UNITED STATES
SECURITIES 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, 2014
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 000-54852
CELATOR PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
Delaware | 20-2680869 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
200 PrincetonSouth Corporate Center Suite 180 Ewing, New Jersey |
08628 | |
(Address of principal executive offices) | (Zip Code) |
(609)-243-0123
(Registrant’s telephone number, including area code)
(Former name or former address, if changed since last report)
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 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 x No ¨
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 the definitions 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 | x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
The number of shares outstanding of the registrant’s common stock, $0.001 par value, as of November 11, 2014 was 33,681,355.
CELATOR PHARMACEUTICALS, INC.
TABLE OF CONTENTS
Celator Pharmaceuticals, Inc. and Subsidiaries
(Unaudited)
September 30, 2014 | December 31, 2013 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 20,180,490 | $ | 23,589,516 | ||||
Restricted cash | 285,801 | 287,657 | ||||||
Other receivables | 6,335 | 1,417,313 | ||||||
Prepaid expenses and deposits | 679,681 | 491,465 | ||||||
Assets held for sale | 74,086 | 74,086 | ||||||
Other current assets | 541,468 | 468,389 | ||||||
Total current assets | 21,767,861 | 26,328,426 | ||||||
Property and equipment, net | 1,008,426 | 1,138,579 | ||||||
Other assets | 612,180 | 5,745 | ||||||
Total assets | $ | 23,388,467 | $ | 27,472,750 | ||||
Liabilities | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 183,174 | $ | 1,193,148 | ||||
Accrued liabilities | 2,022,462 | 1,630,809 | ||||||
Current portion of deferred revenue | 542,986 | 542,986 | ||||||
Total current liabilities | 2,748,622 | 3,366,943 | ||||||
Long-term debt | 10,077,056 | - | ||||||
Deferred revenue | 180,996 | 588,236 | ||||||
Deferred rent | 47,626 | 53,084 | ||||||
Total liabilities | 13,054,300 | 4,008,263 | ||||||
Stockholders' equity | ||||||||
Preferred stock | ||||||||
Authorized 20,000,000 shares, par value $0.001 | - | - | ||||||
Common stock | ||||||||
Authorized 200,000,000 shares, par value $0.001 | ||||||||
Issued and outstanding 26,078,532 and 26,035,596 shares as of September 30, 2014 and December 31, 2013, respectively | 26,079 | 26,036 | ||||||
Warrants | 1,083,193 | 1,083,193 | ||||||
Additional paid-in capital | 157,372,043 | 155,953,894 | ||||||
Accumulated other comprehensive loss | (1,133,266 | ) | (1,133,266 | ) | ||||
Accumulated deficit | (147,013,882 | ) | (132,465,370 | ) | ||||
Total stockholders' equity | 10,334,167 | 23,464,487 | ||||||
Total liabilities and stockholders' equity | $ | 23,388,467 | $ | 27,472,750 |
See accompanying notes to consolidated financial statements.
1 |
Celator Pharmaceuticals, Inc. and Subsidiaries
Consolidated Statements of Loss
(Unaudited)
Three months ended | Nine months ended | |||||||||||||||
September 30 | September 30 | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Expenses | ||||||||||||||||
Research and development | $ | 3,334,789 | $ | 2,325,891 | $ | 9,238,756 | $ | 5,995,866 | ||||||||
Leukemia & Lymphoma Society funding | (135,747 | ) | (135,746 | ) | (907,240 | ) | (425,339 | ) | ||||||||
General and administrative | 1,874,412 | 1,434,436 | 5,491,779 | 3,922,084 | ||||||||||||
(Gain) loss on disposal of property and equipment | - | (12,059 | ) | - | 126,633 | |||||||||||
Amortization and depreciation | 48,521 | 51,239 | 144,609 | 148,291 | ||||||||||||
Operating loss | (5,121,975 | ) | (3,663,761 | ) | (13,967,904 | ) | (9,767,535 | ) | ||||||||
Other income (expenses) | ||||||||||||||||
Foreign exchange loss | (1,408 | ) | (16,745 | ) | (27,721 | ) | (21,229 | ) | ||||||||
Interest and miscellaneous income | 2,887 | 3,094 | 7,144 | 6,560 | ||||||||||||
Non-cash derivative instrument charge | - | - | - | (7,473,108 | ) | |||||||||||
Interest expense | (359,321 | ) | - | (560,031 | ) | (147,025 | ) | |||||||||
Net loss | $ | (5,479,817 | ) | $ | (3,677,412 | ) | $ | (14,548,512 | ) | $ | (17,402,337 | ) | ||||
Net loss per share | ||||||||||||||||
Basic and diluted | $ | (0.21 | ) | $ | (0.14 | ) | $ | (0.56 | ) | $ | (0.84 | ) | ||||
Weighted average of common shares outstanding | ||||||||||||||||
Basic and diluted | 26,078,532 | 26,026,793 | 26,065,006 | 20,641,876 |
See accompanying notes to consolidated financial statements.
2 |
Celator Pharmaceuticals, Inc. and Subsidiaries
Consolidated Statement of Stockholders’ Equity
For the Nine Months Ended September 30, 2014
(Unaudited)
Additional | Accumulated Other | |||||||||||||||||||||||||||
Common Stock | Paid-In | Comprehensive | Accumulated | Stockholders’ | ||||||||||||||||||||||||
Number | Amount | Warrants | Capital | Loss | Deficit | Equity | ||||||||||||||||||||||
Balance at December 31, 2013 | 26,035,596 | $ | 26,036 | $ | 1,083,193 | $ | 155,953,894 | $ | (1,133,266 | ) | $ | (132,465,370 | ) | $ | 23,464,487 | |||||||||||||
Issued for cash on exercise of stock options | 42,936 | 43 | - | 100,596 | - | - | 100,639 | |||||||||||||||||||||
Stock based compensation | - | - | - | 996,801 | - | - | 996,801 | |||||||||||||||||||||
Warrants issued | - | - | - | 320,752 | - | - | 320,752 | |||||||||||||||||||||
Net loss for the period | - | - | - | - | - | (14,548,512 | ) | (14,548,512 | ) | |||||||||||||||||||
Balance at September 30, 2014 | 26,078,532 | $ | 26,079 | $ | 1,083,193 | $ | 157,372,043 | $ | (1,133,266 | ) | $ | (147,013,882 | ) | $ | 10,334,167 |
See accompanying notes to consolidated financial statements.
3 |
Celator Pharmaceuticals, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Nine months ended | ||||||||
September 30, | ||||||||
2014 | 2013 | |||||||
Operating activities | ||||||||
Net loss | $ | (14,548,512 | ) | $ | (17,402,337 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
Amortization and depreciation | 144,609 | 148,291 | ||||||
Non-cash stock-based compensation expense | 996,801 | 322,069 | ||||||
Loss on disposal of property and equipment | - | 126,633 | ||||||
Non-cash derivative instrument charge | - | 7,473,108 | ||||||
Non-cash financing costs | 165,232 | 74,751 | ||||||
Changes in operating assets and liabilities | ||||||||
Other receivables | 1,407,230 | 1,990,932 | ||||||
Prepaid expenses and deposits | (189,470 | ) | (134,177 | ) | ||||
Restricted cash | (38 | ) | (250,037 | ) | ||||
Other current assets | (73,079 | ) | (530,391 | ) | ||||
Other assets | (16,568 | ) | - | |||||
Accounts payable | (1,007,161 | ) | (22,332 | ) | ||||
Accrued liabilities | 400,843 | 208,124 | ||||||
Deferred rent | (5,458 | ) | 23,148 | |||||
Deferred revenue | (407,240 | ) | (425,339 | ) | ||||
Cash used in operating activities | (13,132,811 | ) | (8,397,557 | ) | ||||
Investing activities | ||||||||
Purchase of property and equipment | (14,456 | ) | (82,009 | ) | ||||
Proceeds on disposals of property and equipment | - | 51,776 | ||||||
Cash used in investing activities | (14,456 | ) | (30,233 | ) | ||||
Financing activities | ||||||||
Proceeds from issuance of common stock and on options exercised | 104,387 | 32,499,986 | ||||||
Payment of share issuance costs | - | (3,079,611 | ) | |||||
Proceeds from loans payable | 9,827,216 | - | ||||||
Payment of debt issuance costs | (184,469 | ) | - | |||||
Repayments of loans payable | - | (3,000,000 | ) | |||||
Cash provided by financing activities | 9,747,134 | 26,420,375 | ||||||
Effect of foreign exchange rate changes | (8,893 | ) | 877 | |||||
Net change in cash | (3,409,026 | ) | 17,993,462 | |||||
Cash and cash equivalents, beginning of period | 23,589,516 | 9,648,008 | ||||||
Cash and cash equivalents, end of period | $ | 20,180,490 | $ | 27,641,470 | ||||
Supplemental disclosure of cash flow information | ||||||||
Interest paid | 311,458 | 79,388 |
See accompanying notes to consolidated financial statements
4 |
Celator Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
(Unaudited)
1. | Nature of Business and Liquidity |
Celator Pharmaceuticals, Inc. (the “Company”), with locations in Ewing, N.J., and Vancouver, B.C., is a pharmaceutical company developing new and more effective therapies to treat cancer. CombiPlex®, the Company’s proprietary drug ratio technology platform, represents a novel approach that identifies molar ratios of drugs that will deliver a synergistic benefit, and locks the desired ratio in a nano-scale drug delivery vehicle that maintains the ratio in patients with the goal of improving clinical outcomes.
The Company has incurred recurring losses and negative cash flows from operations since inception. As of September 30, 2014, the Company had an accumulated deficit of $147.0 million. The Company expects operating losses and negative cash flows to continue for the foreseeable future until such time, if ever, that it can generate significant revenues from its product candidates currently in development. At September 30, 2014, the Company had cash and cash equivalents of $20.2 million. On October 28, 2014, the Company completed a public offering of 7,602,823 shares of common stock and warrants to purchase up to 760,282 shares of its common stock. The Company received approximately $13.5 million in net proceeds from the public offering (See Note 13). Management believes that the cash and cash equivalents at September 30, 2014, cash available to the Company through the Hercules Technology Growth Capital Inc. (“Hercules”) term loan and the funds received from the October 28, 2014 public offering will be sufficient to meet estimated working capital requirements and fund planned operations into the second half of 2016.
The Company is subject to those risks associated with any specialty pharmaceutical company that has substantial expenditures for research and development. There can be no assurance that the Company’s research and development projects will be successful, that products developed will obtain necessary regulatory approval, or that any approved product will be commercially viable. Substantial additional financing will be needed by the Company to fund its operations and to commercialize its product candidates. In addition, the Company operates in an environment of rapid technological change and is largely dependent on the services of its employees and consultants.
2. | Summary of Significant Accounting Policies |
The accompanying unaudited consolidated financial statements and related disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the consolidated financial statements and notes included in Company’s Annual Report on Form 10-K for the year ended December 31, 2013. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been omitted.
In the opinion of management of the Company, the interim consolidated financial statements reflect all adjustments considered necessary for a fair presentation of the financial position, operating results and cash flows of the interim periods. All such adjustments are of a normal, recurring nature. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year.
Basis of consolidation: The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Celator Pharmaceuticals Corp. (“CPC”) and Celator UK Ltd. All intercompany transactions have been eliminated.
Use of estimates: The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting period. Actual results may differ from those estimates. Significant areas requiring management estimates in the preparation of these consolidated financial statements include, among other things, assessment of other receivables, accrued liabilities, impairment and amortization of property and equipment, valuation allowance for deferred income taxes, valuation of stock-based compensation and contingencies.
Loss per share: The net loss per share for the nine months ended September 30, 2013 has been corrected for an immaterial error in the calculation of average weighted shares outstanding. The revision is as follows:
5 |
Celator Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
(Unaudited)
As Reported | As Revised | |||||||
Net loss | $ | (17,402,337 | ) | $ | (17,402,337 | ) | ||
Net loss per share | $ | (0.87 | ) | $ | (0.84 | ) | ||
Weighted average shares outstanding | 19,977,071 | 20,641,876 |
The above correction has no impact on any other prior year financial statement amounts or disclosures.
New Accounting Pronouncement : In June 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-10, Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation , which eliminates all incremental financial reporting requirements for development stage entities by removing Accounting Standards Codification (ASC) Topic 915, Development Stage Entities, from the FASB Accounting Standards Codification. The amendments in this Update remove the financial reporting distinction between development stage entities and other reporting entities from U.S. GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. ASC Topic 915 is removed effective for annual periods beginning after December 15, 2014 and early adoption is permitted. The Company adopted the ASU effective with the issuance of its June 30, 2014 financial statements.
In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40). The ASU provides U.S. GAAP guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. The amendments in this ASU are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter.
