuant to the
Interim CEO Contract and this Agreement. For the avoidance of doubt, the prorated bonus for the 2020 fiscal year shall be calculated
using Executive’s start date under the Interim CEO Contract. The Cash Bonus, if any, will be awarded by the Board in its
reasonable discretion based on the achievement of Company and personal performance metrics established by the Board on an
annual basis, and in any event not later than the 60th day of the applicable fiscal year, following good faith
consultation with the Executive. Except as set forth in Section 4 of this Agreement, any Cash Bonus allocable to the Executive
hereunder shall be earned by the Executive if and only if the Executive actively employed on a full-time basis with the Company and
is otherwise in compliance with the Executive’s obligations under this Agreement through the end of the fiscal year to which
such Cash Bonus relates and, subject to sub-sections (a) and (b) of Section 4, on the payment date therefor. Any Cash
Bonus awarded to the Executive hereunder will be payable in a single lump sum cash payment, less applicable taxes and withholdings,
not later than two and one-half months after the end of the
fiscal year to which it relates in accordance with the
Company’s customary practices for annual bonus payments.
(c) Equity
Incentives. Subject to the approval of the Board, the Executive shall be granted stock options under the Equity Incentive Plan as
specified on Exhibit B hereto. In addition, the Executive shall be eligible to participate in equity incentive programs established
by the Company from time to time in accordance with the terms of those programs.
(d) Participation
in Employee Benefit Plans. The Executive shall be eligible to continue to participate in any and all employee benefit plans from time
to time in effect for employees of the Company generally. Such participation shall be subject to (i) the terms of the applicable
plan documents, and (ii) generally applicable Company policies.
(e) Vacation
and Fringe Benefits. The Executive shall be entitled to participate in all vacation and other fringe benefit programs of the Company
to the extent and on the same terms and conditions as are accorded to other senior management employees of the Company.
(f) Reimbursement
of Other Expenses.
(i) The
Company will directly pay for the attorneys’ fees incurred by the Executive in connection with the review and negotiation of this
Agreement, as well as all other documents in connection with the commencement of her employment with the Company in an aggregate amount up to $15,000. Upon receiving a summary invoice and Form W9 from Outten & Golden LLP, the Company
shall issue payment to Outten & Golden LLP no later than 10 business days following the Executive’s submission of such
documentation.
(ii) The
Company shall reimburse the Executive for the reasonable and necessary out-of-pocket business expenses incurred by the Executive for or on behalf of the Company in furtherance of the performance
of the Executive’s duties hereunder in accordance with the Company’s policies as approved by the Board from time to time,
subject in all cases to the Company’s requirements with respect to reporting and documentation of such expenses.
(g) Section 409A.
If any reimbursement under this Section 3 is not exempt from Section 409A of the Internal Revenue Code of 1986, as amended (the
“Code”) then (i) any reimbursement in one calendar year shall not affect the amount that may be reimbursed in any other
calendar year; (ii) a reimbursement (or right thereto) may not be exchanged or liquidated for another benefit or payment; and (iii) a
reimbursement shall be made no later than the end of the calendar year following the calendar year in which the Executive incurred the
related expense.
4. Termination.
(a) Death. The
Executive’s employment with the Company shall automatically terminate effective as of the date of the Executive’s death,
in which event the Company shall not have any further obligation or liability under this Agreement except that the Company shall pay
to the Executive’s estate: (i) any portion of the Executive’s Base
Salary for the period up to the Executive’s
date of death that has been earned but remains unpaid; (ii) any expenses properly incurred but not yet reimbursed, including, without
limitation, the reimbursements provided for in sub-sections (d) and (f) of Section 3; (iii) any benefits that have
accrued to the Executive under the terms of the employee benefit plans of the Company, which benefits shall be paid in accordance with
the terms of those plans (the payments in clauses (i) through (iii) collectively, the “Accrued Obligations”); (iv) the
Cash Bonus awarded pursuant to Section 3(b), if any, with respect to the fiscal year prior to the fiscal year of termination, to
the extent unpaid (the “Earned Bonus”). The Accrued Obligations shall be paid on the first payroll date following the last
date of employment to the extent administratively feasible and, if not, then on the second payroll date following the last date of employment.
The Earned Bonus, if any, will be paid when it would have been paid had Executive remained employed with the Company.
(b) Disability.
The Company may terminate the employment of the Executive immediately upon written notice to the Executive in the event of the Disability
of the Executive, in which event the Company shall not have any further obligation or liability under this Agreement except for the Accrued
Obligations and the Earned Bonus. The Accrued Obligations shall be paid on the first payroll date following the last date of employment
to the extent administratively feasible and, if not, then on the second payroll date following the last date of employment. The Earned
Bonus, if any, will be paid when it would have been paid had Executive remained employed with the Company.
(c) Termination
of the Executive’s Employment for Cause. The Company may terminate the employment of the Executive for Cause immediately upon providing written notice of such termination to the Executive.
If the Executive’s employment with the Company is terminated by the Company for Cause, the Company shall not have any further obligation
or liability under this Agreement except for the Accrued Obligations. The Accrued Obligations shall be paid on the first payroll date
following the last date of employment to the extent administratively feasible and, if not, then on the second payroll date following the last date of employment.
(d) Other
Termination by the Company. The Company may terminate the employment of the Executive for any reason other than one specified in
Section 4(b) or Section 4(c) immediately upon written notice of termination to the Executive. If the Executive’s
employment with the Company is terminated by the Company for any reason other than one specified in Section 4(b) or Section 4(c),
in addition to the Accrued Obligations and the Earned Bonus, and subject to the execution by the Executive of a release in the form of
Exhibit C hereto (the “Release”) and the compliance by the Executive with the Release and all terms and provisions
of this Agreement and the Invention Assignment Agreement (as defined in Section 5(b)) that survive the termination of the Executive’s
employment by the Company the Executive shall be entitled to receive (i) severance payments in an amount equal to the Base Salary
for the for the twelve (12) month period following the termination date; (ii) direct payment by the Company of COBRA premiums at
the same level of employer subsidization as was in effect on the termination date until the earlier of the end of the twelve (12) month
period following the termination date or (2) the date the Executive becomes eligible for group health insurance through another
employer and (iii) with regard to any of the Executive’s awarded and outstanding options to purchase shares of the Company’s
Common Stock that are subject to
time-based vesting, a number of option shares equal
to the number of shares that would have vested if Executive continued to be employed for a period equal to 9 months after the date of
termination shall become vested and exercisable. Notwithstanding the foregoing, if the Executive’s employment with the Company
is terminated by the Company (or its successor) for any reason other than one specified in Section 4(b) or Section 4(c) within
the twelve (12) month period following a Change of Control, then, in addition to the Accrued Obligations and the Earned Bonus, and subject
to the execution by the Executive of the Release and the compliance by the Executive with the Release and all terms and provisions of
this Agreement and the Invention Assignment Agreement (as defined in Section 5(b)) that survive the termination of the Executive
s employment by the Company, the Executive shall be entitled to (A) receive severance payments in the form of continued payment
of the Base Salary for the eighteen (18) month period following the termination date, (B) direct payment by the Company of COBRA
premiums at the same level of employer subsidization as was in effect on the termination date until the earlier of (1) the date
that is eighteen (18) months following the termination date or (2) the date the Executive becomes eligible for group health insurance
through another employer, (C) an amount equal to the target Cash Bonus and (D) with regard to any of the Executive’s
awarded and outstanding options to purchase shares of the Company’s Common Stock that are subject to time-based vesting, a number
of option shares equal to the number of shares that would have vested if Executive continued to be employed for a period equal to 9 months
after the date of termination shall become vested and exercisable. Any payments and benefits due pursuant to this Section 4(d),
other than the Accrued Obligations and Earned Bonus, shall be paid or commence as soon as administratively feasible within 60 days, but
no earlier than 30 days, after the date of the Executive’s termination of employment, provided the Executive has timely executed
and returned the Release and, if a revocation period is applicable, the Executive has not revoked the Release; provided however, that
if the 60-day period begins in one calendar year and ends in a second calendar year, the severance payments shall begin to be paid in
the second calendar year. On the date that payments pursuant to this Section 4(d) commence, the Company will pay the Executive
in a single lump sum payment, less applicable taxes and withholding, the payments that the Executive would have received on or prior
to such date but for the delay imposed by the immediately preceding sentence, with the balance of the payments to be paid as originally
scheduled. The Accrued Obligations will be paid on the first payroll date following last date of employment to the extent administratively
feasible and, if not, then on the second payroll date following the last date of employment. The Earned Bonus will be paid when it would
have been paid had Executive remained employed with the Company. If the Executive’s employment with the Company is terminated by
the Company pursuant to this Section 4(d), the Company shall not have any further obligation or liability under this Agreement except
for the payments specified in this Section 4(d) and payment of the Accrued Obligations and the Earned Bonus.
(e) Termination
by the Executive for Good Reason. The Executive may terminate her employment with the Company for Good Reason immediately upon providing
written notice of such termination to the Company. If the Executive shall terminate the Executive’s employment with the Company
for Good Reason, the Executive shall be entitled to receive the same payments and benefits on the same terms and conditions as would
be applicable upon a termination of the Executive’s employment by the Company as provided in Section 4(d) and subject
to the satisfaction of the other provisions of such Section 4(d) and this Section 4(e). If the Executive’s employment
with the Company is terminated by the
Executive for Good
Reason pursuant to this Section 4(e), the Company shall not have any further obligation or liability under this Agreement except
for the payments specified in Section 4(d) and payment of the Accrued Obligations and the Earned Bonus. The Executive may not terminate
her employment with the Company for Good Reason pursuant to this Section 4(e), and shall not be considered to have done so for any
purpose of this Agreement, unless (A) the Executive, within 60 days after the initial existence of the act or failure to act by
the Company that constitutes “Good Reason” within the meaning of this Agreement, provides the Company with written notice
that describes in particular detail, the act or failure to act that the Executive believes to constitute “Good Reason” and
identifies the particular clause of this Section 4(e) that the Executive contends is applicable to such act or failure to act;
(B) the Company, within 30 days after its receipt of such notice, fails or refuses to rescind such act or remedy such failure to
act so as to eliminate “Good Reason” for the termination by the Executive of the Executive’s employment relationship
with the Company; and (C) the Executive actually resigns from the employ of the Company on or before that date that is 12 calendar
months after the initial existence of the act or failure to act by the Company that constitutes “Good Reason.” If the requirements
of the immediately preceding sentence are not fully satisfied on a timely basis, then the resignation by the Executive from the employ
of the Company shall not be deemed to have been for “Good Reason,” the Executive shall not be entitled to any of the benefits
to which the Executive would have been entitled if the Executive had resigned from the employ of the Company for “Good Reason,”
and the Company shall not be required to pay any amount or provide any benefit that would otherwise have been due to the Executive under
this Section 4(e) had the Executive resigned with “Good Reason.”
(f) Other
Termination by the Executive. The Executive may terminate the Executive’s employment for any reason other than one specified
in Section 4(e) upon 30 days’ prior written notice of termination to the Company. In the event the Executive shall terminate
the Executive’s employment pursuant to this Section 4(f), the Company shall not have any further obligation or liability under
this Agreement, except for the Accrued Obligations, which shall be paid on the first payroll date following last date of employment to
the extent administratively feasible and if not, then on the second payroll date following the last date of employment. The Company shall
not have the right following Executive’s provision of notice to terminate the Executive’s employment prior to the end of the
notice period unless the Company pays the Executive for the full notice period.
(g) Base
Salary Continuation. The Base Salary continuation set forth in Sections 4(d) and (e) above shall be intended either (i) to
satisfy the safe harbor set forth in the Treas. Regs. 1.409A-1(b)(9)(iii), or (ii) be treated as a Short-term Deferral as that term
is defined Treas. Regs. 1.409A-1(b)(4). To the extent such continuation payments exceed the applicable safe harbor amount or do not constitute
a Short-term Deferral, the excess amount shall be treated as deferred compensation under Code section 409A and as such shall be payable
pursuant to the following schedule: such excess amount shall be paid via standard payroll in periodic installments in accordance with
the Company’s usual practice for its senior executives. Solely for the purposes of Code section 409A, each installment payment is
considered a separate payment. Notwithstanding any provision in this Agreement to the contrary, in the event that the Executive is a “specified
employee” as defined in Code section 409A, any continuation payment, continuation benefits or other amounts payable under this Agreement
that would be subject to the special rule regarding payments to “specified employees” under Section 409(A)(a)(2)(B) of
the
Code shall not be paid before the expiration of a period of six months following the date of the Executive’s termination of
employment or before the date of the Executive’s death, if earlier.
(h) Parachute
Provisions. In the event a Change of Control occurs, the Company will engage an independent accounting firm (the “Accounting
Firm”) at its expense to determine whether the Executive received, is entitled to receive or will become entitled to receive any
benefits or payments in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) (the “Total Payments”)
and whether the Total Payments will be subject to the tax (the “Excise Tax”) imposed by Section 4999 of the Code. If
the Total Payments will be subject to the Excise Tax, at the Executive’s election, (i) the Company shall use reasonable efforts
to obtain the approval of Company’s stockholders in the manner contemplated by Q&A 7 of Treas. Reg. Section 1.280G such
that the Excise Tax shall not apply to any portion of the Total Payments, or (ii) the aggregate present value of the Total Payments
shall be reduced (but not below $1) if reducing the Total Payments will provide the Executive with a greater net after-tax amount than
would be the case if no reduction was made. Any reduction shall be done in accordance with Section 409A of the Code.
5. Restrictive
Covenants.
(a) Non-Competition
and Non-Solicitation. The Executive shall not, and shall not permit any person or entity directly or indirectly controlled by the
Executive (alone or together with others) (the “Executive Affiliates”) to, directly or indirectly (including, without limitation,
through ownership, management, operation or control of any other person or entity, or participation in the ownership, management, operation
or control of any other person or entity, or by having any interest, as a stockholder, lender, investor, agent, consultant, employee,
partner or otherwise, in or with respect to any other person or entity) do any of the following:
(i) During
the period of the Executive’s employment with the Company and for 12 months following the date of termination of the Executive’s
employment for any reason (the “Restricted Period”), own, manage, operate, control, invest in, participate in, provide consulting
services to, or be involved or associated with in any capacity, any person or entity that is engaged in a Competitive Business anywhere
in the world; provided that the foregoing shall not prohibit the Executive and Executive Affiliates from owning in the aggregate less
than one percent of any class of securities listed on a national securities exchange or traded publicly in the over-the-counter market;
(ii) During
the Restricted Period: (A) solicit, encourage or entice any client, customer, vendor, licensee, licensor, consultant or supplier
of or to the Company to cease to do business with, or to reduce or modify the business such person or entity has done with or intends
to do with, or to end, reduce or modify any relationship or proposed relationship of such person or entity with, the Company, or (B) interfere
with, disrupt or attempt to disrupt or otherwise jeopardize any relationship of the Company with any client, customer, vendor, licensee,
licensor, consultant or supplier or any other person or entity with whom the Company has a business relationship; and
(iii) During
the Restricted Period, solicit, hire, contract for services or otherwise employ any person who at the time of the Executive’s termination
of employment or at any time during the six-month period immediately preceding such termination is or was an employee of, or a consultant
to, the Company, or otherwise encourage any such individual to leave the employ of, or to terminate any such consulting arrangement with,
the Company, or, with respect to any such employee or consultant who is then an employee of or consultant to the Company, to become an
employee of, or consultant to, any other person or entity, or employ or retain any such person.
(b) Invention
Assignment Agreement. The Executive and the Company have entered into that certain Employment Confidentiality and Invention Agreement
dated as of the date hereof (the “Invention Assignment Agreement”) and attached hereto as Exhibit D, the terms
and conditions of which are incorporated by reference herein and made a part hereof.
(c) Injunctive
Relief. The Executive acknowledges that the Executive’s compliance with the agreements in this Section 5 is necessary to
protect the good will and other proprietary interests of the Company and that the Executive is one of the principal executives of the
Company and conversant with its affairs, its trade secrets and other proprietary information. The Executive acknowledges that a breach
of any of the Executive’s agreements in this Section 5 may result in irreparable and continuing damage to the Company for which
there may be no adequate remedy at law; and the Executive agrees that in the event of any material breach of the aforesaid agreements,
the Company and its successors and assigns shall be entitled to seek injunctive relief and to such other and further relief as may be
proper.
(d) Tolling.
The Restricted Period and any additional periods thereafter under this Section 5 shall be tolled and shall cease to run during the
period of any violation by the Executive of any of the Restrictive Covenants.
6. No
Conflicts. The Executive represents and warrants that the Executive is not party to any agreement,
contract or understanding, whether of employment, consultancy or otherwise, in conflict with this Agreement or which would in any way
restrict or prohibit the Executive from undertaking or performing services for the Company or otherwise from entering into or performing
this Agreement or the Invention Assignment Agreement.
7. Full
Agreement. This Agreement (including the Exhibits hereto), constitutes the entire agreement of
the parties concerning its subject matter and supersedes all other oral or written understandings, discussions, and agreements, and may
be modified only in a writing signed by both parties. The parties acknowledge that they have read and fully understand the contents of
this Agreement and execute it after having an opportunity to consult with legal counsel.
8. Amendments.
Any amendment to this Agreement shall be made in writing and signed by the parties hereto.
9. Enforceability.
If any provision of this Agreement shall be invalid or unenforceable, in whole or in part, then
such provision shall be deemed to be modified or restricted to the extent and in the manner necessary to render the same valid and enforceable,
or shall be deemed excised from this Agreement, as the case may require, and this Agreement shall be construed and enforced to the maximum
extent permitted by law as if such provision had been originally incorporated herein as so modified or restricted or as if such provision
had not been originally incorporated herein, as the case may be.
10. Construction.
This Agreement shall be construed and interpreted in accordance with the internal laws of the Commonwealth of Pennsylvania.
11. Assignment.
(a) By
the Company. The rights and obligations of the Company under this Agreement shall inure to the benefit of, and shall be binding upon,
the successors and assigns of the Company. This Agreement may be assigned to the Company without the consent of the Executive.
(b) By
the Executive. This Agreement and the obligations created hereunder may not be assigned by the Executives, but all rights of the Executive
hereunder shall inure to the benefit of and be enforceable by the Executive’s heirs, devisees, legatees executors, administrators
and personal representatives. Any attempted assignment in violation of this Section 11(b) shall be null and void.
12. Notice.
All notices required or permitted to be given hereunder shall be in writing and shall be deemed to have been given when mailed by certified
mail, return receipt requested, or delivered by a national overnight delivery service addressed to the intended recipient as follows:
If to the Company:
Cognition Therapeutics, Inc.
2403 Sidney St # 261
Pittsburgh,
PA 15203
Attention: Chairman of the Board
If to the Executive:
Lisa Ricciardi
40 Old Post Road
Rye, NY 10580
With a copy to:
Wendi S. Lazar, Esq.
Outten & Golden, LLP
685
Third Avenue, Floor 25
New York, NY 10017
Any party may from time to time change its address for the purpose
of notices to that party by a similar notice specifying a new address, but no such change shall be deemed to have been given until it
is actually received by the party sought to be charged with its contents.
13. Waivers.
No claim or right arising out of a breach or default under this Agreement shall be discharged in whole or in part by a waiver of that
claim or right unless the waiver is supported by consideration and is in writing and executed by the aggrieved party hereto or such party’s
duly authorized agent. A waiver by any party hereto of a breach or default by the other party hereto of any provision of this Agreement
shall not be deemed a waiver of future compliance therewith, and such provisions shall remain in full force and effect.
14. Survival
of Covenants. The provisions of Section 4 through this Section 14 shall survive the
termination of the Executive’s employment shall continue in effect thereafter.
(Signature page follows)
Execution Version
IN WITNESS WHEREOF, this Agreement has been executed
by the parties on the date(s) indicated below first above written.
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COGNITION THERAPEUTICS, INC.
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By:
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/s/ Robert Gailus
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Title:
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Chairman of the Board
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Date:
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6/6/20
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/s/ Lisa Ricciardi
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Lisa Ricciardi
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Date:
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6/9/20
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Exhibit A
Certain
Definitions
The following terms have the meaning set forth below
wherever they are used in this Agreement.
“Cause” for the Company (or a successor,
if appropriate) to terminate the Executive’s employment will exist upon the occurrence of any of the following events: (i) the
Executive’s material breach of this Agreement or any material violation of the Company’s written policies or rules; (ii) the
Executive’s having committed willful fraud or willful misconduct, in any such case which is materially injurious to the Company;
(iii) the Executive’s having been convicted of a felony involving moral turpitude that results in material harm to the standing
or reputation of the Company; or (iv) the Executive’s material breach of the terms of the Invention Assignment Agreement; provided,
however, that no Cause shall exist unless the Company has provided written notice to Executive describing in detail such Cause conduct
and, to the extent an at or omission giving rise to Cause is reasonably susceptible to cure, Executive shall be given a reasonable opportunity,
not to exceed thirty (30) days, after written notice by the Company to cure such act or omission.
“Change of Control” shall have the meaning
set forth in the Equity Incentive Plan.
“Code” means the Internal Revenue Code
of 1986, as amended.
“Commencement Date” means May ___,
2020.
“Competitive Business” means a business
that is engaged in the research, development, marketing, manufacturing, sale or other commercialization of any compound or other agent
that targets the sigma-2/PGRMC1 receptor for the prevention and/or treatment of Alzheimer’s Disease or any other neurodegenerative
indication or condition.
“Disability means a condition entitling the
Executive to benefits under the Company’s long term disability plan, policy or arrangement; provided, however, that if no such plan,
policy or arrangement is then maintained by the Company and applicable to the Executive, “Disability” will mean an illness,
incapacity or a mental or physical condition that renders the Executive unable or incompetent, with or without a reasonable accommodation,
to carry out the job responsibilities that the Executive held or the tasks that the Executive was assigned at the time the disability
commenced, as determined in good faith by a physician mutually acceptable to the Company and the Executive, for a period of 90 consecutive
days, or 180 non-consecutive days in any rolling 12-month period.
“Equity Incentive Plan” means the Cognition
Therapeutics, Inc. 2017 Equity Incentive Plan, as amended from time to time, and any successor thereto.
“Full Diluted Equity” means the issued
and outstanding shares of the Company’s Common Stock, determined on a fully-diluted, as-converted basis as of the date of grant
of the applicable stock options.
“Good Reason” for the Executive to resign
from the employ of the Company will exist upon the occurrence of any of the following events, subject to compliance with the other provisions
of Section 4(e): (a) a reduction in the Base Salary, as then in effect; (b) a material reduction of the Executive’s
authority, position, responsibilities or duties, except that, following a Change of Control, a reduction in authority, position, responsibilities
or duties solely by virtue of the Company being acquired and becoming part of a larger entity or operated as a subsidiary shall not constitute
Good Reason; (c) a change in title or reporting line; (d) Executive no longer holding a board seat in accordance with Section 1(c);
(c) the Company’s material breach of this Agreement; or (d) a relocation of the Executive’s principal workplace
by more than 30 miles from the Company’s principal offices as of the Commencement Date.
Execution Version
Exhibit B
Stock
Option Terms
Initial Stock Option. In addition to
the options granted to Executive under the Interim CEO Contract, the Executive will be granted additional stock options under the Equity
Incentive Plan exercisable for the purchase of shares of the Company’s Common Stock (“Share”) representing 5% of the
Company’s Fully Diluted Equity (the “Initial Stock Options”). The Initial Stock Options will vest over a four-year period
as follows: (i) 25% vesting on the first anniversary of the Commencement Date; and (ii) 75% vesting in equal monthly installments
over the following 36 months.
The Executive will be granted additional stock options
upon completion of the Series C if completed as an up round at $1.15 per share to maintain her Fully Diluted Equity position at a
minimum of 5%. Notwithstanding the above, if the Executive’s performance exceeds expectation, but does not reach the specified share
price hurdle noted above, the Board will not unreasonably withhold the additional stock options grant to maintain her Fully Diluted Equity
position at a minimum of 5%. Notwithstanding anything to the contrary, the Executive shall be entitled to the immediate vesting of any
unvested Shares subject to the Initial Stock Options if the Company undergoes a Change of Control and the Executive is still actively
employed by the Company on the closing of such Change of Control.
Additional Stock Option. If the Company
closes an offering of its equity securities at a price per share of the Company’s Preferred Stock of at least $1.75, and the Executive
is actively employed by the Company on the date of such closing, the Company shall grant the Executive an additional stock option (“Additional
Option”) to purchase Shares representing 1% of the Company’s Fully Diluted Equity, taking into account the securities issued
in the applicable offering), after giving effect to such grant. The Additional Option will vest as follows: (i) 25% of the Shares
underlying the Additional Option shall vest and become exercisable on the date of grant (“Grant Date”); and (ii) the
remaining 75% of the Shares underlying the Additional Option shall vest and become exercisable in 36 substantially equal monthly installments,
with each such installment vesting on the first day of every calendar month commencing on the first day of the first full calendar month
following the Grant Date, subject to the Executive’s continued employment by the Company through each such date.
Notwithstanding anything to the contrary, if the
Company undergoes a Change of Control at a price per share of the Company’s Preferred Stock of at least $1.75 but less than $3.50,
and the Executive is still actively employed by the Company on the closing of such Change of Control, the Executive shall be entitled
to the immediate vesting of any unvested Shares subject to the Additional Option, then held by the Executive.
Second Additional Option. If the Company closes an offering
of its equity securities at a price per share of the Company’s Preferred Stock of at least $3.50, and the Executive is actively
employed by the Company on the date of such closing, the Company shall grant the Executive an additional stock option (“Second
Additional Option”) to
purchase Shares representing 1% of the Company’s
Fully Diluted Equity, taking into account the securities issued in the applicable offering), after giving effect to such grant. The Second
Additional Option will vest as follows: (i) 25% of the Shares underlying the Second Additional Option shall vest and become exercisable
on the date of grant (the “Second Grant Date”); and (ii) the remaining 75% of the Shares underlying the Second Additional
Option shall vest and become exercisable in 36 substantially equal monthly installments, with each such installment vesting on the first
day of every calendar month commencing on the first day of the first full calendar month following the Second Grant Date, subject to
the Executive’s continued employment by the Company through each such date.
Notwithstanding anything to the contrary, if the
Company undergoes a Change of Control at a price per share of the Company’s Preferred Stock of at least $3.50, and the Executive
is still actively employed by the Company on the closing of such Change of Control, the Executive shall be entitled to the immediate vesting
of any unvested Shares subject to the Additional Option and Second Additional Option then held by the Executive.
The exercise price of all stock options will be the
fair market value per share of Common Stock as determined by the Board, and the grant thereof will be subject to the execution of a stock
option agreement in the form approved by the Company. In addition, the following terms shall apply to all such stock option grants: (i) the
stock options shall have a 10-year terms, (ii) the stock options shall remain exercisable, to the extent vested, for a period equal
to the lesser of three years plus 90 days (or 2 years plus 90 days in the event that Executive is terminated for Cause) after the date
of termination or until the end of the 10-year term, regardless of the Executive’s employment status with the Company, (iii) the
definition of “Cause” for purposes of the stock options shall have the meaning set forth in this Agreement and not the Equity
Incentive Plan and (iv) subject to applicable legal requirements and limitations with respect to vesting, exercisability and other
applicable terms, it is intended that all stock options granted to the Executive be treated as incentive stock options under Section 422
of the Code, with any portion that does not so qualify being treated as nonqualified stock options.
Execution Version
EXHIBIT C
RELEASE OF CLAIMS
1. Termination
of Employment. Lisa Ricciardi (“Executive”) hereby agrees and recognizes that, as of ________, 20__, Executive’s
employment relationship with Cognition Therapeutics, Inc., a Delaware corporation (the “Company”), will be permanently
and irrevocably severed.
2. Release
of Claims. In consideration of the payments and benefits described in Section 4(d) and Section 4(e) of the
employment agreement (the “Employment Agreement”), effective May ___, 2020, by and between Executive and the
Company, to which Executive agrees Executive is not entitled until and unless Executive executes and does not revoke this Release,
Executive, for and on behalf of herself and her heirs, executors, administrators and assigns, hereby waives and releases any and all
complaints, claims, suits, controversies, and actions, whether known or unknown, suspected or claimed, which Executive, or any of
the Executive’s heirs, executors, administrators or assigns ever had, now has or may have against the Company and/or its
respective predecessors, successors, past or present parents or subsidiaries, affiliates, investors, branches or related entities,
in their respective capacities as such (collectively, including the Company, the “Entities”) and/or the Entities’
past or present stockholders, insurers, assigns, trustees, directors, officers, limited and general partners, managers, joint
venturers, members, employees or agents in their respective capacities as such (collectively with the Entities, the
“Releasees”) by reason of circumstances, acts or omissions which have occurred on or prior to the date that this Release
becomes effective, including, without limitation, (a) any complaint, charge or cause of action arising under (i) federal,
state or local laws pertaining to employment or termination of employment, including the Age Discrimination in Employment Act of
1967 (the “ADEA,” a law which prohibits discrimination on the basis of age), the National Labor Relations Act, as
amended, the Civil Rights Act of 1991, as amended, the Americans with Disabilities Act of 1990, as amended, Title VII of the Civil
Rights Act of 1964, as amended, the Equal Pay Act of 1963, as amended, the Family and Medical Leave Act of 1993, as amended, the
Worker Adjustment Restraining and Notification Act, as amended, the Executive Retirement Income Security Act of 1974, as amended,
any applicable Executive Order Programs, the Fair Labor Standards Act, or their state or local counterparts (including, but not
limited to, the Pennsylvania Human Relations Act); (ii) any other federal, state or local civil or human rights law;
(iii) any other local, state, or federal law, regulation or ordinance; (iv) any public policy, contract and/or
quasi-contract or tort (including, but not limited to, claims of breach of the Employment Agreement, an expressed or implied
contract, tortious interference with contract or prospective business advantage, breach of the covenant of good faith and fair
dealing, promissory estoppel, detrimental reliance, invasion of privacy, nonphysical injury, personal injury or sickness or any
other harm, wrongful or retaliatory discharge, fraud, defamation, slander, libel, false imprisonment, negligent or intentional
infliction of emotional distress); (v) common law; or (vi) any policies, practices or procedures of the Company; or
(b) any claim for costs, fees, or other expenses, including attorneys’ fees incurred in these matters (the
“Released Claims”). By signing this Release, Executive acknowledges that she intends to waive and release any rights
known or unknown that she may have against the Releasees under these and any other laws. Notwithstanding the foregoing, Executive
does not release, discharge or waive: any rights to indemnification
that she may have under the certificate of incorporation, the
by-laws or equivalent governing documents of the Company or its subsidiaries or affiliates, the laws of the State of Delaware or any
other state of which any such subsidiary or affiliate is a domiciliary, the Employment Agreement or any indemnification agreement
between Executive and the Company, including those that cannot be released as a matter of law, such as her rights to COBRA, workers
compensation, and unemployment insurance; any rights to insurance coverage under any directors’ and officers’ personal
liability insurance or fiduciary insurance policy; any rights she may have in her capacity as a stockholder of the Company; any
rights she may have to enforce the vested terms of any equity or other incentive agreement previously provided to her; any rights
she may have to severance benefits and payment of Accrued Obligations or the Earned Bonus under the Employment Agreement (the
“Excluded Claims”). The Executive acknowledges that she has made no assignment or transfer of any right, claim, demand,
cause of action, or other matter covered by this Section 1.
3. Proceedings.
Executive acknowledges that she has not filed any complaint charge, claim or proceeding, if any, or assigned to any other person the right
to bring any such complaint, charge, claim, or proceeding, relating to the Related Claims against any of the Releasees before any local,
state or federal agency, court or other body (each individually a “Proceeding”). Executive (i) acknowledges that she
will not initiate or cause to be initiated on her behalf any Proceeding and will not participate in any Proceeding, in each case, except
as required by law and (ii) waives any right she may have to benefit in any manner from any relief (whether monetary or otherwise)
arising out of any Proceeding, including any Proceeding conducted by the Equal Employment Opportunity Commission (the “EEOC”).
Further, Executive understands that, by executing this Release, she will be limiting the availability of certain remedies that she may
have against the Releasees and limiting also her ability to pursue certain claims against the Releasees. Notwithstanding the above, nothing
in Section 1 of this Release shall prevent Executive from (i) initiating or causing to be initiated on her behalf any complaint,
charge, claim or proceeding against any Releasee before any local, state or federal agency, court or other body challenging the validity
of the waiver of her claims under the ADEA contained in Section 1 of this Release (but no other portion of such waiver), (ii) initiating
or participating in an investigation or proceeding conducted by the EEOC or (iii) reporting possible violations of federal, state
or local law, ordinance or regulation to any governmental agency or entity, including, but not limited to, the Department of Justice,
the U.S. Securities and Exchange Commission (the “SEC”), the Congress and any agency Inspector General, or otherwise taking
action or making disclosures that are protected under the whistleblower provisions of any federal, state or local law, ordinance or regulation,
including, but not limited to, Rule 21F-17 promulgated under the Securities Exchange Act of 1934, as amended, or (iv) receiving
a monetary award for information provided to the SEC pursuant to Rule 21F-17 promulgated under the Securities Exchange Act of 1934,
as amended. The Executive acknowledges and agrees that the Executive’s separation from employment with the Company in compliance
with the terms of the Employment Agreement shall not serve as the basis for any claim or action (including, without limitation, any claim
under the Age Discrimination in Employment Act of 1967).
4. Time
to Consider. Executive acknowledges that she has been advised that she has twenty-one (21)/forty-five(45) days from the date of receipt
of this Release to consider all the provisions of this Release and, further, that if Executive signs this Release prior to the expiration
of such twenty-one(21)/forty-five (45) day period, she does hereby knowingly and voluntarily waive said given twenty-one(21)/forty-five
(45) day period. EXECUTIVE FURTHER ACKNOWLEDGES THAT SHE HAS RELEASE THIS RELEASE CAREFULLY, HAS BEEN ADVISED BY THE COMPANY TO, AND
HAS IN FACT, CONSULTED AN ATTORNEY, AND FULLY UNDERSTANDS THAT BY SIGNING BELOW SHE IS GIVING UP CERTAIN RIGHTS WHICH SHE MAY HAVE
TO SUE OR ASSERT A CLAIM AGAINST ANY OF THE RELEASEES, AS DESCRIBED IN SECTION 1 OF THIS RELEASE AND THE OTHER PROVISIONS HEREOF.
