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U.S. SECURITIES AND EXCHANGE COMMISSION FORM 10-KSB (X) Annual Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended November 30, 2004. Commission File Number MultiCell Technologies, Inc. DELAWARE 52-1412493 55 Access Rd, Suite 700 Securities registered under Section 12(b) of the Exchange Act: Securities registered pursuant to Section 12(g) of the Act: Title of each class Name of each exchange on which registered
WASHINGTON, DC 20549
(Name of small business issuer in its charter)
(State or other jurisdiction of
incorporation or organization)
(IRS Employer Identification No.)
Warwick, RI 02886
(401) 738-7560
(Address and telephone number of principal executive offices)
None
Common Stock, $0.01 par value per share
OTC Bulletin Board
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes No X
Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB [X]
State issuer's revenues for its most recent fiscal year: $ 759,925
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity as of a specified date within the past 60 days (based upon 91,416,890 shares held by non-affiliates and the closing price of $.31 per share for the common stock on the over-the counter market as of January 21, 2005): $28,339,236
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 126,624,246 shares of common stock as of January 21, 2005.
DOCUMENTS INCORPORATED BY REFERENCE
None.
Transitional Small Business Disclosure Format (check one): Yes ____ No __X_
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MULTICELL TECHNOLOGIES, INC.
FORM 10-KSB
INDEX
PART I |
PAGE |
|
Item 1. |
DESCRIPTION OF BUSINESS |
3 |
Item 2. |
DESCRIPTION OF PROPERTY |
11 |
Item 3. |
LEGAL PROCEEDINGS |
12 |
Item 4. |
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
12 |
PART II |
||
Item 5. |
MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES |
12 |
Item 6. |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
13 |
Item 7. |
FINANCIAL STATEMENTS |
17 |
Item 8. |
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
17 |
Item 8A. |
CONTROLS AND PROCEDURES |
17 |
Item 8B |
OTHER INFORMATION |
17 |
PART III |
||
Item 9. |
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT |
18 |
Item 10. |
EXECUTIVE COMPENSATION |
21 |
Item 11. |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS |
23 |
Item 12. |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS |
26 |
Item 13. |
EXHIBITS AND REPORTS ON FORM 8-K |
27 |
Item 14. |
PRINCIPAL ACCOUNTANT FEES AND SERVICES |
28 |
SIGNATURES |
29 |
|
EXHIBIT INDEX |
30 |
|
CONSOLIDATED FINANCIAL STATEMENTS |
F1 - F26 |
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FORWARD LOOKING STATEMENTS
This Annual Report and the information incorporated herein by reference contain forward-looking statements that involve a number of risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Although our forward-looking statement reflect the good faith judgment of our management, these statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties, and actual results and outcomes may differ materially from results and outcomes discussed in the forward-looking statements.
Forward-looking statements can be identified by the use of forward-looking words such as "believes," "expects," "hopes," "may'" "will," "plan," "intends," "estimates," "could," "should," "would," "continue," "seeks," "pro forma" or "anticipates," or other similar words (including their use in the negative), or by discussions of future matters such as the development of new products, technology enhancements, possible changes in legislation and other statements that are not historical. These statements include but are not limited to statements under the captions "Business," and "Management's Discussion and Analysis" as well as other sections in this report. You should be aware that the occurrence of any of the events discussed under these headings and elsewhere in this Annual Report could substantially harm our business, results of operati ons and financial condition. If any of these events occurs, the trading price of our common stock could decline and you could lose all or a part of the value of your shares of our common stock.
The cautionary statement made in this Annual Report are intended to be applicable to all related forward looking statement wherever they may appear in this Annual Report. We urge you not to place undue reliance on these forward-looking statements, which speak only as of the date of this annual report.
PART I
About MultiCell Technologies, Inc.
MultiCell Technologies, Inc., (MultiCell) was incorporated in Delaware on April 28, 1970 as "Exten Ventures, Inc". It operates two subsidiaries, MCT Rhode Island Corp. ("MCT") and Xenogenics Corporation ("Xenogenics"). As used herein, the "Company" refers to MultiCell, together with MCT and Xenogenics. Effective April 1, 2004, we changed our name from Exten Industries, Inc. to MultiCell Technologies, Inc. Our principal offices are at 55 Access Road, Suite 700, Warwick, RI 02886, (401) 738-7560.
We are a global leader in producing immortalized human liver cells (hepatocytes). Our intellectual property portfolio positions us as a leader in the creation of highly functional, immortalized, non-tumorigenic human hepatocyte cell lines. Our proprietary human cell lines are ideal for developing highly predictive, high throughput drug discovery assays and enable innovative clinical approaches for treating a variety of liver-related diseases. We believe we are unique due to our understanding of the function, engineering and culturing of liver cells.
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We believe we are differentiated by: 1) our understanding of the function and manipulation of the liver cell and 2) our understanding of stem cells, cell therapy and cell transplantation. Our intellectual property portfolio positions us for use of non-tumorgenic immortalized mammalian hepatocytes for treating liver disease. We have established a worldwide reputation as a source of licensed immortalized liver cell lines. The Company is developing cell-related technologies and products to treat a variety of liver diseases and has identified four clinically relevant applications for its cell-based products:
· |
Drug Discovery - High throughput screening assays for drug discovery, lead optimization, and pharmacogenomic studies |
· |
Stem cells and cell transplantation to treat metabolic liver deficiencies |
· |
Cellular component of liver assist devices used to treat patients suffering from acute and chronic liver failure |
· |
Production of natural therapeutic plasma proteins. |
Merger: An agreement of merger between Exten Industries, Inc. (parent) and MultiCell Technologies, Inc (subsidiary) was entered into on March 20, 2004. From and after the effective time, the separate existence of the subsidiary ceased and all its assets, property, rights and powers, as well as all debts due it, were transferred to and vested in the parent as the surviving corporation. The name by which the surviving corporation is known is MultiCell Technologies, Inc.
