UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2016
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: 000-55334
COHBAR, INC.
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
26-1299952
(I.R.S. Employer
Identification No.)
1455 Adams Drive, Suite 2050
Menlo Park, CA 94025
(Address of principal executive offices, including zip code)
(650) 446-7888
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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 Exchange
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting
company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act:
Large accelerated filer ☐
Accelerated filer ☐
Non-accelerated filer ☐
(do not check if a smaller reporting company)
Smaller reporting company ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of common equity held by non-affiliates as of June 30, 2016 was $43,750,384, based upon the closing price of
the Registrant’s common stock as quoted in OTCQX Marketplace on such date. As of March 28, 2017 the registrant had outstanding
35,857,701 shares of common stock.
The registrant has incorporated by reference into Part III of this Form 10-K portions of its Proxy Statement for its 2017 Annual
Meeting of Shareholders.
Documents Incorporated by Reference
COHBAR, INC.
2016 FORM 10-K ANNUAL REPORT
Table of Contents
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART I
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
PART III
Item 15.
Item 16.
Exhibits, Financial Statement Schedules
Form 10-K Summary
Signatures
PART IV
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64
Forward-Looking Statements
PART I
This report, including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains
forward-looking statements regarding future events and our future results that are based on our current expectations, estimates, forecasts,
and projections about our business, our results of operations, the industry in which we operate and the beliefs and assumptions of our
management. Words such as “may”, “will”, “should”, “could”, “anticipate”, “believe”, “expect”, “intend”, “plan”, “potential”, “continue”
and similar expressions are intended to identify these forward looking statements. Examples of such forward-looking statements include:
● statements regarding anticipated outcomes of our research into mitochondrial-derived peptides (MDPs), and pre-clinical and
clinical trials for our mitochondria based therapeutics (MBTs);
● expectations regarding the future market for any drug we may develop;
● statements regarding the anticipated therapeutic properties of our MBT drug development candidates;
● expectations regarding our ability to effectively protect our intellectual property; and
● expectations regarding our ability to attract and retain qualified employees and key personnel.
These statements reflect our current beliefs and are based on information currently available to us. Forward-looking statements
involve significant risks and uncertainties, including without limitation, those listed in the “Risk Factors” section. A number of factors
could cause actual results to differ materially from the results discussed in the forward-looking statements including, but not limited to,
changes in general economic and market conditions and the risk factors disclosed under “Risk Factors”. Although the forward-looking
statements contained in this report are based upon what we believe to be reasonable assumptions, we cannot assure you that actual results
will be consistent with these forward-looking statements. Investors should not place undue reliance on forward-looking statements. These
forward-looking statements are made as of the date hereof and we assume no obligation to update or revise them to reflect new events or
circumstances, except as required by applicable law.
Item 1. Business
OVERVIEW
CohBar, Inc. (“CohBar,” “we,” “us,” “our,” “its” or the “Company”) is an innovative biotechnology company and a leader in the
research and development of mitochondria based therapeutics (MBTs), an emerging class of drugs with the potential to treat a wide range of
diseases associated with aging and metabolic dysfunction, including obesity, fatty liver disease (NAFLD) and non-alcoholic steatohepatitis
(NASH), type 2 diabetes mellitus (T2D), cancer, atherosclerosis, cardiovascular disease and neurodegenerative diseases such as
Alzheimer’s.
MBTs originate from almost two decades of research by our founders, resulting in their discovery of a novel group of peptides
called mitochondrial-derived peptides (MDPs) encoded within the genome of mitochondria, the powerhouses of the cell. These naturally
occurring MDPs and certain related analogs have demonstrated a range of biological activity and therapeutic potential in pre-clinical
models across multiple diseases associated with aging.
We believe CohBar is a first mover in exploring the mitochondrial genome for therapeutically relevant peptides, and have
developed a proprietary MBT technology platform which uses proprietary cell based assays and animal models of disease to rapidly identify
mitochondrial peptides with promising biological activity. Once identified, we deploy proprietary optimization techniques to improve the
drug-like properties of our MBT candidates, enabling us to match the most biologically promising peptides to disease indications that have
substantial unmet medical needs.
1
In September 2016, we advanced two novel, optimized analogs of our MOTS-c MDP, CB4209 and CB4211, into IND-enabling
studies as our lead MBT drug candidates with potential for treatment of fatty liver disease (NAFLD), Nonalcoholic steatohepatitis (NASH),
obesity, and type 2 diabetes (T2D). To date, our founders and scientific team have discovered a large number of MDPs that have
demonstrated a range of biological activities and therapeutic potential. Our ongoing research and development of our pipeline MDPs is
focused on identifying and advancing novel improved analogs of those MDPs that have the greatest therapeutic and commercial potential
for development into drugs.
Our scientific team includes the expertise of our founders, Dr. Pinchas Cohen, Dean of the Davis School of Gerontology at the
University of Southern California, and Dr. Nir Barzilai, Professor of Genetics and Director of the Institute for Aging Research at the Albert
Einstein College of Medicine, and is augmented by our co-founders, Dr. David Sinclair, Professor of Genetics at Harvard Medical School,
and Dr. John Amatruda, former Senior Vice President and Franchise Head for Diabetes and Obesity at Merck Research Laboratories. Our
research and development efforts are conducted under the leadership of our Chief Scientific Officer, Dr. Kenneth Cundy, former Chief
Scientific Officer at Xenoport, Inc. and Senior Director of Biopharmaceutics at Gilead Sciences, Inc. Dr. Cundy is the co-inventor of
several approved drugs including tenofovir, an antiretroviral drug that is marketed globally in various combinations with other drugs for the
treatment of HIV infection (Atripla®, Viread®, Complera®, Stribild®, Truvada®), gabapentin enacarbil (Horizant®) for the treatment of
RLS and post-herpetic neuralgia, and Nanocrystal® technology, employed in several other approved drugs.
We are the exclusive licensee from the Regents of the University of California and the Albert Einstein College of Medicine of
four issued U.S. patents, four U.S. patent applications and several related international patent applications in various international
jurisdictions. Our licensed patents and patent applications include claims that are directed to compositions comprising MDPs and their
analogs and/or methods of their use in the treatment of indicated diseases. We have also filed more than 65 provisional patent applications
with claims directed to both compositions comprising and methods of using novel proprietary MDPs and their analogs. See “Business –
Patents and Intellectual Property”.
We believe that the proprietary capabilities of our technology platform combined with our scientific expertise and intellectual
property portfolio provides a competitive advantage in our mission to treat age-related diseases and extend healthy life spans through the
advancement of MBTs as a new class of transformative drugs.
We were formed as a limited liability company in the state of Delaware in 2007, and we incorporated in Delaware in 2009. We
completed our initial public offering of common stock in January 2015 and our common stock is listed for trading on the TSXV (COB.U)
and the OTCQX (CWBR).
Our laboratory and corporate headquarters are located in Menlo Park, California.
2
BUSINESS STRATEGY
Our strategic objective is to secure, maintain and exploit a leading scientific, commercial and intellectual property position in the
arena of mitochondria based therapeutics, with best-in-class treatments for diseases associated with aging and metabolic dysfunction. The
key elements of our strategy include:
● advancing our lead program to IND submission and through clinical trials;
● utilizing our proprietary platform technology to continue identifying, assessing and optimizing new analogs of biologically
active MDPs and advancing those MBT candidates with the greatest therapeutic and commercial potential;
● developing strategic partnerships with leading pharmaceutical companies and other organizations to support our research
programs and future development and commercialization efforts;
● raising adequate capital to support our operations, research and clinical development programs;
● minimizing operating costs and related funding requirements for our research and development activities through careful
program management and cost-efficient relationships with academic partners, consultants and contract research organizations
(CROs);
● optimizing the development of our intellectual property portfolio to capture all novel therapeutically relevant peptides encoded
within the mitochondrial genome; and
● increasing awareness and recognition of our team, assets, capabilities and opportunities within the investment and scientific
communities.
OUR PIPELINE
Our pipeline includes a number of MDPs and MBT candidates in different stages of pre-clinical study. Our research efforts are
focused on identifying, assessing and optimizing new analogs of biologically active MDPs and advancing those MDPs considered to have
greatest therapeutic and commercial potential as MBT candidates.
Lead MBT Drug Candidates (CB4209/CB4211)
Our lead development candidates, CB4209/CB4211, are being evaluated as MBTs for the potential treatment of NASH, obesity
and T2D. In September 2016, we announced the advancement of these candidates into IND-enabling activities.
CB4209 and CB4211 are novel, optimized analogs of MOTS-c, a naturally occurring mitochondrial peptide discovered by our
founders and their academic collaborators in 2012. Their research in cells and animal models indicated that MOTS-c plays a significant role
in the regulation of metabolism. Certain of the original MOTS-c studies were published in an article entitled “The Mitochondrial-Derived
Peptide, MOTS-c, Promotes Metabolic Homeostasis and Reduces Obesity and Insulin Resistance,” which appeared in the March 3, 2015
edition of the journal Cell Metabolism.
In pre-clinical models, CB4209 and CB4211 have demonstrated significant therapeutic potential for the treatment of obesity,
including significantly greater weight loss together with more selective reduction of fat mass versus lean mass in head-to-head comparison
to a market-leading obesity drug. In these models, treatment with CB4209 and CB4211 also showed improvements in triglyceride levels, as
well as favorable effects on liver enzyme markers associated with fatty liver disease (NAFLD) and NASH. The therapeutic effects of
CB4209 and CB4211 have been further evaluated in the well-established preclinical STAM™ mouse model of NASH. In this model,
treatment with CB4209 or CB4211 resulted in a significant reduction of the non-alcoholic fatty liver disease activity score, or NAS, a
composite measure of steatosis (fat accumulation), inflammation and hepatocyte ballooning (cellular injury). Additional efficacy studies
are ongoing or planned. CB4209 and CB4211 represent first-in-class drugs for the treatment of NASH and obesity, targeting energy
regulation and lipid metabolism.
3
Investigational Programs
Our R&D pipeline also includes the MDPs described below. Our pre-clinical activities with respect to these peptides are focused
on identifying and optimizing those MDPs and their analogs that demonstrate the greatest commercial and therapeutic potential as MBTs.
Humanin Analogs: Humanin, the first MDP to be discovered, has demonstrated protective effects in various animal models of age-
related diseases, including Alzheimer’s disease, atherosclerosis, myocardial and cerebral ischemia and T2D. Humanin levels in humans
have been shown to decline with age, and elevated levels of humanin together with lower incidence of age-related diseases have been
observed in centenarians as well as their offspring. In vitro studies with humanin and humanin analogs have demonstrated protective effects
against neuronal toxicity suggesting that a humanin analog may have potential for development as an MBT treatment for neurodegenerative
diseases such as Alzheimer’s disease.
SHLP Analogs: Our founders and their academic collaborators discovered several other peptides encoded within the mitochondrial
genome with a similar origin to humanin; we refer to these as small humanin-like peptides, or SHLPs. In cancer treatment models
conducted by our founders and their collaborators, both in cell culture and in mice, SHLP-6 demonstrated suppression of cancer progression
via mechanisms involving both suppression of tumor angiogenesis (blood vessel development) and induction of apoptosis (cancer cell
death). There is preclinical evidence to suggest that SHLP-2 has protective effects against neuronal toxicity. Certain of the SHLP studies
were published in a research paper entitled “Naturally occurring mitochondrial-derived peptides are age-dependent regulators of apoptosis,
insulin sensitivity, and inflammatory markers,” which appeared in the April 2016 edition of the journal Aging.
Additional MDPs: We have discovered over 65 new, previously untested peptides encoded within the mitochondrial genome.
These MDPs and their analogs have demonstrated various degrees of biological activity in a wide range of cell based and/or animal models
relevant to diseases, such as NASH, obesity, T2D, cancer, cardiovascular and Alzheimer’s.
All of our pipeline MDPs and MBT candidates are in the pre-clinical stage of development, and there is no guarantee that the
activity demonstrated in pre-clinical models will be shown in human testing.
Disease Focus
Our research and development focuses on diseases associated with aging and metabolic dysfunction. Our research to date suggests
multiple possible therapeutic indications for each of our pipeline MDPs. While we believe our current and any future MBT drug candidates
we identify would be advanced against one of the following diseases as a primary indication, it is possible that we may determine to
advance a drug candidate for treatment of a different disease as a primary indication. We may determine to advance any future drug
candidate against an alternative primary disease indication if, for example, additional data suggests greater therapeutic potential for the
drug candidate against the alternative indication, or we determine that the development, approval or commercialization pathway may be
more favorable for a drug candidate targeted against the alternative indication.
NAFLD and NASH – Non-alcoholic fatty liver disease (NAFLD) is the build-up of extra fat in liver cells that is not due to alcohol
consumption and tends to develop in people who are overweight or obese or have diabetes, high cholesterol or high levels of triglycerides.
Non-alcoholic steatohepatitis (NASH) is a more severe form of NAFLD characterized by swelling of the liver that eventually may lead to
scarring (cirrhosis) and over time to liver cancer or liver failure. NAFLD affects as much as 34% of the U.S. population while as many as
12% of U.S. adults may have NASH. Currently, there are no FDA approved treatments for NAFLD/NASH.
4
Obesity –– Obesity is now recognized as the most prevalent metabolic disease world-wide, reaching epidemic proportions in both
developed and developing countries and affecting all age groups. More than one-third of the U.S. adult population, and over 40% of U.S.
age groups between 45 and 75, have obesity. The prevalence of class III, or morbid, obesity (body mass index ≥40) has increased
dramatically in several countries and currently affects 6% of adults in the U.S., with an estimated increase of 130% over the next two
decades. Obesity is a major risk factor for age-related diseases such as heart disease, stroke, T2D and certain types of cancer.
Type 2 diabetes mellitus – T2D is a chronic disease characterized by a relative deficiency in insulin production and secretion by
the pancreas and an inability of the body to respond to insulin normally, i.e. insulin resistance. Hyperglycemia, or raised blood sugar, is a
common effect of uncontrolled diabetes and over time leads to serious damage to many of the body’s systems, especially the nerves,
kidneys, eyes and blood vessels.
Cancer – Cancer is a generic term for a large group of diseases that can affect any part of the body. One defining feature of cancer
is the rapid creation of abnormal cells that grow beyond their usual boundaries, and which can then invade adjoining parts of the body and
spread to other organs. This process is referred to as metastasis. Metastases are a major cause of death from cancer. Cancer is a leading
cause of death worldwide. Cancer drugs such as chemotherapy, hormone therapy and other treatments are used to destroy cancer cells. The
goal of cancer drugs is to cure the disease or, when a cure is not possible, to prolong life or improve quality of life for patients with
incurable cancer.
Alzheimer’s disease – In the brain, neurons connect and communicate at synapses, where tiny bursts of chemicals called
neurotransmitters carry information from one cell to another. Alzheimer’s, a neurodegenerative disease, disrupts this process and eventually
destroys synapses and kills neurons, damaging the brain’s communication network. There is no cure, and medications on the market today
treat only the symptoms of Alzheimer’s disease and do not have the ability to stop its onset or its progression. There is an urgent and unmet
need for both a disease-modifying drug for Alzheimer’s disease as well as for better symptomatic treatments.
Atherosclerosis – Atherosclerosis is a cardiovascular disease commonly referred to as a “hardening” or furring of the arteries. It is
caused by the formation of multiple atheromatous plaques within the arteries. This process is the major underlying risk for developing
myocardial infarction (heart attack) as those plaques will either narrow the vessel or rupture, preventing blood flow in the coronary artery
to parts of the heart muscle. Heart disease is the leading cause of death for both men and women. Cholesterol lowering drugs are
considered the main preventive approach to treat atherosclerosis, however these drugs are estimated to prevent only one-third of incidences
of myocardial infarction, and there is significant unmet need for additional therapeutic options.
COMPETITION
The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a
strong emphasis on proprietary products. While we believe that our scientific knowledge, technology, and development experience provide
us with competitive advantages, we face potential competition from many different sources, including major pharmaceutical, specialty
pharmaceutical and biotechnology companies, academic institutions and governmental agencies and public and private research institutions.
Many of our competitors may have significantly greater financial resources and capabilities for research and development, manufacturing,
pre-clinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do.
There are numerous therapies currently marketed to treat obesity, T2D, cancer and Alzheimer’s disease. There are no currently
approved therapies for the treatment of NAFLD and NASH, but numerous therapies are in development. These therapies are varied in their
design, therapeutic application and mechanism of action and may provide significant competition for any of our product candidates for
which we obtain market approval. New products or therapies may also become available that provide efficacy, safety, convenience and
other benefits that are not provided by currently marketed products and therapies. As a result, they may provide significant competition for
any of our product candidates for which we obtain market approval.
5
If a CohBar MBT is developed and approved for treatment of patients with obesity it may compete with products currently
approved for obesity, such as Saxenda, Belviq, Contrave and Qsymia, and investigational therapies that are currently being studied for the
treatment of obesity, such as CB1-receptor-antagonists, 5-HT receptor agonists, SGLT-2 antagonist, GLP-1 agonists and Adenylate Cyclase
3 activators.
If a CohBar MBT is developed and approved for treatment of patients with NASH, it may compete with several investigational
therapies that are currently being studied for the treatment of NAFLD/NASH including, for example, FXR activators, PXR activators,
ACC1/2 inhibitors, PPAR-α, -γ and -δ activators, SREBP2/MIR-33a inhibitors, DGAT1 or 2 inhibitors, CCR2/5 antagonists, CXCR3
antagonists.
If a CohBar MBT is developed and approved for treatment of patients with T2D, it would compete with several classes of drugs
for T2D that are approved to improve glucose control, including sulfonylureas, glinides, PPAR gamma agonists, biguanides, alpha
glucosidase inhibitors, DPP IV inhibitors, GLP1 agonists, SGLT2 inhibitors, bromocriptine and insulin. Insulin sensitizing agents approved
to treat T2D are the PPAR gamma agonists pioglitazone and rosiglitazone. These agents are not generic, are oral once-daily pills and are
effective in lowering glucose and A1C. Metformin is also sometimes called an insulin sensitizer. It is available as a generic and comes in a
once-daily formulation. Drugs approved for obesity may also be used to treat T2D. In addition there are several investigational drugs being
studied to treat T2D and if these investigational therapies were approved they would also compete with an MBT developed and approved
for T2D.
If a CohBar MBT is developed and approved for the treatment for patients with cancer, it would compete with all approved
therapies for the cancer it is approved to treat. Since the specific cancer that these investigational therapies might be approved to treat is
unknown, they would theoretically compete with any pharmaceutical agent that is approved to treat cancer. In addition, there are several
investigational drugs being studied to treat cancer, and if these investigational therapies were approved, they would also compete with an
MBT developed and approved for the treatment of cancer.
