[X]
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
[ ]
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
For the transition period from _________ to __________.
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Delaware
|
41-1649949
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification Number)
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8 Penn Center
1628 JFK Blvd, Suite 300
Philadelphia, PA
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19103
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(Address of principal executive offices)
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(Zip code)
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Large accelerated filer [ ]
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Accelerated filer [X]
|
Non-accelerated filer [ ]
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Smaller reporting company [ ]
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(Do not check if a smaller reporting company)
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Item
|
Page
|
||||
PART I - FINANCIAL INFORMATION
|
|||||
1. | |||||
1 | |||||
2 | |||||
3 | |||||
5 | |||||
2. | 12 | ||||
4. | 18 | ||||
PART II - OTHER INFORMATION
|
|||||
1. | 18 | ||||
6. | 18 | ||||
19 | |||||
20 |
June 30,
2012
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December 31,
2011
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|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Current Assets:
|
||||||||
Cash and cash equivalents
|
$ | 3,111,342 | $ | 8,995,571 | ||||
Cash restricted pursuant to letters of credit
|
407,463 | 250,000 | ||||||
Accounts receivable
|
3,552 | 37,065 | ||||||
Stock subscriptions receivable
|
— | 6,667 | ||||||
Prepaid expenses and other current assets
|
218,409 | 274,208 | ||||||
Total current assets
|
3,740,766 | 9,563,511 | ||||||
Property and Equipment, at cost:
|
||||||||
Computer equipment
|
332,287 | 298,290 | ||||||
Office and laboratory equipment (including assets under capitalized leases)
|
689,077 | 624,817 | ||||||
Furniture and fixtures
|
169,581 | 186,837 | ||||||
Manufacturing equipment
|
341,620 | 156,435 | ||||||
Leasehold improvements
|
187,264 | 187,264 | ||||||
1,719,829 | 1,453,643 | |||||||
Less-Accumulated depreciation and amortization
|
(1,156,232 | ) | (1,135,912 | ) | ||||
Net property and equipment (including assets under capitalized leases)
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563,597 | 317,731 | ||||||
Other Assets:
|
||||||||
Intangible assets, net of accumulated amortization
|
9,625,000 | 9,625,000 | ||||||
Deposits and other assets
|
10,816 | 20,565 | ||||||
Total other assets
|
9,635,816 | 9,645,565 | ||||||
Total assets
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$ | 13,940,179 | $ | 19,526,807 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
Current Liabilities:
|
||||||||
Accounts payable
|
$ | 683,672 | $ | 365,298 | ||||
Deferred revenue
|
123,721 | 123,708 | ||||||
Current portion of notes payable and capital lease obligation, net of discounts
|
2,405 | 2,288 | ||||||
Derivative warrant liability
|
392,536 | 1,035,337 | ||||||
Accrued expenses and other liabilities
|
742,979 | 965,832 | ||||||
Total current liabilities
|
1,945,313 | 2,492,463 | ||||||
Notes payable and capital lease obligation, net of current portion and discounts
|
2,656 | 3,888 | ||||||
Deferred revenue, net of current portion
|
— | 61,867 | ||||||
Total liabilities
|
1,947,969 | 2,558,218 | ||||||
Commitments
|
||||||||
Stockholders’ Equity:
|
||||||||
Convertible Preferred Stock:
|
||||||||
Series C, $0.01 par value, authorized 10,000 shares, issued and outstanding 9,974.185 shares at June 30, 2012 and December 31, 2011
|
100 | 100 | ||||||