3. | Fair Value Measurements |
Financial instruments of the Company consist of cash deposits, money market investments, other receivables, accounts payable, certain accrued liabilities and debt. The carrying value of these financial instruments generally approximates fair value due to their short-term nature.
ASC Topic 820, Fair Value Measurements establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820-10 establishes three levels of inputs that may be used to measure fair value:
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2 applies to assets or liabilities for which there are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, such as: quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
6 |
Celator Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
(Unaudited)
ASC 820 requires disclosures about transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales, issuances, and settlements relating to Level 3 measurements. It also clarifies existing fair value disclosures regarding the level of disaggregation and the inputs and valuation techniques used to measure fair value.
The Company recognizes transfers between input levels as of the actual date of event. There were no transfers between levels and the following table provides the assets carried at fair value:
Fair Value | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
September 30, 2014 | ||||||||||||||||
Assets: | ||||||||||||||||
Money Market Fund | $ | 17,727,260 | $ | 17,727,260 | $ | - | $ | - | ||||||||
December 31, 2013 | ||||||||||||||||
Assets: | ||||||||||||||||
Certificates of Deposit | $ | 15,003,472 | $ | 15,003,472 | $ | - | $ | - | ||||||||
Money Market Fund | 7,597,730 | 7,597,730 | - | - | ||||||||||||
Total | $ | 22,601,202 | $ | 22,601,202 | $ | - | $ | - |
Non-cash derivative instrument charge
The Company recognized a non-cash derivative instrument charge of $7,473,108 during the nine months ended September 30, 2013. The charge related to an obligation to issue additional shares of common stock and warrants to certain existing stockholders who participated in early closings of a private placement that started in 2012 and closed on April 29, 2013. The fair value of these common shares and warrants was recognized as a derivative liability with a corresponding charge to the statement of loss. Upon the closing of the April 2013 Private Placement, the derivative liability was reclassified into stockholders’ equity as the obligation to issue additional securities no longer existed. This contractual obligation was fair valued using significant unobservable inputs (Level 3).
4. | Other Receivables |
Other receivables as of September 30, 2014 and December 31, 2013, consists of the following:
September 30, 2014 | December 31, 2013 | |||||||
Receivables related to the sale of New Jersey net operating losses | $ | - | $ | 1,412,302 | ||||
Other receivables | 6,335 | 5,011 | ||||||
$ | 6,335 | $ | 1,417,313 |
5. | Other Current Assets |
Other current assets as of September 30, 2014 and December 31, 2013 consist of the following:
September 30, 2014 | December 31, 2013 | |||||||
Clinical trial materials | $ | 541,468 | $ | 468,389 |
6. | Property and Equipment |
Property and equipment as of September 30, 2014 and December 31, 2013 including assets held under capital lease, consists of the following:
7 |
Celator Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
(Unaudited)
September 30, 2014 | December 31, 2013 | |||||||
Computer and equipment | $ | 141,998 | $ | 136,498 | ||||
Furniture and office equipment | 96,457 | 96,457 | ||||||
Laboratory equipment | 1,769,589 | 1,760,633 | ||||||
Capital lease equipment | 155,523 | 155,523 | ||||||
Leaseholds | 37,789 | 37,789 | ||||||
2,201,356 | 2,186,900 | |||||||
Less: Accumulated depreciation | (1,192,930 | ) | (1,048,321 | ) | ||||
$ | 1,008,426 | $ | 1,138,579 |
Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Depreciation and amortization | $ | 48,521 | $ | 51,239 | $ | 144,609 | $ | 148,291 |
In February 2012, the Company closed a laboratory in Canada and consigned certain property and equipment for sale with net book value of $507,622. At September 30, 2014 and December 31, 2013, the net book value of the remaining consigned equipment was $74,086 and consisted solely of scientific equipment, which is presented as assets held for sale on the consolidated balance sheet.
During nine months ended September 30, 2013 assets held for sale with a net book value of $177,428 were sold for proceeds of $51,776 resulting in a loss on disposal of $125,422. There were no disposals during the nine months ended September 30, 2014.
7. | Other Assets |
Other assets as of September 30, 2014 and December 31, 2013 consist of the following:
September 30, 2014 | December 31, 2013 | |||||||
Deferred financing costs (see Note 9) | $ | 589,828 | $ | - | ||||
Other non-current assets | 22,352 | 5,745 | ||||||
$ | 612,180 | $ | 5,745 |
8. | Accrued Liabilities |
Accrued liabilities as of September 30, 2014 and December 31, 2013 consist of the following:
8 |
Celator Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
(Unaudited)
September 30, 2014 | December 31, 2013 | |||||||
Accrued bonuses | $ | 748,444 | $ | 624,472 | ||||
Accrued salaries and vacation | 213,775 | 143,484 | ||||||
Accrued professional fees | 60,000 | 30,911 | ||||||
Accrued clinical trial expenses | 494,651 | 636,497 | ||||||
Accrued drug manufacturing expenses | 145,565 | - | ||||||
Interest payable | 83,339 | - | ||||||
Accrued trade payables other | 276,688 | 195,445 | ||||||
$ | 2,022,462 | $ | 1,630,809 |
9. | Loans Payable |
On May 9, 2014, the Company entered into a term loan agreement for $15 million with Hercules Technology Growth Capital, Inc. (“Hercules”). The first $10 million of the term loan was funded at closing, and is repayable in installments over forty-two months including an initial interest-only period of twelve months after closing. The remaining $5 million of the term loan can be drawn down at the Company’s option at any time between December 15, 2014 and March 31, 2015. Interest is payable monthly at the greater of 9.75% or an adjusted rate based upon the US prime rate with interest only period extendable to December 1, 2015, contingent upon achieving full enrollment of the CPX-351 Phase 3 study by December 31, 2014. The funds will be used to provide general working capital.
On October 24, 2014, the Company achieved full enrollment of the CPX-351 Phase 3 study resulting in the interest only period extendable to December 1, 2015 and the term loan maturity date of December 1, 2017 extendable to June 1, 2018. As a result, the outstanding term loan balance has been classified as non-current at September 30, 2014.
Pursuant to the loan agreement, the Company issued Hercules a warrant to purchase 158,006 shares of the Company’s common stock at an exercise price of $2.67 per share with a term of five years. The fair value of the warrants of $320,752 and financing costs of $357,253 incurred in connection with the term loan were recorded as debt issuance costs and will be amortized as interest expense using the effective interest method over the term of the loan. Amortization of debt issuance costs was $57,670 and $88,176 for the three and nine months ended September 30, 2014 respectively and the remaining unamortized debt issuance costs of $589,828 are included in other non-current assets.
In addition, the Company will pay an end of term charge of $592,500 on the earliest to occur of (i) the term loan maturity date, (ii) the date that the Company prepays the outstanding loan, or (iii) the date that the loan become due and payable. The end of term charge will be accrued as additional interest expense using the effective interest rate method over the term of the loan. The Company accrued $50,396 and $77,056 of this fee during the three and nine months ended September 30, 2014 respectively.
Long-term debt as of September 30, 2014 consists of the following:
Loan payable | $ | 10,000,000 | ||
End of term fee | 77,056 | |||
Long-term debt | $ | 10,077,056 |
9 |
Celator Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
(Unaudited)
10. | Stock-Based Compensation |
The following table summarizes the activity of the Company’s stock option plans for the nine months ended September 30, 2014:
Number of options | Exercise price | |||||||
December 31, 2013 | 2,578,252 | $ | 2.98 | |||||
Granted | 499,100 | 3.13 | ||||||
Exercised | (42,936 | ) | 2.34 | |||||
Cancelled | (14,603 | ) | 3.17 | |||||
September 30, 2014 | 3,019,813 | $ | 3.01 | |||||
Exercisable at September 30, 2014 | 1,193,556 | $ | 2.75 |
The following table provides information regarding stock options activity during the periods:
Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Stock compensation expense recognized | $ | 354,204 | $ | 235,289 | $ | 996,801 | $ | 322,069 | ||||||||
Weighted average grant-date fair value of stock options issued (per share) | $ | 2.22 | $ | 2.11 | $ | 2.68 | $ | 2.14 | ||||||||
Grant-date fair value of stock options issued | $ | 45,732 | $ | 59,080 | $ | 1,337,588 | $ | 3,314,341 | ||||||||
Volatility | 112.0 | % | 117.0 | % | 114.4 | % | 118.3 | % | ||||||||
Risk-free interest rate | 1.9 | % | 1.6 | % | 2.0 | % | 1.9 | % | ||||||||
Dividend yield | 0 | % | 0 | % | 0 | % | 0 | % | ||||||||
Expected life in years | 6.0 | 6.0 | 6.2 | 6.2 | ||||||||||||
Intrinsic value of stock options exercised | $ | - | $ | - | $ | 38,892 | $ | - |
The grant-date fair value of stock options is estimated using the Black Scholes option pricing model. The Company determined the options’ life based on the simplified method and determined the options’ expected volatility based on peer group volatility and dividend yield based on the historical dividend payments. The risk free interest rate is based on the yield of an applicable term Treasury instrument.
The Company amortizes the fair value of the stock options on a straight-line basis over the applicable requisite service periods of the awards, which is generally the vesting period. At September 30, 2014, the total compensation cost related to non-vested awards not yet recognized and weighted average period over which it will be recognized was $3,988,729 and 2.9 years, respectively.
11. | Geographic Segment Information |
The Company operates in the United States and Canada. The Company’s CPX-351 clinical trial materials are manufactured by a third party using the Company’s equipment located in Germany. Geographic net loss information is based on the location whereby the expenses were incurred. The geographic information about total assets is based on the physical location of the assets.
Total Assets | ||||||||
September 30, 2014 | December 31, 2013 | |||||||
United States | $ | 22,226,025 | $ | 26,190,516 | ||||
Canada | 266,844 | 284,563 | ||||||
Germany | 895,598 | 997,671 | ||||||
Total Assets | $ | 23,388,467 | $ | 27,472,750 |
10 |
Celator Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
(Unaudited)
Net Loss | ||||||||||||||||
Three months ended | Nine months | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
United States | (5,046,236 | ) | (3,274,731 | ) | (12,977,790 | ) | (15,649,089 | ) | ||||||||
Canada | (433,581 | ) | (402,681 | ) | (1,570,722 | ) | (1,753,248 | ) | ||||||||
Total Net Loss | $ | (5,479,817 | ) | $ | (3,677,412 | ) | $ | (14,548,512 | ) | $ | (17,402,337 | ) |
12. | Commitments and Contingencies |
In September 2014, the Company entered into a lease agreement for a laboratory space in Vancouver, British Columbia, which expires in September 2015. The remaining minimum lease payments as of September 30, 2014 were $35,090.
In March 2013, the Company entered into an office lease agreement for office space in Ewing, New Jersey, which commenced in June 2013 with a term of sixty months. The remaining minimum lease payments as of September 30, 2014 were $530,232. Under the Ewing, New Jersey lease agreement, the Company will be obligated to maintain a letter of credit from a bank with respect to its security deposit obligations in the amount of $200,000 during the first year of the Agreement, which amount will be reduced by $40,000 per year on each of December 1, 2014, 2015, and 2016 and by $60,000 on December 1, 2017.
In February 2013, the Company renewed its office lease agreements for office space in Vancouver, British Columbia, effective April 1, 2013, which expires in June 2016. The remaining minimum lease payments as of September 30, 2014 were $111,638.
The Company has a worldwide exclusive license agreement with Princeton University dated June 2007 that provides the Company with exclusive rights to some aspects of its nanoparticle polymer technology arising from research sponsored by the Company at Princeton University between 2003 and 2007. These inventions are generally characterized as particulate constructs for release of active agents for medical application. Of the products currently in the Company’s pipeline, only the hydrophobic docetaxel prodrug nanoparticle (HDPN) formulation is subject to this agreement. The Company is obligated to pay a royalty on net sales to Princeton University of a low single-digit percentage if any invention is sold by the Company or a company to which the product covered by the invention was licensed by the Company, which was generated under the exclusive licensing agreement. No royalty or other product/sub-license-related payments have been made to date. The Company is obligated to provide Princeton University a percentage within the range of 45% to 55% of proceeds obtained from a sub-license of the intellectual property to a third party in cases where the Company has not conducted any research or development activities and is solely licensing out the original intellectual property jointly developed by the Company and Princeton University. The Company may terminate the agreement at any time by giving 90 days written notice to Princeton University. Princeton may terminate the agreement if the Company should breach or fail to perform under the agreement, with written notice of default provided by Princeton University to the Company and only if the Company fails to cure the default within 60 days. The Company is obligated under the agreement to provide an annual progress report to Princeton University on any developments of the licensed technology as well as prosecution of the patents covering the technology and the use of commercially reasonable efforts to develop licensed products.
