Relates to Form SB-2
Registration No. 333-93859
Filed under Rule 424(b)(3) and (c)
SUPPLEMENT TO PROSPECTUS OF
NEUROBIOLOGICAL TECHNOLOGIES, INC.
The following information supplements the prospectus, dated January 21,
2000, of Neurobiological Technologies, Inc. related to 5,434,700 shares of its
Common Stock and 2,604,880 shares of its Common Stock issuable upon exercise of
warrants. This statement should be read in conjunction with the prospectus.
THE DATE OF THIS SUPPLEMENT IS FEBRUARY 25, 2000
<PAGE>
I. UNAUDITED FINANCIAL INFORMATION
The financial data presented below for the three and six months ended,
and as of, December 31, 1999 and for the three and six months ended December 31,
1998, and for the period from August 27, 1987 (inception) through December 31,
1999 is derived from our unaudited consolidated financial statements. Such
unaudited consolidated financial statements reflect all adjustments which are,
in the opinion of management, necessary and of a normal recurring nature to
present fairly the operating results for the interim periods reported. The
results of operations for the three months ended December 31, 1999 are not
necessarily indicative of the results to be expected for the fiscal year ending
June 30, 2000. Our balance sheet data as of December 31, 1999 is derived from
our unaudited consolidated financial statements. This information should be read
in conjunction with the consolidated financial statements and notes thereto
included elsewhere in the prospectus.
The following information was included in our quarterly report on Form
10-Q for the three months ended December 31, 1999, as filed with the Securities
and Exchange Commission on February 14, 2000.
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<PAGE>
<TABLE>
NEUROBIOLOGICAL TECHNOLOGIES, INC.
(A development stage company)
CONDENSED BALANCE SHEETS
(Unaudited)
<CAPTION>
December 31, June 30,
1999 1999
-------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,306,980 $ 201,202
Prepaid expenses and other 31,399 43,833
-------------------------------
Total current assets 2,338,379 245,035
Property and equipment, net 3,139 3,796
-------------------------------
$ 2,341,518 $ 248,831
===============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 796,825 $ 934,839
Note payable to shareholder -- 200,000
-------------------------------
Total current liabilities 796,825 1,134,839
Stockholders' equity:
Convertible preferred stock, $.001 par value,
25,000,000 shares authorized, 2,332,000 outstanding
at December 31, 1999 and June 30, 1999 1,166,000 1,166,000
Common stock, $.001 par value, 25,000,000
shares authorized, 13,275,501 and 7,563,575
outstanding at December 31, 1999 and June 30,
1999, respectively 34,045,978 29,985,352
Deficit accumulated during development stage (33,667,285) (32,037,360)
-------------------------------
Total stockholders' equity 1,544,693 (886,008)
-------------------------------
$ 2,341,518 $ 248,831
===============================
<FN>
See accompanying notes.
</FN>
</TABLE>
3
<PAGE>
<TABLE>
NEUROBIOLOGICAL TECHNOLOGIES, INC.
(A development stage company)
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Period from
Three months ended Six months ended August 27, 1987
December 31, December 31, (inception)
-------------------------------------------------------------- through
1999 1998 1999 1998 December 31, 1999
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUES
License $ -- $ -- $ -- $ -- $ 2,100,000
Grant -- -- -- -- 149,444
------------------------------------------------------------------------------------
Total revenue -- -- -- -- 2,249,444
EXPENSES
Research and development 625,469 619,104 1,161,407 1,059,677 26,230,093
General and administrative 245,027 333,170 491,734 555,206 11,888,306
------------------------------------------------------------------------------------
Total expenses 870,496 952,274 1,653,141 1,614,883 38,118,399
Operating loss (870,496) (952,274) (1,653,141) (1,614,883) (35,868,955)
Interest income 21,695 11,714 23,216 34,722 2,201,670
------------------------------------------------------------------------------------
NET LOSS $ (848,801) $ (940,560) $(1,629,925) $(1,580,161) $(33,667,285)
====================================================================================
BASIC & DILUTED
NET LOSS PER SHARE $ (0.07) $ (0.12) $ (0.17) $ (0.21)
=================================================================
Shares used in basic & diluted
net loss per share calculation 11,518,777 7,553,699 9,604,432 7,553,699
=================================================================
<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>
Six months ended Period from
December 31, August 27, 1987
---------------------------- (inception) through
1999 1998 December 31, 1999
-------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (1,629,925) $ (1,580,161) $(33,667,285)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 657 32,619 638,863
Issuance of common stock and warrants
for license rights and services -- -- 139,775
Changes in assets and liabilities:
Prepaid expenses and other 12,434 11,530 (31,399)
Accounts payable and accrued expenses (138,014) 34,649 796,825
-------------------------------------------------
Net cash used in operating activities (1,754,848) (1,501,363) (32,123,221)
-------------------------------------------------
INVESTING ACTIVITIES:
Purchase of investments -- -- (33,839,678)
Sale of investments -- -- 33,839,678
Purchases of property and equipment, net -- -- (358,940)
Additions to patents and licenses -- -- (283,062)
-------------------------------------------------
Net cash (used in) provided by
investing activities -- -- (642,002)
FINANCING ACTIVITIES:
Proceeds of short-term borrowings (200,000) -- 235,000
Issuance of common stock, net 4,060,626 -- 26,679,121
Issuance of preferred stock, net -- -- 8,158,082
-------------------------------------------------
Net cash provided by financing activities 3,860,626 -- 35,072,203
Increase (decrease) in cash and
cash equivalents 2,105,778 (1,501,363) 2,306,980
Cash and equivalents at beginning of period 201,202 2,020,886 --
-------------------------------------------------
Cash and equivalents at end of period $ 2,306,980 $ 519,523 $ 2,306,980
=================================================
<FN>
See accompanying notes.