Series D, $0.01 par value, authorized 3,600,000 shares, issued and outstanding 3,006,000 shares at June 30, 2012 and December 31, 2011 (preference in liquidation of $3,006,000 at June 30, 2012)
|
30,060 | 30,060 | ||||||
Common Stock, $0.01 par value, authorized 150,000,000 shares, issued and outstanding 39,615,344 and 38,543,944 shares at June 30, 2012 and December 31, 2011, respectively
|
396,156 | 385,442 | ||||||
Additional paid-in capital
|
99,276,015 | 98,116,327 | ||||||
Common stock subscribed for but not paid for or issued, 0 and 33,333 shares at June 30, 2012 and December 31, 2011, respectively
|
— | 6,667 | ||||||
Accumulated deficit
|
(87,710,121 | ) | (81,570,007 | ) | ||||
Total stockholders’ equity
|
11,992,210 | 16,968,589 | ||||||
Total liabilities and stockholders’ equity
|
$ | 13,940,179 | $ | 19,526,807 |
For the Three Months
Ended June 30,
|
For the Six Months
Ended June 30,
|
|||||||||||||||
|
2012
|
2011
|
2012
|
2011
|
||||||||||||
Licensing revenue
|
$ | 30,927 | $ | 121,455 | $ | 61,854 | $ | 242,910 | ||||||||
Other revenue
|
- | 37,065 | - | 145,152 | ||||||||||||
Total revenues
|
30,927 | 158,520 | 61,854 | 388,062 | ||||||||||||
Operating Expenses:
|
||||||||||||||||
Research and development
|
2,200,307 | 996,149 | 3,591,952 | 1,862,099 | ||||||||||||
Selling, general and administrative
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1,334,852 | 978,150 | 3,194,256 | 1,900,265 | ||||||||||||
Total operating expenses
|
3,535,159 | 1,974,299 | 6,786,208 | 3,762,364 | ||||||||||||
Loss from operations
|
(3,504,232 | ) | (1,815,779 | ) | (6,724,354 | ) | (3,374,302 | ) | ||||||||
Other Income (Expense):
|
||||||||||||||||
Interest income
|
1,556 | 1,210 | 4,515 | 3,289 | ||||||||||||
Interest expense
|
(134 | ) | (604 | ) | (284 | ) | (13,354 | ) | ||||||||
Loss on extinguishment of debt/payables
|
- | - | - | (1,514 | ) | |||||||||||
Gain (loss) on disposals of assets
|
(21,272 | ) | (2,531 | ) | (21,272 | ) | 834 | |||||||||
Derivative warrant liability gain (loss)
|
369,738 | (122,011 | ) | 601,281 | (3,151,908 | ) | ||||||||||
Other income (expense), net
|
349,888 | (123,936 | ) | 584,240 | (3,162,653 | ) | ||||||||||
Net loss
|
(3,154,344 | ) | (1,939,715 | ) | (6,140,114 | ) | (6,536,955 | ) | ||||||||
Deemed dividend on beneficial conversion feature of Series D Convertible Preferred Stock
|
- | - | - | (1,975,211 | ) | |||||||||||
Accretion of dividends on Convertible Perpetual Redeemable Preferred Stock
|
- | (47,558 | ) | - | (93,242 | ) | ||||||||||
Net loss applicable to common shareholders
|
$ | (3,154,344 | ) | $ | (1,987,273 | ) | $ | (6,140,114 | ) | $ | (8,605,408 | ) | ||||
Net loss per common share, basic and diluted
|
$ | (0.08 | ) | $ | (0.06 | ) | $ | (0.16 | ) | $ | (0.26 | ) | ||||
Basic and diluted weighted average common shares outstanding
|
39,160,643 | 33,911,459 | 38,951,809 | 33,277,823 |
For the Six Months
Ended June 30,
|
||||||||
|
2012
|
2011
|
||||||
Cash Flows From Operating Activities:
|
||||||||
Net loss
|
$ | (6,140,114 | ) | $ | (6,536,955 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Depreciation and amortization
|
43,757 | 14,200 | ||||||
Share-based compensation, net
|
436,056 | 286,508 | ||||||
Fair value of common stock and warrants issued for services
|
50,299 | 380,763 | ||||||
Derivative warrant liability (gain) loss
|
(601,281 | ) | 3,151,908 | |||||
Non-cash loss on extinguishment of debt
|
— | 1,514 | ||||||
Non-cash interest expense
|
— | 12,159 | ||||||
Non-cash loss on disposal of assets
|
21,272 | 2,731 | ||||||
Changes in assets and liabilities:
|
||||||||
Accounts receivable
|
33,513 | 104,423 | ||||||
Stock subscriptions receivable
|
— | 285,000 | ||||||
Prepaid expenses and other current assets
|
55,799 | (83,602 | ) | |||||
