FORM 10-QSB
UNITED STATES
SECURITY AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to _____________
Commission file number 0-23280
NEUROBIOLOGICAL TECHNOLOGIES, INC.
(exact name of small business issuer as specified in its charter)
Delaware 94-3049219
(State or other jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
1387 Marina Way South
Richmond, California 94804
(Address of principal executive offices)
(510) 215-8000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of the common stock, as of the latest practical date.
Common Stock, $.001 Par Value -7,553,699- shares outstanding
as of October 30, 1998
Transitional Small Business Disclosure format Yes [ ] No [X]
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INDEX
NEUROBIOLOGICAL TECHNOLOGIES, INC.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Unaudited)
Condensed Balance Sheets -- September 30, 1998 and June 30, 1998
Condensed Statements of Operations -- Three months ended September 30,
1998 and 1997; Period from August 27, 1987 (inception) through
September 30, 1998
Condensed Statements of Cash Flows -- Three months ended September 30,
1998 and 1997; Period from August 27, 1987 (inception) through
September 30, 1998
Notes to Condensed Financial Statements -- September 30, 1998
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Unaudited)
<TABLE>
NEUROBIOLOGICAL TECHNOLOGIES, INC.
(A development stage company)
CONDENSED BALANCE SHEETS
(Unaudited)
<CAPTION>
September 30, June 30,
1998 1998
----------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,343,371 $ 2,020,886
Prepaid expenses and other 61,284 59,016
----------------------------------
Total current assets 1,404,655 2,079,902
Property and equipment, net 37,729 53,447
----------------------------------
$ 1,442,384 $ 2,133,349
==================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 446,214 $ 497,578
Stockholders' equity:
Common stock, $.001 par value, 25,000,000
shares authorized, 7,553,699 outstanding at
September 30, 1998 and June 30, 1998 29,980,898 29,980,898
Deficit accumulated during development stage (28,984,728) (28,345,127)
----------------------------------
Total stockholders' equity 996,170 1,635,771
----------------------------------
$ 1,442,384 $ 2,133,349
==================================
<FN>
See accompanying notes.
</FN>
</TABLE>
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<TABLE>
NEUROBIOLOGICAL TECHNOLOGIES, INC.
(A development stage company)
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Period from
Three months ended August 27, 1987
(inception) through
September 30,
----------------------------------
1998 1997 September 30, 1998
----------------------------------------------------------
<S> <C> <C> <C>
REVENUES
License $ -- $ -- $ 2,100,000
Grant -- -- 49,900
----------------------------------------------------------
Total revenue -- -- 2,149,900
EXPENSES
Research and development 440,573 697,584 22,728,954
General and administrative 222,036 621,467 10,560,187
----------------------------------------------------------
Total expenses 662,609 1,319,051 33,289,141
Operating loss (662,609) (1,319,051) (31,139,241)
Interest income 23,008 43,165 2,154,513
----------------------------------------------------------
NET LOSS $ (639,601) $ (1,275,886) $(28,984,728)
----------------------------------------------------------
BASIC AND DILUTED
NET LOSS PER SHARE $ (0.08) $ (0.20)
====================================
Shares used in basic and diluted
net loss per share calculation 7,553,699 6,540,314
====================================
<FN>
See accompanying notes.
</FN>
</TABLE>
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<TABLE>
NEUROBIOLOGICAL TECHNOLOGIES, INC.
(A development stage company)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Period from
Three months ended August 27, 1987
September 30, (inception) through
---------------------------------
1998 1997 September 30, 1998
-----------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (639,601) $ (1,275,886) $(28,984,728)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 15,718 31,489 612,132
Issuance of common stock and warrants
for license rights and services -- -- 139,775
Changes in assets and liabilities:
Prepaid expenses and other (2,268) 57,359 (61,284)
Accounts payable and accrued expenses (51,364) (314,158) 446,214
-----------------------------------------------------------
Net cash used in operating activities (677,515) (1,501,196) (27,847,891)
-----------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of investments -- -- (33,839,678)
Sale of investments -- 2,559,911 33,839,678
Purchases of property and equipment -- -- (366,799)
Additions to patents and licenses -- -- (283,062)
-----------------------------------------------------------
Net cash (used in) provided by
investing activities -- 2,559,911 (649,861)
FINANCING ACTIVITIES:
Proceeds of short-term borrowings -- -- 235,000
Issuance of common stock -- -- 22,614,041
Issuance of preferred stock -- -- 6,992,082
-----------------------------------------------------------
Net cash provided by financing activities -- -- 29,841,123
Increase (decrease) in cash and
cash equivalents (677,515) 1,058,715 1,343,371
Cash and equivalents at beginning of period 2,020,886 1,278,402 --
-----------------------------------------------------------
Cash and equivalents at end of period $ 1,343,371 $ 2,337,117 $ 1,343,371
===========================================================
<FN>
See accompanying notes.