EXECUTIVE ACKNOWLEDGES THAT SHE HAS NOT BEEN FORCED OR PRESSURED IN ANY MANNER WHATSOEVER TO SIGN THIS RELEASE, AND EXECUTIVE AGREES
TO ALL OF ITS TERMS VOLUNTARILY. [EXECUTIVE ALSO ACKNOWLEDGES THAT SHE HAS RECEIVED ALL INFORMATION REQUIRED TO BE DISCLOSED IN CONNECTION
WITH AN EXIT INCENTIVE OR OTHER EMPLOYMENT TERMINATION PROGRAM.]
5. Revocation.
Executive hereby acknowledges and understands that Executive shall have seven (7) days from the date of her execution of this Release
to revoke this Release (including, without limitation, any and all claims arising under the ADEA) and that neither the Company nor any
other person is obligated to provide any benefits to Executive pursuant to Section 4(d) or Section 4(e) of the Employment
Agreement until eight (8) days have passed since Executive’s signing of this Release without Executive having revoked this
Release, in which event the Company immediately shall arrange and/or pay for any such benefits otherwise attributable to said eight (8) day
period, consistent with the term of the Employment Agreement. If Executive revokes this Release, Executive will be deemed not to have
accepted the terms of this Release, no action or forbearance of action will be required of the Company under any section of this Release,
and Executive shall not be entitled to receive any portion of the severance compensation and benefits which are conditioned on the delivery
of this Release.
6. No
Admission. This Release does not constitute an admission of liability or wrongdoing of any kind by Executive or the Company.
7. Confidentiality.
Executive agrees that Executive will not communicate or disclose the terms of this Release to any persons with the exception of members
of Executive’s immediate family and Executive’s attorney and financial advisor, or as permitted by Section 3 above.
8. Return
of Company Property. Executive represents that all equipment and other property of the Company, including any documents and
files, whether electronically stored or maintained in hard copy, have been returned to the Company, and that Executive has
not
retained any copies of the same. Notwithstanding anything to the contrary in this Agreement, Executive may retain her contact lists,
whether in electronic or paper form (e.g. rolodex, Outlook contacts, etc.) and copies of documents related to Executive’s
compensation and benefits.
9. Non-Disparagement.
Executive will not disparage any Releasee or otherwise take any action which could reasonably be expected to adversely affect the personal
or professional reputation of any Releasee. The Company’s directors, officers and senior executives shall not disparage or otherwise
take any action which could reasonably be expected to adversely affect the personal or professional reputation of the Executive.
10. Post-Employment
Obligations. Executive reaffirms that she will comply with all of her post-employment obligations as set forth in Section 5 of
the Employment Agreement.
11. Entire
Agreement. This Agreement constitutes the entire agreement between the parties and supersedes any and all prior representations, agreements,
written or oral, expressed or implied, except for Section 5 of the Employment Agreement, which survives the termination of Executive’s
employment and is incorporated herein by reference, and except for any agreements with respect to Executive’s options to acquire
Common Stock of the Company. This Agreement may not be modified or amended other than by an agreement in writing signed by an officer
of the Company.
12. Acknowledgement.
Executive acknowledges and agrees that, subsequent to the termination of Executive’s employment, Executive shall not be eligible
for any payments from the Company or Company-paid benefits, except as expressly set forth in this Agreement. Executive also acknowledges
and agrees that Executive has been paid for all time worked and has received all other compensation owed to her.
13. Assignment.
This Agreement shall be binding upon and be for the benefit of the parties as well as Executive’s heirs and the Company’s
successors and assigns.
14. General
Provisions. A failure of any of the Releasees to insist on strict compliance with any provision of this Release shall not be deemed
a waiver of such provision or any other provision hereof. If any provision of this Release is determined to be so broad as to be unenforceable,
such provision shall be interpreted to be only so broad as is enforceable, and in the event that any provision is determined to be entirely
unenforceable, such provision shall be deemed severable, such that all other provisions of this Release shall remain valid and binding
upon Executive and the Releasees.
15. Governing
Law. The validity, interpretations, construction and performance of this Release shall be governed by the laws of the Commonwealth
of Pennsylvania without giving effect to conflict of laws principles.
IN WITNESS WHEREOF, Executive has hereunto set Executive’s
hand as of the day and year set forth opposite her signature below.
Exhibit 10.17
SEPARATION
AND RELEASE AGREEMENT
THIS SEPARATION AND RELEASE
AGREEMENT (this “Agreement”) is made by and between Kenneth I. Moch (the “Executive”)
and Cognition Therapeutics, Inc. (the “Company”).
WHEREAS, the Company and the
Executive entered into an Employment Agreement, effective October 11, 2016 and subsequently amended (the “Employment
Agreement”), which governs the Executive’s employment with the Company; and
WHEREAS, the Executive’s
employment with the Company and its affiliates ceased as of March 17, 2020 (the “Termination Date”); and
WHEREAS, the Company has agreed
to pay the Executive certain amounts and provide certain benefits in connection with the Executive’s termination of his employment,
subject to his execution of this Agreement.
NOW THEREFORE, in consideration
of these premises and the mutual promises contained herein, and intending to be legally bound hereby, the parties agree as follows:
1. Termination
of Employment. Executive hereby agrees and recognizes that, as of the Termination Date his employment relationship with the Company
has been permanently and irrevocably severed and all officer, director and fiduciary positions with the Company or any of its affiliates,
including with respect to any benefit plan sponsored by or contributed to by the Company or any of its affiliates, held by the Executive
terminated effective as of the Termination Date. Executive shall execute any document reasonably requested to effect his resignation
from the Company’s board of directors and termination of his officer and other positions with the Company. Notwithstanding the
foregoing, Executive shall serve the Company in an advisory role pursuant to the Advisor Services Agreement with the Company dated as
of March 17, 2020.
2. Consideration;
Acknowledgements.
a. In
connection with the cessation of the Executive’s employment, and in consideration of the Executive’s execution of this Agreement,
and this Agreement becoming irrevocable in accordance with its terms, the Company will (1) continue to pay Executive’s base
salary (at the rate of $386,250) for the twelve (12) month period following the Termination Date, (2) in satisfaction of any and
all bonus amounts payable to Executive, make a lump sum payment to Executive of $104,287.50 and (3) waive in the entirety the medical
insurance premiums under COBRA until the earlier of the first anniversary of the Termination Date and the date Executive becomes eligible
for medical benefits through another employer. The payment described in this Section 2 shall commence as soon as administratively
feasible following the date that this Agreement becomes irrevocable, provided that the Company will pay Executive in a single lump sum
payment the payments that Executive would have received between the Termination Date and the date this Agreement becomes irrevocable,
with the balance of the payments to be paid as originally scheduled. The Company shall also pay Executive his accrued but unused vacation
time (i.e. ten (10) days) no later than the second payroll date of the Company occurring after the Termination Date.
b. Executive
acknowledges that: (1) he has no entitlement or rights under any severance or similar arrangement maintained by the Company or
any of its affiliates, and (2) except as otherwise provided specifically in this Section 2 of this Agreement, the Company
and its affiliates do
not and will not have any other liability or obligation to the Executive, including under the Employment
Agreement. The Executive further acknowledges that, in the absence of his execution of this Agreement, the payments specified in
this Section 2, would not otherwise be payable. Executive further acknowledges and agrees that all incentive equity awards made
by the Company to Executive, including without limitation any options to purchase Common Stock of the Company, shall cease to vest
as of the Termination Date and no portion of any options that are not exercisable as of the Termination Date shall thereafter become
exercisable, regardless of any service or availability of Executive to the Company following the Termination Date.
3. Release
of Claims. In consideration of the payments and benefits described in Section 2 hereof, to which Executive agrees Executive
is not entitled until and unless Executive executes and does not revoke this Agreement, Executive, for and on behalf of himself and
his heirs, executors, administrators and assigns, hereby waives and releases any and all complaints, claims, suits, controversies,
and actions, whether known or unknown, suspected or claimed, which Executive, or any of the Executive’s heirs, executors,
administrators or assigns ever had, now has or may have against the Company and/or its respective predecessors, successors, past or
present parents or subsidiaries, affiliates, investors, branches or related entities (collectively, including the Company, the
“Entities”) and/or the Entities’ past or present stockholders, insurers, assigns, trustees,
directors, officers, limited and general partners, managers, joint venturers, members, employees or agents in their respective
capacities as such (collectively with the Entities, the “Releasees”) by reason of circumstances, acts or
omissions which have occurred on or prior to the date that this Agreement becomes effective, including, without limitation,
(a) any complaint, charge or cause of action arising under (i) federal, state or local laws pertaining to employment or
termination of employment, including the Age Discrimination in Employment Act of 1967 (the “ADEA,” a law
which prohibits discrimination on the basis of age), the National Labor Relations Act, as amended, the Civil Rights Act of 1991, as
amended, the Americans with Disabilities Act of 1990, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal
Pay Act of 1963, as amended, the Family and Medical Leave Act of 1993, as amended, the Worker Adjustment Retraining and Notification
Act, as amended, the Executive Retirement Income Security Act of 1974, as amended, any applicable Executive Order Programs, the Fair
Labor Standards Act, or their state or local counterparts (including, but not limited to, the Pennsylvania Human Relations Act);
(ii) any other federal, state or local civil or human rights law; (iii) any other local, state, or federal law, regulation
or ordinance; (iv) any public policy, contract and/or quasi-contract or tort (including, but not limited to, claims of breach
of the Employment Agreement, an expressed or implied contract, tortious interference with contract or prospective business
advantage, breach of the covenant of good faith and fair dealing, promissory estoppel, detrimental reliance, invasion of privacy,
nonphysical injury, personal injury or sickness or any other harm, wrongful or retaliatory discharge, fraud, defamation, slander,
libel, false imprisonment, negligent or intentional infliction of emotional distress); (v) common law; or (vi) any
policies, practices or procedures of the Company; or (b) any claim for costs, fees, or other expenses, including
attorneys’ fees incurred in these matters (the “Released Claims”). By signing this Agreement,
Executive acknowledges that he intends to waive and release any rights known or unknown that he may have against the Releasees under
these and any other laws. Notwithstanding the foregoing, Executive does not release, discharge or waive: any rights to
indemnification that he may have under the certificate of incorporation, the by-laws or equivalent governing documents of the
Company or its subsidiaries or affiliates, the laws of the State of Delaware or any other state of which any such subsidiary or
affiliate is a domiciliary, the Employment Agreement or any indemnification agreement between Executive and the Company; any rights
to insurance coverage under any directors’ and officers’ personal liability insurance or fiduciary insurance policy; any
rights he may have in his capacity as a stockholder of the Company; any rights he may have to enforce the vested terms of any equity
or other incentive agreement previously provided to him; any rights he may have to the Accrued Obligations under the Employment
Agreement
and severance benefits describe in Section 2 hereof. The Executive acknowledges that he has made no assignment or
transfer of any right, claim, demand, cause of action, or other matter covered by this Section 3.
4. Proceedings.
Executive acknowledges that he has not filed any complaint, charge, claim or proceeding, if any, or assigned to any other person the right
to bring any such complaint, charge, claim, or proceeding, relating to the Released Claims against any of the Releasees before any local,
state or federal agency, court or other body (each individually a “Proceeding”). Executive (i) acknowledges
that he will not initiate or cause to be initiated on her behalf any Proceeding and will not participate in any Proceeding, in each case,
except as required by law and (ii) waives any right he may have to benefit in any manner from any relief (whether monetary or otherwise)
arising out of any Proceeding, including any Proceeding conducted by the Equal Employment Opportunity Commission (the “EEOC”).
Further, Executive understands that, by executing this Agreement, he will be limiting the availability of certain remedies that he may
have against the Releasees and limiting also his ability to pursue certain claims against the Releasees. Notwithstanding the above, nothing
in Section 3 of this Agreement shall prevent Executive from (i) initiating or causing to be initiated on his behalf any complaint,
charge, claim or proceeding against any Releasee before any local, state or federal agency, court or other body challenging the validity
of the waiver of his claims under the ADEA contained in Section 3 of this Agreement (but no other portion of such waiver), (ii) initiating
or participating in an investigation or proceeding conducted by the EEOC or (iii) reporting possible violations of federal, state
or local law, ordinance or regulation to any governmental agency or entity, including, but not limited to, the Department of Justice,
the U.S. Securities and Exchange Commission (the “SEC”), the Congress and any agency Inspector General, or otherwise
taking action or making disclosures that are protected under the whistleblower provisions of any federal, state or local law, ordinance
or regulation, including, but not limited to, Rule 21F-17 promulgated under the Securities Exchange Act of 1934, as amended; or (iv) receiving
a monetary award for information provided to the SEC pursuant to Rule 21F-17 promulgated under the Securities Exchange Act of 1934,
as amended. The Executive acknowledges and agrees that the Executive’s separation from employment with the Company in compliance
with the terms of the Employment Agreement shall not serve as the basis for any claim or action (including, without limitation, any claim
under the Age Discrimination in Employment Act of 1967).
5. Time
to Consider. Executive acknowledges that he has been advised that he has twenty- one (21) days from the date of receipt of this Agreement
to consider all the provisions of this Agreement and, further, that if Executive signs this Agreement prior to the expiration of such
twenty-one (21) day period, he does hereby knowingly and voluntarily waive said given twenty-one (21) day period. EXECUTIVE FURTHER ACKNOWLEDGES
THAT HE HAS READ THIS AGREEMENT CAREFULLY, HAS BEEN ADVISED BY THE COMPANY TO, AND HAS IN FACT, CONSULTED AN ATTORNEY, AND FULLY UNDERSTANDS
THAT BY SIGNING BELOW HE IS GIVING UP CERTAIN RIGHTS WHICH HE MAY HAVE TO SUE OR ASSERT A CLAIM AGAINST ANY OF THE RELEASEES, AS
DESCRIBED IN SECTION 3 OF THIS AGREEMENT AND THE OTHER PROVISIONS HEREOF. EXECUTIVE ACKNOWLEDGES THAT HE HAS NOT BEEN FORCED OR PRESSURED
IN ANY MANNER WHATSOEVER TO SIGN THIS AGREEMENT, AND EXECUTIVE AGREES TO ALL OF ITS TERMS VOLUNTARILY.
6. Revocation.
Executive hereby acknowledges and understands that Executive shall have seven (7) days from the date of his execution of this
Agreement to revoke this Agreement (including, without limitation, any and all claims arising under the ADEA) and that neither the
Company nor any other person is obligated to provide any benefits to Executive pursuant to Section 2 of this Agreement until
eight (8) days have passed since Executive’s signing of this Agreement without Executive having
revoked this Agreement.
If Executive revokes this Agreement, Executive will be deemed not to have accepted the terms of this Agreement, no action or
forbearance of action will be required of the Company under any section of this Agreement, and Executive shall not be entitled to
receive any portion of the severance compensation and benefits which are conditioned on the delivery of this Agreement.
7. No
Admission. This Agreement does not constitute an admission of liability or wrongdoing of any kind by Executive or the Company.
8. Confidentiality.
Executive agrees that Executive will not communicate or disclose the terms of this Agreement to any persons with the exception of members
of Executive’s immediate family and Executive’s attorney and financial advisor, or as permitted by Section 4 above.
9. Return
of Company Property; Expenses. Executive represents that all equipment and other property of the Company, including any documents
and files containing Confidential Information (as such term is defined in the Employee Non-Disclosure and Invention Assignment Agreement
by and between the Company and the Executive) whether electronically stored or maintained in hard copy, have been returned or will be
promptly returned to the Company. In furtherance thereof, Executive will, no later than May 1, 2020, deliver all Company files held
by him to an electronic dropbox, dataroom or other electronic platform established by the Company, or by such other method determined
by the Company in its discretion. Notwithstanding the foregoing, the Company agrees that Executive may keep the Company-issued laptop
computer currently in his possession, provided that Executive shall deliver any new documents and files electronically stored thereon
to the Company, no later than one month after the termination of the Advisory Services Agreement, and that Executive will not retain any
copies of the Confidential Information. The Company will reimburse all properly incurred business expenses pursuant to the Company’s
expense reimbursement policy, provided, that Executive submits any such business expenses within sixty (60) days following the Termination
Date. The Company will reimburse up to $5,000 of the reasonable attorneys’ fees incurred by Executive in connection with entry into
this Agreement and the Advisor Services Agreement.
10. Non-Disparagement.
Executive will not disparage any Releasee or otherwise take any action which could reasonably be expected to adversely affect the personal
or professional reputation of any Releasee. The Company’s directors, officers and senior executives shall not disparage or otherwise
take any action which could reasonably be expected to adversely affect the personal or professional reputation of the Executive.
11. Post-Employment
Obligations. Executive reaffirms that he will comply with all of his post-employment obligations as set forth in Section 5 of
the Employment Agreement.
12. Stock
Options. Reference is hereby made to the Incentive Stock Option Agreement between the Executive and the Company dated as of
April 28, 2017, as amended, pursuant to which the Executive was awarded 3,834,211 shares of the Company’s Common Stock
(the “2017 Option Shares”). As of the Termination Date, 2,339,304 of the 2017 Option Shares are vested and
have an exercise price of $0.27 per share. The parties further agree that the remaining 2017 Option Shares (i.e., 1,494,907 shares
of Company Common Stock) were automatically forfeited as of the Termination Date. Reference is hereby made to the Incentive Stock
Option Agreement between the Executive and the Company dated as of April 24, 2019, pursuant to which the Executive was awarded
100,000 shares of the Company’s Common Stock (the “2019 Option Shares”). As of the Termination Date,
none of the 2019 Option Shares are vested and the entirety of the 2019 Option Shares were automatically forfeited as of the
Termination Date. The parties acknowledge and agree that 1,282,272 of the vested 2017 Option Shares are eligible to be treated as
incentive stock options under Section 422 of the Code if exercised by the deadline prescribed under applicable law. The
remainder of the vested 2017 Option Shares, together with any of such 1,282,272 vested 2017 Option Shares
that are not exercised by
the applicable deadline and not eligible for tax treatment under Section 422 of the Code, subject to Section 1(b) of
that certain Option Transfer Agreement by and among the Company, the Executive and The 2012 Kenneth Ian Moch Irrevocable GST Trust
F/B/O Ellen Gray Stolzman and Descendants dated May 25, 2012 (the “Trust”), have been or shall be
deemed transferred to the Trust pursuant to and subject to the terms and conditions of the Option Transfer Agreement dated as of
July 20, 2019 by and among the Company, the Executive and the Trust. The 2017 Option Shares shall remain subject to the terms
of the Incentive Stock Option Agreement and the Cognition Therapeutics, Inc. Amended and Restated 2007 Equity Incentive Plan,
including, without limitation, permitting exercise of the 2017 Option Shares up to the date that is three (3) years plus three
(3) months after the Termination Date.
13. Entire
Agreement. This Agreement constitutes the entire agreement between the parties and supersedes any and all prior representations, agreements,
written or oral, expressed or implied, except for Section 5 of the Employment Agreement, which survives the termination of Executive’s
employment and is incorporated herein by reference, and except for any agreements with respect to Executive’s options to acquire
Common Stock of the Company. This Agreement may not be modified or amended other than by an agreement in writing signed by an officer
of the Company.
14. Acknowledgement.
Executive acknowledges and agrees that, subsequent to the termination of Executive’s employment, Executive shall not be eligible
for any payments from the Company or Company-paid benefits, except as expressly set forth in this Agreement. Executive also acknowledges
and agrees that Executive has been paid for all time worked and has received all other compensation owed to him.
15. Assignment.
This Agreement shall be binding upon and be for the benefit of the parties as well as Executive’s heirs and the Company’s
successors and assigns.
16. General
Provisions. A failure of any of the Releasees to insist on strict compliance with any provision of this Agreement shall not be deemed
a waiver of such provision or any other provision hereof. If any provision of this Agreement is determined to be so broad as to be unenforceable,
such provision shall be interpreted to be only so broad as is enforceable, and in the event that any provision is determined to be entirely
unenforceable, such provision shall be deemed severable, such that all other provisions of this Agreement shall remain valid and binding
upon Executive and the Releasees.
17. Governing
Law. The validity, interpretations, construction and performance of this Agreement shall be governed by the laws of the Commonwealth
of Pennsylvania without giving effect to conflict of laws principles.
18. Counterparts
and Facsimiles. This Agreement may be executed, including execution by facsimile signature, in multiple counterparts, each of which
shall be deemed an original, and all of which together shall be deemed to be one and the same instrument.
[space intentionally left blank; signature page follows]
IN WITNESS WHEREOF, the Company
has caused this Agreement to be executed by its respective duly authorized officer, and the Executive has executed this Agreement, on
the date(s) below written.
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COGNITION
THERAPEUTICS, INC.
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By:
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/s/ Robert Gailus
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Name &
Title: Robert Gailus
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Date: April 21,
2020
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KENNETH
I. MOCH
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/s/ Kenneth
I. Moch
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Date: April 21,
2020
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Exhibit 10.18
ADVISOR
SERVICES AGREEMENT
This Advisor Services Agreement
(“Agreement”), effective as of March 17, 2020, is made between Cognition Therapeutics, Inc. (the “Company”)
and Kenneth I. Moch (“Advisor”).
WHEREAS, Advisor’s employment
by the Company ceased on March 17, 2020 (the “Termination Date”) and in connection therewith the Company and Advisor
entered into a Separation and Release Agreement dated as of April 21, 2020 (the “Separation Agreement”); and
WHEREAS, the Company wishes
to retain the services of Advisor following the Termination Date to advise and consult the Company in various matters in which Advisor
has expertise and that are relative to the Company’s business, and Advisor is willing to provide such services.
NOW, THEREFORE, in consideration
of the foregoing and the mutual covenants and promises contained herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:
1. For
the twelve (12) month period following the Termination Date (the “Initial Term”), subject to earlier termination or extension
in accordance with Section 9, Advisor will (i) advise and act on the Company’s behalf to assist the Company in transitioning
his duties and responsibilities (related to his prior employment) and (ii) perform such other consulting services, including with
respect to the Company’s business strategy, and legal matters and investor relations, as the Company’s Chief Executive Officer
(including any interim Chief Executive Officer) may reasonably request and as reasonably agreed to by Advisor. Advisor will perform such
services in good faith, to the best of his ability and in compliance with all applicable laws. Advisor will be reasonably available to
the Company (and to persons the Company may designate) at reasonable times (on-site, by telephone and/or by email) on an as-needed basis
with regard to the performance of the services, and Advisor agrees to commit sufficient time to the performance of the services, which
will not exceed 40 hours per month.
2. Company
agrees to pay Advisor for his consulting services an aggregate amount of $100,000 for the Initial Term, paid in substantially equal monthly
installments in accordance with the Company’s normal practices. The fees payable in any Renewal Term, if applicable, will be determined
between the parties.
3. Advisor
acknowledges and agrees that all incentive equity awards made by Company to Advisor during or in connection with his employment by Company,
including without limitation any options to purchase Common Stock of Company, ceased to vest as of the Termination Date and no portion
of any options that are not exercisable as of the Termination Date shall thereafter become exercisable.
4. Company
will reimburse Advisor for all reasonable business expenses incurred in connection with the engagement reflected by this Agreement. Any
such expenses that are beyond incidental costs (including, without limitation, any travel expenses) incurred in connection with the performance
of Advisor’s duties must be approved by Company in advance.
5. Advisor
shall act strictly in a professional consulting capacity as an independent contractor for all purposes, including without
limitation, federal, state and local withholding, employment and payroll tax purposes, and in all situations and shall not be
considered an employee of the Company for any purposes. Advisor acknowledges that during the Term he will not be eligible to
participate in any retirement, welfare, or other employee benefit plan or arrangement maintained by the Company or its affiliates
(other than in accordance with COBRA and consistent with the Separation Agreement) and agrees that he will
not claim any such
benefits. Advisor shall make no representation to any third party that Advisor is an agent or employee of Company. Advisor shall
have no authority to bind Company or to incur other obligations on behalf of Company.
6. Advisor
agrees that all the Intellectual Property (as defined below) is considered to be “works made for hire” as that term is defined
in Section 101 of the Copyright Act (17 U.S.C. § 101) and that all right, title and interest in such Intellectual Property shall
be the sole and exclusive property of Company and its subsidiaries and affiliates (collectively, the “Company Parties” and
each a “Company Party”). To the extent that any of the Intellectual Property may not by law be considered a work made for
hire, or to the extent that, notwithstanding the foregoing, Advisor retains any interest in the Intellectual Property, Advisor hereby
irrevocably assigns and transfers to the Company Parties any and all right, title, or interest that Advisor may now or in the future have
in the Intellectual Property under patent, copyright, trade secret, trademark or other law, in perpetuity or for the longest period otherwise
permitted by law, without the necessity of further consideration. The Company Parties will be entitled to obtain and hold in its own name
all copyrights, patents, trade secrets, trademarks and other similar registrations with respect to such Intellectual Property. Advisor
further agrees to execute any and all documents and provide any further cooperation or assistance reasonably required by the Company to
perfect, maintain or otherwise protect its rights in the Intellectual Property. If the Company or any other Company Party, as applicable,
are unable after reasonable efforts to secure the Advisor’s signature, cooperation or assistance in accordance with the preceding
sentence, whether because of the Advisor’s incapacity or any other reason whatsoever, Advisor hereby designates and appoints each
Company Party or its designee as the Advisor’s agent and attorney-in-fact, to act on his behalf, to execute and file documents and
to do all other lawfully permitted acts necessary or desirable to perfect, maintain or otherwise protect the Company Parties’ rights
in the Intellectual Property. Advisor acknowledges and agrees that such appointment is coupled with an interest and is therefore irrevocable.
“Intellectual Property” means inventions, original works of authorship, developments, concepts, improvements or any trade
secrets which relate in any manner to the Company Parties’ business or proposed business, whether or not patentable or registrable
under patent, copyright or similar laws, which Advisor may solely or jointly conceives or develops or reduces to practice or causes to
be conceived or developed or reduced to practice, at any time and at any place while Advisor is engaged by Company (collectively referred
to as “Inventions”), including any and all intellectual property rights inherent in the Inventions and appurtenant thereto
including, without limitation, all patent rights, copyrights, trademark rights and trade secret rights.
7. Advisor
recognizes and acknowledges that the Confidential Information (as defined below) is a valuable, special and unique asset of the
business of the Company. As a result, both during the term of this Agreement and thereafter, Advisor will not, without the prior
written consent of Company, for any reason divulge to any third-party or use for his own benefit, or for any purpose other than the
exclusive benefit of Company, any Confidential Information. All right, title and interest in and to Confidential Information shall
be and remain the sole and exclusive property of the Company Parties. Advisor shall not remove from the offices or premises of any
Company Party any documents, records, notebooks, files, correspondence, reports, memoranda or similar materials of or containing
Confidential Information, or other materials or property of any kind belonging to any of the Company Parties unless necessary or
appropriate in the performance of his duties to the Company Parties. If Advisor removes such materials or property in the
performance of his services, he will return such materials or property promptly after the removal has served its purpose. Advisor
will not make, retain, remove and/or distribute any copies of any such materials or property, or divulge to any third person the
nature of and/or contents of such materials or property, except to the extent necessary to satisfy contractual obligations of any of
the Company Parties and to perform his services on behalf of the Company Parties. Upon termination of the Advisor’s engagement
by the Company, he shall leave with the Company Parties or promptly return to the Company Parties all originals and copies of such
materials or property then in his possession. “Confidential
Information” means any Company Party’s proprietary or
confidential information, technical data, trade secrets or know-how, including, but not limited to, research, product plans and
developments, prototypes, products, services, customer lists and customers, prospective customers and contacts, proposals, customer
purchasing practices, prices and pricing methodology, cost information, terms and conditions of business relationships with
customers, customer research and other needs, markets, software, developments, inventions, processes, formulas, technology, designs,
drawings, engineering, distribution and sales methods and systems, sales and profit figures, finances, personnel information
including, information regarding compensation, skills, training, promotions, and duties, as well as reports and other business
information that Advisor learns of, obtains, or that is disclosed to Advisor relating to the Company Parties at any time prior to or
during Advisor’s engagement by the Company, either directly or indirectly, in writing, orally or by review or inspection of
documents or other tangible property. Failure by any of the Company Parties to mark any of the Confidential Information as
confidential or proprietary shall not affect its status as Confidential Information.
8. Advisor
acknowledges that any breach by him, willfully or otherwise, of Sections 6 or 7 of this Agreement will cause continuing and irreparable
injury to the Company Parties for which monetary damages would not be an adequate remedy. Advisor shall not, in any action or proceeding
to enforce any of the provisions of this Agreement, assert the claim or defense that such an adequate remedy at law exists. In the event
of any such breach or threatened breach by Advisor of Section 6 or 7, the Company Parties shall be entitled to injunctive or other
similar equitable relief in any court, without any requirement that a bond or other security be posted, and this Agreement shall not in
any way limit remedies of law or in equity otherwise available to the Company Parties.
9. This
Agreement shall automatically terminate upon the one-year anniversary of the Termination Date (the “Initial Term”), provided
that Advisor and Company may agree to extend the engagement of Advisor (such extension period a “Renewal Term” and together
with the Initial Term, the “Term”). Either party may terminate this Agreement during the Term upon ten (10) days advance
written notice to the other party, in which case no further fees shall be payable to Advisor; provided, however, in the event that Company
terminates this Agreement and Advisor’s engagement during the Initial Term without “Cause”, Company shall continue to
pay Advisor the balance of fees during the remainder of the Initial Term pursuant to Section 2. For purposes of this Agreement, “Cause”
means (i) the Advisors’ continued failure to substantially perform his duties and obligations to Company pursuant to this Agreement,
including but not limited to any material breach of this Agreement, and failure to cure the same within ten (10) business days after
being notified by Company, (ii) Advisor having committed willful fraud or willful misconduct, in any such case which is materially
injurious to the Company; (iii) Advisor having been convicted of a felony involving moral turpitude that results in material harm
to the standing or reputation of Company; (iv) Advisor’s material breach of the terms of the Separation Agreement or Section 5
of the Employment Agreement effective October 11, 2016 and subsequently amended, by and between Company and Advisor; or (v) Advisor
engages in such other behavior detrimental to the interests of the Company during the Term as the Board reasonably determines.
10. Company
may assign this Agreement to any parent company or direct or indirect subsidiary of the Company, or any successor to all or substantially
all of the assets and business of the Company by means of liquidation, dissolution, merger, consolidation, transfer of assets, sale of
stock or otherwise. The duties of Advisor hereunder are personal to Advisor and may not be assigned by him.
11. This
Agreement will be governed by the laws of the Commonwealth of Pennsylvania, without regard to conflict of law principles. The Parties
(i) agree that any legal proceeding arising out of this Agreement may be brought in the courts of record of the Commonwealth of Pennsylvania
or the courts of the United States located in the Commonwealth of Pennsylvania; (ii) consent to the jurisdiction of each
such court
in any such suit, action or proceeding; and (iii) waive any objection which said Parties may have to the laying of venue of any such
suit, action or proceeding in any of such courts.
[signature page follows]
IN WITNESS WHEREOF, the Company
has caused this Agreement to be executed by its duly authorized officer, and Advisor has executed this Agreement, in each case on the
dates indicated below.
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ADVISOR
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COGNITION THERAPEUTICS, INC.
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/s/ Kenneth I. Moch
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By:
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Kenneth I. Moch
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Name:
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Title:
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Date: :
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April 21, 2020
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Date:
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IN WITNESS WHEREOF, the Company
has caused this Agreement to be executed by its duly authorized officer, and Advisor has executed this Agreement, in each case on the
dates indicated below.
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ADVISOR
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COGNITION THERAPEUTICS, INC.
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By:
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/s/ Robert Gailus
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Kenneth I. Moch
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Name:
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Robert Gailus
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Title:
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Chairman, Cognition Therapeutics, Inc.
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Date:
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Date:
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April 21, 2020
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Exhibit 10.19
Cognition Therapeutics Inc.
2403 Sidney Street
Pittsburgh PA 15203
t: 412 481 2210 f: 412 481 2216
www.cogrx com
October 7, 2019
Mr. James O’Brien
20 Hollow Tree Ridge Road
Darien, Connecticut 06820
Dear Jim:
This letter agreement (the
“Agreement”) sets forth the terms and conditions of your employment with Cognition Therapeutics, Inc., a Delaware corporation
(the “Company”).
1. Position
and Duties.
(a) Position.
Effective October 28, 2019 (the “Start Date”), you shall commence your employment with the Company as its Chief Financial
Officer. This Agreement will set forth the terms and conditions of your employment in such capacity.
(b) Duties.
Your employment by the Company shall be full-time and exclusive of any other employment and you shall devote all of your business time,
attention and services to the Company and its Affiliates (as defined below). You will perform such duties as may be customary to, and
consistent with, the position of Chief Financial Officer, and such duties that may reasonably be assigned from time to time by the Chief
Executive Officer. You will devote your best efforts, business judgment, skill and knowledge to the advancement of the business and interests
of the Company and to the discharge of your duties and responsibilities to the Company. Notwithstanding the foregoing, during the term
of your employment, you may participate in charitable activities and manage your passive investments, in each case so long as such activities
do not interfere with the performance of your duties and responsibilities hereunder or present a conflict of interest with the Company
or its Affiliates.
(c) Office
Location. You shall perform your services hereunder primarily at the Company’s offices to be established in the Tri-State (New
York, New Jersey, Connecticut) area, and in Pittsburgh, PA, subject to reasonable business travel.
2. Compensation
and Benefits. During your employment, as compensation for all services performed by you for the Company, the Company will provide
you the following pay and benefits:
(a) Base
Salary. The Company will pay you a base salary (the “Base Salary”) at the rate of $340,000 per year, payable in accordance
with the regular payroll practices of the Company and subject to adjustment from time to time by the Company’s Board of Directors
(the “Board”) in its discretion.
Mr. James OBrien
October 7, 2019
Page Two
(b) Bonus
Compensation. During your employment, you will be considered annually for a cash bonus targeted at 30% of your Base Salary. The amount
of any bonus awarded to you for any year will be determined by the Board in its discretion, based on your performance and that of the
Company against the specific priorities and/or goals established for each such annual period by the Board. Any annual bonus will be paid
in the year following the fiscal year with respect to which such annual bonus was earned and attributable, at the same time as other executives
receive any applicable bonus compensation and as soon as practicable following the availability of the Company’s results of operations
for the applicable fiscal year. Subject to Section 5(a)(i), in order for you to receive payment of any such annual bonus, you must
be employed by the Company on the date of payment.
