TAO Synergies Inc. quarterly report, Q3 FY2022

Business context and reporting period

The supplied filing is Synaptogenix, Inc.’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2022; it does not appear to be a filing by TAO Synergies Inc. Synaptogenix is a clinical-stage biopharmaceutical company focused principally on Bryostatin-1 for Alzheimer’s disease, with other potential applications under evaluation.

Key financial metrics

At September 30, 2022, cash and cash equivalents were $26.33 million, current assets $27.33 million, current liabilities $684,000, working capital $26.65 million, and stockholders’ equity $26.67 million. The balance sheet reports no debt. Operating cash use was $8.43 million for the nine months; investing cash use was $5,000 and financing cash inflow was $553,000, primarily from warrant exercises. Cash declined $7.88 million from year-end 2021. Gross margin is not applicable because the company reported no revenue.

Material changes versus comparable periods

• Third-quarter operating expenses rose 8.1% year over year: R&D increased 77.4%, while G&A decreased 19.6%. Net loss increased approximately 3.4% to $3.03 million.
• For the first nine months, operating expenses rose 22.3% and net loss increased 20.1%. Higher R&D spending on the Alzheimer’s Phase 2 trial was the main driver; lower G&A partially offset it.
• Cash used in operations increased from $6.67 million in the first nine months of 2021 to $8.43 million in 2022. The prior-year period included substantial private-placement proceeds; 2022 financing inflows were limited to warrant exercises.
• Cash-based liquidity remained substantial, but working capital fell from $33.51 million at December 31, 2021. Common shares outstanding increased from 6.73 million to 6.84 million during the nine months.

Outlook, risks and unusual items

• Management estimated cash of approximately $25.6–$25.7 million at the report date would fund projected operations for at least 12 months from filing. It expects to need additional capital for further development; financing may be unavailable, dilutive, restrictive, or require surrendering product rights.
• The ongoing Alzheimer’s Phase 2 trial had completed enrollment; cumulative costs were approximately $10.3 million by September 30. Its estimated budget was about $12.0 million, with the company reporting that the NIH grant’s maximum $2.7 million reimbursement had been received. A separate open-label, dose-ranging Phase 2 study was underway, with an estimated $2.0 million budget and approximately $865,000 of cumulative expense.
• Management expected the current Phase 2 trial to be materially concluded by year-end 2022 and anticipated top-line data in the fourth quarter. The filing reports that an earlier confirmatory Phase 2 study missed its primary endpoint; a post-hoc moderate-severity analysis showed no statistically significant difference between treatment and placebo groups.
• Other stated risks include clinical and regulatory uncertainty, possible trial delays, competition, capital needs, and bryostatin supply. Existing NCI supply arrangements do not cover all trials needed for potential FDA approval; alternative supply or additional agreements may be necessary.
• Disclosure controls and procedures were deemed ineffective as of September 30, 2022, owing to material weaknesses involving segregation of duties, financial close and reporting documentation, and IT general controls. Management nevertheless stated the reported financial statements fairly present the company’s financial position and results.
• Stock-based compensation was $2.24 million for the nine months. The company also disclosed potential uncapped tax-related indemnification obligations associated with its spin-off, but reported no indemnification liability as of the filing date.

Important facts for investors to verify

1. Whether the Phase 2 top-line results were released as expected, and what they show relative to the earlier trial’s failed primary endpoint.
2. Actual cash burn and runway against management’s estimate, and the amount and terms of any future financing.
3. Progress in remediating the disclosed control weaknesses and whether subsequent filings report effective controls.
4. Availability and sufficiency of bryostatin supply, and the costs and timelines for planned clinical programs.
5. Potential dilution from outstanding warrants, options and restricted stock units; the filing lists 5.18 million warrants, 130,000 options and 495,000 unvested restricted stock units at September 30, 2022.