Business context and reporting period
This is Synaptogenix, Inc.’s Form 10-K for the fiscal year ended December 31, 2022, not a filing for TAO Synergies Inc. The company is a pre-revenue biopharmaceutical developer focused on Bryostatin-1, principally for Alzheimer’s disease (AD). It reported results for FY 2022 and FY 2021.
Financial results and liquidity
| Metric | FY 2022 | FY 2021 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $6.32 million | $4.34 million |
| General and administrative expense | $9.81 million | $8.28 million |
| Total operating expenses | $16.13 million | $12.62 million |
| Net loss | $5.57 million | $12.61 million |
| Net loss attributable to common stockholders | $5.69 million | $12.61 million |
| Basic and diluted loss per share | $0.81 | $2.51 |
| Net cash used in operating activities | $11.21 million | $8.71 million |
FY 2022 other income included $8.41 million from a reduction in the fair value of warrant liabilities, $1.82 million from a reduction in the fair value of an embedded derivative liability, and $0.34 million of interest income. These valuation gains are non-cash and materially reduced the reported net loss; they should not be read as operating profitability. Margins are not meaningful because the company had no revenue.
At December 31, 2022, cash and cash equivalents were $37.48 million, working capital was $37.27 million, and total assets were $38.61 million. Total liabilities were $3.19 million, including $1.51 million of warrant liabilities and approximately $0.37 million of derivative liabilities. No conventional borrowings are reported. The $15 million face amount of Series B convertible preferred stock is presented separately from liabilities, with $115,890 of accrued dividends. Management estimated cash of approximately $36.0 million at the report date and said it expected funds to cover at least 12 months of projected operations; further capital will be needed for subsequent development and approval studies.
Material changes versus the prior year
- Operating expenses rose 27.9% to $16.13 million, with R&D up 45.9% and G&A up 18.5%.
- Net loss declined 55.8%, primarily because of non-cash fair-value gains on the new preferred-stock-related warrants and embedded derivative, plus higher interest income, partly offset by increased operating expenses.
- Operating cash use increased by approximately $2.50 million. Financing provided $14.48 million in 2022, principally from the November preferred-stock placement and warrant exercises; 2021 financing was $37.13 million.
- Common shares outstanding increased from 6.73 million at year-end 2021 to 7.27 million at year-end 2022. The November 2022 placement also created potential conversion and warrant dilution.
Outlook, risks and unusual items
- AD trial results: The extended confirmatory Phase 2 study of Bryostatin-1 (Study #204) failed its primary endpoint at week 28; average SIB increases were 1.4 points for Bryostatin-1 and 0.6 points for placebo. In a March 2023 analysis, the company reported that secondary endpoints were not statistically significant in the overall population and no prespecified secondary endpoints were met in the low-to-moderately severe subgroup. It reported significance on nearly all prespecified secondary endpoints in a more severe subgroup (MMSE-2 scores 10–14), along with positive exploratory and post hoc analyses. Management said it was evaluating the results and next steps; subgroup findings do not change the failed primary endpoint.
- Other programs: The FDA placed the Fragile X IND on clinical hold pending further pharmacokinetic and pharmacodynamic analyses. The company discontinued its small open-label AD dose-ranging study in December 2022, after incurring approximately $1.4 million of expense. A Cleveland Clinic collaboration is exploring Bryostatin-1 for multiple sclerosis, but future work is not yet specified.
- Funding and preferred-stock terms: The November 2022 placement generated approximately $13.93 million net proceeds. Series B preferred stock carries a 7% annual dividend, compounded monthly, and is subject to 15 monthly redemption installments beginning June 1, 2023. Certain triggering events can raise the dividend rate to 15% and permit cash redemption at a premium. The terms also include potential share issuance, price-based adjustments and covenants. A March 2023 amendment extended the first installment and shareholder-approval deadlines to June 1, 2023, and the maturity date to August 31, 2024.
- Financial reporting controls: Management concluded that disclosure controls and internal control over financial reporting were ineffective at year-end because of material weaknesses involving segregation of duties and user access, period-end reporting and documentation, and IT general controls. A significant deficiency also concerned fair-value calculations and oversight of specialists. Management reported no resulting financial-statement misstatements and described remediation efforts. The auditor’s financial-statement opinion was unqualified, but the auditor did not audit internal-control effectiveness.
- Key business risks: The company has no product revenue and expects continued losses; it will need additional financing or a strategic partner to fund later-stage development. Risks include clinical and regulatory uncertainty, dependence on CRE and third-party trial providers, drug-supply constraints, patent uncertainty, dilution and preferred-stock redemption obligations. The filing reports no pending legal proceedings against the company.
Important facts for investors to verify
- Review the full Study #204 data, statistical analysis plan, subgroup definitions and any FDA feedback; distinguish post hoc or subgroup signals from prespecified primary results.
- Confirm current cash, subsequent spending and the assumptions behind management’s 12-month runway estimate, including plans for further AD or other-indication studies.
- Review the Series B preferred-stock certificate and amendments, upcoming installment payments, shareholder-approval status, cash-redemption triggers, conversion adjustments and potential dilution.
- Assess the value and assumptions of the warrant and derivative liabilities, which use Level 3 valuation inputs and drove substantial non-cash income in 2022. The filing reports derivative liability of $370,300 on the balance sheet and $369,400 in the fair-value note; confirm the applicable figure.
- Track remediation and testing of the disclosed material weaknesses and significant deficiency, and check whether subsequent filings report effective controls or any restatement.