If a CohBar MBT is developed and approved for the treatment for patients with Alzheimer’s disease or other neurodegenerative
diseases, it would compete with all approved therapies to treat Alzheimer’s disease including donepezil (Aricept), galantamine (Razadyne),
memantine (Namenda), rivastigmine (Exelon) and tacrine (Cognex). In addition, there are several investigational drugs being studied to
treat Alzheimer’s and other neurodegenerative diseases that, if approved, would also compete with an MBT developed and approved for the
treatment of Alzheimer’s and other neurodegenerative diseases.
FINANCING
Our business strategy and plans for research and development of our MDPs and MBT candidates includes periodic infusion of new
capital to our Company. We may seek to obtain funding for our business through partnership agreements with pharmaceutical and
biotechnology companies or through the issuance and sale of our equity securities in capital raising transactions.
6
EMPLOYEES
As of March 28, 2017 we had 11 employees, all of whom were full-time. In addition to our employees, each of our founders serves
as a consultant to the Company and consults directly with our employees and scientific staff to advance our research programs. Each of Drs.
Cohen, Barzilai, Amatruda and Sinclair provide consulting services in the areas of peptide research, genetics, aging and age related
diseases, drug discovery, development and commercialization and other areas relevant to our business pursuant to consulting agreements
that provide for annual service terms. The service terms under the agreements expired in 2015. We continue to compensate our founders
for their ongoing services under the terms of the original agreements. Additionally, from time to time we engage other subject-matter
experts on a consulting basis in specific areas of our research and development efforts. None of our employees are represented by a labor
union or covered by a collective bargaining agreement. We have not experienced any work stoppages and we consider our relations with
our employees to be good.
RESEARCH AND DEVELOPMENT
Research and development activities are central to our business model. Our research programs include activities related to
discovery of novel MDPs, investigational research to evaluate the potential therapeutic effects of certain discovered MDPs in preclinical
models and engineering novel, improved analogs of certain discovered MDPs with characteristics suitable for further development as
potential MBT drug candidates. Depending on factors of capability, cost, efficiency and intellectual property rights we conduct our research
programs independently at our laboratory facility, pursuant to contractual arrangements with CROs or under collaborative arrangements
with academic institutions. Research and development expenses for the years ended December 31, 2016 and 2015 were $3,606,515 and
$1,966,221, respectively.
INTELLECTUAL PROPERTY
Patents
Our commercial success depends in part on our ability to obtain and maintain proprietary protection for our novel biological
discoveries and therapeutic methods, to operate without infringing on the proprietary rights of others and to prevent others from infringing
our proprietary rights. We seek to protect our proprietary position by, among other methods, licensing and/or filing patent applications
related to our proprietary technology, inventions and improvements that are important to the development and implementation of our
business.
Our intellectual property and patent strategy is focused on our MDPs, their analogs and our MBT candidates. Our strategy is
generally to seek patent protection in the United States and, where applicable, in those international jurisdictions we identify as holding
significant potential market opportunity for any drug we may develop and in which patent protection is available. We also rely on trade
secrets, know-how, continuing technological innovation and potential in-licensing opportunities to develop and maintain our proprietary
position. With respect to new biologically active MDPs that we identify within the mitochondrial genome we typically file provisional
patent applications and seek composition-of-matter and method-of-treatment patents for our MDPs, their analogs, and prospective MBTs
based on pre-clinical evaluation of therapeutic potential. We intend to file non-provisional patent applications for those MDPs and analogs
within our pipeline based on further assessment of their therapeutic and commercial potential, as well as strategic and competitive
considerations. We believe that the opportunity to engineer analogs or create combination therapies will afford us the opportunity to
strengthen IP protection for our drug development candidates as they advance through our development pipeline and to broaden our IP
protection internationally.
We are the exclusive licensee of four issued patents that will expire starting in 2028. Additionally, we have filed more than 65
provisional patent applications with claims directed to both composition-of-matter and methods-of-use of novel proprietary MDPs and their
analogs.
7
A summary of our licensed, non-provisional patents and patent applications as it relates to specific MDPs and their analogs
appears below:
Therapeutic Activities / Method of Use Claims
Granted
/ Filed
MOTS-c Two Filed
Composition
Claims
ü
Type 1
Diabetes
ü
Type 2
Diabetes
ü
Obesity
ü
Fatty
Liver
ü
ü
ü
ü
ü
SHLP-6
Filed
SHLP-2 Granted
Humanin
Analogs Granted
Humanin
Analogs
Two
Granted
Humanin
and
Humanin
Analogs
Filed
Cancer
Alzheimer’s Atherosclerosis
ü
ü
ü
Individual patents terms extend for varying periods of time depending on the date of filing of the patent application or the date of
patent issuance and the legal term of patents in the countries in which they are obtained. Generally, patents issued from applications filed in
the United States are effective for twenty years from the earliest non-provisional filing date. In addition, in certain instances, a patent term
can be extended to recapture a portion of the term effectively lost as a result of the FDA regulatory review period, however, the restoration
period cannot be longer than five years and the total patent term, including the restoration period, must not exceed fourteen years following
FDA approval. The duration of foreign patents varies in accordance with provisions of applicable local law, but typically is also twenty
years from the earliest international filing date.
National and international patent laws concerning peptide therapeutics remain highly unsettled. Policies regarding the patent
eligibility or breadth of claims allowed in such patents are currently in flux in the United States and other countries. Changes in either the
patent laws or in interpretations of patent laws in the United States and other countries can diminish our ability to protect our inventions and
enforce our intellectual property rights. Accordingly, we cannot predict the breadth or enforceability of claims that may be granted in our
patents or in third-party patents. The biotechnology and pharmaceutical industries are characterized by extensive litigation regarding
patents and other intellectual property rights. Our ability to maintain and solidify our proprietary position for our drugs and technology will
depend on our success in obtaining effective claims and enforcing those claims once granted. We do not know whether any of the patent
applications that we may file or license from third parties will result in the issuance of any patents. The issued patents that we license, or
may license or own in the future, may be challenged, invalidated or circumvented, and the rights granted under any issued patents may not
provide us with sufficient protection or competitive advantages against competitors with similar technology. Furthermore, our competitors
may be able to independently develop and commercialize similar drugs or duplicate our technology, business model or strategy without
infringing our patents. Because of the extensive time required for clinical development and regulatory review of a drug we may develop, it
is possible that, before any of our drugs can be commercialized, any related patent may expire or remain in force for only a short period
following commercialization, thereby reducing any advantage of any such patent.
8
The patent positions for our research peptides are described below:
MOTS-c Patent Coverage
We are the exclusive licensee from the Regents of the University of California (the “Regents”) to intellectual property rights
related to MOTS-c, including two patent applications filed in the United States (U.S. Application No. 14/213,617 and U.S. Divisional
Application No. 15/146249 ) and corresponding foreign applications filed in multiple countries and regions. These applications include
composition of matter claims directed to MOTS-c and certain analogs of MOTS-c, as well as methods of use claims for MOTS-c or certain
analogs of MOTS-c as a treatment for type 1 diabetes, type 2 diabetes, fatty liver, obesity and cancer.
MOTS-c Analog Patent Coverage
CohBar has also filed a new provisional patent application that covers novel optimized analogs of MOTS-c with improved
properties, including claims directed to composition-of-matter and methods-of-use.
SHLP-2 and SHLP-6 Patent Coverage
We are the exclusive licensee from the Regents to intellectual property for SHLP-2 and SHLP-6 and their analogs. This
intellectual property includes the following issued and pending patents:
● U.S. Patent No. 8,637,470, issued on January 28, 2014, with composition of matter claims directed to SHLP-2 and analogs.
● A divisional patent application in the United States for SHLP-6 (U.S. Application No. 14/134,430), with claims directed at the
SHLP-6 composition of matter, and methods of use in treating cancer.
We are pursuing intellectual property protection related to certain analogs of these peptides.
Humanin and Humanin Analogs Patent Coverage
We are the exclusive licensee from the Regents and the Albert Einstein College of Medicine of Yeshiva University to the
following U.S. patent applications and issued U.S. patents and covering humanin and humanin analogs for treatment of disease.
● U.S. Patent No. 8,309,525, issued on November 13, 2012, with claims covering pharmaceutical compositions of humanin
analogs.
● U.S. Patent No. 7,998,928, issued on August 16, 2011, with claims directed to methods of using a humanin analog to treat type
1 diabetes.
● U.S. Patent No. 8,653,027 issued on February 18, 2014 as a continuation of U.S. Patent 7,998,928, with claims directed to
methods of using an additional humanin analog to treat type 1 diabetes.
● U.S. Patent Application No. 13/526,309 (pending), with claims directed to methods of using humanin or a humanin analog to
treat atherosclerosis.
Newly-Identified MDPs and Analog Coverage
CohBar has also filed more than 65 new provisional patent applications that cover newly-identified MDPs and their novel,
improved analogs, including claims directed to composition-of-matter and methods-of-use. Provisional patent applications are not publicly
available and information regarding the specific MDPs and analogs identified in the provisional applications, and related claims, are held
confidential. We intend to file non-provisional patent applications for those MDPs and analogs within our pipeline based on further
assessment of their therapeutic and commercial potential, as well as strategic and competitive considerations.
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Trade Secrets
In addition to patents, we rely upon unpatented trade secrets, know-how and continuing technological innovation to develop and
maintain our competitive position. We seek to protect our proprietary information, in part, using confidentiality agreements with our
commercial partners, collaborators, employees and consultants and invention assignment agreements with our employees. These
agreements are designed to protect our proprietary information and, in the case of the invention assignment agreements, to grant us
ownership of technologies that are developed through a relationship with a third party. These agreements may be breached, and we may not
have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by
competitors. To the extent that our commercial partners, collaborators, employees and consultants use intellectual property owned by others
in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.
Trademarks
Our application for registration of the trademark COHBAR TM in the United States was published on January 20, 2015. The
USPTO issued a Notice of Allowance of our trademark application on March 20, 2015. We filed an extension of time for filing a statement
of use on February 27, 2017.
In-licenses
MOTS-c Exclusive License
On August 6, 2013, we entered into an exclusive license agreement with the Regents to obtain worldwide, exclusive rights under
patent filings and other intellectual property rights in inventions developed by Dr. Cohen and academic collaborators at the University of
California, Los Angeles. The intellectual property includes the pending U.S. and international patent filings described above under “ MOTS-
c Patent Coverage”.
We agreed to pay the Regents specified development milestone payments aggregating up to $765,000 for the first product sold
under the license. Milestone payments for additional products developed and sold under the license are reduced by 50%. We are also
required to pay annual maintenance fees to the licensors. Aggregate maintenance fees for the first three years following execution of the
agreement are $7,500. Thereafter, we are required to pay maintenance fees of $5,000 annually until the first sale of a licensed product. In
addition, we are required to pay the Regents royalties equal to 2% of our worldwide net sales of drugs, therapies or other products
developed from claims covered by the licensed patent, subject to a minimum royalty payment of $75,000 annually, beginning after the first
commercial sale of a licensed product. We are required to pay the Regents royalties ranging from 8% of worldwide sublicense sales of
covered products (if the sublicense is entered after commencement of phase II clinical trials) to 12% of worldwide sublicense sales (if the
sublicense is entered prior to commencement of phase I clinical trials). The agreement also requires us to meet certain diligence and
development milestones, including filing of an Investigational New Drug (IND) Application for a product covered by the agreement on or
before the seventh anniversary of the agreement date.
Under the agreement, the license rights granted to us are subject to any rights the U.S. Government may have in such licensed
rights due to its sponsorship of research that led to the creation of the licensed rights. The agreement also provides that if the Regents
become aware of a third-party’s interest in exploiting the licensed technologies in a field that we are not actively pursuing, then we may be
obligated either to issue a sublicense for use in the unexploited field to the third-party on substantially similar terms or to actively pursue
the unexploited field subject to appropriate diligence milestones. The agreement terminates upon the expiration of the last valid claim of
the licensed patent rights. We may terminate the agreement at any time by giving the Regents advance written notice. The agreement may
also be terminated by the Regents in the event of our continuing material breach after notice of such breach and the opportunity to cure.
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Humanin and SHLPs Exclusive License
On November 30, 2011, we entered into an exclusive license agreement with the Regents and the Albert Einstein College of
Medicine at Yeshiva University to obtain worldwide, exclusive rights under patent filings and other intellectual property rights in inventions
developed by Drs. Cohen and Barzilai and their academic collaborators. The intellectual property subject to the agreement includes four
issued and two pending U.S. patents including composition claims directed to humanin analogs, SHLP-2 and SHLP-6 and methods of use
claims directed to humanin, humanin analogs and SHLP-6. See “Humanin and Humanin Analogs Patent Coverage” and “SHLP-2 and
SHLP-6 Patent Coverage”.
We agreed to pay the licensors specified development milestone payments aggregating up to $765,000 for the first product sold
under the license. Milestone payments for additional products developed and sold under the license are reduced by 50%. We are also
required to pay annual maintenance fees to the licensors. Aggregate maintenance fees for the first five years following execution of the
agreement are $80,000. Thereafter, we are required to pay maintenance fees of $50,000 annually until the first sale of a licensed product. In
addition, we are required to pay the licensors royalties equal to 2% of our worldwide net sales of drugs, therapies or other products
developed from claims covered by the licensed patents, subject to a minimum royalty payment of $75,000 annually, beginning after the first
commercial sale of a licensed product. We are required to pay royalties ranging from 8% of worldwide sublicense sales of covered products
(if the sublicense is entered after commencement of phase II clinical trials) to 12% of worldwide sublicense sales (if the sublicense is
entered prior to commencement of phase I clinical trials). The agreement also requires us to meet certain diligence and development
milestones, including filing of an IND for a product covered by the agreement on or before the seventh anniversary of the agreement date.
Under the agreement, the license rights granted to us are subject to any rights the U.S. Government may have in such licensed
rights due to its sponsorship of research that led to the creation of the licensed rights. The agreement terminates upon the expiration of the
last valid claim of the licensed patent rights. We may terminate the agreement at any time by giving the Regents advance written notice.
The agreement may also be terminated by the Regents in the event of our continuing material breach after notice of such breach and the
opportunity to cure.
ENVIRONMENTAL AND OTHER REGULATORY MATTERS
Government Regulation
The pre-clinical studies and clinical testing, manufacture, labeling, storage, record keeping, advertising, promotion, export,
marketing and sales, among other things, of our therapeutic candidates and future products, are subject to extensive regulation by
governmental authorities in the United States and other countries. In the United States, pharmaceutical products are regulated by the Food
and Drug Administration (the “FDA”) under the Federal Food, Drug, and Cosmetic Act (the “FDCA”) and other laws. Biologics are
subject to regulation by the FDA under the FDCA, the Public Health Service Act, and related regulations, and other federal, state and local
statutes and regulations. Biological products include, among other things, viruses, therapeutic serums, vaccines and most protein products.
Product development and approval within these regulatory frameworks takes a number of years, and involves the expenditure of substantial
resources.
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Regulatory approval will be required in all major markets in which we, or our licensees, seek to test our products in development.
At a minimum, such approval requires evaluation of data relating to quality, safety and efficacy of a product for its proposed use. The
specific types of data required and the regulations relating to these data differ depending on the territory, the drug involved, the proposed
indication and the stage of development.
In general, new chemical entities are tested in animal models to determine whether the product is reasonably safe for initial human
testing. Additional preclinical testing continues during the clinical development stage. Clinical trials for new products are typically
conducted in three sequential phases that may overlap. Phase 1 trials typically involve the initial introduction of the pharmaceutical into
healthy human volunteers and focus on testing for safety, dosage tolerance, metabolism, distribution, excretion and clinical pharmacology.
In the case of serious or life-threatening diseases, such as cancer, initial Phase 1 trials are often conducted in patients directly, with
preliminary exploration of potential efficacy. Phase 2 trials involve clinical trials to evaluate the effectiveness of the drug for a particular
indication or indications in patients with the disease or condition under study and to determine the common short-term side effects and risks
associated with the drug. Phase 2 trials are typically closely monitored and conducted in a relatively small number of patients, usually
involving no more than several hundred subjects. Phase 3 trials are generally expanded, well-controlled clinical trials. They are performed
after preliminary evidence suggesting effectiveness of the drug has been obtained, and are intended to gather the additional information
about effectiveness and safety that is needed to evaluate the overall benefit-risk relationship of the drug and to provide an adequate basis
for physician labeling.
In the United States, specific pre-clinical data, chemical data and a proposed clinical study protocol, as described above, must be
submitted to the FDA as part of an Investigational New Drug application, or IND, which, unless the FDA objects, will become effective 30
days following receipt by the FDA. Phase 1 trials may commence only after the IND application becomes effective. Following completion
of Phase 1 trials, further submissions to regulatory authorities are necessary in relation to Phase 2 and 3 trials to update the existing IND.
Authorities may require additional preclinical or clinical data before allowing the trials to commence and could demand discontinuation of
studies at any time if there are significant safety issues. In addition to regulatory review, a clinical trial involving human subjects has to be
approved by an independent body. The exact composition and responsibilities of this body differ from country to country. In the United
States, for example, each clinical trial is conducted under the auspices of an Institutional Review Board for any institution at which the
clinical trial is conducted. This board considers among other factors, the design of the clinical trial, ethical factors, the safety of the human
subjects and the possible liability risk for the institution.
Information generated in this process is susceptible to varying interpretations that could delay, limit, or prevent regulatory
approval at any stage of the approval process. Failure to demonstrate adequately the quality, safety and efficacy of a therapeutic drug under
development would delay or prevent regulatory approval of the product.
In order to gain marketing approval, we must submit a new drug application, or NDA, for review by the FDA. The NDA must
include a substantial amount of data and other information concerning safety and effectiveness the drug compound from laboratory, animal
and clinical testing, as well as data and information manufacturing, product stability, and proposed product labeling.
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There can be no assurance that if clinical trials are completed that we or any future collaborative partners will submit an NDA or
similar applications outside of the United States for required authorizations to manufacture or market potential products, or that any such
applications will be reviewed or approved in a timely manner. Approval of an NDA, if granted at all, can take several months to several
years, and the approval process can be affected by a number of factors. Additional studies or clinical trials may be requested during the
review and may delay marketing approval and involve unbudgeted costs. Regulatory authorities may conduct inspections of relevant
facilities and review manufacturing procedures, operating systems and personnel qualifications. In addition to obtaining approval for each
product, in many cases each drug manufacturing facility must be approved. Further, inspections may occur over the life of the product. An
inspection of the clinical investigation sites by a competent authority may be required as part of the regulatory approval procedure. As a
condition of marketing approval, the regulatory agency may require post-marketing surveillance to monitor adverse effects, or other
additional studies as deemed appropriate. After approval for the initial indication, further clinical studies are usually necessary to gain
approval for additional indications. The terms of any approval, including labeling content, may be more restrictive than expected and could
affect product marketability.