(c) Stock
Options. In connection with the commencement of your employment, the Company’s management will recommend that the Board grant
you a stock option (the “Option”), under and subject in all respects to the Cognition Therapeutics 2017 Equity Incentive Plan
(the “Plan”) and award agreement, to purchase the number of shares of the Company’s common stock, par value $0.001 per
share (the “Common Stock”) equal to 0.75% of the Company’s outstanding equity on a fully diluted basis. The Option will:
(A) have an exercise price per share equal to the fair market value per share of Common Stock on the date of the grant, as determined
by the Board; and (B) will be subject to vesting requirements such that (i) 25% of the shares of Common Stock underlying the
Option shall vest as of the first anniversary of the Start Date, and (ii) the remaining 75% of the shares of Common Stock underlying
the Option shall vest in 36 substantially equal monthly installments as of the last day of each month thereafter, in each case if you
remain continuously employed by the Company through the applicable vesting dates; provided, however, that any then-unvested portion
of the Option shall vest upon the closing of a Change in Control (as defined in Section 6) if you remain employed through such event.
(d) Participation
in Employee Benefit Plans. You shall be eligible to participate in any and all employee benefit plans from time to time in effect
for employees of the Company generally. The Company shall not be required to establish or maintain any such program or plan. Such participation
shall be subject to (i) the terms of the applicable plan documents, and (ii) generally applicable Company policies. The Company
may alter, modify, add to or terminate its employee benefit plans at any time as it, in its sole discretion, determines to be appropriate.
(e) Paid
Time Off. You will be entitled to 4 weeks vacation, in addition to holidays observed by the Company, pursuant to the Company’s
paid-time-off policies. Vacation may be taken at such times and intervals as you shall determine, subject to the business needs of the
Company and prior notice to the Chief Executive Officer.
(f) Business
Expenses. The Company will pay or reimburse you for all reasonable business expenses incurred or paid by you in the performance of
your duties and responsibilities for the Company, subject to any maximum annual limit and other restrictions on such expenses set forth
by the Company and to such reasonable substantiation and documentation as the Company may specify from time to time.
3. Confidential
Information; Restricted Activities; Intellectual Property. To induce the Company to enter into this Agreement, as a condition to
your employment by the Company, and in recognition of (i) the compensation payable to you pursuant to this Agreement, and
(ii) such other consideration payable to you by the Company or any of its Affiliates, you must sign and return to the
Mr. James OBrien
October 7, 2019
Page Three
Company
no later than your Start Date the Confidential Disclosure, Invention Assignment, Noncompetition, Non-Solicitation and
Non-Interference Agreement attached hereto as Exhibit A (the “Restrictive Covenants Agreement”).
4. Termination
of Employment. Your employment under this Agreement shall continue for no definite term until terminated pursuant to this Section 4.
(a) The
Company may terminate your employment for Cause upon notice to you setting forth in reasonable detail the nature of the Cause (as defined
below). The following, as determined by the Company in its reasonable judgment, shall constitute “Cause” for termination:
(i) your persistent and willful refusal to follow reasonable directives of the Chief Executive Officer; (ii) gross negligence
or willful misconduct in the performance of your duties and responsibilities to the Company or any of its Affiliates; (iii) your
material breach of this Agreement or any other agreement between you and the Company, which breach continues for more than 15 days after
the Company gives you written notice that sets forth in reasonable detail the nature of such breach; or (iv) other conduct by you
that is or could reasonably anticipated to be materially harmful to the business, interests or reputation of the Company or any of its
Affiliates. The Company may terminate your employment as a result of your Disability and at any time other than for Cause upon notice
to you. Termination of your employment as a result of your Disability will not be construed as a termination by the Company “other
than for Cause.”
(b) You
may terminate your employment at any time upon 60 days’ notice to the Company without Good Reason. You may also terminate your employment
with Good Reason. “Good Reason” means, without your consent: (i) a material diminution by the Company of your responsibilities
with the position you then hold, or (ii) the Company reduces your Base Salary, other than in connection with the same percentage
across-the-board decrease in base salaries applicable to other key executives; provided that, in each case, written notice of your resignation
for Good Reason must be delivered to the Company within thirty (30) days after the occurrence of the event falling within the definition
of Good Reason in order for your resignation for Good Reason to be effective, the Company fails to cure such event within thirty (30)
days after delivery of such notice to cure any such event and you resign your employment within thirty (30) days following the expiration
of that cure period.
(c) This
Agreement shall automatically terminate in the event of your death during employment.
5. Severance
Payments and Other Matters Related to Termination.
(a) Involuntary
Termination/Good Reason Termination.
(i) In
the event of termination of your employment by the Company other than for Cause, or your resignation of employment for Good Reason,
the Company (or its successor, as applicable) will (A) continue to pay you your Base Salary for a period of six (6) months
after the date of termination; (B) pay you for any bonus to which you would have otherwise been entitled for the prior fiscal
year but for the termination of your employment prior to payment of such bonus; and (C) waive the applicable premium otherwise
payable for COBRA continuation coverage for you (and, to the extent covered immediately prior to the date of such cessation, your
eligible dependents) for a period equal to six (6) months following termination; provided, however, that if such termination
occurs within eighteen (18)
Mr. James OBrien
October 7, 2019
Page Four
months after your Start Date, the Base Salary continuation described in subsection (A), and the
subsidized COBRA coverage described in subject (C), shall be provided for nine (9) months in lieu of six (6) months. The
Company will also pay you any Base Salary earned but not paid through the date of termination, pay for any vacation time accrued but
not used to that date and reimburse any business expenses incurred in accordance with Company policy and subject to the
Company’s policies regarding appropriate documentation (the “Accrued Rights”).
(ii) Notwithstanding
the foregoing, in the event your employment is terminated by the Company (or its successor) other than for Cause or by you for Good Reason,
in each case during the twelve (12) month period immediately following the occurrence of a Change in Control (as defined below), you will
receive the payments and benefits described in Section 5(a)(i) above, subject to the following modifications: (A) references
in in Section 5(a)(i) to “six (6) months” or “nine (9) months” (as applicable) will each be
replaced with a reference to “twelve (12) months”; and (B) all unvested restricted stock, stock options and other equity
incentives awarded to you by the Company will become immediately and automatically fully vested and exercisable (as applicable). The payments
described in subsection (A) of this Section 5(a)(ii) shall be paid in a lump sum not later than the forty-fifty (45th)
day following your termination of employment.
(b) Limitation
of Payments. If any payment or benefit due under this Agreement, together with all other payments and benefits you receive or are
entitled to receive from the Company or any of its Affiliates, would (if paid or provided) constitute an excess parachute payment (within
the meaning of Section 280G(b)(1) of the Code), the amounts otherwise payable and benefits otherwise due under this Agreement will
be limited to the minimum extent necessary to ensure that no portion thereof will fail to be tax-deductible to the Company by reason of
Section 280G of the Code or result in an excise tax pursuant to Section 4999 of the Code. The determination of whether any payment
or benefit would (if paid or provided) constitute an excess parachute payment will be made by the Board, in its sole discretion. If a
reduction to the payments otherwise payable under this Agreement or any other arrangement is required pursuant to this Section 5(b),
such reduction shall be made in the following order: (i) first, any future cash payments (if necessary, to zero); (ii) second,
any current cash payments (if necessary, to zero); (iii) third, all non-cash payments (other than equity’ or equity derivative
related payments) (if necessary, to zero); and (iv) fourth, all equity or equity derivative payments; provided that in all events,
such reductions shall be done in a manner consistent with the requirements of Section 409A of the Code, to the extent applicable.
(c) Severance
Conditional upon Release. The payments and benefits described in Section 5(a) are in lieu of, and not in addition to,
any other severance arrangement maintained by the Company. Notwithstanding any provision of this Agreement, the payments described
in Section 5(a) (other than the Accrued Rights) are conditioned on your execution and delivery to the Company of a general
release of all claims against the Company and its Affiliates in a manner consistent with the requirements of the Older Workers
Benefit Protection Act and any other applicable law, and in a form reasonably prescribed by the Company (the “Release”)
and such Release becoming irrevocable within sixty (60) days following the date of termination and (ii) your continued
compliance with the Restrictive Covenants Agreement. The severance benefits described in Section 5(a) (other than the
Accrued Rights) will be paid or begin to be paid or provided within sixty (60) days following your date of termination; provided
that the initial payment of Base Salary continuation shall include a catch-up payment to cover amounts retroactive to the day
immediately following the effective date of your termination of employment. If the severance benefits payable pursuant to
Section 5(a) are deferred compensation subject to the requirements of Section 409A of
Mr. James OBrien
October 7, 2019
Page Five
the Code, and if the 60-day
period described herein begins in one taxable year and ends in a second taxable year, such payments shall not commence until the
second taxable year.
(d) Termination
for Cause, upon Disability, or by Voluntary Termination. In the event of termination of your employment by the Company for Cause or
Disability, or your voluntary termination of employment, the Company will pay you the Accrued Rights. The Company shall have no other
obligation to you, including any bonus or severance payments.
(e) Survival
of Certain Provisions. Provisions of this Agreement shall survive any termination if so provided in this Agreement or if necessary
or desirable to accomplish the purposes of other surviving provisions. The obligation of the Company to make payments to you under this
Section 5, and your right to retain such payments, are expressly conditioned upon your continued full performance of your obligations
under the Restrictive Covenants Agreement. Upon termination by either you or the Company, all rights, duties and obligations of you and
the Company to each other shall cease, except as otherwise expressly provided in this Agreement.
6. Definitions.
For purposes of this Agreement, the following definitions apply:
“Affiliate” means
any Person that controls, is controlled by or under common control of the Person, with “control” meaning the ownership or
right to vote at least a majority of the equity interests of such Person.
“Change in Control”
means (A) the sale, lease, exchange, transfer or other disposition of all or substantially all of the assets of the Company and its
Affiliates, or (B) any sale, merger, consolidation or other business combination that results in the holders of the outstanding voting
securities of the Company immediately prior to such transaction beneficially owning or controlling less than a majority of the voting
securities of the surviving entity immediately thereafter.
“Code” means the
Internal Revenue Code of 1986, as amended from time to time.
“Disability” means
a condition that, in the judgment of the Board, renders you incapable of performing your duties under this Agreement with or without a
reasonable accommodation.
“Person” means
an individual, a corporation, a limited liability company, an association, a partnership, an estate, a trust or any other entity or organization,
other than the Company or any of its Affiliates.
7. Conflicting
Agreements. You hereby represent and warrant that your signing of this Agreement and the performance of your obligations under it
will not breach or be in conflict with any other agreement to which you are a party or are bound, and that you are not now subject to
any covenants against competition or similar covenants or any court orders that could affect the performance of your obligations under
this Agreement. You agree that you will not disclose to or use on behalf of the Company any proprietary information of a third party without
that party’s consent.
8. Withholding.
All payments made by the Company under this Agreement shall be reduced by any tax or other amounts required to be withheld by the Company
under applicable law.
Mr. James OBrien
October 7, 2019
Page Six
9. Assignment.
Neither you nor the Company may make any assignment of this Agreement or any interest in it, by operation of law or otherwise, without
the prior written consent of the other; provided, however, that the Company may assign its rights and obligations under this Agreement
without your consent to one of its Affiliates or to any Person with whom the Company shall hereafter effect a reorganization, consolidate
with, or merge into or to whom it transfers all or substantially all of its properties or assets. This Agreement shall inure to the benefit
of and be binding upon you and the Company, and each of our respective successors, executors, administrators, heirs and permitted assigns.
10. Severability.
If any portion or provision of this Agreement shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction,
then the remainder of this Agreement, or the application of such portion or provision in circumstances other than those as to which it
is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Agreement shall be valid
and enforceable to the fullest extent permitted by law.
11. Miscellaneous.
This Agreement sets forth the entire agreement between you and the Company and replaces all prior and contemporaneous communications,
agreements and understandings, written or oral, with respect to the terms and conditions of your employment. This Agreement may not be
modified or amended, and no breach shall be deemed to be waived, unless agreed to in writing by you and an expressly authorized representative
of the Board. The headings and captions in this Agreement are for convenience only and in no way define or describe the scope or content
of any provision of this Agreement. This Agreement may be executed in two counterparts, each of which shall be an original and all of
which together shall constitute one and the same instrument. This Agreement shall be governed and construed in accordance with the laws
of the Commonwealth of Pennsylvania, without regard to the conflict of laws principles thereof.
12. Notices.
Any notices provided for in this Agreement shall be in writing and shall be effective when delivered in person or deposited in the United
States mail, postage prepaid, and addressed to you at your last known address on the books of the Company or, in the case of the Company,
to it at its principal place of business, attention of the Chief Executive Officer, or to such other address as either party may specify
by notice to the other actually received.
13. Section 409A. It
is intended that this Agreement be drafted and administered in compliance with section 409A of the Code, including, but not limited
to, ally future amendments to Code section 409A, and any other Internal Revenue Service or other governmental rulings or
interpretations (together, “Section 409A”) issued pursuant to Section 409A so as not to subject you to payment
of interest or any additional tax under Code section 409A. The parties intend for any payments under this Agreement to either
satisfy the requirements of Section 409A or to be exempt from the application of Section 409A, and this Agreement shall be
construed and interpreted accordingly. Notwithstanding anything in this Agreement to the contrary, all payments to be made upon a
termination of employment under this Agreement will only be made upon a “separation from service” within the meaning of
Section 409A. To the maximum extent permitted under Section 409A, the cash severance benefits payable under this Agreement
are intended to meet the requirements of the short-term deferral exemption under Section 409A and the “separation pay
exception” under Treas. Reg. § 1.409A-1(b)(9)(iii). For purposes of the application of Treas. Reg. §
1.409A-1(b)(4)(or any successor provision), each payment in a series of payments to you will be deemed a separate payment.
Notwithstanding anything herein to the contrary, to the extent any expense, reimbursement or in-kind benefit provided to you
constitutes a “deferral of compensation” within
Mr. James OBrien
October 7, 2019
Page Seven
the meaning of Section 409A of the Code (i) the amount of
expenses eligible for reimbursement or in-kind benefits provided to you during any calendar year will not affect the amount of
expenses eligible for reimbursement or in-kind benefits provided to you in any other calendar year, (ii) the reimbursements for
expenses for which you are entitled to be reimbursed shall be made on or before the last day of the calendar year following the
calendar year in which the applicable expense is incurred and (iii) the light to payment or reimbursement or in-kind benefits
hereunder may not be liquidated or exchanged for any other benefit.
14. Arbitration.
Any dispute or controversy arising under or in connection with this Agreement or your employment with the Company, other than a claim
for injunctive relief pursuant to the Restrictive Covenants Agreement, shall be settled exclusively by arbitration, conducted before a
single arbitrator in Pittsburgh, Pennsylvania (applying Pennsylvania law) in accordance with the National Rules for the Resolution
of Employment Disputes of the American Arbitration Association then in effect. However, prior to resorting to arbitration, both parties
agree to negotiate in good faith to resolve any such dispute or controversy. The arbiter shall be selected in accordance with the rules of
the American Arbitration Association. The decision of the arbitrator shall be final and binding upon the parties hereto and judgment may
be entered on the arbitrator’s award in any court having jurisdiction. The prevailing party in any such proceeding shall be entitled
to receive from the other party all reasonable attorneys’ fees incurred by such prevailing party and all costs incurred in connection
therewith if and to the extent so awarded by the arbitrator.
[remainder of page intentionally left blank]
Mr. James OBrien
October 7, 2019
Page Eight
Please sign this Agreement
in the space provided and return it to me. At the time you sign and return it, and the Company counter-signs it this Agreement will take
effect as a binding agreement between you and the Company on the basis set forth above.
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COGNITION THERAPEUTICS, INC.
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By:
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/s/ Kenneth I. Moch
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By:
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/s/ James O’Brien
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Name:
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Kenneth I. Moch
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James O’Brien
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Title:
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President and Chief Executive Officer
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Date signed: October 7, 2019
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Date signed:
October 8, 2019
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EXHIBIT A
Restrictive Covenants Agreement
EMPLOYEE
NON-DISCLOSURE AND
INVENTION ASSIGNMENT AGREEMENT
THIS AGREEMENT between Cognition
Therapeutics, Inc. (the “Company”), a Delaware corporation with its principal offices at 2403 Sidney St.,
Suite 261, Pittsburgh, PA 15203 and James M. O’Brien (the “Employee”), an individual residing at the
address set forth on the signature page to this Agreement.
Recitals:
The parties desire to enter into this Agreement
in connection with the Employee’s employment by the Company.
NOW, THEREFORE, in consideration of the employment
of the Employee by the Company and the payment by the Company of compensation to the Employee for services rendered and to be rendered,
and intending to be legally bound hereby, the parties hereto agree as follows:
1. Non-Disclosure
of Confidential Information. The Employee acknowledges that in the course of performing services for the Company, the Employee
may obtain knowledge of the Company’s business plans, products, processes, software, know-how, trade secrets, formulas,
methods, models, prototypes, discoveries, inventions, materials and reagents, improvements, disclosures, customer and supplier
lists, names and positions of employees and/or other proprietary and/or confidential information (collectively, the
“Confidential Information”). The Employee agrees to keep the Confidential Information secret and confidential and not to
publish, disclose or divulge to any other party, or use for the Employee’s own benefit or to the detriment of the Company,
any Confidential Information without the prior written consent of the Company, whether or not such Confidential Information was
discovered or developed by the Employee. The Employee also agrees not to divulge, publish or use any proprietary and/or
confidential information of others that the Company is obligated to maintain in confidence.
2. Inventions
and Discoveries.
(a) Disclosure. The
Employee shall promptly and fully disclose to the Company, with all necessary detail, all developments, know-how, discoveries,
inventions, improvements, concepts, ideas, formulae, processes and methods (whether copyrightable, patentable or otherwise)
made, received, conceived, acquired or written by the Employee (whether or not at the request or upon the suggestion of the
Company), solely or jointly with others, during the period of the Employee’s engagement by the Company as a consultant
hereunder that (i) relate to any line of business, activity or field of interest or investigation with respect to which the
Employee renders services to the Company or (ii) are otherwise made through the use of the Company’s time, facilities or
materials (all of the foregoing being hereinafter referred to collectively as the “Inventions”).
(b) Assignment
and Transfer. The Employee agrees to assign and transfer to the Company all of the Employee’s right, title and interest in
and to the Inventions, and the Employee further agrees to deliver to the Company any and all drawings, notes, specifications
and
data relating to the Inventions,
and to sign, acknowledge and deliver all such further papers, including applications for and assignments of copyrights and patents, and
all renewals thereof, as may be necessary to obtain copyrights and patents for any Inventions in any and all countries and to vest title
thereto in the Company and its successors and assigns and to otherwise protect the Company ’s interests therein.
(c) Power
of Attorney. If the Company is unable, after reasonable effort, to secure the Consultant’s signature on any application
for patent, copyright, trademark or other analogous registration or other documents regarding any legal protection relating to an
Invention, whether because of the Employee’s physical or mental incapacity or for any other reason whatsoever, the Employee
hereby irrevocably designates and appoints each of the President and each Vice President of the Company as the Employee’s
agent and attorney-in-fact, to act for and in the Employee’s behalf and stead to execute and file any such application or
applications or other documents and to do all other lawfully permitted acts to further the prosecution and issuance of patent,
copyright, trademark or other registrations or any other legal protection thereon with respect to an Invention with the same legal
force and effect as if executed by the Employee.
(d) Documentation
and Records. The Employee shall hold in a fiduciary capacity for the benefit of the Company all documentation, disks, programs,
data, records, drawings, manuals, reports, sketches, blueprints, letters, notes, notebooks and all other writings, electronic data,
graphics and tangible information and materials of a secret, confidential or proprietary information nature relating to the Company
or the Company’s business that are in the possession or under the control of the Employee. The Employee agrees that in
connection with any research, development or other services performed for the Company, the Employee will maintain careful, adequate
and contemporaneous written records of all Inventions, which records shall be the property of the Company.
3. Injunctive
Relief. The Employee acknowledges that compliance with this Agreement is necessary to protect the goodwill and other proprietary
interests of the Company. The Employee acknowledges that a breach of this Agreement will result in irreparable and continuing damage
to the Company and its business, for which there will be no adequate remedy at law. The Employee further agrees that in the event of
any breach of this Agreement, the Company and its successors and assigns shall be entitled to injunctive relief and to such
other and further relief and damages as may be proper.
4. No
Right to Employment. It is expressly understood that this Agreement is not intended to define the scope of the Employee’s
employment by the Company or the terms of such employment other than as specifically provided herein. Any such other terms may or
may not be contained in a written agreement. In any event, nothing contained in this Agreement shall be interpreted to create an
employment relationship other than at will.
5. Survival
of Agreement; Binding Nature. It is expressly agreed that the provisions of this Agreement shall survive and apply after the
termination of the Employee’s employment with the Company. This Agreement shall be binding on and inure to the benefit of the
Employee’s executors, administrators or other legal representatives or assigns and on the Company’s successors and
assigns. The Company shall have the right to assign this Agreement without the consent of the Employee.
6. Enforceability.
If any provision of this Agreement shall be invalid or unenforceable, in whole or in part, then such provision shall be deemed to be
modified or restricted to the extent and in the manner necessary to render the same valid and enforceable, or shall be deemed
excised from this Agreement, as the case may require, and this Agreement shall be construed and enforced accordingly to the
maximum extent permitted by law.
7. No
Waiver. No claim or right arising out of a breach or default under this Agreement shall be discharged in whole or in part by a waiver
of that claim or right unless the waiver is in writing and signed by the aggrieved party.
8. Construction.
This Agreement shall be construed and interpreted in accordance with the substantive laws of the Commonwealth of Pennsylvania. This
Agreement supersedes and replaces any existing agreement between the Employee and the Company relating generally to the same subject
matter; and this Agreement may not be modified, in whole or in part, except in writing signed by both of the parties.
IN WITNESS WHEREOF, this Agreement has been signed
by the parties as of the date set forth below next to the name of the Employee.
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COGNITION THERAPEUTICS, INC.
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Date:
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October 7, 2019
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By:
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/s/ Kenneth I. Moch
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Name: Kenneth I. Moch
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Title: President & CEO
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Date:
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October 8, 2019
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/s/ James M. O’Brien
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Employee’s Signature
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James M. O’Brien
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Name of Employee (please print or type)
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Employee’s Address:
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20 Hollow Tree Ridge Rd
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Darien, CT 06828
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Exhibit 10.24
Notice of Award
|
Multi-Year Funded Research Project Grant
Department of Health and Human Services
National Institutes of Health
NATIONAL INSTITUTE ON AGING
|
Federal Award Date: 08/14/2016
|
|
Grant Number: 1RF1AG054176-01
FAIN: RF1AG054176
Principal Investigator(s):
SUSAN M CATALANO, PHD
Project Title: Phase 1b first-in-patient safety trial for CT1812,
a novel Alzheimer’s synaptic protection therapeutic
Catalano, Susan
Chief Science Officer
2403 Sidney Street
Suite 261
Pittsburgh, PA 152035118
Award e-mailed to: scatalano@cogrx.com
Period Of Performance:
Budget Period: 08/15/2016 - 07/31/2018
Project Period: 08/15/2016 - 07/31/2018
Dear Business Official:
The National Institutes of Health hereby awards a grant in the amount
of $2,410,669 (see “Award Calculation” in Section I and “Terms and Conditions” in Section III) to COGNITION THERAPEUTICS,
INC. in support of the above referenced project. This award is pursuant to the authority of 42 USC 241 42 CFR 52 and is subject to the
requirements of this statute and regulation and of other referenced, incorporated or attached terms and conditions.
Acceptance of this award including the “Terms and Conditions”
is acknowledged by the grantee when funds are drawn down or otherwise obtained from the grant payment system.
Each publication, press release, or other document about research
supported by an NIH award must include an acknowledgment of NIH award support and a disclaimer such as “Research reported in this
publication was supported by the National Institute On Aging of the National Institutes of Health under Award Number RF1AG054176. The
content is solely the responsibility of the authors and does not necessarily represent the official views of the National Institutes
of Health.” Prior to issuing a press release concerning the outcome of this research, please notify the NIH awarding IC in advance
to allow for coordination.
Award recipients must promote objectivity in research by establishing
standards that provide a reasonable expectation that the design, conduct and reporting of research funded under NIH awards will be free
from bias resulting from an Investigator’s Financial Conflict of Interest (FCOI), in accordance with the 2011 revised regulation
at 42 CFR Part 50 Subpart F. The Institution shall submit all FCOI reports to the NIH through the eRA Commons FCOI Module. The regulation
does not apply to Phase I Small Business Innovative Research (SBIR) and Small Business Technology Transfer (STTR) awards. Consult the
NIH website http://grants.nih.gov/grants/policy/coi/ for a link to the regulation and additional important information.
If you have any questions about this award, please contact the individual(s)
referenced in Section IV.
Sincerely yours,
TRACI LAFFERTY
Grants Management Officer
NATIONAL INSTITUTE ON AGING
Additional information follows
SECTION I - AWARD DATA - 1RF1AG054176-01
|
Award Calculation (U.S. Dollars)
|
|
|
|
|
Salaries and Wages
|
|
$
|
200,532
|
|
|
Personnel Costs (Subtotal)
|
|
$
|
200,532
|
|
|
Other
|
|
$
|
1,728,003
|
|
|
|
|
|
|
|
|
Federal Direct Costs
|
|
$
|
1,928,535
|
|
|
Federal F&A Costs
|
|
$
|
482,134
|
|
|
Approved Budget
|
|
$
|
2,410,669
|
|
|
Total Amount of Federal Funds Obligated (Federal Share)
|
|
$
|
2,410,669
|
|
|
TOTAL FEDERAL AWARD AMOUNT
|
|
$
|
2,410,669
|
|
|
|
|
|
|
|
|
AMOUNT OF THIS ACTION (FEDERAL SHARE)
|
|
$
|
2,410,669
|
|
|
SUMMARY TOTALS FOR ALL YEARS
|
|
|
YR
|
|
|
THIS AWARD
|
|
|
CUMULATIVE TOTALS
|
|
|
1
|
|
|
$
|
2,410,669
|
|
|
$
|
2,410,669
|
|
Fiscal Information:
|
CFDA Name:
|
Aging Research
|
|
CFDA Number:
|
93.866
|
|
EIN:
|
1134365359A1
|
|
Document Number:
|
RAG054176A
|
|
PMS Account Type:
|
P (Subaccount)
|
|
Fiscal Year:
|
2016
|
|
IC
|
|
CAN
|
|
|
2016
|
|
|
AG
|
|
|
8013663
|
|
|
$
|
2,410,669
|
|
NIH Administrative Data:
PCC: 3CCCTLR / OC: 414A / Released: LAFFERTYT 08/11/2016
Award Processed: 08/14/2016 08:10:03 AM
SECTION II - PAYMENT/HOTLINE INFORMATION
- 1RF1AG054176-01
For payment and HHS Office of Inspector General Hotline information,
see the NIH Home Page at http://grants.nih.gov/grants/policy/awardconditions.htm
SECTION III - TERMS AND CONDITIONS
- 1RF1AG054176-01
This award is based on the application submitted to, and as approved
by, NIH on the above-titled project and is subject to the terms and conditions incorporated either directly or by reference in the following:
|
|
a.
|
The grant program legislation and program regulation cited in this
Notice of Award.
|
|
|
b.
|
Conditions on activities and expenditure of funds in other statutory
requirements, such as those included in appropriations acts.
|
|
|
d.
|
National Policy Requirements and all other requirements described
in the NIH Grants Policy Statement, including addenda in effect as of the beginning date
of the budget period.
|
|
|
e.
|
Federal Award Performance Goals: As required by the periodic report
in the RPPR or in the final progress report when applicable.
|
|
|
f.
|
This award notice, INCLUDING THE TERMS AND CONDITIONS CITED BELOW.
|
(See NIH Home Page at http://grants.nih.gov/grants/policy/awardconditions.htm
for certain references cited above.)
Research and Development (R&D): All awards issued by
the National Institutes of Health (NIH) meet the definition of “Research and Development” at 45 CFR Part § 75.2. As
such, auditees should identify NIH awards as part of the R&D cluster on the Schedule of Expenditures of Federal Awards (SEFA).
The auditor should test NIH awards for compliance as instructed in Part V, Clusters of Programs. NIH recognizes that some awards may
have another classification for purposes of indirect costs. The auditor is not required to report the disconnect (i.e., the award is
classified as R&D for Federal Audit Requirement purposes but non-research for indirect cost rate purposes), unless the auditee
is charging indirect costs at a rate other than the rate(s) specified in the award document(s).
An unobligated balance may be carried over into the next budget period
without Grants Management Officer prior approval.
This grant is excluded from Streamlined Noncompeting Award Procedures
(SNAP). MULTI-YEAR FUNDED AWARD: This is a multi-year funded award. A progress report is due annually on or before the anniversary
of the budget/project period start date of the award, in accord with the instructions posted at: http://grants.nih.gov/grants/policy/myf.htm.
This award is subject to the requirements of 2 CFR Part 25 for institutions
to receive a Dun & Bradstreet Universal Numbering System (DUNS) number and maintain an active registration in the System for Award
Management (SAM). Should a consortium/subaward be issued under this award, a DUNS requirement must be included. See http://grants.nih.gov/grants/policy/awardconditions.htm
for the full NIH award term implementing this requirement and other additional information.
This award has been assigned the Federal Award Identification Number
(FAIN) RF1AG054176. Recipients must document the assigned FAIN on each consortium/subaward issued under this award.
Based on the project period start date of this project, this award
is likely subject to the Transparency Act subaward and executive compensation reporting requirement of 2 CFR Part 170. There are conditions
that may exclude this award; see http://grants.nih.gov/grants/policy/awardconditions.htm for additional award applicability information.
In accordance with P.L. 110-161, compliance with the NIH Public Access
Policy is now mandatory. For more information, see NOT-OD-08-033 and the Public Access website: http://publicaccess.nih.gov/.
This award provides support for one or more clinical trials. By law
(Title VIII, Section 801 of Public Law 110-85), the “responsible party” must register “applicable clinical trials”
on the ClinicalTrials.gov Protocol Registration System Information Website. NIH encourages registration of all trials whether
required under the law or not. For more information, see http://grants.nih.gov/ClinicalTrials fdaaa/
This award represents the final year of the competitive segment for
this grant. See the NIH Grants Policy Statement Section 8.6 Closeout for complete closeout requirements at: http://grants.nih.gov/grants/policy/policy.htm#gps.
A final expenditure Federal Financial Report (FFR) (SF 425) must be
submitted through the eRA Commons (Commons) within 120 days of the expiration date; see the NIH Grants Policy Statement Section 8.6.1
Financial Reports, http://grants.nih.gov/grants/policy/policy.htm#gps, for additional information on this submission requirement.
The final FFR must indicate the exact balance of unobligated funds and may not reflect any unliquidated obligations. There must be no
discrepancies between the final FFR expenditure data and the Payment Management System’s (PMS) quarterly cash transaction data.
A final quarterly federal cash transaction report is not required for awards in PMS B subaccounts (i.e., awards to foreign entities and
to Federal agencies). NIH will close the awards using the last recorded cash drawdown level in PMS for awards that do not require a final
FFR on expenditures or quarterly federal cash transaction reporting. It is important to note that for financial closeout, if a grantee
fails to submit a required final expenditure FFR, NIH will close the grant using the last recorded cash drawdown level. If the grantee
submits a final expenditure FFR but does not reconcile any discrepancies between expenditures reported on the final expenditure FFR and
the last cash report to PMS, NIH will close the award at the lower amount. This could be considered a debt or result in disallowed costs.
A Final Invention Statement and Certification form (HHS 568), (not
applicable to training, construction, conference or cancer education grants) must be submitted within 120 days of the expiration date.
The HHS 568 form may be downloaded at: http://grants.nih.gov/grants/forms.htm. This paragraph does not apply to Training grants,
Fellowships, and certain other programs—i.e., activity codes C06, R13, R25, S10.
Unless an application for competitive renewal is submitted, a final
progress report must also be submitted within 120 days of the expiration date. Instructions for preparing a Final Progress Report are
at: http://grants.nih.gov/grants/funding/finalprogressreport.pdf. Any other specific requirements set forth in the terms and conditions
of the award must also be addressed in the final progress report. Institute/Centers may accept the progress report contained in competitive
renewal (type 2) in lieu of a separate final progress report. Contact the awarding IC for IC- specific policy regarding acceptance of
a progress report contained in a competitive renewal application in lieu of a separate final progress report.
NIH strongly encourages electronic submission of the final progress
report and the final invention statement through the Closeout feature in the Commons, but will accept an email or hard copy submission
as indicated below.
Email: The final progress report and final invention statement may
be e-mailed as PDF attachments to: NIHCloseoutCenter@mail.nih.gov.
Hard copy: Paper submissions of the final progress report and the
final invention statement may be faxed to the NIH Division of Central Grants Processing, Grants Closeout Center, at 301-4802304, or
mailed to:
National Institutes of Health
Office of Extramural Research
Division of Central Grants Processing
Grants Closeout Center
6705 Rockledge Drive
Suite 5016, MSC 7986
Bethesda, MD 20892-7986 (for regular or U.S. Postal Service Express mail)
Bethesda, MD 20817 (for other courier/express deliveries only)
NOTE: If this is the final year of a competitive segment due to the
transfer of the grant to another institution, then a Final Progress Report is not required. However, a final expenditure FFR is required
and should be submitted electronically as noted above. If not already submitted, the Final Invention Statement is required and should
be sent directly to the assigned Grants Management Specialist.
In accordance with the regulatory requirements provided at 45 CFR
75.113 and Appendix XII to 45 CFR Part 75, recipients that have currently active Federal grants, cooperative agreements, and procurement
contracts with cumulative total value greater than $10,000,000 must report and maintain information in the System for Award Management
(SAM) about civil, criminal, and administrative proceedings in connection with the award or performance of a Federal award that reached
final disposition within the most recent five-year period. The recipient must also make semiannual disclosures regarding such proceedings.
Proceedings information will be made publicly available in the designated integrity and performance system (currently the Federal Awardee
Performance and Integrity Information System (FAPIIS)). Full reporting requirements and procedures are found in Appendix XII to 45 CFR
Part 75. This term does not apply to NIH fellowships.
Treatment of Program Income:
Additional Costs
SECTION IV - AG Special Terms and
Conditions - 1RF1AG054176-01
Restriction: This award restricts all funds requested for F&A
that are in excess of 10% of salaries and wages, $462,081 is restricted pending the negotiation of an F&A rate(s). These restricted
funds may not be used for any purpose without the prior approval of the grants management official. If the rate(s) negotiated is(are)
lower than originally estimated/funded, this award amount may be revised downward.
Restriction: Recruitment of participants cannot be initiated
until the NIA program staff, the IRB and the DSMB have approved the protocol and data and safety monitoring plan.
Funding for this award has been provided by Alzheimer’s Disease
Initiative funds.