The Company has a collaborative research agreement dated May 2001 with the British Columbia Cancer Agency (“BCCA”) whereby in consideration for the license and conditional assignment of all Company-sponsored intellectual property to the Company by BCCA, the Company will pay to BCCA a royalty in the low single digits on net sales of royalty-bearing products in territories so long as a valid claim exists for inventions made between June 2000 and June 2005 under the agreement. All obligations relating to the conduct of the research and assignment of intellectual property have been completed. No payments of royalties have been made to date. Either party may terminate the agreement if the other party commits a material breach or default and such breach or default is not reasonably cured within 45 days.
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Celator Pharmaceuticals, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
(Unaudited)
In consideration of funding by the Leukemia & Lymphoma Society ® (“LLS”) and transfer to the Company of any rights LLS may have to any project inventions developed during the term of the agreement, the Company may be required to pay LLS a cash multiple on the LLS funding, (LLS funding is the $5 million in support of the Phase 3 study in addition to the approximately $4.1 million the Company received in support of the Phase 2 study). Subject to exclusions under the agreement, the Company is obligated to pay LLS an amount equal to 50% of the cash payments the Company receives from out-licenses and transfers of rights to the product or other liquidity event, as defined in the agreement, until LLS has received an amount equal to 1.5 times the amount of funding the Company receives from LLS. The total amount payable by the Company to LLS will not exceed 3.55 times the amount of funding received from LLS, with the specific amount depending on when the payment(s) occur relative to the timing of the research program and product commercialization. The payments may take the form of cash payments or royalties (not to exceed 5% of net sales) but will not exceed the maximum amount referred to in the preceding sentence.
13. | Subsequent Events |
Public Offering of Common Stock and Warrants to Purchase Common Stock
On October 28, 2014, the Company completed a public offering of 7,602,823 shares of common stock and warrants to purchase up to 760,282 shares of its common stock, including the exercise in full of the underwriters’ overallotment option to purchase up to an additional 991,673 shares of common stock. The shares of common stock and warrants were offered in units consisting of one share of common stock and a warrant to purchase 0.10 of a share of common stock at a price of $1.95 per unit. The Company received approximately $13.5 million in net proceeds from the public offering after payment of fees, expenses and underwriting expenses. The shares of common stock and the warrants were immediately separable and were issued separately. The warrants have an exercise price of $3.58 per share and have a term of five years. In addition, the Company issued to the underwriters, underwriter warrants to purchase 114,042 shares of common stock at an exercise price of $3.58 per share.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report and other written reports and oral statements made from time to time by the Company may contain so-called “forward-looking statements,” all of which are based on management’s current expectations and are subject to risks and uncertainties that may cause results to differ materially from those set forth in the statements. One can identify these forward-looking statements by their use of words such as “anticipates,” “expects,” “plans,” “will,” “estimates,” “forecasts,” “projects” and other words of similar meaning. One can also identify them by the fact that they do not relate strictly to historical or current facts. Examples of forward-looking statements contained in this Form 10-Q quarterly report include, among others, statements about the sufficiency of its capital to fund its activities into the second half of 2016, the expected timeline for its milestones in connection with its Phase 3 clinical study, its product pipeline, statements regarding the efficacy of the Company's CombiPlex® technology, the safety, tolerability, efficacy and therapeutic potential of CPX-351, whether clinical results for CPX-351 obtained to date will be predictive of future clinical study results, and the Company's expectations regarding the Company's development plans for CPX-351 and our drug candidates, and the Company's expectations about expanding the Company's product pipeline and advancing the Company's CombiPlex platform. Forward-looking statements in this release involve substantial risks and uncertainties that could cause our clinical development programs, future results, performance or achievements to differ significantly from those expressed or implied by the forward-looking statements. Such risks and uncertainties include, among others, capital market conditions, the uncertainties inherent in the conduct of future clinical studies, enrollment in clinical studies, availability of data from ongoing clinical studies, expectations for regulatory approvals, and other matters that could affect the availability or commercial potential of the Company’s drug candidates. Forward-looking statements in this Form 10-Q quarterly report involve substantial risks and uncertainties that could cause the Company's clinical development programs, future results, performance of achievements to differ significantly from those expressed or implied in the forward-looking statements. One must carefully consider any such statement and should understand that many factors could cause actual results to differ materially from the Company’s forward-looking statements. These factors include inaccurate assumptions and a broad variety of other risks and uncertainties, including some that are known and some that are not. No forward-looking statement can be guaranteed and actual future results may vary materially.
The Company does not assume the obligation to update any forward-looking statement. One should carefully evaluate such statements in light of factors, including risk factors, described in the Company’s filings with the SEC, especially on Forms 10-K, 10-Q and 8-K. In Item 1A. “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, the Company discusses in more detail various important risk factors that could cause actual results to differ from expected or historic results. The Company notes these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. One should understand that it is not possible to predict or identify all such factors. Consequently, the reader should not consider any such list to be a complete statement of all potential risks or uncertainties.
Highlights
Celator Pharmaceuticals, Inc., with locations in Ewing, N.J., and Vancouver, B.C., is a pharmaceutical company developing new and more effective therapies to treat cancer. CombiPlex®, the Company’s proprietary drug ratio technology platform, represents a novel approach that identifies molar ratios of drugs that will deliver a synergistic benefit, and locks the desired ratio in a nano-scale drug delivery vehicle that maintains the ratio in patients with the goal of improving clinical outcomes. The Company’s pipeline includes two clinical stage products, CPX-351, a liposomal formulation of cytarabine:daunorubicin for the treatment of acute myeloid leukemia, or AML, and CPX-1, a liposomal formulation of irinotecan:floxuridine, for the treatment of colorectal cancer; and preclinical stage product candidates, including CPX-571, a liposomal formulation of irinotecan:cisplatin, and CPX-8, a hydrophobic docetaxel prodrug nanoparticle, or HDPN, a formulation being studied by the National Cancer Institute’s Nanotechnology Characterization Laboratory. The Company plans to advance the CombiPlex platform and widen its application to include molecularly targeted therapies. Areas of investigation include:
· | Combinations targeting signaling pathways associated with major cancer indications: |
o | Inhibitors of PI3K/AKT/mTOR pathways in combination with |
o | Inhibitors of Ras/Raf/MEK/ERK pathways |
· | Combinations of existing chemotherapeutics with molecularly targeted agents: |
o | Active cytotoxics such as taxanes in combination with |
o | Cellular response modulators that control apoptosis |
· | Combinations of epigenetic modulators: |
o | Histone deacetylase inhibitors in combination with |
o | Hypomethylating agents |
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Overview
The Company was founded in 1999 by a team led by Dr. Lawrence Mayer (currently the Company’s President and Chief Scientific Officer) and Dr. Marcel Bally from the British Columbia Cancer Agency. The Company’s strategy evolved into developing drug combination products based on CombiPlex, the Company’s proprietary drug ratio technology platform.
Since the founding of the Company, $99.1 million has been invested in research and development with funds being used with the Company’s proprietary technologies, including CombiPlex, creating a pipeline of drugs and managing the clinical studies. The Company’s commercial success depends upon its ability, and the ability of any of its future collaborators, to develop, manufacture, market, and sell the product candidates. Numerous U.S. and foreign issued patents and pending patent applications that are owned by third parties exist in the fields in which the Company is developing products. There is no guarantee that the Company will be able to market or sell any of its products.
The Company intends to use future net proceeds to fund its development activities, including clinical studies, manufacturing development (including capital expenditures), working capital and other general corporate purposes.
The Company believes that, based on its current financial resources, it will need to raise additional funding for the development and potential commercialization of CPX-351. To the extent that the costs of the planned study exceed current estimates or the survival analysis does not occur within the currently anticipated timeframe, and the Company is unable to raise sufficient additional capital to cover such additional costs, the Company will need to reduce operating expenses, enter into a collaboration or other similar arrangement with respect to development and/or commercialization rights to CPX-351, out-license intellectual property rights to CPX-351, sell assets or effect a combination of the above. No assurance can be given that the Company will be able to effect any of such transactions on acceptable terms, if at all.
The Company has spent research and development funds on clinical studies, research collaborations and intellectual property costs. For the years 2010 through June 2014, the bulk of the spending has been on clinical studies. The three major studies are:
Study 204 — Randomized Phase 2 Study of CPX-351 in Newly Diagnosed AML Patients Age 60 – 75
Study 205 — Randomized Phase 2 Study of CPX-351 in AML Patients in First Relapse, Patients Age 18 – 65
Study 301 — Randomized Phase 3 Study in Patients with sAML
Study 204 was intended to be a direct test of whether delivery of a fixed, synergistic ratio of two drugs, cytarabine and daunorubicin, (i.e., CPX-351 - which is a 90 minute infusion on days 1, 3 and 5) provided increased clinical efficacy over conventional administration of the same agents (i.e., which is a 7-day continuous infusion of cytarabine, combined with daunorubicin on days 1, 2 and 3, commonly referred to as the 7+3 regimen). This study is complete. In the overall population, in patients treated with CPX-351 the response rate increased by 30.3% (66.7% vs. 51.2%), the 60-day mortality was decreased by 67.8% (4.7% vs. 14.6%), median event-free survival increased by 225.0% (6.5 months vs. 2.0 months) and the median overall survival increased 14.0% (14.7 months vs. 12.9 months). In sAML patients (approximately 41% of the overall population), the response rate increased by 82.0% (57.5% vs. 31.6%), the 60-day mortality decreased 80.7% (6.1% vs. 31.6%), the median event-free survival increased 3.5-fold (4.5 months vs. 1.3 months) and the median overall survival increased by 98.4% (12.1 months vs. 6.1 months).
Study 205 was a randomized Phase 2 clinical study designed to be a direct test of whether CPX-351 provides increased clinical efficacy over salvage therapies in first relapse AML patients age 18 – 65. This study is complete. In the overall population, CPX-351 resulted in a 20.8% relative increase in response rate (49.4% vs. 40.9%) compared to the control arm of salvage therapies, a 6.9% decrease in the 60-day mortality (14.8% vs. 15.9%), a 34.9% increase in median overall survival (8.5 months vs. 6.3 months) and an 31.1% increase in 1-year survival rate (35.8% vs. 27.3%). For patients in the unfavorable risk category (68% of the overall population), CPX-351 resulted in a 42.4% relative increase in response rate (39.3% vs. 27.6%) compared to the control arm of salvage therapies, a 33.2% decrease in 60-day mortality (16.1% vs. 24.1%), a 57.1% increase in median overall survival (6.6 months vs. 4.2 months) and a higher 1-year survival rate of 177.7% (28.6% vs. 10.3%).
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Study 301 is a randomized controlled Phase 3 study in patients with sAML, with overall survival as the primary end-point. This Phase 3 study has been undertaken to confirm the Study 204 clinical observations where CPX-351 provided the largest efficacy improvements in sAML patients and to provide the necessary data for product registration. Study 301 enrolled the first patient in December 2012, completed its third independent Data and Safety Monitoring Board review in June 2014, which review recommended that the study continue as planned without any modifications. Sites in the U.S. and Canada are participating in this study. There will be significant costs associated with this study, including site enrollment grants, patient monitoring, database maintenance, statistical monitoring, data analysis, salaries and insurance.
On October 24, 2014, the Company achieved the target enrollment, of 300 patients, in its Phase 3 study of CPX-351. This Phase 3 study is a multicenter, randomized, open-label study testing CPX-351 versus the current standard of care, conventional cytarabine and daunorubicin therapy (7+3) in patients with untreated high-risk (secondary) AML. The Company expects the following milestones related to its Phase 3 clinical study:
· | Q4 2014 – Data and Safety and Monitoring Board pre-planned analysis of the first 225 randomized patients with a minimum of 60 days follow-up |
· | Q2 2015 – Analysis of the induction response rate (CR+CRi), a secondary endpoint of the study |
· | Q1 2016 – Analysis of overall survival, the primary endpoint of the study |
· | 2H 2016 – The New Drug Application (“NDA”) is anticipated to be filed. |
In June 2012, the Company entered into an agreement with LLS pursuant to which the Leukemia and Lymphoma Society (LLS) is providing $5.0 million in funding from the LLS Therapy Acceleration Program (“TAP”) program for the Phase 3 study of CPX-351. The agreement provided for LLS to make an upfront payment of $2.0 million to the Company, which was received in July 2012, and further payments totaling an additional $3.0 million on the achievement of clinical milestones; however, the amount may be refundable by the Company in the event of a material breach by the Company under the agreement. The $2.0 million upfront payment has been recorded as deferred revenue and will be recognized over the estimated performance period of the research and development services to be provided under the agreement. As of September 30, 2014, $0.7 million was deferred. Since November 2012, the Company has received a total of $1.5 million for milestones achieved under this agreement. In consideration of LLS’s funding, and transfer to the Company of any rights LLS may have to any project inventions developed during the term of the agreement, the Company must pay LLS a multiple on the LLS funding (LLS funding is the $5 million in support of the Phase 3 study in addition to the approximately $4.1 million the Company received in support of the Phase 2 study during 2010 and 2011). Subject to exclusions under the agreement, the Company is obligated to pay LLS an amount equal to 50% of the cash payments the Company receives from outlicenses and transfers of rights to the product or other liquidity event, as defined in the agreement, until LLS has received an amount equal to 1.5 times the amount of funding the Company receives from LLS. The total amount payable by the Company to LLS will not exceed 3.55 times the amount of funding received from LLS, with the specific amount depending on when the payment(s) occur relative to the timing of the research program and product commercialization. The payments may take the form of cash payments or royalties (not to exceed 5% of net sales) but will not exceed the maximum amount referred to in the preceding sentence.