Deposits and other assets
|
9,749 | (10,566 | ) | |||||
Accounts payable
|
318,374 | (175,345 | ) | |||||
Deferred revenue
|
(61,854 | ) | (242,910 | ) | ||||
Accrued expenses and other liabilities
|
67,147 | 207,238 | ||||||
Net cash used in operating activities
|
(5,767,283 | ) | (2,602,934 | ) | ||||
Cash Flows from Investing Activities:
|
||||||||
Purchase of property and equipment
|
(310,895 | ) | (249,127 | ) | ||||
Increase in restricted cash
|
(157,463 | ) | (128,250 | ) | ||||
Net cash used in investing activities
|
(468,358 | ) | (377,377 | ) | ||||
Cash Flows From Financing Activities:
|
||||||||
Proceeds from the exercise of warrants
|
151,680 | 576,224 | ||||||
Proceeds from issuance of common stock and warrants, net of issuance costs
|
6,667 | 794,761 | ||||||
Principal payments for capital lease obligations
|
(1,115 | ) | (1,009 | ) | ||||
Proceeds from issuance of Series D Convertible Preferred Stock, net of issuance costs
|
— | 2,478,702 | ||||||
Proceeds from bridge notes
|
— | 1,000,000 | ||||||
Repayment of bridge notes
|
— | (75,000 | ) | |||||
Proceeds from exercise of stock options
|
194,180 | 64,250 | ||||||
Net cash provided by financing activities
|
351,412 | 4,837,928 | ||||||
Net increase (decrease) in cash and cash equivalents
|
(5,884,229 | ) | 1,857,617 | |||||
Cash and cash equivalents, beginning of period
|
8,995,571 | 1,342,044 | ||||||
Cash and cash equivalents, end of period
|
$ | 3,111,342 | $ | 3,199,661 |
|
Six Months Ended
June 30,
|
|||||||
|
2012
|
2011
|
||||||
Supplemental Disclosure of Cash Flow Information and
Non-Cash Financing Transactions:
|
||||||||
Cash paid for interest
|
$ | 284 | $ | 1,196 | ||||
Accretion of dividend on Series B Perpetual Redeemable Preferred Stock
|
$ | — | $ | 93,242 | ||||
Deemed dividend on beneficial conversion feature of Series D Convertible Preferred Stock
|
$ | — | $ | 1,975,211 | ||||
Issuance of common stock in settlement of short term note
|
$ | — | $ | 25,000 | ||||
Conversion of notes payable and accrued interest into Series D Convertible
Preferred Stock
|
$ | — | $ | 1,006,000 | ||||
Reclassification of derivative warrant liability to additional paid-in capital
|
$ | 41,520 | $ | 2,170,727 | ||||
Fair value of warrants issued to investor relations services
|
$ | — | $ | 173,000 | ||||
Fair value of common stock issued for short-term note extension
|
$ | — | $ | 10,500 | ||||
Fair value of warrants issued to financial advisors as financing costs
|
$ | — | $ | 41,363 | ||||
Fair value of common stock issued in connection with settlement agreement
|
$ | 208,000 | $ | — | ||||
Cancellation of restricted common stock
|
$ | — | $ | 5,250 |
|
●
|
analyte extraction, with the Symphony® tCGM System (“Symphony”) for needle-free, continuous glucose monitoring for use in hospital critical care units and for people with diabetes; and
|
|
●
|
enhanced needle-free drug delivery.
|
June 30, 2012
|
December 31, 2011
|
||||||||||||||||
Estimated Life
|
Cost
|
Accumulated Amortization
|
Net
|
Net
|
|||||||||||||
Contract related intangible asset:
|
|||||||||||||||||
Cato Research discounted contract
|
3 years
|
$ | 355,000 | $ | 355,000 | $ | — | $ | — | ||||||||
Technology related intangible assets:
|
|||||||||||||||||
Patents for the AzoneTS-based product candidates and formulation
|
6 years
|
1,305,000 | — | 1,305,000 | 1,305,000 | ||||||||||||
Drug Master Files containing formulation, clinical and safety documentation used by the FDA
|
6 years
|
1,500,000 | — | 1,500,000 | 1,500,000 | ||||||||||||
In-process pharmaceutical products for 2 indications
|
6 years
|
6,820,000 | — | 6,820,000 | 6,820,000 | ||||||||||||
Total technology related intangible assets
|
9,625,000 | — | 9,625,000 | 9,625,000 | |||||||||||||
Intangible assets, net