The progress report for this multi-year funded (MYF) award is due
annually on or before the anniversary of the budget/project period start date of the award and must be submitted via the eRA Commons.
Additional information on submission requirements and directions can be found at http://grants.nih.gov/grants/policy/myf.htm.
None of the funds in this award shall be used to pay the salary of
an individual at a rate in excess of the current salary cap. Therefore, this award and/or future years are adjusted accordingly, if applicable.
Current salary cap levels can be found at the following URL: http://grants.nih.gov/grants/policy/salcap summary.htm.
STAFF CONTACTS
The Grants Management Specialist is responsible for the negotiation,
award and administration of this project and for interpretation of Grants Administration policies and provisions. The Program Official
is responsible for the scientific, programmatic and technical aspects of this project. These individuals work together in overall project
administration. Prior approval requests (signed by an Authorized Organizational Representative) should be submitted in writing to the
Grants Management Specialist. Requests may be made via e-mail.
Grants Management Specialist: Robin Laney
Email: laneyr@nia.nih.gov Phone: 301-496-1472 Fax: 301-402-3672
Program Official: Laurie M. Ryan
Email: ryanl@nia.nih.gov Phone: 301.496.9350 Fax: 301-496-1494
SPREADSHEET SUMMARY
GRANT NUMBER: 1RF1AG054176-01
INSTITUTION: COGNITION THERAPEUTICS, INC.
|
Budget
|
|
Year 1
|
|
|
Salaries and Wages
|
|
$
|
200,532
|
|
|
Personnel Costs (Subtotal)
|
|
$
|
200,532
|
|
|
Other
|
|
$
|
1,728,003
|
|
|
TOTAL FEDERAL DC
|
|
$
|
1,928,535
|
|
|
TOTAL FEDERAL F&A
|
|
$
|
482,134
|
|
|
TOTAL COST
|
|
$
|
2,410,669
|
|
|
Facilities and Administrative Costs
|
|
Year 1
|
|
|
F&A Cost Rate 1
|
|
|
25
|
%
|
|
F&A Cost Base 1
|
|
$
|
1,928,535
|
|
|
F&A Costs 1
|
|
$
|
482,134
|
|
Exhibit 10.25
Notice
of Award
|
RESEARCH
Department of Health and Human Services National Institutes of Health
|
Federal Award Date: 09/12/2017
|
|
NATIONAL INSTITUTE ON AGING
Grant Number: 1R01AG057553-01
FAIN: R01AG057553
Principal Investigator(s):
SUSAN M CATALANO,
PHD
Project
Title: A Pilot Synaptic Vesicle Glycoprotein 2A (SV2A) PET Study to Evaluate the Effect of CT1812 Treatment on Synaptic Density in
Subjects with Mild to Moderate Alzheimer's Disease
Dr. Catalano, Susan, Ph.D
Chief Science Officer
2403 Sidney Street
Suite 261
Pittsburgh, PA 152035118
Award e-mailed
to: scatalano@cogrx.com
Period Of Performance:
Budget
Period: 09/15/2017 - 03/31/2018
Project
Period: 09/15/2017 - 03/31/2019
Dear Business Official:
The National
Institutes of Health hereby awards a grant in the amount of $2,371,589 (see “Award Calculation” in Section I and “Terms
and Conditions” in Section III) to COGNITION THERAPEUTICS, INC. in support of the above referenced project. This award is pursuant
to the authority of 42 USC 241 42 CFR 52 and is subject to the requirements of this statute and regulation and of other referenced, incorporated
or attached terms and conditions.
Acceptance
of this award including the “Terms and Conditions” is acknowledged by the grantee when funds are drawn down or otherwise
obtained from the grant payment system.
Each publication,
press release, or other document about research supported by an NIH award must include an acknowledgment of NIH award support and a disclaimer
such as “Research reported in this publication was supported by the National Institute On Aging of the National Institutes of Health
under Award Number R01AG057553. The content is solely the responsibility of the authors and does not necessarily represent the official
views of the National Institutes of Health.” Prior to issuing a press release concerning the outcome of this research, please notify
the NIH awarding IC in advance to allow for coordination.
Award
recipients must promote objectivity in research by establishing standards that provide a reasonable expectation that the design, conduct
and reporting of research funded under NIH awards will be free from bias resulting from an Investigator's Financial Conflict of Interest
(FCOI), in accordance with the 2011 revised regulation at 42 CFR Part 50 Subpart F. The Institution shall submit all FCOI reports to
the NIH through the eRA Commons FCOI Module. The regulation does not apply to Phase I Small Business Innovative Research (SBIR) and Small
Business Technology Transfer (STTR) awards. Consult the NIH website http://grants.nih.gov/grants/policy/coi/ for a link to the
regulation and additional important information.
If you have
any questions about this award, please contact the individual(s) referenced in Section IV.
Sincerely yours,
Robin Laney
Grants Management
Officer
NATIONAL
INSTITUTE ON AGING
Additional information
follows
SECTION
I - AWARD DATA - 1R01AG057553-01
Award Calculation
(U.S. Dollars)
|
Federal Direct Costs
|
|
$
|
2,261,064
|
|
|
Federal F&A Costs
|
|
$
|
110,525
|
|
|
Approved Budget
|
|
$
|
2,371,589
|
|
|
Total Amount of Federal Funds Obligated (Federal Share)
|
|
$
|
2,371,589
|
|
|
TOTAL FEDERAL AWARD AMOUNT
|
|
$
|
2,371,589
|
|
|
|
|
|
|
|
|
AMOUNT OF THIS ACTION (FEDERAL SHARE)
|
|
$
|
2,371,589
|
|
SUMMARY TOTALS FOR ALL
YEARS
|
YR
|
|
THIS AWARD
|
|
|
CUMULATIVE TOTALS
|
|
|
1
|
|
$
|
2,371,589
|
|
|
$
|
2,371,589
|
|
|
2
|
|
$
|
1,759,152
|
|
|
$
|
1,759,152
|
|
Recommended future year
total cost support, subject to the availability of funds and satisfactory progress of the project
Fiscal Information:
|
CFDA Name:
|
Aging Research
|
|
CFDA Number:
|
93.866
|
|
EIN:
|
1134365359A1
|
|
Document Number:
|
RAG057553A
|
|
PMS Account Type:
|
P (Subaccount)
|
|
Fiscal Year:
|
2017
|
|
IC
|
|
|
CAN
|
|
|
2017
|
|
|
2018
|
|
|
AG
|
|
|
|
8013663
|
|
|
$
|
2,371,589
|
|
|
$
|
1,759,152
|
|
Recommended future year total
cost support, subject to the availability of funds and satisfactory progress of the project
NIH Administrative
Data:
PCC:
3CCCTLR / OC: 414A / Released: LANEYR 09/11/2017 Award Processed: 09/12/2017 12:03:11 AM
SECTION II
- PAYMENT/HOTLINE INFORMATION - 1R01AG057553-01
For
payment and HHS Office of Inspector General Hotline information, see the NIH Home Page at http://grants.nih.gov/grants/policy/awardconditions.htm
SECTION
III - TERMS AND CONDITIONS - 1R01AG057553-01
This award is based on the
application submitted to, and as approved by, NIH on the above-titled project and is subject to the terms and conditions incorporated
either directly or by reference in the following:
|
|
a.
|
The grant program legislation and program regulation cited in
this Notice of Award.
|
|
|
b.
|
Conditions on activities and expenditure of funds in other statutory
requirements, such as those included in appropriations acts.
|
|
|
c.
|
45 CFR Part 75.
|
|
|
d.
|
National Policy Requirements and all other requirements described in
the NIH Grants Policy Statement, including addenda in effect as of the beginning date of
the budget period.
|
|
|
e.
|
Federal Award Performance Goals: As required by the periodic report in
the RPPR or in the final progress report when applicable.
|
|
|
f.
|
This award notice, INCLUDING THE TERMS AND CONDITIONS CITED
BELOW.
|
(See
NIH Home Page at http://grants.nih.gov/grants/policy/awardconditions.htm for certain references cited above.)
Research and Development (R&D):
All awards issued by the National Institutes of Health (NIH) meet the definition of “Research and Development” at 45
CFR Part § 75.2. As such, auditees should identify NIH awards as part of the R&D cluster on the Schedule of Expenditures
of Federal Awards (SEFA). The auditor should test NIH awards for compliance as instructed in Part V, Clusters of Programs. NIH recognizes
that some awards may have another classification for purposes of indirect costs. The auditor is not required to report the disconnect
(i.e., the award is classified as R&D for Federal Audit Requirement purposes but non-research for indirect cost rate purposes), unless
the auditee is charging indirect costs at a rate other than the rate(s) specified in the award document(s).
An unobligated balance may be carried
over into the next budget period without Grants Management Officer prior approval.
This grant is excluded from Streamlined
Noncompeting Award Procedures (SNAP).
This
award is subject to the requirements of 2 CFR Part 25 for institutions to receive a Dun & Bradstreet Universal Numbering System (DUNS)
number and maintain an active registration in the System for Award Management (SAM). Should a consortium/subaward be issued under this
award, a DUNS requirement must be included. See http://grants.nih.gov/grants/policy/awardconditions.htm for the full NIH award
term implementing this requirement and other additional information.
This award has been assigned the Federal
Award Identification Number (FAIN) R01AG057553. Recipients must document the assigned FAIN on each consortium/subaward issued under this
award.
Based
on the project period start date of this project, this award is likely subject to the Transparency Act subaward and executive compensation
reporting requirement of 2 CFR Part 170. There are conditions that may exclude this award; see http://grants.nih.gov/grants/policy/awardconditions.htm for
additional award applicability information.
In
accordance with P.L. 110-161, compliance with the NIH Public Access Policy is now mandatory. For more information, see NOT-OD-08-033
and the Public Access website: http://publicaccess.nih.gov/.
This
award provides support for one or more clinical trials. By law (Title VIII, Section 801 of Public Law 110-85), the “responsible
party” must register “applicable clinical trials” on the ClinicalTrials.gov Protocol Registration System Information
Website. NIH encourages registration of all trials whether required under the law or not. For more information, see http://grants.nih.gov/ClinicalTrials
fdaaa/.
In accordance with the regulatory requirements
provided at 45 CFR 75.113 and Appendix XII to 45 CFR Part 75, recipients that have currently active Federal grants, cooperative agreements,
and procurement contracts with cumulative total value greater than $10,000,000 must report and maintain information in the System for
Award Management (SAM) about civil, criminal, and administrative proceedings in connection with the award or performance of a Federal
award that reached final disposition within the most recent five-year period. The recipient must also make semiannual disclosures regarding
such proceedings. Proceedings information will be made publicly available in the designated integrity and performance system (currently
the Federal Awardee Performance and Integrity Information System (FAPIIS)). Full reporting requirements and procedures are found in Appendix
XII to 45 CFR Part 75. This term does not apply to NIH fellowships.
Treatment of Program Income:
SECTION IV -
AG Special Terms and Conditions - 1R01AG057553-01
RESTRICTION: The present award
is being made without a currently valid certification of IRB approval for this project with the following restriction: Only activities
that are clearly severable and independent from activities that involve human subjects may be conducted pending the National Institute
on Aging's acceptance of the certification of IRB approval.
No funds may be drawn down from the
payment system and no obligations may be made against Federal funds for any research involving human subjects prior to the National Institute
on Aging's notification to the grantee that the identified issues have been resolved and this restriction removed.
Failure to respond within the 60-day
period and/or to otherwise comply with the above requirements may result in suspension and/or termination of this award, audit/or disallowances,
and/or other appropriate action.
See
the NIH Grants Policy Statement, Chapter 4.1.15 Human Subjects Protections (http://grants.nih.gov/grants/policy/nihgps/HTML5/section
4/4 public policy requirements objectives and other appropriation mandates.htm), for specific requirements related to the protection
of human subjects, which are applicable to and a term and condition of this award.
Recruitment of participants cannot
be initiated until the NIA program staff, IRB, and the DSMB have approved the protocol and data and safety monitoring plan.
None
of the funds in this award shall be used to pay the salary of an individual at a rate in excess of the current salary cap. Therefore,
this award and/or future years are adjusted accordingly, if applicable. Current salary cap levels can be found at the following URL:
http://grants.nih.gov/grants/policy/salcap summary.htm
This
award includes funds awarded for consortium activity with Yale University in the amount of $1,180,815 ($704,964 direct costs + $475,851
facilities and administrative costs). Consortiums are to be established and administered as described in the NIH Grants Policy Statement
(NIH GPS). The referenced section of the NIH Grants Policy Statement, 2015 is available at: http://grants.nih.gov/grants/policy/nihgps/HTML5/section
15/15 consortium agreements.htm
This award includes funds for twelve
months of support. The competing budget period is awarded for less than 12 months. Continuation awards will cycle each year on 4/1. The
Research Performance Progress Reports (RPPR) are due 45 days prior to this date.
Funding for this award has been provided
by Alzheimer's Disease Initiative funds.
ClinicalTrials.gov is a federal
registry and results database of publicly and privately supported clinical studies of human participants conducted around the world.
In September 2016, NIH issued a final policy to promote broad and responsible dissemination of information from NIH-funded clinical
trials through ClinicalTrials.gov. Under this policy, every clinical trial funded in whole or in part by NIH is expected to be registered
on ClinicalTrials.gov and have summary results information submitted and posted in a timely manner, whether subject to FDAAA 801 or not.
Public
Policy Requirements and Objectives: https://grants.nih.gov/grants/policy/nihgps/HTML5/section 4/4.1 public policy requirements and
objectives.htm?Highlight=clinical
STAFF
CONTACTS
The Grants Management Specialist is
responsible for the negotiation, award and administration of this project and for interpretation of Grants Administration policies and
provisions. The Program Official is responsible for the scientific, programmatic and technical aspects of this project. These individuals
work together in overall project administration. Prior approval requests (signed by an Authorized Organizational Representative) should
be submitted in writing to the Grants Management Specialist. Requests may be made via e-mail.
Grants Management Specialist:
Richard Proper
Email: properr@mail.nih.gov
Phone: 301-402-7735 Fax: 301-402-3672
Program Official: Laurie M.
Ryan
Email: ryanl@nia.nih.gov Phone:
301.496.9350 Fax: 301-496-1494
SPREADSHEET SUMMARY
GRANT NUMBER: 1R01AG057553-01
INSTITUTION: COGNITION THERAPEUTICS,
INC.
|
Facilities and Administrative Costs
|
|
Year 1
|
|
|
Year 2
|
|
|
F&A Cost Rate 1
|
|
|
10
|
%
|
|
|
10
|
%
|
|
F&A Cost Base 1
|
|
$
|
1,105,249
|
|
|
$
|
515,250
|
|
|
F&A Costs 1
|
|
$
|
110,525
|
|
|
$
|
51,525
|
|
Exhibit 10.26
Notice of Award
|
Multi-Year Funded Research Project Grant
Department of Health and Human Services
National Institutes of Health
|
Federal Award Date: 04/18/2018
|
|
|
|
NATIONAL INSTITUTE ON AGING
|
|
|
Grant Number:
1RF1AG057780-01 REVISED
FAIN: RF1AG057780
Principal Investigator(s):
SUSAN M CATALANO, PHD
Project Title: A Pilot CSF Catheter Study to Evaluate the Effect
of CT1812 Treatment on Aβ Oligomer Clearance into CSF in Subjects with Mild to Moderate Alzheimer’s
Disease
Hank Safferstein
Chief Science Officer
2403 Sidney Street
Suite 261
Pittsburgh, PA 152035118
Award e-mailed to: scatalano@cogrx.com
Period Of Performance:
Budget Period: 09/30/2017 - 06/30/2019
Project Period: 09/30/2017 - 06/30/2019
Dear Business Official:
The National Institutes of Health hereby revises this award (see “Award
Calculation” in Section I and “Terms and Conditions” in Section III) to COGNITION THERAPEUTICS, INC. in support of
the above referenced project. This award is pursuant to the authority of 42 USC 241 42 CFR 52 and is subject to the requirements of this
statute and regulation and of other referenced, incorporated or attached terms and conditions.
Acceptance of this award including the “Terms and Conditions”
is acknowledged by the grantee when funds are drawn down or otherwise obtained from the grant payment system.
Each publication, press release, or other document about research
supported by an NIH award must include an acknowledgment of NIH award support and a disclaimer such as “Research reported in this
publication was supported by the National Institute On Aging of the National Institutes of Health under Award Number RF1AG057780. The
content is solely the responsibility of the authors and does not necessarily represent the official views of the National Institutes
of Health.” Prior to issuing a press release concerning the outcome of this research, please notify the NIH awarding IC in advance
to allow for coordination.
Award recipients must promote objectivity in research by
establishing standards that provide a reasonable expectation that the design, conduct and reporting of research funded under NIH
awards will be free from bias resulting from an Investigator's Financial Conflict of Interest (FCOI), in accordance with the 2011
revised regulation at 42 CFR Part 50 Subpart F. The Institution shall submit all FCOI reports to the NIH through the eRA Commons
FCOI Module. The regulation does not apply to Phase I Small Business Innovative Research (SBIR) and Small Business Technology
Transfer (STTR) awards. Consult the NIH website http://grants.nih.gov/grants/policy/coi/ for a link to the regulation and
additional important information.
If you have any questions about this award, please contact the individual(s)
referenced in Section IV.
Sincerely yours,
Robin Laney
Grants Management
Officer
NATIONAL INSTITUTE ON AGING
Additional information
follows
SECTION
I - AWARD DATA - 1RF1AG057780-01 REVISED
|
Award Calculation (U.S. Dollars) Salaries
and Wages
|
|
$
|
132,000
|
|
|
Personnel Costs (Subtotal)
|
|
$
|
132,000
|
|
|
Consultant Services
|
|
$
|
90,000
|
|
|
Materials & Supplies
|
|
$
|
15,000
|
|
|
Other
|
|
$
|
937,000
|
|
|
Subawards/Consortium/Contractual Costs
|
|
$
|
1,230,871
|
|
|
Federal Direct Costs
|
|
$
|
2,404,871
|
|
|
Federal F&A Costs
|
|
$
|
122,400
|
|
|
Approved Budget
|
|
$
|
2,527,271
|
|
|
Total Amount of Federal Funds Obligated (Federal
Share)
|
|
$
|
2,527,271
|
|
|
TOTAL FEDERAL AWARD AMOUNT
|
|
$
|
2,527,271
|
|
|
AMOUNT OF THIS ACTION (FEDERAL SHARE)
|
|
$
|
0
|
|
|
SUMMARY TOTALS FOR ALL YEARS
|
|
|
|
YR
|
|
|
THIS
AWARD
|
|
|
|
CUMULATIVE
TOTALS
|
|
|
1
|
|
$
|
2,527,271
|
|
|
$
|
2,527,271
|
|
|
Fiscal Information:
|
|
|
CFDA Name:
|
Aging Research
|
|
CFDA Number:
|
93.866 1134365359A1
|
|
EIN:
|
RAG057780A
|
|
Document Number:
|
P (Subaccount) 2017
|
|
PMS Account Type:
|
|
|
Fiscal Year:
|
|
|
IC
|
|
CAN
|
|
|
2017
|
|
|
AG
|
|
|
8013663
|
|
|
$
|
2,527,271
|
|
NIH Administrative
Data:
PCC:
3CCCTLR / OC: 414A / Released: LANEYR 04/17/2018
Award Processed: 04/18/2018 12:00:48 AM
SECTION II - PAYMENT/HOTLINE INFORMATION
- 1RF1AG057780-01 REVISED
For payment and HHS Office of Inspector
General Hotline information, see the NIH Home Page at http://grants.nih.gov/grants/policy/awardconditions.htm
SECTION
III - TERMS AND CONDITIONS - 1RF1AG057780-01 REVISED
This award is based on the application
submitted to, and as approved by, NIH on the above-titled project and is subject to the terms and conditions incorporated either directly
or by reference in the following:
|
|
a.
|
The grant program legislation and program
regulation cited in this Notice of Award.
|
|
|
b.
|
Conditions on activities and expenditure of funds in other statutory
requirements, such as those included in appropriations acts.
|
|
|
c.
|
45 CFR Part 75.
|
|
|
d.
|
National Policy Requirements and all other requirements described in
the NIH Grants Policy Statement, including addenda in effect as of the beginning date of
the budget period.
|
|
|
e.
|
Federal Award Performance Goals: As required by the periodic report in
the RPPR or in the final progress report when applicable.
|
|
|
f.
|
This award notice, INCLUDING THE TERMS AND CONDITIONS CITED BELOW.
|
(See NIH Home Page at http://grants.nih.gov/grants/policy/awardconditions.htm
for certain references cited above.)
Research and Development
(R&D): All awards issued by the National Institutes of Health (NIH) meet the definition of “Research and
Development” at 45 CFR Part § 75.2. As such, auditees should identify NIH awards as part of the R&D cluster on
the Schedule of Expenditures of Federal Awards (SEFA). The auditor should test NIH awards for compliance as instructed in Part V,
Clusters of Programs. NIH recognizes that some awards may have another classification for purposes of indirect costs. The auditor is
not required to report the disconnect (i.e., the award is classified as R&D for Federal Audit Requirement purposes but
non-research for indirect cost rate purposes), unless the auditee is charging indirect costs at a rate other than the rate(s)
specified in the award document(s).
An unobligated balance may be carried
over into the next budget period without Grants Management Officer prior approval.
This grant is excluded from Streamlined
Noncompeting Award Procedures (SNAP).
MULTI-YEAR FUNDED AWARD: This
is a multi-year funded award. A progress report is due annually on or before the anniversary of the budget/project period start date
of the award, in accord with the instructions posted at: http://grants.nih.gov/grants/policy/myf.htm.
This award is subject to the
requirements of 2 CFR Part 25 for institutions to receive a Dun & Bradstreet Universal Numbering System (DUNS) number and
maintain an active registration in the System for Award Management (SAM). Should a consortium/subaward be issued under this
award, a DUNS requirement must be included. See http://grants.nih.gov/grants/policy/awardconditions.htm for the full NIH
award term implementing this requirement and other additional information.
This award has been assigned the Federal
Award Identification Number (FAIN) RF1AG057780. Recipients must document the assigned FAIN on each consortium/subaward issued under this
award.
Based on the project period start date
of this project, this award is likely subject to the Transparency Act subaward and executive compensation reporting requirement of 2
CFR Part 170. There are conditions that may exclude this award; see http://grants.nih.gov/grants/policy/awardconditions.htm for
additional award applicability information.
In accordance with P.L. 110-161, compliance
with the NIH Public Access Policy is now mandatory. For more information, see NOT-OD-08-033 and the Public Access website: http://publicaccess.nih.gov/.
This award provides support for
one or more clinical trials. By law (Title VIII, Section 801 of Public Law 110-85), the “responsible party” must
register “applicable clinical trials” on the ClinicalTrials.gov Protocol Registration System Information Website. NIH
encourages registration of all trials whether required under the law or not. For more information, see http://grants.nih.gov/ClinicalTrials
fdaaa/.
This award represents the final year
of the competitive segment for this grant. See the NIH Grants Policy Statement Section 8.6 Closeout for complete closeout requirements
at: http://grants.nih.gov/grants/policy/policy.htm#gps.
A final expenditure Federal Financial
Report (FFR) (SF 425) must be submitted through the eRA Commons (Commons) within 120 days of the period of performance end date; see
the NIH Grants Policy Statement Section 8.6.1 Financial Reports, http://grants.nih.gov/grants/policy/policy.htm#gps, for additional
information on this submission requirement. The final FFR must indicate the exact balance of unobligated funds and may not reflect any
unliquidated obligations. There must be no discrepancies between the final FFR expenditure data and the Payment Management System's (PMS)
quarterly cash transaction data.
A final quarterly federal cash
transaction report is not required for awards in PMS B subaccounts (i.e., awards to foreign entities and to Federal agencies). NIH
will close the awards using the last recorded cash drawdown level in PMS for awards that do not require a final FFR on expenditures
or quarterly federal cash transaction reporting. It is important to note that for financial closeout, if a grantee fails to submit a
required final expenditure FFR, NIH will close the grant using the last recorded cash drawdown level. If the grantee submits a final
expenditure FFR but does not reconcile any discrepancies between expenditures reported on the final expenditure FFR and the last
cash report to PMS, NIH will close the award at the lower amount. This could be considered a debt or result in disallowed
costs.
A Final Invention Statement and
Certification form (HHS 568), (not applicable to training, construction, conference or cancer education grants) must be submitted
within 120 days of the expiration date. The HHS 568 form may be downloaded at: http://grants.nih.gov/grants/forms.htm. This
paragraph does not apply to Training grants, Fellowships, and certain other programs—i.e., activity codes C06, D42, D43, D71,
DP7, G07, G08, G11, K12, K16, K30, P09, P40, P41, P51, R13, R25, R28, R30, R90, RL5, RL9, S10, S14, S15, U13, U14, U41, U42,
U45, UC6, UC7, UR2, X01, X02.
Unless an application for competitive
renewal is submitted, a Final Research Performance Progress Report (Final RPPR) must also be submitted within 120 days of the period
of performance end date. If a competitive renewal application is submitted prior to that date, then an Interim RPPR must be submitted
by that date as well. Instructions for preparing an Interim or Final RPPR are at: https://grants.nih.gov/grants/rppr/rppr instruction
guide.pdf. Any other specific requirements set forth in the terms and conditions of the award must also be addressed in the Interim
or Final RPPR. Note that data reported within Section I of the Interim and Final RPPR forms will be made public and should be written
for a lay person audience.
NIH strongly encourages electronic
submission of the final invention statement through the Closeout feature in the Commons, but will accept an email or hard copy
submission as indicated below.
Email: The final invention statement
may be e-mailed as PDF attachments to: NIHCloseoutCenter@mail.nih.gov.
Hard copy: Paper submissions of
the final invention statement may be faxed to the NIH Division of Central Grants Processing, Grants Closeout Center, at
301-480-2304, or mailed to:
National Institutes
of Health
Office of Extramural Research
Division of Central Grants Processing
Grants Closeout Center
6705 Rockledge Drive
Suite 5016, MSC 7986
Bethesda, MD 20892-7986 (for regular
or U.S. Postal Service Express mail)
Bethesda, MD 20817 (for other courier/express
deliveries only)
NOTE: If this is the final year of
a competitive segment due to the transfer of the grant to another institution, then a Final RPPR is not required. However, a final expenditure
FFR is required and should be submitted electronically as noted above. If not already submitted, the Final Invention Statement is required
and should be sent directly to the assigned Grants Management Specialist.
In accordance with the regulatory
requirements provided at 45 CFR 75.113 and Appendix XII to 45 CFR Part 75, recipients that have currently active Federal grants,
cooperative agreements, and procurement contracts with cumulative total value greater than $10,000,000 must report and maintain
information in the System for Award Management (SAM) about civil, criminal, and administrative proceedings in connection with the
award or performance of a Federal award that reached final disposition within the most recent five-year period. The recipient must
also make semiannual disclosures regarding such proceedings. Proceedings information will be made publicly available in the
designated integrity and performance system (currently the Federal Awardee Performance and Integrity Information System (FAPIIS)).
Full reporting requirements and procedures are found in Appendix XII to 45 CFR Part 75. This term does not apply to NIH
fellowships.
Treatment of Program Income:
Additional Costs
SECTION
IV - AG Special Terms and Conditions - 1RF1AG057780-01 REVISED
Clinical Trial Indicator: Yes
This award supports one or more NIH-defined
Clinical Trials. See the NIH Grants Policy Statement Section 1.2 for NIH definition of Clinical Trial.
REVISION: This revised award
reflects the Office for Human Research Protections' (OHRP) approval of Assurance(s) of Compliance with 45 CFR 46 the grantee organization.
This revised award reflects the
NIH awarding component's acceptance of the certification of Institutional Review Board (IRB) approval for the grantee organization
and releases the restriction on the Notice of Award issued on 9/16/2017. Accordingly, the special condition prohibiting research
involving human subjects is removed, effective as of the date of IRB approval.
Supersedes Notice of Award issued
9/16/2017. Previous terms and conditions apply:
The progress report for this multi-year
funded (MYF) award is due annually on or before the anniversary of the budget/project period start date of the award and must be submitted
via the eRA Commons. Additional information on submission requirements and directions can be found at: http://grants.nih.gov/grants/policy/myf.htm.
Funds for this award expire on the
last day of the 5th Fiscal Year of the Initial Award (06/30/2022).
Funding for this award has been provided
by Alzheimer's Disease Initiative funds.
ClinicalTrials.gov is a
federal registry and results database of publicly and privately supported clinical studies of human participants conducted around
the world. In September 2016, NIH issued a final policy to promote broad and responsible dissemination of information from NIH-
funded clinical trials through ClinicalTrials.gov. Under this policy, every clinical trial funded in whole or in part by NIH is
expected to be registered on ClinicalTrials.gov and have summary results information submitted and posted in a timely manner,
whether subject to FDAAA 801 or not.
Public Policy Requirements and Objectives:
https://grants.nih.gov/grants/policy/nihgps/HTML5/section 4/4.1 public policy requirements and objectives.htm?Highlight=clinical
This award includes funds for
twelve months of support. The competing budget period is awarded for less than 12 months. Continuation awards will cycle each year
on 4/1. The Research Performance Progress Report (RPPR) is due 45 days prior to this date.
This award includes funds awarded for
consortium activity with the University of Pennsylvania in the amount of $288,525 ($179,208 direct costs + $109,317 facilities
and administrative costs) Washington University in the amount of $326,165 ($217,321 direct costs + $108,844 facilities and administrative
costs). Consortiums are to be established and administered as described in the NIH Grants Policy Statement (NIH GPS). The referenced
section of the NIH Grants Policy Statement, 2015 is available at: http://grants.nih.gov/grants/policy/nihgps/HTML5/section 15/15 consortium
agreements.htm.
STAFF CONTACTS
The Grants Management Specialist is
responsible for the negotiation, award and administration of this project and for interpretation of Grants Administration policies and
provisions. The Program Official is responsible for the scientific, programmatic and technical aspects of this project. These individuals
work together in overall project administration. Prior approval requests (signed by an Authorized Organizational Representative) should
be submitted in writing to the Grants Management Specialist. Requests may be made via e-mail.
Grants Management Specialist:
Jessica Perez
Email: perezj@nia.nih.gov Phone:
301 496-1472 Fax: 301 402-3672
Program Official: Laurie M.
Ryan
Email: ryanl@nia.nih.gov Phone:
301.496.9350 Fax: 301-496-1494
SPREADSHEET SUMMARY
GRANT NUMBER: 1RF1AG057780-01
REVISED
INSTITUTION: COGNITION THERAPEUTICS, INC.
|
Budget
|
|
Year 1
|
|
|
Salaries and Wages
|
|
$
|
132,000
|
|
|
Personnel Costs (Subtotal)
|
|
$
|
132,000
|
|
|
Consultant Services
|
|
$
|
90,000
|
|
|
Materials & Supplies
|
|
$
|
15,000
|
|
|
Other
|
|
$
|
937,000
|
|
|
Subawards/Consortium/Contractual Costs
|
|
$
|
1,230,871
|
|
|
TOTAL FEDERAL DC
|
|
$
|
2,404,871
|
|
|
TOTAL FEDERAL F&A
|
|
$
|
122,400
|
|
|
TOTAL COST
|
|
$
|
2,527,271
|
|
|
Facilities and Administrative Costs
|
|
Year 1
|
|
|
F&A Cost Rate 1
|
|
|
10
|
%
|
|
F&A Cost Base 1
|
|
$
|
1,067,550
|
|
|
F&A Costs 1
|
|
$
|
106,755
|
|
|
F&A Cost Rate 2
|
|
|
10
|
%
|
|
F&A Cost Base 2
|
|
$
|
156,450
|
|
|
F&A Costs 2
|
|
$
|
15,645
|
|
Exhibit 10.27
Notice of Award
|
|
RESEARCH
Department of Health and Human Services
National Institutes of Health
|
Federal
Award Date: 09/08/2018
|
|
NATIONAL INSTITUTE ON AGING
Grant Number: 1R01AG058660-01
FAIN: R01AG058660
Principal Investigator(s):
SUSAN M CATALANO, PHD
Project Title: A Randomized,
Double-blind, Placebo-Controlled, Parallel-Group, Phase II Study to Evaluate the Safety and Efficacy of CT1812 in Subjects with Mild
to Moderate Alzheimer's Disease
Dr. Catalano, Susan, Ph.D
Chief Science Officer
2403 Sidney Street
Suite 261
Pittsburgh, PA 153025118
Award e-mailed to: scatalano@cogrx.com
Period Of Performance:
Budget Period: 09/15/2018 -
05/31/2019
Project Period: 09/15/2018 -
05/31/2021
Dear Business Official:
The National Institutes of Health hereby
awards a grant in the amount of $5,059,534 (see “Award Calculation” in Section I and “Terms and Conditions” in
Section III) to COGNITION THERAPEUTICS, INC. in support of the above referenced project. This award is pursuant to the authority of 42
USC 241 42 CFR 52 and is subject to the requirements of this statute and regulation and of other referenced, incorporated or attached
terms and conditions.
Acceptance of this award including
the “Terms and Conditions” is acknowledged by the grantee when funds are drawn down or otherwise obtained from the grant
payment system.
Each publication, press release, or
other document about research supported by an NIH award must include an acknowledgment of NIH award support and a disclaimer such as
“Research reported in this publication was supported by the National Institute On Aging of the National Institutes of Health under
Award Number R01AG058660. The content is solely the responsibility of the authors and does not necessarily represent the official views
of the National Institutes of Health.” Prior to issuing a press release concerning the outcome of this research, please notify
the NIH awarding IC in advance to allow for coordination.
Award recipients must promote objectivity
in research by establishing standards that provide a reasonable expectation that the design, conduct and reporting of research funded
under NIH awards will be free from bias resulting from an Investigator's Financial Conflict of Interest (FCOI), in accordance with the
2011 revised regulation at 42 CFR Part 50 Subpart F. The Institution shall submit all FCOI reports to the NIH through the eRA Commons
FCOI Module. The regulation does not apply to Phase I Small Business Innovative Research (SBIR) and Small Business Technology Transfer
(STTR) awards. Consult the NIH website http://grants.nih.gov/grants/policy/coi/ for a link to the regulation and additional important
information.
If you have any questions about this award, please contact the individual(s)
referenced in Section IV.
