UNITED STATES
SECURITY AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM 10-Q
_______________
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to _____________
Commission file number 0-23280
NEUROBIOLOGICAL TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 94-3049219
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3260 Blume Drive, Suite 500
Richmond, California 94806
(Address of principal executive offices)
(510) 262-1730
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities 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 [X] No [_]
Indicate the number of shares outstanding of each of the issuer's classes of the
common stock, as of the latest practical date.
Common Stock, $.001 Par Value 17,503,699 shares outstanding
as of November 1, 2001
NEUROBIOLOGICAL TECHNOLOGIES, INC.
FORM 10-Q
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Unaudited)..................................... 3
Condensed Balance Sheets -- September 30, 2001 and June 30, 2001..... 3
Condensed Statements of Operations -- Three months ended
September 30, 2001 and 2000; Period from August 27, 1987
(inception) through September 30, 2001............................... 4
Condensed Statements of Cash Flows -- Three months ended
September 30, 2001 and 2000; Period from August 27, 1987
(inception) through September 30, 2001............................... 5
Notes to Condensed Financial Statements.............................. 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION................................... 7
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK........... 12
PART II. OTHER INFORMATION.................................................... 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K..................................... 13
SIGNATURES.................................................................... 13
2
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NEUROBIOLOGICAL TECHNOLOGIES, INC.
(A development stage company)
CONDENSED BALANCE SHEETS
September 30, June 30,
2001 2001
-------------------------------------
(unaudited) (Note 1)
ASSETS
Current assets:
Cash and cash equivalents $ 2,367,311 $ 3,626,700
Short-term investments 7,910,574 6,555,575
Interest receivable 116,624 132,044
Prepaid expenses and other 182,723 253,827
-------------------------------------
Total current assets 10,577,232 10,568,146
Long-term investments -- 861,313
Property and equipment, net 22,979 28,820
-------------------------------------
$ 10,600,211 $ 11,458,279
=====================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 528,847 $ 762,049
-------------------------------------
Total current liabilities 528,847 762,049
Stockholders' equity:
Convertible preferred stock, $.001 par value, 5,000,000
shares authorized, 2,332,000 issued in series,
1,582,000 outstanding at September 30, 2001 and
June 30, 2001 791,000 791,000
Common stock, $.001 par value, 35,000,000 shares
authorized, 17,503,699 outstanding at September 30,
2001 and June 30, 2001 43,660,557 43,660,557
Deferred compensation (177,938) (191,626)
Deficit accumulated during development stage (34,202,255) (33,563,701)
-------------------------------------
Total stockholders' equity 10,071,364 10,696,230
-------------------------------------
$ 10,600,211 $ 11,458,279
=====================================
See accompanying notes.
3
NEUROBIOLOGICAL TECHNOLOGIES, INC.
(A development stage company)
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Period from
Three months ended September 30, August 27, 1987
-------------------------------- (inception) through
2001 2000 September 30, 2001
----------------------------------------------------------
Revenues
License $ -- $ -- $ 6,881,250
Grant -- -- 149,444
----------------------------------------------------------
Total revenues -- -- 7,030,694
Expenses
Research and development 255,561 235,597 28,414,001
General and administrative 499,690 528,671 15,832,242
----------------------------------------------------------
Total expenses 755,251 764,268 44,246,243
----------------------------------------------------------
Operating loss (755,251) (764,268) (37,215,549)
Interest income 116,697 145,897 3,055,125
----------------------------------------------------------
Loss before income tax expense (638,554) (618,371) (34,160,424)
Income tax expense -- -- 41,831
----------------------------------------------------------
Net loss $ (638,554) $ (618,371) $(34,202,255)
==========================================================
Basic and diluted net loss per share $(0.04) $(0.04)
=================================
Weighted average shares used in basic and
diluted net loss per share calculation 17,503,699 16,103,854
=================================
See accompanying notes.
4
NEUROBIOLOGICAL TECHNOLOGIES, INC.