On April 29, 2013, the Company entered into a securities purchase agreement and subscription agreements with certain accredited investors for the issuance and sale in the final round of a private placement of 10,430,034 shares of common stock, which the Company sold at a price of $3.116 per share for aggregate gross proceeds of $32,499,986. Warrants to purchase 0.28 shares of common stock at $3.58 per share were issued for each share of common stock purchased. The net proceeds totaled $29,420,375 for this financing.
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In connection with this final closing of the financing, 1,923,599 shares of common stock and 161,327 warrants to purchase shares of common stock at $5.21 and 1,056,898 warrants to purchase shares of common stock at $3.58 per share were issued to certain existing stockholders of the Company who participated in earlier closings of this financing. The fair value of these common shares and warrants was recognized as a derivative liability with a corresponding charge to the statement of loss. The derivative liability was fair valued at $7,473,108. Upon the closing of the April 2013 private placement, the derivative liability was reclassed into Stockholders’ equity as the obligation to issue additional securities no longer existed.
On May 9, 2014, the Company entered into a term loan agreement for $15 million with Hercules Technology Growth Capital, Inc. The first $10 million of the term loan was funded at closing, and is repayable in installments over forty-two months including an initial interest-only period of twelve months after closing. The remaining $5 million of the term loan can be drawn down at the Company’s option at any time between December 15, 2014 and March 31, 2015. Interest is payable monthly at the greater of 9.75% or an adjusted rate based upon the US prime rate with interest only period extendable to December 1, 2015, contingent upon achieving full enrollment of the CPX-351 Phase 3 study by December 31, 2014. The funds will be used to provide general working capital.
On October 24, 2014, the Company achieved full enrollment of the CPX-351 Phase 3 study resulting in the interest only period extendable to December 1, 2015 and the term loan maturity date of December 1, 2017 extendable to June 1, 2018.
Pursuant to the loan agreement, the Company issued Hercules a warrant to purchase 158,006 shares of the Company’s common stock at an exercise price of $2.67 per share with a term of five years. The fair value of the warrants of $320,752 and financing costs of $357,253 incurred in connection with the term loan were recorded as debt issuance costs and will be amortized as interest expense using the effective interest method over the term of the loan. As of September 30, 2014, the remaining unamortized debt issuance costs of $589,828 are included in other non-current assets.
In addition, the Company will pay an end of term charge of $592,500 on the earliest to occur of (i) the term loan maturity date, (ii) the date that the Company prepays the outstanding loan, or (iii) the date that the loan become due and payable. The end of term charge will be accrued as additional interest expense using the effective interest rate method over the term of the loan. As of September 30, 2014, the accrued fee was $77,056.
On October 28, 2014, the Company completed a public offering of 7,602,823 shares of common stock and warrants to purchase up to 760,282 shares of its common stock, including the exercise in full of the underwriters’ overallotment option to purchase up to an additional 991,673 shares of common stock. The shares of common stock and warrants were offered in units consisting of one share of common stock and a warrant to purchase 0.10 of a share of common stock at a price of $1.95 per unit. The Company received approximately $13.5 million in net proceeds from the public offering after payment of fees, expenses and underwriting expenses. The shares of common stock and the warrants were immediately separable and were issued separately. The warrants have an exercise price of $3.58 per share and have a term of five years. In addition, the Company issued to the underwriters, underwriter warrants to purchase 114,042 shares of common stock at an exercise price of $3.58 per share.
Based on current projections, the Company believes it now has sufficient capital to fund its activities into the second half of 2016.
Results of Operations
Three months ended September 30, 2014 compared to the three months ended September 30, 2013
Expenses
Research and Development: The Company charges research and development costs to operations as incurred. The Company’s research and development expenses were $3,335,000 for the three months ended September 30, 2014 compared to $2,326,000 for the three months ended September 30, 2013 reflecting an increase of $1,009,000. The increase was primarily attributable to $359,000 increase in manufacturing and drug and lipid costs, $328,000 increase in outsourced clinical trial and regulatory activities related to the Phase 3 trial of CPX-351, $199,000 increase in compensation and stock option expenses, and $79,000 increase due to a greater number of patients enrolling and materials being sent to sites and the progression of the 301 study.
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LLS Funding: The LLS revenue recognized for the three months ended September 30, 2014 and 2013 was $136,000 and represents the amortization of a $2,000,000 upfront payment received during 2012 that was deferred and is being recognized over the estimated performance period of the research and development services to be provided under the agreement.
General and Administrative: General and administrative expenses consist largely of salaries and related benefits, investor relations costs, external costs for professional fees relating to legal, accounting and tax services, investor relations expenses, director and scientific advisory services as well as the lease expense for the facilities.
General and administrative expenses were $1,874,000 for the three months ended September 30, 2014 compared to $1,434,000 for the three months ended September 30, 2013, reflecting an increase of $440,000. The increase was primarily attributable to $201,000 increase in consulting associated with commercial operations and strategic planning, $151,000 increase in compensation and stock option expenses, $117,000 increase in investor relations costs, and increase in professional fees of $27,000. These increases were offset by a reduction in public company related expenses of $55,000.
Gain or loss on Disposal of Property and Equipment: The Company recorded a gain on disposal of property and equipment of $12,000 for the three months ended September 30, 2013. The gain in 2013 arose from the sale of assets that were classified as held for sale at the beginning the year.
Amortization and Depreciation: Amortization and depreciation expense was $49,000 for the three months ended September 30, 2014 and $51,000 for the three months ended September 30, 2013.
Other Income and Expenses
Interest Expense: Interest expense for the three months ended September 30, 2014 was $359,000 and related to interest on a term loan entered into with Hercules Technology Capital Growth in May 2014. Interest expense includes amortization of non-cash debt issuance costs and the accrual of the end of term charge of $108,000. There was no interest expense for the three months ended September 30, 2013
Nine months ended September 30, 2014 compared to the nine months ended September 30, 2013
Expenses
Research and Development: The Company charges research and development costs to operations as incurred. The Company’s research and development expenses were $9,239,000 for the nine months ended September 30, 2014 compared to $5,996,000 for the nine months ended September 30, 2013 reflecting an increase of $3,243,000. The increase was primarily attributable to $1,116,000 increase in manufacturing, drug and lipid costs, $778,000 increase in outsourced clinical trial and regulatory activities related to the Phase 3 trial of CPX-351, $655,000 for compensation and stock option expense increase in clinical trials and regulatory departments, $387,000 for a metabolism study for CPX-351 that began the second half of 2013, $103,000 increase in quality assurance audits and external service related to manufacturing, $107,000 due to increase in drug storage and shipping costs to sites, and $88,000 increase in intellectual property costs.
LLS Funding: The LLS funding for the nine months ended September 30, 2014 was $907,000 compared to $425,000 for the nine months ended September 30, 2013. The amount recognized during the nine months ended September 30, 2014 represents payment from LLS for achieving 50% overall enrollment milestone in January 2014 of $500,000 and amortization of an upfront payment received during 2012 of $407,000. The nine months ended September 30, 2013 amount represents amortization of an upfront payment received during 2012 of $425,000.
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General and Administrative: General and administrative expenses consist of salaries and related benefits, lease expense of the facilities, investor relations costs, professional fees relating to legal, accounting, and tax services and other administrative costs.
General and administrative expenses were $5,492,000 for the nine months ended September 30, 2014 compared to $3,922,000 for the nine months ended September 30, 2013, reflecting an increase of $1,570,000. The increase was primarily attributable to $835,000 due to compensation and stock option expense increase, $507,000 increase in commercial operations and strategic planning, $222,000 increase in investor relations, $60,000 for increased board of directors’ fees, and $33,000 increase in directors and officers insurance. These increases were offset by reductions in leases and building operating costs of $54,000, public company related costs of $20,000, and recruitment expenses of $24,000.
Loss on Disposal of Property and Equipment: The Company recorded a loss on disposal of property and equipment of $127,000 for the nine months ended September 30, 2013. The loss in 2013 arose from the sale of assets that were classified as held for sale at the beginning the year.
Amortization and Depreciation: Amortization and depreciation expense was $145,000 for the nine months ended September 30, 2014 and $148,000 for the nine months ended September 30, 2013.
Other Income and Expenses
Non-cash derivative instrument charge: Non-cash derivative instrument charge was $7,473,000 for the nine months ended September 30, 2013. The charge resulted from the obligation to issue additional shares of common stock and warrants by the Company, at the April 29, 2013 closing, to certain existing stockholders who participated in early closings of this financing.
Interest Expense: Interest expense was $560,000 and $147,000 for the nine months ended September 30, 2014 and September 30, 2013 respectively. Interest expense of $560,000 for the nine months ended September 30, 2014 related to interest on a Hercules Technology Capital Growth term loan entered into in May 2014 which includes $165,000 related to non-cash amortization of deferred financing costs and the accrual of the end of term charge. Interest expense of $147,000 for the nine months ended September 30, 2013 consisted of $72,000 of interest on a bank loan and $75,000 of non-cash financing costs.
Liquidity and Capital Resources
Overview
There is considerable time and cost associated with developing a potential drug or pharmaceutical product to the point of regulatory approval and commercialization. To date, the Company has funded its operations primarily through private placements of preferred stock and common stock, convertible debt and debt financings. However, we may pursue additional financing options, including entering into agreements with collaborative partners in order to provide milestone payments, license fees and equity investments. As of September 30, 2014, the Company had cash and cash equivalents of approximately $20.2 million.
On October 28, 2014, the Company completed a public offering of 7,602,823 shares of common stock and warrants to purchase up to 760,282 shares of its common stock, including the exercise in full of the underwriters’ overallotment option to purchase up to an additional 991,673shares of common stock. The shares of common stock and warrants were offered in units consisting of one share of common stock and a warrant to purchase 0.10 of a share of common stock at a price of $1.95 per unit. The Company received approximately $13.5 million in net proceeds from the public offering after payment of fees, expenses and underwriting expenses. The shares of common stock and the warrants were immediately separable and were issued separately. The warrants have an exercise price of $3.58 per share and have a term of five years. In addition, the Company issued to the underwriters, underwriter warrants to purchase 114,042 shares of common stock at an exercise price of $3.58 per share.
On May 9, 2014, the Company entered into a term loan agreement for $15 million with Hercules Technology Growth Capital, Inc. The first $10 million of the term loan was funded at closing, and is repayable in installments over forty-two months including an initial interest-only period of twelve months after closing. The net proceeds from the loan were $9.6 million. The remaining $5 million of the term loan can be drawn down at the Company’s option at any time between December 15, 2014 and March 31, 2015. It is the Company’s intention to draw the remaining $5 million of the term loan on or before March 31, 2015. Interest is payable monthly at the greater of 9.75% or an adjusted rate based upon the US prime rate with interest only period extendable to December 1, 2015, contingent upon achieving full enrollment of the CPX-351 Phase 3 study by December 31, 2014. The funds will be used to provide general working capital. On October 24, 2014, the Company achieved full enrollment of the CPX-351 Phase 3 study resulting in the interest only period extendable to December 1, 2015 and the term loan maturity date of December 1, 2017 extendable to June 1, 2018.
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In April 2013, the Company raised $29.4 million of net proceeds from the final round of a private placement. We expect to continue to incur losses as we fund our research and development activities and commercial launch activities, and we do not expect material revenues for at least the next few years.
Even though we believe we currently have access to sufficient funds to meet our financial needs into the second half of 2016, our business strategy in the future will require us to raise additional capital through licensing, debt or equity sales, other means or any combination of these options. The Company’s future capital requirements will depend on many factors, including those factors described in Item 1A. “Risk Factors” of the 2013 Form 10-K annual report as well as the Company’s ability to execute on its business and strategic plans as currently conceived.