</FN>
</TABLE>
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NEUROBIOLOGICAL TECHNOLOGIES, INC.
(A development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
September 30, 1998
NOTE 1-BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310(b)
of Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation
have been included. Operating results for the three month period ended September
30, 1998 are not necessarily indicative of the results that may be expected for
the year ended June 30, 1999. For further information, refer to the financial
statements and footnotes thereto included in the Company's Form 10-KSB for the
fiscal year ended June 30, 1998.
The Company believes that its available cash and cash equivalents of
$1.3 million as of September 30, 1998 are adequate to fund its operations
through the second quarter of fiscal 1999. The Company will need to raise
substantial additional capital to fund subsequent operations beyond the second
quarter of fiscal 1999. The Company intends to seek funding through public or
private financings, collaborative or other arrangements with corporate partners,
or from other sources. However, there can be no assurance that funding will be
available on favorable terms from any of these sources, if at all. If such
funding is unavailable, the Company will be required to delay, scale back, or
eliminate one or more of its research, discovery, or development projects,
including clinical trials, and to make future reductions in workforce and the
Company will need to consider obtaining funds through entering into arrangements
with collaborative partners or others that may require the Company to relinquish
rights to certain of its technologies, product candidates or products that the
Company would not otherwise relinquish. and other restructuring alternatives,
including the license or sale of certain of its assets and technology,
discontinuing operations or liquidation.
BASIC AND DILUTED NET LOSS PER SHARE
Net loss per share is presented under the requirements of Financial
Accounting Standards Board ("FAS") No. 128, "Earnings per Share" which replaced
the calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Basic earnings per share excludes any dilutive
effects of options, warrants, and convertible securities. Diluted earnings per
share is very similar to the previously reported fully diluted earnings per
share. The effects of potentially dilutive securities
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have been excluded from the computation of basic and diluted net loss per share
as their effect is antidilutive.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued FAS No.
130 "Reporting Comprehensive Income," which established new standards for
reporting and displaying comprehensive income and its components in a full set
of general purpose financial statements. FAS 130 is effective for the Company's
financial statements for the year ending June 30, 1999. There is no difference
in the Company's historical net losses as reported and the comprehensive net
losses under the provisions of FAS 130.
In June 1997, the Financial Accounting Standards Board issued FAS No.
131, "Disclosures about Segments of an Enterprise and Related Information." FAS
131 will change the way companies report selected segment information in interim
financial reports to shareholders. FAS 131 is effective for the Company's
financial statements for the year ending June 30, 1999. The Company does not
expect any changes necessary to comply with the provisions of FAS 131.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Neurobiological Technologies, Inc. ("NTI" or the "Company") is an
emerging drug development company focused on the clinical evaluation and
regulatory approval of neuroscience drugs. NTI develops neuroprotective and
neuromodulatory agents to treat progressive neurological impairments
characteristic of various nervous system disorders, including diabetic
neuropathy, brain cancer, and AIDS dementia syndrome.
NTI's strategy is to in-license and develop early stage drug candidates
that target major medical needs and which can be rapidly commercialized. The
Company's experienced management team oversees the human clinical trials
necessary to establish preliminary evidence of efficacy and seeks partnerships
with pharmaceutical and biotechnology companies for late-stage development and
marketing of its product candidates.
NTI currently has two product candidates in Phase II clinical trials.