|
$ | 9,980,000 | $ | 355,000 | $ | 9,625,000 | $ | 9,625,000 |
Franklin
|
Philadelphia
|
Total
|
||||||||||
For the period ending December 31,
|
||||||||||||
2012
|
$ | 209,000 | $ | 90,000 | $ | 299,000 | ||||||
2013
|
424,000 | 183,000 | 607,000 | |||||||||
2014
|
434,000 | 187,000 | 621,000 | |||||||||
2015
|
444,000 | 192,000 | 636,000 | |||||||||
2016
|
454,000 | 196,000 | 650,000 | |||||||||
Total
|
$ | 1,965,000 | $ | 848,000 | $ | 2,813,000 |
2012
|
2011
|
|||||||
Derivative warrant liability as of January 1
|
$ | 1,035,337 | $ | 1,544,996 | ||||
Total unrealized losses included in net loss (1)
|
— | 2,191,147 | ||||||
Total realized losses included in net loss (1)
|
— | 978,678 | ||||||
Total unrealized gains included in net loss (1)
|
(539,648 | ) | (17,917 | ) | ||||
Total realized gains included in net loss (1)
|
(61,633 | ) | — | |||||
Reclassification of derivative warrant liability to additional paid-in capital for derivative warrants exercised
|
(41,520 | ) | (2,170,726 | ) | ||||
Derivative warrant liability as of June 30
|
$ | 392,536 | $ | 2,526,178 |
Stock Option Plans
|
|||||||||||||
2003 Plan
|
2008 Plan
|
||||||||||||
Shares Available For Issuance
|
|||||||||||||
Total reserved for stock options and restricted stock
|
1,600,000 | 10,000,000 | |||||||||||
Net restricted stock issued net of cancellations
|
(161,250 | ) | (2,208,406 | ) | |||||||||
Stock options granted
|
(1,544,491 | ) | (2,275,000 | ) | |||||||||
Add back options cancelled before exercise
|
678,491 | 375,000 | |||||||||||
Options cancelled by plan vote
|
— | — | |||||||||||
Remaining shares available for future grants
|
572,750 | 5,891,594 |
Not Pursuant
to a Plan
|
||||||||||||
Total granted
|
1,544,491 | 2,275,000 | 3,100,000 | |||||||||
Less: Restricted stock cancelled
|
— | — | — | |||||||||
Options cancelled
|
(678,491 | ) | (375,000 | ) | (1,383,334 | ) | ||||||
Options exercised
|
(352,000 | ) | (130,000 | ) | (666,666 | ) | ||||||
Net shares outstanding before restricted stock
|
514,000 | 1,770,000 | 1,050,000 | |||||||||
Net restricted stock issued net of cancellations
|
161,250 | 2,208,406 | 284,844 | |||||||||
Outstanding shares at March 31, 2012
|
675,250 | 3,978,406 | 1,334,844 |
|
2012
|
2011
|
||||||
Risk-free interest rate
|
0.94% — 2.05 | % | 2.43% — 3.47 | % | ||||
Expected dividend yield
|
— | — | ||||||
Expected term
|
6.5 years
|
6.0 — 6.5 years
|
||||||
Forfeiture rate (excluding fully vested stock options)
|
15 | % | 0% — 15 | % | ||||
Expected volatility
|
131% — 137 | % | 140% — 142 | % |
Stock Options
|
Shares
|
Weighted-
Average
Exercise
Price
|
Weighted-
Average
Remaining
Contractual
Term
|
Aggregate
Intrinsic
Value
|
|||||||||
Outstanding at January 1, 2012
|
3,395,103 | $ | 1.68 | ||||||||||
Granted
|
430,000 | 1.84 | |||||||||||
Exercised
|
(233,666 | ) | 0.96 | ||||||||||
Forfeited or expired
|
(257,437 | ) | 4.58 | ||||||||||
Outstanding at June 30, 2012
|
3,334,000 | $ | 1.53 |
7.3 years
|
$ | 1,866,200 | |||||||
Exercisable at June 30, 2012
|
2,112,830 | $ | 0.91 |
6.1 years
|
$ | 1,861,033 |
Restricted Stock
|
Shares
|
Weighted-
Average
Grant-Date
Fair Value
|
||||||
Nonvested at January 1, 2012
|
1,819,594 | $ | 1.72 | |||||
Granted this period
|
703,656 | 1.95 | ||||||
Grants made in prior periods, now becoming restricted
|
220,000 | 0.92 | ||||||
Vested
|
(110,000 | ) | 2.24 | |||||
Forfeited
|
— | — | ||||||
Nonvested at June 30, 2012
|
2,633,250 | $ | 1.78 |
·
|
1,679,594 shares of restricted stock vest upon the FDA approval of Symphony or the sale of the Company;
|
·
|
220,000 shares of restricted stock vest upon the sale of the Company; and
|
·
|
733,656 shares of restricted stock vest over one to four years, at each of the anniversary dates of the grants.