Holders of an approved NDA are required to report certain adverse reactions and production problems, if any, to the FDA, and to
comply with certain requirements concerning advertising and promotional labeling for their products. Moreover, quality control and
manufacturing procedures must continue to conform to cGMP after approval, and the FDA periodically inspects manufacturing facilities to
assess cGMP compliance. 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. We expect to continue to rely upon third-party
manufacturers to produce commercial supplies of any products which are approved for marketing. We cannot be sure that those
manufacturers will remain in compliance with applicable regulations, or that future FDA inspections will not identify compliance issues at
the facilities of our contract manufacturers that may disrupt production or distribution, or require substantial resources to correct.
Any of our future products approved by the FDA will likely be purchased principally by healthcare providers that typically bill
various third-party payers, such as governmental programs (e.g., Medicare and Medicaid), private insurance plans and managed care plans,
for the healthcare products and services provided to their patients. The ability of customers to obtain appropriate reimbursement for the
products and services they provide is crucial to the success of new drug and biologic products. The availability of reimbursement affects
which products customers purchase and the prices they are willing to pay. Reimbursement varies from country to country and can
significantly impact the acceptance of new products. Even if we were to develop a promising new product, we may find limited demand for
the product unless reimbursement approval is obtained from private and governmental third-party payers.
If the FDA approves any of our future products and reimbursement for those products is approved by any federal or state
healthcare programs, then we will be subject to federal and state laws, such as the Federal False Claims Act, state false claims acts, the
illegal remuneration provisions of the Social Security Act, and federal and state anti-kickback laws that govern financial and other
arrangements among drug manufacturers and developers and the physicians and other practitioners or facilities that purchase or prescribe
products. Among other things, these laws prohibit kickbacks, bribes and rebates, as well as other direct and indirect payments that are
intended to induce the use or prescription of medical products or services payable by any federal or state healthcare program, and prohibit
presenting a false or misleading claim for payment under a federal or state program. Possible sanctions for violation of any of these
restrictions or prohibitions include loss of eligibility to participate in federal and state reimbursement programs and civil and criminal
penalties. If we fail to comply, even inadvertently, with any of these requirements, we could be required to alter our operations, enter into
corporate integrity, deferred prosecution or similar agreements with state or federal government agencies, and could become subject to
significant civil and criminal penalties.
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AVAILABLE INFORMATION
Our common stock is listed on the TSX Venture Exchange and trades under the symbol “COB.U.” It also trades in the OTCQX
marketplace under the symbol “CWBR.” Our principal executive offices are located at 1455 Adams Drive, Suite 2050, Menlo Park,
California 94025, and our telephone number is (650) 446-7888. The internet address of our corporate website is http://www.cohbar.com.
We file annual reports, quarterly reports, current reports, proxy statements and other information with the Securities and Exchange
Commission (the “SEC”) under the Securities Exchange Act of 1934, as amended. You can inspect and obtain a copy of our reports, proxy
statements and other information filed with the SEC at the offices of the SEC’s Public Reference Room at 100 F Street N.E., Washington,
D.C. 20549, on official business days during the hours of 10 a.m. to 3 p.m. EST. Please call the SEC at 1-800-SEC-0330 for further
information on the Public Reference Room. The SEC maintains an internet website at http://www.sec.gov where you can access copies of
most of our SEC filings.
We make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to
those reports, available free of charge on our corporate website. In addition, our Code of Ethics and Business Conduct and the charters of
our Audit Committee, Compensation Committee and Governance and Nominating Committee are available on our corporate website. The
contents of our corporate website are not incorporated into, or otherwise to be regarded as part of, this Annual Report on Form 10-K.
Item 1A. Risk Factors
CohBar operates in an environment that involves a number of risks and uncertainties. The risks and uncertainties described in this
Annual Report on Form 10-K are not the only risks and uncertainties that we face. Additional risks and uncertainties that presently are not
considered material or are not known to us, and therefore are not mentioned herein, may impair our business operations. If any of the risks
described in this Annual Report on Form 10-K actually occur, our business, operating results and financial position could be adversely
affected.
We have had a history of losses and no revenue.
Since our conversion to a Delaware corporation in September 2009 through December 31, 2016, we have accumulated losses of
$14,409,536. As of December 31, 2016, we had working capital of $8,430,652 and stockholders’ equity of $8,697,974. We can offer no
assurance that we will ever operate profitably or that we will generate positive cash flow in the future. To date, we have not generated any
revenues from our operations and do not expect to generate any revenue from the sale of products in the near future. As a result, our
management expects the business to continue to experience negative cash flow for the foreseeable future and cannot predict when, if ever,
our business might become profitable. With the cash and investments on hand as of December 31, 2016 combined with the exercises of
warrants subsequent to December 31, 2016, the Company believes that it has sufficient capital to meet its operating expenses and
obligations for the next twelve months from the date of this filing. Until we can generate significant revenues, if ever, we expect to satisfy
our future cash needs through equity or debt financing. We will need to raise additional funds, and such funds may not be available on
commercially acceptable terms, if at all. If we are unable to raise funds on acceptable terms, we may not be able to execute our business
plan, take advantage of future opportunities, or respond to competitive pressures or unanticipated requirements. This may seriously harm
our business, financial condition and results of operations. In the event we are not able to continue operations our stockholders will likely
suffer a complete loss of their investments in our securities.
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We are an early research stage biotechnology company and may never be able to successfully develop marketable products or
generate any revenue. We have a very limited relevant operating history upon which an evaluation of our performance and prospects
can be made. There is no assurance that our future operations will result in profits. If we cannot generate sufficient revenues, we may
suspend or cease operations.
We are an early-stage company. Our operations to date have been limited to organizing and staffing our company, business
planning, raising capital, in-licensing intellectual property, identifying MDPs for further research and performing research on identified
MDPs. We have not generated any revenues to date. All of our MBTs are in the concept or research stage. Moreover, we cannot be certain
that our research and development efforts will be successful or, if successful, that our MBTs will ever be approved by the FDA. Typically,
it takes 10-12 years to develop one new medicine from the time it is discovered to when it is available for treating patients and longer
timeframes are not uncommon. Even if approved, our products may not generate commercial revenues. We have no relevant operating
history upon which an evaluation of our performance and prospects can be made. We are subject to all of the business risks associated with
a new enterprise, including, but not limited to, risks of unforeseen capital requirements, failure of potential drug candidates either in
research, pre-clinical testing or in clinical trials, failure to establish business relationships and competitive disadvantages against other
companies. If we fail to become profitable, we may suspend or cease operations.
We will need additional funding and may be unable to raise additional capital when needed, which would force us to delay,
reduce or eliminate our research and development activities.
Our operations to date have consumed substantial amounts of cash, and we expect our capital and operating expenditures to
increase in the next few years. We may not be able to generate significant revenues for several years, if at all. Until we can generate
significant revenues, if ever, we expect to satisfy our future cash needs through equity or debt financing. We cannot be certain that
additional funding will be available on acceptable terms, or at all. If adequate funds are not available, we may be required to delay, reduce
the scope of, or eliminate one or more of our research and development activities.
We may not be successful in our efforts to identify or discover potential drug development candidates.
A key element of our strategy is to identify and test MDPs that play a role in cellular processes underlying our targeted disease
indications. A significant portion of the research that we are conducting involves emerging scientific knowledge and drug discovery
methods. Our drug discovery efforts may not be successful in identifying MBTs that are useful in treating disease. Our research programs
may initially show promise in identifying potential drug development candidates, yet fail to yield candidates for pre-clinical and clinical
development for a number of reasons, including:
● the research methodology used may not be successful in identifying appropriate potential drug development candidates; or
● potential drug development candidates may, on further study, be shown not to be effective in humans, or to have unacceptable
toxicities, harmful side effects, or other characteristics that indicate that they are unlikely to be medicines that will receive
marketing approval and achieve market acceptance.
Research programs to identify new product candidates require substantial technical, financial and human resources. We may
choose to focus our efforts and resources on a potential product candidate that ultimately proves to be unsuccessful. If we are unable to
identify suitable MBTs for pre-clinical and clinical development, we will not be able to obtain product revenues in future periods, which
likely would result in significant harm to our financial position and adversely impact our stock price.
15
Our research and development plans will require substantial additional future funding which could impact our operational
and financial condition. Without the required additional funds, we will likely cease operations.
It will take several years before we are able to develop potentially marketable products, if at all. Our research and development
plans will require substantial additional capital to:
● conduct research, pre-clinical testing and human studies;
● manufacture any future drug development candidate or product at pilot and commercial scale; and
● establish and develop quality control, regulatory, and administrative capabilities to support these programs.
Our future operating and capital needs will depend on many factors, including:
● the pace of scientific progress in our research programs and the magnitude of these programs;
● the scope and results of pre-clinical testing and human studies;
● the time and costs involved in obtaining regulatory approvals;
● the time and costs involved in preparing, filing, prosecuting, securing, maintaining and enforcing intellectual property rights;
● competing technological and market developments;
● our ability to establish additional collaborations;
● changes in any future collaborations;
● the cost of manufacturing our drug products; and
● the effectiveness of efforts to commercialize and market our products.
We base our outlook regarding the need for funds on many uncertain variables. Such uncertainties include the success of our
research and development initiatives, regulatory approvals, the timing of events outside our direct control such as negotiations with
potential strategic partners and other factors. Any of these uncertain events can significantly change our cash requirements as they
determine such one-time events as the receipt or payment of major milestones and other payments.
Additional funds will be required to support our operations and if we are unable to obtain them on favorable terms, we may be
required to cease or reduce further research and development of our drug product programs, sell or abandon some or all of our intellectual
property, merge with another entity or cease operations.
We have a material weakness in our internal control over financial reporting. In addition, because of our status as an
emerging growth company, our independent registered public accountants are not required to provide an attestation report as to our
internal control over financial reporting for several years.
We are required to annually assess the effectiveness of our internal control over financial reporting pursuant to Section 404 of
Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley Act”) and to report any material weaknesses in such internal control. A
“material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a
reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a
timely basis. As of December 31, 2016, we conducted an evaluation of the effectiveness of the design and operation of our internal control
over financial reporting and based on this evaluation we concluded, as of December 31, 2016, that our internal controls over financial
reporting were not effective due to a material weakness. The material weakness relates to our having one employee assigned to positions
that involve processing financial information, resulting in a lack of segregation of duties so that all journal entries and account
reconciliations are reviewed by someone other than the preparer, heightening the risk of error or fraud. Because of our limited resources we
may be unable remediate the identified material weakness in a timely manner, or additional control deficiencies may be identified. If we are
unable to remediate the material weakness, or otherwise maintain effective internal control over financial reporting, we may not be able to
report our financial results accurately, prevent fraud or file our periodic reports in a timely manner.
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Our independent registered public accounting firm will not be required to attest formally to the effectiveness of our internal
control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act until we are no longer an “emerging growth company”
as defined in the Jumpstart our Business Startups Act of 2012 (“JOBS Act”). We will be an emerging growth company until December 31,
2020, although circumstances could cause us to lose that status earlier, including if the market value of our common stock held by non-
affiliates exceeds $700 million as of any June 30 before that time, in which case we would no longer be an emerging growth company as of
the following December 31. Accordingly, you will not likely be able to depend on any attestation concerning our internal control over
financial reporting from our independent registered public accountants for several years.
If we fail to demonstrate efficacy in our research and clinical trials, our future business prospects, financial condition and
operating results will be materially adversely affected.
The success of our research and development efforts will be greatly dependent upon our ability to demonstrate efficacy of MBTs
in non-clinical studies, as well as in clinical trials. Non-clinical studies involve testing potential MBTs in appropriate non-human disease
models to demonstrate efficacy and safety. Regulatory agencies evaluate these data carefully before they will approve clinical testing in
humans. If certain non-clinical data reveals potential safety issues or the results are inconsistent with an expectation of the potential drug’s
efficacy in humans, the program may be discontinued or the regulatory agencies may require additional testing before allowing human
clinical trials. This additional testing will increase program expenses and extend timelines. We may decide to suspend further testing on our
potential drugs if, in the judgment of our management and advisors, the non-clinical test results do not support further development.
Moreover, success in research, pre-clinical testing and early clinical trials does not ensure that later clinical trials will be successful,
and we cannot be sure that the results of later clinical trials will replicate the results of prior clinical trials and non-clinical testing. The
clinical trial process may fail to demonstrate that our potential drug candidates are safe for humans and effective for indicated uses. This
failure would cause us to abandon a drug candidate and may delay development of other potential drug candidates. Any delay in, or
termination of, our non-clinical testing or clinical trials will delay the filing of an investigational new drug application and new drug
application with the Food and Drug Administration or the equivalent applications with pharmaceutical regulatory authorities outside the
United States and, ultimately, our ability to commercialize our potential drugs and generate product revenues. In addition, we expect that
our early clinical trials will involve small patient populations. Because of the small sample size, the results of these early clinical trials may
not be indicative of future results.
Following successful non-clinical testing, potential drugs will need to be tested in a clinical development program to provide data
on safety and efficacy prior to becoming eligible for product approval and licensure by regulatory agencies.
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If any of our future potential drugs in clinical development become the subject of problems, our ability to sustain our development
programs will become critically compromised. For example, efficacy or safety concerns may arise, whether or not justified, that could lead
to the suspension or termination of our clinical programs. Examples of problems that could arise include, among others:
● efficacy or safety concerns with the potential drug candidates, even if not justified;
● failure of agencies to approve a drug candidate and/or requiring additional clinical or non-clinical studies before prior to
determining approvability;
● manufacturing difficulties or concerns;
● regulatory proceedings subjecting the potential drug candidates to potential recall;
● publicity affecting doctor prescription or patient use of the potential drugs;
● pressure from competitive products; or
● introduction of more effective treatments.
Each clinical phase is designed to test attributes of the drug and problems that might result in the termination of the entire clinical
plan. These problems can be revealed at any time throughout the overall clinical program. The failure to demonstrate efficacy in our
clinical trials would have a material adverse effect on our future business prospects, financial condition and operating results.
Even if we are able to develop our potential drugs, we may not be able to obtain regulatory approval, or if approved, we may not
be able to generate significant revenues or successfully commercialize our products, which will adversely affect our financial results
and financial condition and we will have to delay or terminate some or all of our research and development plans which may force us to
cease operations.
All of our potential drug candidates will require extensive additional research and development, including pre-clinical testing and
clinical trials, as well as regulatory approvals, before we can market them. We cannot predict if or when any potential drug candidate we
intend to develop will be approved for marketing. There are many reasons that we may fail in our efforts to develop our potential drug
candidates. These include:
● the possibility that pre-clinical testing or clinical trials may show that our potential drugs are ineffective and/or cause harmful
side effects or toxicities;
● our potential drugs may prove to be too expensive to manufacture or administer to patients;
● our potential drugs may fail to receive necessary regulatory approvals from the United States Food and Drug Administration or
foreign regulatory authorities in a timely manner, or at all;
● even if our potential drugs are approved, we may not be able to produce them in commercial quantities or at reasonable costs;
● even if our potential drugs are approved, they may not achieve commercial acceptance;
● regulatory or governmental authorities may apply restrictions to any of our potential drugs, which could adversely affect their
commercial success; and
● the proprietary rights of other parties may prevent us or our potential collaborative partners from marketing our potential drugs.
If we fail to develop our potential drug candidates, our financial results and financial condition will be adversely affected, we will
have to delay or terminate some or all of our research and development plans and may be forced to cease operations.
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If we do not maintain the support of qualified scientific collaborators, our revenue, growth and profitability will likely be
limited, which would have a material adverse effect on our business.
We will need to maintain our existing relationships with leading scientists and/or establish new relationships with scientific
collaborators. We believe that such relationships are pivotal to establishing products using our technologies as a standard of care for various
indications. There is no assurance that our founders, scientific advisors or research partners will continue to work with us or that we will be
able to attract additional research partners. If we are not able to establish scientific relationships to assist in our research and development,
we may not be able to successfully develop our potential drug candidates. If this happens, our business will be adversely affected.
We will seek to establish development and commercialization collaborations, and, if we are not able to establish them on
commercially reasonable terms, we may have to alter our development and commercialization plans.
Our potential drug development programs and the potential commercialization of our drug candidates will require substantial
additional cash to fund expenses. We may decide to collaborate with pharmaceutical or biotechnology companies in connection with the
development or commercialization of our potential drug candidates.
We face significant competition in seeking appropriate collaborators. Whether we reach a definitive collaboration agreement will
depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed
collaboration and the proposed collaborator’s evaluation of a number of factors. Those factors may include the design or results of clinical
trials, the likelihood of approval by the FDA or similar regulatory authorities outside the United States, the potential market for the subject
product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of
competing products, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such
ownership without regard to the merits of the challenge and industry and market conditions generally. The collaborator may also consider
alternative product candidates or technologies for similar indications that may be available to collaborate on, and whether such alternative
collaboration project could be more attractive than the one with us for our product candidate.
Collaborations are complex and time-consuming to negotiate and document. In addition, there have been a significant number of
recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future
collaborators.
We may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may
have to curtail the development of the product candidate for which we are seeking to collaborate, reduce or delay its development program
or one or more of our other development programs, delay its potential commercialization or reduce the scope of any sales or marketing
activities, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to
increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which
may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop our
product candidates or bring them to market and generate product revenue.
We expect to rely on third parties to conduct our clinical trials and some aspects of our research and pre-clinical testing. These
third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials, research or pre-
clinical testing.
We currently rely on third parties to conduct some aspects of our research and expect to continue to rely on third parties to conduct
additional aspects of our research and pre-clinical testing, as well as any future clinical trials. Any of these third parties may terminate their
engagements with us at any time. If we need to enter into alternative arrangements, it would delay our product research and development
activities.
19
Our reliance on these third parties for research and development activities will reduce our control over these activities but will not
relieve us of our responsibilities. For example, we will remain responsible for ensuring that each of our clinical trials is conducted in
accordance with the general investigational plan and protocols for the trial. Moreover, the FDA requires us to comply with standards,
commonly referred to as Good Clinical Practices, for conducting, recording and reporting the results of clinical trials to assure that data and
reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. We also are
required to register ongoing clinical trials and post the results of completed clinical trials on a government-sponsored database,
ClinicalTrials.gov, within certain timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.
Furthermore, these third parties may also have relationships with other entities, some of which may be our competitors. If these
third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our clinical trials in accordance with
regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, marketing approvals for our
drug candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our medicines.
We also expect to rely on other third parties to store and distribute drug supplies for our clinical trials. Any performance failure on
the part of our distributors could delay clinical development or marketing approval of our drug candidates or commercialization of our
products, producing additional losses and depriving us of potential product revenue.