The Company is developing Memantine, an orally available compound that appears
to restore the function of impaired neurons by modulation activity of the NMDA
receptor, integral to the membranes of such cells. Such restoration of function
may inhibit injured or damaged neurons from firing abnormally, a pathological
process associated with many neurological conditions, including dementia,
Alzheimer's disease, neuropathic pain, and AIDS dementia. The Company is also
developing XERECEPT(TM), a synthetic preparation
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of the human peptide Corticotropin-Releasing Factor, which the Company believes
has novel anti-edema properties. NTI is developing XERECEPT as a treatment for
peritumoral brain edema (swelling of the brain caused by a tumor). XERECEPT has
been granted orphan drug designation by the FDA. Significant additional
preclinical testing and clinical testing will be required prior to submission of
any regulatory application for the commercial use of these products. There can
be no assurance that the Company will have the financial resources necessary to
conduct future clinical trials or that such trials, if conducted, will
demonstrate an adequate level of safety or efficacy for commercialization of
these products.
Since 1987 when NTI was founded, the Company has applied a majority of
its resources to its research and development programs. The Company is a
development stage company, has not received any revenue from the sale of
products, and does not anticipate receiving revenue from the sale of products in
the near future. The Company has incurred losses since its inception and expects
to incur substantial, increasing losses due to ongoing and planned research and
development efforts. As part of the strategic planning process, the Company has
limited expenditures to only two drug candidates. The Company will need to
obtain additional financing to continue operations beyond the second quarter of
fiscal 1999.
RESULTS OF OPERATIONS
The Company's research and development expenses decreased to
approximately $441,000 in the three months ended September 30, 1998 from
approximately $698,000 in the same period of the prior year. The decrease was
primarily due to the Company narrowing its clinical focus to the development of
two product candidates. General and administrative expenses decreased to
approximately $222,000 in the three months ended September 30, 1998 from
$621,000 in the three months ended September 30, 1997. The decrease was
primarily due to decreased expenditures in activities relating to seeking
financing and corporate partnerships, reduction in workforce and lower facility
costs. Interest income decreased to $23,000 in the three months ended September
30, 1998 from $43,000 in the same period of the prior year primarily due to
lower average cash balances.
The Company expects to incur substantial ongoing costs primarily for
Phase II clinical trials for its development programs and related administrative
support. Assuming that the Company obtains financing to continue operations, the
Company expects that its expenditures will continue to increase as its products
move through Phase II and, if the Phase II trials are successful, Phase III
clinical trials.
LIQUIDITY AND CAPITAL RESOURCES
The Company expects its cash requirements to increase significantly in
future periods. Future cash requirements will depend on numerous factors,
including: the in-licensing of potential drug candidates; the progress on
development programs; the time and costs involved in seeking to obtain
regulatory approval; the ability of the Company to establish collaborative
arrangements; product commercialization activities; and the
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acquisition of manufacturing or laboratory facilities. As part of the strategic
planning process, the Company has limited expenditures to only two drug
candidates, which allowed the Company to reduce its workforce from 22 to 11
persons, many of whom are employed part-time.
From inception through September 30, 1998, the Company has raised a
total of $29.8 million in net proceeds from the sale of common and preferred
stock.
The Company believes that its available cash and cash equivalents of
$1.3 million as of September 30, 1998 are adequate to fund its operations
through the second quarter of fiscal 1999. The Company will need to raise
substantial additional capital to fund subsequent operations beyond the second
quarter of fiscal 1999. The Company intends to seek funding through public or
private financings, collaborative or other arrangements with corporate partners,
or from other sources. However, there can be no assurance that funding will be
available on favorable terms from any of these sources, if at all. If such
funding is unavailable, the Company will be required to delay, scale back, or
eliminate one or more of its research, discovery, or development projects,
including clinical trials, and to make further reductions in workforce and the
Company will need to comsider obtaining funds through entering into arrangements
with collaborative partners or others that may require the Company to relinquish
rights to certain of its technologies, product candidates or products that the
Company would not otherwise relinquish, and other restructuring alternatives,
including the license or sale of certain of its assets and technology,
discontinuing operations or liquidation.
IMPACT OF YEAR 2000 ISSUE
Year 2000 ("Y2K") exposure is the result of computer programs using two
instead of four digits to represent the year. These computer programs may
erroneously interpret dates beyond the year 1999, which could cause system
failures or other computer errors, leading to disruptions in operations.