|
Number of
Shares
Exercisable
|
Exercise Price
|
Date of Expiration
|
|||||||
Outstanding warrants accounted for as derivative warrant liability:
|
|||||||||
Granted to investors and placement agent in private placement
|
112,148 | $ | 1.28 |
7/16/2012
|
|||||
Granted to financial investment advisor
|
3,000 | 1.38 |
7/25/2012
|
||||||
Granted to financial advisor in connection with an acquisition
|
61,625 | 1.75 |
9/14/2012
|
||||||
Granted to financial investment advisor
|
7,500 | 1.30 |
2/11/2013
|
||||||
Granted to investors in private placement
|
154,990 | 0.50 |
2/11/2013
|
||||||
Granted to investors in private placement
|
177,324 | 1.50 |
3/24/2013
|
||||||
Total outstanding warrants accounted for as derivative warrant liability
|
516,587 | ||||||||
Weighted average exercise price
|
$ | 1.18 | |||||||
Weighted average time to expiration in years
|
0.48 years
|
||||||||
Outstanding warrants accounted for as equity:
|
|||||||||
Granted to investors in private placement of preferred stock
|
32,249 | $ | 1.00 |
9/30/2013
|
|||||
Granted to investors in private placement of preferred stock
|
198,333 | 1.50 |
10/28/2013
|
||||||
Granted to investors in private placement of preferred stock
|
390,000 | 0.75 |
2/28/2014
|
||||||
Granted to vendor
|
60,000 | 0.60 |
3/15/2014
|
||||||
Granted to investors in private placement
|
400,000 | 1.59 |
6/30/2014
|
||||||
Granted to investors in private placement
|
768,000 | 2.00 |
11/13/2014
|
||||||
Granted to placement agent in private placement
|
256,906 | 1.50 |
11/13/2014
|
||||||
Granted to vendor
|
50,000 | 2.00 |
12/1/2012
|
||||||
Granted to investors in private placement
|
63,000 | 2.00 |
12/3/2014
|
||||||
Granted to investors in private placement
|
341,325 | 2.25 |
2/9/2015
|
||||||
Granted to placement agents in private placement
|
28,500 | 2.25 |
2/9/2015
|
||||||
Granted to investor in private placement
|
6,375 | 2.25 |
3/18/2015
|
||||||
Granted to financial investment advisor
|
100,000 | 1.50 |
2/10/2013
|
||||||
Granted to financial investment advisor
|
10,367 | 2.00 |
3/3/2013
|
||||||
Granted to investors in private placement
|
187,500 | 1.50 |
11/5/2012
|
||||||
Granted to investors in private placement
|
187,500 | 2.50 |
11/5/2012
|
||||||
Granted to placement agent in private placement
|
5,000 | 1.50 |
11/5/2012
|
||||||
Granted to placement agent in private placement
|
5,000 | 2.50 |
11/5/2012
|
||||||
Granted to investors in private placement
|
35,000 | 1.50 |
11/26/2012
|
||||||
Granted to investors in private placement
|
35,000 | 2.50 |
11/26/2012
|
||||||
Granted to investors in private placement
|
495,000 | 1.50 |
12/29/2012
|
||||||
Granted to investors in private placement
|
512,500 | 2.50 |
12/29/2012
|
||||||
Granted to placement agent in private placement
|
30,000 | 1.50 |
12/29/2012
|
||||||
Granted to placement agent in private placement
|
30,000 | 2.50 |
12/29/2012
|
||||||
Granted to investors in private placement
|
245,750 | 1.50 |
1/4/2013
|
||||||
Granted to investors in private placement
|
245,750 | 2.50 |
1/4/2013
|
||||||
Granted to placement agent in private placement
|
18,125 | 1.50 |
1/4/2013
|
||||||
Granted to placement agent in private placement
|
18,125 | 2.50 |
1/4/2013
|
||||||
Granted to investors in private placement
|
255,000 | 1.50 |
2/3/2013
|
||||||
Granted to investors in private placement
|
280,000 | 2.50 |
2/3/2013
|
||||||
Granted to placement agent in private placement
|
1,250 | 1.50 |
2/3/2013
|
||||||
Granted to placement agent in private placement
|
1,250 | 2.50 |
2/3/2013
|
||||||
Granted to investors in private placement
|
250,000 | 1.50 |
2/8/2013
|
||||||
Granted to investors in private placement
|
250,000 | 2.50 |
2/8/2013
|
||||||
Granted to investors in private placement
|
959,582 | 3.00 |
12/7/2014
|
||||||
Total outstanding warrants accounted for as equity
|
6,752,387 | ||||||||
Weighted average exercise price
|
$ | 2.00 | |||||||
Weighted average time to expiration in years
|
0.92 years
|
||||||||
Totals for all warrants outstanding:
|
|||||||||
Total
|
7,268,974 | ||||||||
Weighted average exercise price
|
$ | 1.95 | |||||||
Weighted average time to expiration in years
|
0.89 years
|
Warrants
|
Shares
|
Weighted-
Average
Exercise Price
|
||||||
Outstanding at January 1, 2012
|
7,527,529 | $ | 1.92 | |||||
Granted
|
— | — | ||||||
Exercised
|
(118,500 | ) | 1.28 | |||||
Forfeited or expired
|
(140,055 | ) | 1.07 | |||||
Outstanding at June 30, 2012
|
7,268,974 | $ | 1.95 |
|
•
|
our ability to obtain funding from third parties, including any future collaborative partners, on reasonable terms;
|
|
•
|
our progress on research and development programs;
|
|
•
|
the time and costs required to gain regulatory approvals;
|
|
•
|
the costs of manufacturing, marketing and distributing our products, if successfully developed and approved;
|
|
•
|
the costs of filing, prosecuting and enforcing patents, patent applications, patent claims and trademarks;
|
|
•
|
the status of competing products; and
|
|
•
|
the market acceptance and third-party reimbursement of our products, if successfully developed and approved.