Cash Flows
Net cash used in operating activities was $13,133,000 for the nine months ended September 30, 2014. The nine months ended September 30, 2014 amount reflected the Company’s net loss of $14,549,000, offset by $1,307,000 in net non-cash charges including non-cash charge relating to amortization and depreciation of $145,000, stock-based compensation expense of $997,000 and non-cash interest expense of $165,000 related to the deferred financing costs amortization for a term loan. In addition, the Company generated $109,000 of operating cash as a result of changes in certain of its operating assets and liabilities during the nine months ended September 30, 2014. The changes in operating assets and liabilities were a decrease in other receivables of $1,407,000, and an increase in accrued expenses of $401,000; offset by increases in prepaid expenses and deposits of $189,000, other current assets of $73,000, and other assets of $17,000 and decreases in accounts payable of $1,007,000, deferred rent of $6,000 and deferred revenue of $407,000.
Net cash used in operating activities was $8,398,000 for the nine months ended September 30, 2013. The nine months ended September 30, 2013 amount reflected the Company’s net loss of $17,402,000, offset by $8,145,000 in net non-cash charges including amortization and depreciation of $148,000, stock-based compensation expense of $322,000, loss on disposal of property and equipment of $127,000, non-cash charge relating to a derivative instrument of $7,473,000 and non-cash interest expense of $75,000 related to the deferred financing costs amortization for bank loan. In addition, the Company generated $860,000 of operating cash as a result of changes in certain of its operating assets and liabilities during the nine months ended September 30, 2013. The changes in operating assets and liabilities were a decrease in other receivables of $1,991,000, and increases in accrued liabilities of $208,000 and deferred rent liability of $23,000 offset by increases in prepaid expenses and deposits $134,000, restricted cash of $250,000, and other current assets of $530,000 and decreases in accounts payable of $22,000 and deferred revenue of $425,000.
Cash used in investing activities for the nine months ended September 30, 2014 was $14,000 for property and equipment expenditures. Cash used in investing activities was $30,000 for the nine months ended September 30, 2013, reflecting $82,000 of property and equipment expenditures offset by $52,000 of proceeds from the sale of property and equipment.
Cash provided by financing activities for the nine months ended September 30, 2014 was $9,747,000. The cash inflow was from the net proceeds on issuance of debt of $9,643,000 and from exercised stock options of $104,000. Cash provided by financing activities for the nine months ended September 30, 2013 was $26,420,000. The cash inflow was from the net proceeds of $29,420,000 from the April 2013 final round of a private placement offset by $3,000,000 for the repayment of bank debt.
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Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, other than operating leases, that have or are reasonably likely to have a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. We do not have any interest in special purpose entities, structured finance entities or other variable interest entities.
Critical Accounting Policies
The Company’s significant accounting policies, which include management’s best estimates and judgments, are included in Note 2 to the consolidated financial statements for the year ended December 31, 2013 included in Celator Pharmaceuticals Inc.’s Form 10-K filed. There have been no significant changes in the Company’s critical accounting policies since December 31, 2013.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We invest excess cash in investment grade, interest-bearing securities and at September 30, 2014, had approximately $17.7 million invested in money market instruments. Such investments are subject to interest rate and credit risk and are not fully insured by the federal government. We believe our policy of investing in highly rated securities, whose liquidities are, at September 30, 2014, all less than 90 days minimizes such risks. In addition, while a hypothetical one percent per annum decrease in market interest rates would have decreased our interest income for the period, it would not have resulted in a loss of the principal and the decline in interest income would have been immaterial to us.
The Company had outstanding total debt at September 30, 2014 of $10 million. Interest is payable monthly at the greater of 9.75% or an adjusted rate based upon the US prime rate with interest only period extendable to December 1, 2015, contingent upon achieving full enrollment of the CPX-351 Phase 3 study by December 31, 2014. On October 24, 2014, the Company achieved full enrollment of the CPX-351 Phase 3 study resulting in the interest only period extendable to December 1, 2015 and the term loan maturity date of December 1, 2017 extendable to June 1, 2018.
The majority of our business is conducted in U.S. dollars. However, we do conduct certain transactions in other currencies, including Canadian dollars. Historically, fluctuations in foreign currency exchange rates have not materially affected our results of operations, and during the nine months ended September 30, 2014 and 2013, our results of operations were not materially affected by fluctuations in foreign currency exchange rates.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) at the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures as of the end of the period covered by this report are effective to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding the disclosure.
Change in Internal Control over Financial Reporting
No change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) 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.
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There are no material pending legal proceedings.
Except for the historical information in this report, the matters contained in this report include forward-looking statements that involve risks and uncertainties. Our operating results and financial condition have varied in the past and may in the future vary significantly depending on a number of factors. These factors, among others, could cause actual results to differ materially from those contained in forward-looking statements made in this report and presented elsewhere by management from time to time. Such factors may have a material adverse effect upon our business, results of operations and financial condition.
You should consider carefully the risk factors, together with all of the other information included in our Annual Report on Form 10-K for the year ended December 31, 2013. Each of these risk factors could adversely affect our business, results of operations and financial condition, as well as adversely affect the value of an investment in our common stock. There have been no material changes to our risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2013.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
There were no sales of equity securities during the nine months ended September 30, 2014.
Exhibits required by Item 601 of Regulation S-K are listed in the Exhibit Index hereto and include the following:
3.1 | Third Amended and Restated Certificate of Incorporation of the Company, as amended. (Incorporated by reference to Exhibit 3.1 to the Company’s Form 10-Q filed on August 7, 2014.) |
3.2 | Amend and Restated By-laws of the Company. (Incorporated by reference to Exhibit 3.2 to the Company’s Form 8-K current report filed on April 18, 2013.) |
4.1 | Warrant Agreement between Celator Pharmaceuticals, Inc. and American Stock Transfer & Trust Company, LLC. (Filed herewith.) |
4.2 | Form of Underwriter Warrant. (Incorporated by reference Exhibit 4.2 to the Company’s Form 8-K current report filed with SEC on October 23, 2014). |
31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15a-14(a) under the Exchange Act. |
31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15a-14(a) under the Exchange Act. |
32.1 | Certification Pursuant to 18 U.S.C. Section 1350 of principal executive officer and principal financial officer. |
101.1 | The following financial statements from Celator Pharmaceuticals Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets at September 30, 2014 and December 31, 2013, (ii) the Statements of Loss for the three and nine months ended September 30, 2014 and 2013, (iii) Statement of Shareholders’ Equity for the nine months ended September 30, 2014, (iv) the Consolidated Statements of Cash Flows for the nine months ended September 30, 2014 and 2013, and (v) Notes to Consolidated Financial Statements. |
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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.
CELATOR PHARMACEUTICALS, INC.
Signature | Title | Date |
/s/ Scott T. Jackson Scott T. Jackson |
Chief Executive
Officer and a Director (principal executive officer) |
November 13, 2014 |
/s/ Fred M. Powell Fred M. Powell |
Vice President
and Chief Financial Officer (principal financial and accounting officer) |
November 13, 2014 |
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EXHIBIT INDEX
Exhibit No. | Description |
3.1 | Third Amended and Restated Certificate of Incorporation of the Company, as amended. (Incorporated by reference to Exhibit 3.1 to the Company’s Form 10-Q filed on August 7, 2014.) |
3.2 | Amend and Restated By-laws of the Company. (Incorporated by reference to Exhibit 3.2 to the Company’s Form 8-K current report filed on April 18, 2013.) |
4.1 | Warrant Agreement between Celator Pharmaceuticals, Inc. and American Stock Transfer & Trust Company, LLC. (Filed herewith.) |
4.2 | Form of Underwriter Warrant. (Incorporated by reference Exhibit 4.2 to the Company’s Form 8-K current report filed with SEC on October 23, 2014). |
31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15a-14(a) under the Exchange Act. |
31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15a-14(a) under the Exchange Act. |
32.1 | Certification Pursuant to 18 U.S.C. Section 1350 of principal executive officer and principal financial officer. |
101.1 | The following financial statements from Celator Pharmaceuticals Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets at September 30, 2014 and December 31, 2013, (ii) the Statements of Loss for the three and nine months ended September 30, 2014 and 2013, (iii) Statement of Shareholders’ Equity for the nine months ended September 30, 2014, (iv) the Consolidated Statements of Cash Flows for the nine months ended September 30, 2014 and 2013, and (v) Notes to Consolidated Financial Statements. |
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Exhibit 4.1
CELATOR PHARMACEUTICALS, INC.
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (this “Warrant Agreement”) is dated October 28, 2014, between Celator Pharmaceuticals, Inc., a Delaware corporation (the “Company”), and American Stock Transfer & Trust Company, LLC, acting as warrant agent (the “Warrant Agent”).
WHEREAS, the Company is engaged in a public offering (the “Offering”) of Common Stock (as defined below) and Warrants (as defined below) and, in connection therewith, has determined to issue and deliver warrants (the “Warrants”) to purchase up to 760,282 shares of Common Stock (as defined below) (the “Warrant Shares”) to the investors in the Offering, including Warrants to purchase up to 99,167 shares of Common Stock subject to an overallotment option granted to the underwriters as described in the Prospectus Supplement (as defined below), each Warrant evidencing the right of the holder thereof to purchase 0.10 of a share of the Company’s common stock, par value $.001 per share (the “Common Stock”), for $3.58 per whole share of Common Stock, as adjusted from time to time as provided in Section 9 herein (the “Exercise Price”);
WHEREAS, the Company has filed with the Securities and Exchange Commission (the “Commission”) a shelf registration statement on Form S-3 (File No. 333-193720), as amended (the “Registration Statement”), for the registration under the Securities Act of 1933, as amended (the “Act”), of, among other securities, the Warrants and the Common Stock issuable upon exercise of the Warrants;
WHEREAS, the Company has filed with the Commission a prospectus supplement to the Registration Statement pursuant to Rule 424(b)(5) under the Act (the “Prospectus Supplement”) describing the terms of the Warrants and the Common Stock issuable upon exercise of the Warrants;
WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing so to act, in connection with the issuance, registration, transfer, exercise and replacement of the Warrants and, in the Warrant Agent’s capacity as the Company’s transfer agent, the delivery of the Warrant Shares.
NOW, THEREFORE, in consideration of the foregoing and for the purpose of defining the terms and provisions of the Warrants and the respective rights and obligations thereunder of the Company, the Warrant Agent and the registered holders from time to time of the Warrants (each, a “Holder” and collectively, the “Holders”), the parties hereby agree as follows:
1. Definitions. In addition to the terms defined elsewhere in this Warrant Agreement, the following terms shall have the following meanings:
“Business Day” means any day except Saturday, Sunday and any day which shall be a federal legal holiday in the United States or a day on which banking institutions in the City of New York are authorized or required by law or other government action to close.
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“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder.
“Expiration Date” means the date five (5) years after the Initial Issuance Date.
“Initial Issuance Date” means October 28, 2014.
“Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.
“Trading Day” means any day on which the Common Stock are traded on the NASDAQ Stock Market, or, if the NASDAQ Stock Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock are then traded; provided that “Trading Day” shall not include any day on which the Common Stock are scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock are suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time).
2. Appointment of Warrant Agent. The Company hereby appoints the Warrant Agent to act as agent for the Company in accordance with the terms and conditions hereof, and the Warrant Agent hereby accepts such appointment. The Company may from time to time appoint such Co-Warrant Agents as it may, in its sole discretion, deem necessary or desirable.
3. Registration.
(a) The Warrant Agent shall maintain books (“Warrant Register”), for the registration of original issuance and the registration of transfer of the Warrants. The Warrants may be represented by definitive warrant certificates in physical form (“Warrant Certificates”) or by one or more book-entry warrants (“Book-Entry Warrants”) deposited with The Depository Trust Company (the “Depository”) and registered in the name of Cede & Co., a nominee of the Depository. Ownership of beneficial interests in the Book-Entry Warrants shall be shown on, and the transfer of such ownership shall be effected through, records maintained by (i) the Depository or its nominee for each Book-Entry Warrant or (ii) institutions that have accounts with the Depository (such institution, with respect to a Warrant in its account, a “Participant”).
(b) If the Warrants are not “DTC Eligible” as of the Initial Issuance Date or the Depository subsequently ceases to make its book-entry settlement system available for the Warrants, the Company may instruct the Warrant Agent regarding other arrangements for book-entry settlement. In the event that the Warrants are not eligible for, or it is no longer necessary to have the Warrants available in, book-entry form, the Warrant Agent shall provide written instructions to the Depository to deliver to the Warrant Agent for cancellation the Book-Entry Warrants, and the Company shall instruct the Warrant Agent to deliver to each Holder a Warrant Certificate.
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(c) Notwithstanding the foregoing and anything else herein to the contrary, the Warrants may be issued in uncertificated form if so specified by the Company.