Hepatocytes: According to a recent Bain and Company study, it costs approximately $1.7 billion to discover, test and launch a new drug. In spite of this large investment of time, effort and money, drugs continue to be withdrawn from human clinical trials and the commercial market. Bain and Company estimate that failures or U.S. Federal Drug Administration ("FDA") rejections of new drug applications due to unanticipated toxicity and/or drug-drug interactions costs the pharmaceutical industry about $2 billion each year. According to the FDA, a ten percent improvement in predicting failures before clinical trials could save a pharmaceutical company $100 million in development costs per drug.
Most drugs that enter the body are metabolized by liver cells called hepatocytes. Unfortunately, the overall disposition of the drug may vary from patient to patient because of genetic and environmental factors. These factors affect drug metabolism and drug transport and may lead to unforeseen adverse drug reactions and/or altered metabolism and clearance of the drug itself.
There is an urgent need for highly predictive, high-throughput cell-based models to identify the impact of genetics on what the body does to the drug and what the drug does to the body. Although primary human hepatocytes are used to screen for potential toxicities and drug-drug interactions, their expense, limited supply, variable quality, and rapid loss of functions in culture may prohibit the routine use of these cells during the early stages of drug development.
MultiCell's immortalized human hepatocyte cell lines have demonstrated the ability to replace the continuous need for primary cells for many absorption, distribution, metabolism, excretion and toxicity (ADME/tox) applications. Expanded from our cell banks, our cell lines have significant cost and quality control advantages over primary cell sources. Our proprietary hepatic cell lines radically differ from other liver cell lines in that they are non-tumorigenic yet regenerate while maintaining liver function. A prolific cell without liver function is of little value. Our cell lines provide a consistent and functional resource for drug discovery and toxicology research, and can also be clinically utilized for cell-based therapies to supplement liver function and regeneration.
The Company is developing new cell lines to better model the impact of genetic differences on drug disposition. We envision that validated cell lines will be incorporated into medium-to-high throughput assays to economically and rapidly identify potential adverse drug reactions prior to expensive clinical studies.
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Liver Stem Cell and Other Stem Cell Programs:
In December 2003, we acquired the exclusive worldwide rights to US Patent # 6129911, for Liver Stem Cells. This patent, which was filed by the Company's Senior Vice President and Chief Science Officer Dr. Ronald Faris, involved methods for the identification and extraction of stem cells from adult liver tissue.
Stem cells have two overall characteristics: |
|
· |
Cells developed from stem cells produce all the kinds of mature cells making up the particular organ or tissue; and. |
· |
They are multi- or pluripotent and self renew- that is, other cells developed from stem cells are themselves new stem cells |
Stem cells are known to or thought to exist for many systems of the human body, including the blood and immune system, cardiovascular, the central and peripheral nervous systems and the liver, pancreas endocrine, and the skin systems. These cells are responsible for organ regeneration during normal cell replacement or after trauma to a specific organ.
It is our goal to obtain broad patent protection on liver stem cell technology followed by diversification into other stem cell fields such as cardiovascular and pancreatic stem cell technologies. We continue to advance our internal research programs to characterize the liver stem and/or progenitor cells. Liver stem cells may be useful in the treatment of diseases such as hepatitis, liver failure, blood-clotting disorder, cirrhosis of the liver and liver cancer. Our adult stem cell (ASCs) technology has two distinct advantages over embryonic stem cells (ESCs): 1) its non-controversial, non-fetal origin and 2) it has no animal protein contamination.
Liver Assist Device: Xenogenics, our majority-owned (56.4%) subsidiary, owns all of the rights to the Sybiol® synthetic bio-liver device, for which notice of allotment for a United States patent has been issued. The Sybiol "artificial liver" is intended to act as a substitute liver for a patient whose own liver is healing from injury or disease or for use as an artificial liver "bridge" for transplant patients awaiting a donor organ. The device may also be used to assist and improve the quality of life for patients with chronic liver disease or episodic liver trauma. The key to our device, or other devices attempting to gain approval, is the functionality of the cells. The Company plans to use its proprietary immortalized human hepatocytes to catalyze the Sybiol. The Company will need to demonstrate sufficient process controls to meet strict standards for a complex medical system. This means the cell production facility will need to meet the same standards as those pertaining to a pharmaceutical company. The cells may be produced in our own facility, or by a manufacturing partner with the requisite skills and equipment that meets FDA requirements. Both the device and the cells will require FDA approval. The Company has not yet filed a plan to initiate clinical trials for the Sybiol device with the FDA.
Xenogenics has not generated any revenues. We currently estimate that we will need approximately $500,000 to $750,000 to validate the Sybiol through large animal testing.
Xenogenics is currently owned as follows:
MultiCell Technologies, Inc. |
56.4% |
Kestrel Equity Partners, Ltd. |
21.7% |
Jack Schaps |
12.5% |
W. Gerald Newmin |
8.0% |
Others |
1.4% |
Total |
100.0% |
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Biopharmaceutical Background: Our technology offers potentially significant competitive advantages in the development and commercialization of products. MultiCell's liver cell technology can be used to produce biopharmaceutical products that may demonstrate enhanced biological properties and prove to be potentially more efficacious and less toxic than products derived from other cell production systems. The technology may be well suited for the production of certain human viruses that cannot be produced efficiently at present using alternative technologies. From a production perspective, our technology offers the ability to manufacture biopharmaceutical products in large volumes, which may speed the production process and reduce manufacturing costs.
