ProMIS Neurosciences (US:PMN)2023-03-08 22:10Part I Item 1. Business The company is a development-stage biotech firm using a computational platform for neurodegenerative disease therapies - ProMIS utilizes a patented, in-licensed technology platform that uses computational modeling to identify disease-specific epitopes on misfolded proteins, aiming to create selective antibody therapies for neurodegenerative diseases232425 - The company's lead product candidate is PMN310, a monoclonal antibody for Alzheimer's disease that selectively targets toxic amyloid-beta oligomers while avoiding plaque and healthy monomers40 - Key objectives for 2023 include submitting the U.S. IND for PMN310 to initiate a Phase 1 clinical study, advancing another antibody into preclinical development, and conducting further preclinical work on an amyloid vaccine program30 Main Product Pipeline Status | Product Candidate | Target Protein | Indication | Development Stage | | :--- | :--- | :--- | :--- | | PMN310 | Amyloid beta | Alzheimer's Disease (AD) | Preclinical (Phase 1 planned) | | PMN267 | TDP-43 | Amyotrophic Lateral Sclerosis (ALS) | Preclinical | | PMN442 | Alpha-synuclein | Multiple System Atrophy (MSA) | Preclinical | Item 1A. Risk Factors The company faces significant clinical, financial, operational, and regulatory risks as an early-stage entity - The company's product candidates are in early development stages, requiring significant additional investment with no guarantee of regulatory approval or commercial success203207 - ProMIS has a history of incurring losses and anticipates continued losses, raising substantial doubt about its ability to continue as a going concern without additional capital278280 - The company relies on third parties for research, development, manufacturing, and potential marketing of its product candidates, and the loss of these relationships could hinder development285286 - Success is dependent on obtaining and maintaining sufficient intellectual property protection, as failure to do so could allow competitors to develop similar products313314 - The business is subject to extensive healthcare regulations, and non-compliance could result in substantial penalties, while approved products will face ongoing oversight and pricing pressures397401417 Item 1B. Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None494 Item 2. Properties The company does not own or lease any material properties - The Company does not own or lease any material properties494 Item 3. Legal Proceedings The company is not party to any material legal proceedings - The company is not currently a party to any litigation or legal proceedings that management believes would have a material adverse effect on the business495 Item 4. Mine Safety Disclosures This section is not applicable to the company's operations - Not applicable496 Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common shares trade on Nasdaq and TSX under the symbol "PMN" with no dividends paid - The company's common shares trade on the Nasdaq Capital Market and the Toronto Stock Exchange (TSX) under the ticker symbol "PMN"497 - No dividends have been declared or paid in the last five fiscal years, and the company does not expect to pay dividends in the foreseeable future498499 - During 2022, the company issued unregistered securities, including stock options, Series 1 Preferred Shares, and units in a PIPE offering502507 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The company reported a wider net loss of $18.1 million in 2022, driven by higher R&D and G&A expenses - The company has incurred significant operating losses since inception, with a net loss of $18.1 million for the year ended December 31, 2022, and an accumulated deficit of $80.3 million520 - Management has concluded that its cash of $5.9 million as of December 31, 2022, is not sufficient to fund operations for the next 12 months, which raises substantial doubt about the company's ability to continue as a going concern523542 Results of Operations (Years Ended December 31) | | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | Research and development | $16,087,168 | $4,627,386 | $11,459,782 | | General and administrative | $7,292,744 | $3,663,707 | $3,629,037 | | Total operating expenses | $23,379,912 | $8,291,093 | $15,088,819 | | Loss from operations | ($23,379,912) | ($8,291,093) | ($15,088,819) | | Other income/(expense) | $5,317,649 | ($1,499,013) | $6,816,662 | | Net loss | ($18,062,263) | ($9,790,106) | ($8,272,157) | Cash Flow Summary (Years Ended December 31) | | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($17,033,883) | ($9,305,383) | | Net cash provided by (used in) investing activities | ($1,981) | $94,618 | | Net cash provided by financing activities | $6,494,654 | $25,522,801 | | Net (decrease) increase in cash | ($11,068,109) | $16,137,018 | Item 7A. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to credit, liquidity, and foreign currency risks, with minimal impact from inflation - The company faces liquidity risk as a pre-revenue development stage company and relies on external fundraising to support operations559 - ProMIS is exposed to foreign exchange risk on its U.S. dollar denominated assets and liabilities; a 10% change in the U.S. exchange rate would impact net loss by approximately $0.2 million560 - Inflation is not considered to have had a material effect on the company's business or financial results during 2022 or 2021561 Item 8. Financial Statements and Supplementary Data The financial statements show a net loss of $18.1 million for 2022 and a going concern uncertainty warning - The independent auditor's report includes a paragraph expressing substantial doubt about the Company's ability to continue as a going concern due to its accumulated deficit and net losses566 Consolidated Balance Sheet Data (as of December 