4. Countersignature; Transfer of Warrants; Mutilated, Destroyed, Lost or Stolen Certificates.
(a) The Warrant Certificates shall be substantially in the form of Exhibit A hereto and executed on behalf of the Company by its Chief Executive Officer, the Vice President, the Chief Financial Officer or any Vice President, either manually or by facsimile signature. The Warrant Certificates shall be countersigned by the Warrant Agent either manually or by facsimile signature and shall not be valid for any purpose unless so countersigned. In case any officer of the Company who shall have signed any of the Warrant Certificates shall cease to be such officer of the Company before countersignature by the Warrant Agent and issuance and delivery by the Company, such Warrant Certificates nevertheless, may be countersigned by the Warrant Agent, issued and delivered with the same force and effect as though the person who signed such Warrant Certificate had not ceased to be such officer of the Company; and any Warrant Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Warrant Certificate shall be a proper officer of the Company to sign such Warrant Certificate although at the date of the execution of this Agreement any such person was not such an officer.
(b) The Warrant Agent will create a special account for the issuance of Warrant Certificates.
(c) Subject to the last sentence of this Section 4(c) and subject to applicable law, rules or regulations, or any “stop transfer” instructions the Company may give to the Warrant Agent, at any time after the Initial Issuance Date, and at or prior to 5:00 P.M., New York City time, on the Expiration Date, upon the surrender of any Warrant Certificate, together with a Form of Assignment substantially in the form of Exhibit B, to the principal office of the Warrant Agent, the Warrant Agent shall register the transfer, from time to time, of any outstanding Warrant into the Warrant Register and the Warrant Agent shall issue in exchange therefor one or more new Warrants as requested by the Holder of the Warrants so surrendered, representing an equal aggregate number of Warrants. The Book-Entry Warrants may be transferred only in whole and only to the Depository, to another nominee of the Depository, to a successor depository, or to a nominee of a successor depository. Upon the registration of transfer, the Company shall execute and the Warrant Agent shall, subject to the last sentence of this Section 4(c), countersign and deliver to the Person entitled thereto a Warrant Certificate or Warrant Certificates, as the case may be, as so requested. The Company may require payment from the Holder of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer of Warrant Certificates. The Company shall compensate the Warrant Agent per the fee schedule mutually agreed upon by the parties hereto and provided separately on the date hereof.
(e) Upon receipt by the Warrant Agent of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of a Warrant Certificate, which evidence shall include an affidavit of loss, or in the case of mutilated certificates, the certificate or portion thereof remaining, and, in case of loss, theft or destruction, of indemnity or security in customary form and amount which shall include a corporate bond of indemnity satisfactory to the Warrant Agent, and satisfaction of any other reasonable requirements established by Section 8-405 of the Uniform Commercial Code as in effect in the State of Delaware, and reimbursement to the Company and the Warrant Agent of all reasonable expenses incidental thereto, and upon surrender to the Warrant Agent and cancellation of the Warrant Certificate if mutilated, the Company will make and deliver a new Warrant Certificate of like tenor to the Warrant Agent for delivery to the Holder in lieu of the Warrant Certificate so lost, stolen, destroyed or mutilated.
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5. Exercise and Duration of Warrant.
(a) All or any part of the Warrant shall be exercisable, in whole or in part, by the registered Holder at any time and from time to time on or after the Initial Issuance Date and through and including 5:00 P.M., New York City time, on the Expiration Date. At 5:00 P.M., New York City time, on the Expiration Date, the Warrant shall be terminated and no longer outstanding; provided, however that, notwithstanding the foregoing, without any further action by or on behalf of the Holder, the Warrant shall automatically be deemed to be exercised in full pursuant to the net exercise provisions of Section 10 effective immediately prior to such termination.
(b) The Holder may exercise the Warrant by delivering, not later than 5:00 p.m., New York City time, on any Business Day prior to the Expiration Date, to the principal office of the Warrant Agent (i) an exercise notice, in the form attached as Exhibit C hereto (the “Exercise Notice”), appropriately completed and duly signed by the Holder or, in the case of a Book-Entry Warrant, properly delivered by the Participant in accordance with the Depository’s procedures and (ii) payment of the Exercise Price for the number of Warrant Shares as to which the Warrant is being exercised (which may take the form of a “cashless exercise” if so indicated in the Exercise Notice pursuant to Section 10), and the date such items are delivered to the Company (as determined in accordance with the notice provisions hereof) is an “Exercise Date.” If the Exercise Notice is received by the Warrant Agent after 5:00 p.m., New York City Time, on the specified Exercise Date, the Warrants will be deemed to be received and exercised on the Trading Day next succeeding the Exercise Date. The Holder shall not be required to deliver the original Warrant in order to effect an exercise hereunder. Execution and delivery of the Exercise Notice shall have the same effect as cancellation of the original Warrant and issuance of a new Warrant evidencing the right to purchase the remaining number of Warrant Shares. No ink original of any Exercise Notice shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Exercise Notice be required. Upon receipt of payment of the Exercise Price by the Warrant Agent or one of its agents, the Warrant Agent or such agent shall promptly remit such payment to the Company at an account designated by the Company to the Warrant Agent. In the event of a “cashless exercise,” the Exercise Notice must be delivered to the Company at the address specified in Section 18 hereof.
6. Delivery of Warrant Shares.
(a) Upon exercise of the Warrant, the Warrant Agent shall promptly advise the Company and the transfer agent and registrar in respect of (i) the Warrant Shares issuable upon such exercise as to the number of Warrants exercised in accordance with the terms and conditions of this Warrant Agreement, (ii) the instructions of the Holder or Participant, as the case may be, with respect to delivery of the Warrant Shares issuable upon such exercise, and the delivery of Warrant Certificates, as appropriate, evidencing the balance, if any, of the Warrants remaining after such exercise, (iii) in case of a Book-Entry Warrant, the notation that shall be made to the records maintained by the Depository, its nominee for each Book-Entry Warrant, or a Participant, as appropriate, evidencing the balance, if any, of the Warrants remaining after such exercise and (d) such other information as the Company or such transfer agent and registrar shall reasonably require. Provided that the Warrant Agent has received funds in the amount of the Exercise Price, the Company shall promptly (but in no event later than three Trading Days after the Exercise Date) issue or cause to be issued and cause to be delivered to the Holder (or upon the written order of the Holder, in such name or names as the Holder may designate) or the Participant, as the case may be, , a certificate for the Warrant Shares issuable upon such exercise, free of restrictive legends. The Holder (or any Person permissibly so designated by the Holder to receive Warrant Shares) or the Participant, as applicable, shall be deemed to have become the holder of record of such Warrant Shares as of the Exercise Date. In lieu of delivering physical certificates representing the Warrant Shares issuable upon exercise, provided the Company’s transfer agent is participating in the Depository’s Fast Automated Securities Transfer program, upon the written request of the Holder or the Participant, as applicable, the Company shall use its commercially reasonable efforts to deliver, or cause to be delivered, Warrant Shares hereunder electronically through The Depository Trust Company or another established clearing corporation performing similar functions, if available.
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(b) If by the close of the third Trading Day after delivery of a properly completed Exercise Notice (and any other documents required pursuant to Section 6(a)), the Company fails to deliver to the Holder or the Participant, as applicable, the required number of Warrant Shares in the manner required pursuant to Section 4(a), and if on or after the Trading Day immediately following such third Trading Day and prior to the receipt of such Warrant Shares, the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall, within three Trading Days after the Holder’s request and in the Holder’s sole discretion, either (i) pay in cash to the Holder an amount equal to the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which point the Company’s obligation to deliver such certificate (and to issue such Warrant Shares) shall terminate or (ii) promptly honor its obligation to deliver to the Holder Warrant Shares and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of Warrant Shares, times (B) the Closing Sales Price (as defined below) on the date of receipt of a properly completed Exercise Notice.
(c) To the extent permitted by law, the Company’s obligations to issue and deliver Warrant Shares in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of Warrant Shares. Nothing herein shall limit the Holder’s right to pursue any other remedies available to the Holder hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.
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7. Charges, Taxes and Expenses. Issuance and delivery of certificates for shares of Common Stock upon exercise of the Warrant shall be made without charge to the Holder for any issue or transfer tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or Warrants in a name other than that of the Holder or an Affiliate thereof. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring the Warrant or receiving Warrant Shares upon exercise of the Warrant.
8. Reservation of Warrant Shares. The Company covenants that it will reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved shares of Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of the Warrants as herein provided, one hundred percent (100%) of the number of Warrant Shares that are issuable and deliverable upon the exercise of the Warrants, free from preemptive rights or any other contingent purchase rights of persons other than the Holder (taking into account the adjustments and restrictions of Section 9). The Company covenants that all Warrant Shares so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable. The Company will take all such action as may be necessary to assure that such shares of Common Stock may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of any securities exchange or automated quotation system upon which the Common Stock may be listed.
9. Certain Adjustments. The Exercise Price and number of Warrant Shares issuable upon exercise of the Warrants are subject to adjustment from time to time as set forth in this Section 9.
(a) Stock Dividends and Splits. If the Company, at any time while the Warrants are outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides its outstanding shares of Common Stock into a larger number of shares, or (iii) combines its outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately before such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this Section 9(a) shall become effective immediately after the effective date of such subdivision or combination.
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(b) Pro Rata Distributions. If the Company, at any time while the Warrants are outstanding, distributes to all holders of Common Stock (i) evidences of its indebtedness, (ii) any security (other than a distribution of Common Stock covered by the preceding paragraph), (iii) rights or warrants to subscribe for or purchase any security, or (iv) any other asset (in each case, “Distributed Property”), then, upon the exercise of any Warrant that occurs after the record date fixed for determination of stockholders entitled to receive such distribution, the Holder shall be entitled to receive, in addition to the Warrant Shares otherwise issuable upon such exercise (if applicable), the Distributed Property that such Holder would have been entitled to receive in respect of such number of Warrant Shares had the Holder been the record holder of such Warrant Shares immediately prior to such record date.
(c) Fundamental Transactions. If, at any time while the Warrants are outstanding (i) the Company effects any merger or consolidation of the Company with or into another Person, in which the Company is not the survivor and the stockholders of the Company immediately prior to such merger or consolidation do not own, directly or indirectly, at least fifty percent (50%) of the voting securities of the surviving entity, (ii) the Company effects any sale of all or substantially all of its assets or at least a majority of its Common Stock is acquired by a third party, in each case, in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which all or substantially all of the holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (other than as a result of a subdivision or combination of shares of Common Stock covered by Section 9(a)) (in any such case, a “Fundamental Transaction”), then the Holder shall thereafter receive, upon exercise of any Warrant, in lieu of any Warrant Shares, the same amount and kind of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of the number of Warrant Shares then issuable upon exercise in full of such Warrant without regard to any limitations on exercise contained herein (the “Alternate Consideration”). The Company shall not affect any such Fundamental Transaction unless prior to or simultaneously with the consummation thereof, any successor to the Company, surviving entity or the corporation purchasing or otherwise acquiring such assets or other appropriate corporation or entity shall assume the obligation to deliver to the Holder, such Alternate Consideration as, in accordance with the foregoing provisions, the Holder may be entitled to purchase and/or receive (as the case may be), and the other obligations under any Warrant. The provisions of this paragraph (c) shall similarly apply to subsequent transactions analogous to a Fundamental Transaction.
(d) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to paragraph (a) and (e) of this Section 9, the number of Warrant Shares that may be purchased upon exercise of the Warrants shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the increased or decreased number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment.
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(e) Calculations. All calculations under this Section 9 shall be made to the nearest cent or the nearest share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the sale or issuance of any such shares shall be considered an issue or sale of Common Stock.
(f) Notice of Adjustments. Upon the occurrence of each adjustment pursuant to this Section 9, the Company at its expense will, at the written request of the Holder, promptly compute such adjustment, in good faith, in accordance with the terms of the Warrants and prepare a certificate setting forth such adjustment, including a statement of the adjusted Exercise Price and adjusted number or type of Warrant Shares or other securities issuable upon exercise of the Warrants (as applicable), describing the transactions giving rise to such adjustments and showing in detail the facts upon which such adjustment is based. Upon written request, the Company will promptly deliver a copy of each such certificate to the Holder and to the Company’s transfer agent.