Biopharmaceutical products are therapeutic products produced by means of biological production systems. Bacteria and yeast initially were used to produce the first generation of human biopharmaceutical products. The first available human cell-based production systems employed human cells that spontaneously acquired the ability to divide for finite periods of time. These include the MRC-5 and WI-38 cell lines, which were both created from human lung tissue. These cell lines have been successfully used to produce a number of human vaccines (rubella, mumps, measles, rabies and hepatitis A). The latest state-of-the-art technology encompasses the use of human immortalized cells. Normal human cells that are purposely engineered to grow indefinitely in culture. The immortalized cell and its progeny are called a "cell line." To our knowledge four such cell lines have been created: MultiCell liver cell e.g. Fa2N-4, PER.C6, 293 and 911, which have been used for research and development of vac cines, antibodies and proteins. In addition, various animal derived cell lines are used for proteins (e.g. CHO) and vaccines (e.g. MDCK, VERO).
We believe that our technology provides a unique manufacturing system that consists of a human cell line that can be used to produce a variety of biopharmaceutical products. We developed the MultiCell liver cell technology from a single source of healthy, human liver cells in a documented manner. The cell line has been successfully adapted to grow without the need for serum supplementation. There are two areas in which our technology can be used currently:
Therapeutic Proteins: MultiCell's technology can be used as a production system for developing and manufacturing antibodies or proteins by inserting DNA encoding for a particular protein into liver cells. These modified liver cells will grow further and secrete the desired antibody or protein, which can then be used for pre-clinical research or developed for therapeutic proteins.
Unique Liver Proteins: A number of therapeutic plasma proteins are naturally made and secreted by mammalian hepatocytes. The Company's immortalized hepatocytes are producing several therapeutic proteins in culture that have immediate value in the commercial markets. A partial list of these proteins includes albumin, a-1-antitrypsin, blood clotting factors, and transferrin. Several of these proteins require liver specific processing for full biological activity. The Company believes that it will be able to "scale-up" production of its cell lines.
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We believe that our technology has the following key advantages over current bio-manufacturing systems:
· |
Human-based. We believe that antibody and protein products based on the human-based liver cell technology will demonstrate enhanced biological properties making them potentially more efficacious. |
· |
High Yields. MultiCell's technology potentially offers a system for high yield, large-scale biopharmaceutical product production with proper posttranslational modification. |
· |
Scalability in Serum-free Conditions. MultiCell's cells can be cultured in its proprietary serum-free medium. The use of a serum-free medium also offers the potential to significantly improve the purification of biopharmaceuticals produced using our technology. The absence of animal proteins will also accelerate regulatory approval. |
About Our Revenues
In August 2003 we signed an exclusive manufacturing and distribution license agreement for two of our cell lines with XenoTech, LLC. The agreement is for seven years with minimum royalties of $18 million due the Company in order for XenoTech to maintain exclusivity. XenoTech was founded in 1994 by Andrew Parkinson, Ph.D. to study drug metabolism. XenoTech provides products and contract research services to optimize discovery, development and approval of new drugs and has an established sales and marketing organization to the global pharmaceutical industry.
In early 2003, we signed a 15-year non-exclusive license agreement with Pfizer, Inc. for further research use of our two cell lines.
Our research and development has also been funded by the National Institute of Health ("NIH"), Small Business Innovative Research ("SBIR") and other grants, as well as direct investment.
Patents and Proprietary Technology
Our success depends in part, on intellectual property protection and the ability of our licensees, to preserve those rights.
We rely on certain licenses granted to us by Rhode Island Hospital and others. We also rely on trade secrets and proprietary know how unprotected by patents, that we protect, in part, by confidentiality agreements. It is our policy to require our employees, board of directors, consultants, licensees, outside contractors and collaborators, scientific advisory board members and other advisors to execute confidentiality agreements upon the commencement of their relationships with us. These agreements provide that all confidential information made known to the individual in the course of the individual's relationship with the Company be kept as confidential and not be disclosed to third parties except in specific limited and agreed upon circumstances. We also require signed confidentiality or material transfer agreements from any company that is to receive our confidential information. In the case of employees, consultants and contractors, the agreements generally provide that all inventi ons conceived by the individual while rendering services to us shall be assigned to us as the exclusive property of the Company. There can be no guarantee that these agreements will not be violated or that we would have adequate remedies for such violation or that our trade secrets or proprietary know-how will not become known by or independently developed by competitors.
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Any proprietary protection that our Company can obtain and maintain will be important to our business. The Company has an exclusive, long-term license agreement with Rhode Island Hospital for use of the following patents owned by the Hospital related to liver cell lines and Liver Assist Devices (LADs):
US Patent #6,017,760, Isolation and Culture of Porcine Hepatocytes, expires October 9, 2015; |
US Patent #6,107,043, Immortalized Hepatocytes, expires February 8, 2019; |
US Patent #5,043,260, Perfusion Device for Hepatocytes, expires August 27, 2008; |
US Patent #4,795,459, Implantable Prosthetic Device (Endothelial) expires January 3, 2006; |
US Patent #6129911, Liver Stem Cell, expires October 10, 2017 |
Once we have begun to generate revenues and pay royalties, the annual license fee structure does not apply. We will pay a 5% royalty until we pay Rhode Island Hospital an aggregate of $550,000. After that, the royalty percentage decreases to 2% for the life of the patents.
Xenogenics was notified by the United States Patent and Trademark Office on November 3, 2003 that its patent application for an "Artificial Liver Apparatus And Method", the Sybiol® Synthetic Bio-Liver Device, will be allowed. The Sybiol® trademark is registered in the United States Patent and Trademark Office, number 2,048,080.