Sincerely yours,
Robin Laney
Grants Management Officer
NATIONAL INSTITUTE
ON AGING
Additional information follows
SECTION I - AWARD DATA - 1R01AG058660-01
|
Award Calculation (U.S. Dollars)
Salaries and Wages Personnel Costs
|
|
|
|
|
|
(Subtotal) Consultant
Services
|
|
$
|
171,250
|
|
|
Other
|
|
$
|
171,250
|
|
|
|
|
$
|
70,000
|
|
|
|
|
$
|
3,650,699
|
|
|
|
|
|
|
|
|
Federal Direct Costs
|
|
$
|
3,891,949
|
|
|
Federal F&A Costs
|
|
$
|
1,167,585
|
|
|
Approved Budget
|
|
$
|
5,059,534
|
|
|
Total Amount of Federal Funds Obligated (Federal Share)
|
|
$
|
5,059,534
|
|
|
TOTAL FEDERAL AWARD AMOUNT
|
|
$
|
5,059,534
|
|
|
AMOUNT OF THIS ACTION (FEDERAL SHARE)
|
|
$
|
5,059,534
|
|
|
SUMMARY TOTALS FOR ALL YEARS
|
|
|
|
YR
|
|
|
|
THIS
AWARD
|
|
|
|
CUMULATIVE
TOTALS
|
|
|
1
|
|
|
$
|
5,059,534
|
|
|
$
|
5,059,534
|
|
|
2
|
|
|
$
|
5,735,586
|
|
|
$
|
5,735,586
|
|
|
3
|
|
|
$
|
5,774,586
|
|
|
$
|
5,774,586
|
|
Recommended
future year total cost support, subject to the availability of funds and satisfactory progress of the project
Fiscal Information:
|
CFDA Name:
|
|
|
Aging
Research
|
|
|
CFDA Number:
|
|
|
93.866
|
|
|
EIN:
|
|
|
1134365359A1
|
|
|
Document Number:
|
|
|
RAG058660A
|
|
|
PMS Account Type:
|
|
|
P
(Subaccount)
|
|
|
Fiscal Year:
|
|
|
2018
|
|
|
IC
|
|
CAN
|
|
|
2018
|
|
|
2019
|
|
|
2020
|
|
|
AG
|
|
|
8033159
|
|
|
$
|
5,059,534
|
|
|
$
|
5,735,586
|
|
|
$
|
5,774,586
|
|
Recommended
future year total cost support, subject to the availability of funds and satisfactory progress of the project
NIH
Administrative Data:
PCC:
3CCCTLR / OC: 414A / Released: LANEYR 09/07/2018
Award Processed: 09/08/2018 12:03:31 AM
SECTION II - PAYMENT/HOTLINE INFORMATION
- 1R01AG058660-01
For
payment and HHS Office of Inspector General Hotline information, see the NIH Home Page at http://grants.nih.gov/grants/policy/awardconditions.htm
SECTION
III - TERMS AND CONDITIONS - 1R01AG058660-01
This
award is based on the application submitted to, and as approved by, NIH on the above-titled project and is subject to the terms and conditions
incorporated either directly or by reference in the following:
|
|
a.
|
The grant program legislation and program regulation cited in this
Notice of Award.
|
|
|
b.
|
Conditions on activities and expenditure
of funds in other statutory requirements, such as those included in appropriations acts.
|
|
|
c.
|
45 CFR Part 75.
|
|
|
d.
|
National Policy Requirements and
all other requirements described in the NIH Grants Policy Statement, including addenda in
effect as of the beginning date of the budget period.
|
|
|
e.
|
Federal Award Performance Goals: As required by the periodic report
in the RPPR or in the final progress report when applicable.
|
|
|
f.
|
This award notice, INCLUDING THE TERMS AND CONDITIONS CITED BELOW.
|
(See NIH Home Page at http://grants.nih.gov/grants/policy/awardconditions.htm
for certain references cited above.)
Research and Development (R&D):
All awards issued by the National Institutes of Health (NIH) meet the definition of “Research and Development” at 45
CFR Part § 75.2. As such, auditees should identify NIH awards as part of the R&D cluster on the Schedule of Expenditures
of Federal Awards (SEFA). The auditor should test NIH awards for compliance as instructed in Part V, Clusters of Programs. NIH recognizes
that some awards may have another classification for purposes of indirect costs. The auditor is not required to report the disconnect
(i.e., the award is classified as R&D for Federal Audit Requirement purposes but non-research for indirect cost rate purposes), unless
the auditee is charging indirect costs at a rate other than the rate(s) specified in the award document(s).
An unobligated balance may be carried
over into the next budget period without Grants Management Officer prior approval.
This grant is subject to Streamlined
Noncompeting Award Procedures (SNAP).
This award is subject to the requirements
of 2 CFR Part 25 for institutions to receive a Dun & Bradstreet Universal Numbering System (DUNS) number and maintain an active registration
in the System for Award Management (SAM). Should a consortium/subaward be issued under this award, a DUNS requirement must be included.
See http://grants.nih.gov/grants/policy/awardconditions.htm for the full NIH award term implementing this requirement and other
additional information.
This award has been assigned the Federal
Award Identification Number (FAIN) R01AG058660. Recipients must document the assigned FAIN on each consortium/subaward issued under this
award.
Based on the project period start date
of this project, this award is likely subject to the Transparency Act subaward and executive compensation reporting requirement of 2
CFR Part 170. There are conditions that may exclude this award; see http://grants.nih.gov/grants/policy/awardconditions.htm for
additional award applicability information.
In accordance with P.L. 110-161, compliance
with the NIH Public Access Policy is now mandatory. For more information, see NOT-OD-08-033 and the Public Access website: http://publicaccess.nih.gov/.
This award provides support for one
or more clinical trials. By law (Title VIII, Section 801 of Public Law 110-85), the “responsible party” must register
“applicable clinical trials” on the ClinicalTrials.gov Protocol Registration System Information Website. NIH encourages
registration of all trials whether required under the law or not. For more information, see http://grants.nih.gov/ClinicalTrials_fdaaa/
In accordance with the regulatory requirements
provided at 45 CFR 75.113 and Appendix XII to 45 CFR Part 75, recipients that have currently active Federal grants, cooperative agreements,
and procurement contracts with cumulative total value greater than $10,000,000 must report and maintain information in the System for
Award Management (SAM) about civil, criminal, and administrative proceedings in connection with the award or performance of a Federal
award that reached final disposition within the most recent five-year period. The recipient must also make semiannual disclosures regarding
such proceedings. Proceedings information will be made publicly available in the designated integrity and performance system (currently
the Federal Awardee Performance and Integrity Information System (FAPIIS)). Full reporting requirements and procedures are found in Appendix
XII to 45 CFR Part 75. This term does not apply to NIH fellowships.
Treatment of Program Income:
Additional
Costs
SECTION IV - AG Special Terms and Conditions
- 1R01AG058660-01
Clinical Trial Indicator: Yes
This award supports one or more NIH-defined
Clinical Trials. See the NIH Grants Policy Statement Section 1.2 for NIH definition of Clinical Trial.
Restriction: Participant
recruitment cannot begin until the National Institute on Aging (NIA) program staff, the Data and Safety Monitoring Board (DSMB) and the
grantee's Institutional Review Board (IRB) has reviewed and approved the Data and Safety Monitoring Plan protocol and the NIA program
staff has documentation of the IRB's approval.
Funding for this award has been provided
by Alzheimer's Disease Initiative funds.
ClinicalTrials.gov is a federal
registry and results database of publicly and privately supported clinical studies of human participants conducted around the world.
In September 2016, NIH issued a final policy to promote broad and responsible dissemination of information from NIH-funded clinical
trials through ClinicalTrials.gov. Under this policy, every clinical trial funded in whole or in part by NIH is expected to be registered
on ClinicalTrials.gov and have summary results information submitted and posted in a timely manner, whether subject to FDAAA 801 or not.
Public Policy Requirements and Objectives:
https://grants.nih.gov/grants/policy/nihgps/HTML5/section
4/4.1 public policy requirements and objectives.htm?Highlight=clinical
This award includes funds for twelve
months of support. The competing budget period is awarded for less than 12 months. Continuation awards will cycle each year on 06/01.
The Research Performance Progress Reports (RPPR) are due 45 days prior to this date.
STAFF CONTACTS
The Grants Management Specialist is
responsible for the negotiation, award and administration of this project and for interpretation of Grants Administration policies and
provisions. The Program Official is responsible for the scientific, programmatic and technical aspects of this project. These individuals
work together in overall project administration. Prior approval requests (signed by an Authorized Organizational Representative) should
be submitted in writing to the Grants Management Specialist. Requests may be made via e-mail.
Grants Management Specialist:
Jennifer Edwards
Email: edwardsj@mail.nih.gov
Phone: 301-827-6689
Program Official: Laurie M.
Ryan
Email: ryanl@nia.nih.gov Phone:
301.496.9350 Fax: 301-496-1494
SPREADSHEET
SUMMARY
GRANT NUMBER: 1R01AG058660-01
INSTITUTION: COGNITION THERAPEUTICS,
INC.
|
Budget
|
|
Year 1
|
|
|
Year 2
|
|
|
Year 3
|
|
|
Salaries and Wages
|
|
$
|
171,250
|
|
|
$
|
171,250
|
|
|
$
|
176,250
|
|
|
Personnel Costs (Subtotal)
|
|
$
|
171,250
|
|
|
$
|
171,250
|
|
|
$
|
176,250
|
|
|
Consultant Services
|
|
$
|
70,000
|
|
|
$
|
70,000
|
|
|
$
|
70,000
|
|
|
Other
|
|
$
|
3,650,699
|
|
|
$
|
4,170,739
|
|
|
$
|
4,195,739
|
|
|
TOTAL FEDERAL DC
|
|
$
|
3,891,949
|
|
|
$
|
4,411,989
|
|
|
$
|
4,441,989
|
|
|
TOTAL FEDERAL F&A
|
|
$
|
1,167,585
|
|
|
$
|
1,323,597
|
|
|
$
|
1,332,597
|
|
|
TOTAL COST
|
|
$
|
5,059,534
|
|
|
$
|
5,735,586
|
|
|
$
|
5,774,586
|
|
|
Facilities and Administrative Costs
|
|
Year 1
|
|
|
Year 2
|
|
|
Year 3
|
|
|
F&A Cost Rate 1
|
|
|
30
|
%
|
|
|
30
|
%
|
|
|
30
|
%
|
|
F&A Cost Base 1
|
|
$
|
3,891,949
|
|
|
$
|
4,411,989
|
|
|
$
|
4,441,989
|
|
|
F&A Costs 1
|
|
$
|
1,167,585
|
|
|
$
|
1,323,597
|
|
|
$
|
1,332,597
|
|
Exhibit 10.28
Notice of Award
|
RESEARCH
Department of Health and Human Services
National Institutes of Health
NATIONAL INSTITUTE ON AGING
|
Federal Award Date: 08/28/2020
|
|
|
|
|
|
|
Grant
Number: 3R01AG058660-03S2
FAIN:
R01AG058660
Principal
Investigator(s):
SUSAN
M CATALANO, PHD
Project
Title: A Randomized, Double-blind, Placebo-Controlled, Parallel-Group, Phase II Study to Evaluate the Safety and Efficacy of CT1812
in Subjects with Mild to Moderate Alzheimer's Disease
Dr.
Susan Catalano
Cognition
Therapeutics, Inc.
2403
Sidney Street
Suite
261
Pittsburgh,
PA 15302
Award
e-mailed to: scatalano@cogrx.com
Period
Of Performance:
Budget
Period: 09/01/2020 - 05/31/2021
Project
Period: 09/15/2018 - 05/31/2021
Dear
Business Official:
The
National Institutes of Health hereby awards a grant in the amount of $278,623 (see “Award Calculation” in Section I and “Terms
and Conditions” in Section III) to COGNITION THERAPEUTICS, INC. in support of the above referenced project. This award is pursuant
to the authority of 42 USC 241 42 CFR 52 and is subject to the requirements of this statute and regulation and of other referenced, incorporated
or attached terms and conditions.
Acceptance
of this award including the “Terms and Conditions” is acknowledged by the grantee when funds are drawn down or otherwise
obtained from the grant payment system.
Each
publication, press release, or other document about research supported by an NIH award must include an acknowledgment of NIH award support
and a disclaimer such as “Research reported in this publication was supported by the National Institute On Aging of the National
Institutes of Health under Award Number R01AG058660. The content is solely the responsibility of the authors and does not necessarily
represent the official views of the National Institutes of Health.” Prior to issuing a press release concerning the outcome of
this research, please notify the NIH awarding IC in advance to allow for coordination.
Award
recipients must promote objectivity in research by establishing standards that provide a reasonable expectation that the design, conduct
and reporting of research funded under NIH awards will be free from bias resulting from an Investigator's Financial Conflict of Interest
(FCOI), in accordance with the 2011 revised regulation at 42 CFR Part 50 Subpart F. The Institution shall submit all FCOI reports to
the NIH through the eRA Commons FCOI Module. The regulation does not apply to Phase I Small Business Innovative Research (SBIR) and Small
Business Technology Transfer (STTR) awards. Consult the NIH website http://grants.nih.gov/grants/policy/coi/ for a link to the
regulation and additional important information.
If
you have any questions about this award, please contact the individual(s) referenced in Section IV.
Sincerely
yours,
Jessica
Perez
Grants
Management Officer
NATIONAL INSTITUTE ON AGING
Additional
information follows
SECTION
I - AWARD DATA - 3R01AG058660-03S2
Award Calculation (U.S. Dollars)
|
Federal
Direct Costs
|
|
$
|
214,325
|
|
|
Federal F&A Costs
|
|
$
|
64,298
|
|
|
Approved Budget
|
|
$
|
278,623
|
|
|
Total Amount of Federal Funds Obligated (Federal Share)
|
|
$
|
278,623
|
|
|
TOTAL FEDERAL AWARD AMOUNT
|
|
$
|
278,623
|
|
|
|
|
|
|
|
|
AMOUNT OF THIS ACTION (FEDERAL SHARE)
|
|
$
|
278,623
|
|
|
SUMMARY TOTAL FEDERAL AWARD AMOUNT YEAR ( 3 )
|
|
|
GRANT NUMBER
|
|
|
TOTAL
FEDERAL AWARD AMOUNT
|
|
|
3R01AG058660-03S2
|
|
$
|
278,623
|
|
|
5R01AG058660-03
|
|
$
|
5,774,586
|
|
|
TOTAL
|
|
$
|
6,053,209
|
|
|
SUMMARY TOTALS FOR ALL YEARS
|
|
YR
|
|
|
|
THIS
AWARD
|
|
|
|
CUMULATIVE
TOTALS
|
|
|
3
|
|
|
$
|
278,623
|
|
|
$
|
6,053,209
|
|
Fiscal Information:
|
CFDA Name:
|
|
|
Aging
Research
|
|
|
CFDA Number:
|
|
|
93.866
|
|
|
EIN:
|
|
|
1134365359A1
|
|
|
Document Number:
|
|
|
RAG058660A
|
|
|
PMS Account Type:
|
|
|
P
(Subaccount)
|
|
|
Fiscal Year:
|
|
|
2020
|
|
|
IC
|
|
|
CAN
|
|
|
2020
|
|
|
AG
|
|
|
|
8033159
|
|
|
$
|
278,623
|
|
NIH Administrative Data:
PCC: 3CCCTLR / OC: 41023 / Released: PEREZJ 08/25/2020
Award Processed: 08/28/2020 12:18:20 AM
SECTION
II - PAYMENT/HOTLINE INFORMATION - 3R01AG058660-03S2
For payment
and HHS Office of Inspector General Hotline information, see the NIH Home Page at http://grants.nih.gov/grants/policy/awardconditions.htm
SECTION
III - TERMS AND CONDITIONS - 3R01AG058660-03S2
This award
is based on the application submitted to, and as approved by, NIH on the above-titled project and is subject to the terms and conditions
incorporated either directly or by reference in the following:
|
|
a.
|
The grant program legislation and program regulation cited in this Notice of Award.
|
|
|
b.
|
Conditions on activities and expenditure of funds in other statutory
requirements, such as those included in appropriations acts.
|
|
|
c.
|
45 CFR Part 75.
|
|
|
d.
|
National Policy Requirements and all other requirements described in
the NIH Grants Policy Statement, including addenda in effect as of the beginning date of
the budget period.
|
|
|
e.
|
Federal Award Performance Goals: As required by the periodic report in
the RPPR or in the final progress report when applicable.
|
|
|
f.
|
This award notice, INCLUDING THE TERMS AND CONDITIONS CITED BELOW.
|
(See NIH Home Page at http://grants.nih.gov/grants/policy/awardconditions.htm
for certain references cited above.)
Research and Development
(R&D): All awards issued by the National Institutes of Health (NIH) meet the definition of “Research and
Development” at 45 CFR Part § 75.2. As such, auditees should identify NIH awards as part of the R&D cluster on
the Schedule of Expenditures of Federal Awards (SEFA). The auditor should test NIH awards for compliance as instructed in Part V,
Clusters of Programs. NIH recognizes that some awards may have another classification for purposes of indirect costs. The auditor is
not required to report the disconnect (i.e., the award is classified as R&D for Federal Audit Requirement purposes but
non-research for indirect cost rate purposes), unless the auditee is charging indirect costs at a rate other than the rate(s)
specified in the award document(s).
An unobligated balance may be carried
over into the next budget period without Grants Management Officer prior approval.
This award is subject to the requirements
of 2 CFR Part 25 for institutions to receive a Dun & Bradstreet Universal Numbering System (DUNS) number and maintain an active registration
in the System for Award Management (SAM). Should a consortium/subaward be issued under this award, a DUNS requirement must be included.
See http://grants.nih.gov/grants/policy/awardconditions.htm for the full NIH award term implementing this requirement and other
additional information.
This award has been assigned the Federal
Award Identification Number (FAIN) R01AG058660. Recipients must document the assigned FAIN on each consortium/subaward issued under this
award.
Based on the project period start date
of this project, this award is likely subject to the Transparency Act subaward and executive compensation reporting requirement of 2
CFR Part 170. There are conditions that may exclude this award; see http://grants.nih.gov/grants/policy/awardconditions.htm for
additional award applicability information.
In accordance with P.L. 110-161, compliance
with the NIH Public Access Policy is now mandatory. For more information, see NOT-OD-08-033 and the Public Access website: http://publicaccess.nih.gov/.
This award represents the final year
of the competitive segment for this grant. See the NIH Grants Policy Statement Section 8.6 Closeout for complete closeout requirements
at: http://grants.nih.gov/grants/policy/policy.htm#gps.
A final expenditure Federal Financial
Report (FFR) (SF 425) must be submitted through the eRA Commons (Commons) within 120 days of the period of performance end date; see
the NIH Grants Policy Statement Section 8.6.1 Financial Reports, http://grants.nih.gov/grants/policy/policy.htm#gps, for additional
information on this submission requirement. The final FFR must indicate the exact balance of unobligated funds and may not reflect any
unliquidated obligations. There must be no discrepancies between the final FFR expenditure data and the Payment Management System's (PMS)
quarterly cash transaction data. A final quarterly federal cash transaction report is not required for awards in PMS B subaccounts (i.e.,
awards to foreign entities and to Federal agencies). NIH will close the awards using the last recorded cash drawdown level in PMS for
awards that do not require a final FFR on expenditures or quarterly federal cash transaction reporting. It is important to note that
for financial closeout, if a grantee fails to submit a required final expenditure FFR, NIH will close the grant using the last recorded
cash drawdown level. If the grantee submits a final expenditure FFR but does not reconcile any discrepancies between expenditures reported
on the final expenditure FFR and the last cash report to PMS, NIH will close the award at the lower amount. This could be considered
a debt or result in disallowed costs.
A Final Invention Statement and Certification
form (HHS 568), (not applicable to training, construction, conference or cancer education grants) must be submitted within 120 days of
the expiration date. The HHS 568 form may be downloaded at: http://grants.nih.gov/grants/forms.htm. This paragraph does not apply
to Training grants, Fellowships, and certain other programs—i.e., activity codes C06, D42, D43, D71, DP7, G07, G08, G11, K12, K16,
K30, P09, P40, P41, P51, R13, R25, R28, R30, R90, RL5, RL9, S10, S14, S15, U13, U14, U41, U42, U45, UC6, UC7, UR2, X01, X02.
Unless an application for competitive
renewal is submitted, a Final Research Performance Progress Report (Final RPPR) must also be submitted within 120 days of the period
of performance end date. If a competitive renewal application is submitted prior to that date, then an Interim RPPR must be submitted
by that date as well. Instructions for preparing an Interim or Final RPPR are at: https://grants.nih.gov/grants/rppr/rppr instruction
guide.pdf. Any other specific requirements set forth in the terms and conditions of the award must also be addressed in the Interim
or Final RPPR. Note that data reported within Section I of the Interim and Final RPPR forms will be made public and should be written
for a lay person audience.
NIH strongly encourages electronic
submission of the final invention statement through the Closeout feature in the Commons, but will accept an email or hard copy submission
as indicated below.
Email: The final invention statement
may be e-mailed as PDF attachments to: NIHCloseoutCenter@mail.nih.gov.
Hard copy: Paper submissions of the
final invention statement may be faxed to the NIH Division of Central Grants Processing, Grants Closeout Center, at 301-480-2304, or
mailed to:
National Institutes of Health
Office of Extramural Research Division
of Central Grants Processing
Grants Closeout Center 6705 Rockledge
Drive Suite 5016, MSC 7986
Bethesda, MD 20892-7986 (for regular
or U.S. Postal Service Express mail)
Bethesda, MD 20817 (for other courier/express
deliveries only)
NOTE: If this is the final year of
a competitive segment due to the transfer of the grant to another institution, then a Final RPPR is not required. However, a final expenditure
FFR is required and should be submitted electronically as noted above. If not already submitted, the Final Invention Statement is required
and should be sent directly to the assigned Grants Management Specialist.
In accordance with the regulatory requirements
provided at 45 CFR 75.113 and Appendix XII to 45 CFR Part 75, recipients that have currently active Federal grants, cooperative agreements,
and procurement contracts with cumulative total value greater than $10,000,000 must report and maintain information in the System for
Award Management (SAM) about civil, criminal, and administrative proceedings in connection with the award or performance of a Federal
award that reached final disposition within the most recent five-year period. The recipient must also make semiannual disclosures regarding
such proceedings. Proceedings information will be made publicly available in the designated integrity and performance system (currently
the Federal Awardee Performance and Integrity Information System (FAPIIS)). Full reporting requirements and procedures are found in Appendix
XII to 45 CFR Part 75. This term does not apply to NIH fellowships.
Treatment of Program Income:
Additional Costs
SECTION
IV - AG Special Terms and Conditions - 3R01AG058660-03S2
Clinical Trial Indicator: No
This award does not support any NIH-defined
Clinical Trials. See the NIH Grants Policy Statement Section 1.2 for NIH definition of Clinical Trial.
Funding for this award has been provided
by Alzheimer's Disease Initiative funds.
Includes an administrative increase
of $278,623 in accordance with the e-Application submitted on 05/22/2020.
STAFF CONTACTS
The Grants Management Specialist is
responsible for the negotiation, award and administration of this project and for interpretation of Grants Administration policies and
provisions. The Program Official is responsible for the scientific, programmatic and technical aspects of this project. These individuals
work together in overall project administration. Prior approval requests (signed by an Authorized Organizational Representative) should
be submitted in writing to the Grants Management Specialist. Requests may be made via e-mail.
Grants Management Specialist:
Jennifer Edwards
Email: edwardsj@mail.nih.gov
Phone: 301-827-6689
Program Official: Laurie M.
Ryan
Email: ryanl@nia.nih.gov Phone:
301.496.9350 Fax: 301-496-1494
SPREADSHEET
SUMMARY
GRANT NUMBER: 3R01AG058660-03S2
INSTITUTION: COGNITION THERAPEUTICS, INC.
|
Facilities and Administrative Costs
|
|
Year 3
|
|
|
F&A Cost Rate 1
|
|
|
30
|
%
|
|
F&A Cost Base 1
|
|
$
|
214,325
|
|
|
F&A Costs 1
|
|
$
|
64,298
|
|
Exhibit 10.29
Notice of Award
|
Multi-Year Funded Research Project Grant
|
Federal Award Date: 09/05/2020
|
|
|
Department of Health and Human Services
|
|
|
National Institutes of Health
|
|
NATIONAL INSTITUTE ON AGING
|
Grant Number:
|
1RF1AG051593-01
|
|
FAIN:
|
RF1AG051593
|
Principal Investigator(s):
SUSAN M CATALANO, PHD
Project Title: Phase 1 safety trial for CT1812, a novel small
molecule therapeutic targeting a synaptic receptor for Abeta oligomers
Dr. Catalano, Susan
2403 Sidney Street
Suite 261
Pittsburgh, PA 152035118
Award e-mailed to: scatalano@cogrx.com
Period Of Performance:
Budget Period: 09/15/2016 - 06/30/2018
Project Period: 09/15/2016 - 06/30/2018
Dear Business Official:
The National Institutes of Health hereby awards a grant in the amount
of $2,410,669 (see “Award Calculation” in Section I and “Terms and Conditions” in Section III) to COGNITION THERAPEUTICS,
INC. in support of the above referenced project. This award is pursuant to the authority of 42 USC 241 42 CFR 52 and is subject to the
requirements of this statute and regulation and of other referenced, incorporated or attached terms and conditions.
Acceptance of this award including the “Terms and Conditions”
is acknowledged by the grantee when funds are drawn down or otherwise obtained from the grant payment system.
Each publication, press release, or other document about research supported
by an NIH award must include an acknowledgment of NIH award support and a disclaimer such as “Research reported in this publication
was supported by the National Institute On Aging of the National Institutes of Health under Award Number RF1AG051593. The content is solely
the responsibility of the authors and does not necessarily represent the official views of the National Institutes of Health.” Prior
to issuing a press release concerning the outcome of this research, please notify the NIH awarding IC in advance to allow for coordination.
Award recipients must promote objectivity in research by establishing
standards that provide a reasonable expectation that the design, conduct and reporting of research funded under NIH awards will be free
from bias resulting from an Investigator’s Financial Conflict of Interest (FCOI), in accordance with the 2011 revised regulation
at 42 CFR Part 50 Subpart F. The Institution shall submit all FCOI reports to the NIH through the eRA Commons FCOI Module. The regulation
does not apply to Phase I Small Business Innovative Research (SBIR) and Small Business Technology Transfer (STTR) awards. Consult the
NIH website http://grants.nih.gov/grants/policy/coi/ for a link to the regulation and additional
important information.
If you have any questions about this award, please contact the individual(s)
referenced in Section IV.
Sincerely yours,
TRACI LAFFERTY
Grants Management Officer
NATIONAL INSTITUTE ON AGING
Additional information follows
SECTION I - AWARD DATA - 1RF1AG051593-01
|
Award Calculation (U.S. Dollars)
|
|
|
|
|
Salaries and Wages
|
|
$
|
200,532
|
|
|
Personnel Costs (Subtotal)
|
|
$
|
200,532
|
|
|
Other
|
|
$
|
1,728,003
|
|
|
Federal Direct Costs
|
|
$
|
1,928,535
|
|
|
Federal F&A Costs
|
|
$
|
482,134
|
|
|
Approved Budget
|
|
$
|
2,410,669
|
|
|
Total Amount of Federal Funds Obligated (Federal Share)
|
|
$
|
2,410,669
|
|
|
TOTAL FEDERAL AWARD AMOUNT
|
|
$
|
2,410,669
|
|
|
|
|
|
|
|
|
AMOUNT OF THIS ACTION (FEDERAL SHARE)
|
|
$
|
2,410,669
|
|
SUMMARY TOTALS FOR ALL YEARS
|
YR
|
|
|
THIS AWARD
|
|
|
|
CUMULATIVE TOTALS
|
|
|
1
|
|
$
|
2,410,669
|
|
|
$
|
2,410,669
|
|
Fiscal Information:
|
CFDA Name:
|
Aging Research
|
|
CFDA Number:
|
93.866
|
|
EIN:
|
1134365359A1
|
|
Document Number:
|
RAG051593A
|
|
PMS Account Type:
|
P (Subaccount)
|
|
Fiscal Year:
|
2016
|
|
IC
|
|
CAN
|
|
|
2016
|
|
|
AG
|
|
|
8013663
|
|
|
$
|
2,410,669
|
|
NIH Administrative Data:
PCC: 3CCCTLR / OC: 414A / Released: LAFFERTYT 09/02/2016
Award Processed: 09/05/2016 12:01:24 AM
SECTION II - PAYMENT/HOTLINE INFORMATION
- 1RF1AG051593-01
For payment and HHS Office of Inspector General Hotline information,
see the NIH Home Page at http://grants.nih.gov/grants/policy/awardconditions.htm
SECTION III - TERMS AND CONDITIONS
- 1RF1AG051593-01
This award is based on the application submitted to, and as approved
by, NIH on the above-titled project and is subject to the terms and conditions incorporated either directly or by reference in the following:
|
|
a.
|
The grant program legislation and program regulation cited in this Notice of Award.
|
|
|
b.
|
Conditions on activities and expenditure of funds in other statutory requirements, such as those included in appropriations acts.
|
|
|
d.
|
National Policy Requirements and all other requirements described in the NIH Grants Policy Statement, including addenda in effect
as of the beginning date of the budget period.
|
|
|
e.
|
Federal Award Performance Goals: As required by the periodic report in the RPPR or in the final progress report when applicable.
|
|
|
f.
|
This award notice, INCLUDING THE TERMS AND CONDITIONS CITED BELOW.
|
(See NIH Home Page at http://grants.nih.gov/grants/policy/awardconditions.htm
for certain references cited above.)
Research and Development (R&D): All awards issued by the
National Institutes of Health (NIH) meet the definition of “Research and Development” at 45 CFR Part § 75.2. As
such, auditees should identify NIH awards as part of the R&D cluster on the Schedule of Expenditures of Federal Awards (SEFA). The
auditor should test NIH awards for compliance as instructed in Part V, Clusters of Programs. NIH recognizes that some awards may have
another classification for purposes of indirect costs. The auditor is not required to report the disconnect (i.e., the award is classified
as R&D for Federal Audit Requirement purposes but non-research for indirect cost rate purposes), unless the auditee is charging indirect
costs at a rate other than the rate(s) specified in the award document(s).
An unobligated balance may be carried over into the next budget period
without Grants Management Officer prior approval.
This grant is subject to Streamlined Noncompeting Award Procedures
(SNAP).
MULTI-YEAR FUNDED AWARD: This is a multi-year funded award.
A progress report is due annually on or before the anniversary of the budget/project period start date of the award, in accord with the
instructions posted at: http://grants.nih.gov/grants/policy/myf.htm.
This award is subject to the requirements of 2 CFR Part 25 for institutions
to receive a Dun & Bradstreet Universal Numbering System (DUNS) number and maintain an active registration in the System for Award
Management (SAM). Should a consortium/subaward be issued under this award, a DUNS requirement must be included. See http://grants.nih.gov/grants/policy/awardconditions.htm
for the full NIH award term implementing this requirement and other additional information.
This award has been assigned the Federal Award Identification Number
(FAIN) RF1AG051593. Recipients must document the assigned FAIN on each consortium/subaward issued under this award.
Based on the project period start date of this project, this award
is likely subject to the Transparency Act subaward and executive compensation reporting requirement of 2 CFR Part 170. There are conditions
that may exclude this award; see http://grants.nih.gov/grants/policy/awardconditions.htm for
additional award applicability information.
In accordance with P.L. 110-161, compliance with the NIH Public Access
Policy is now mandatory. For more information, see NOT-OD-08-033 and the Public Access website: http://publicaccess.nih.gov/.
This award provides support for one or more clinical trials. By law
(Title VIII, Section 801 of Public Law 110-85), the “responsible party” must register
“applicable clinical trials” on the ClinicalTrials.gov Protocol Registration System Information
Website. NIH encourages registration of all trials whether required under the law or not. For more information, see http://grants.nih.gov/ClinicalTrials
fdaaa/.
This award represents the final year of the competitive segment for
this grant. See the NIH Grants Policy Statement Section 8.6 Closeout for complete closeout requirements at: http://grants.nih.gov/grants/policy/policy.htm#gps.
A final expenditure Federal Financial Report (FFR) (SF 425) must be
submitted through the eRA Commons (Commons) within 120 days of the expiration date; see the NIH Grants Policy Statement Section 8.6.1
Financial Reports, http://grants.nih.gov/grants/policy/policy.htm#gps, for additional information
on this submission requirement. The final FFR must indicate the exact balance of unobligated funds and may not reflect any unliquidated
obligations. There must be no discrepancies between the final FFR expenditure data and the Payment Management System’s (PMS) quarterly
cash transaction data. A final quarterly federal cash transaction report is not required for awards in PMS B subaccounts (i.e., awards
to foreign entities and to Federal agencies). NIH will close the awards using the last recorded cash drawdown level in PMS for awards
that do not require a final FFR on expenditures or quarterly federal cash transaction reporting. It is important to note that for financial
closeout, if a grantee fails to submit a required final expenditure FFR, NIH will close the grant using the last recorded cash drawdown
level. If the grantee submits a final expenditure FFR but does not reconcile any discrepancies between expenditures reported on the final
expenditure FFR and the last cash report to PMS, NIH will close the award at the lower amount. This could be considered a debt or result
in disallowed costs.
A Final Invention Statement and Certification form (HHS 568), (not
applicable to training, construction, conference or cancer education grants) must be submitted within 120 days of the expiration date.
The HHS 568 form may be downloaded at: http://grants.nih.gov/grants/forms.htm. This paragraph
does not apply to Training grants, Fellowships, and certain other programs—i.e., activity codes C06, R13, R25, S10.
Unless an application for competitive renewal is submitted, a final
progress report must also be submitted within 120 days of the expiration date. Instructions for preparing a Final Progress Report are
at: http://grants.nih.gov/grants/funding/finalprogressreport.pdf. Any other specific requirements
set forth in the terms and conditions of the award must also be addressed in the final progress report. Institute/Centers may accept
the progress report contained in competitive renewal (type 2) in lieu of a separate final progress report. Contact the awarding IC for
IC- specific policy regarding acceptance of a progress report contained in a competitive renewal application in lieu of a separate final
progress report.
NIH strongly encourages electronic submission of the final progress
report and the final invention statement through the Closeout feature in the Commons, but will accept an email or hard copy submission
as indicated below.
Email: The final progress report and final invention statement may
be e-mailed as PDF attachments to: NIHCloseoutCenter@,mail.nih.gov.