The Company has completed an assessment of its computer systems. The
Company only uses commercially available software and will continue to install
Y2K compliant upgrades during 1999. The Company believes that such systems will
function properly with respect to dates in the Y2K and thereafter. The Company
is assessing the possible effects on the Company's operations of the Y2K
readiness of key subcontractors. We then intend to contact these subcontractors
to determine their Y2K readiness. The potential impact of Y2K compliance and
related cost are not known at this time and Y2K problems could result in
material adverse consequences to the Company. At present, given the Company's
financial position, the Company does not intend to create a contingency plan if
Y2K readiness is not achieved.
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FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
The Company believes that its available cash and cash equivalents of
$1.3 million as of September 30, 1998 are adequate to fund its operations
through the second quarter of fiscal 1999. In addition, the Company will require
substantial additional funds beyond the second quarter of fiscal 1999 to conduct
the research and development and preclinical and clinical testing of its
potential products and to market any products that may be developed. The Company
intends to seek such additional funding through public or private financings,
collaborative or other arrangements with corporate partners, or from other
sources. There can be no assurance that additional financing will be available
from any of these sources, or, if available, that it will be available on
acceptable terms. The Company may seek to raise additional funds whenever market
conditions so permit. If additional funds are raised by issuing equity
securities, further significant dilution to existing shareholders may result. If
such funding is unavailable, the Company will be required to delay, scale back,
or eliminate one or more of its research, discovery, or development projects,
including clinical trials, and to make further reductions in workforce and the
Company will need to consider obtaining funds through entering into arrangements
with collaborative partners or others that may require the Company to relinquish
rights to certain of its technologies, product candidates or products that the
Company would not otherwise relinquish, and other restructuring alternatives,
including the license or sale of certain of its assets and technology,
discontinuing operations or liquidation.
Although the Company currently plans to contract with third parties to
manufacture clinical and commercial scale quantities of its potential products,
to the extent the Company subsequently determines to establish its own
manufacturing facilities, the Company will require substantial additional
capital. The Company's future capital requirements depend on numerous factors,
including the amount of royalties received from Merz for future sales of
Memantine; the progress of the Company's research, preclinical development and
clinical development programs, the time and cost involved in obtaining
regulatory approvals; the cost of filing, prosecuting, defending, and
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enforcing patent claims and other intellectual property rights; competing
technological and market developments; changes in the Company's existing
research relationships; the ability of the Company to establish collaborative
relationships; the development of commercialization activities and arrangements;
and the purchase of additional capital equipment.
GOING CONCERN DISCLOSURE IN INDEPENDENT AUDITORS' REPORT
The report of the Company's independent auditors with respect to the
Company's financial statements included in Form 10-KSB for the year ended June
30, 1998 includes a "going concern" modification, indicating that the Company's
recurring losses during the development state raise substantial doubt about the
Company's ability to continue as a going concern. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Notes to
Condensed Financial Statements."
EARLY STAGE OF DEVELOPMENT: TECHNOLOGICAL UNCERTAINTY
NTI is at an early stage of development and currently has no marketed
products. All of the Company's potential products are in research, preclinical
development or clinical development, and no revenues have been generated from
product sales. To date, most of the Company's resources have been dedicated to
the research and development of selected candidate pharmaceutical products, and
there can be no assurance that the Company will be able to develop a candidate
product that will receive required regulatory approvals or be successfully
commercialized. The Company is currently evaluating two potential products in
Phase II clinical trials. Results attained in preclinical studies and in such
early stage clinical trials are not necessarily indicative of results that will
be obtained upon further human clinical testing. The potential products
currently under development by the Company will require significant additional
clinical testing prior to submission of any regulatory application for
commercial use. Such activities will require substantial resources and will
necessitate the raising of substantial additional capital.
The Company's potential products are subject to the risks of failure
inherent in the development of products based on new technologies. These risks
include the possibilities that any or all of the potential products will be
found to be unsafe, ineffective or toxic, or otherwise fail to receive necessary
regulatory clearances; that the products, if safe and effective, will be
difficult to manufacture on a large scale or uneconomical to market; that
proprietary rights of third parties will preclude the Company from marketing
products; or that third parties market or will market superior or equivalent
products. There can be no assurance that the Company's development activities
will result in any commercially viable products. The Company does not expect to
be able to commercialize any products for a number of years, if at all.