In December of 2003, we acquired the exclusive worldwide rights to US Patent # 6129911, for Liver Stem Cells from Rhode Island Hospital.. We agreed to pay an annual license fee of $20,000 for the first three years of the agreement and $10,000 per annum thereafter until a product is developed. Once a product is developed, if ever, the annual license fee will end and we will pay Rhode Island Hospital a 5% royalty on net sales of any product we sell covered by the patent until we pay an aggregate of $550,000 in royalties and a 2% royalty thereafter until the expiration of the patent.
Need for Government Approval
The use of immortalized hepatocytes for drug discovery purposes does not require FDA approval. However, some of our products will be subject to regulation in the United States by the FDA and by comparable regulatory authorities in foreign jurisdictions. The Sybiol synthetic bio-liver device will be classified as a "biologic" regulated under the Public Health Service Act and the Food, Drug and Cosmetic Act. The use of human immortalized liver cells for this application will also be regulated by the FDA. Development of a therapeutic product for human use is a multi-step process. First, animal and in vitro testing must establish the potential safety and efficacy of the experimental product for a given disease. Once the product is found to be reasonably safe and potentially efficacious in animals, suggesting that human testing would be appropriate, an Investigational New Drug ("IND") application is submitted to the FDA. FDA approval, which may in some circumstances involve substantia l delays, is necessary before commencing clinical investigations in humans. Clinical investigations can take many years. We have not yet begun the regulatory approval process for our Sybiol® biosynthetic liver device with the FDA. We may, when adequate funding and resources are available, begin the approval process. If we are able to validate the device design, then we currently plan to find a partner to take the project forward. Before human studies may begin, the cells provided for the system will be subjected to the same scrutiny as the Sybiol device. We will need to demonstrate sufficient process controls to meet strict standards for a complex medical system. This means the cell production facility will need to meet the same Good Manufacturing Practice ("GMP") standards as those pertaining to a pharmaceutical company.
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Research and Development
In fiscal year 2004, our Company spent $804,761 on improving the function of our cell lines. Product development costs during fiscal year 2003 were $482,309. These efforts have been towards improving the functionality of our immortalized hepatocytes, introducing products utilizing these cells, and expanding our intellectual property base. Improvements in the function of our immortalized hepatocytes will open more markets and expand the usage in the current markets for our cells.
Competition
We are engaged in businesses characterized by extensive research efforts, rapid technological change, and intense competition. A number of companies are pursuing the development of immortalized liver cells, adult stem cells, artificial liver devices and protein production.
Hepatocytes: There appears to be only one real non-academic competitor in the immortalized hepatocyte business , and none in the non-tumorigenic immortalized hepatocyte business.
Amphioxis Cell Technologies, Inc., which is focused on the sale of immortalized hepatocytes. The cells they are promoting are based on a cell line developed from a hepatoma (cancerous liver tumor).
Stem Cells: A number of companies are attempting to develop therapeutic products based on stem cells. Cell therapy, the use of cells in treatment of medical disorders, with or without traditional therapies, can be as simple as a blood transfusion or as exciting as the promise of stem cell transplants or therapies. The Company has a patent on a non-embryonic stem cell, which differentiates us from fetal stem cells that have been plagued by ethical and contamination issues. Human stem cells can develop and differentiate into all cells and tissues in the body. As such, they are a potential source for the manufacture of replacement cells and tissues for organ repair applications in chronic diseases.
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Competition in the stem cell arena ranges from academic institutions to public companies in a variety of stem cell areas. Some of the public and private companies include, but are not limited to the following:
Geron Corporation: Geron is focused on developing and commercializing therapeutic and diagnostic products for cancer based on a telomerase technology, and cell-based therapeutics using human embryonic stem cell technology. Telomerase is an enzyme that is expressed in nearly all cancer cells, but not in most normal cells. Geron's goal is to kill cancer cells in which telomerase is abnormally expressed by inhibiting or targeting telomerase, and to diagnose cancer by measuring telomerase activity. |
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Cryo-Cell International, Inc.: Cryo-Cell is primarily focused on the processing and cryopreservation of umbilical cord (U-Cord®) stem cells for family use. |
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StemCells, Inc.: Stem Cells is engaged in the discovery and development of adult stem cells to treat diseases of, or injury to, the central nervous system (CNS), liver and pancreas. The company is among the most advanced in pursuing stem cell therapies, and uses a proven search engine to isolate rare stem cells (cells that can produce all of the types of mature cells of an organ and can also self-renew) and progenitor cells (cells that come from stem cells, can still produce one or more types of mature cells in an organ, but do not self renew) from human tissues. To date, StemCells has found the human neural stem cell and has filed patent applications on candidate human liver- and pancreas-derived cells. |
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PharmaFrontiers Corp.: PharmaFrontiers is a commercialization driven biotechnology company that develops autologous cellular therapies for the treatment of multiple sclerosis, congestive heart failure, and diabetes. The company is focused on autologous cellular therapy applications based on its proprietary stem cell and T-cell vaccination technologies. |
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Aastrom Biosciences: Aastrom is developing and commercializing proprietary adult bone marrow stem cell based products for regenerative medicine. |
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Vesta Therapeutics Inc.: Vesta is a privately held company developing cell therapeutics for liver repair and regeneration. The company's technology is centered on the isolation, expansion, and cryopreservation of liver cells (human hepatocytes) obtained from organ donor livers that are not suitable for whole organ transplantation. |
Liver Assist Devices: Competitors in various stages of development of liver assist devices include:
Gambro: Gambro acquired the business of Teraklin AG, Germany, and is expanding its intensive care business into the extracorporeal treatments for liver support. Teraklin develops, manufactures and markets a liver filtering system utilizing albumin to remove toxic substances for the treatment of acute liver failure. Teraklin's product line will be integrated into Gambro Renal Products' renal intensive care business. The system would appear to have use in critically ill patients as a bridge to transplantation. |
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Arbios Systems, Inc.: Arbios is a biomedical device company that, through its wholly-owned subsidiary, Arbios Technologies, Inc., is engaged in the discovery, acquisition and development of proprietary liver assist devices and new technologies useful in the diagnosis and treatment of acute liver failure. Arbios' products in development include SEPETTM, a novel blood purification therapy employing selective plasma filtration therapy, HepatAssist-2TM, a bioartificial liver based on technology acquired from Circe Biomedical, Inc., and LIVERAIDTM, a bioartificial liver in which liver cell therapy and sorbent-based hemodiafiltration are integrated in the company's proprietary three-compartment cartridge with fiber-in-fiber geometry. |
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Hepalife, Inc.: Hepalife is a Canadian firm that is developing, under a recently extended research contract, a porcine cell line that it believes will have application in a liver assist device. They do not have a commercially available product. |
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VitaGen (formerly Hepatix): VitaGen was acquired by Vital Therapies, Inc. after declaring bankruptcy. We believe they hope to restart their clinical trial program at some point in the future. |
In Europe, Braun Inc. has demonstrated interest in supporting the development of a complicated and sophisticated hollow fiber device, which has already been used to treat two patients.