|
Payments due by period
|
||||||||||||||||||||
Total
|
Less than
1 year
|
1-3 years
|
3-5 years
|
More than
5 years
|
||||||||||||||||
Facility Lease – Franklin, MA
|
$ | 2,348,000 | $ | 419,000 | $ | 868,000 | $ | 908,000 | $ | 153,000 | ||||||||||
Facility Lease – Philadelphia, PA
|
930,000 | 181,000 | 375,000 | 374,000 | — | |||||||||||||||
Operating Lease Obligations
|
15,000 | 8,000 | 7,000 | — | — | |||||||||||||||
Capital Lease Obligation
|
6,000 | 3,000 | 3,000 | — | — | |||||||||||||||
Total
|
$ | 3,299,000 | $ | 611,000 | $ | 1,253,000 | $ | 1,282,000 | $ |
153,000
|
By: | /s/ Patrick T. Mooney | ||
Patrick T. Mooney, M.D. | |||
Chief Executive Officer and Chairman of the Board | |||
(Principal Executive Officer) | |||
By: | /s/ Christopher P. Schnittker | ||
Christopher P. Schnittker, CPA | |||
Chief Financial Officer and Treasurer | |||
(Principal Financial Officer) |
Exhibit No.
|
Item
|
|
3.1 |
Amended and Restated Certificate of Incorporation dated June 20, 2012.
|
|
3.2 |
Certificate of Designation, Preferences and Rights of Series C Preferred Stock dated July 19, 2012.
|
|
3.3 |
Certificate of Designation, Preferences and Rights of Series D Preferred Stock dated July 19, 2012.
|
|
5.1
|
Opinion of Morgan Lewis & Bockius LLP is incorporated by reference to Exhibit 5.1 of the Registrant’s Quarterly Report on Form 10-Q filed May 10, 2012.
|
|
10.1
|
At Market Issuance Sales Agreement with MLV & Co. dated May 9, 2012 is incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q filed May 10, 2012.***
|
|
10.2 |
Amended and Restated License Agreement between the Company and Ferndale Pharma Group, Inc. dated July 3, 2012.**
|
|
31.1 |
Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31.2 |
Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32.1
|
Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
32.2
|
Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
101
|
The following materials from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, formatted in XBRL (Extensible Business Reporting Language), (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Cash Flows, and (iv) Notes to Consolidated Financial Statements.*
|
|
* Pursuant to Rule 406T of Regulation S-T, the XBRL (Extensible Business Reporting Language) information included in Exhibit 101 hereto is deemed furnished and not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
|
||
** Confidential treatment has been requested as to certain portions, which portions have been omitted and filed separately with the Securities and Exchange Commission.
|
||
*** In response to shareholder feedback and concerns, the Company terminated the At Market Issuance Sales Agreement between the Company and MLV & Co. LLC effective as of May 28, 2012. No shares were sold under the Sales Agreement prior to the termination date. |
By: /s/ Patrick T. Mooney, M.D. | ||
Name: Patrick T. Mooney, M.D. | ||
Title: Chief Executive Officer |
By: /s/ Kimberly Burke | ||
Name: Kimberly Burke | ||
Title: General Counsel |
Date of Conversion: | |||||
Number of Preferred Shares to be converted: | |||||
Stock certificate no(s). of Preferred Shares to be converted: | |||||
The Common Stock have been sold: | YES | NO | |||
Please confirm the following information: | |||||
Conversion Rate: | |||||
Number of shares of Common Stock to be issued: | |||||
Number of shares of Common Stock beneficially owned or deemed beneficially owned by the Holder on the Date of Conversion determined in accordance with Section 16 of the Securities Exchange Act of 1934, as amended: | |||||
Please issue the Common Stock into which the Preferred Shares are being converted and, if applicable, any check drawn on an account of the Company in the following name and to the following address: | |||||
Issue to: | |||||
Facsimile Number: | |||||
Authorization: | |||||
By: | |||||
Title: | |||||
Dated: |
(1)
|
the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date; and
|
(2)
|
the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution.