DEPENDENCE ON MERZ AND ON OTHER THIRD PARTIES
The Company has only limited internal resources and thus the Company
has relied and will continue to rely heavily on others for research,
development, manufacture and
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commercialization of its potential products. With respect to Memantine, the
Company is dependent on Merz for the manufacturing and supply of drug for the
Company's clinical trials, and the successful commercialization of the product
to treat neuropathic pain and AIDS-related dementia. The only revenue that the
Company will receive in the future for Memantine are royalties received on
product sales by Merz. Any failure by Merz to successfully commercialize
Memantine after its development will have a material adverse effect on the
Company's business, financial condition and results of operations.
The Company has entered into various arrangements (many of which are
non-exclusive) with consultants, academic collaborators, licensors, licensees,
contractors and others, and it is dependent upon the level of commitment and
subsequent success of these outside parties in performing their
responsibilities. Certain of these agreements place responsibility for
preclinical testing and human clinical trials and for preparing and submitting
submissions for regulatory approval for potential products on the collaborator,
licensor or contractor. Should such collaborator, licensor or contractor fail to
perform, the Company's business may be adversely affected.
The Company has entered into certain agreements and licenses with third
parties, a number of which require the Company to pay royalties and make other
payments. Failure by the Company to make such payments could cause the Company
to lose rights to technology or data under these agreements.
The Company has relied on scientific, technical, clinical, commercial
and other data supplied and disclosed by others in entering into these
agreements and will rely on such data in support of applications to enter human
clinical trials for its potential products. Although the Company has no reason
to believe that this information contains errors or omissions of fact, there can
be no assurance that there are no errors or omissions of fact that would change
materially the Company's view of the future likelihood of FDA approval or
commercial viability of these potential products.
GOVERNMENT REGULATION AND PRODUCT APPROVAL
The FDA and state and local agencies, and comparable agencies and
entities in foreign countries, impose substantial requirements on the
manufacturing and marketing of human therapeutics through lengthy and detailed
laboratory, preclinical animal studies and clinical testing procedures, sampling
activities, and other costly and time consuming procedures. Satisfaction of
these requirements typically takes many years and varies substantially based on
the type, complexity, and novelty of the drug. The effect of government
regulation may be to delay for a considerable period of time or prevent the
marketing of any product that the Company may develop and/or to impose costly
procedures upon the Company's activities, the result of which may be to furnish
an advantage to its competitors. There can be no assurance that FDA or other
regulatory approval for any products developed by the Company will be granted on
a timely basis or at all. Any such delay in obtaining or failure to obtain such
approvals would adversely affect the marketing of the Company's proposed
products and its ability to earn product
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revenues or royalties. In addition, success in preclinical or early stage
clinical trials does not assure success in later stage clinical trials. As with
any regulated product, additional government regulations may be promulgated
which could delay regulatory approval of the Company's potential products.
Adverse government regulation which might arise from future legislation or
administrative action cannot be predicted.
UNCERTAINTY OF PROTECTION OF PATENTS AND PROPRIETARY RIGHTS
The Company's success will depend, in large part, on its ability to
obtain or license patents, protect trade secrets and operate without infringing
upon the proprietary rights of others. There can be no assurance that any of the
patent applications licensed to the Company will be approved, that the Company
will not be challenged by others, or that the patents of others will not impair
the ability of the Company to do business.
The patent position of biotechnology firms generally is highly
uncertain, involving complex legal and factual questions, and has recently been
the subject of much litigation. No consistent policy has emerged from the United
States Patent and Trademark Office regarding the breadth of claims allowed or
the degree of protection afforded under biotechnology patents. Finally, there
can be no assurance that others will not independently develop similar products,
duplicate any of the Company's potential products, or design around any
potential patented products of the Company. As a result, there can be no
assurance that patent applications relating to the Company's potential products
or processes will result in patents being issued, or that patents, if issued,
will provide protection against competitors who successfully challenge the
Company's patents, obtain patents that may have an adverse effect on the
Company's ability to conduct business, or be able to circumvent the Company's
patent position. In view of the time delay in patent approval and the secrecy
afforded United States patent applications, the Company does not know if other
applications that would have priority over the Company's applications have been
filed.