To our knowledge, there is no approved affordable mass produced live-cell bio-artificial liver device currently available on the global market. Our device is intended to closely replicate human liver functions and not just to function as a blood-cleaning device. We believe that the differences in design between existing products and the Sybiol device will result in the Sybiol device, should it receive FDA approval, to achieve substantial commercial success.
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Therapeutic Proteins: There are numerous companies utilizing recombinant technology to produce therapeutic proteins, including but not limited to, Baxter, Amgen, and Genentech; however, only two companies have recently introduced novel technology to scale up protein production. These Companies are:
CruCell: Crucell has developed three proprietary technologies to develop a range of biological products, or "biologics". These include (1) PER.C6® technology, which uses a human cell line for the production and large scale manufacturing of recombinant proteins and vaccines, (2) AdVac® technology, which is used with PER.C6® technology to develop novel recombinant vaccines, and (3) MAbstract® technology, for isolation of target-specific antibodies. Each technology has proven to be highly versatile and can be used in diverse fields of biomedicine. Within Crucell, these technologies are utilized to discover, develop and produce vaccines and antibodies for the prevention and treatment of infectious diseases. |
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GlycoFi: GlycoFi has engineered a variety of different yeast strains, each producing proteins with one specific patterns of glycosylation. Certain protein glycoforms are known to confer greater therapeutic efficacy than others. Once the proper glycoform of a protein has been isolated and validated, the same strain that produced the protein in research quantities can be used in a large-scale production process. This is a novel yet unproven technology. |
Employees
As of February 25, 2004 we had seven full-time employees and two part-time employees.
FACTORS THAT MAY AFFECT FUTURE PERFORMANCE
We have a history of losses and may never become profitable.
Since we commenced operations on April 28, 1970, we have incurred a substantial accumulated deficit. As of November 30, 2004, our accumulated deficit was $20,687,122. Our losses have primarily resulted from significant costs associated with the research and development relating to our cell line and other operating costs. We expect that we will continue to incur net losses until we are able to generate sufficient operating revenues to support expenditures. However, we may never generate positive cash flow or sufficient revenue to fund our operations and we may never attain profitability.
If we do not obtain adequate financing to fund our future research and development and operations, we may not be able to successfully implement our business plan.
We have in the past increased, and plan to increase further, our operating expenses in order to fund higher levels of product development, undertake and complete the regulatory approval process, and increase our administrative resources in anticipation of future growth. We will increase our administrative resources to support the hiring of additional employees that will enable us to expand our research and product development capacity. We intend to finance our operations with revenues from royalties generated from our license agreement with XenoTech, by selling capital stock to investors (such as our recently completed $4 million private placement with Mercator Advisory Group and its affiliated funds), through new strategic alliances, and by acquiring or merging with companies that generate revenues and positive cash flows and use such cash flows and continuing to use our common stock to pay for consulting and professional services.
We also anticipate the need for additional financing in the future in order to fund continued research and development and to respond to competitive pressures. We anticipate that our future cash requirements may be fulfilled by potential direct product sales, the sale of additional equity securities, debt financing and/or the sale or licensing of our technologies. We cannot guarantee, however, that enough future funds will be generated from operations or from the aforementioned or other potential sources. Although we recently raised gross proceeds of $4 million in a private placement, we do not have any binding commitment with regard to future financing. If adequate funds are not available or not available on acceptable terms, we may be unable to fund expansion, develop new or enhance existing products and services or respond to competitive pressures, any of which could have a material adverse effect on our business, results of operations and financial condition.
If we finance our operations by acquiring other companies using our common stock, the issuance of such shares could adversely affect our stock price and dilute your ownership percentage.
If we acquire profitable, revenue generating companies as a means of financing our operations, we will likely need to issue a substantial number of shares of our common stock to do so, which would dilute the percentage ownership of our other shareholders and may adversely affect the price of our stock.
If our ownership interest in Xenogenics continues to decline, the value of your investment in our company could be adversely affected.
During the past several years our ownership interest in Xenogenics has decreased from 100% in 1997 to the current 56.4%. The decrease in our ownership percentage is due to our having sold equity in Xenogenics in an effort to raise capital to fund Xenogenics' continuing research and development and operations. As part of the prior offering of Xenogenics' equity, there remains outstanding 211,566 options to purchase common stock of Xenogenics, which, assuming the exercise of all options, would reduce our ownership percentage in Xenogenics to 53.4%.