Hard copy: Paper submissions of the final progress report and the final
invention statement may be faxed to the NIH Division of Central Grants Processing, Grants Closeout Center, at 301-4802304, or mailed
to:
National Institutes of Health
Office of Extramural Research
Division of Central Grants Processing
Grants Closeout Center
6705 Rockledge Drive
Suite 5016, MSC 7986
Bethesda, MD 20892-7986 (for regular or U.S. Postal Service Express mail)
Bethesda, MD 20817 (for other courier/express deliveries only)
NOTE: If this is the final year of a competitive segment due to the
transfer of the grant to another institution, then a Final Progress Report is not required. However, a final expenditure FFR is required
and should be submitted electronically as noted above. If not already submitted, the Final Invention Statement is required and should
be sent directly to the assigned Grants Management Specialist.
In accordance with the regulatory requirements provided at 45 CFR
75.113 and Appendix XII to 45 CFR Part 75, recipients that have currently active Federal grants, cooperative agreements, and procurement
contracts with cumulative total value greater than $10,000,000 must report and maintain information in the System for Award Management
(SAM) about civil, criminal, and administrative proceedings in connection with the award or performance of a Federal award that reached
final disposition within the most recent five-year period. The recipient must also make semiannual disclosures regarding such proceedings.
Proceedings information will be made publicly available in the designated integrity and performance system (currently the Federal Awardee
Performance and Integrity Information System (FAPIIS)). Full reporting requirements and procedures are found in Appendix XII to 45 CFR
Part 75. This term does not apply to NIH fellowships.
Treatment of Program Income:
Additional Costs
SECTION IV - AG Special Terms and
Conditions - 1RF1AG051593-01 Funding for this award has been provided by Alzheimer’s Disease Initiative funds.
RESTRICTION: This award includes $482,134 for Facilities and
Administration (F&A) costs. Of this amount, $482,134 is restricted pending the negotiation of an F&A rate(s). These restricted
funds may not be used for any purpose without the prior approval of the grants management official. If the rate(s) negotiated is(are)
lower than originally estimated/funded, this award amount may be revised downward.
The progress report for this multi-year funded (MYF) award is due
annually on or before the anniversary of the budget/project period start date of the award and must be submitted via the eRA Commons.
Additional information on submission requirements and directions can be found at http://grants.nih.gov/grants/policy/myf.htm.
None of the funds in this award shall be used to pay the salary of
an individual at a rate in excess of the current salary cap. Therefore, this award and/or future years are adjusted accordingly, if applicable.
Current salary cap levels can be found at the following URL: http://grants.nih.gov/grants/policy/salcap
summary.htm.
STAFF CONTACTS
The Grants Management Specialist is responsible for the negotiation,
award and administration of this project and for interpretation of Grants Administration policies and provisions. The Program Official
is responsible for the scientific, programmatic and technical aspects of this project. These individuals work together in overall project
administration. Prior approval requests (signed by an Authorized Organizational Representative) should be submitted in writing to the
Grants Management Specialist. Requests may be made via e-mail.
Grants Management Specialist: Robin Laney
Email: laneyr@nia.nih.gov Phone: 301-496-1472 Fax: 301-402-3672
Program Official: Laurie M. Ryan
Email: ryanl@nia.nih.gov Phone: 301.496.9350 Fax: 301-496-1494
SPREADSHEET SUMMARY
GRANT NUMBER: 1RF1AG051593-01
INSTITUTION: COGNITION THERAPEUTICS, INC.
|
Budget
|
|
Year 1
|
|
|
Salaries and Wages
|
|
$
|
200,532
|
|
|
Personnel Costs (Subtotal)
|
|
$
|
200,532
|
|
|
Other
|
|
$
|
1,728,003
|
|
|
TOTAL FEDERAL DC
|
|
$
|
1,928,535
|
|
|
TOTAL FEDERAL F&A
|
|
$
|
482,134
|
|
|
TOTAL COST
|
|
$
|
2,410,669
|
|
|
Facilities and Administrative Costs
|
|
Year 1
|
|
|
F&A Cost Rate 1
|
|
|
25
|
%
|
|
F&A Cost Base 1
|
|
$
|
1,928,535
|
|
|
F&A Costs 1
|
|
$
|
482,134
|
|
Exhibit 10.30
Notice of Award
|
Multi-Year Funded Research Project Grant
Department of Health and Human Services
National Institutes of Health
|
Federal Award Date: 09/18/2020
|
|
NATIONAL INSTITUTE ON AGING
|
Grant Number:
|
3RF1AG057553-01S2 REVISED
|
|
FAIN:
|
RF1AG057553
|
Principal Investigator(s):
SUSAN M CATALANO, PHD
Project Title: A Pilot Synaptic Vesicle Glycoprotein 2A (SV2A)
PET Study to Evaluate the Effect of CT1812 Treatment on Synaptic Density in Subjects with Mild to Moderate Alzheimer’s Disease
Dr. Catalano, Susan, Ph.D
Chief Science Officer
2403 Sidney Street Suite 261
Pittsburgh, PA 152035118
Award e-mailed to: scatalano@cogrx.com
Period Of Performance:
Budget Period: 09/11/2020 - 06/30/2021
Project Period: 09/01/2020 - 06/30/2021
Dear Business Official:
The National Institutes of Health hereby revises this award (see “Award
Calculation” in Section I and “Terms and Conditions” in Section III) to COGNITION THERAPEUTICS, INC. in support of the
above referenced project. This award is pursuant to the authority of 42 USC 241 42 CFR 52 and is subject to the requirements of this statute
and regulation and of other referenced, incorporated or attached terms and conditions.
Acceptance of this award including the “Terms and Conditions”
is acknowledged by the grantee when funds are drawn down or otherwise obtained from the grant payment system.
Each publication, press release, or other document about research supported
by an NIH award must include an acknowledgment of NIH award support and a disclaimer such as “Research reported in this publication
was supported by the National Institute On Aging of the National Institutes of Health under Award Number RF1AG057553. The content is solely
the responsibility of the authors and does not necessarily represent the official views of the National Institutes of Health.” Prior
to issuing a press release concerning the outcome of this research, please notify the NIH awarding IC in advance to allow for coordination.
Award recipients must promote objectivity in research by establishing
standards that provide a reasonable expectation that the design, conduct and reporting of research funded under NIH awards will be free
from bias resulting from an Investigator’s Financial Conflict of Interest (FCOI), in accordance with the 2011 revised regulation
at 42 CFR Part 50 Subpart F. The Institution shall submit all FCOI reports to the NIH through the eRA Commons FCOI Module. The regulation
does not apply to Phase I Small Business Innovative Research (SBIR) and Small Business Technology Transfer (STTR) awards. Consult the
NIH website http://grants.nih.gov/grants/policy/coi/ for a link to the regulation and additional
important information.
If you have any questions about this award, please contact the individual(s)
referenced in Section IV.
Sincerely yours,
Robin Laney
Grants Management Officer
NATIONAL INSTITUTE ON AGING
Additional information follows
SECTION I - AWARD DATA - 3RF1AG057553-01S2
REVISED
|
Award Calculation (U.S. Dollars)
|
|
|
|
|
Salaries and Wages
|
|
$
|
130,601
|
|
|
Personnel Costs (Subtotal)
|
|
$
|
130,601
|
|
|
Consultant Services
|
|
$
|
119,000
|
|
|
Federal Direct Costs
|
|
$
|
249,601
|
|
|
Federal F&A Costs
|
|
$
|
74,880
|
|
|
Approved Budget
|
|
$
|
324,481
|
|
|
Total Amount of Federal Funds Obligated (Federal Share) TOTAL
|
|
$
|
324,481
|
|
|
FEDERAL AWARD AMOUNT
|
|
$
|
324,481
|
|
|
|
|
|
|
|
|
AMOUNT OF THIS ACTION (FEDERAL SHARE)
|
|
$
|
0
|
|
|
SUMMARY TOTAL FEDERAL AWARD AMOUNT YEAR ( 1 )
|
|
|
|
GRANT NUMBER
|
|
|
TOTAL FEDERAL AWARD AMOUNT
|
|
|
3RF1AG057553-01S2
|
|
$
|
324,481
|
|
|
1RF1AG057553-01
|
|
$
|
4,130,741
|
|
|
3RF1AG057553-01S1
|
|
$
|
340,552
|
|
|
TOTAL
|
|
$
|
4,795,774
|
|
|
SUMMARY TOTALS FOR ALL YEARS
|
|
|
|
YR
|
|
|
THIS AWARD
|
|
|
|
CUMULATIVE TOTALS
|
|
|
1
|
|
$
|
324,481
|
|
|
$
|
4,795,774
|
|
Fiscal Information:
|
CFDA Name:
|
Aging Research
|
|
CFDA Number:
|
93.866
|
|
EIN:
|
1134365359A1
|
|
Document Number:
|
RAG057553A
|
|
PMS Account Type:
|
P (Subaccount)
|
|
Fiscal Year:
|
2020
|
|
IC
|
|
CAN
|
|
|
2020
|
|
|
AG
|
|
|
8034655
|
|
|
$
|
324,481
|
|
NIH Administrative Data:
PCC: 3CCCTLR / OC: 41023 / Released: LANEYR 09/17/2020
Award Processed: 09/18/2020 12:02:17 AM
SECTION II - PAYMENT/HOTLINE INFORMATION
- 3RF1AG057553-01S2 REVISED
For payment and HHS Office of Inspector General Hotline information,
see the NIH Home Page at http://grants.nih.gov/grants/policy/awardconditions.htm
SECTION III - TERMS AND CONDITIONS
- 3RF1AG057553-01S2 REVISED
This award is based on the application submitted to, and as approved
by, NIH on the above-titled project and is subject to the terms and conditions incorporated either directly or by reference in the following:
|
|
a.
|
The grant program legislation and program regulation cited in this Notice of Award.
|
|
|
b.
|
Conditions on activities and expenditure of funds in other statutory requirements, such as those included in appropriations acts.
|
|
|
c.
|
45 CFR Part 75.
|
|
|
d.
|
National Policy Requirements and all other requirements described in the NIH Grants Policy Statement, including addenda in effect
as of the beginning date of the budget period.
|
|
|
e.
|
Federal Award Performance Goals: As required by the periodic report in the RPPR or in the final progress report when applicable.
|
|
|
f.
|
This award notice, INCLUDING THE TERMS AND CONDITIONS CITED BELOW.
|
(See NIH Home Page at http://grants.nih.gov/grants/policy/awardconditions.htm
for certain references cited above.)
Research and Development (R&D): All awards issued by
the National Institutes of Health (NIH) meet the definition of “Research and Development” at 45 CFR Part § 75.2. As
such, auditees should identify NIH awards as part of the R&D cluster on the Schedule of Expenditures of Federal Awards (SEFA).
The auditor should test NIH awards for compliance as instructed in Part V, Clusters of Programs. NIH recognizes that some awards may
have another classification for purposes of indirect costs. The auditor is not required to report the disconnect (i.e., the award is
classified as R&D for Federal Audit Requirement purposes but non-research for indirect cost rate purposes), unless the auditee
is charging indirect costs at a rate other than the rate(s) specified in the award document(s).
An unobligated balance may be carried over into the next budget period
without Grants Management Officer prior approval.
This grant is excluded from Streamlined Noncompeting Award Procedures
(SNAP).
This award is subject to the requirements of 2 CFR Part 25 for institutions
to receive a Dun & Bradstreet Universal Numbering System (DUNS) number and maintain an active registration in the System for Award
Management (SAM). Should a consortium/subaward be issued under this award, a DUNS requirement must be included. See http://grants.nih.gov/grants/policy/awardconditions.htm
for the full NIH award term implementing this requirement and other additional information.
This award has been assigned the Federal Award Identification Number
(FAIN) RF1AG057553. Recipients must document the assigned FAIN on each consortium/subaward issued under this award.
Based on the project period start date of this project, this award
is likely subject to the Transparency Act subaward and executive compensation reporting requirement of 2 CFR Part 170. There are conditions
that may exclude this award; see http://grants.nih.gov/grants/policy/awardconditions.htm for
additional award applicability information.
In accordance with P.L. 110-161, compliance with the NIH Public Access
Policy is now mandatory. For more information, see NOT-OD-08-033 and the Public Access website: http://publicaccess.nih.gov/.
This award provides support for one or more clinical trials. By law
(Title VIII, Section 801 of Public Law 110-85), the “responsible party” must register
“applicable clinical trials” on the ClinicalTrials.gov Protocol Registration System Information
Website. NIH encourages registration of all trials whether required under the law or not. For more information, see http://grants.nih.gov/ClinicalTrials
fdaaa/.
This award represents the final year of the competitive segment for
this grant. See the NIH Grants Policy Statement Section 8.6 Closeout for complete closeout requirements at: http://grants.nih.gov/grants/policy/policy.htm#gps.
A final expenditure Federal Financial Report (FFR) (SF 425) must
be submitted through the eRA Commons (Commons) within 120 days of the period of performance end date; see the NIH Grants Policy
Statement Section 8.6.1 Financial Reports, http://grants.nih.gov/grants/policy/policy.htm#gps,
for additional information on this submission requirement. The final FFR must indicate the exact balance of unobligated funds and
may not reflect any unliquidated obligations. There must be no discrepancies between the final FFR expenditure data and the Payment
Management System’s (PMS) quarterly cash transaction data. A final quarterly federal cash transaction report is not required
for awards in PMS B subaccounts (i.e., awards to foreign entities and to Federal agencies). NIH will close the awards using the last
recorded cash drawdown level in PMS for awards that do not require a final FFR on expenditures or quarterly federal cash transaction
reporting. It is important to note that for financial closeout, if a grantee fails to submit a required final expenditure FFR, NIH
will close the grant using the last recorded cash drawdown level. If the grantee submits a final expenditure FFR but does not
reconcile any discrepancies between expenditures reported on the final expenditure FFR and the last cash report to PMS, NIH will
close the award at the lower amount. This could be considered a debt or result in disallowed costs.
A Final Invention Statement and Certification form (HHS 568), (not
applicable to training, construction, conference or cancer education grants) must be submitted within 120 days of the expiration date.
The HHS 568 form may be downloaded at: http://grants.nih.gov/grants/forms.htm.
This paragraph does not apply to Training grants, Fellowships, and
certain other programs—i.e., activity codes C06, D42, D43, D71, DP7, G07, G08, G11, K12, K16, K30, P09, P40, P41, P51, R13, R25,
R28, R30, R90, RL5, RL9, S10, S14, S15, U13, U14, U41, U42, U45, UC6, UC7, UR2, X01, X02.
Unless an application for competitive renewal is submitted, a Final
Research Performance Progress Report (Final RPPR) must also be submitted within 120 days of the period of performance end date. If a
competitive renewal application is submitted prior to that date, then an Interim RPPR must be submitted by that date as well. Instructions
for preparing an Interim or Final RPPR are at: https://grants.nih.gov/grants/rppr/rppr instruction guide.pdf.
Any other specific requirements set forth in the terms and conditions of the award must also be addressed in the Interim or Final RPPR.
Note that data reported within Section I of the Interim and Final RPPR forms will be made public and should be written for a lay person
audience.
NIH strongly encourages electronic submission of the final invention
statement through the Closeout feature in the Commons, but will accept an email or hard copy submission as indicated below.
Email: The final invention statement may be e-mailed as PDF attachments
to: NIHCloseoutCenter@,mail.nih.gov.
Hard copy: Paper submissions of the final invention statement may be
faxed to the NIH Division of Central Grants Processing, Grants Closeout Center, at 301-480-2304, or mailed to:
National Institutes of Health
Office of Extramural Research
Division of Central Grants Processing
Grants Closeout Center
6705 Rockledge Drive
Suite 5016, MSC 7986
Bethesda, MD 20892-7986 (for regular or U.S. Postal Service Express mail)
Bethesda, MD 20817 (for other courier/express deliveries only)
NOTE: If this is the final year of a competitive segment due to the
transfer of the grant to another institution, then a Final RPPR is not required. However, a final expenditure FFR is required and should
be submitted electronically as noted above. If not already submitted, the Final Invention Statement is required and should be sent directly
to the assigned Grants Management Specialist.
In accordance with the regulatory requirements provided at 45 CFR 75.113
and Appendix XII to 45 CFR Part 75, recipients that have currently active Federal grants, cooperative agreements, and procurement contracts
with cumulative total value greater than $10,000,000 must report and maintain information in the System for Award Management (SAM) about
civil, criminal, and administrative proceedings in connection with the award or performance of a Federal award that reached final disposition
within the most recent five-year period. The recipient must also make semiannual disclosures regarding such proceedings. Proceedings information
will be made publicly available in the designated integrity and performance system (currently the Federal Awardee Performance and Integrity
Information System (FAPIIS)). Full reporting requirements and procedures are found in Appendix XII to 45 CFR Part 75. This term does not
apply to NIH fellowships.
Treatment of Program Income:
Additional Costs
SECTION IV - AG Special Terms and Conditions
- 3RF1AG057553-01S2 REVISED
Clinical Trial Indicator: Yes
This award supports one or more NIH-defined Clinical Trials. See the NIH Grants Policy Statement Section 1.2 for NIH definition of Clinical
Trial.
REVISION: The sole purpose of this revision is to remove the
Yale consortia term from the NGA dated 9/8/2020.
Supersedes Notice of Award issued 9/8/2020. Previous terms and conditions
apply:
Funding for this award has been provided by Alzheimer’s Disease
Initiative funds.
Includes an administrative increase of $324,481 for AD funds ‘to
address increased trial costs related to treatment phase extension and delay in enrollment as a result of contract issues’ in accordance
with the letter of 1/7/2020 from Dr. Laurie Ryan.
STAFF CONTACTS
The Grants Management Specialist is responsible for the negotiation,
award and administration of this project and for interpretation of Grants Administration policies and provisions. The Program Official
is responsible for the scientific, programmatic and technical aspects of this project. These individuals work together in overall project
administration. Prior approval requests (signed by an Authorized Organizational Representative) should be submitted in writing to the
Grants Management Specialist. Requests may be made via e-mail.
Grants Management Specialist: Jennifer Edwards
Email: edwardsj@mail.nih.gov Phone: 301-827-6689
Program Official: Laurie M. Ryan
Email: ryanl@nia.nih.gov Phone: 301.496.9350 Fax: 301-496-1494
SPREADSHEET SUMMARY
GRANT NUMBER: 3RF1AG057553-01S2 REVISED
INSTITUTION: COGNITION THERAPEUTICS, INC.
|
Budget
|
|
Year 1
|
|
|
Salaries and Wages
|
|
$
|
130,601
|
|
|
Personnel Costs (Subtotal)
|
|
$
|
130,601
|
|
|
Consultant Services
|
|
$
|
119,000
|
|
|
TOTAL FEDERAL DC
|
|
$
|
249,601
|
|
|
TOTAL FEDERAL F&A
|
|
$
|
74,880
|
|
|
TOTAL COST
|
|
$
|
324,481
|
|
|
Facilities and Administrative Costs
|
|
Year 1
|
|
|
F&A Cost Rate 1
|
|
|
30
|
%
|
|
F&A Cost Base 1
|
|
$
|
249,601
|
|
|
F&A Costs 1
|
|
$
|
74,880
|
|
Exhibit 10.31
|
Department of Health and Human Services
National Institutes of Health
NATIONAL
INSTITUTE ON AGING
|
Notice of Award
FAIN# R01AG065248
Federal Award Date
02/03/2021
|
|
Recipient Information
|
|
|
1. Recipient Name
|
|
|
COGNITION THERAPEUTICS, INC.
|
|
|
2403 SIDNEY ST STE 261
|
|
|
|
|
|
PITTSBURGH, PA 15203
|
|
|
|
|
|
2. Congressional District of Recipient
|
|
|
14
|
|
|
|
|
|
3. Payment System Identifier (ID)
|
|
|
1134365359A1
|
|
|
|
|
|
4. Employer Identification Number (EIN)
|
|
|
134365359
|
|
|
|
|
|
5. Data Universal Numbering System (DUNS)
|
|
|
808434612
|
|
|
|
|
|
6. Recipient's Unique Entity Identifier
|
|
|
|
|
|
7. Project Director or Principal Investigator
|
|
|
SUSAN M CATALANO, PHD (Contact)
|
|
|
President/founder
|
|
|
scatalano@cogrx.com
|
|
|
(412) 481-2210
|
|
|
|
|
|
8. Authorized Official
|
|
|
Dr. Susan Catalano Ph.D
|
|
|
|
|
|
Federal Agency Information
|
|
|
9. Awarding Agency Contact Information
|
|
|
Jennifer Edwards
|
|
|
|
|
NATIONAL INSTITUTE ON AGING
edwardsj@mail.nih.gov
|
|
|
|
|
301-827-6689
|
|
|
|
|
|
10. Program Official Contact Information
|
|
|
Laurie M. Ryan
|
|
|
Health Scientist Administrator
|
|
|
NATIONAL INSTITUTE ON AGING
|
|
|
ryanl@nia.nih.gov
|
|
|
301.496.9350
|
|
Federal Award Information
|
|
|
|
11. Award Number
|
|
|
1R01AG065248-01
|
|
|
|
|
|
12. Unique Federal Award Identification Number (FAIN)
|
|
|
R01AG065248
|
|
|
|
|
|
13. Statutory Authority
|
|
|
42 USC 241 42 CFR 52
|
|
|
|
|
|
14. Federal Award Project Title
|
|
|
Randomized Double Blind, Placebo Controlled, Parallel Group Trial to Evaluate the
|
|
|
Safety and Efficacy of CT1812 in Early Alzheimer’s Disease over 18 Months
|
|
|
|
|
|
15. Assistance Listing Number
|
|
|
93.866
|
|
|
|
|
|
16. Assistance Listing Program Title
|
|
|
Aging Research
|
|
|
|
|
|
17. Award Action Type
|
|
|
New Competing (REVISED)
|
|
|
|
|
|
18. Is the Award R&D?
|
|
|
Yes
|
|
|
|
|
|
Summary Federal Award Financial Information
|
|
19. Budget Period Start Date 06/01/2020 - End Date 05/31/2021
|
|
20. Total Amount of Federal Funds Obligated by this Action
|
|
$
|
147,190
|
|
|
20 a. Direct Cost Amount
|
|
$
|
0
|
|
|
20 b. Indirect Cost Amount
|
|
$
|
147,190
|
|
|
21. Authorized Carryover
|
|
$
|
0
|
|
|
22. Offset
|
|
$
|
0
|
|
|
23. Total Amount of Federal Funds Obligated this budget period
|
|
$
|
24,533,829
|
|
|
24. Total Approved Cost Sharing or Matching, where applicable
|
|
$
|
0
|
|
|
25. Total Federal and Non-Federal Approved this Budget Period
|
|
$
|
24,533,829
|
|
|
|
|
26. Project Period Start Date 06/01/2020 - End Date 05/31/2025
|
|
27. Total Amount of the Federal Award including Approved Cost
|
|
$
|
24,533,829
|
|
|
Sharing or Matching this Project Period
|
|
|
|
|
|
28. Authorized Treatment of Program Income
|
|
|
Additional Costs
|
|
|
|
|
|
29. Grants Management Officer - Signature
|
|
|
Robin Laney
|
|
30. Remarks
Acceptance of this award,
including the “Terms and Conditions,” is acknowledged by the recipient when funds are drawn down or otherwise requested from
the grant payment system.
Notice of Award
|
RESEARCH
Department of Health and Human Services
National Institutes of Health
NATIONAL INSTITUTE ON AGING
|
|
SECTION I - AWARD DATA - 1R01AG065248-01
REVISED
Principal Investigator(s):
Paul S. Aisen, MD
SUSAN M CATALANO (contact),
PHD CHRISTOPHER H VAN DYCK, MD
Award e-mailed to: scatalano@cogrx.com
Dear Authorized Official:
The National Institutes of Health hereby revises this award to reflect
an increase in the amount of $147,190 (see “Award Calculation” in Section I and “Terms and Conditions” in Section
III) to COGNITION THERAPEUTICS, INC. in support of the above referenced project. This award is pursuant to the authority of 42 USC 241
42 CFR 52 and is subject to the requirements of this statute and regulation and of other referenced, incorporated or attached terms and
conditions.
Acceptance of this award, including the “Terms and Conditions,”
is acknowledged by the recipient when funds are drawn down or otherwise requested from the grant payment system.
Each publication, press release, or other document about research
supported by an NIH award must include an acknowledgment of NIH award support and a disclaimer such as “Research reported in this
publication was supported by the National Institute On Aging of the National Institutes of Health under Award Number R01AG065248. The
content is solely the responsibility of the authors and does not necessarily represent the official views of the National Institutes
of Health.” Prior to issuing a press release concerning the outcome of this research, please notify the NIH awarding IC in advance
to allow for coordination.
Award recipients must promote objectivity in research by establishing
standards that provide a reasonable expectation that the design, conduct and reporting of research funded under NIH awards will be free
from bias resulting from an Investigator’s Financial Conflict of Interest (FCOI), in accordance with the 2011 revised regulation
at 42 CFR Part 50 Subpart F. The Institution shall submit all FCOI reports to the NIH through the eRA Commons FCOI Module. The regulation
does not apply to Phase I Small Business Innovative Research (SBIR) and Small Business Technology Transfer (STTR) awards. Consult the
NIH website http://grants.nih.gov/grants/policy/coi/ for a link to the regulation and additional important information.
If you have any questions about this award, please direct questions
to the Federal Agency contacts.
Sincerely yours,
Robin Laney
Grants Management Officer
NATIONAL INSTITUTE ON AGING
Additional information follows
|
Cumulative Award Calculations for this Budget Period (U.S. Dollars)
|
|
Salaries and Wages
|
|
$
|
236,680
|
|
|
Personnel Costs (Subtotal)
|
|
$
|
236,680
|
|
|
Consultant Services
|
|
$
|
87,500
|
|
|
Travel
|
|
$
|
20,000
|
|
|
Other
|
|
$
|
9,898,865
|
|
|
Subawards/Consortium/Contractual Costs
|
|
$
|
11,055,680
|
|
|
|
|
|
|
|
|
Federal Direct Costs
|
|
$
|
21,298,725
|
|
|
Federal F&A Costs
|
|
$
|
3,235,104
|
|
|
Approved Budget
|
|
$
|
24,533,829
|
|
|
Total Amount of Federal Funds Authorized (Federal Share)
|
|
$
|
24,533,829
|
|
|
TOTAL FEDERAL AWARD AMOUNT
|
|
$
|
24,533,829
|
|
|
|
|
|
|
|
|
AMOUNT OF THIS ACTION (FEDERAL SHARE)
|
|
$
|
147,190
|
|
|
SUMMARY TOTALS FOR ALL YEARS (for
this Document Number)
|
|
|
YR
|
|
|
THIS AWARD
|
|
|
CUMULATIVE TOTALS
|
|
|
1
|
|
|
$
|
24,533,829
|
|
|
$
|
24,533,829
|
|
|
2
|
|
|
$
|
14,619,478
|
|
|
$
|
14,619,478
|
|
|
3
|
|
|
$
|
13,127,747
|
|
|
$
|
13,127,747
|
|
|
4
|
|
|
$
|
12,199,042
|
|
|
$
|
12,199,042
|
|
|
5
|
|
|
$
|
16,494,670
|
|
|
$
|
16,494,670
|
|
Recommended future year total cost support, subject to the availability
of funds and satisfactory progress of the project
Fiscal Information:
|
Payment System Identifier:
|
1134365359A1
|
|
Document Number:
|
RAG65248A
|
|
PMS Account Type:
|
P (Subaccount)
|
|
Fiscal Year:
|
2020
|
|
IC
|
|
|
CAN
|
|
|
2020
|
|
|
2021
|
|
|
2022
|
|
|
2023
|
|
|
2024
|
|
|
AG
|
|
|
|
8033159
|
|
|
$
|
24,533,829
|
|
|
$
|
14,619,478
|
|
|
$
|
13,127,747
|
|
|
$
|
12,199,042
|
|
|
$
|
16,494,670
|
|
Recommended future year total cost support, subject to the availability
of funds and satisfactory progress of the project
NIH Administrative Data:
PCC: 3CCCTLR / OC: 41021 / Released: Laney, Robin 02/01/2021
Award Processed: 02/03/2021 12:01:18 AM
SECTION II - PAYMENT/HOTLINE INFORMATION
- 1R01AG065248-01 REVISED
For payment and HHS Office of Inspector General Hotline information,
see the NIH Home Page at http://grants.nih.gov/grants/policy/awardconditions.htm
SECTION III - STANDARD TERMS AND
CONDITIONS - 1R01AG065248-01 REVISED
This award is based on the application submitted to, and as approved
by, NIH on the above-titled project and is subject to the terms and conditions incorporated either directly or by reference in the following:
|
|
a.
|
The grant program legislation and program regulation cited in this
Notice of Award.
|
|
|
b.
|
Conditions on activities and expenditure of funds in other statutory
requirements, such as those included in appropriations acts.
|
|
|
d.
|
National Policy Requirements and all other requirements described in
the NIH Grants Policy Statement, including addenda in effect as of the beginning date of
the budget period.
|
|
|
e.
|
Federal Award Performance Goals: As required by the periodic report
in the RPPR or in the final progress report when applicable.
|
|
|
f.
|
This award notice, INCLUDING THE TERMS AND CONDITIONS CITED BELOW.
|
(See NIH Home Page at http://grants.nih.gov/grants/policy/awardconditions.htm
for certain references cited above.)
Research and Development (R&D): All awards issued by the
National Institutes of Health (NIH) meet the definition of “Research and Development” at 45 CFR Part § 75.2. As
such, auditees should identify NIH awards as part of the R&D cluster on the Schedule of Expenditures of Federal Awards (SEFA). The
auditor should test NIH awards for compliance as instructed in Part V, Clusters of Programs. NIH recognizes that some awards may have
another classification for purposes of indirect costs. The auditor is not required to report the disconnect (i.e., the award is classified
as R&D for Federal Audit Requirement purposes but non-research for indirect cost rate purposes), unless the auditee is charging indirect
costs at a rate other than the rate(s) specified in the award document(s).
Carry over of an unobligated balance into the next budget period requires
Grants Management Officer prior approval.
This grant is excluded from Streamlined Noncompeting Award Procedures
(SNAP).
This award is subject to the requirements of 2 CFR Part 25 for
institutions to receive a Dun & Bradstreet Universal Numbering System (DUNS) number and maintain an active registration in the
System for Award Management (SAM). Should a consortium/subaward be issued under this award, a DUNS requirement must be included. See http://grants.nih.gov/grants/policy/awardconditions.htm
for the full NIH award term implementing this requirement and other additional information.
This award has been assigned the Federal Award Identification Number
(FAIN) R01AG065248. Recipients must document the assigned FAIN on each consortium/subaward issued under this award.
Based on the project period start date of this project, this award
is likely subject to the Transparency Act subaward and executive compensation reporting requirement of 2 CFR Part 170. There are conditions
that may exclude this award; see http://grants.nih.gov/grants/policy/awardconditions.htm for additional award applicability information.
In accordance with P.L. 110-161, compliance with the NIH Public Access
Policy is now mandatory. For more information, see NOT-OD-08-033 and the Public Access website: http://publicaccess.nih.gov/.
This award provides support for one or more clinical trials. By law
(Title VIII, Section 801 of Public Law 110-85), the “responsible party” must register “applicable clinical trials”
on the ClinicalTrials.gov Protocol Registration System Information Website. NIH encourages registration of all trials whether
required under the law or not. For more information, see http://grants.nih.gov/ClinicalTrials fdaaa/.
In accordance with the regulatory requirements provided at 45 CFR
75.113 and Appendix XII to 45 CFR Part 75, recipients that have currently active Federal grants, cooperative agreements, and procurement
contracts with cumulative total value greater than $10,000,000 must report and maintain information in the System for Award Management
(SAM) about civil, criminal, and administrative proceedings in connection with the award or performance of a Federal award that reached
final disposition within the most recent five-year period. The recipient must also make semiannual disclosures regarding such proceedings.
Proceedings information will be made publicly available in the designated integrity and performance system (currently the Federal Awardee
Performance and Integrity Information System (FAPIIS)). Full reporting requirements and procedures are found in Appendix XII to 45 CFR
Part 75. This term does not apply to NIH fellowships.
Treatment of Program Income:
Additional Costs
SECTION IV - AG SPECIFIC AWARD CONDITIONS
- 1R01AG065248-01 REVISED
Clinical Trial Indicator: Yes
This award supports one or more NIH-defined Clinical Trials. See the
NIH Grants Policy Statement Section 1.2 for NIH definition of Clinical Trial.
This revised award includes an increase of $147,190 in facilities
and administrative costs due to Cognition Therapeutics, Inc’s negotiated rate agreement dated 11/06/2020.
This revised award removes the restriction regarding facilities and
administrative costs ($2,058,609).
Supersedes Notice of Award issued 01/12/2021. Previous terms and
conditions apply:
This award is revised to change the title in accordance with the grantee’s
request dated 12/03/2020.
Supersedes Notice of Award issued 08/14/2020. Previous terms and
conditions apply:
This revised award corrects the carryover designation: Carryover of
an unobligated balance into the next budget period requires Grants Management Officer prior approval.
Supersedes Notice of Award issued 05/29/2020. Previous terms and
conditions apply:
RESTRICTION: The present award is being made without
a currently valid certification of Institutional Review Board (IRB) approval for this project with the following restriction: Only activities
that are clearly severable and independent from activities that involve human subjects may be conducted under this award until the project
has received IRB approval consistent with 45 CFR Part 46 and certification of IRB approval has been submitted to and accepted by the
NIH awarding component.
No funds may be drawn down from the payment system and no obligations
may be made against Federal funds for research involving human subjects by the grantee or any other site engaged in such research for
any period not covered by an OHRP-approved Assurance and IRB approval consistent with 45 CFR Part 46.
Failure to comply with the above requirements may result in suspension
and/or termination of this award, withholding of support, audit disallowances, and/or other appropriate action.
See the NIH Grants Policy Statement, Chapter 4.1.15 Human Subjects
Protections (http://grants.nih.gov/grants/policy/nihgps/HTML5/section 4/4 public policy requirements objectives and other appropriation
mandates.htm), for specific requirements related to the protection of human subjects, which are applicable to and a term and condition
of this award.
Funding for this award has been provided by Alzheimer’s Disease
Initiative funds. Funding for this award has been provided by Alzheimer’s Disease Initiative funds.
In keeping with NOT-OD-06-054 (http://grants.nih.gov/grants/guide/notice-files/NOT-OD-06-
054.html), as this grant has multiple Principal Investigators (PIs), although the signatures of the PIs are not required on prior
approval requests submitted to the agency, the grantee institution must secure and retain the signatures of all of the PIs within their
own internal processes.
None of the funds in this award shall be used to pay the salary of
an individual at a rate in excess of the current salary cap. Therefore, this award and/or future years are adjusted accordingly, if applicable.