</FN>
</TABLE>
5
<PAGE>
NEUROBIOLOGICAL TECHNOLOGIES, INC.
(A development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
December 31, 1999
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 December
31, 1999 are not necessarily indicative of the results that may be expected for
the year ended June 30, 2000. For further information, refer to the financial
statements and footnotes included in the Company's Form 10-KSB for the fiscal
year ended June 30, 1999.
The Company raised approximately $4.2 million in gross proceeds from a
private placement of its securities at $4.00 per unit completed in November
1999. Each unit consisted of five shares of common stock and a five-year warrant
to purchase two shares of common stock exercisable at $1.75 per share. In
November 1999, the Company repaid the outstanding principal and interest on loan
from Merz + Co. GmbH & Co. ("Merz") in the aggregate amount of approximately
$1.2 million.
The Company believes that its available cash and cash equivalents of
$2.3 million as of December 31, 1999 will be adequate to fund its operations
through this fiscal year ending June 30, 2000. The Company will need to raise
substantial additional capital to fund subsequent operations beyond the fiscal
year ending June 30, 2000. 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. The
Company will also need to consider obtaining funds through entering into
arrangements with collaborative partners or others which 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". Basic loss per
share is computed based on the average shares of common stock outstanding and
excludes any options, warrants, and convertible securities. Potentially dilutive
securities, such as options, warrants, and convertible preferred stock, have
also been excluded from the computation of diluted net loss per share as their
effect is antidilutive.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Statements in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and elsewhere in this Form 10-QSB that are
not historical are forward-looking statements and are subject to a number of
risks and uncertainties which could cause actual results to differ materially
from those discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those set forth under "Other
Factors That May Affect Our Operations." 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.
OVERVIEW
Neurobiological Technologies, Inc. ("NTI," "we," "us," "our" or the
"Company") is an emerging drug development company focused on the clinical
development and regulatory approval of neuroscience drugs. We 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.
Our strategy is to in-license and develop early stage drug candidates
that target major medical needs and which can be rapidly commercialized. Our
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 our product candidates.
During the quarter ending December 31, 1999, we completed a Phase II
human clinical testing for Memantine, an orally available compound which appears
to restore the function of impaired neurons by modulation activity of the
N-methyl-d-aspartate ("NMDA") receptor, integral to the membranes of such cells.
Such restoration of function appears to inhibit injured or damaged neurons from
firing abnormally, a pathological process associated with many neurological
conditions, including dementia, Alzheimer's disease, neuropathic pain
(persistent pain resulting from abnormal signals to the brain) and AIDS
dementia. In January 2000, we announced that the preliminary results of our 421
patient Phase IIB clinical trial of Memantine as a treatment for painful
diabetic neuropathy showed that subjects receiving 40 mg dosages of Memantine
had a statistically significant reduction in nighttime pain intensity compared
to subjects receiving placebo at the end of eight weeks. Although positive
trends were seen in the groups treated with 20 mg of Memantine compared to
placebo, no statistical significance was observed. We are currently completing
analysis of the trial data. We expect to present further trial results at the
52nd Annual Meeting of the American Academy of Neurology in San Diego, April 29
- - May 6, 2000.
In October 1999, we announced that our alliance partner, Merz + Co.