|
Date of Conversion: | |||||
Number of shares of Preferred Stock to be converted: | |||||
Stock certificate no(s). of Preferred Stock to be converted: | |||||
The Common Stock have been sold: | YES | NO | |||
Please confirm the following information: | |||||
Number of shares of Common Stock to be issued: | |||||
Number of shares of Common Stock beneficially owned or deemed beneficially owned by the holder on the Date of Conversion determined in accordance with Section 16 of the Securities Exchange Act of 1934, as amended: | |||||
Please issue the Common Stock into which the Preferred Stock are being converted and, if applicable, any check drawn on an account of the Company in the following name and to the following address: | |||||
Issue to: | |||||
Facsimile Number: | |||||
Authorization: | |||||
By: | |||||
Title: | |||||
Dated: |
1.
|
Definitions.
|
|
“Field” means the temporary disruption of the outer layer of the skin prior to the application of topical anesthetic or analgesic cream, for local dermal anesthesia or analgesia prior to a needle insertion or IV procedure.
|
|
“Final Patent Refusal” means a final, non-appealable denial or refusal (not subject to re-examination) to issue a patent in a certain country by that country’s patent reviewing body.
|
|
“Prelude Technology” means Licensor’s proprietary technology known as the Prelude® SkinPrep System that is intended to temporarily disrupt the outer layer of the skin for the purpose of administering, among other things, a topical anesthetic or analgesic and accelerating the time to onset for topical anesthetic or analgesic drugs including, but not limited to, lidocaine.
|
|
“Product Components” means, collectively, an abrasive tip, a reference electrode ring, Benzalkonium Chloride for skin preparation, and topical 4% lidocaine cream.
|
|
“Products” means the Device and the Product Components assembled in a kit.
|
|
“Recipient” means the party receiving Confidential Information.
|
|
“Sublicensee Breach” means a breach by a Sublicensee of the payment obligations affecting Licensor or any other material terms and conditions of a sublicense that would constitute a breach of the terms and conditions of this Agreement if such acts were performed by Licensee.
|
|
“Territory” means the United States and its territories and possessions, Canada, Mexico, Australia, New Zealand, Switzerland, the countries of the European Community and the countries of South America.
|
|
“Trademarks” means the trademarks set forth on the attached Schedule C.
|
Aggregate Net Sales
|
Milestone Payment Amounts
|
$[**]
|
$[**]
|
$[**]
|
$[**]
|
$[**]
|
$[**]
|
$[**]
|
$[**]
|
Contract Year
|
Minimum Annual Royalty
|
1
|
$[**]
|
2
|
$[**]
|
3
|
$[**]
|
4
|
$[**]
|
5 – 10
|
$[**]
|
Country
|
Patent No.
|
Date Issued
|
Expires
|
AT
|
E 499.967
|
9/26/11
|
4/25/2008
|
AU
|
2008245585
|
1/19/12
|
4/25/2028
|
BE
|
2,152,358
|
6/7/11
|
4/25/2028
|
DK
|
DK/EP2152358
|
6/27/11
|
4/25/2028
|
GR
|
GR 3075105
|
5/30/11
|
4/25/2028
|
HK
|
1,140,709
|
12/5/11
|
4/25/2028
|
HR
|
P20110396
|
8/4/11
|
4/25/2028
|
HU
|
2,152,358
|
8/17/11
|
4/25/2028
|
IE
|
2,152,358
|
6/24/11
|
4/25/2028
|
LT
|
2,152,358
|
9/26/11
|
4/25/2028
|
NO
|
NO/EP2152358
|
7/18/11
|
4/25/2028
|
NZ
|
580997
|
12/5/11
|
4/25/2028
|
RU
|
2435616
|
12/10/11
|
4/25/2028
|
SK
|
E 9561
|
9/5/11
|
4/25/2028
|
TR
|
TR201105270 T4
|
4/25/2028
|
|
EP
|
2152358
|
3/2/11
|
National patents in all designated countries:
Bulgaria, Switzerland and Liechtenstein, Cyprus, Czech Republic, Germany, Estonia, Spain, Finland, France, United Kingdom, Iceland, Italy, Luxembourg, Latvia, Monaco, Malta, Netherlands, Poland, Portugal, Romania, Sweden and Slovenia,
|
Country
|
Serial No.
|
Date Filed
|
US
|
12/110,034
|
04/25/08
|
BR
|
PI 0810969-9
|
10/27/09
|
CA
|
2,685,423
|
12/14/09
|
CN
|
200880020556
|
4/25/08
|
Trademark
|
Country
|
Application No.