31) | | 2022 | 2021 | | :--- | :--- | :--- | | Total Current Assets | $6,903,487 | $17,714,469 | | Total Assets | $6,924,646 | $17,746,754 | | Total Current Liabilities | $6,413,044 | $929,074 | | Total Liabilities | $8,272,418 | $12,086,696 | | Total Shareholders' (Deficit) Equity | ($1,347,772) | $5,660,058 | Consolidated Statement of Operations Data (for the year ended December 31) | | 2022 | 2021 | | :--- | :--- | :--- | | Total operating expenses | $23,379,912 | $8,291,093 | | Loss from operations | ($23,379,912) | ($8,291,093) | | Net loss | ($18,062,263) | ($9,790,106) | | Net loss per share, basic and diluted | ($2.41) | ($1.69) | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company engaged Baker Tilly US, LLP as its principal auditor in 2022 and reports no material disagreements - The company engaged Baker Tilly US, LLP in December 2021 to perform a U.S. audit, and Baker Tilly became the principal auditor in July 2022705 - There were no material disagreements with the accountant on accounting and financial disclosure during the audits for the periods ending December 31, 2022 and 2021707 Item 9A. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of the end of the fiscal year - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2022709 - The annual report does not include a management assessment of internal control over financial reporting, as permitted for newly public companies710 - There were no changes in internal control over financial reporting during the quarter ended December 31, 2022, that have materially affected, or are reasonably likely to materially affect, internal controls711 Part III Item 10. Directors, Executive Officers, and Corporate Governance This section details the company's leadership team, board structure, and corporate governance framework - The executive team is led by CEO Gail Farfel, who joined in September 2022, and the Board is chaired by Eugene Williams716717729 - The Board has three main committees: Audit, Corporate Governance and Nominating, and Compensation, with a majority of members identified as independent746750760 - The company has adopted a Code of Business Conduct and Ethics applicable to all employees, officers, and directors747 Item 11. Executive Compensation Executive compensation for 2022 consisted of base salary and equity awards for named executive officers - The company's compensation policy for named executive officers (NEOs) utilizes base salary and long-term equity incentives like stock options to be competitive and align interests with shareholders774775 - Employment agreements are in place for key executives, detailing base salaries, bonus eligibility, and severance arrangements; CEO Gail Farfel's agreement includes a $500,000 base salary and a target bonus of 50% of her annualized base salary785793794 Summary Compensation Table for 2022 | Name and Principal Position | Year | Salary ($) | Bonus ($) | Option Awards ($) | All Other Compensation ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Gail Farfel, CEO | 2022 | $144,231 | $25,000 | $839,932 | $8,000 | $992,163 | | Eugene Williams, Chairman & Former CEO | 2022 | $419,942 | $0 | $243,929 | $19,266 | $683,137 | | Gavin Malenfant, COO | 2022 | $380,000 | $0 | $0 | $33,489 | $413,489 | | Neil Cashman, CSO | 2022 | $333,795 | $0 | $243,929 | $0 | $577,724 | Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Directors and executives beneficially own 9.69% of common shares, with two entities holding over 5% each - As of February 6, 2023, all directors and executive officers as a group beneficially owned 920,557 common shares, representing 9.69% of the class817 - Two entities are reported as beneficial owners of more than 5% of the company's shares: Title 19 Investments LLC and Crocker Mountain LLC, each holding 9.99%817 Equity Compensation Plan Information (as of Dec 31, 2022) | Plan Category | Securities to be issued upon exercise (a) | Securities remaining available for future issuance (c) | | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 1,044,086 | 411,685 | Item 13. Certain Relationships and Related Transactions, and Director Independence The company discloses transactions with entities related to its CSO, CFO, and major shareholders - The company has a collaborative research agreement with the University of British Columbia (UBC), where CSO Dr. Neil Cashman is a principal investigator, incurring $557,665 in related costs in 2022823 - Consulting services are provided by Danforth Advisors, LLC, a firm where CFO Daniel Geffken is a managing director, with payments totaling $365,247 in 2022823 - Major shareholders, Title 19 Promis and Crocker Mountain LLC, participated in significant financing activities, including convertible debenture and PIPE offerings826827829 - The Board has determined that six of its directors are independent under Nasdaq corporate governance rules831 Item 14. Principal Accountant Fees and Services Total accountant fees were $389,000 in 2022, with all services pre-approved by the Audit Committee - The Audit Committee has a policy that requires pre-approval of all audit and non-audit services provided by the independent auditor834 Accountant Fees (in thousands) | Fee Category | 2022 | 2021 | | :--- | :--- | :--- | | Audit Fees | $245 | $315 | | Audit-Related Fees | $117 | $19 | | Tax Fees | $27 | $11 | | Total Fees | $389 | $345 | Part IV Item 15. Exhibits and Financial Statement Schedules This section lists all financial statements, schedules, and exhibits filed as part of the annual report - This section contains the list of financial statements filed with the report839843 - An index of all exhibits filed with the Form 10-K is provided, including corporate governance documents, material agreements, and officer certifications841845 Item 16. Form 10-K Summary This item is not applicable to the company's filing - Not applicable842