We contract with third parties for the manufacture of our peptide materials for research and expect to continue to do so for any
future product candidate advanced to pre-clinical testing, clinical trials and commercialization. This reliance on third parties increases
the risk that we will not have sufficient quantities of our research peptide materials, product candidates or medicines, or that such
supply will not be available to us at an acceptable cost, which could delay, prevent or impair our research, development or
commercialization efforts.
We do not have manufacturing facilities adequate to produce our research peptide materials or supplies of any future product
candidate. We currently rely, and expect to continue to rely, on third-party manufacturers for the manufacture of our peptide materials, any
future product candidates for pre-clinical and clinical testing, and for commercial supply of any of these product candidates for which we or
future collaborators obtain marketing approval. We do not have long term supply agreements with any third-party manufacturers, and we
purchase our research peptides on a purchase order basis.
We may be unable to establish any agreements with third-party manufacturers or to do so on acceptable terms. Even if we are able
to establish agreements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including:
● reliance on the third party for regulatory compliance and quality assurance;
● the possible breach of the manufacturing agreement by the third party;
● the possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us; and
● reliance on the third party for regulatory compliance, quality assurance, and safety and pharmacovigilance reporting.
20
Third-party manufacturers may not be able to comply with current good manufacturing practices, or cGMP, regulations or similar
regulatory requirements outside the United States. Our failure, or the failure of our third-party manufacturers, to comply with applicable
regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties, delays, suspension or withdrawal of
approvals, license revocation, seizures or recalls of product candidates or medicines, operating restrictions and criminal prosecutions, any
of which could significantly and adversely affect supplies of our medicines and harm our business and results of operations.
Any drug candidate that we may develop may compete with other drug candidates and products for access to manufacturing
facilities. There are a limited number of manufacturers that operate under cGMP regulations and that might be capable of manufacturing for
us.
Our current and anticipated future dependence upon others for the manufacture of our investigational materials or future product
candidates or medicines may adversely affect our future profit margins and our ability to commercialize any medicines that receive
marketing approval on a timely and competitive basis.
We may not be able to develop drug candidates, market or generate sales of our products to the extent anticipated. Our
business may fail and investors could lose all of their investment in our Company.
Assuming that we are successful in developing our potential drug candidates and receiving regulatory clearances to market our
potential products, our ability to successfully penetrate the market and generate sales of those products may be limited by a number of
factors, including the following:
● if our competitors receive regulatory approvals for and begin marketing similar products in the United States, the European
Union, Japan and other territories before we do, greater awareness of their products as compared to ours will cause our
competitive position to suffer;
● information from our competitors or the academic community indicating that current products or new products are more
effective or offer compelling other benefits than our future products could impede our market penetration or decrease our future
market share; and
● the pricing and reimbursement environment for our future products, as well as pricing and reimbursement decisions by our
competitors and by payers, may have an effect on our revenues.
If any of these happened, our business could be adversely affected.
Any product candidate we are able to develop and commercialize would compete in the marketplace with existing therapies and
new therapies that may become available in the future. These competitive therapies may be more effective, less costly, more easily
administered, or offer other advantages over any product we seek to market.
There are numerous therapies currently marketed to treat diabetes, cancer, Alzheimer’s disease and other diseases for which our
potential product candidates may be indicated. For example, if we develop an approved treatment for type 2 diabetes, it would compete
with several classes of drugs for type 2 diabetes that are approved to improve glucose control. These include the insulin sensitizers
pioglitazone (Actos) and rosiglitazone (Avandia), which are administered as oral once daily pills, and metformin, which is sometimes
called an insulin sensitizer and is available as a generic once daily formulation. If we develop an approved treatment for Alzheimer’s
disease it would compete with approved therapies such as donepezil (Aricept), galantamine (Razadyne), memantine (Namenda),
rivastigmine (Exelon) and tacrine (Cognex). These therapies are varied in their design, therapeutic application and mechanism of action and
may provide significant competition for any of our product candidates for which we obtain market approval. New products may also
become available that provide efficacy, safety, convenience and other benefits that are not provided by currently marketed therapies. As a
result, they may provide significant competition for any of our product candidates for which we obtain market approval. 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. Our competitors also
may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in
our competitors establishing a strong market position before we are able to enter the market. In addition, our ability to compete may be
affected in many cases by insurers or other third-party payers seeking to encourage the use of existing products which are generic or are
otherwise less expensive to provide.
21
Our future success depends on key members of our scientific team and our ability to attract, retain and motivate qualified
personnel.
We are highly dependent on our founders, Dr. Pinchas Cohen and Dr. Nir Barzilai, and the other principal members of our
management and scientific teams. Drs. Cohen and Barzilai are members of our board of directors and provide certain scientific and research
advisory services to us pursuant to consulting arrangements with each of them. Other members of our key management and scientific teams
are employed “at will,” meaning we or they may terminate the employment relationship at any time. Our consultants and advisors,
including our founders, may be employed by employers other than us and may have commitments under consulting or advisory contracts
with other entities that may limit their availability to us. In addition, we rely on other consultants and advisors from time to time, including
drug discovery and development advisors, to assist us in formulating our research and development strategy. Agreements with these
advisors typically may be terminated by either party, for any reason, on relatively short notice. We do not maintain “key person” insurance
for any of the key members of our team. The loss of the services of any of these persons could impede the achievement of our research,
development and commercialization objectives.
Recruiting and retaining qualified scientific, clinical, and managerial personnel will also be critical to our success. We may not be
able to attract and retain these personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology
companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and
research institutions.
We expect to expand our research, development and regulatory capabilities, and as a result, we may encounter difficulties in
managing our growth, which could disrupt our operations.
We expect to experience significant growth in the scope of our operations, particularly in the areas of research, drug development
and regulatory affairs. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational
and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our limited financial
resources and our limited operating history, we may not be able to effectively manage the expected expansion of our operations. Any
inability to manage growth could delay the execution of our business plans or disrupt our operations.
The use of any of our products in clinical trials may expose us to liability claims, which may cost us significant amounts of
money to defend against or pay out, causing our business to suffer.
The nature of our business exposes us to potential liability risks inherent in the testing, manufacturing and marketing of our
products. We do not currently have any drug candidates in clinical trials, however, if any of our drug candidates enter into clinical trials or
become marketed products, they could potentially harm people or allegedly harm people, possibly subjecting us to costly and damaging
product liability claims. Some of the patients who participate in clinical trials are already ill when they enter a trial or may intentionally or
unintentionally fail to meet the exclusion criteria. The waivers we obtain may not be enforceable and may not protect us from liability or
the costs of product liability litigation. Although we intend to obtain product liability insurance which we believe is adequate, we are
subject to the risk that our insurance will not be sufficient to cover claims. The insurance costs along with the defense or payment of
liabilities above the amount of coverage could cost us significant amounts of money and management distraction from other elements of
the business, causing our business to suffer.
22
The patent positions of biopharmaceutical products are complex and uncertain and we may not be able to protect our patented
or other intellectual property. If we cannot protect this property, we may be prevented from using it or our competitors may use it and
our business could suffer significant harm. Also, the time and money we spend on acquiring and enforcing patents and other
intellectual property will reduce the time and money we have available for our research and development, possibly resulting in a slow
down or cessation of our research and development.
We are the exclusive licensee of patents and patent applications related to our MDPs and expect to own or license patents related
to our potential drug candidates. However, neither patents nor patent applications ensure the protection of our intellectual property for a
number of reasons, including the following:
● The United States Supreme Court rendered a decision in Molecular Pathology vs. Myriad Genetics, Inc., 133 S.Ct. 2107 (2013)
(“Myriad”), in which the court held that naturally occurring DNA segments are products of nature and not patentable as
compositions of matter. On March 4, 2014, the U.S. Patent and Trademark Office (“USPTO”) issued guidelines for
examination of such claims that, among other things, extended the Myriad decision to any natural product. Since MDPs are
natural products isolated from cells, the USPTO guidelines may affect allowability of some of our patent claims (pertaining to
natural MDP sequences) that are filed in the USPTO but are not yet issued. Further, while the USPTO guidelines are not
binding on the courts, it is likely that as the law of subject matter eligibility continues to develop Myriad will be extended to
natural products other than DNA. Thus, our issued U.S. patent claims directed to MDPs as compositions of matter may be
vulnerable to challenge by competitors who seek to have our claims rendered invalid. While Myriad and the USPTO guidelines
described above will affect our patents only in the United States, there is no certainty that similar laws or regulations will not be
adopted in other jurisdictions.
● Competitors may interfere with our patenting process in a variety of ways. Competitors may claim that they invented the
claimed invention prior to us. Competitors may also claim that we are infringing their patents and restrict our freedom to
operate. Competitors may also contest our patents and patent applications, if issued, by showing in various patent offices that,
among other reasons, the patented subject matter was not original, was not novel or was obvious. In litigation, a competitor
could claim that our patents and patent applications are not valid or enforceable for a number of reasons. If a court agrees, we
would lose some or all of our patent protection.
● As a company, we have no meaningful experience with competitors interfering with our patents or patent applications. In order
to enforce our intellectual property, we may need to file a lawsuit against a competitor. Enforcing our intellectual property in a
lawsuit can take significant time and money. We may not have the resources to enforce our intellectual property if a third party
infringes an issued patent claim. Infringement lawsuits may require significant time and money resources. If we do not have
such resources, the licensor is not obligated to help us enforce our patent rights. If the licensor does take action by filing a
lawsuit claiming infringement, we will not be able to participate in the suit and therefore will not have control over the
proceedings or the outcome of the suit.
● Because of the time, money and effort involved in obtaining and enforcing patents, our management may spend less time and
resources on developing potential drug candidates than they otherwise would, which could increase our operating expenses and
delay product programs.
23
● Our licensed patent applications directed to the composition and methods of using MOTS-c, and SHLP-6, which we consider as
a research peptide for the potential treatment of cancer, have not yet been issued. There can be no assurance that these or our
other licensed patent applications will result in the issuance of patents, and we cannot predict the breadth of claims that may be
allowed in our currently pending patent applications or in patent applications we may file or license from others in the future.
● Issuance of a patent may not provide much practical protection. If we receive a patent of narrow scope, then it may be easy for
competitors to design products that do not infringe our patent(s).
● We have limited ability to expand coverage of our licensed patent related to SHLP-2 and our licensed patent application related
to SHLP-6 outside of the United States. The lack of patent protection in international jurisdictions may inhibit our ability to
advance MBT drug candidates in these markets.
● If a court decides that the method of manufacture or use of any of our drug candidates infringes on a third-party patent, we may
have to pay substantial damages for infringement.
● A court may prohibit us from making, selling or licensing a potential drug candidate unless the patent holder grants a license. A
patent holder is not required to grant a license. If a license is available, we may have to pay substantial royalties or grant cross
licenses to our patents, and the license terms may be unacceptable.
● Redesigning our potential drug candidates so that they do not infringe on other patents may not be possible or could require
substantial funds and time.
It is also unclear whether our trade secrets are adequately protected. While we use reasonable efforts to protect our trade secrets,
our employees or consultants may unintentionally or willfully disclose our information to competitors. Enforcing a claim that someone
illegally obtained and is using our trade secrets is expensive and time consuming, and the outcome is unpredictable. In addition, courts
outside the United States are sometimes less willing to protect trade secrets. Our competitors may independently develop equivalent
knowledge, methods and know-how. We may also support and collaborate in research conducted by government organizations, hospitals,
universities or other educational institutions. These research partners may be unable or unwilling to grant us exclusive rights to technology
or products derived from these collaborations prior to entering into the relationship.
If we do not obtain required intellectual property rights, we could encounter delays in our drug development efforts while we
attempt to design around other patents or even be prohibited from developing, manufacturing or selling potential drug candidates requiring
these rights or licenses. There is also a risk that disputes may arise as to the rights to technology or potential drug candidates developed in
collaboration with other parties.
If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market,
or if they change their recommendations regarding our stock adversely, 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 may
publish about us, our business, our market, or our competitors. If any of the analysts who may cover us change their recommendation
regarding our stock adversely, or provide more favorable relative recommendations about our competitors, our stock price would likely
decline. If any analysts who may cover us were to cease coverage or our company or fail to regularly publish reports on us, we could lose
visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
24
Shares of our common stock eligible for future sale in the public marketplace may adversely affect the market price of our
common stock.
The price of our common stock could decline if there are substantial sales of our common stock in the public stock market. There
were 34,807,881 shares of our common stock outstanding as of December 31, 2016. Of these, 12,915,343 shares were subject to lock-up
agreements which expired on January 6, 2017. These shares are currently eligible for resale under a registration statement we filed with the
Securities and Exchange Commission and continue to maintain as effective. Sales of a substantial number of these shares, or the perception
in the market that the holders of a large number of shares are able to or intend to sell shares, could reduce the market price of our common
stock.
The market price of our common stock may be highly volatile.
The market for our common stock will likely be characterized by significant price volatility when compared to more established
issuers and we expect that it will continue to be so for the foreseeable future. The market price of our common stock is likely to be volatile
for a number of reasons. First, our common stock is likely to be sporadically and/or thinly traded. As a consequence of this lack of liquidity,
the trading of relatively small quantities of common stock by our stockholders may disproportionately influence the price of the common
stock in either direction. The price of the common stock could, for example, decline precipitously if even a relatively small number of
shares are sold on the market without commensurate demand, as compared to a market for shares of an established issuer which could better
absorb those sales without adverse impact on its share price. Secondly, we are a speculative investment due to our lack of profits to date and
substantial uncertainty regarding our ability to develop and commercialize a drug product from our new or existing technologies. As a
consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of
negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be
the case with the shares of an established issuer. We cannot make any predictions or projections as to what the prevailing market price for
our common stock will be at any time or as to what effect the sale of common stock or the availability of common stock for sale at any time
will have on the prevailing market price.
Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.
Under Section 382 and related provisions of the Internal Revenue Code of 1986, as amended (the “Code”), if a corporation
undergoes an “ownership change” (generally defined as a greater than 50% change (by value) in its equity ownership over a three year
period), the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-
change income may be limited. We may in the future as a result of subsequent shifts in our stock ownership experience an “ownership
change.” Thus, our ability to utilize carryforwards of our net operating losses and other tax attributes to reduce future tax liabilities may be
substantially restricted. At this time, we have not completed a full study to assess whether an ownership change under Section 382 of the
Code occurred due to the costs and complexities associated with such a study. Further, U.S. tax laws limit the time during which these
carryforwards may be applied against future taxes. Therefore, we may not be able to take full advantage of these carryforwards for federal
or state tax purposes.
25
Our management owns a significant percentage of our outstanding common stock. If the ownership of our common stock
continues to be highly concentrated in management, it may prevent other stockholders from influencing significant corporate decisions.
As of March 28, 2017, our executive officers and directors own, as a group, approximately 35.7% of the outstanding shares of our
common stock. Additionally, our executive officers and directors own, as a group, options and warrants exercisable for approximately
12.7% of our outstanding common stock, assuming exercise of such options and warrants. As a result, our management could exert
significant influence over matters requiring stockholder approval, including the election of our board of directors, the approval of mergers
and other extraordinary transactions, as well as the terms of any of these transactions. This concentration of ownership could have the
effect of delaying or preventing a change in our control or otherwise discouraging a potential acquirer from attempting to obtain control of
us, which could in turn have an adverse effect on the fair market value of our company and our common stock. These actions may be taken
even if they are opposed by our other stockholders.
Because the principal trading markets for our shares are the TSX Venture Exchange and the OTCQX marketplace, the
corporate governance rules of the major U.S. stock exchanges do not apply to us. As a result, our governance practices may differ from
those of a company listed on such U.S. exchanges.
Our governance practices need not comply with certain New York Stock Exchange and NASDAQ corporate governance
standards, including:
● the requirements that a majority of our board of directors consists of independent directors;
● the requirement that we have an audit committee that is composed entirely of independent directors with a written charter
addressing the committee’s purpose and responsibilities; and
● the requirement that we have a compensation committee that is composed entirely of independent directors with a written
charter addressing the committee’s purpose and responsibilities.
There can be no assurance that we will voluntarily comply with any of the foregoing requirements. Accordingly, you may not
have the same protections afforded to stockholders of companies that are subject to such corporate governance requirements.
The requirements of being a public company may strain our resources, divert management’s attention and require us to
disclose information that is helpful to competitors, make us more attractive to potential litigants and make it more difficult to attract and
retain qualified personnel.
As a public company, we are subject to the reporting requirements of the Securities Act, the Securities Exchange Act of 1934, as
amended (Exchange Act), the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act),
and applicable Canadian securities rules and regulations. Despite recent reforms made possible by the JOBS Act, compliance with these
rules and regulations creates significant legal and financial compliance costs and makes some activities difficult, time-consuming or costly.
The Exchange Act and applicable Canadian provincial securities legislation require, among other things, that we file annual, quarterly, and
current reports with respect to our business and operating results.
Additionally, the Sarbanes-Oxley Act and the related rules and regulations of the SEC, as well as the rules and regulations of
applicable Canadian securities regulators and the rules of the TSX-V, require us to implement particular corporate governance practices and
adhere to a variety of reporting requirements and complex accounting rules. Among other things, we are subject to rules regarding the
independence of the members of our board of directors and committees of the board and their experience in finance and accounting matters
and certain of our executive officers are required to provide certifications in connection with our quarterly and annual reports filed with the
SEC and applicable Canadian securities regulators. The perceived personal risk associated with these rules may deter qualified individuals
from accepting these positions. Accordingly, we may be unable to attract and retain qualified officers and directors. If we are unable to
attract and retain qualified officers and directors, our business and our ability to maintain the listing of our shares of common stock on the
TSX-V or another stock exchange could be adversely affected.
26
We are an emerging growth company, and we cannot be certain if the reduced reporting requirements applicable to emerging
growth companies will make our common stock less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act. For as long as we continue to be an emerging growth
company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are
not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the
Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and
exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any
golden parachute payments not previously approved. We could be an emerging growth company through December 31, 2020, although
circumstances could cause us to lose that status earlier, including if we have more than $1.0 billion in annual revenue, the market value of
our common stock held by non-affiliates exceeds $700 million as of any June 30 (the last day of our second fiscal quarter) before that time,
or we issue more than $1.0 billion of non-convertible debt over a three-year period, in which case we would no longer be an emerging
growth company as of the following December 31 (the last day of our fiscal year). We cannot predict if investors will find our common
stock less attractive because we may 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.
Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as
those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised
accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not
emerging growth companies. Recent accounting standards that have been issued or proposed by the FASB or other standards-setting bodies
that do not require adoption until a future date are not expected to have a material impact on our financial statements upon adoption.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
In February 2015, the Company entered into a lease agreement for an expanded laboratory facility. The laboratory space is leased
on a month-to month basis and is part of a shared facility in Menlo Park, California. The Company also terminated a previous month-to-
month lease for the laboratory space in Pasadena, California effective March 31, 2015.