(A development stage company)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Period from
Three months ended September 30, August 27, 1987
----------------------------------- (inception) through
2001 2000 September 30, 2001
-------------------------------------------------------------
OPERATING ACTIVITIES:
Net loss $ (638,554) $ (618,371) $(34,202,255)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 5,841 4,959 672,546
Gain on sale of property and equipment -- -- (1,500)
Amortization of deferred stock compensation 13,688 13,688 95,812
Issuance of common stock, options and warrants
for license rights and services -- -- 209,975
Changes in assets and liabilities:
Interest receivable 15,420 -- (116,624)
Prepaid expenses and other current assets 71,104 (6,963) (182,723)
Accounts payable and accrued expenses (233,202) (233,390) 528,847
-------------------------------------------------------------
Net cash used in operating activities (765,703) (840,077) (32,995,922)
INVESTING ACTIVITIES:
Purchase of investments (5,421,046) (3,204,163) (52,228,486)
Maturity of investments 4,927,360 -- 44,317,912
Purchases of property and equipment, net -- (22,569) (412,463)
Proceeds from sale of property & equipment -- -- 1,500
Additions to patents and licenses -- -- (283,062)
-------------------------------------------------------------
Net cash used in investing activities (493,686) (3,226,732) (8,604,599)
FINANCING ACTIVITIES:
Payment of note payable -- -- (200,000)
Proceeds from short-term borrowings -- -- 435,000
Issuance of common stock, net -- 465,999 35,574,750
Issuance of preferred stock, net -- -- 8,158,082
-------------------------------------------------------------
Net cash provided by financing activities -- 465,999 43,967,832
-------------------------------------------------------------
(Decrease) increase in cash and cash equivalents (1,259,389) (3,600,810) 2,367,311
Cash and equivalents at beginning of period 3,626,700 7,387,076 --
-------------------------------------------------------------
Cash and equivalents at end of period $ 2,367,311 $ 3,786,266 $ 2,367,311
=============================================================
SUPPLEMENTAL DISCLOSURES:
Conversion of short-term borrowings to
Series A preferred stock $ -- $ -- $ 235,000
=============================================================
Conversion of preferred stock to common stock $ -- $ 50,000 $ 7,602,082
=============================================================
Deferred stock compensation related to options
granted $ -- $ -- $ 273,750
=============================================================
See accompanying notes.
5
NEUROBIOLOGICAL TECHNOLOGIES, INC.
(A development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
September 30, 2001
NOTE 1-BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial reporting and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnote disclosures required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three-month period
ended September 30, 2001 are not necessarily indicative of the results that may
be expected for the fiscal year ended June 30, 2002.
The balance sheet at June 30, 2001 has been derived from the audited
financials at that date but does not include all the information and footnotes
required by generally accepted accounting principles for complete financial
statements.
For further information, refer to the financial statements and footnotes
included in our annual report on Form 10-K for the fiscal year ended June 30,
2001.
BASIC AND DILUTED NET LOSS PER SHARE
Net loss per share is presented under the requirements of Financial
Accounting Standards Board ("FAS") No. 128, "Earnings per Share." Basic loss
per share is computed based on the average shares of common stock outstanding
and excludes any options, warrants, and convertible securities. Potentially
dilutive securities, such as options, warrants, and convertible preferred stock,
have also been excluded from the computation of diluted net loss per share as
their effect is antidilutive.
COMPREHENSIVE INCOME (LOSS)
The Company has no items of other comprehensive income (loss), and,
accordingly, its net income (loss) is equal to its comprehensive income (loss).
REVENUE RECOGNITION
Revenue related to license fees with non-cancelable, non-refundable terms
and no future performance obligations are recognized when collection is assured.
Such revenues are deferred and recognized over the performance period if future
performance obligations exist. Non-refundable up-front payments received in
connection with research and development activities are deferred and recognized
on a straight-line basis over the relevant periods specified in the agreement,
generally the research term. Revenue associated with milestones are recognized
as earned, based on completion of development milestones, either upon receipt,
or when collection is assured.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Except for the historical information contained herein, the matters
discussed in this "Management's Discussion and Analysis of Financial Condition
and Results of Operations," and elsewhere in this Form 10-Q are forward-looking
statements that involve risks and uncertainties. The factors listed in the
section captioned "Risk Factors," as well as any cautionary language in this
Form 10-Q, provide examples of risks, uncertainties and events that may cause
our actual results to differ materially from those projected. These forward-
looking statements represent our judgment as of the date of the filing. We
disclaim, however, any intent or obligation to update these forward-looking
statements.