Although we do not have any future plans to sell any additional equity in Xenogenics, circumstances may arise in which the sale of equity in Xenogenics is the only way we can raise the capital necessary to keep Xenogenics operational. The sale of additional equity in Xenogenics could adversely affect the value of your investment in our common stock.
We have not yet begun the regulatory approval process for our products with the Food and Drug Administration (the "FDA").
If we do not obtain governmental approvals for some of our products, we will be unable to market them.
Under FDA rules, we are required to obtain scientific data to support any health claims regarding human use that we make concerning our products. We will not be able to commercialize our products until we complete clinical testing, have acceptable clinical trial results and receive regulatory approval from the FDA and foreign regulatory authorities, as appropriate. The FDA and other regulatory authorities require that the safety and efficacy of a biologic product be supported by results from adequate and well-controlled clinical trials before approval for commercial sale with respect to use for humans. If the results of the clinical trials of our products do not demonstrate that they are safe and effective, we will not be able to submit to the FDA relevant applications for pre-market approval. Further, the results of pre-clinical testing and initial clinical trials do not necessarily predict how safe and effective a product will be when it is evaluated in large-scale advanced clinical trials. It is possib le that unacceptable side effects may be discovered at any time. A number of companies have suffered significant setbacks in advanced clinical trials, despite promising results in earlier trials. Even if we believe the clinical trials that we conduct demonstrate the safety and efficacy of a product, the FDA and other regulatory authorities may not accept our assessment of the results. The process of obtaining regulatory clearances or approvals is costly, uncertain and time-consuming.
We may experience difficulties in the introduction of some of our products that could result in our having to incur significant unexpected expenses or delay the launch of such products.
We cannot predict the duration or success of any pre-clinical and clinical trials that we undertake. The rate of completion of the clinical trials for our products will depend on many factors, including obtaining adequate clinical supplies and the rate of patient recruitment. Patient recruitment is a function of many factors, including the size of the patient population, the proximity of patients to clinical sites, and the eligibility criteria for patients who may enroll in the trial. We may experience increased costs, program delays, or both, if there are delays in patient enrollment in the clinical trials.
Because we are significantly smaller than many other medical technology companies, we may be at a competitive disadvantage if such companies introduce products that are similar to ours.
Most of the other medical companies that could be potential competitors have greater capital resources, more significant research and development programs and facilities, and greater experience in the production, marketing and distribution of medical products than we do. There are a number of companies attempting to develop a liver assist device system, as well as related cells. Our ability to compete effectively could be adversely affected if one of the more established companies that can devote significant resources to the development, sale and marketing of its products, develops a product that achieves commercial success.
If we do not successfully manage future growth, our ability to complete production of our products according to our current schedule may be adversely affected.
If we are unable to manage our anticipated future growth effectively with its resulting increases in operating, administrative, financial, accounting and personnel systems, our ability to complete production of our products on schedule could be adversely affected.
Our highly volatile stock price and trading volume may adversely affect the liquidity of our common stock.
The market price of our common stock, as well as the market prices of securities of companies in the biotechnology sector generally, has been highly volatile and is likely to continue to be highly volatile. For example, the market price of our common stock traded as high as $1.16 per share during October of 2003 up from $0.06 six weeks earlier, and increased 150% in one day following the announcement of our agreement with Pfizer. While the reasons for the volatility of the market price of our common stock and its trading volume are sometimes unknown, in general the market price of our common stock may be significantly impacted by many factors, including, but not limited to:
· |
Announcements of technological innovations or new commercial products by us or our competitors; |
· |
Publicity regarding actual or potential clinical trial results relating to products under development by us or our competitors; |
· |
Our financial results or that of our competitors; |
· |
Announcements of licensing agreements, joint ventures, strategic alliances, and any other transaction that involves the sale or use of our technologies or competitive technologies; |
· |
Developments and/or disputes concerning our patent or proprietary rights; |
· |
Regulatory developments and product safety concerns; |
· |
General stock trends in the biotechnology and pharmaceutical industry sectors; |
· |
Economic trends and other external factors, including but not limited to, interest rate fluctuations, economic recession, inflation, foreign market trends, national crisis, and disasters; and |
· |
Health care reimbursement reform and cost-containment measures implemented by government agencies. |
These and other external factors have caused and may continue to cause the market price and demand for our common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of common stock and may otherwise negatively affect the liquidity of our common stock. The volatility of our common stock could cause you to lose a substantial portion of your investment if you purchased your shares at the higher end of the volatility.
Our common stock is subject to penny stock regulation, which may affect its liquidity.
Our common stock is subject to regulations of the Securities and Exchange Commission (the "Commission") relating to the market for penny stocks. Penny stock, as defined by the Penny Stock Reform Act, is any equity security not traded on a national securities exchange or quoted on the Nasdaq National Market or SmallCap Market that has a market price of less than $5.00 per share. The penny stock regulations generally require that a disclosure schedule explaining the penny stock market and the risks associated therewith be delivered to purchasers of penny stocks and impose various sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and accredited investors. The broker-dealer must make a suitability determination for each purchaser and receive the purchaser's written agreement prior to the sale. In addition, the broker-dealer must make certain mandated disclosures, including the actual sale or purchase price and actual bid offer quotations, as well a s the compensation to be received by the broker-dealer and certain associated persons. The regulations applicable to penny stocks may severely affect the market liquidity for our common stock and could limit your ability to sell your securities in the secondary market.
The exercise of outstanding options and warrants, the conversion of outstanding Series I convertible preferred stock and debt and the issuance of additional options, warrants, preferred stock and convertible debt may adversely affect our stock price and your percentage ownership.
Our success depends significantly upon proprietary technology.