Rent expense amounted to $171,294 and $107,385 for the years ended December 31, 2016 and 2015, respectively.
Item 3. Legal Proceedings
From time to time, we may be subject to legal proceedings and claims in the ordinary course of business. We are not currently a
party to any material legal proceedings, and to our knowledge none is threatened. There can be no assurance that future legal proceedings
arising in the ordinary course of business or otherwise will not have a material adverse effect on our financial position, results of operations
or cash flows.
Item 4. Mine Safety Disclosures
Not applicable.
27
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market for our Common Stock
Our common stock has traded on the TSX Venture Exchange (the “TSX-V”) under the symbol “COB.U” since January 8, 2015.
Prior to that date, there was no public trading market for our common stock. Our initial public offering was priced at USD $1.00 per share
on January 6, 2015. The following table sets forth for the periods indicated, the high and low sales prices from the TSX-V.
Market price per share of common stock
High sales price
Low sales price
Market price per share of common stock
High sales price
Low sales price
March 31
June 30
September 30 December 31
Quarters Ended 2016
$
$
1.68 $
1.05 $
3.30 $
1.60 $
2.50 $
2.40 $
2.42
2.00
March 31
June 30
September 30 December 31
Quarters Ended 2015
$
$
1.65 $
1.25 $
1.37 $
0.85 $
1.25 $
1.15 $
1.44
1.10
On March 28, 2017, the closing price for our common stock as reported on the TSX-V was USD $1.80 per share.
Our common stock has been quoted for trading on the OTC Markets Group OTCQX marketplace (the “OTCQX”) under the
symbol “CWBR” since May 20, 2015. The following table sets forth, for the periods indicated, the high and low bid prices for our common
stock as determined from quotations on the OTCQX. The quotations reflect inter-dealer prices, without retail markup, markdown, or
commissions, and may not represent actual transactions.
Bid price per share of common stock
High bid price
Low bid price
Bid price per share of common stock
High bid price
Low bid price
March 31
June 30
September 30 December 31
Quarters Ended 2016
$
$
1.60 $
1.03 $
2.88 $
1.53 $
2.35 $
2.06 $
2.30
1.90
March 31
June 30
September 30 December 31
Quarters Ended 2015
$
$
- $
- $
1.01 $
- $
1.14 $
0.89 $
1.25
1.09
On March 28, 2017, the closing bid price for our common stock as reported on the OTCQX was USD $1.59 per share.
28
Holders of Common Stock
As of March 28, 2017, there were 35,857,701 shares of our common stock outstanding held by 43 holders of record and
approximately 750 beneficial shareholders.
Dividends
We have not declared or paid a cash dividend on our capital stock and do not intend to pay cash dividends for the foreseeable
future. All dividends are subject to the approval of our board of directors. Any future determinations to pay dividends on our capital stock
would depend on our results of operations, our financial condition and liquidity requirements, restrictions that may be imposed by
applicable laws or our contracts, and any other factors that our board of directors in its sole discretion may consider relevant in declaring a
dividend.
Use of Proceeds
On December 19, 2014, the SEC declared effective our registration statement on Form S-1 (File No. 333-200033) in connection
with our initial public offering. The registration statement related to 11,250,000 units, each comprised of one share of our common stock,
par value $0.001 per share, and one half of one common stock purchase warrant. On January 6, 2015, we sold 11,250,000 units at the price
of $1.00 per unit, for an aggregate sale price of $11,250,000. The offering occurred solely in Canada using Haywood Securities, Inc. as
agent. We also issued unit purchase options to the agent for the offering exercisable for an aggregate of 786,696 units at a price of $1.00
per unit at any time prior to July 6, 2016. From the date of our initial public offering through the expiration of the warrants underlying our
units on January 6, 2017, we received an aggregate of $5,055,604 and issued 2,921,126 shares of our common stock. The funds received
and shares issued related to the exercise of common stock purchase warrants and unit purchase options issued in connection with our initial
public offering.
We incurred expenses of $996,516 in connection with our initial public offering. None of the agent commissions, compensation
options or other offering expenses were paid, directly or indirectly, to any of our directors or officers or their associates or to persons
owning 10% or more of our common stock or to any affiliate of ours. We received net proceeds of $15,309,108 from the offering and
subsequent exercises of warrants and unit purchase options. We have used approximately $9,238,373 of proceeds from the offering for
working capital and other general corporate purposes, including research and development expenditures, general and administrative
expenditures and capital expenditures. We anticipate using the balance of the proceeds for working capital and other general corporate
purposes, including research and development expenditures, general and administrative expenditures and capital expenditures during 2017.
Share Repurchases
During the year ended December 31, 2016, there were no purchases of shares of common stock made by, or on behalf of, the
Company as defined by Rule 10b-18 of the Securities Exchange Act of 1934.
Equity Compensation Plans
See Item 12 for Equity Compensation Plan information.
Item 6. Selected Financial Data
Not applicable.
29
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
We are an innovative biotechnology company and a leader in the research and development of mitochondria based therapeutics
(MBTs), an emerging class of drugs with the potential to treat a wide range of diseases associated with aging and metabolic dysfunction,
including obesity, fatty liver disease (NAFLD) and non-alcoholic steatohepatitis (NASH), type 2 diabetes mellitus (T2D), cancer,
atherosclerosis, cardiovascular disease, and neurodegenerative diseases such as Alzheimer’s.
MBTs originate from almost two decades of research by our founders, resulting in their discovery of a novel group of peptides
called mitochondrial-derived peptides (MDPs) encoded within the genome of mitochondria, the powerhouses of the cell. These naturally
occurring MDPs and related analogs have demonstrated a range of biological activity and therapeutic potential in pre-clinical models across
multiple diseases associated with aging.
We are focused on building our organization, enhancing our scientific and management teams and their capabilities, planning and
strategy, raising capital and the research and development of our MDPs. Our research efforts have focused on discovering and evaluating
our MDPs for potential development as MBT drug candidates. We seek to identify and advance research on MDPs with superior potential
for yielding a MBT drug candidate, and ultimately a drug, for which we have a strong intellectual property position.
In September 2016, we advanced two novel, optimized analogs of our MOTS-c MDP, CB4209 and CB4211, into IND-enabling
studies as our lead MBT drug candidates with potential for treatment of fatty liver disease (NAFLD), Nonalcoholic steatohepatitis (NASH),
obesity, and type 2 diabetes (T2D). To date, our founders and scientific team have discovered a large number of MDPs that have
demonstrated a range of biological activities and therapeutic potential. Our ongoing research and development of our pipeline MDPs is
focused on identifying and advancing novel improved analogs of those MDPs that have the greatest therapeutic and commercial potential
for development into drugs.
We have financed our operations primarily through proceeds from our IPO and concurrent private offering, private placements of
our preferred stock and, to a lesser extent, from grants from research foundations. Since our inception through December 31, 2016, our
operations have been funded with an aggregate of approximately $23.4 million, of which approximately $0.2 million was from a grant-
funding organization and approximately $23.2 million was from the issuance of equity instruments.
Since inception, we have incurred significant operating losses. Our net losses were $6,074,999 and $3,878,210 for the years ended
December 31, 2016 and 2015, respectively. As of December 31, 2016, we had an accumulated deficit of $14,409,536. We expect to
continue to incur significant expenses and operating losses over the next several years. Our net losses may fluctuate significantly from
quarter to quarter and from year to year. We anticipate incurring increasing expenses from IND-enabling activities for our lead programs,
pre-clinical development of our research peptides, continued development of our MBTs and from the expansion and protection of our
intellectual property portfolio.
30
Financial Operations Review
Revenue
To date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of
products in the near future. In the future, we will seek to generate revenue from product sales, either directly or under any future licensing,
development or similar relationship with a strategic partner.
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research activities, including our drug discovery
efforts, and the development of our product candidates, which include:
● employee-related expenses including salaries, benefits, and stock-based compensation expense;
● expenses incurred under agreements with third parties, including contract research organizations, or CROs, that conduct
research and development and pre-clinical activities on our behalf and the cost of consultants;
● the cost of laboratory equipment, supplies and manufacturing MBT test materials; and
● depreciation and other personnel-related costs associated with research and product development.
We expense all research and development expenses as incurred. We expect our research and development expenses to increase in
the year ending December 31, 2017, as we continue our efforts to advance our lead MBT candidate program and to discover, evaluate and
optimize other MDPs as potential MBT drug candidates.
Our Research Programs
Our research programs include IND-enabling activities for our lead MBT candidate program, as well as operation of our platform
technology related to discovery of new MDPs, investigational research to evaluate the therapeutic potential of certain discovered MDPs
and engineering analogs of certain discovered MDPs to improve their characteristics as potential MBT drug development candidates.
Depending on factors of capability, cost, efficiency and intellectual property rights we conduct our research programs independently at our
laboratory facility, pursuant to contractual arrangements with CROs or under collaborative arrangements with academic institutions.
The success of our research programs and the timing of those programs and the possible development of a research peptide into a
drug candidate is highly uncertain. As such, at this time, we cannot reasonably estimate or know the nature, timing or estimated costs of the
efforts that will be necessary to complete research and development of a commercial drug. We are also unable to predict when, if ever, we
will receive material net cash inflows from our operations. This is due to the numerous risks and uncertainties associated with developing
medicines, including the uncertainty of:
● establishing an appropriate safety profile with toxicology studies;
● successfully designing, enrolling and completing clinical trials;
● receiving marketing approvals from applicable regulatory authorities;
● establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;
● obtaining and enforcing patent and trade secret protection for our product candidates;
● launching commercial sales of the products, if and when approved, whether alone or in collaboration with others; and
● maintaining an acceptable safety profile of the products following approval.
31
A change in the outcome of any of these variables with respect to the development of any of our product candidates would
significantly change the costs and timing associated with the development of that product candidate.
Research and development activities are central to our business model. Our MBT drug target candidates are in early stages of
investigational research. Candidates in later stages of clinical development generally have higher development costs than those in earlier
stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect research and
development costs to increase significantly for the foreseeable future as our product candidate development programs progress. However,
we do not believe that it is possible at this time to accurately project total program-specific expenses through commercialization. There are
numerous factors associated with the successful commercialization of any of our product candidates, including future trial design and
various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development.
Additionally, future commercial and regulatory factors beyond our control will impact our clinical development programs and plans.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for
personnel in executive, finance and administrative functions. Other significant costs include legal fees relating to patent and corporate
matters and fees for accounting and consulting services. We anticipate that our general and administrative expenses will increase in the
future to support continued research and development activities and the potential commercialization of our product candidates. These
increases will likely include increased costs related to the hiring of additional personnel, and fees to outside consultants, lawyers and
accountants, among other expenses.
Results of Operations
Comparison of Fiscal Years Ended December 31, 2016 and 2015
Operating Expenses
Research and development expenses were $3,606,515 in the year ended December 31, 2016 compared to $1,966,221 in the prior
year, a $1,640,294 increase, or 83%. The increase in research and development expenses in the year ended December 31, 2016, was
primarily due to an $830,862 increase in wages, benefits and stock-based compensation primarily associated with the expansion of our
scientific staff and a $693,973 increase in laboratory supply and preclinical study costs related to our efforts to develop optimized MBT
candidates. We expect our research and development expenses to increase in the year ending December 31, 2017, as we continue to
advance our lead MBT candidate program and evaluate and optimize other MDPs as potential MBT drug candidates.
General and administrative expenses were $2,470,062 in the year ended December 31, 2016 compared to $1,908,080 in the prior
year, a $561,982 increase, or 29%. The increase in general and administrative expenses in the year ended December 31, 2016, was
primarily due to a $417,338 increase in wages, benefits and stock-based compensation associated with the expansion of our staff with the
addition of our CEO and Director of Investor Relations and a $145,445 increase in stock-based compensation with the grants made to those
new employees, offset by other miscellaneous decreases. We expect our general and administrative expenses to remain relatively constant
in the year ending December 31, 2017.
32
Liquidity and Capital Resources
As of December 31, 2016 and 2015, we had $3,257,458 and $4,803,687, respectively, in cash. We maintain our cash in a checking
and a savings account on deposit with a banking institution in the United States. In February 2015 our Board of Directors adopted an
investment policy pursuant to which we maintain a portfolio of short-term highly liquid securities. As of December 31, 2016, we had
$5,428,962 invested in U.S. Treasury Bills and Certificates of Deposit.
We believe the cash on hand and short-term investments as of December 31, 2016 combined with the exercises of warrants
subsequent to December 31, 2016, are sufficient to meet our operating expenses and obligations for the next twelve months from the date of
this filing. However, if unanticipated difficulties arise we may be required to raise additional capital to support our operations or curtail our
research and development activities until such time as additional capital becomes available.
Cash Flows from Operating Activities
Net cash used in operating activities for the years ended December 31, 2016 and 2015 was $5,202,973 and $3,631,163,
respectively. Cash used in operations for the year ended December 31, 2016 was primarily due to our reported net loss of $6,074,999 which
was offset by non-cash items of stock based-compensation, depreciation and amortization of the debt discount totaling $793,603. Cash used
in operations for the year ended December 31, 2015 was primarily due to our reported net loss of $3,878,210 which was offset by non-cash
items totaling $427,773.
Cash Flows from Investing Activities
Net cash used in investing activities for the years ended December 31, 2016 and 2015 was $46,395 and $5,732,863, respectively.
Investing activities for the fiscal year ended December 31, 2016 related to $88,915 in purchases of property and equipment during the year,
offset by the net amount of purchases and redemptions of short-term highly liquid securities of $58,838. Investing activities for the fiscal
year ended December 31, 2015 related to the $5,478,800 net amount of purchases and redemptions of short-term highly liquid securities
and $225,671 in purchases of property and equipment during the year as we built out and equipped our lab.
Cash Flows from Financing Activities
Net cash provided by financing activities for the years ended December 31, 2016 and 2015 was $3,703,139 and $12,973,221,
respectively. Cash provided by financing activities for the year ended December 31, 2016 was primarily due to the proceeds received from
the exercise of common stock purchase warrants and agent’s unit purchase options of $3,700,539. Cash provided by financing activities for
the year ended December 31, 2015 was primarily due to the completion of our IPO. We sold 11,250,000 units in the IPO at a price of $1.00
per unit, providing net proceeds of $10,253,484, net of agents’ commissions and expenses. Concurrently with the IPO, we also completed a
previously-subscribed private placement of an additional 2,700,000 units for gross proceeds of $2,700,000.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Inflation
Inflation did not have a material effect on our business, financial condition or results of operations in 2016 or 2015.
33
Contractual Obligations
Licensing Agreements
The Company is a party to an Exclusive License Agreement (the “2011 Exclusive Agreement”) with the Regents of the University
of California (the “Regents”) whereby the Regents granted to the Company an exclusive license for the use of certain patents. The
Company paid the Regents an initial license issue fee of $35,000, which was charged to General and Administrative expense, as incurred.
The Company agreed to pay the licensors specified development milestone payments aggregating up to $765,000 for the first product sold
under the license. Milestone payments for additional products developed and sold under the license are reduced by 50%. The Company is
also required to pay annual maintenance fees to the licensors. Aggregate maintenance fees for the first five years following execution of the
agreement are $80,000. Thereafter, the Company is required to pay maintenance fees of $50,000 annually until the first sale of a licensed
product. In addition, for the duration of the 2011 Exclusive Agreement, the Company is required to pay the licensors royalties equal to 2%
of its worldwide net sales of drugs, therapies or other products developed from claims covered by the licensed patents, subject to a
minimum royalty payment of $75,000 annually, beginning after the first commercial sale of a licensed product. The Company is required to
pay royalties ranging from 8% of worldwide sublicense sales of covered products (if the sublicense is entered after commencement of phase
II clinical trials) to 12% of worldwide sublicense sales (if the sublicense is entered prior to commencement of phase I clinical trials). The
agreement also requires the Company to meet certain diligence and development milestones, including filing of an Investigational New
Drug (“IND”) Application for a product covered by the agreement on or before the seventh anniversary of the agreement date. Through
December 31, 2016, no royalties have been incurred under the 2011 Exclusive Agreement.
The Company is a party to an Exclusive License Agreement (the “2013 Exclusive Agreement”) with the Regents whereby the
Regents granted to the Company an exclusive license for the use of certain other patents. The Company paid Regents an initial license
issue fee of $10,000 for these other patents, which was charged to General and Administrative expense, as incurred. The Company agreed
to pay the Regents specified development milestone payments aggregating up to $765,000 for the first product sold under the 2013
Exclusive Agreement. Milestone payments for additional products developed and sold under the 2013 Exclusive Agreement are reduced by
50%. In addition, for the duration of the 2013 Exclusive Agreement, the Company is required to pay the Regents royalties equal to 2% of
the Company’s worldwide net sales of drugs, therapies or other products developed from claims covered by the licensed patent, subject to a
minimum royalty payment of $75,000 annually, beginning after the first commercial sale of a licensed product. The Company is required to
pay the Regents royalties ranging from 8% of worldwide sublicense sales of covered products (if the sublicense is entered after
commencement of phase II clinical trials to 12% of worldwide sublicense sales (if the sublicense is entered prior to commencement of phase
I clinical trials). The agreement also requires the Company to meet certain diligence and development milestones, including filing of an
IND Application for a product covered by the agreement on or before the seventh anniversary of the agreement date. Through December
31, 2016, no royalties have been incurred under the 2013 Exclusive License Agreement.
Operating Lease
In February 2015, we entered into a lease agreement for a new and expanded laboratory facility. The laboratory space is leased on
a month-to month basis and is part of a shared facility in Menlo Park, California. We also terminated our previous month-to-month lease for
the laboratory space in Pasadena, California effective March 31, 2015.
Rent expense amounted to $171,294 and $107,385 for the years ended December 31, 2016 and 2015, respectively.
34
Research Loan
In 2013, we were awarded a research loan from the Alzheimer’s Drug Discovery Foundation (“ADDF”). The award was funded in
two installments of $102,630 totaling $205,260. We issued promissory notes evidencing each installment of the loan. The notes accrue
interest at a rate per annum equal to the prime rate published two days prior to the date of the notes and resets each anniversary of the note.
Through December 31, 2016, the interest rate on each note ranged from 3.25% to 3.75% per annum. The first installment on the notes
matured on January 21, 2017 and was paid in March 2017. The second installment will become due on September 12, 2017. In connection
with the award we also issued to the Alzheimer’s Drug Discovery Foundation a warrant to purchase 15,596 shares of the Company’s
common stock at an exercise price of $0.99 per share. The terms of the award generally require us to apply the loan proceeds towards
research on potential treatments for Alzheimer’s disease.
Recent Accounting Pronouncements
See Note 3 to the Financial Statements for the year ended December 31, 2016, for a summary of the relevant recent accounting
pronouncements.
Other recent accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not
require adoption until a future date are not expected to have a material impact on the Company’s financial statements upon adoption.