OVERVIEW
Neurobiological Technologies, Inc. or NTI(R) ("NTI," "we," "us," "our" or
the "Company") is an emerging drug development company focused on the clinical
development and regulatory approval of neuroscience drugs. We are developing
neuroprotective and neuromodulatory agents to treat progressive neurological
impairments characteristic of various nervous system disorders, including
diabetic neuropathy, brain cancer and AIDS-related dementia. Our strategy is to
in-license and develop early-stage drug candidates that target major medical
needs and that may be rapidly commercialized.
In April 1998, we entered into a strategic research and marketing
cooperation agreement with Merz + Co. ("Merz") and Children's Medical Center
Corporation to further the clinical development and commercialization of
Memantine. Pursuant to this agreement, NTI and Merz share scientific, clinical
and regulatory information about Memantine, particularly safety data, to
facilitate regulatory review and marketing approval by the Federal Drug
Administration ("FDA") and foreign regulatory authorities. Pursuant to this
agreement, we will share in future revenues from sales of Memantine for all
indications.
In June 2000, Merz entered into an agreement with Forest Laboratories, Inc.
("Forest") for the development and marketing of Memantine in the United States
for the treatment of Alzheimer's disease, neuropathic pain and AIDS-related
dementia. In August 2000, Merz entered into a strategic license and cooperation
agreement with H. Lundbeck A/S ("Lundbeck") of Copenhagen, Denmark for the
further development and marketing of Memantine for the treatment of Alzheimer's
disease, neuropathic pain and AIDS-related dementia. Lundbeck has acquired
exclusive rights to Memantine in certain European markets, Canada, Australia and
South Africa and semi-exclusive rights to co-market Memantine with Merz in other
markets worldwide, excluding the United States, where Forest has development
rights, and Japan, where Merz has granted development rights to Suntory Ltd.
("Suntory"). Memantine has been marketed by Merz in Germany since 1989 with the
labeling "dementia syndrome."
In August 2001, we entered into an agreement with Merz and Suntory. NTI
has granted to Merz the right to use all confidential data for the commercial
exploitation of Memantine. Merz will provide Suntory with a hard copy of the
data. If Suntory decides to use the data in any way, a payment will be made to
NTI. If the data constitutes and essential part of the New Drug Application
("NDA") documents, an additional payment will be made to NTI.
In August 2001, we announced that Forest would be conducting the second of
two trials necessary for registration of an NDA to the FDA for diabetic
neuropathy. This will be a large-scale, multi-center, double-blind placebo
controlled trial to assess the safety and efficacy of Memantine in the treatment
of diabetic neuropathy and is expected to be completed in 2002. We conducted
the first such trial with an enrollment of over 400 patients and reported
positive results in January 2000.
Since our founding in 1987, we have applied a majority of our resources to
our research and development programs and have generated only limited operating
revenue. Except for fiscal 2001, we have incurred losses in each year since our
inception and we expect to continue to incur losses in the future due to ongoing
research and development efforts.
7
RESULTS OF OPERATIONS
Our research and development expenses increased slightly to approximately
$256,000 in the three months ended September 30, 2001 from approximately
$236,000 in the three months ended September 30, 2000. The increase was
primarily due to costs associated with the initiation of long term toxicology
studies for the development of XERECEPT(TM). General and administrative
expenses decreased to approximately $500,000 in the three months ended September
30, 2001 from $529,000 in the same period of the prior year. The decrease was
primarily due to decreased expenditures in activities relating to seeking
financing and corporate partnerships. Interest income decreased to
approximately $117,000 in the three months ended September 30, 2001 from
approximately $146,000 in the same period of the prior year due to lower average
interest rates and lower average invested cash balances.