We rely on a combination of intellectual property laws, licensing agreements, non-disclosure agreements and other contractual provisions to establish, maintain and protect our proprietary rights, all of which afford only limited protection. The Company has exclusive rights to use several patents and one patent pending for various cell lines and one prosthetic device. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to infringe aspects of our products or services or to obtain and use information that we regard as proprietary. We will monitor the situation and, if warranted, we are ready to file a complaint and take whatever action we deem necessary to protect our intellectual property rights.
Item 2. DESCRIPTION OF PROPERTY
MultiCell Technologies
Warwick, Rhode Island. MultiCell leases approximately 2,700 square feet of space in an office building located at 55 Access Rd., Warwick, RI 02886. The lease for the facility in Warwick requires aggregate monthly payments of $4,863 and continued through July 31, 2004. The Company has operated on a month-to-month lease since August 1, 2004. The Company is currently negotiating a new lease for larger facilities.
Arizona. As of November 30, 2002, we owned 202 undeveloped lots in the Grand Canyon Development in Valle, Arizona, approximately 70 miles south of the Grand Canyon that were acquired by prior management as a tangible asset. We currently have no policy of acquisition of land for capital gain or income. We are currently in arrears on back taxes and interest in the amount of $177,000. Presently, we plan to deed 194 lots to the State of Arizona, following which we will have no obligation or liability with respect to such lots. The State has not given us a date yet when deeding can be executed. Since we have paid taxes within the last five years on eight of the lots, Arizona law prohibits us from deeding these lots back to the state and we therefore intend to sell them as soon as possible. Our obligation with respect to such lots is approximately $912.
MCT. Rhode Island Corp and Xenogenics
Our two subsidiaries share the corporate facility in Warwick, Rhode Island that houses administration, research, development and manufacturing of human cells and cell lines. We are currently considering potential new sites for our operations.
- 11 - |
Item 3. LEGAL PROCEEDINGS
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
Our common stock is traded on the OTC Bulletin Board under the symbol MUCL.OB. Our stock is considered penny stock and is, therefore, subject to the Securities Enforcement Remedies and Penny Stock Reform Act of 1990. Penny stock is defined as any equity security not traded on a national stock exchange or quoted on NASDAQ and that has a market price of less than $5.00 per share. Additional disclosure is required in connection with any trades involving a stock defined as a penny stock (subject to certain exceptions), including the delivery, prior to any such transaction, of a disclosure schedule explaining the penny stock market and the associated risks. Broker-dealers who recommend such low-priced securities to persons other than established customers and accredited investors must satisfy special sales practice requirements, including a requirement that they make an individualized written suitability determination for the purchase and receive the purchaser's written consent prior to the transaction.
The table below gives the range of high and low bid prices of our common stock for the fiscal years ended November 30, 2004 and November 30, 2003 based on information provided by the OTC Bulletin Board. Such over-the-counter market quotations reflect inter-dealer prices, without mark-up, mark-down or commissions and may not necessarily represent actual transactions or a liquid trading market.
Fiscal Year Ended November 30, 2004 |
||
High |
Low |
|
First quarter |
$.74 |
$.49 |
Second quarter |
$.56 |
$.27 |
Third quarter |
$.33 |
$.19 |
Fourth quarter |
$.27 |
$.18 |
Fiscal Year Ended November 30, 2003 |
||
High |
Low |
|
First quarter |
$.09 |
$.05 |
Second quarter |
$.08 |
$.05 |
Third quarter |
$.12 |
$.09 |
Fourth quarter |
$1.16 |
$.09 |
No cash dividends have been paid on MultiCell Common Stock for the 2004 and 2003 fiscal years and no change of this policy is under consideration by the Board of Directors.
The payment of cash dividends in the future will be determined by the Board of Directors in light of conditions then existing, including our Company's earnings, financial requirements, and opportunities for reinvesting earnings, business conditions, and other factors. There are otherwise no restrictions on the payment of dividends. The number of registered shareholders of record of our Company's common stock on January 21, 2005 was approximately 1,249.
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Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
Overview
MultiCell Technologies, Inc. (the "Company") (OTCBB-MUCL) is a global leader in producing immortalized human liver cells (hepatocytes). Based on our liver technology, the Company intends to develop therapeutic products for the treatment of liver disease and other diseases.
In August, 2003, MultiCell signed an exclusive sales, manufacture and distribution agreement for the use of two of its cell lines by XenoTech, an unrelated party. The agreement, which is for a term of seven years, required XenoTech to make an initial non refundable payment of $800,000 to MultiCell in August 2003. This payment represented consideration for and a guarantee of Nosan's (XenoTech's distributor) right of first negotiation for distribution rights for the Asia Pacific Rim, should MultiCell successfully complete the development of its cell lines for the production of proteins, other cellular constituents and or drug like molecules. Additional consideration under the August 2003 agreement included a $700,000 royalty prepayment. This prepayment is an advance against the minimum royalty payment of $800,000 for the first royalty period, which was 16 months, culminating on November 30, 2004. The subsequent 5 royalty periods will be 12 months and the last royalty period will be 8 month s. XenoTech must bear all the costs for its manufacturing and sales activities and make specified minimum periodic royalty payments that total $18 million over the 7 year term of the agreement to maintain distribution exclusivity. The agreement requires XenoTech to make royalty payments to MultiCell of 17.5% of net sales for the direct sale of its cells and 34% of net sales derived from any sublicense agreement. XenoTech has distribution agreements with numerous companies for a variety of pharmaceutical and laboratory products and also performs contract research for pharmaceutical companies. These services position XenoTech to distribute our cell lines. They utilize direct sales presentations, telemarketing, and direct mail to promote and sell our cells. Additionally, since XenoTech has a number of respected scientists and have developed compelling efficacy data for our cells, they frequently give presentations at conferences that help develop sales leads.