Critical Accounting Estimates
Our management’s discussion and analysis of our financial condition and results of operations are based on our financial
statements, which have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP). U.S.
GAAP requires us to make certain estimates and judgments that can affect the reported amounts of assets and liabilities as of the dates of
the financial statements, the disclosure of contingencies as of the dates of the financial statements, and the reported amounts of revenue
and expenses during the periods presented. We base our estimates on historical experience and on various other assumptions that we
believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of
assets and liabilities. If actual results or events differ materially from those contemplated by us in making these estimates, our reported
financial condition and results of operations for future periods could be materially affected. See “Risk Factors” for certain matters that may
affect our future financial condition or results of operations. An accounting policy is deemed to be critical if it requires an accounting
estimate to be made based on assumptions about matters that are uncertain at the time the estimate is made, if different estimates reasonably
could have been used, or if the changes in estimate that are reasonably likely to occur could materially impact the financial statements. Our
management has discussed the development, selection and disclosure of these estimates with the audit committee of our board of directors.
The following critical accounting estimates reflect significant judgments and estimates used in the preparation of our financial
statements:
● Fair value of financial instruments
● Share-based payments
● Valuation of deferred tax assets
35
Fair Value of Financial Instruments
We measure the fair value of financial assets and liabilities based on the exchange price that would be received for an asset or paid
to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between
market participants on the measurement date. We utilize three levels of inputs that may be used to measure fair value:
● Level 1 – quoted prices in active markets for identical assets or liabilities
● Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable
● Level 3 – inputs that are unobservable (for example, cash flow modeling inputs based on assumptions)
The carrying amounts of cash, accounts payable, accrued liabilities and debt approximate fair value due to the short-term nature of
these instruments.
Share-based Payments
We account for share-based payments using the fair value method. For employees and directors, the fair value of the award is
measured on the grant date. For non-employees, fair value is generally measured based on the fair value of the services provided or the fair
value of the common stock on the measurement date, whichever is more readily determinable and re-measured on interim financial
reporting dates until the service is complete. We have historically granted stock options at exercise prices no less than the fair market value
as determined by the board of directors, with input from management.
The weighted-average fair value of options and warrants has been estimated on the date of grant using the Black-Scholes pricing
model. In computing the impact, the fair value of each instrument is estimated on the date of grant utilizing certain assumptions including a
risk free interest rate, volatility and expected remaining lives of the awards. Since we have a limited history of being publicly traded, the
fair value of stock-based payment awards issued was estimated using a volatility derived from an index of comparable entities. The
assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates
involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions,
our stock-based compensation expense could be materially different in the future. In addition, we are required to estimate the expected
forfeiture rate and only recognize expense for those shares expected to vest. In estimating our forfeiture rate, we analyzed our historical
forfeiture rate, the remaining lives of unvested options, and the number of vested options as a percentage of total options outstanding. If our
actual forfeiture rate is materially different from our estimate, or if we reevaluate the forfeiture rate in the future, the stock-based
compensation expense could be significantly different from what we have recorded in the current period. See Note 3 “Summary of
Significant Account Policies – Share-Based Payment” to our Financial Statements for the years ended December 31, 2016 and 2015
regarding the specific assumptions used with respect to stock-based compensation for the periods presented.
36
Since January 1, 2015, we granted stock options with exercise prices as follows:
Grant Date
July 21, 2015
July 21, 2015
November 10, 2015
January 6, 2016
February 2, 2016
February 28, 2016
March 7, 2016
Number of
Shares
Underlying
Options
Exercise
Price Per
Share
205,000 $
113,124 $
70,000 $
10,000 $
190,000 $
40,000 $
1,456,000 $
1.00 $
1.00 $
1.17 $
1.10 $
1.22 $
1.50 $
1.55 $
Common
Stock Fair
Value Per
Share on
Date of
Grant
0.69
0.81
0.81
0.76
0.84
1.03
1.07
The exercise prices are equal to the higher of (i) the closing price of the our common stock as reported on the OTCQX
marketplace or (ii) the closing price of our common stock as reported by the TSX Venture Exchange as determined by the board of
directors, with input from management on the date of grant.
Valuation of deferred tax assets
We recognize deferred tax assets and liabilities for the expected future tax consequences of items that have been included or
excluded in the financial statements or tax returns. Deferred tax assets and liabilities are determined on the basis of the difference between
the tax basis of assets and liabilities and their respective financial reporting amounts (“temporary differences”) at enacted tax rates in effect
for the years in which the temporary differences are expected to reverse.
We have evaluated and concluded that there were no material uncertain tax positions requiring recognition in the Company’s
financial statements as of December 31, 2016 and 2015. The Company does not expect any significant changes in the unrecognized tax
benefits within twelve months of the reporting date.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
37
Item 8. Financial Statements
Report of Independent Registered Public Accounting Firm
Balance Sheets as of December 31, 2016 and 2015
Statements of Operations for the Years Ended December 31, 2016 and 2015
Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2016 and 2015
Statements of Cash Flows for the Years Ended December 31, 2016 and 2015
Notes to Financial Statements
38
Page
39
40
41
42
43
44
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Audit Committee of the Board of Directors and Stockholders of
CohBar, Inc.
We have audited the accompanying balance sheets of CohBar, Inc. (the “Company”) as of December 31, 2016 and 2015, and the
related statements of operations, changes in stockholders’ equity, and cash flows for the years then ended. These financial statements are
the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from
material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, 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. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of CohBar,
Inc. as of December 31, 2016 and 2015, and the results of its operations and its cash flows for the years then ended in accordance with
accounting principles generally accepted in the United States of America.
/s/ Marcum LLP
Marcum LLP
New York, NY
March 31, 2017
39
CohBar, Inc.
Balance Sheets
ASSETS
As of December 31,
2015
2016
Current assets:
Cash
Investments
Subscription receivable
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Other assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
Accrued liabilities
Accrued payroll and other compensation
Note payable, net of debt discount of $59 and $0 as of December 31, 2016 and 2015, respectively
Total current liabilities
Note payable, net of debt discount of $0 and $255 as of December 31, 2016 and 2015, respectively
Total liabilities
Commitments and contingencies
$
$
$
3,257,458 $
5,428,962
522,326
110,822
4,803,687
5,487,800
-
88,223
9,319,568 10,379,710
199,575
20,492
9,586,890 $ 10,599,777
230,512
36,810
103,294 $
132,780
447,641
205,201
888,916
-
888,916
209,730
155,713
217,250
-
582,693
205,005
787,698
Stockholders’ equity:
Preferred stock, $0.001 par value, Authorized 5,000,000 shares;
No shares issued and outstanding as of December 31, 2016 and December 31, 2015, respectively
-
-
Common stock, $0.001 par value, Authorized 75,000,000 shares;
Issued and outstanding 34,807,881 shares as of December 31, 2016 and 32,320,891 as of December
31, 2015
Additional paid-in capital
Accumulated deficit
Total stockholders’ equity
Total liabilities and stockholders’ equity
34,808
32,321
23,072,702 18,114,295
(8,334,537)
(14,409,536)
8,697,974
9,812,079
9,586,890 $ 10,599,777
$
The accompanying notes are an integral part of these financial statements
40
Revenues
Operating expenses:
Research and development
General and administrative
Total operating expenses
Operating loss
Other income (expense):
Interest income
Interest expense
Other expense
Amortization of debt discount
Total other income (expense)
Net loss
CohBar, Inc.
Statements of Operations
For The Years Ended
December 31,
2016
2015
$
- $
-
3,606,515
2,470,062
6,076,577
(6,076,577)
1,966,221
1,908,080
3,874,301
(3,874,301)
9,368
(7,594)
-
(196)
1,578
4,762
(7,022)
(1,453)
(196)
(3,909)
$ (6,074,999) $ (3,878,210)
(0.12)
$
33,130,424 32,044,274
(0.18) $
Basic and diluted net loss per share
Weighted average common shares outstanding - basic and diluted
The accompanying notes are an integral part of these financial statements
41
CohBar, Inc.
Statements of Changes in Stockholders' Equity
For the Years Ended December 31, 2016 and 2015
Convertible
Series B Preferred
Stockholders’ Equity
Total
Common Stock
Accumulated Stockholders'
Number Amount Number Amount APIC
5,400,000 $
-
5,400 12,915,343 $
-
12,915 $ 5,507,616 $ (4,456,327) $
-
396,850
Deficit
-
-
Equity
1,069,604
396,850
Balance, December 31, 2014
Stock based compensation
Conversion of Series B Preferred
Stock to common stock
(5,400,000)
(5,400) 5,400,000
5,400
-
-
-
Proceeds from the initial public
offering, net
Proceeds from the concurrent
offering
Exercise of compensation options
Deferred offering costs - initial
public offering
Net loss
Balance, December 31, 2015
Stock based compensation
Exercise of employee stock
options
Exercise of compensation options
Exercise of warrants
Net loss
Balance, December 31, 2016
-
-
-
-
-
- $
-
-
-
-
-
- $
- 11,250,000
11,250 10,242,234
-
10,253,484
- 2,700,000
55,548
-
2,700 2,697,300
55,492
56
-
-
2,700,000
55,548
-
-
-
-
- 32,320,891 $
-
-
10,000
-
731,100
-
- 1,745,890
-
-
- 34,807,881 $
-
-
(785,197)
-
-
(3,878,210)
32,321 $18,114,295 $ (8,334,537) $
-
735,429
-
10
731
2,590
730,354
1,746 3,490,034
-
-
-
-
(6,074,999)
34,808 $23,072,702 $ (14,409,536) $
-
(785,197)
(3,878,210)
9,812,079
735,429
2,600
731,085
3,491,780
(6,074,999)
8,697,974
The accompanying notes are an integral part of these financial statements
42
CohBar, Inc.
Statements of Cash Flows
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation
Stock-based compensation
Amortization of debt discount
Changes in operating assets and liabilities:
Restricted cash
Prepaid expenses and other current assets
Accounts payable
Accrued liabilities
Accrued payroll and other compensation
Net cash used in operating activities
Cash flows from investing activities:
Purchases of property and equipment
Payment for security deposit
Purchases of investments
Proceeds from redemptions of investments
Net cash used in investing activities
Cash flows from financing activities:
Deferred offering costs
Proceeds from exercise of warrants
Proceeds from stock option exercises
Proceeds from exercise of compensation options
Proceeds from initial public offering, net
Proceeds from the conversion of private placement puts
Net cash provided by financing activities
Net increase in cash
Cash at beginning of year
Cash at end of year
Non-cash investing and financing activities:
Reclassification of deferred offering costs to equity
Conversion of Series B Preferred Stock to Common Stock
Subscription receivable from exercise of warrants
Supplemental disclosure of cash flow information:
Interest paid
For The Years Ended
December 31,
2016
2015
$ (6,074,999) $ (3,878,210)
57,978
735,429
196
30,727
396,850
196
-
(22,599)
(106,436)
(22,933)
230,391
(5,202,973)
4,055
(68,706)
(80,343)
(149,688)
113,956
(3,631,163)
(88,915)
(16,318)
(225,671)
(19,392)
(14,093,162) (12,731,800)
7,244,000
14,152,000
(5,732,863)
(46,395)
-
2,969,454
(35,811)
-
2,600
731,085
-
55,548
- 10,253,484
2,700,000
-
3,703,139 12,973,221
(1,546,229)
4,803,687
3,257,458 $
3,609,195
1,194,492
4,803,687
- $
- $
522,326 $
785,197
5,400
-
- $
-
$
$
$
$
$
The accompanying notes are an integral part of these financial statements
43
CohBar, Inc.
Notes to Financial Statements
Note 1 - Business Organization and Nature of Operations
CohBar, Inc. (“CohBar” or the “Company”) is an innovative biotechnology company and a leader in the research and development
of mitochondria based therapeutics (MBTs), an emerging class of drugs with the potential to treat a wide range of diseases associated with
aging and metabolic dysfunction, including obesity, fatty liver disease (NAFLD) and non-alcoholic steatohepatitis (NASH), type 2 diabetes
mellitus (T2D), cancer, atherosclerosis, cardiovascular disease, and neurodegenerative diseases such as Alzheimer’s.
The Company’s primary activities include research and development of its MBT pipeline, securing intellectual property
protection, managing collaborations with contract research organizations (“CROs”) and academic institutions, expanding its scientific
leadership and raising capital. To date, the Company has not generated any revenues from operations and does not expect to generate any
revenues in the near future and has funded its business with the proceeds of an initial public offering (“IPO”), private placements of equity
and debt securities and the exercise of outstanding warrants.
Note 2 - Management’s Liquidity Plans
As of December 31, 2016, the Company had working capital and stockholders’ equity of $8,430,652 and $8,697,974, respectively.
During the year ended December 31, 2016, the Company incurred a net loss of $6,074,999. The Company has not generated any revenues,
has incurred net losses since inception and does not expect to generate revenues in the near term.
Based on current budget assumptions and with the cash and investments on hand as of December 31, 2016 combined with the
exercises of warrants subsequent to December 31, 2016, the Company believes that it has sufficient capital to meet its operating expenses
and obligations for the next twelve months from the date of this filing. However, if other unanticipated difficulties arise the Company may
be required to raise additional capital to support its operations, curtail its research and development activities until such time as additional
capital becomes available and delay its target for its upcoming FDA filings and clinical activities. These activities will allow the Company
to slow its rate of spending and extend its use of cash until additional capital is raised. There can be no assurance that such a plan will be
successful. There is no assurance that additional financing will be available when needed or that the Company will be able to obtain such
financing on reasonable terms.
Note 3 - Summary of Significant Accounting Policies
Basis of Presentation
All amounts are presented in U.S. Dollars.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of
America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent liabilities at dates of the financial statements and the reported amounts of revenue and expenses during the
periods. Actual results could differ from these estimates. The Company’s significant estimates and assumptions include the fair value of
financial instruments, stock-based compensation and the valuation allowance relating to the Company’s deferred tax assets.
44
CohBar, Inc.
Notes to Financial Statements
Note 3 - Summary of Significant Accounting Policies (continued)
Concentrations of Credit Risk
The Company maintains deposits in a financial institution which is insured by the Federal Deposit Insurance Corporation
(“FDIC”). At various times, the Company has deposits in this financial institution in excess of the amount insured by the FDIC. The
Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk.
Investments
Investments consist of U.S. Treasury Bills of $3,686,196, which are classified as held-to-maturity, and Certificates of Deposit of
$1,742,766. The Company determines the appropriate balance sheet classification of its investments at the time of purchase and evaluates
the classification at each balance sheet date. All of the Company’s U.S. Treasury Bills and Certificates of Deposit mature within the next
twelve months. Unrealized gains and losses are de minimus. As of December 31, 2016, the carrying value of the Company’s U.S. Treasury
Bills approximates their fair value due to their short-term maturities.
Deferred Offering Costs
The Company classifies amounts related to a potential future offering not closed as of the balance sheet date as Deferred Offering
Costs. During the year ended December 31, 2015, the Company incurred $35,811 of offering related costs. The related offering closed in
January 2015 these costs were recorded as a reduction in additional paid-in capital in the accompanying balance sheets.
Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash
equivalents. As of December 31, 2016 and 2015, the Company did not have any cash equivalents.
Property and Equipment
Property and equipment are stated at cost. Depreciation of computer and lab equipment is computed by use of the straight-line
method based on the estimated useful lives of the assets, which range from three to five years. Expenditures for maintenance and repairs
that do not improve or extend the expected lives of the assets are expensed to operations, while expenditures for major upgrades to existing
items are capitalized. Upon retirement or other disposition of these assets, the costs and accumulated depreciation are removed from the
accounts and resulting gains or losses are reflected in the results of operations.
Fair Value of Financial Instruments
The Company measures the fair value of financial assets and liabilities based on the exchange price that would be received for an
asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement date. The Company utilizes three levels of inputs that may be used to measure
fair value:
Level 1 - quoted prices in active markets for identical assets or liabilities
Level 2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level 3 - inputs that are unobservable (for example, cash flow modeling inputs based on assumptions)
45
CohBar, Inc.
Notes to Financial Statements
Note 3 - Summary of Significant Accounting Policies (continued)
The carrying amounts of cash and accounts payable approximate fair value due to the short-term nature of these instruments. The
amount of debt included in the accompanying balance sheets approximates its fair value because the interest rate of the notes approximates
the current market interest rate.
Common Stock Purchase Warrants
The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) provides the
Company with a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement) providing that
such contracts are indexed to the Company’s own stock. The Company classifies as assets or liabilities any contracts that (i) require net-
cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the Company’s control),
or (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). The
Company assesses classification of its common stock purchase warrants and other free standing derivatives at each reporting date to
determine whether a change in classification between assets and liabilities is required. The Company’s free standing derivatives consist of
warrants to purchase common stock that were issued in connection with its notes payable and IPO. The Company evaluated these warrants
to assess their proper classification using the applicable criteria enumerated under U.S. GAAP and determined that the common stock
purchase warrants meet the criteria for equity classification in the accompanying balance sheets as of December 31, 2016 and 2015.
Income Taxes
The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of items that have been
included or excluded in the financial statements or tax returns. Deferred tax assets and liabilities are determined on the basis of the
difference between the tax basis of assets and liabilities and their respective financial reporting amounts (“temporary differences”) at
enacted tax rates in effect for the years in which the temporary differences are expected to reverse.
Management has evaluated and concluded that there were no material uncertain tax positions requiring recognition in the
Company’s financial statements as of December 31, 2016 and 2015. The Company does not expect any significant changes in the
unrecognized tax benefits within twelve months of the reporting date.
The Company classifies interest expense and any related penalties related to income tax uncertainties as a component of income
tax expense. No interest or penalties have been recognized during the years ended December 31, 2016 and 2015.
Research and Development Expenses
The Company expenses all research and development expenses as incurred. These costs include payroll, employee benefits,
supplies, contracted for lab services, depreciation and other personnel-related costs associated with product development.
46
CohBar, Inc.
Notes to Financial Statements
Note 3 - Summary of Significant Accounting Policies (continued)
Share-Based Payment
The Company accounts for share-based payments using the fair value method. For employees and directors, the fair value of the
award is measured, as discussed below, on the grant date. For non-employees, fair value is generally valued based on the fair value of the
services provided or the fair value of the equity instruments on the measurement date, whichever is more readily determinable and re-
measured on each financial reporting date until the service is complete. The Company has granted stock options at exercise prices equal to
the higher of (i) the closing price of the Company’s common stock as reported on the OTCQX marketplace or (ii) the closing price of the
Company’s common stock as reported by the TSX Venture Exchange as determined by the board of directors, with input from management
on the date of grant. Upon exercise of an option or warrant, the Company issues new shares of common stock out of its authorized shares.