Current salary cap levels can be found at the following URL: http://grants.nih.gov/grants/policy/salcap summary.htm
This award includes funds awarded for consortium activity with the
University of Southern California in the amount of $10,993,514 ($9,379,176 direct costs + $1,614,338 facilities and administrative
costs) and Yale University in the amount of $62,166 ($37,114 direct costs + $25,052 facilities and administrative costs). Consortiums
are to be established and administered as described in the NIH Grants Policy Statement (NIH GPS). The referenced section of the NIH Grants
Policy Statement, 2017 is available at: http://grants.nih.gov/grants/policy/nihgps/HTML5/section 15/15 consortium_agreements.htm.
Recruitment of participants cannot be initiated until the NIA program
staff, IRB, and the DSMB have approved the protocol and data and safety monitoring plan.
Per the FOA, sharing of clinical trial data and biosamples will be
done through the Alzheimer’s Clinical Trials Consortium (ACTC) and is expected to adhere to the following timelines: a) pivotal
trials: follow Collaboration for Alzheimer’s Prevention (CAP) data and biosamples sharing principles to make screening/pre-randomization
baseline data available within 12 months of enrollment completion; post-randomization data and biosamples should be made available as
soon as possible without compromising trial integrity, i.e., after regulatory approval or trial completion/termination or 18 months whichever
comes first; b) other trials and studies: sharing of data and biosamples is expected to at the time of publication of the primary results
or within 9 months of database lock, whichever comes first.
ClinicalTrials.gov is a federal registry and results database
of publicly and privately supported clinical studies of human participants conducted around the world. In September 2016, NIH issued
a final policy to promote broad and responsible dissemination of information from NIH-funded clinical trials through ClinicalTrials.gov.
Under this policy, every clinical trial funded in whole or in part by NIH is expected to be registered on ClinicalTrials.gov and have
summary results information submitted and posted in a timely manner, whether subject to FDAAA 801 or not.
Public Policy Requirements and Objectives:
https://grants.nih.gov/grants/policy/nihgps/HTML5/section 4/4.1 public policy requirements and objectives.htm?Highlight=clinical
SPREADSHEET SUMMARY
AWARD NUMBER: 1R01AG065248-01 REVISED
INSTITUTION: COGNITION THERAPEUTICS, INC.
|
Budget
|
|
Year 1
|
|
|
Year 2
|
|
|
Year 3
|
|
|
Year 4
|
|
|
Year 5
|
|
|
Salaries and Wages
|
|
$
|
236,680
|
|
|
$
|
286,680
|
|
|
$
|
306,680
|
|
|
$
|
306,680
|
|
|
$
|
306,680
|
|
|
Personnel Costs (Subtotal)
|
|
$
|
236,680
|
|
|
$
|
286,680
|
|
|
$
|
306,680
|
|
|
$
|
306,680
|
|
|
$
|
306,680
|
|
|
Consultant Services
|
|
$
|
87,500
|
|
|
$
|
67,500
|
|
|
$
|
67,500
|
|
|
$
|
67,500
|
|
|
$
|
87,500
|
|
|
Travel
|
|
$
|
20,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
Other
|
|
$
|
9,898,865
|
|
|
$
|
3,413,603
|
|
|
$
|
2,258,603
|
|
|
$
|
1,498,603
|
|
|
$
|
4,801,353
|
|
|
Subawards/Consortium/C ontractual Costs
|
|
$
|
11,055,680
|
|
|
$
|
9,618,908
|
|
|
$
|
9,618,908
|
|
|
$
|
9,689,071
|
|
|
$
|
9,617,608
|
|
|
TOTAL FEDERAL DC
|
|
$
|
21,298,725
|
|
|
$
|
13,411,691
|
|
|
$
|
12,276,691
|
|
|
$
|
11,586,854
|
|
|
$
|
14,838,141
|
|
|
TOTAL FEDERAL F&A
|
|
$
|
3,235,104
|
|
|
$
|
1,207,787
|
|
|
$
|
851,056
|
|
|
$
|
612,188
|
|
|
$
|
1,656,529
|
|
|
TOTAL COST
|
|
$
|
24,533,829
|
|
|
$
|
14,619,478
|
|
|
$
|
13,127,747
|
|
|
$
|
12,199,042
|
|
|
$
|
16,494,670
|
|
Facilities and
Administrative Costs
|
|
Year 1
|
|
|
Year 2
|
|
|
Year 3
|
|
|
Year 4
|
|
|
Year 5
|
|
|
F&A Cost Rate 1
|
|
|
31.43
|
%
|
|
|
31.43
|
%
|
|
|
31.43
|
%
|
|
|
31.43
|
%
|
|
|
31.43
|
%
|
|
F&A Cost Base 1
|
|
$
|
10,293,045
|
|
|
$
|
3,842,783
|
|
|
$
|
2,707,783
|
|
|
$
|
1,947,783
|
|
|
$
|
5,270,533
|
|
|
F&A Costs 1
|
|
$
|
3,235,104
|
|
|
$
|
1,207,787
|
|
|
$
|
851,056
|
|
|
$
|
612,188
|
|
|
$
|
1,656,529
|
|
Exhibit 10.32
|
Department of Health and Human Services
National Institutes of Health
NATIONAL INSTITUTE ON AGING
|
Notice of Award
FAIN# SB1AG073028
Federal Award Date
04/30/2021
|
|
Recipient Information
|
|
Federal Award Information
|
|
1. Recipient Name
|
|
|
COGNITION THERAPEUTICS, INC.
|
|
|
|
2403 SIDNEY ST STE 261
|
|
11. Award Number
|
|
|
|
1SB1AG073028-01A1
|
|
PITTSBURGH, PA 15203
|
|
|
|
|
|
12. Unique Federal Award Identification Number (FAIN)
|
|
2. Congressional District of Recipient
|
|
SB1AG073028
|
|
14
|
|
|
|
|
|
13. Statutory Authority
|
|
3. Payment System Identifier (ID)
|
|
P.L. 112-81 Section 5123 42 CFR PART 52
|
|
1134365359A1
|
|
|
|
|
|
14. Federal Award Project Title
|
4. Employer Identification Number (EIN)
134365359
|
|
Human
AME study of CT1812, a small molecule in phase 2 clinical trials for the treatment of Alzheimer's disease
|
|
|
|
|
|
5. Data Universal Numbering System (DUNS)
|
|
15. Assistance Listing Number
|
|
808434612
|
|
93.866
|
|
|
|
|
|
6. Recipient's Unique Entity Identifier
|
|
16. Assistance Listing Program Title
|
|
|
|
Aging Research
|
|
|
|
|
|
7. Project Director or Principal Investigator
|
|
17. Award Action Type
|
|
ANTHONY O CAGGIANO, MD
|
|
New Competing
|
|
Senior Vice President Of Research And
|
|
|
|
Development
|
|
18. Is the Award R&D?
|
|
acaggiano@cogrx.com
|
|
Yes
|
|
914 497-6658
|
|
|
|
|
|
Summary Federal Award Financial Information
|
|
8. Authorized Official
|
|
19. Budget Period Start Date 05/01/2021 – End Date 04/30/2022
|
|
Dr. Susan Catalano
|
|
20. Total Amount of Federal Funds Obligated by this Action
|
$1,642,783
|
|
scatalano@cogrx.com
|
|
20 a. Direct Cost Amount
|
$1,168,159
|
|
412-481-2210
|
|
20 b. Indirect Cost Amount
|
$367,152
|
|
|
|
21. Authorized Carryover
|
$0
|
|
|
|
22. Offset
|
$0
|
|
Federal Agency Information
|
|
23. Total Amount of Federal Funds Obligated this budget period
|
$1,642,783
|
|
9. Awarding Agency Contact Information
|
|
24. Total Approved Cost Sharing or Matching, where applicable
|
$0
|
|
Jennifer Edwards
|
|
25. Total Federal and Non-Federal Approved this Budget Period
|
$1,642,783
|
|
|
|
---------------------------------------------------------------------------------------------------
|
|
NATIONAL INSTITUTE ON AGING
|
|
26. Project Period Start Date 05/01/2021 – End Date 04/30/2022
|
edwardsj@mail.nih.gov
301-827-6689
|
|
27. Total Amount of the Federal Award including Approved Cost Sharing or Matching this Project Period
|
$2,002,902
|
|
10. Program Official Contact Information
|
|
|
|
|
Laurie M. Ryan
|
|
28. Authorized Treatment of Program Income
|
|
|
Health Scientist Administrator
|
|
Additional Costs
|
|
|
NATIONAL INSTITUTE ON AGING
|
|
|
|
|
ryanl@nia.nih.gov
|
|
29. Grants Management Officer - Signature
|
|
|
301.496.9350
|
|
Robin Laney
|
|
|
30. Remarks
|
|
|
|
|
Acceptance of this award, including the “Terms and Conditions,” is acknowledged by the recipient when funds are drawn down or otherwise requested from the grant payment system.
|
|
|
Notice of Award
Commercialization Readiness Program
Department of Health and Human Services
National Institutes of Health
NATIONAL INSTITUTE ON AGING
|
|
|
|
SECTION I – AWARD DATA – 1SB1AG073028-01A1
|
Principal Investigator(s):
ANTHONY O CAGGIANO, MD
Award e-mailed to: scatalano@cogrx.com
Dear Authorized Official:
The National Institutes of Health hereby awards a grant in the amount
of $1,642,783 (see “Award Calculation” in Section I and “Terms and Conditions” in Section III) to COGNITION THERAPEUTICS,
INC. in support of the above referenced project. This award is pursuant to the authority of P.L. 112-81 Section 5123 42 CFR PART 52 and
is subject to the requirements of this statute and regulation and of other referenced, incorporated or attached terms and conditions.
Acceptance of this award, including the “Terms and Conditions,”
is acknowledged by the recipient when funds are drawn down or otherwise requested from the grant payment system.
Each publication, press release, or other document about research supported
by an NIH award must include an acknowledgment of NIH award support and a disclaimer such as “Research reported in this publication
was supported by the National Institute On Aging of the National Institutes of Health under Award Number SB1AG073028. The content is solely
the responsibility of the authors and does not necessarily represent the official views of the National Institutes of Health.” Prior
to issuing a press release concerning the outcome of this research, please notify the NIH awarding IC in advance to allow for coordination.
Award recipients must promote objectivity in research by establishing
standards that provide a reasonable expectation that the design, conduct and reporting of research funded under NIH awards will be free
from bias resulting from an Investigator’s Financial Conflict of Interest (FCOI), in accordance with the 2011 revised regulation
at 42 CFR Part 50 Subpart F. The Institution shall submit all FCOI reports to the NIH through the eRA Commons FCOI Module. The regulation
does not apply to Phase I Small Business Innovative Research (SBIR) and Small Business Technology Transfer (STTR) awards. Consult the
NIH website http://grants.nih.gov/grants/policy/coi/ for a link to the regulation and additional important information.
If you have any questions about this award, please direct questions
to the Federal Agency contacts.
Sincerely yours,
Robin Laney
Grants Management Officer
NATIONAL INSTITUTE ON AGING
Additional information follows
Cumulative Award Calculations for this Budget Period (U.S. Dollars)
|
Salaries and Wages
|
|
$
|
78,920
|
|
|
Personnel Costs (Subtotal)
|
|
$
|
78,920
|
|
|
Consultant Services
|
|
$
|
28,000
|
|
|
Travel
|
|
$
|
4,500
|
|
|
Other
|
|
$
|
1,056,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Direct Costs
|
|
$
|
1,168,159
|
|
|
Federal F&A Costs
|
|
$
|
367,152
|
|
|
Approved Budget
|
|
$
|
1,535,311
|
|
|
Fee
|
|
$
|
107,472
|
|
|
Total Amount of Federal Funds Authorized (Federal Share)
|
|
$
|
1,642,783
|
|
|
TOTAL FEDERAL AWARD AMOUNT
|
|
$
|
1,642,783
|
|
|
|
|
|
|
|
|
AMOUNT OF THIS ACTION (FEDERAL SHARE)
|
|
$
|
1,642,783
|
|
|
SUMMARY TOTALS FOR ALL YEARS (for this Document Number)
|
|
YR
|
THIS AWARD
|
CUMULATIVE TOTALS
|
|
1
|
$1,642,783
|
$1,642,783
|
Fiscal Information:
|
Payment System Identifier:
|
1134365359 A1
|
|
Document Number:
|
SAG073028A
|
|
PMS Account Type:
|
P (Subaccount)
|
|
Fiscal Year:
|
2021
|
|
IC
|
CAN
|
2021
|
|
AG
|
8033287
|
$1,642,783
|
NIH Administrative Data:
PCC: 3CCCTLR / OC: 41030 / Released: Laney, Robin 04/21/2021
Award Processed: 04/30/2021 12:14:14 AM
|
|
SECTION II – PAYMENT/HOTLINE INFORMATION – 1SB1AG073028-01A1
|
For payment and HHS Office of Inspector General Hotline
information, see the NIH Home Page at http://grants.nih.gov/grants/policy/awardconditions.htm
|
|
SECTION III – STANDARD TERMS AND CONDITIONS – 1SB1AG073028-01A1
|
This award is based on the application submitted to, and
as approved by, NIH on the above-titled project and is subject to the terms and conditions incorporated either directly or by reference
in the following:
|
|
a.
|
The grant program legislation and program regulation cited in this Notice of Award.
|
|
|
b.
|
Conditions on activities and expenditure of funds in other statutory requirements, such as those included in appropriations acts.
|
|
|
c.
|
45 CFR Part 75.
|
|
|
d.
|
National Policy Requirements and all other requirements described in the NIH Grants Policy Statement, including addenda in effect
as of the beginning date of the budget period.
|
|
|
e.
|
Federal Award Performance Goals: As required by the periodic report in the RPPR or in the final progress report when applicable.
|
|
|
f.
|
This award notice, INCLUDING THE TERMS AND CONDITIONS CITED BELOW.
|
(See NIH Home Page at http://grants.nih.gov/grants/policy/awardconditions.htm
for certain references cited above.)
Research and Development (R&D): All awards issued
by the National Institutes of Health (NIH) meet the definition of “Research and Development” at 45 CFR Part § 75.2.
As such, auditees should identify NIH awards as part of the R&D cluster on the Schedule of Expenditures of Federal Awards (SEFA).
The auditor should test NIH awards for compliance as instructed in Part V, Clusters of Programs. NIH recognizes that some awards may
have another classification for purposes of indirect costs. The auditor is not required to report the disconnect (i.e., the award is
classified as R&D for Federal Audit Requirement purposes but non-research for indirect cost rate purposes), unless the auditee is
charging indirect costs at a rate other than the rate(s) specified in the award document(s).
This award is subject to the life cycle certification requirements
set forth in Section 18.5.5.4 of the NIH Grants Policy Statement and NOT-OD-19-025. Effective January 1, 2019, Awardees are required
to submit this certification within the I-RPPR and the F-RPPR under Section G.1: Special Notice of Award and Funding Opportunity Announcement
Reporting Requirements and maintain it on file in accordance with the records and retention policy in Section 8.4.2 of the NIH Grants
Policy Statement.
A certification is required at the following times:
· For SBIR/STTR
Phase I Awardees: At the time of receiving final payment or disbursement from the Payment Management System.
· For
SBIR/STTR Phase II Awardees: Prior to receiving more than 50% of the total award amount and prior to final payment or disbursement from
the Payment Management System.
If the grantee cannot complete this certification or cannot
ensure compliance with the certification process, it should notify the GMO immediately. If resolution cannot be reached, the GMO will
void or terminate the grant, as appropriate.
The certification form is available in fillable format
at: http://grants.nih.gov/grants/forms.htm#sbir. Carry over of an unobligated balance into the next budget period requires Grants
Management Officer prior approval.
This award is subject to the requirements of 2 CFR Part
25 for institutions to receive a Dun & Bradstreet Universal Numbering System (DUNS) number and maintain an active registration in
the System for Award Management (SAM). Should a consortium/subaward be issued under this award, a DUNS requirement must be included.
See http://grants.nih.gov/grants/policy/awardconditions.htm for the full NIH award term implementing this requirement and other
additional information.
This award has been assigned the Federal Award Identification
Number (FAIN) SB1AG073028. Recipients must document the assigned FAIN on each consortium/subaward issued under this award.
Based on the project period start date of this project,
this award is likely subject to the Transparency Act subaward and executive compensation reporting requirement of 2 CFR Part 170. There
are conditions that may exclude this award; see http://grants.nih.gov/grants/policy/awardconditions.htm for additional award applicability
information.
In accordance with P.L. 110-161, compliance with the NIH
Public Access Policy is now mandatory. For more information, see NOT-OD-08-033 and the Public Access website: http://publicaccess.nih.gov/.
This award provides support for one or more clinical trials.
By law (Title VIII, Section 801 of Public Law 110-85), the “responsible party” must register “applicable clinical
trials” on the ClinicalTrials.gov Protocol Registration System Information Website. NIH encourages registration of all trials
whether required under the law or not. For more information, see http://grants.nih.gov/ClinicalTrials fdaaa/
This award represents the final year of the competitive
segment for this grant. See the NIH Grants Policy Statement Section 8.6 Closeout for complete closeout requirements at: http://grants.nih.gov/grants/policy/policy.htm#gps.
A final expenditure Federal Financial Report (FFR) (SF
425) must be submitted through the eRA Commons (Commons) within 120 days of the period of performance end date; see the NIH Grants
Policy Statement Section 8.6.1 Financial Reports, http://grants.nih.gov/grants/policy/policy.htm#gps, for additional
information on this submission requirement. The final FFR must indicate the exact balance of unobligated funds and may not reflect
any unliquidated obligations. There must be no discrepancies between the final FFR expenditure data and the Payment Management
System’s (PMS) quarterly cash transaction data. A final quarterly federal cash transaction report is not required for awards
in PMS B subaccounts (i.e., awards to foreign entities and to Federal agencies). NIH will close the awards using the last recorded
cash drawdown level in PMS for awards that do not require a final FFR on expenditures or quarterly federal cash transaction
reporting. It is important to note that for financial closeout, if a grantee fails to submit a required final expenditure FFR, NIH
will close the grant using the last recorded cash drawdown level. If the grantee submits a final expenditure FFR but does not
reconcile any discrepancies between expenditures reported on the final expenditure FFR and the last cash report to PMS, NIH will
close the award at the lower amount. This could be considered a debt or result in disallowed costs.
A Final Invention Statement and Certification form (HHS
568), (not applicable to training, construction, conference or cancer education grants) must be submitted within 120 days of the expiration
date. The HHS 568 form may be downloaded at: http://grants.nih.gov/grants/forms.htm. This paragraph does not apply to Training
grants, Fellowships, and certain other programs—i.e., activity codes C06, D42, D43, D71, DP7, G07, G08, G11, K12, K16, K30, P09,
P40, P41, P51, R13, R25, R28, R30, R90, RL5, RL9, S10, S14, S15, U13, U14, U41, U42, U45, UC6, UC7, UR2, X01, X02.
Unless an application for competitive renewal is submitted,
a Final Research Performance Progress Report (Final RPPR) must also be submitted within 120 days of the period of performance end date.
If a competitive renewal application is submitted prior to that date, then an Interim RPPR must be submitted by that date as well. Instructions
for preparing an Interim or Final RPPR are at: https://grants.nih.gov/grants/rppr/rppr instruction guide.pdf. Any other specific
requirements set forth in the terms and conditions of the award must also be addressed in the Interim or Final RPPR. Note that data
reported within Section I of the Interim and Final RPPR forms will be made public and should be written for a lay person audience.
NIH strongly encourages electronic submission of the final
invention statement through the Closeout feature in the Commons, but will accept an email or hard copy submission as indicated below.
Email: The final invention statement may be e-mailed as
PDF attachments to: NIHCloseoutCenter@mail.nih.gov.
Hard copy: Paper submissions of the final invention statement
may be faxed to the NIH Division of Central Grants Processing, Grants Closeout Center, at 301-480-2304, or mailed to:
National Institutes of Health
Office of Extramural Research
Division of Central Grants Processing
Grants Closeout Center
6705 Rockledge Drive
Suite 5016, MSC 7986
Bethesda, MD 20892-7986 (for regular or U.S. Postal Service Express mail)
Bethesda, MD 20817 (for other courier/express deliveries only)
NOTE: If this is the final year of a competitive segment
due to the transfer of the grant to another institution, then a Final RPPR is not required. However, a final expenditure FFR is required
and should be submitted electronically as noted above. If not already submitted, the Final Invention Statement is required and should
be sent directly to the assigned Grants Management Specialist.
In accordance with the regulatory requirements
provided at 45 CFR 75.113 and Appendix XII to 45 CFR Part 75, recipients that have currently active Federal grants, cooperative
agreements, and procurement contracts with cumulative total value greater than $10,000,000 must report and maintain information in
the System for Award Management (SAM) about civil, criminal, and administrative proceedings in connection with the award or
performance of a Federal award that reached final disposition within the most recent five-year period. The recipient must also make
semiannual disclosures regarding such proceedings. Proceedings information will be made publicly available in the designated
integrity and performance system (currently the Federal Awardee Performance and Integrity Information System (FAPIIS)). Full
reporting requirements and procedures are found in Appendix XII to 45 CFR Part 75. This term does not apply to NIH fellowships.
Treatment of Program Income:
Additional Costs
|
|
SECTION IV – AG SPECIFIC AWARD CONDITIONS – 1SB1AG073028-01A1
|
Clinical Trial Indicator: Yes
This award supports one or more NIH-defined Clinical Trials. See the NIH Grants Policy Statement Section 1.2 for NIH definition of Clinical
Trial.
RESTRICTION: The present award is being made without
a currently valid certification of IRB approval for this project with the following restriction: Only activities that are clearly severable
and independent from activities that involve human subjects may be conducted pending the National Institute on Aging’s acceptance
of the certification of IRB approval.
No funds may be drawn down from the payment system and no
obligations may be made against Federal funds for any research involving human subjects prior to the National Institute on Aging’s
notification to the grantee that the identified issues have been resolved and this restriction removed.
Failure to respond within the 60-day period and/or to otherwise
comply with the above requirements may result in suspension and/or termination of this award, audit/or disallowances, and/or other appropriate
action.
See the NIH Grants Policy Statement, Chapter 4.1.15 Human
Subjects Protections (http://grants.nih.gov/grants/policy/nihgps/HTML5/section 4/4 public policy requirements objectives and other
appropriation mandates.htm), for specific requirements related to the protection of human subjects, which are applicable to and a
term and condition of this award.
Recruitment of participants cannot be initiated until
the NIA program staff, IRB, and the Safety Monitor have approved the protocol and data and safety monitoring plan.
Funding for this award has been provided by Alzheimer’s
Disease Initiative funds.
ClinicalTrials.gov is a federal registry and results
database of publicly and privately supported clinical studies of human participants conducted around the world. In September 2016, NIH
issued a final policy to promote broad and responsible dissemination of information from NIH-funded clinical trials through ClinicalTrials.gov.
Under this policy, every clinical trial funded in whole or in part by NIH is expected to be registered on ClinicalTrials.gov and have
summary results information submitted and posted in a timely manner, whether subject to FDAAA 801 or not.
Public Policy Requirements and Objectives: https://grants.nih.gov/grants/policy/nihgps/HTML5/section
4/4.1 public policy requirements and objectives.htm?Highlight=clinical
Intellectual property rights: Normally, the awardee(s)
organization retains the principal worldwide patent rights to any invention developed with United States Government support. Under
Title 37 Code of Federal Regulations Part 401, the Government receives a royalty-free license for its use, reserves the right to
require the patent holder to license others in certain circumstances, and requires that anyone exclusively licensed to sell the
invention in the United States must normally manufacture it substantially in the United States.
Rights and obligations related to inventions created or
reduced to practice as a result of this award are detailed in 35 U.S.C. 205 and 37 CFR Part 401. These inventions must be reported to
the Extramural Invention Reporting and Technology Resources Branch, OPERA, NIH, 6701 Rockledge Drive, MSC 7750, Bethesda, MD 20892-7750,
(301) 435-1986. For additional information, access the NIH link on the Interagency Edison web site (www.iedison.gov) which includes
an electronic invention reporting system, reference information and the text to 37 CFR 401.
To the extent authorized by 35 U.S.C., Section 205, the
Government will not make public any information disclosing an NIH-supported invention for a 4-year period to allow the awardee organization
a reasonable time to file a patent application, nor will the Government release any information that is part of that patent application.
The fee provided as part of this Notice of Grant Award is
in addition to direct and facilities and administrative costs. The fee is to be drawn down from the DHHS Payment Management System in
increments proportionate to the drawdown of costs.
Allowable costs conducted by for-profit organizations will
be determined by applying the cost principles of Contracts with Commercial Organizations set forth in 48 CFR, Subpart 31.2.
The format for the Final Report is as follows:
1. State the beginning
and ending dates for the period covered by the SBIR/STTR Phase I/Phase II grant.
2. List all key
personnel who have worked on the project during that period, their titles, dates of service, and number of hours devoted to the project.
3. Summarize the
specific aims of the Phase I grant.
4. Provide a succinct
account of published and unpublished results, indicating progress toward their achievement. Summarize the importance of the findings.
Discuss any changes in the specific aims since the project was initiated. Include the Inclusion Enrollment Report with the final enrollment
data for clinical research (MS Word or PDF).
5. List titles and
complete references to publications, and manuscripts accepted for publication, if any, that resulted from the project’s effort.
Submit five copies of such items, except patent and invention reports, as an Appendix.
6. List patents,
copyrights, trademarks, invention reports and other printed materials, if any, that resulted from the project or describe patent status,
trade secrets or other demonstration of IP protection.
7. Describe the
technology developed from this SBIR/STTR, its intended use and who will use it.
8. Describe the
current status of the product (e.g., under development, commercialized, in use, discontinued).
9. If applicable,
describe the status of FDA approval for your product, process, or service (e.g., continuing pre-IND studies, filed an IND, in Phase I
(or II or III) clinical trials, applied for approval, review ongoing, approved, not approved).
10. Describe how
your company has benefited from the program and/or the technology developed (e.g., firm’s growth, follow-on funding, increased technical
expertise, licensing agreements, spin-off companies, public offering [include stock exchange and symbol]).
11. List of the
generic and/or commercial name of product, process, or service, if any, that resulted from SBIR/STTR funding. If applicable, indicate
the number of products sold.
12. Provide the
current number of employees (total full time equivalents [FTEs]).
SPREADSHEET SUMMARY
AWARD NUMBER: 1SB1AG073028-01A1
INSTITUTION: COGNITION THERAPEUTICS, INC.
|
Budget
|
|
Year 1
|
|
|
Salaries and Wages
|
|
$
|
78,920
|
|
|
Personnel Costs (Subtotal)
|
|
$
|
78,920
|
|
|
Consultant Services
|
|
$
|
28,000
|
|
|
Travel
|
|
$
|
4,500
|
|
|
Other
|
|
$
|
1,056,739
|
|
|
FEE
|
|
$
|
107,472
|
|
|
TOTAL FEDERAL DC
|
|
$
|
1,168,159
|
|
|
TOTAL FEDERAL F&A
|
|
$
|
367,152
|
|
|
TOTAL COST
|
|
$
|
1,642,783
|
|
|
Facilities and Administrative Costs
|
|
Year 1
|
|
|
F&A Cost Rate 1
|
|
|
31.43
|
%
|
|
F&A Cost Base 1
|
|
$
|
1,168,159
|
|
|
F&A Costs 1
|
|
$
|
367,152
|
|
Exhibit 10.33
|
Department of Health and Human Services
National Institutes of Health
NATIONAL
INSTITUTE ON AGING
|
Notice of Award
FAIN# R01AG071643
Federal Award Date
05/06/2021
|
|
Recipient Information
|
|
|
|
1.
|
Recipient Name
|
|
|
COGNITION THERAPEUTICS, INC.
2403 SIDNEY ST STE 261
|
|
|
PITTSBURGH, PA 15203
|
|
|
|
|
2.
|
Congressional District
of Recipient 14
|
|
|
|
|
3.
|
Payment System Identifier
(ID)
|
|
|
1134365359A1
|
|
|
|
|
4.
|
Employer Identification
Number (EIN)
|
|
|
134365359
|
|
|
|
|
5.
|
Data Universal Numbering
System (DUNS)
|
|
|
808434612
|
|
|
|
|
6.
|
Recipient’s Unique
Entity Identifier
|
|
|
|
|
7.
|
Project Director or Principal
Investigator
|
|
|
ANTHONY O CAGGIANO, MD (Contact)
|
|
|
Senior Vice President Of Research
And Development
|
|
|
acaggiano@cogrx.com
|
|
|
914 497-6658
|
|
|
|
|
8.
|
Authorized Official
|
|
|
Dr. Susan Catalano.
|
|
|
scatalano@cogrx.com
|
|
|
412-481-2210
|
|
|
|
|
|
|
|
Federal Agency
Information
|
|
|
|
9.
|
Awarding Agency Contact
Information
|
|
|
Jennifer Edwards
|
|
|
NATIONAL INSTITUTE ON AGING
|
|
|
edwardsj@mail.nih.gov
|
|
|
301-827-6689
|
|
|
|
|
10.
|
Program Official Contact
Information
|
|
|
Laurie M. Ryan
|
|
|
Health Scientist Administrator
|
|
|
NATIONAL INSTITUTE ON AGING
|
|
|
ryanl@nia.nih.gov
|
|
|
301.496.9350
|
|
Federal Award Information
|
|
|
|
11.
|
Award Number
|
|
|
1R01AG071643-01
|
|
|
|
|
12.
|
Unique Federal Award Identification Number (FAIN)
|
|
|
R01AG071643
|
|
|
|
|
13.
|
Statutory Authority
|
|
|
42 USC 241 42 CFR 52
|
|
|
|
|
14.
|
Federal Award Project Title
|
|
|
A Randomized, Double-Blind, Placebo-Controlled, Parallel-Group,
Phase 2 Study to Evaluate the Safety and Efficacy of CT1812 in Subjects with Dementia with Lewy Bodies
|
|
|
|
|
15.
|
Assistance Listing Number
|
|
|
93.866
|
|
|
|
|
16.
|
Assistance Listing Program Title
|
|
|
Aging Research
|
|
|
|
|
17.
|
Award Action Type
|
|
|
New Competing
|
|
|
|
|
18.
|
Is the Award R&D?
|
|
|
Yes
|
Summary
Federal Award Financial Information
|
19. Budget Period Start Date 05/15/2021 - End Date 04/30/2022
|
|
|
|
|
|
20. Total Amount of Federal Funds Obligated by this Action
|
|
$
|
10,764,669
|
|
|
20 a. Direct Cost Amount
|
|
$
|
8,294,565
|
|
|
20 b. Indirect Cost Amount
|
|
$
|
2,470,104
|
|
|
21. Authorized Carryover
|
|
$
|
0
|
|
|
22. Offset
|
|
$
|
0
|
|
|
23. Total Amount of Federal Funds Obligated this budget period
|
|
$
|
10,764,669
|
|
|
24. Total Approved Cost Sharing or Matching, where applicable
|
|
$
|
0
|
|
|
25. Total Federal and Non-Federal Approved this Budget Period
|
|
$
|
10,764,669
|
|
|
26. Project Period Start Date 05/15/2021 - End Date 04/30/2024
|
|
|
|
|
|
27. Total Amount of the Federal Award including Approved Cost Sharing or Matching this Project Period
|
|
$
|
10,764,669
|
|
|
28.
|
Authorized Treatment of Program Income
|
|
|
Additional Costs
|
|
29.
|
Grants Management Officer - Signature
|
|
|
Robin Laney
|
|
30.
Remarks
|
|
Acceptance of this award, including the "Terms and Conditions," is acknowledged by the recipient when funds are drawn down or otherwise requested from the grant payment system.
|
SECTION
I - AWARD DATA - 1R01AG071643-01
Principal
Investigator(s):
ANTHONY O CAGGIANO (contact),
MD
James E Galvin, MD
Award e-mailed to: scatalano@cogrx.com
Dear Authorized Official:
The National Institutes of
Health hereby awards a grant in the amount of $10,764,669 (see “Award Calculation” in Section I and “Terms and Conditions”
in Section III) to COGNITION THERAPEUTICS, INC. in support of the above referenced project. This award is pursuant to the authority of
42 USC 241 42 CFR 52 and is subject to the requirements of this statute and regulation and of other referenced, incorporated or attached
terms and conditions.
Acceptance of this award,
including the "Terms and Conditions," is acknowledged by the recipient when funds are drawn down or otherwise requested from
the grant payment system.
Each publication, press release,
or other document about research supported by an NIH award must include an acknowledgment of NIH award support and a disclaimer such as
“Research reported in this publication was supported by the National Institute On Aging of the National Institutes of Health under
Award Number R01AG071643. The content is solely the responsibility of the authors and does not necessarily represent the official views
of the National Institutes of Health.” Prior to issuing a press release concerning the outcome of this research, please notify the
NIH awarding IC in advance to allow for coordination.
Award
recipients must promote objectivity in research by establishing standards that provide a reasonable expectation that the design, conduct
and reporting of research funded under NIH awards will be free from bias resulting from an Investigator's Financial Conflict of Interest
(FCOI), in accordance with the 2011 revised regulation at 42 CFR Part 50 Subpart F. The Institution shall submit all FCOI reports to
the NIH through the eRA Commons FCOI Module. The regulation does not apply to Phase I Small Business Innovative Research (SBIR) and Small
Business Technology Transfer (STTR) awards. Consult the NIH website http://grants.nih.gov/grants/policy/coi/ for a link to the
regulation and additional important information.
If you have any questions
about this award, please direct questions to the Federal Agency contacts.