(g) Notice of Corporate Events. If, while the Warrants are outstanding, the Company (i) declares a dividend or any other distribution of cash, securities or other property in respect of its Common Stock, including, without limitation, any granting of rights or warrants to subscribe for or purchase any capital stock of the Company or any subsidiary, (ii) authorizes or approves, enters into any agreement contemplating or solicits stockholder approval for any Fundamental Transaction or (iii) authorizes the voluntary dissolution, liquidation or winding up of the affairs of the Company, then, except if such notice and the contents thereof shall be deemed to constitute material non-public information, the Company shall deliver to the Holder a notice describing the material terms and conditions of such transaction at least five Trading Days prior to the applicable record or effective date on which a Person would need to hold Common Stock in order to participate in or vote with respect to such transaction, and the Company will take all steps reasonably necessary in order to ensure that the Holder is given the practical opportunity to exercise the Warrants prior to such time so as to participate in or vote with respect to such transaction; provided, however, that the failure to deliver such notice or any defect therein shall not affect the validity of the corporate action required to be described in such notice.
10. Payment of Exercise Price. The Holder shall pay the Exercise Price in immediately available funds; provided, however, pursuant to the exercise of any Warrant in full, that the Holder may, in its sole discretion, satisfy its obligation to pay the Exercise Price through a “cashless exercise,” in which event the Company shall issue to the Holder the number of Warrant Shares determined as follows:
X = Y [(A-B)/A]
where:
X = the number of Warrant Shares to be issued to the Holder.
Y = the total number of Warrant Shares with respect to which the Warrant is being exercised in accordance with the terms of the Warrant and this Warrant Agreement if such exercise were by means of a cash exercise rather than a cashless exercise.
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A = the average of the Closing Sale Prices of the shares of Common Stock (as reported by Bloomberg Financial Markets) for the five Trading Days ending on the date immediately preceding the Exercise Date.
B = the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise.
For purposes of the Warrants, “Closing Sale Price” means, for any security as of any date, the last trade price for such security on the principal trading market of the security, as reported by Bloomberg Financial Markets, or, if the principal trading market of the security begins to operate on an extended hours basis and does not designate the last trade price then the last trade price of such security prior to 4:00 p.m., New York City Time, as reported by Bloomberg Financial Markets, or if the foregoing do not apply, the last trade price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg Financial Markets, or, if no closing bid price is reported for such security by Bloomberg Financial Markets, the average of the bid prices and asked prices of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder in good faith. If the Company and the Holder are unable to agree upon the fair market value of such security, then the Company shall, within two Business Days submit via facsimile (a) the disputed determination of the Exercise Price to an independent, reputable investment bank selected by the Company and approved by the Holder (which approval shall not be unreasonably withheld, conditioned or delayed) or (b) the disputed arithmetic calculation of the Warrant Shares to the Company’s independent, outside accountant. The Company shall cause at its expense the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than ten Business Days from the time it receives the disputed determinations or calculations. Such investment bank’s or accountant’s determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.
11. Beneficial Ownership. The Company shall not effect the exercise of any Warrant, and the Holder shall not have the right to exercise such Warrant, to the extent that after giving effect to such exercise, such Person (together with such Person’s affiliates) would beneficially own in excess of 19.99% (the “Maximum Percentage”) of the shares of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficially owned by such Person and its affiliates shall include the number of shares of Common Stock issuable upon exercise of the Warrant with respect to which the determination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (a) exercise of the remaining, unexercised portion of the Warrant beneficially owned by such Person and its affiliates and (b) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company beneficially owned by such Person and its affiliates (including, without limitation, any convertible notes or convertible preferred stock or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein. Except as set forth in the preceding sentence, for purposes of this paragraph, beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act. For purposes of the Warrant, in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in the most recent of (i) the Company’s most recent Form 10-K, Form 10-Q, Current Report on Form 8-K or other public filing with the Securities and Exchange Commission, as the case may be, (ii) a more recent public announcement by the Company or (iii) any other notice by the Company or the transfer agent setting forth the number of shares of Common Stock outstanding. For any reason at any time, upon the written or oral request of the Holder, the Company shall within two Business Days confirm to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including the Warrant, by the Holder and its affiliates since the date as of which such number of outstanding shares of Common Stock was reported. Neither the Warrant Agent nor the Depository Trust Company has any responsibility for monitoring compliance with this Section 11.
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12. No Fractional Shares. No fractional Warrant Shares will be issued in connection with any exercise of any Warrant. In lieu of any fractional shares which would, otherwise be issuable, the number of Warrant Shares to be issued shall be rounded down to the next whole number and the Company shall pay the Holder in cash the fair market value (based on the Closing Sale Price) for any such fractional shares.
13. Concerning the Warrant Agent.
(a) The Company agrees to pay to the Warrant Agent, pursuant to the fee schedule mutually agreed upon by the parties hereto and provided separately on the date hereof, for all services rendered by it hereunder and, from time to time, its reasonable expenses and counsel fees and other disbursements actually incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder.
(b) The Company covenants and agrees to indemnify and to hold the Warrant Agent harmless against any costs, expenses (including reasonable fees of its legal counsel), losses or damages, which may be paid, incurred or suffered by or to which it may become subject, arising from or out of, directly or indirectly, any claims or liability resulting from its actions as Warrant Agent pursuant hereto; provided, that such covenant and agreement does not extend to, and the Warrant Agent shall not be indemnified with respect to, such costs, expenses, losses and damages incurred or suffered by the Warrant Agent as a result of, or arising out of, its gross negligence, bad faith, or willful misconduct.
(c) In order that the indemnification provisions contained in this Section 13 shall apply, upon the assertion of a claim for which one party may be required to indemnify the other, the party seeking indemnification shall promptly notify the other party of such assertion, and shall keep the other party advised with respect to all developments concerning such claim. The indemnifying party shall have the option to participate with the indemnified party in the defense of such claim or to defend against said claim in its own name or the name of the indemnified party. The indemnified party shall in no case confess any claim or make any compromise in any case in which the indemnifying party may be required to indemnify it except with the indemnifying party’s prior written consent.
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(d) Subject to Section 13(b) above, neither party to this Agreement shall be liable to the other party for any consequential, indirect, special or incidental damages under any provisions of this Agreement or for any consequential, indirect, penal, special or incidental damages arising out of any act or failure to act hereunder even if that party has been advised of or has foreseen the possibility of such damages.
(e) Notwithstanding anything contained herein to the contrary, the rights and obligations of the parties set forth in this Section 13 shall survive termination of this Agreement or the resignation or removal of the Warrant Agent.
14. Purchase or Consolidation or Change of Name of Warrant Agent
(a) Any corporation into which the Warrant Agent or any successor Warrant Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Warrant Agent or any successor Warrant Agent shall be party, or any corporation succeeding to the corporate trust business of the Warrant Agent or any successor Warrant Agent, shall be the successor to the Warrant Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such corporation would be eligible for appointment as a successor Warrant Agent under the provisions of Section 16. In case at the time such successor Warrant Agent shall succeed to the agency created by this Agreement any of the Warrant Certificates shall have been countersigned but not delivered, any such successor Warrant Agent may adopt the countersignature of the predecessor Warrant Agent and deliver such Warrant Certificates so countersigned; and in case at that time any of the Warrant Certificates shall not have been countersigned, any successor Warrant Agent may countersign such Warrant Certificates either in the name of the predecessor Warrant Agent or in the name of the successor Warrant Agent; and in all such cases such Warrant Certificates shall have the full force provided in the Warrant Certificates and in this Agreement.
(b) In case at any time the name of the Warrant Agent shall be changed and at such time any of the Warrant Certificates shall have been countersigned but not delivered, the Warrant Agent may adopt the countersignature under its prior name and deliver such Warrant Certificates so countersigned; and in case at that time any of the Warrant Certificates shall not have been countersigned, the Warrant Agent may countersign such Warrant Certificates either in its prior name or in its changed name; and in all such cases such Warrant Certificates shall have the full force provided in the Warrant Certificates and in this Agreement.
15. Duties of the Warrant Agent. The Warrant Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company, by its acceptance hereof, shall be bound:
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(a) The Warrant Agent may consult with legal counsel reasonably acceptable to the Company (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Warrant Agent as to any action taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the Warrant Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by the Chief Executive Officer, Chief Financial Officer or Vice President of the Company; and such certificate shall be full authentication to the Warrant Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate.
(c) Subject to the limitation set forth in Section 13, the Warrant Agent shall be liable hereunder for its own gross negligence, bad faith or willful misconduct, or for a breach by it of this Agreement.
(d) The Warrant Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Warrant Certificates (except its countersignature thereof) by the Company or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only.
(e) The Warrant Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Warrant Agent) or in respect of the validity or execution of any Warrant Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Warrant Certificate; nor shall it be responsible for the adjustment of the Exercise Price or the making of any change in the number of shares of Common Stock required under the provisions of Section 9 or 12 or responsible for the manner, method or amount of any such change or the ascertaining of the existence of facts that would require any such adjustment or change (except with respect to the exercise of Warrants evidenced by Warrant Certificates after actual notice of any adjustment of the Exercise Price); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Common Stock to be issued pursuant to this Agreement or any Warrant Certificate or as to whether any shares of Common Stock will, when issued, be duly authorized, validly issued, fully paid and nonassessable.
(f) Each party hereto agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the other party hereto for the carrying out or performing by any party of the provisions of this Agreement.
(g) The Warrant Agent is hereby authorized to accept instructions with respect to the performance of its duties hereunder from the Chief Executive Officer, Chief Financial Officer or Vice President of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable and shall be indemnified and held harmless for any action taken or suffered to be taken by it in good faith in accordance with instructions of any such officer, provided Warrant Agent carries out such instructions without gross negligence, bad faith or willful misconduct.
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(h) The Warrant Agent and any shareholder, director, officer or employee of the Warrant Agent may buy, sell or deal in any of the Warrants or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Warrant Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Company or for any other legal entity.
(i) The Warrant Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorney or agents, and the Warrant Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorney or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct, provided reasonable care was exercised in the selection and continued employment thereof.
16. Change of Warrant Agent. The Warrant Agent may resign and be discharged from its duties under this Agreement upon 30 days’ notice in writing mailed to the Company and to each transfer agent of the Common Stock by registered or certified mail, and to the holders of the Warrant Certificates by first-class mail. The Company may remove the Warrant Agent or any successor Warrant Agent upon 30 days’ notice in writing, mailed to the Warrant Agent or successor Warrant Agent, as the case may be, and to each transfer agent of the Common Stock by registered or certified mail, and to the holders of the Warrant Certificates by first-class mail. If the Warrant Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Warrant Agent. If the Company shall fail to make such appointment within a period of 30 days after such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Warrant Agent or by any Holder, then any Holder may apply to any court of competent jurisdiction for the appointment of a new Warrant Agent. Any successor Warrant Agent, whether appointed by the Company or by such a court, shall be a corporation organized and doing business under the laws of the United States or of a state thereof, in good standing, which is authorized under such laws to exercise corporate trust powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Warrant Agent a combined capital and surplus of at least $50,000,000. After appointment, the successor Warrant Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Warrant Agent without further act or deed; but the predecessor Warrant Agent shall deliver and transfer to the successor Warrant Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Warrant Agent and each transfer agent of the Common Stock, and mail a notice thereof in writing to the Holders. However, failure to give any notice provided for in this Section 16, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Warrant Agent or the appointment of the successor Warrant Agent, as the case may be.
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17. Issuance of New Warrant Certificates. Notwithstanding any of the provisions of this Agreement or of the Warrants to the contrary, the Company may, at its option, issue new Warrant Certificates evidencing Warrants in such form as may be approved by its Board of Directors to reflect any adjustment or change in the Exercise Price per share and the number or kind or class of shares of stock or other securities or property purchasable under the Warrant Certificates made in accordance with the provisions of this Agreement.
18. Notices. Notices or demands authorized by this Agreement to be given or made (i) by the Warrant Agent or by any Holder to or on the Company, (ii) subject to the provisions of Section 16, by the Company or by any Holder to or on the Warrant Agent or (iii) by the Company or the Warrant Agent to the Holders, shall be deemed given (x) on the date delivered, if delivered personally, (y) on the first Business Day following the deposit thereof with Federal Express or another recognized overnight courier, if sent by Federal Express or another recognized overnight courier, and (z) on the fourth Business Day following the mailing thereof with postage prepaid, if mailed by registered or certified mail (return receipt requested), in each case to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):
(a) If to the Company, to:
Celator Pharmaceuticals, Inc.
200 PrincetonSouth Corporate Center
Suite 180
Ewing, New Jersey 08628
(b) If to the Warrant Agent, to:
American Stock Transfer & Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
Attention: Corporate Trust Department
Fax: (718) 765-8711
(c) If to the Holders, to the address of such holder as shown on the Warrant Register. Any notice required to be delivered by the Company to the Holders may be given by the Warrant Agent on behalf of the Company.
19. Miscellaneous.
(a) No Rights as a Stockholder. The Holders, solely in such Persons’ capacity as holders of the Warrants, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything contained in the Warrants or this Warrant Agreement be construed to confer upon the Holders, solely in such Persons’ capacity holders of the Warrants, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, amalgamation, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the Holders which such Persons are then entitled to receive upon the due exercise of the Warrant. In addition, nothing contained in the Warrants or this Warrant Agreement shall be construed as imposing any liabilities on the Holders to purchase any securities (upon exercise of any Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstanding this Section 19(a), the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company, contemporaneously with the giving thereof to the stockholders.