We expect to incur ongoing costs primarily for Phase II and Phase III
clinical trials for our development of XERECEPT(TM) and CRH-analogues and
related administrative support. Merz and Merz's marketing partners will pay all
future development costs of Memantine.
LIQUIDITY AND CAPITAL RESOURCES
From inception through September 30, 2001, we have raised a total of
approximately $44 million in net proceeds from the sale of common and preferred
stock.
We had available cash and cash equivalents and investments of approximately
$10.3 million as of September 30, 2001 compared to approximately $11.0 million
at June 30, 2001. We believe that our capital resources will be adequate to fund
our operations through at least the next twelve months. In the course of our
development activities we have incurred significant losses, and, although we
were profitable in the fiscal year ended June 30, 2001, we expect additional
losses in the fiscal year ending June 30, 2002. We expect to incur costs in
fiscal 2002 primarily for Phase II and Phase III clinical trials of XERECEPT and
CRH-analogues and related administrative support. Merz and Merz's marketing
partners will pay all future development costs of Memantine.
Our future capital requirements will depend on a number of factors,
including:
. the amount of payments received from marketing agreements for
Memantine;
. the amount of royalties received from Merz for future sales of
Memantine;
. the progress of our clinical development programs;
. the time and cost involved in obtaining regulatory approvals;
. the cost of filing, prosecuting, defending and enforcing patent claims
and other intellectual property rights;
. competing technological and market developments;
. our ability to establish collaborative relationships; and
. the development of commercialization activities and arrangements.
RISK FACTORS
Because all of our potential products are in clinical development, we may not
develop a candidate product that will receive required regulatory approval or be
successfully commercialized.
We are still in the development stage and have no marketable products. As
a result, there is no revenue from product sales, and most of our resources are
dedicated to the development of selected candidate pharmaceutical products. The
results of our preclinical studies and early stage clinical trials are not
necessarily indicative of those that will be obtained upon further clinical
testing in later stage clinical trials. It is possible that none of our
candidate products will receive regulatory approval or be successfully
commercialized.
8
Our potential products are subject to the risks of failure inherent in the
development of products based on new technologies.
Our potential products are subject to the risks of failure inherent in the
development of products based on new technologies. These risks include the
possibility that the potential products may:
. be found to be unsafe, ineffective or toxic;
. fail to receive necessary regulatory clearances;
. if approved, be difficult to manufacture on a large scale or
uneconomical to market;
. be precluded from marketing by us due to the proprietary rights of
third parties; and
. not be successful because third parties market or may market superior
or equivalent products.
Further, our development activities may not result in any commercially
viable products. We do not expect to be able to commercialize any products for
a number of years, if at all.
We are dependent on Merz and its marketing partners, Forest and Lundbeck, for
the successful commercialization of Memantine.
All of our revenues in fiscal 2001 were license fee payments from Merz
related to our portion of payments received by Merz pursuant to Merz's
agreements with its partners. We received no such payments in the first quarter
of fiscal 2002 and there can be no assurance that we will receive any payments
from Merz in fiscal 2002. The only revenues that we will receive in the
foreseeable future for Memantine are royalties on product sales by Merz or its
marketing partners and our share of payments received by Merz from its partners.
Under certain circumstances, Merz can terminate its agreement with us upon six
months notice. The termination of our agreement with Merz or any failure by
Merz or its partners to successfully commercialize Memantine after its
development would have a material adverse effect on our business, financial
condition and results of operations.
Our quarterly operating results may fluctuate significantly in future periods,
and, as a result, our stock price may fluctuate or decline.
To date, our revenues have primarily come from licensing fee payments from
Merz. Licensing fee payments and, therefore, our results of operations, may
vary significantly from quarter to quarter. Accordingly, we believe that
quarter-to-quarter comparisons of our historical results of operations are not
indicative of our future performance.
We have relied and will continue to rely on others for research, development,
manufacture and commercialization of our potential products.