Sincerely yours,
Robin Laney
Grants Management Officer
NATIONAL INSTITUTE ON AGING
Additional
information follows
|
Cumulative Award
Calculations for this Budget Period (U.S. Dollars)
|
|
|
|
|
|
Salaries and Wages
|
|
$
|
195,565
|
|
|
Personnel Costs (Subtotal)
|
|
$
|
195,565
|
|
|
Consultant Services
|
|
$
|
1,220,350
|
|
|
Travel
|
|
$
|
308,600
|
|
|
Other
|
|
$
|
6,109,550
|
|
|
Subawards/Consortium/Contractual Costs
|
|
$
|
460,500
|
|
|
Federal Direct Costs
|
|
$
|
8,294,565
|
|
|
Federal F&A Costs
|
|
$
|
2,470,104
|
|
|
Approved Budget
|
|
$
|
10,764,669
|
|
|
Total Amount of Federal Funds Authorized (Federal Share)
|
|
$
|
10,764,669
|
|
|
TOTAL FEDERAL AWARD AMOUNT
|
|
$
|
10,764,669
|
|
|
AMOUNT OF THIS ACTION (FEDERAL SHARE)
|
|
$
|
10,764,669
|
|
|
SUMMARY TOTALS FOR
ALL YEARS (for this Document Number)
|
|
|
YR
|
|
|
THIS AWARD
|
|
|
CUMULATIVE TOTALS
|
|
|
1
|
|
|
$
|
10,764,669
|
|
|
$
|
10,764,669
|
|
|
2
|
|
|
$
|
10,254,288
|
|
|
$
|
10,254,288
|
|
|
3
|
|
|
$
|
8,479,107
|
|
|
$
|
8,479,107
|
|
Recommended future year total cost
support, subject to the availability of funds and satisfactory progress of the project
|
Fiscal Information:
|
|
|
Payment System Identifier:
|
1134365359A1
|
|
Document Number:
|
RAG071643A
|
|
PMS Account Type:
|
P
(Subaccount)
|
|
Fiscal Year:
|
2021
|
|
IC
|
|
|
CAN
|
|
|
2021
|
|
|
2022
|
|
|
2023
|
|
|
AG
|
|
|
|
8033159
|
|
|
$
|
10,764,669
|
|
|
$
|
10,254,288
|
|
|
$
|
8,479,107
|
|
Recommended future year total cost support,
subject to the availability of funds and satisfactory progress of the project
NIH Administrative
Data:
PCC: 3CCCTLR
/ OC: 41021 / Released: Laney, Robin 04/27/2021
Award Processed:
05/06/2021 12:12:57 AM
SECTION
II - PAYMENT/HOTLINE INFORMATION - 1R01AG071643-01
For payment and HHS Office of Inspector
General Hotline information, see the NIH Home Page at http://grants.nih.gov/grants/policy/awardconditions.htm
SECTION
III - STANDARD TERMS AND CONDITIONS - 1R01AG071643-01
This award is based on the application
submitted to, and as approved by, NIH on the above-titled project and is subject to the terms and conditions incorporated either directly
or by reference in the following:
|
|
a.
|
The grant program legislation and program regulation cited in
this Notice of Award.
|
|
|
b.
|
Conditions on activities and expenditure of funds in other statutory requirements, such as those included in appropriations acts.
|
|
|
c.
|
45 CFR Part 75.
|
|
|
d.
|
National Policy Requirements and all other requirements described in the NIH Grants Policy Statement, including addenda in effect
as of the beginning date of the budget period.
|
|
|
e.
|
Federal Award Performance Goals: As required by the periodic report in the RPPR or in the final progress report when applicable.
|
|
|
f.
|
This award notice, INCLUDING THE TERMS AND CONDITIONS CITED BELOW.
|
(See
NIH Home Page at http://grants.nih.gov/grants/policy/awardconditions.htm for certain references cited above.)
Research
and Development (R&D): All awards issued by the National Institutes of Health (NIH) meet the definition of “Research and
Development” at 45 CFR Part § 75.2. As such, auditees should identify NIH awards as part of the R&D cluster on
the Schedule of Expenditures of Federal Awards (SEFA). The auditor should test NIH awards for compliance as instructed in Part V, Clusters
of Programs. NIH recognizes that some awards may have another classification for purposes of indirect costs. The auditor is not required
to report the disconnect (i.e., the award is classified as R&D for Federal Audit Requirement purposes but non-research for indirect
cost rate purposes), unless the auditee is charging indirect costs at a rate other than the rate(s) specified in the award document(s).
Carry
over of an unobligated balance into the next budget period requires Grants Management Officer prior approval.
This
grant is excluded from Streamlined Noncompeting Award Procedures (SNAP).
This
award is subject to the requirements of 2 CFR Part 25 for institutions to receive a Dun & Bradstreet Universal Numbering System (DUNS)
number and maintain an active registration in the System for Award Management (SAM). Should a consortium/subaward be issued under this
award, a DUNS requirement must be included. See http://grants.nih.gov/grants/policy/awardconditions.htm for the full NIH award
term implementing this requirement and other additional information.
This
award has been assigned the Federal Award Identification Number (FAIN) R01AG071643. Recipients must document the assigned FAIN on each
consortium/subaward issued under this award.
Based
on the project period start date of this project, this award is likely subject to the Transparency Act subaward and executive compensation
reporting requirement of 2 CFR Part 170. There are conditions that may exclude this award; see http://grants.nih.gov/grants/policy/awardconditions.htm
for additional award applicability information.
In
accordance with P.L. 110-161, compliance with the NIH Public Access Policy is now mandatory. For more information, see NOT-OD-08-033
and the Public Access website: http://publicaccess.nih.gov/.
This
award provides support for one or more clinical trials. By law (Title VIII, Section 801 of Public Law 110-85), the "responsible
party” must register "applicable clinical trials” on the ClinicalTrials.gov Protocol Registration System Information
Website. NIH encourages registration of all trials whether required under the law or not. For more information, see http://grants.nih.gov/ClinicalTrials
fdaaa/.
In
accordance with the regulatory requirements provided at 45 CFR 75.113 and Appendix XII to 45 CFR Part 75, recipients that have currently
active Federal grants, cooperative agreements, and procurement contracts with cumulative total value greater than $10,000,000 must report
and maintain information in the System for Award Management (SAM) about civil, criminal, and administrative proceedings in connection
with the award or performance of a Federal award that reached final disposition within the most recent five-year period. The recipient
must also make semiannual disclosures regarding such proceedings. Proceedings information will be made publicly available in the designated
integrity and performance system (currently the Federal Awardee Performance and Integrity Information System (FAPIIS)). Full reporting
requirements and procedures are found in Appendix XII to 45 CFR Part 75. This term does not apply to NIH fellowships.
Treatment
of Program Income:
Additional
Costs
SECTION
IV - AG SPECIFIC AWARD CONDITIONS - 1R01AG071643-01
Clinical
Trial Indicator: Yes
This
award supports one or more NIH-defined Clinical Trials. See the NIH Grants Policy Statement Section 1.2 for NIH definition of Clinical
Trial.
RESTRICTION:
The present award is being made without a currently valid certification of IRB approval for this project with the following restriction:
Only activities that are clearly severable and independent from activities that involve human subjects may be conducted pending the National
Institute on Aging's acceptance of the certification of IRB approval.
No
funds may be drawn down from the payment system and no obligations may be made against Federal funds for any research involving human
subjects prior to the National Institute on Aging's notification to the grantee that the identified issues have been resolved and this
restriction removed.
Failure
to respond within the 60-day period and/or to otherwise comply with the above requirements may result in suspension and/or termination
of this award, audit/or disallowances, and/or other appropriate action.
See
the NIH Grants Policy Statement, Chapter 4.1.15 Human Subjects Protections (http://grants.nih.gov/grants/policy/nihgps/HTML5/section
4/4 public policy requirements obje ctives and other appropriation mandates.htm), for specific requirements related to the protection
of human subjects, which are applicable to and a term and condition of this award.
Recruitment
of participants cannot be initiated until the NIA program staff, IRB, and the DSMB have approved the protocol and data and safety monitoring
plan.
This
provisional award is issued subject to the following condition:
Under
governing policy, Federal funds administered by the NIH may not be expended for research in a foreign entity (Sweden) pending further
administrative review. No funds may be drawn from the payment system for a foreign project pending acceptance of the clearance.
=================================
Sharing
of clinical trial data and bio-samples is expected at the time of publication of the primary results or within 9 months of database lock,
whichever comes first.
Funding
for this award has been provided by Alzheimer's Disease Initiative funds.
In
keeping with NOT-OD-06-054 (http://grants.nih.gov/grants/guide/notice-files/NOT-OD-06- 054.html), as this grant has multiple Principal
Investigators (PIs), although the signatures of the PIs are not required on prior approval requests submitted to the agency, the grantee
institution must secure and retain the signatures of all of the PIs within their own internal processes.
This
award includes funds awarded for consortium activity with University of Miami, Miller School of Medicine in the amount of $460,500 ($300,000
direct costs + $160,500 facilities and administrative costs). Consortiums are to be established and administered as described in the
NIH Grants Policy Statement (NIH GPS). The referenced section of the NIH Grants Policy Statement is available at: http://grants.nih.gov/grants/policy/nihgps/HTML5/section
15/15 consortium_agreements.htm.
No
research involving human subjects may be conducted at any performance site until OHRP has approved a Federalwide Assurance (FWA) for
that site and the grantee has ensured that the research has received appropriate Institutional Review Board (IRB) approval.
ClinicalTrials.gov
is a federal registry and results database of publicly and privately supported clinical studies of human participants conducted around
the world. In September 2016, NIH issued a final policy to promote broad and responsible dissemination of information from NIH- funded
clinical trials through ClinicalTrials.gov. Under this policy, every clinical trial funded in whole or in part by NIH is expected to
be registered on ClinicalTrials.gov and have summary results information submitted and posted in a timely manner, whether subject to
FDAAA 801 or not.
Public
Policy Requirements and Objectives: https://grants.nih.gov/grants/policy/nihgps/HTML5/section 4/4.1 public policy requirements and
objectives.htm?Highlight=clinical
SPREADSHEET
SUMMARY
AWARD
NUMBER: 1R01AG071643-01
INSTITUTION:
COGNITION THERAPEUTICS, INC.
|
Budget
|
|
Year 1
|
|
|
Year 2
|
|
|
Year 3
|
|
|
Salaries and Wages
|
|
$
|
195,565
|
|
|
$
|
195,565
|
|
|
$
|
195,565
|
|
|
Personnel Costs (Subtotal)
|
|
$
|
195,565
|
|
|
$
|
195,565
|
|
|
$
|
195,565
|
|
|
Consultant Services
|
|
$
|
1,220,350
|
|
|
$
|
665,000
|
|
|
$
|
180,000
|
|
|
Travel
|
|
$
|
308,600
|
|
|
$
|
17,500
|
|
|
$
|
10,000
|
|
|
Other
|
|
$
|
6,109,550
|
|
|
$
|
6,570,500
|
|
|
$
|
5,715,250
|
|
|
Subawards/Consortium/Contractual Costs
|
|
$
|
460,500
|
|
|
$
|
456,782
|
|
|
$
|
452,948
|
|
|
TOTAL FEDERAL DC
|
|
$
|
8,294,565
|
|
|
$
|
7,905,347
|
|
|
$
|
6,553,763
|
|
|
TOTAL FEDERAL F&A
|
|
$
|
2,470,104
|
|
|
$
|
2,348,941
|
|
|
$
|
1,925,344
|
|
|
TOTAL COST
|
|
$
|
10,764,669
|
|
|
$
|
10,254,288
|
|
|
$
|
8,479,107
|
|
|
Facilities and Administrative Costs
|
|
Year 1
|
|
|
Year 2
|
|
|
Year 3
|
|
|
F&A Cost Rate 1
|
|
|
31.43
|
%
|
|
|
31.43
|
%
|
|
|
31.43
|
%
|
|
F&A Cost Base 1
|
|
$
|
7,859,065
|
|
|
$
|
7,473,565
|
|
|
$
|
6,125,815
|
|
|
F&A Costs 1
|
|
$
|
2,470,104
|
|
|
$
|
2,348,941
|
|
|
$
|
1,925,344
|
|
Exhibit 10.34
|
Department
of Health and Human Services
National Institutes of Health
NATIONAL
INSTITUTE ON AGING
|
Notice of Award
FAIN# R01AG058660
Federal Award Date
05/10/2021
|
|
Recipient Information
|
|
|
1. Recipient Name
|
|
|
COGNITION THERAPEUTICS, INC.
|
|
|
2403 SIDNEY ST STE 261
|
|
|
|
|
|
PITTSBURGH, PA 15203
|
|
|
|
|
|
2. Congressional District of Recipient
|
|
|
14
|
|
|
|
|
|
3. Payment System Identifier (ID)
|
|
|
1134365359A1
|
|
|
|
|
|
4. Employer Identification Number (EIN)
|
|
|
134365359
|
|
|
|
|
|
5. Data Universal Numbering System (DUNS)
|
|
|
808434612
|
|
|
|
|
|
6. Recipient's Unique Entity Identifier
|
|
|
|
|
|
|
|
|
7. Project Director or Principal Investigator
|
|
|
SUSAN M CATALANO, PHD (Contact)
|
|
|
President/founder
|
|
|
scatalano@cogrx.com
|
|
|
(412) 481-2210
|
|
|
|
|
|
8. Authorized Official
|
|
|
Dr. Susan Catalano Ph.D
|
|
|
scatalano@cogrx.com
|
|
|
412-481-2210
|
|
|
|
|
|
Federal Agency Information
|
|
|
9. Awarding Agency Contact Information
|
|
|
Jennifer Edwards
|
|
|
|
|
NATIONAL INSTITUTE ON AGING
edwardsj@mail.nih.gov
|
|
|
301-827-6689
|
|
|
|
|
|
|
|
10. Program Official Contact Information
|
|
|
Laurie M. Ryan
|
|
|
Health Scientist Administrator
|
|
|
NATIONAL INSTITUTE ON AGING
|
|
|
ryanl@nia.nih.gov
|
|
|
301.496.9350
|
|
|
|
|
|
Federal Award Information
|
|
|
|
|
11. Award Number
|
|
|
3R01AG058660-03S1A1
|
|
|
|
|
|
12. Unique Federal Award Identification Number (FAIN)
|
|
|
R01AG058660
|
|
|
|
|
|
13. Statutory Authority
|
|
|
42 USC 241 42 CFR 52
|
|
|
|
|
|
14. Federal Award Project Title
|
|
|
Randomized Double Blind, Placebo Controlled, Parallel Group, Phase II Study to
|
|
|
Evaluate the Safety and Efficacy of CT1812 in Subjects with Mild to Moderate
|
|
|
Alzheimer’s Disease
|
|
|
|
|
|
15. Assistance Listing Number
|
|
|
93.866
|
|
|
|
|
|
16. Assistance Listing Program Title
|
|
|
Aging Research
|
|
|
|
|
|
17. Award Action Type
|
|
|
Supplement (REVISED)
|
|
|
|
|
|
18. Is the Award R&D?
|
|
|
Yes
|
|
|
|
|
|
Summary Federal Award Financial Information
|
|
|
|
|
|
|
19. Budget Period Start Date 05/01/2020 - End Date 05/31/2022
|
|
|
|
|
|
20. Total Amount of Federal Funds Obligated by this Action
|
|
$
|
0
|
|
|
20 a. Direct Cost Amount
|
|
$
|
0
|
|
|
20 b. Indirect Cost Amount
|
|
$
|
0
|
|
|
21. Authorized Carryover
|
|
$
|
0
|
|
|
22. Offset
|
|
$
|
0
|
|
|
23. Total Amount of Federal Funds Obligated this budget period
|
|
$
|
13,634,548
|
|
|
24. Total Approved Cost Sharing or Matching, where applicable
|
|
$
|
0
|
|
|
25. Total Federal and Non-Federal Approved this Budget Period
|
|
$
|
13,634,548
|
|
|
|
|
26. Project Period Start Date 09/15/2018 - End Date 05/31/2022
|
|
27. Total Amount of the Federal Award including Approved Cost
|
|
$
|
30,482,877
|
|
|
Sharing or Matching this Project Period
|
|
|
|
|
|
28.
Authorized Treatment of Program Income
|
|
|
Additional
Costs
|
|
|
|
|
|
29.
Grants Management Officer - Signature
|
|
|
Robin
Laney
|
|
30.
Remarks
Acceptance
of this award, including the “Terms and Conditions,” is acknowledged by the recipient when funds are drawn down or otherwise
requested from the grant payment system.
Notice of Award
|
|
RESEARCH
Department of Health and Human Services
National Institutes of Health
NATIONAL INSTITUTE ON AGING
|
|
SECTION I - AWARD DATA - 3R01AG058660-03S1A1
REVISED
Principal Investigator(s):
SUSAN M CATALANO, PHD
Award e-mailed to: scatalano@cogrx.com
Dear Authorized Official:
The National Institutes of Health hereby revises this award (see “Award
Calculation” in Section I and “Terms and Conditions” in Section III) to COGNITION THERAPEUTICS, INC. in support of
the above referenced project. This award is pursuant to the authority of 42 USC 241 42 CFR 52 and is subject to the requirements of this
statute and regulation and of other referenced, incorporated or attached terms and conditions.
Acceptance of this award, including the “Terms and Conditions,”
is acknowledged by the recipient when funds are drawn down or otherwise requested from the grant payment system.
Each publication, press release, or other document about research
supported by an NIH award must include an acknowledgment of NIH award support and a disclaimer such as “Research reported in this
publication was supported by the National Institute On Aging of the National Institutes of Health under Award Number R01AG058660. The
content is solely the responsibility of the authors and does not necessarily represent the official views of the National Institutes
of Health.” Prior to issuing a press release concerning the outcome of this research, please notify the NIH awarding IC in advance
to allow for coordination.
Award recipients must promote objectivity in research by establishing
standards that provide a reasonable expectation that the design, conduct and reporting of research funded under NIH awards will be free
from bias resulting from an Investigator’s Financial Conflict of Interest (FCOI), in accordance with the 2011 revised regulation
at 42 CFR Part 50 Subpart F. The Institution shall submit all FCOI reports to the NIH through the eRA Commons FCOI Module. The regulation
does not apply to Phase I Small Business Innovative Research (SBIR) and Small Business Technology Transfer (STTR) awards. Consult the
NIH website http://grants.nih.gov/grants/policy/coi/ for a link to the regulation and additional important information.
If you have any questions about this award, please direct questions
to the Federal Agency contacts.
Sincerely yours,
Robin Laney
Grants Management Officer
NATIONAL INSTITUTE ON AGING
Additional information follows
|
Cumulative Award Calculations
for this Budget Period (U.S. Dollars)
|
|
|
|
|
|
Salaries and Wages
|
|
$
|
153,350
|
|
|
Personnel Costs (Subtotal)
|
|
$
|
153,350
|
|
|
Consultant Services
|
|
$
|
132,000
|
|
|
Materials & Supplies
|
|
$
|
78,991
|
|
|
Other
|
|
$
|
10,009,659
|
|
|
|
|
|
|
|
|
Federal Direct Costs
|
|
$
|
10,374,000
|
|
|
Federal F&A Costs
|
|
$
|
3,260,548
|
|
|
Approved Budget
|
|
$
|
13,634,548
|
|
|
Total Amount of Federal Funds Authorized (Federal Share)
|
|
$
|
13,634,548
|
|
|
TOTAL FEDERAL AWARD AMOUNT
|
|
$
|
13,634,548
|
|
|
|
|
|
|
|
|
AMOUNT OF THIS ACTION (FEDERAL SHARE)
|
|
$
|
0
|
|
|
SUMMARY TOTAL FEDERAL
AWARD AMOUNT YEAR ( 3 ) (for this Document Number)
|
|
AWARD NUMBER
|
|
TOTAL FEDERAL AWARD AMOUNT
|
|
|
3R01AG058660-03S1A1
|
|
$
|
13,634,548
|
|
|
5R01AG058660-03
|
|
$
|
5,774,586
|
|
|
3R01AG058660-03S2
|
|
$
|
278,623
|
|
|
TOTAL
|
|
$
|
19,687,757
|
|
|
SUMMARY TOTALS FOR
ALL YEARS (for this Document Number)
|
|
|
YR
|
|
|
THIS AWARD
|
|
|
CUMULATIVE TOTALS
|
|
|
3
|
|
|
$
|
13,634,548
|
|
|
$
|
19,687,757
|
|
Fiscal Information:
|
Payment System Identifier:
|
1134365359A1
|
|
Document Number:
|
RAG058660A
|
|
PMS Account Type:
|
P (Subaccount)
|
|
Fiscal Year:
|
2021
|
|
IC
|
|
CAN
|
|
|
2021
|
|
|
AG
|
|
|
8033159
|
|
|
$
|
13,634,548
|
|
NIH Administrative Data:
PCC: 3CCCTLR / OC: 41023 / Released: Laney, Robin 05/07/2021
Award Processed: 05/10/2021 12:04:55 AM
SECTION II - PAYMENT/HOTLINE INFORMATION
- 3R01AG058660-03S1A1 REVISED
For payment and HHS Office of Inspector General Hotline information,
see the NIH Home Page at http://grants.nih.gov/grants/policy/awardconditions.htm
SECTION III - STANDARD TERMS AND
CONDITIONS - 3R01AG058660-03S1A1 REVISED
This award is based on the application submitted to, and as approved
by, NIH on the above-titled project and is subject to the terms and conditions incorporated either directly or by reference in the following:
|
|
a.
|
The
grant program legislation and program regulation cited in this Notice of Award.
|
|
|
b.
|
Conditions
on activities and expenditure of funds in other statutory requirements, such as those included
in appropriations acts.
|
|
|
d.
|
National
Policy Requirements and all other requirements described in the NIH Grants Policy
|
Statement, including addenda in effect
as of the beginning date of the budget period.
|
|
e.
|
Federal
Award Performance Goals: As required by the periodic report in the RPPR or in the final progress
report when applicable.
|
|
|
f.
|
This
award notice, INCLUDING THE TERMS AND CONDITIONS CITED BELOW.
|
(See NIH Home Page at http://grants.nih.gov/grants/policy/awardconditions.htm
for certain references cited above.)
Research and Development (R&D): All awards issued by the
National Institutes of Health (NIH) meet the definition of “Research and Development” at 45 CFR Part § 75.2. As
such, auditees should identify NIH awards as part of the R&D cluster on the Schedule of Expenditures of Federal Awards (SEFA). The
auditor should test NIH awards for compliance as instructed in Part V, Clusters of Programs. NIH recognizes that some awards may have
another classification for purposes of indirect costs. The auditor is not required to report the disconnect (i.e., the award is classified
as R&D for Federal Audit Requirement purposes but non-research for indirect cost rate purposes), unless the auditee is charging indirect
costs at a rate other than the rate(s) specified in the award document(s).
Carry over of an unobligated balance into the next budget period requires
Grants Management Officer prior approval.
This grant is excluded from Streamlined Noncompeting Award Procedures
(SNAP).
This award is subject to the requirements of 2 CFR Part 25 for institutions
to receive a Dun & Bradstreet Universal Numbering System (DUNS) number and maintain an active registration in the System for Award
Management (SAM). Should a consortium/subaward be issued under this award, a DUNS requirement must be included. See http://grants.nih.gov/grants/policy/awardconditions.htm
for the full NIH award term implementing this requirement and other additional information.
This award has been assigned the Federal Award Identification Number
(FAIN) R01AG058660. Recipients must document the assigned FAIN on each consortium/subaward issued under this award.
Based on the project period start date of this project, this award
is likely subject to the Transparency Act subaward and executive compensation reporting requirement of 2 CFR Part 170. There are conditions
that may exclude this award; see http://grants.nih.gov/grants/policy/awardconditions.htm for additional award applicability information.
In accordance with P.L. 110-161, compliance with the NIH Public Access
Policy is now mandatory. For more information, see NOT-OD-08-033 and the Public Access website: http://publicaccess.nih.gov/.
This award provides support for one or more clinical trials. By law
(Title VIII, Section 801 of Public Law 110-85), the “responsible party” must register “applicable clinical trials”
on the ClinicalTrials.gov Protocol Registration System Information Website. NIH encourages registration of all trials whether
required under the law or not. For more information, see http://grants.nih.gov/ClinicalTrials fdaaa/.
This award represents the final year of the competitive segment for
this grant. See the NIH Grants Policy Statement Section 8.6 Closeout for complete closeout requirements at: http://grants.nih.gov/grants/policy/policy.htm#gps.
A final expenditure Federal Financial Report (FFR) (SF 425) must be
submitted through the eRA Commons (Commons) within 120 days of the period of performance end date; see the NIH Grants Policy Statement
Section 8.6.1 Financial Reports, http://grants.nih.gov/grants/policy/policy.htm#gps, for additional information on this submission
requirement. The final FFR must indicate the exact balance of unobligated funds and may not reflect any unliquidated obligations. There
must be no discrepancies between the final FFR expenditure data and the Payment Management System’s (PMS) quarterly cash transaction
data. A final quarterly federal cash transaction report is not required for awards in PMS B subaccounts (i.e., awards to foreign entities
and to Federal agencies). NIH will close the awards using the last recorded cash drawdown level in PMS for awards that do not require
a final FFR on expenditures or quarterly federal cash transaction reporting. It is important to note that for financial closeout, if
a grantee fails to submit a Page 4 of 7 required final expenditure FFR, NIH will close the grant using the last recorded cash drawdown
level. If the grantee submits a final expenditure FFR but does not reconcile any discrepancies between expenditures reported on the final
expenditure FFR and the last cash report to PMS, NIH will close the award at the lower amount. This could be considered a debt or result
in disallowed costs.
A Final Invention Statement and Certification form (HHS 568), (not
applicable to training, construction, conference or cancer education grants) must be submitted within 120 days of the expiration date.
The HHS 568 form may be downloaded at: http://grants.nih.gov/grants/forms.htm. This paragraph does not apply to Training grants,
Fellowships, and certain other programs—i.e., activity codes C06, D42, D43, D71, DP7, G07, G08, G11, K12, K16, K30, P09, P40, P41,
P51, R13, R25, R28, R30, R90, RL5, RL9, S10, S14, S15, U13, U14, U41, U42, U45, UC6, UC7, UR2, X01, X02.
Unless an application for competitive renewal is submitted, a Final
Research Performance Progress Report (Final RPPR) must also be submitted within 120 days of the period of performance end date. If a
competitive renewal application is submitted prior to that date, then an Interim RPPR must be submitted by that date as well. Instructions
for preparing an Interim or Final RPPR are at: https://grants.nih.gov/grants/rppr/rppr instruction guide.pdf. Any other specific
requirements set forth in the terms and conditions of the award must also be addressed in the Interim or Final RPPR. Note that data
reported within Section I of the Interim and Final RPPR forms will be made public and should be written for a lay person audience.
NIH strongly encourages electronic submission of the final invention
statement through the Closeout feature in the Commons, but will accept an email or hard copy submission as indicated below.
Email: The final invention statement may be e-mailed as PDF attachments
to: NIHCloseoutCenter@mail.nih.gov.
Hard copy: Paper submissions of the final invention statement may
be faxed to the NIH Division of Central Grants Processing, Grants Closeout Center, at 301-480-2304, or mailed to:
National Institutes of Health
Office of Extramural Research
Division of Central Grants Processing
Grants Closeout Center
6705 Rockledge Drive
Suite 5016, MSC 7986
Bethesda, MD 20892-7986 (for regular or U.S. Postal Service Express mail)
Bethesda, MD 20817 (for other courier/express deliveries only)
NOTE: If this is the final year of a competitive segment due to
the transfer of the grant to another institution, then a Final RPPR is not required. However, a final expenditure FFR is required
and should be submitted electronically as noted above. If not already submitted, the Final Invention Statement is required and
should be sent directly to the assigned Grants Management Specialist.
In accordance with the regulatory requirements provided at 45 CFR
75.113 and Appendix XII to 45 CFR Part 75, recipients that have currently active Federal grants, cooperative agreements, and procurement
contracts with cumulative total value greater than $10,000,000 must report and maintain information in the System for Award Management
(SAM) about civil, criminal, and administrative proceedings in connection with the award or performance of a Federal award that reached
final disposition within the most recent five-year period. The recipient must also make semiannual disclosures regarding such proceedings.
Proceedings information will be made publicly available in the designated integrity and performance system (currently the Federal Awardee
Performance and Integrity Information System (FAPIIS)). Full reporting requirements and procedures are found in Appendix XII to 45 CFR
Part 75. This term does not apply to NIH fellowships.
Treatment of Program Income:
Additional Costs
SECTION IV - AG SPECIFIC AWARD CONDITIONS
- 3R01AG058660-03S1A1 REVISED
Clinical Trial Indicator: Yes
This award supports one or more NIH-defined Clinical Trials. See the NIH Grants Policy Statement Section 1.2 for NIH definition of Clinical
Trial.
This revised award changes the budget and project period end dates
to coincide with the parent grant.
Supersedes Notice of Award issued 04/29/2021. Previous terms and
conditions apply:
Funding for this award has been provided by Alzheimer’s Disease
Initiative funds.
No research involving human subjects may be conducted at any performance
site until OHRP has approved a Federalwide Assurance (FWA) for that site and the grantee has ensured that the research has received appropriate
Institutional Review Board (IRB) approval.
This award reflects the acceptance of the single Institutional Review
Board (sIRB) plan submitted with the application dated 07/01/2020. Any changes to this plan require the written prior approval of the
National Institute on Aging.
None of the funds in this award shall be used to pay the salary of
an individual at a rate in excess of the current salary cap. Therefore, this award and/or future years are adjusted accordingly, if applicable.
Current salary cap levels can be found at the following URL:
http://grants.nih.gov/grants/policy/salcap summary.htm.
ClinicalTrials.gov is a federal registry and results database
of publicly and privately supported clinical studies of human participants conducted around the world. In September 2016, NIH issued
a final policy to promote broad and responsible dissemination of information from NIH- funded clinical trials through ClinicalTrials.gov.
Under this policy, every clinical trial funded in whole or in part by NIH is expected to be registered on ClinicalTrials.gov and have
summary results information submitted and posted in a timely manner, whether subject to FDAAA 801 or not.
Public Policy Requirements and Objectives:
https://grants.nih.gov/grants/policy/nihgps/HTML5/section 4/4.1 public policy requirements and objectives.htm?Highlight=clinical
SPREADSHEET SUMMARY
AWARD NUMBER: 3R01AG058660-03S1A1 REVISED
INSTITUTION: COGNITION THERAPEUTICS, INC.
|
Budget
|
|
Year 3
|
|
|
Salaries and Wages
|
|
$
|
153,350
|
|
|
Personnel Costs (Subtotal)
|
|
$
|
153,350
|
|
|
Consultant Services
|
|
$
|
132,000
|
|
|
Materials & Supplies
|
|
$
|
78,991
|
|
|
Other
|
|
$
|
10,009,659
|
|
|
TOTAL FEDERAL DC
|
|
$
|
10,374,000
|
|
|
TOTAL FEDERAL F&A
|
|
$
|
3,260,548
|
|
|
TOTAL COST
|
|
$
|
13,634,548
|
|
|
Facilities and Administrative Costs
|
|
Year 3
|
|
|
F&A Cost Rate 1
|
|
|
31.43
|
%
|
|
F&A Cost Base 1
|
|
$
|
10,374,000
|
|
|
F&A Costs 1
|
|
$
|
3,260,548
|
|
Exhibit 23.1
Consent of Independent Registered
Public Accounting Firm
We consent to
the reference to our firm under the caption "Experts" and to the use of our report dated May 7, 2021, in the Registration Statement
(Form S-1) and related Prospectus of Cognition Therapeutics Inc. dated July 19, 2021.
/s/ Ernst & Young LLP
Philadelphia,
Pennsylvania
July 19, 2021
![[MISSING IMAGE: LG_COGNITION-4CLR.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/07/19/0001104659-21-093246_LG_COGNITION-4CLR.JPG)
![[MISSING IMAGE: TM2113659D6-FC_OURPIPE4C.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/07/19/0001104659-21-093246_TM2113659D6-FC_OURPIPE4C.JPG)
![[MISSING IMAGE: TM2113659D3_PH-CELLMEM4CLR.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/07/19/0001104659-21-093246_TM2113659D3_PH-CELLMEM4CLR.JPG)
![[MISSING IMAGE: TM2113659D3_PH-OURPROD4C.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/07/19/0001104659-21-093246_TM2113659D3_PH-OURPROD4C.JPG)
![[MISSING IMAGE: TM2113659D3_PH-WILLSYNACBW.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/07/19/0001104659-21-093246_TM2113659D3_PH-WILLSYNACBW.JPG)
![[MISSING IMAGE: TM2113659D3_PH-WILLTYABW.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/07/19/0001104659-21-093246_TM2113659D3_PH-WILLTYABW.JPG)
![[MISSING IMAGE: TM2113659D3_TBL-OVERVIE4C.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/07/19/0001104659-21-093246_TM2113659D3_TBL-OVERVIE4C.JPG)
![[MISSING IMAGE: TM2113659D3_LC-COGNOUT4C.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/07/19/0001104659-21-093246_TM2113659D3_LC-COGNOUT4C.JPG)
![[MISSING IMAGE: TM2113659D3-LC_LSMEAN4C.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/07/19/0001104659-21-093246_TM2113659D3-LC_LSMEAN4C.JPG)
![[MISSING IMAGE: TM2113659D3_LC-DISPLACE4C.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/07/19/0001104659-21-093246_TM2113659D3_LC-DISPLACE4C.JPG)
![[MISSING IMAGE: TM2113659D3_LC-CT18124C.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/07/19/0001104659-21-093246_TM2113659D3_LC-CT18124C.JPG)
![[MISSING IMAGE: TM2113659D3_LC-OURPHASE4C.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/07/19/0001104659-21-093246_TM2113659D3_LC-OURPHASE4C.JPG)
![[MISSING IMAGE: TM2113659D6-PH_PREVEN4C.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/07/19/0001104659-21-093246_TM2113659D6-PH_PREVEN4C.JPG)
![[MISSING IMAGE: TM2113659D3-PH_OLIGOM4C.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/07/19/0001104659-21-093246_TM2113659D3-PH_OLIGOM4C.JPG)
![[MISSING IMAGE: TM2113659D3-PH_RESTORE4C.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/07/19/0001104659-21-093246_TM2113659D3-PH_RESTORE4C.JPG)
![[MISSING IMAGE: TM2113659D3-PH_ANATOM4C.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/07/19/0001104659-21-093246_TM2113659D3-PH_ANATOM4C.JPG)
![[MISSING IMAGE: TM2113659D3-TBL_PATHWAY4C.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/07/19/0001104659-21-093246_TM2113659D3-TBL_PATHWAY4C.JPG)
![[MISSING IMAGE: TM2113659D3-BC_INFLAMAT4C.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/07/19/0001104659-21-093246_TM2113659D3-BC_INFLAMAT4C.JPG)
![[MISSING IMAGE: TM2113659D3_FC-INFLAMMA4C.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/07/19/0001104659-21-093246_TM2113659D3_FC-INFLAMMA4C.JPG)
![[MISSING IMAGE: TM2113659D3-LC_SIMILAR4C.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/07/19/0001104659-21-093246_TM2113659D3-LC_SIMILAR4C.JPG)
![[MISSING IMAGE: TM2113659D3-LC_ANTAGON4C.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/07/19/0001104659-21-093246_TM2113659D3-LC_ANTAGON4C.JPG)