The weighted-average fair value of options and warrants has been estimated on the date of grant using the Black-Scholes pricing
model. The fair value of each instrument is estimated on the date of grant utilizing certain assumptions for a risk free interest rate, volatility
and expected remaining lives of the awards. Since the Company has a limited history of being publicly traded, the fair value of stock-based
payment awards issued was estimated using a volatility derived from an index of comparable entities. The assumptions used in calculating
the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and
the application of management judgment. As a result, if factors change and the Company uses different assumptions, the Company’s stock-
based compensation expense could be materially different in the future. In addition, the Company is required to estimate the expected
forfeiture rate and only recognize expense for those shares expected to vest. In estimating the Company’s forfeiture rate, the Company
analyzed its historical forfeiture rate, the remaining lives of unvested options, and the number of vested options as a percentage of total
options outstanding. If the Company’s actual forfeiture rate is materially different from its estimate, or if the Company reevaluates the
forfeiture rate in the future, the stock-based compensation expense could be significantly different from what the Company has recorded in
the current period.
The weighted-average Black-Scholes assumptions are as follows:
Expected life
Risk free interest rate
Expected volatility
Expected dividend yield
Forfeiture rate
For the Years Ended
December 31,
2016
2015
6 years
2 years
1.31%
79%
0%
0%
0.71%
80%
0%
0%
As of December 31, 2016, total unrecognized stock option compensation expense is $1,921,906, which will be recognized as those
options vest over a period of approximately four years. The amount of future stock option compensation expense could be affected by any
future option grants or by any option holders leaving the Company before their grants are fully vested.
47
CohBar, Inc.
Notes to Financial Statements
Note 3 - Summary of Significant Accounting Policies (continued)
Net Loss Per Share of Common Stock
Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted average number of
common shares outstanding during the period. Diluted net earnings per share reflects the potential dilution that could occur if securities or
other instruments to issue common stock were exercised or converted into common stock. Potentially dilutive securities are excluded from
the computation of diluted net loss per share as their inclusion would be anti-dilutive and consist of the following:
Warrants
Options
Totals
Recent Accounting Pronouncements
As of December 31,
2015
2016
7,936,391
6,681,051
3,724,083
4,652,497
11,333,548 11,660,474
In August 2014, the FASB (“Financial Accounting Stands Board”) issued Accounting Standard Update (“ASU”) No. 2014-15,
Presentation of Financial Statements-Going Concern, which requires management to evaluate whether there is substantial doubt about an
entity’s ability to continue as a going concern for each annual and interim reporting period. If substantial doubt exists, additional disclosure
and impact are required. This new standard is effective for the Company for the annual period ending after December 15, 2016 and for
annual periods and interim periods thereafter. The Company adopted the pronouncement as of December 31, 2016 (see Note 2).
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which is effective for the fiscal
years beginning after December 15, 2018. ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both
financing and operating leases, along with additional qualitative and quantitative disclosures. Early adoption is permitted. The Company is
in the process of evaluating the effect that ASU 2016-02 will have on its financial statements.
In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to
Employee Share-Based Payment Accounting. This ASU simplifies several aspects of the accounting for share-based payment transactions,
including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash
flows. This ASU is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The
Company is currently evaluating the effect that the adoption of this ASU will have on its financial statements.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash
Receipts and Cash Payments. This ASU provides guidance on statement of cash flows presentation for eight specific cash flow issues where
diversity in practice exists. This ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal
years. The adoption of this standard is not expected to have a material impact on the Company’s financial position and results of operations.
48
CohBar, Inc.
Notes to Financial Statements
Note 4 – Property and Equipment
Property and equipment consist of the following:
Lab equipment
Computer and equipment
Total property and equipment
Less: accumulated depreciation
Total property and equipment, net
As of December 31,
2015
2016
304,499 $
21,378
325,877
(95,365)
230,512 $
222,724
14,238
236,962
(37,387)
199,575
$
$
Depreciation expense related to property and equipment for the years ended December 31, 2016 and 2015 was $57,978 and
$30,727, respectively.
Note 5 – Accrued Liabilities
Accrued liabilities consist of the following:
Lab services & supplies
Professional fees
Consultant fees
Interest
Other
Total accrued liabilities
Note 6 - Note Payable
As of December 31,
2015
2016
87,100 $
17,760
2,500
25,420
-
132,780 $
72,044
48,265
15,495
17,826
2,083
155,713
$
$
In 2013, the Company was awarded a grant from the Alzheimer’s Drug Discovery Foundation (“ADDF”) totaling $205,260. The
Company executed Promissory Notes (the “Notes”) which governed the terms of the repayment of the grant. The Notes have a term of
four years the first installment on the notes matured on January 21, 2017 and was paid in March 2017. The second installment will become
due on September 12, 2017. In the event of a change of control, the total principal amount that is outstanding under the Notes, plus all
accrued and unpaid interest become immediately due and payable. The Notes include interest rates that are equal to the prime rate that is
published two days prior to the issuance date of the Notes and resets on each anniversary of the Notes. Through December 31, 2016, the
interest rate on each note ranged from 3.25% to 3.75% per annum. In connection with the grant award, the Company also issued to the
Alzheimer’s Drug Discovery Foundation a warrant to purchase 15,596 shares of the Company’s common stock at an exercise price of
$0.99. The Company determined the fair value of the warrants issued using the Black-Scholes pricing model with the assumptions
discussed in Note 3 and allocated the proceeds based on the relative fair value of the debt instrument and the related warrants. The
aggregate deferred debt discount related to the Note was $785. The Company amortized $196 of the debt discount during each of the years
ended December 31, 2016 and 2015, respectively, using the effective interest method. The warrant expires on the 10 year anniversary of
the grant date.
49
CohBar, Inc.
Notes to Financial Statements
Note 7 - Commitments and Contingencies
Litigations, Claims and Assessments
The Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. Such
matters are subject to many uncertainties, and outcomes are not predictable with assurance. There are no such loss contingencies that are
included in the financial statements as of December 31, 2016.
Licensing Agreements
The Company is a party to an Exclusive License Agreement (the “2011 Exclusive Agreement”) with The Regents of the
University of California (“The Regents”) which remains in effect for the life of the last-to-expire patent or last to be abandoned patent
application, whichever is later. The Company agreed to pay the licensors specified development milestone payments aggregating up to
$765,000 for the first product sold under the license. Milestone payments for additional products developed and sold under the license are
reduced by 50%. The Company is also required to pay annual maintenance fees to the licensors. Aggregate maintenance fees for the first
five years following execution of the agreement are $80,000. Thereafter, the Company is required to pay maintenance fees of $50,000
annually until the first sale of a licensed product. In addition, for the duration of the 2011 Exclusive Agreement, the Company is required to
pay the licensors royalties equal to 2% of its worldwide net sales of drugs, therapies or other products developed from claims covered by
the licensed patents, subject to a minimum royalty payment of $75,000 annually, beginning after the first commercial sale of a licensed
product. The Company is required to pay royalties ranging from 8% of worldwide sublicense sales of covered products (if the sublicense is
entered after commencement of phase II clinical trials to 12% of worldwide sublicense sales (if the sublicense is entered prior to
commencement of phase I clinical trials). The agreement also requires the Company to meet certain diligence and development milestones,
including filing of an Investigational New Drug (“IND”) Application for a product covered by the agreement on or before the seventh
anniversary of the agreement date. Through December 31, 2016, no royalties have been incurred under the agreement. All maintenance fees
due and payable as of that date have been paid.
The Company is also a party to an Exclusive License Agreement (the “2013 Exclusive Agreement”) with The Regents whereby
The Regents granted to the Company an exclusive license for the use of certain other patents. The 2013 Exclusive Agreement remains in
effect for the life of the last-to-expire patent or last to be abandoned patent application, whichever is later. The Company paid Regents an
initial license issue fee of $10,000 for these other patents, which was charged to General and Administrative expense, as incurred. The
Company is also required to pay annual maintenance fees to the licensors. Aggregate maintenance fees for the first three years following
execution of the agreement are $7,500. Thereafter, the Company is required to pay maintenance fees of $5,000 annually until the first sale
of a licensed product. The Company agreed to pay The Regents specified development milestone payments aggregating up to $765,000 for
the first product sold under the 2013 Exclusive Agreement. Milestone payments for additional products developed and sold under the 2013
Exclusive Agreement are reduced by 50%. In addition, for the duration of the 2013 Exclusive Agreement, the Company is required to pay
The Regents royalties equal to 2% of the Company’s worldwide net sales of drugs, therapies or other products developed from claims
covered by the licensed patent, subject to a minimum royalty payment of $75,000 annually, beginning after the first commercial sale of a
licensed product. The Company is required to pay The Regents royalties ranging from 8% of worldwide sublicense sales of covered
products (if the sublicense is entered after commencement of phase II clinical trials to 12% of worldwide sublicense sales (if the sublicense
is entered prior to commencement of phase I clinical trials). The agreement also requires the Company to meet certain diligence and
development milestones, including filing of an IND Application for a product covered by the agreement on or before the seventh
anniversary of the agreement date. Through December 31, 2016, no royalties have been incurred under the agreement. All maintenance
fees due and payable as of that date have been paid.
50
CohBar, Inc.
Notes to Financial Statements
Note 7 - Commitments and Contingencies (continued)
Operating Lease
In February 2015, the Company entered into a lease agreement for an expanded laboratory facility. The laboratory space is leased
on a month-to month basis and is part of a shared facility in Menlo Park, California. In 2016, the Company increased its shared space in this
facility. The Company also terminated a previous month-to-month lease for the laboratory space in Pasadena, California effective March
31, 2015.
Rent expense amounted to $171,294 and $107,385 for the years ended December 31, 2016 and 2015, respectively.
Note 8 - Income Taxes
The tax effects of temporary differences that give rise to deferred tax assets are as follows:
Current:
Accrued expenses
Non-current:
Stock compensation
Net operating loss carryforward
Research and development credit carry forward
Total deferred tax assets
Valuation allowance
As of December 31,
2015
2016
$
51,174 $
31,156
163,221
132,645
5,058,119
2,989,634
267,325
100,480
5,539,839
3,253,915
(5,539,839)
(3,253,915)
Deferred tax asset, net of valuation allowance
$
- $
-
51
CohBar, Inc.
Notes to Financial Statements
Note 8 - Income Taxes (continued)
A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows:
U.S. statutory federal rate
State income taxes, net of federal tax
Permanent differences
Prior year ture-ups
R&D tax credit
Change in valuation allowance
Income tax provision (benefit)
The income tax provision consists of the following:
Federal
Current
Deferred
State and local
Current
Deferred
Change in valuation allowance
Income tax provision (benefit)
For the Years Ended
December 31,
2016
2015
(34.0)%
(5.1)%
4.2%
-%
(2.7)%
37.6%
-%
(34.0)%
(5.4)%
2.6%
-%
(2.1)%
38.9%
-%
For the Years Ended
December 31,
2016
2015
$
- $
(1,815,660)
-
(1,190,022)
-
(470,263)
2,285,923
- $
-
(316,709)
1,506,731
-
The Company assesses the likelihood that deferred tax assets will be realized. To the extent that realization is not more-likely-
than-not, a valuation allowance is established. Based upon the Company’s losses since inception, management believes that it is more-
likely-than-not that future benefits of deferred tax assets will not be realized. Therefore, the Company established a full valuation
allowance as of December 31, 2016 and 2015. As of December 31, 2016 and 2015, the change in valuation allowance was $2,285,923 and
1,506,731, respectively.
The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions, principally California and
New Jersey. The Company is subject to examination by the various taxing authorities. The Company’s federal and state income tax returns
for tax years beginning in 2011 remain subject to examination.
At December 31, 2016 and 2015, the Company had $12,865,384 and $7,672,674, respectively, of federal and state net operating
loss carryovers that may be available to offset future taxable income. The net operating loss carry forwards, if not utilized, will begin to
expire from 2029 to 2036 for federal and state purposes. In accordance with Section 382 of the Internal Revenue Code, the usage of the
Company’s net operating loss carryforward could be limited in the event of a change in ownership. At this time, the Company has not
completed a full study to assess whether an ownership change under Section 382 of the Code occurred due to the costs and complexities
associated with such a study.
52
CohBar, Inc.
Notes to Financial Statements
Note 9 - Stockholders’ Equity
Authorized Capital
In January 2015, the Company completed its initial public offering (“IPO”) on the TSX Venture Exchange. The Company sold
11,250,000 units at a price of $1.00 per unit, providing gross proceeds of $11,250,000. Concurrently with the IPO, the Company completed
a previously-subscribed private placement of an additional 2,700,000 units for gross proceeds of $2,700,000, resulting in total gross
proceeds of $13,950,000. After deducting $996,516 in offering expenses, the Company received net proceeds of $12,953,484. The
Company also incurred internal offering costs of $785,197 which is classified as a reduction to additional paid-in capital in the
accompanying balance sheets. All units consist of one share of the Company’s common stock and one-half of one common stock purchase
warrant. In the aggregate, a total of 13,950,000 shares of common stock and 6,975,000 warrants to purchase common stock were issued in
connection with the IPO and concurrent private placement. Each whole warrant was exercisable to acquire one share of the Company’s
common stock at a price of $2.00 per share at any time up to January 6, 2017.
In January 2015, the Company amended its Certificate of Incorporation to increase the total number of authorized shares of
common stock. Following the amendment, the Company has authorized the issuance and sale of up to 80,000,000 shares of stock,
consisting of 75,000,000 shares of common stock having a par value of $0.001 and 5,000,000 shares of Preferred Stock having a par value
of $0.001 per share. As of December 31, 2016 and 2015, there were no shares of Preferred Stock outstanding and there were no declared but
unpaid dividends or undeclared dividend arrearages on any shares of the Company’s capital stock.
Preferred Stock
During the year ended December 31, 2014, the Company sold 5,400,000 shares of convertible Series B Preferred Stock. Each
share of Series B Preferred Stock was convertible, at the option of the holder, into Common Stock. Each stockholder of Series B Preferred
Stock was entitled to vote in the election of the Company’s Board of Directors. The purchasers of Series B Preferred Stock entered into put
agreements requiring the purchasers, at the Company’s option, to purchase from the Company securities of the same type as those sold to
investors in any future public offering of the Company’s securities, at the same price as the securities sold in the initial public offering, for
an aggregate purchase price of up to $2,700,000.
Upon the completion of the IPO on January 6, 2015, each outstanding share of Series B Preferred Stock was automatically
converted into one share of common stock. The Company converted 5,400,000 shares of then outstanding Series B Preferred Stock into
5,400,000 shares of its common stock.
The Company also exercised its rights under the aforementioned put agreements requiring the purchasers of Series B Preferred
Stock to purchase 2,700,000 shares of common stock at the proposed public offering price of $1.00 per share for total cash proceeds of
$2,700,000.
Stock Options
The Company has an incentive stock plan, the 2011 Equity Incentive Plan (the “2011 Plan”). In January 2015, the Company
amended and restated the 2011 Plan. The Amendment and Restatement increased the aggregate number of shares of its common stock that
may be issued pursuant to stock awards under the plan. In accordance with the rules of the TSX Venture Exchange regarding equity
incentive plans, the number of shares that can be reserved for issuance under the 2011 Plan is equal to 20% of the Company’s common
stock outstanding at the completion of the offering. The total number of shares reserved for issuance after the completion of the IPO is
6,453,069.
53
CohBar, Inc.
Notes to Financial Statements
Note 9 - Stockholders’ Equity (continued)
The Company has granted stock options to employees, non-employee directors and consultants from the 2011 Plan through the
year ended December 31, 2016. Options granted under the Plan may be Incentive Stock Options or Non-statutory Stock Options, as
determined by the Administrator at the time of grant. At December 31, 2016, 1,665,572 shares of the Company’s common stock were
available for future issuance under the 2011 Plan.
In January 2016, the Company issued a warrant to purchase 125,000 shares of the Company’s common stock to an investor
relations firm as partial compensation for consulting services it will provide to the Company over a two year period. Pursuant to applicable
policies of the TSX-V, the shares issuable under the warrant will be counted against the limit of shares authorized for issuance under the
2011 Plan, notwithstanding that the warrant was not issued under the 2011 Plan.
During the year ended December 31, 2016, the Company granted stock options to employees to purchase 1,696,000 shares of the
Company’s common stock. The stock options have exercise prices that range from $1.10 to $1.55 per share, are subject to vesting over four
years, have terms of ten years and have an aggregate grant date fair value of approximately $1,418,000.
During the year ended December 31, 2016, 10,000 stock options were exercised for cash proceeds of $2,600.
During the year ended December 31, 2015, the Company granted stock options to employees and consultants to purchase 388,124
shares of the Company’s common stock. The stock options have exercise prices of $1.00 and $1.17, are subject to vesting over four years,
have terms of ten years and have an aggregate grant date fair value of approximately $301,557.
During the years ended December 31, 2016 and 2015, the Company cancelled 26,486 and 5,000 employees and agents options.
The cancelled options were added back to the available pool for future issuance.
127,532 stock options granted during the year ended December 31, 2014, contained performance conditions which included (i) the
optionee’s continuous service and (ii) completion of the Company’s initial public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended. Since the stock options contained performance conditions that were not met as of December
31, 2014, their fair value was recorded in the year ended December 31, 2015.
The compensation expense associated with stock-based awards granted to individuals is recorded by the Company in the same
expense classifications as cash compensation paid. During the year ended December 31, 2016, the Company recorded a total of $735,429
of stock based compensation recognizing $361,137 as a general and administrative expense and $374,292 as a research and development
expense in the accompanying statements of operations. During the year ended December 31, 2015, the Company recorded a total of
$396,850 of stock based compensation recognizing $215,692 as a general and administrative expense and $181,158 as a research and
development expense in the accompanying statements of operations.
54
CohBar, Inc.
Notes to Financial Statements
Note 9 - Stockholders’ Equity (continued)
The following table represents stock option activity for the years ended December 31, 2016 and 2015:
Stock Options
Exercise Price
Fair Value Contractual Aggregate
Weighted Average
Balance – December 31, 2014
Granted
Exercised
Cancelled
Balance – December 31, 2015
Granted
Exercised
Cancelled
Balance – December 31, 2016
2,609,811
1,174,820
(55,548)
(5,000)
Outstanding Exercisable Outstanding Exercisable Vested Life (Years) Intrinsic Value
-
-
-
-
-
-
-
-
5,561,368
459,437 $
786,696
(55,548)
-
3,724,083 1,963,948 $
-
1,696,000
-
(741,100)
-
(26,486)
4,652,497 1,908,883 $
0.38 $
1.01
-
-
0.67 $
1.50
-
-
0.92 $
9.57 $
3.48
-
-
7.09 $
6.25
-
-
8.24 $
0.17 $
1.00
-
-
0.34 $
-
-
-
0.41 $
0.17
0.38
-
-
0.34
-
-
-
0.41
The granted balance for 2015 in the table above includes 786,696 options granted to the agents that took part in the IPO (see
“Agent’s Compensation Options” below). All other options were granted to employees and consultants under the 2011 Plan.