GmbH & Co., had concluded two major Phase III trials in vascular dementia with
Memantine and that the initial results look promising. A total of 900 patients
were enrolled in multiple sites in the UK and France. The trial was designed to
investigate improvements in cognition, a major focus of drug therapy for
dementia. Merz plans to disclose data from the trials at the International
Stockholm/Springfield Symposium on Advances in Alzheimer's Therapy Conference to
be held in Stockholm in April 2000. Merz's Phase III program for Memantine as a
treatment for Alzheimer's disease in the United States is continuing.
Memantine has been marketed by Merz in Germany since 1989 with the
labeling "dementia syndrome." NTI and Merz are currently assisting each other to
advance our respective clinical development programs by sharing scientific
information and clinical trial data. We are also seeking a marketing agreement
for Memantine with a large pharmaceutical company.
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<PAGE>
Memantine is also currently being evaluated as a treatment for
AIDS-related dementia in a Phase II human clinical trial funded by the National
Institutes of Health ("NIH"). The trial is being conducted by AIDS Clinical
Trials Group ("ACTG"), and is designed to evaluate Memantine's ability to reduce
symptoms of dementia and neuropathic pain in patients with AIDS. The ACTG has
also implemented a protocol permitting open-label dosing for up to 60 weeks
following the double blinded phase of the trial. This open-label phase will
provide data on the long-term safety of Memantine. We are supplying Memantine
for the trial and will have the right to use the resulting data for the
commercial development of Memantine for that indication.
We are also developing XERECEPT(TM), a synthetic preparation of the
natural human peptide Corticotropin-Releasing Factor, as a treatment for brain
swelling due to brain tumors (peritumoral brain edema). XERECEPT received orphan
drug designation for this indication by the FDA.
We raised approximately $4.2 million in gross proceeds from a private
placement of our securities at $4.00 per unit completed in November 1999. Each
unit consisted of five shares of common stock and a five-year warrant to
purchase two shares of common stock exercisable at $1.75 per share.
Approximately $1.2 million of the proceeds were used to repay the outstanding
principal and interest on loan from Merz; the remainder is being used to fund
our operations including late-stage clinical development of Memantine.
Since 1987 when NTI was founded, we have applied a substantial portion
of our resources to our research and development programs. We are a development
stage company, have not received any revenue from the sale of products, and do
not anticipate receiving revenue from the sale of products in the near future.
We have incurred losses since our inception and expects to incur substantial,
increasing losses due to ongoing and planned research and development efforts.
RESULTS OF OPERATIONS
Our research and development expenses increased to approximately
$625,000 in the three months ended December 31, 1999 from approximately $619,000
in the same period of the prior year. General and administrative expenses
decreased to approximately $245,000 in the three months ended December 31, 1999
from $333,000 in the three months ended December 31, 1998. The decrease was
primarily due to lower facility, investor relations and employee related costs.
Interest income increased to $22,000 in the three months ended December 31, 1999
from $12,000 in the same period of the prior year primarily due to higher
average cash balances as a result of shares sold in the private placement
completed in November 1999.
We expect to incur substantial ongoing costs primarily for Phase II and
Phase III clinical trials for our development programs and related
administrative support. If we obtain financing to continue operations beyond the
current fiscal year, we expect that our expenditures will continue to increase
as our products move through Phase II and Phase III clinical trials.
LIQUIDITY AND CAPITAL RESOURCES
From inception through December 31, 1999, we have raised a total of
$35.1 million in net proceeds from the sale of common and preferred stock.
We believe our available cash and cash equivalents of $ 2.3 million as
of December 31, 1999 will be adequate to fund our operations through the fiscal
year ending June 30, 2000. We will need to raise substantial additional capital
to fund subsequent operations beyond June 30, 2000. We intend to seek funding
through public or private financings, collaborative or other arrangements with
corporate partners, or from other sources. There is a risk that we may not be
able to obtain the additional financing from any of these sources, or, if
financing is available, that it will be available on acceptable terms. In
addition, we may seek to raise additional funds whenever market conditions
permit. Raising additional funds through issuing equity securities may result in
significant dilution to our existing stockholders.
If we are not able to raise adequate funds, we may be required to
delay, scale back, or terminate our clinical trials, or to obtain funds through
entering into arrangements with collaborative partners or others. Such
arrangements may require us to give up additional rights to our technology,
product candidates or
8
<PAGE>
products.
Our future capital requirements will depend on a number of factors,
including:
o the amount of royalties received from Merz for future sales of
Memantine;
o the progress of our clinical development programs;
o the time and cost involved in obtaining regulatory approvals;
o the cost of filing, prosecuting, defending, and enforcing patent claims
and other intellectual property rights;
o competing technological and market developments;
o our ability to establish collaborative relationships;
o the development of commercialization activities and arrangements; and
o the purchase of additional capital equipment.
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. Our
computer systems have so far functioned properly with regard to Y2K.
9