We have entered into various contractual arrangements (many of which are
non-exclusive) with consultants, academic collaborators, licensors, licensees
and others, and we are dependent upon the level of commitment and subsequent
success of these outside parties in performing their responsibilities. Certain
of these agreements place significant responsibility for preclinical testing and
human clinical trials and for preparing and submitting submissions for
regulatory approval for potential products on the collaborator, licensor or
contractor. If the collaborator, licensor or contractor fails to perform, our
business, financial conditions and results may be adversely affected.
We have also relied on scientific, technical, clinical, commercial and
other data supplied and disclosed by others in entering into these agreements.
We have relied on this data in support of applications for human clinical trials
for our potential products. Although we have no reason to believe that this
information contains errors or omissions of fact, it is possible that there are
errors or omissions of fact that would change materially our view of the future
likelihood of FDA approval or commercial viability of these potential products.
We have agreements and licenses with third parties that require us to pay
royalties and make other payments to such parties. Our failure to make such
payments could cause us to lose rights to technology or data under these
agreements.
9
The FDA and state and local agencies, and comparable agencies and entities in
foreign countries impose substantial requirements on the manufacturing and
marketing of human therapeutics through lengthy and detailed laboratory and
clinical testing procedures, sampling activities and other costly and time
consuming procedures.
Fulfillment of regulatory requirements for marketing human therapeutics
typically takes many years and varies substantially based on the type,
complexity, and novelty of the drug for which approval is sought. Government
regulation may:
. delay for a considerable period of time or prevent marketing of any
product that we may develop; and/or
. impose costly procedures upon our activities.
Either of these effects of government regulation may provide an advantage
to our competitors.
There can be no assurance that FDA or other regulatory approval for any
products developed by NTI will be granted on a timely basis or at all. Any
delay in obtaining, or failure to obtain, required approvals would adversely
affect the marketing of our proposed products and our ability to earn product
revenues or royalties.
In addition, success in preclinical or early stage clinical trials does not
assure success in later stage clinical trials. As with any regulated product,
additional government regulations may be instituted which could delay regulatory
approval of our potential products. Additional government regulations that
might result from future legislation or administrative action cannot be
predicted.
The impact of recent changes in global economic conditions may negatively impact
our stock price.
The domestic and international economic environment is more uncertain than
it has been in recent periods. Additionally, the September 11, 2001 terrorist
attacks in New York City, Washington, D.C. and Pennsylvania, and the United
States' military response, has further affected economic certainty and the
economic environment. Economic and political uncertainty resulting from the
attacks and the U.S. military response could adversely affect our development
efforts as well as those of Merz and its marketing partners. This would have a
material adverse effect on our results of operations and our stock price.
Our success will depend, in large part, on our ability to obtain or license
patents, protect trade secrets and operate without infringing upon the
proprietary rights of others.
The patent position of biotechnology firms generally is highly uncertain
because:
. patents involve complex legal and factual issues that have recently
been the subject of much litigation;
. no consistent policy has emerged from the United States Patent and
Trademark Office regarding the breadth of claims allowed or the degree
of protection afforded under biotechnology patents; and
. others may independently develop similar products, duplicate any of
our potential products, or design around the claims of any of our
potential patented products.
In addition, because of the time delay in patent approval and the secrecy
afforded United States patent applications, we do not know if other
applications, which might have priority over our applications, have been filed.
Further, because we have non-exclusive licenses to patent rights covering
certain uses of XERECEPT, others may develop, manufacture and market products
that could compete with those we develop.
As a result of all of these factors, there can be no assurance that patent
applications relating to our potential products or processes will result in
patents being issued, or that patents, if issued, will
10
provide protection against competitors who successfully challenge our patents,
obtain patents that may have an adverse effect on our ability to conduct
business, or be able to circumvent our patent position.
A number of pharmaceutical and biotechnology companies and research and
academic institutions have developed technologies, filed patent applications or
received patents on various technologies that may be related to our business.
Some of these technologies, applications or patents may conflict with our or any
of our licensors' technologies or patent applications. Such conflict could
limit the scope of the patents, if any, that we may be able to obtain or to
which we have a license or result in the denial of our patent applications or
the patent applications for which we have licenses. In addition, if patents
that cover our activities have been or are issued to other companies, there can
be no assurance that we would be able to obtain licenses to these patents at a
reasonable cost, or be able to develop alternative technology.