MANUFACTURING LIMITATIONS
The Company currently does not have its own manufacturing facilities to
manufacture products under the current Good Manufacturing Practices (cGMP)
requirements prescribed by the FDA. The Company has established arrangements
with its corporate collaborator, Merz, and with contract manufacturers to supply
potential products for preclinical and clinical trials and intends to establish
similar arrangements for the manufacture, packaging, labeling and distribution
of products, if approved for marketing. If the Company's contractors are unable
to supply sufficient quantities of product candidates manufactured in accordance
with cGMP on acceptable terms, or if the Company were unable to contract for
supplies of such product candidates because of lack of financing, the Company's
preclinical and human clinical testing schedule would be delayed. If the Company
should encounter delays or difficulties in establishing relationships with
manufacturers to produce, package and distribute its products, market
introduction and subsequent sales of such products would be adversely affected.
Moreover, collaborators and contract manufacturers that the Company may use must
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adhere to cGMP regulations enforced by the FDA through its facilities inspection
program. If these facilities cannot pass a pre-approval plant inspection, the
FDA pre-market approval of the products would be adversely affected. The
Company's dependence on third parties for the manufacture of products may
adversely affect the Company's results of operations and its ability to develop
and deliver products on a timely and competitive basis.
RISK OF PRODUCT LIABILITY
Clinical trials or marketing of any of the Company's potential products
may expose the Company to liability claims from the use of such products. The
Company's product liability insurance does not cover commercial sales of
products. The Company has a limited amount of product liability insurance to
cover liabilities arising from clinical trials. There can be no assurance that
the Company's insurance will be adequate to cover any liabilities arising from
the Company's clinical trials, that the Company will be able to obtain product
liability insurance covering commercial sales or, if obtained, that sufficient
coverage can be acquired at a reasonable cost. An inability to obtain insurance
at acceptable cost or otherwise protect against potential product liability
claims could prevent or inhibit commercialization of any products developed by
the Company.
DEPENDENCE ON QUALIFIED PERSONNEL AND ADVISORS
The Company is highly dependent upon its scientific and management
staff and on consultants and advisors, the loss of whose services might
significantly delay the achievement of planned development objectives. During
fiscal year 1998, the Company reduced its workforce from 22 to 11 persons, many
of whom are employed part time. The Company believes that this reduction in
force has not damaged its ability to manage ongoing human clinic trials.
However, a further reduction in force would have a material adverse effect on
the Company's operations.
In addition, the Company is dependent on collaborators at research
institutions. Recruiting and retaining qualified personnel, collaborators,
advisors and consultants will be critical to the Company's success. There is
intense competition for such qualified personnel in the area of the Company's
activities, and there can be no assurance that the Company will be able to
continue to attract and retain the personnel necessary for the development of
the Company's business. The inability to acquire such services or to develop
needed expertise could have a material adverse effect on the Company's
operations.
Note: Except for the historical information contained herein, the matters
discussed in this Management's Discussion and Analysis of Financial Conditions
and Results of Operations and other sections of this quarterly report are
forward looking statements that involve risks and uncertainties, including the
ability to raise capital; properly design, implement, and complete planned
trials; meet regulatory requirements; demonstrate safety and efficacy for
product candidates; manage third party contractors; and avoid infringement of
third party proprietary rights, as well as other risks detailed
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from time to time in the Company's Securities and Exchange Commission filings.
Actual results may differ materially from those projected. These forward looking
statements represent the Company's judgment as of the date hereof. The Company
disclaims, however, any intent or obligation to update these forward looking
statements.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27: Financial Data Schedule for the period ended September 30, 1998.
Reports: The Company did not file any reports on Form 8-K during the three
months ended September 30, 1998.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEUROBIOLOGICAL TECHNOLOGIES, INC.
Dated: November 12, 1998 /s/ Paul E. Freiman
----------------------------------
Paul E. Freiman
President, Chief Executive Officer
(Principal Executive and
Accounting Officer) and Director
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM BALANCE
SHEET AND INCOME STATEMENTS DATED
9/30/98 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000918112
<NAME> NEUROBIOLOGICAL TECHNOLOGIES, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
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