|
Prelude
|
United States
|
77/732,793
|
Country of Territory
|
License Fee*
|
Year 1 Minimum
Annual Royalty**
|
Germany
|
$ [**]
|
$ [**]
|
France
|
$ [**]
|
$ [**]
|
United Kingdom
|
$ [**]
|
$ [**]
|
Italy
|
$ [**]
|
$ [**]
|
Spain
|
$ [**]
|
$ [**]
|
Netherlands
|
$ [**]
|
$ [**]
|
Belgium
|
$ [**]
|
$ [**]
|
Sweden
|
$ [**]
|
$ [**]
|
Switzerland
|
$ [**]
|
$ [**]
|
Austria
|
$ [**]
|
$ [**]
|
Canada
|
$ [**]
|
$ [**]
|
Mexico
|
$ [**]
|
$ [**]
|
Brazil
|
$ [**]
|
$ [**]
|
Argentina
|
$ [**]
|
$ [**]
|
Chile
|
$ [**]
|
$ [**]
|
Australia
|
$ [**]
|
$ [**]
|
1. I have reviewed this Quarterly Report on Form 10-Q of Echo Therapeutics, Inc. (the “Company”) for the quarter ended June 30, 2012;
|
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 Company as of and for the periods presented in this report;
|
4. The Company’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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company 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 Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period on 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 generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the Company’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 Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
|
5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors:
|
(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 Company’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 Company’s internal control over financial reporting.
|
1. I have reviewed this Quarterly Report on Form 10-Q of Echo Therapeutics, Inc. (the “Company”) for the quarter ended June 30, 2012;
|
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 Company as of and for the periods presented in this report;
|
4. The Company’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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company 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 Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period on 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 generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the Company’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 Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
|
5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors:
|
(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 Company’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 Company’s internal control over financial reporting.
|
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
CASH AND CASH EQUIVALENTS (Details Narrative) (USD $)
|
Jun. 30, 2012
|
---|---|
Cash And Cash Equivalents | |
Cash and cash equivalents | $ 3,100,000 |
Insurance coverage | $ 250,000 |
Warrants (Details Narrative)
|
6 Months Ended |
---|---|
Jun. 30, 2012
|
|
Warrants | |
Shares of Common Stock issued upon the exercise of warrants | 118,500 |
STOCK OPTIONS AND RESTRICTED STOCK (Details Narrative) (USD $)
|
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2012
|
Jun. 30, 2011
|
Dec. 31, 2011
|
|
Stock Options And Restricted Stock | |||
Common Stock outstanding | 38,836,022 | ||
Maximum authorized shares | 150,000,000 | 150,000,000 | |
Additional paid-in capital and non-cash compensation expense | $ 407,000 | $ 287,000 | |
Weighted-average grant-date fair value of stock options granted | $ 1.84 | ||
Share-based compensation expense | 407,000 | 287,000 | |
Total unrecognized compensation expense | $ 2,537,000 | ||
Plan2003Member
|
|||
Stock Options And Restricted Stock | |||
Common Stock outstanding | 514,000 | ||
Restricted shares of Common Stock issued and options to purchase an aggregate | 161,250 | ||
Maximum authorized shares | 1,600,000 | ||
Shares Future grants | 560,000 | ||
Plan2008Member
|
|||
Stock Options And Restricted Stock | |||
Restricted shares of Common Stock issued and options to purchase an aggregate | 3,978,406 | ||
Maximum authorized shares | 10,000,000 | ||
Shares Future grants | 5,891,594 |
OPERATING LEASE COMMITMENTS
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2012
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 4. OPERATING LEASE COMMITMENTS | The Company leases approximately 13,000 square feet of manufacturing, laboratory and office space in a single facility located in Franklin, Massachusetts under a lease expiring March 31, 2014. Beginning June 1, 2012, a lease amendment increased the total space to 37,050 square feet and extended the expiration date to October 31, 2017.
The Company also leases approximately 5,400 square feet of corporate office space in a single facility located in Philadelphia, Pennsylvania under a lease expiring April 30, 2014. Beginning June 1, 2012, a lease amendment increased the total space to 7,861 square feet and extended the expiration date to May 31, 2017.
Future minimum lease payments for each of the next 5 years under these operating leases are as follows:
The Companys facilities lease expense was approximately $74,000 and $53,000 for the three months ended June 30, 2012 and 2011, respectively, and $151,000 and $86,000 for the six months ended June 30, 2012 and 2011, respectively. |
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