The following table summarizes information on stock options outstanding and exercisable as of December 31, 2016:
Exercise
Price
Number
Outstanding
Weighted
Average Remaining
Contractual Term
Weighted
Average
Number
Weighted
Average
Exercise Price Exercisable Exercise Price
0.05
0.26
0.73
1.00
1.10
1.17
1.22
1.50
1.55
$
$
$
$
$
$
$
$
$
Totals
72,876
1,024,810
1,475,687
313,124
10,000
70,000
190,000
40,000
1,456,000
4,652,497
Agent’s Compensation Options
5.25 years
7.28 years
7.87 years
8.56 years
9.02 years
8.87 years
9.10 years
9.17 years
9.19 years
$
$
$
$
$
$
$
$
$
0.05
0.26
0.73
1.00
1.10
1.17
1.22
1.50
1.55
72,876 $
919,296 $
768,587 $
126,457 $
- $
21,667 $
- $
- $
- $
1,908,883
0.05
0.26
0.73
1.00
1.10
1.17
1.22
1.50
1.55
In connection with the closing of its IPO in January 2015 the Company issued 786,696 compensation options (“Compensation
Options”) to the agents that took part in the offering. Each Compensation Option is exercisable for a unit consisting of one share of
common stock and one-half of one common stock purchase warrant at an exercise price of $1.00 per unit. The Compensation Options
expired on July 6, 2016. Each whole warrant issuable upon exercise of Compensation Options is exercisable to acquire one share of
common stock at an exercise price of $2.00 per share at any time up to January 6, 2017. Because the Compensation Options are considered
a cost of the IPO, the resulting value is recognized as both an increase and decrease to the equity section of the accompanying balance
sheets. The Compensation Options are not part of the Company’s 2011 Plan.
During the year ended December 31, 2016, a total of 731,100 Compensation Options were exercised for cash proceeds of
$731,100.
55
CohBar, Inc.
Notes to Financial Statements
Note 9 - Stockholders’ Equity (continued)
During the year ended December 31, 2015, a total of 55,548 Compensation Options were exercised for cash proceeds of $55,548.
Warrants
In January 2016, the Company issued a warrant to purchase 125,000 shares of the Company’s common stock to an investor
relations firm as partial compensation for consulting services to be provided over a two-year period. The warrant is exercisable at $1.15 per
share, has a term of three years and is subject to vesting over the two-year service period.
During the year ended December 31, 2016, the Company issued warrants to purchase an aggregate of 365,550 shares of common
stock as a result of the exercise of 731,100 Compensation Options.
During the year ended December 31, 2015, the Company issued warrants to purchase an aggregate of 7,002,774 shares of
common stock in conjunction with the issuance of units sold in the IPO and concurrent private placement, and upon the exercise of 55,548
Compensation Options. The warrants were exercisable through January 6, 2017 at a price of $2.00 per share.
During the year ended December 31, 2016, a total of 1,745,890 warrants were exercised for cash proceeds of $2,969,454 (see Note
10 - Subscription Receivable).
The following table represents warrant activity for the years ended December 31, 2016 and 2015:
Warrants
Exercise Price
Fair Value Contractual Aggregate
Weighted Average
Balance – December 31, 2014
Granted
Exercised
Cancelled
Balance – December 31, 2015
Granted
Exercised
Cancelled
Balance – December 31, 2016
-
-
933,617
Outstanding Exercisable Outstanding Exercisable Vested Life (Years) Intrinsic Value
-
-
-
-
-
-
-
-
2,516,058
933,617 $
7,002,774 7,002,774
-
-
7,936,391 7,936,391 $
428,050
(1,745,890) (1,745,890)
-
6,681,051 6,618,551 $
8.64 $
1.52
-
-
1.80 $
-
-
-
0.98 $
0.28 $
2.00
-
-
1.80 $
-
-
-
1.74 $
0.28 $
2.00
-
-
1.80 $
-
-
-
1.74 $
0.21
0.43
-
-
0.41
-
-
-
0.41
490,550
-
Note 10 – Subscription Receivable
During December 2016, a total of 261,163 warrants were exercised for cash proceeds of $522,326. Due to the timing of the
exercises, the shares underlying the warrants were issued in December 2016 and the proceeds were received in January 2017. The
outstanding proceeds were recorded as a Subscription Receivable in the accompanying balance sheets as of December 31, 2016.
Note 11 - Related Party Transactions
Two of the Company’s Directors provide consulting, scientific and research and advisory services to the Company pursuant to
agreements that provide for annual compensation of $42,000 each. Each agreement provides for an annual service term and can be
extended by mutual consent of both parties. The service terms under the agreements expired in 2015. The Company continues to
compensate Dr. Cohen and Dr. Barzilai for their ongoing services under the terms of the original agreements. During each of the years
ended December 31, 2016 and 2015, $42,000 was paid to each director by the Company for consulting fees. As of December 31, 2016 and
2015, no amounts were owed to either Director.
56
CohBar, Inc.
Notes to Financial Statements
Note 12 - Subsequent Events
Management has evaluated subsequent events to determine if events or transactions occurring through the date on which the
financial statements were issued require adjustment or disclosure in the Company’s financial statements.
In January 2017, a total of 926,588 warrants were exercised for cash proceeds of $1,853,176. An additional $522,326 was received
in January 2017 which was the proceeds from warrants exercised in December 2016.
In January 2017, 4,695,846 warrants expired.
In January 2017, the Company granted stock options to purchase 731,000 shares of the Company’s common stock to its
employees. The stock options are performance based and will be valued at the time milestones are reached.
In January 2017, the Company granted stock options to purchase 200,000 shares of the Company’s common stock to two of its
Directors. The Company also granted stock options to purchase 100,000 shares of the Company’s common stock to one of its employees.
The 300,000 stock options have an exercise price of $2.40 and are exercisable during a ten year term, subject to vesting based on
continuous service over periods between zero and four years from the date of grant.
In January and February 2017, consultants to the Company exercised a total of 106,982 warrants for cash proceeds of $29,491.
In February 2017, 16,250 stock options were exercised for cash proceeds of $19,825.
57
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
An evaluation was conducted under the supervision and with the participation of our management, including Simon Allen, our
Chief Executive Officer, and Jeffrey Biunno, our Chief Financial Officer (collectively, the “Certifying Officers”), of the effectiveness of
our disclosure controls and procedures as of December 31, 2016, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange
Act of 1934 (the “Exchange Act”). Based on that evaluation, our management concluded that, during the period covered by this annual
report, our disclosure controls and procedures were not effective due to a material weakness.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is
defined in Rule 13a-15(f) and 15(d)-15(f) under the Exchange Act. This rule defines internal control over financial reporting as a process
designed by, or under the supervision of, Certifying Officers, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Our internal control over financial
reporting includes those policies and procedures that:
● pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of
our assets;
● provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with U.S. GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our
management and directors; and
● provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management's Assessment
Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our internal
control over financial reporting based on the criteria established in Internal Control - Integrated Framework (2013), issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded as of December
31, 2016, that our internal control over financial reporting was not effective due to a material weakness. A material weakness is a control
deficiency, or a combination of control deficiencies, in internal control over financial reporting, such that there is a reasonable possibility
that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The material
weakness relates to our having one employee assigned to positions that involve processing financial information, resulting in a lack of
segregation of duties so that all journal entries and account reconciliations are reviewed by someone other than the preparer, heightening
the risk of error or fraud. If we are unable to remediate the material weakness, or other control deficiencies are identified, we may not be
able to report our financial results accurately, prevent fraud or file our periodic reports as a public company in a timely manner.
58
Due to our small size and early stage of our business, segregation of duties may not always be possible and may not be
economically feasible. We have limited capital resources and have given priority in the use of those resources to our research and
development efforts. As a result, we have not been able to take steps to improve our internal controls over financial reporting during the
year ended December 31, 2016. However, we continue to evaluate the effectiveness of our internal controls and procedures on an on-going
basis. As our operations grow and become more complex, we intend to hire additional personnel in financial reporting and other areas.
However, there can be no assurance of when, if ever, we will be able to remediate the identified material weaknesses.
Auditor Attestation
This Annual Report on Form 10-K does not include an attestation of our registered public accounting firm regarding internal
control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to
applicable rules of the Securities and Exchange Commission.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the last fiscal quarter that have materially affected,
or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.
59
Item 10. Directors, Executive Officers and Corporate Governance
PART III
The information required by this item will be set forth under the captions Election of Directors, Section 16(a) Beneficial
Ownership Reporting Compliance, Executive Officers, Information Concerning the Board of Directors and Code of Ethics in our definitive
Proxy Statement for our 2017 Annual Meeting of Shareholders to be filed with the SEC by April 30, 2017 (“Proxy Statement”). If the
Proxy Statement is not filed with the SEC by April 30, 2017, such information will be included in an amendment to this Annual Report on
Form 10-K filed by April 30, 2017.
Item 11. Executive Compensation
The information required by this item will be set forth under the captions Executive Compensation and Director Compensation in
our definitive Proxy Statement for our 2017 Annual Meeting of Shareholders to be filed with the SEC by April 30, 2017. If the Proxy
Statement is not filed with the SEC by April 30, 2017, such information will be included in an amendment to this Annual Report on Form
10-K filed by April 30, 2017.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Equity Compensation Plan Information
The following table provides information about our equity compensation plan as of December 31, 2016:
Plan Category
Equity compensation plans approved by
stockholders
Equity compensation plans not approved by
stockholders
Total
Number of securities to
be issued upon exercise
of options warrants and
rights
(a)
Weighted-average
exercise price of
outstanding options
warrants and rights
(b)
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))
(c)
4,777,497
$
897,075(1) $
$
5,674,572
1.07
0.26
1.21
1,665,572
-
1,665,572
(1) Consists of warrants issued to an Executive Officer pursuant to an employment agreement and two consultants pursuant to
consulting agreements.
Beneficial Ownership
The information required by this item is included under the caption Security Ownership of Certain Beneficial Owners and
Management in our definitive Proxy Statement for our 2017 Annual Meeting of Shareholders to be filed with the SEC by April 30, 2017. If
the Proxy Statement is not filed with the SEC by April 30, 2017, such information will be included in an amendment to this Annual Report
on Form 10-K filed by April 30, 2017.
60
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item is included under the caption Information Concerning the Board of Directors in our
definitive Proxy Statement for our 2017 Annual Meeting of Shareholders to be filed with the SEC by April 30, 2017 (“Proxy Statement”).
If the Proxy Statement is not filed with the SEC by April 30, 2017, such information will be included in an amendment to this Annual
Report on Form 10-K filed by April 30, 2017.
Item 14. Principal Accounting Fees and Services
The information required by this item is included under the caption Ratification of Appointment of Registered Independent Public
Accounting Firm in our definitive Proxy Statement for our 2017 Annual Meeting of Shareholders to be filed with the SEC by April 30,
2017. If the Proxy Statement is not filed with the SEC by April 30, 2017, such information will be included in an amendment to this Annual
Report on Form 10-K filed by April 30, 2017.
61
Item 15. Exhibits and Financial Statement Schedules
PART IV
Financial statement schedules have been omitted because they are not applicable or the required information is shown in the
financial statements or notes thereto.
Item 16. Form 10-K Summary
Not applicable.
62
Exhibits
The following exhibits are filed herewith and this list is intended to constitute the exhibit index.
Exhibit No.
Description
3.1
3.2
10.1 *
10.2 *
10.3
10.4
10.5 *
10.6 *
10.7
10.8 *
10.9 *
10.10 *
10.11 *
10.12 *
10.13 *
10.14 *
23.1
31.1
31.2
32.1
Third Amended and Restated Articles of Incorporation - Incorporated by reference to Exhibit 3.1 of our Current Report on
Form 8-K, as filed with the Commission on January 8, 2015.
Amended and Restated Bylaws - Incorporated by reference to Exhibit 3.2 of our Current Report on Form 8-K, as filed with the
Commission on January 8, 2015.
Amended and Restated 2011 Equity Incentive Plan - Incorporated by reference to Exhibit 10.1 of our Current Report on Form
8-K, as filed with the Commission on January 8, 2015.
Form of Option Agreement under the 2011 Equity Incentive Plan -- Incorporated by reference to Exhibit 10.2 to our
Registration Statement on Form S-1 (File No. 333-200033) as filed with the Commission on November 10, 2014.
Exclusive License Agreement, dated August 6, 2013, between CohBar, Inc. and the Regents of the University of California -
Incorporated by reference to Exhibit 10.4 to our Registration Statement on Form S-1 (File No. 333-200033) as filed with the
Commission on November 10, 2014.
Exclusive License Agreement, dated November 3, 2011, between and among CohBar, Inc. and the Regents of the University of
California, and Albert Einstein College of Medicine of Yeshiva University - Incorporated by reference to Exhibit 10.5 to our
Registration Statement on Form S-1 (File No. 333-200033) as filed with the Commission on November 10, 2014.
Form of Indemnification Agreement - Incorporated by reference to Exhibit 10.6 to our Registration Statement on Form S-1
(File No. 333-200033) as filed with the Commission on November 10, 2014.
Common Stock Purchase Warrant, dated April 11, 2014, issued to Jon Stern - Incorporated by reference to Exhibit 10.7 to our
Registration Statement on Form S-1 (File No. 333-200033) as filed with the Commission on November 10, 2014.
Form of Common Stock Purchase Warrants issued January 9, 2014 - Incorporated by reference to Exhibit 10.8 to our
Registration Statement on Form S-1 (File No. 333-200033) as filed with the Commission on November 10, 2014.
Executive Employment Agreement, dated April 11, 2014, between CohBar, Inc. and Jon Stern - Incorporated by reference to
Exhibit 10.11 to our Registration Statement on Form S-1 (File No. 333-200033) as filed with the Commission on November
10, 2014.
Executive Employment Agreement, dated November 27, 2013, between CohBar, Inc. and Jeffrey F. Biunno - Incorporated by
reference to Exhibit 10.12 to our Registration Statement on Form S-1 (File No. 333-200033) as filed with the Commission on
November 10, 2014.
Amendment, dated as of July 11, 2016, to Executive Employment Agreement, dated as of November 27, 2013, between
CohBar, Inc. and Jeffrey F. Biunno. Incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the
quarter ended September 30, 2016, filed with the Commission on November 14, 2016.
Executive Employment Agreement, dated November 17, 2014, between CohBar, Inc. and Kenneth Cundy - Incorporated by
reference to Exhibit 10.13 to the Amendment No. 2 of our Registration Statement on Form S-1 (File No. 333-200033) as filed
with the Commission on November 28, 2014.
Consulting Agreement, dated November 10, 2011, by and between the Company and Nir Barzilai, as extended by an extension
agreement dated November 1, 2014 - Incorporated by reference to Exhibit 10.13 to our Registration Statement on Form S-1
(File No. 333-200033) as filed with the Commission on November 10, 2014.
Consulting Agreement, dated September 29, 2014, by and between the Company and Pinchas Cohen - Incorporated by
reference to Exhibit 10.14 to our Registration Statement on Form S-1 (File No. 333-200033) as filed with the Commission on
November 10, 2014.
Executive Employment Agreement, dated March 7, 2016, by and between CohBar, Inc. and Simon Allen - Incorporated by
reference to Exhibit 10.13 to our Registration Statement on Form S-1 (File No. 333-200033) as filed with the Commission on
April 26, 2016.
Consent of independent registered public accounting firm.
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934,
as amended.
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934,
as amended.
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS
XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
*
Indicates management contract, compensatory agreement or arrangement, in which our directors or executive officers may participate.
63
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 31, 2017
COHBAR, INC.
SIGNATURES
By:
/s/ Jeffrey F. Biunno
Jeffrey F. Biunno
Chief Financial Officer
(Principal Financial and Accounting Officer)
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes and appoints Jeffrey F. Biunno and Simon Allen, and each of
them, with full power of substitution and resubstitution and full power to act without the other, as his true and lawful attorney-in-fact and
agent to act in his name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated
below, and to file any and all amendments to this report, with all 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, ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his
substitute or substitutes may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
Signature
/s/ Simon Allen
Simon Allen
/s/ Jeffrey F. Biunno
Jeffrey F. Biunno
/s/ Jon L. Stern
Jon L. Stern
/s/ Albion J. Fitzgerald
Albion J. Fitzgerald
/s/ Nir Barzilai
Nir Barzilai
/s/ Pinchas Cohen
Pinchas Cohen
/s/ Marc E. Goldberg
Marc E. Goldberg
Title
Chief Executive Officer
(Principal Executive Officer)
Chief Financial Officer, Treasurer and Secretary
(Principal Financial and Accounting Officer)
Date
March 31, 2017
March 31, 2017
Chief Operating Officer and Director
March 31, 2017
Chairman of the Board of Directors
March 31, 2017
Director
Director
Director
64
March 31, 2017
March 31, 2017
March 31, 2017
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENT
We consent to the incorporation by reference in the Registration Statement of CohBar, Inc. on Form S-8 (File No. 333-205412) of our
report dated March 31, 2017, with respect to our audits of the financial statements of CohBar, Inc. as of December 31, 2016 and 2015 and
for the years then ended, which report is included in this Annual Report on Form 10-K of CohBar, Inc. for the year ended December 31,
2016.
Exhibit 23.1
/s/ Marcum llp
Marcum llp
New York, NY
March 31, 2017
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 31.1
I, Simon Allen, certify that:
1.
I have reviewed this Annual Report on Form 10-K of CohBar, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with general accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the
equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial
information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant's internal control over financial reporting.
March 31, 2017
Date
By: /s/ Simon Allen
Simon Allen
Chief Executive Officer
(Principal Executive Officer)
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 31.2
I, Jeffrey F. Biunno, certify that:
1.
I have reviewed this Annual Report on Form 10-K of CohBar, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with general accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the
equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial
information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant's internal control over financial reporting.
March 31, 2017
Date
By: /s/ Jeffrey F. Biunno
Jeffrey F. Biunno
Chief Financial Officer
(Principal Financial Officer)
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(Subsection (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)
EXHIBIT 32.1
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States
Code), the undersigned officers of CohBar, Inc., a Delaware corporation (the “Company”), do hereby certify that:
1. To our knowledge, the Annual Report on Form 10-K for the year ended December 31, 2016 (the “Form 10-K”) of the Company
fully complies with the requirements of Section 13(a) or 15(d) of the Securities Act of 1934; and
2. The information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations
of the Company.
March 31, 2017
Date
March 31, 2017
Date
By: /s/ Simon Allen
Simon Allen
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Jeffrey F. Biunno
Jeffrey F. Biunno
Chief Financial Officer
(Principal Financial and Accounting Officer)