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(b) Successors and Assigns. Subject to compliance with applicable securities laws, any Warrant may be assigned by the Holder. The Warrants may not be assigned by the Company except to a successor in the event of a Fundamental Transaction. The Warrants shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns. Subject to the preceding sentence, nothing in the Warrants or this Warrant Agreement shall be construed to give to any Person other than the Company and the Holders any legal or equitable right, remedy or cause of action under the Warrants. Any attempted assignment in violation of this Section 19(b) shall be null and void.
(c) Registration of Common Stock. The Company will use its reasonable best efforts to maintain the effectiveness of the Registration Statement, or a new registration statement, for the registration under the Act of the Common Stock issuable upon exercise of the Warrants and ensure that a prospectus is available for delivery to the Holders until the expiration of the Warrants in accordance with the provisions of this Warrant Agreement; provided, however, that in no event shall the Holders have the right to net settle the Warrants for cash irrespective of whether an effective registration statement is then in effect.
(d) Non-circumvention. The Company hereby covenants and agrees that the Company will not, by amendment of its corporate charter, bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities or any other voluntary action, seek to avoid the observance or performance of any of the terms of the Warrants or this Warrant Agreement, and will at all times in good faith carry out all the provisions of the Warrants and this Warrant Agreement. Without limiting the generality of the foregoing, the Company shall not increase the par value of any shares of Common Stock receivable upon the exercise of the Warrants above the Warrant Price then in effect.
(c) Amendment and Waiver.
(i) The Company and the Warrant Agent may from time to time supplement or amend this Warrant Agreement without the approval of any Holders of Warrants in order to cure any ambiguity, to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, or to make any other provisions with regard to matters or questions arising hereunder which the Company and the Warrant Agent may deem necessary or desirable and which shall not adversely affect the interests of the Holders.
(ii) In addition to the foregoing, this Warrant Agreement may be amended, modified or supplemented, and waiver or consents to departures from the provisions of this Warrant Agreement may be given, if the Company and the holders of outstanding Warrants representing at least a majority of the shares of Common Stock purchasable under the outstanding Warrants consent to such amendment, modification, supplement, waiver or consent.
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(d) Governing Law; Jurisdiction. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS WARRANT AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE state and federal courts sitting in the City of New York, Borough of Manhattan, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS WARRANT AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW.
(e) Headings. The headings herein are for convenience only, do not constitute a part of this Warrant Agreement and shall not be deemed to limit or affect any of the provisions hereof.
(f) Severability. In case any one or more of the provisions of this Warrant Agreement shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant Agreement shall not in any way be affected or impaired thereby, and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant Agreement.
(g) Force Majeure. Notwithstanding anything to the contrary contained herein, the Warrant Agent shall not be liable for any delays or failures in performance resulting from acts beyond its reasonable control including, without limitation, acts of God, terrorist acts, shortage of supply, breakdowns or malfunctions, interruptions or malfunction of computer facilities, or loss of data due to power failures or mechanical difficulties with information storage or retrieval systems, labor difficulties, war, or civil unrest.
(Signature page follows.)
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IN WITNESS WHEREOF, the Company has caused this Warrant Agreement to be duly executed by its authorized officer as of the date first indicated above.
CELATOR PHARMACEUTICALS, INC. | ||
By: | /s/ Scott T. Jackson | |
Name: Scott T. Jackson | ||
Title: Chief Executive Officer | ||
AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC | ||
By: | /s/ Paula Caroppoli | |
Name: Paula Caroppoli | ||
Title: Senior Vice President |
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Exhibit A
EXERCISABLE ON OR AFTER OCTOBER __, 2014
AND ON OR BEFORE THE EXPIRATION DATE
No. |
Warrant to Purchase Shares
|
Warrant Certificate
WARRANTS TO ACQUIRE COMMON STOCK OF CELATOR PHARMACEUTICALS, INC.
This warrant certificate (this “Warrant Certificate”) certifies that , or registered assigns, is the registered holder of a Warrant (the “Warrant”) to acquire from Celator Pharmaceuticals, Inc., a Delaware corporation (the “Company”), the number of fully paid and non-assessable shares of Common Stock, $0.001 par value, of the Company (the “Common Stock”) specified above for consideration equal to the Exercise Price (as defined in the Warrant Agreement (as defined below)) per share of Common Stock. The Exercise Price and number of shares of Common Stock and/or type of securities or property issuable upon exercise of the Warrant are subject to adjustment upon the occurrence of certain events as set forth in the Warrant Agreement. The Warrant evidenced by this Warrant Certificate shall not be exercisable after and shall terminate and become void as of 5:00 P.M., New York time, on October __, 2019 (the “Expiration Date”).
The Warrant evidenced by this Warrant Certificate is part of a duly authorized issue of warrants expiring on the Expiration Date entitling the Holder hereof to receive shares of Common Stock, and is issued or to be issued pursuant to a Warrant Agreement dated October __, 2014 (the “Warrant Agreement”), duly executed and delivered by the Company to American Stock Transfer & Trust Company, LLC, as warrant agent (the “Warrant Agent”, which term includes any successor warrant agent under the Warrant Agreement), which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Warrant Agent, the Company and the Holders (“Holders” meaning, from time to time, the registered holders of the warrants issued thereunder). To the extent any provisions of this Warrant Certificate conflicts with any provision of the Warrant Agreement, the provisions of the Warrant Agreement shall apply. A copy of the Warrant Agreement may be obtained by the Holder hereof upon written request to the Company at 200 PrincetonSouth Corporate Center, Suite 180, Ewing, New Jersey 08628, Attn: Chief Financial Officer. Capitalized terms not defined herein have the meanings ascribed thereto in the Warrant Agreement.
This Warrant may be exercised, in whole or in part, at any time on or after October __, 2014 and on or before the Expiration Date, subject to the terms of the Warrant Agreement including, but not limited to, Section 4 thereof, by surrendering this Warrant Certificate, with the Form of Election to Purchase attached hereto properly completed and executed, together with payment of the Exercise Price in accordance with Section 5 or Section 10 of the Warrant Agreement. Each exercise must be for a whole number of Warrant Shares. In the event that upon any exercise of the Warrant evidenced hereby the number of shares of Common Stock acquired shall be less than the total number of shares of Common Stock which may be purchased pursuant to this Warrant, there shall be issued to the Holder hereof or such Holder’s assignee a new Warrant Certificate evidencing the unexercised portion of this Warrant.
The Warrant Agreement provides that upon the occurrence of certain events the Exercise Price set forth in this Warrant Certificate may, subject to certain conditions, be adjusted, and that upon the occurrence of certain events the number of shares of Common Stock and/or the type of securities or other property issuable upon the exercise of this Warrant shall be adjusted. No fractions of a share of Common Stock will be issued upon the exercise of this Warrant, but the Company will pay the cash value thereof determined as provided in the Warrant Agreement.
Warrant Certificates, when surrendered at the office of the Warrant Agent by the registered Holder thereof in person or by such Holder’s legal representative or attorney duly appointed and authorized in writing, may be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge, for another Warrant Certificate or Warrant Certificates of like tenor evidencing in the aggregate the right to purchase a like number of Warrant Shares.
Each taker and holder of this Warrant Certificate, by taking or holding the same, consents and agrees that the holder of this Warrant Certificate when duly endorsed in blank may be treated by the Company, the Warrant Agent and all other persons dealing with this Warrant Certificate as the absolute owner hereof for any purpose and as the person entitled to exercise the rights represented hereby or the person entitled to the transfer hereof on the register of the Company maintained by the Warrant Agent, any notice to the contrary notwithstanding, provided that until such transfer on such register, the Company and the Warrant Agent may treat the registered Holder hereof as the owner for all purposes.
This Warrant does not entitle any Holder to any of the rights of a stockholder of the Company.
This Warrant Certificate and the Warrant Agreement are subject to amendment as provided in the Warrant Agreement.
This Warrant Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Warrant Agent.
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IN WITNESS WHEREOF, the undersigned have caused this Certificate to be executed as of the date set forth below.
CELATOR PHARMACEUTICALS, INC. | ||
By: | ||
Name: | ||
Title: |
Dated: ___________________________
Countersigned:
AMERICAN STOCK TRANSFER &
TRUST COMPANY, LLC
By:______________________________
Name:
Title:
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EXHIBIT B
Form of Assignment
(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto _______________ the right represented by the foregoing Warrant to purchase ______ shares of Common Stock of Celator Pharmaceuticals, Inc. and all rights evidenced thereby are hereby assigned to
Name: | |
(Please Print) | |
Address: | |
(Please Print) | |
Dated: _______________ __, ______ | |
Holder’s Signature: | |
Holder’s Address: |
EXHIBIT C
Form of Exercise Notice
(To be executed by the Holder to purchase
shares of Common Stock
under the foregoing Warrant)
Celator Pharmaceuticals, Inc.:
(1) Description. The undersigned is the Holder of the Warrant (the “Warrant”) issued by Celator Pharmaceuticals, Inc., a Delaware corporation (the “Company”) to purchase ____________ shares of Common Stock (“Warrant Shares”) in accordance with the terms of the Warrant and the Warrant Agreement. Capitalized terms used herein and not otherwise defined herein have the respective meanings set forth in the Warrant and the Warrant Agreement.
(2) Form of Exercise Price. The Holder intends that payment of the Exercise Price shall be made as:
_____ a Cash Exercise ; or
_____ a Cashless Exercise under Section 10 of the Warrant Agreement, with respect to the full exercise of the Warrant.
(3) Payment of Exercise Price. In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holder shall pay the Aggregate Exercise Price, in lawful money of the United States, in cash, certified check or bank draft payable or by wire transfer to the order of the Warrant Agent (or as otherwise agreed to by the Company) delivered to the Warrant Agent, together with any applicable taxes payable by the undersigned pursuant to the Warrant.
(4) Delivery. Pursuant to this Exercise Notice, the Company shall deliver to the Holder _____________ Warrant Shares in accordance with the terms of the Warrant Agreement.
Dated:
Name of Holder:
By:
Name:
Title:
(Signature must conform in all respects to name of
Holder as specified on the face of the Warrant.)
Exhibit 31.1
Certification of Chief Executive Officer Pursuant to
Exchange Act Rules 13a-14(a) or 15d-14(a)
I, Scott T. Jackson, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Celator Pharmaceuticals, 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(s) 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 15(d)-15(f)) 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 generally 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; and
5. The registrant’s other certifying officer(s) 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.
Date: November 13, 2014 |
/s/ Scott T. Jackson |
Scott T. Jackson, | |
Chief Executive Officer |
Exhibit 31.2
Certification of Chief Financial Officer Pursuant to
Exchange Act Rules 13a-14(a) or 15d-14(a)
I, Fred M. Powell, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Celator Pharmaceuticals, 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(s) 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 15(d)-15(f)) 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 generally 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; and
5. The registrant’s other certifying officer(s) 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.
Date: November 13, 2014 |
/s/ Fred M. Powell |
Fred M. Powell, Vice President and | |
Chief Financial Officer |
Exhibit 32.1
Certification Pursuant to 18 U.S.C. Section 1350,
In connection with the quarterly report of Celator Pharmaceuticals, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned, in the capacities and on the date indicated below, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: November 13, 2014 |
/s/ Scott T. Jackson |
Scott T. Jackson, | |
Chief Executive Officer | |
(Principal executive officer) | |
Date: November 13, 2014 |
/s/ Fred M. Powell |
Fred M. Powell, Vice President and | |
Chief Financial Officer | |
(Principal financial and accounting officer) |
Property and Equipment (Details Textual) (USD $)
|
3 Months Ended | 9 Months Ended | 9 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|---|---|
Sep. 30, 2014
|
Sep. 30, 2013
|
Sep. 30, 2014
|
Sep. 30, 2013
|
Feb. 29, 2012
Property and Equipment [Member]
|
Sep. 30, 2014
Scientific Equipment [Member]
|
Sep. 30, 2013
Assets Held for Sale [Member]
|
Dec. 31, 2013
Assets Held for Sale [Member]
|
|
Property, Plant and Equipment [Line Items] | ||||||||
Assets Held For Sale Long Lived | $ 507,622 | $ 74,086 | ||||||
Assets Disposals, Written Off Net Book Value | 177,428 | 74,086 | ||||||
Proceeds from sale of assets | 0 | 51,776 | 51,776 | |||||
Loss on disposal of property and equipment | $ 0 | $ (12,059) | $ 0 | $ 126,633 | $ 125,422 |
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