Because we do not have our own manufacturing facilities, we face risks from
outsourcing.
Merz and Merz's marketing partners have the responsibility of supplying
Memantine for their clinical trials.
We rely on third-party contract manufacturers to provide us with XERECEPT
which is manufactured to our specifications using established chemical synthesis
methods. We have performed audits on these third-party manufacturers to ensure
compliance with the current Good Manufacturing Practice (cGMP) regulations. We
currently have no plans to build or develop an in-house manufacturing capability
for XERECEPT. We believe that alternative cGMP suppliers of the bulk drug and
finished dosage forms of the product will be available to meet our needs.
However, we face certain risks by outsourcing manufacturing, including:
. the delay of our preclinical and human clinical testing if our
contractors are unable to supply sufficient quantities of product
candidates manufactured in accordance with cGMP on acceptable terms;
. the delay of market introduction and subsequent sales if we should
encounter difficulties establishing relationships with manufacturers
to produce, package and distribute our products; and
. adverse effects on FDA pre-market approval of potential products and
contract manufacturers if they do not adhere to cGMP regulations.
Therefore, our dependence on third parties for the manufacture of products
may adversely affect our results of operations and our ability to develop and
deliver products on a timely and competitive basis.
Clinical trials or marketing of any of our potential products may expose us to
liability claims from the use of such products which our insurance may not
cover.
We have a limited amount of product liability insurance to cover
liabilities arising from clinical trials. Our current product liability
insurance does not cover commercial sales of products. We cannot be sure that
we will be able to obtain product liability insurance covering commercial sales
or, if such insurance is obtained, that sufficient coverage can be acquired at a
reasonable cost. An inability to obtain insurance at acceptable cost or
otherwise protect against potential product liability claims could prevent or
inhibit commercialization of any products we develop.
Further reductions in our staff might significantly delay the achievement of
planned development objectives.
Each person currently employed by NTI serves an essential function. Any
reductions in work force could impair our ability to manage ongoing clinical
trials and may have a material adverse effect on our operations.
11
The market price of our common stock has been, and is likely to continue to be,
highly volatile.
The average daily trading volume of our common stock has been low compared
to that of other biopharmaceutical companies. Our common stock was delisted
from The Nasdaq Stock Market in February 1998 because we failed to meet the
financial conditions necessary to remain listed. In July 2000, we were approved
for listing on The Nasdaq SmallCap Market. However, we may not continue to
qualify for listing on that market.
Factors that may cause volatility in our stock price include:
. the results of preclinical studies and clinical trials by the Company,
Merz or its marketing partners or our competitors;
. other evidence of the safety or efficacy of products of the Company,
Merz or its marketing partners or our competitors;
. announcements of technological innovations or new therapeutic products
by the Company or our competitors;
. developments in patent or other proprietary rights of the Company or
our competitors, including litigation;
. fluctuations in our operating results;
. government regulation and health care legislation; and
. market conditions for life science companies' stocks in general.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
In the normal course of business, our financial position is subject to a
variety of risks, including market risk associated with interest rate movements.
We regularly assess these risks and have established policies and business
practices to protect against these and other exposures. As a result, we do not
anticipate material potential losses in these areas.
The primary objective for our investment activities is to preserve
principal while maximizing yields without significantly increasing risk. This
is accomplished by investing in widely diversified investments, consisting
primarily of investment grade securities. As of September 30, 2001, 100% of our
portfolio will mature in one year or less. A hypothetical 50 basis point
increase in interest rates would not result in a material decrease or increase
in the fair value of our available-for-sale securities. We have no investments
denominated in foreign country currencies and therefore our investments are not
subject to foreign currency exchange risk.
12
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
None.
(b) Reports:
The Company did not file a report on Form 8-K during the three months ended
September 30, 2001.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEUROBIOLOGICAL TECHNOLOGIES, INC.
Dated: November 14, 2001 /s/ Paul E. Freiman
----------------------------------
Paul E. Freiman
President, Chief Executive Officer
(Principal Executive and Accounting
Officer) and Director
13