Even with the agreement with XenoTech, we have operated and will continue to operate by minimizing expenses. Our largest expenses relate to personnel and meeting the legal and reporting requirements of being a public company. By utilizing consultants whenever possible, and asking employees to manage multiple responsibilities, operating costs are kept low. Additionally, a number of employees and our Board of Directors receive Company stock in lieu of cash as all or part of their compensation to help in the effort to minimize monthly cash flow.
We intend to gradually add scientific and support personnel. We want to add specialists for our key research areas. These strategic additions will help us expand our product offerings leading us to additional revenues and profits. Of course as revenues increase, administrative personnel will be necessary to meet the added workload. Other expenses, such as sales and customer service, will increase commensurate with increased revenues. The Company's current research and development efforts focus on development of future cell line products and redesign of existing products. Due to the ongoing nature of this research, we are unable to ascertain with certainty the total estimated completion dates and costs associated with this research. As with any research efforts, there is uncertainty and risk associated with whether these efforts will produce results in a timely manner so as to enhance the Company's market position. Company sponsored research and development costs related to future produ cts and redesign of present products is expensed as incurred. For the years ended November 30, 2004 and 2003, research and development costs were $804,761 and $482,309, respectively. Research and development costs are expensed as incurred and include such costs as salaries, employee benefits, costs determined utilizing the Black-Scholes option-pricing model for options issued to the Scientific Advisory Board, and supplies.
- 13 - |
The Application of Critical Accounting Policies
Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Research and Development - Company sponsored research and development costs related to future products and redesign of present products are expensed as incurred. Such costs are offset by proceeds from research grants.
License Agreements - costs incurred to obtain license agreements are capitalized and amortized on a straight-line basis over the term of the respective agreement.
Revenue Recognition - The Company's revenues have been generated primarily from contractual research and royalties on the license for the sale of cells through its sale and distribution agreement with XenoTech LLC ("XenoTech"). Management believes such sources of revenue will be part of the Company's ongoing operations. In recognizing revenues the Company applies the guidance provided by SEC Staff Accounting Bulletin Topic 13, "Revenue Recognition" ("Topic 13"). Under the provisions of Topic 13, the Company recognizes revenue from commercial and government research agreements as services are performed, provided a contractual arrangement exists, the contract price is fixed or determinable and the collection of the contracted amounts is probable. In situations where the Company receives payment in advance of the performance of services, such amounts are deferred and recognized as revenue as the related services are performed. Deferred revenues associated wit h services expected to be performed within the 12-month period subsequent to the balance sheet date are classified as current liabilities. Deferred revenues associated with services expected to be performed at a later date are classified as non-current liabilities.
Stock-Based Compensation - Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation" provides for the use of a fair value based method of accounting for stock-based compensation. However, SFAS 123 has allowed an entity to continue to measure compensation costs related to stock and stock options issued to employees using the intrinsic value method of accounting prescribed by Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting for Stock issued to Employees." Entities electing to continue to use the intrinsic value method must make pro forma disclosures of net income or loss and earnings or loss per share as if a fair value method of accounting had been applied. The Company has elected to continue to account for its stock-based compensation to employees under APB 25. In accordance with the provisions of SFAS 123, all other issuances of common stock, stock options, warrants or other equi ty instruments to employees and non-employees as the consideration for goods or services received by the Company are accounted for based on the fair value of the equity instruments issued (unless the fair value of the consideration received can be more reliably measured). Generally, the fair value of any options, warrant or similar equity instruments issued will be estimated based on the Black-Scholes option pricing model. SFAS123 has been significantly revised as explained below.
- 14 - |
Long-Lived Assets - Long-lived assets that do not have indefinite lives, such as property and equipment and license agreements, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment losses are recognized when events or changes in circumstances indicate that the undiscounted cash flows estimated to be generated by such assets are less than their carrying value and, accordingly, all or a portion of such carrying value may not be recoverable. Impairment losses for assets to be held and used are then measured based on the excess, if any, of the carrying amounts of the assets over their fair values. Long-lived assets to be disposed of in a manner that meets certain criteria are stated at the lower of their carrying amounts or fair values less costs to sell and are no longer depreciated.
RECENT ACCOUNTING PRONOUCEMENTS
In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity" ("SFAS 150"). SFAS 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS 150 was effective for interim periods beginning after June 15, 2003. The Company does not believe this accounting pronouncement will have a material impact on the financial statements for fiscal 2005.
In December 2004, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards No.123(R)("SFAS 123R), "Share Based Payments", which amends SFAS 123 and will be effective for public companies that are small business filers for interim or annual periods beginning after December 15, 2005. The new standard will require us to expense employee stock options and other share-based payments. The FASB believes the use of a binomial lattice model for option valuation is capable of more fully reflecting certain characteristics of employee share options compared to the Black-Scholes options pricing model. The new standard may be adopted in one of three ways - the modified prospective transition method, a variation of the modified prospective transition method or the modified retrospective transition method. We are currently evaluating how we will adopt the standard and evaluating the effect that the adoption of SFAS 123(R) will have on our financial position and results of operations.
In December 2004, the FASB issued SFAS No. 153 "Exchange of Nonmonetary Assets, an amendment of APB Opinion No. 29". The guidance in Accounting Principles Board Opinion No. 29, "Accounting for Nonmonetary Transactions" ("APB 29") is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of assets exchanged. The guidance in APB 29, however, included certain exceptions to that principle. SFAS 153 amends APB 29 to eliminate the exception for nonmonetary exchanges of similar productive assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. SFAS 153 is effective for nonmonetary exchanges occurring in fiscal periods beginning after June 15, 2005. The adoption of SFAS 153 is not expected to have a material impact on our financial position and results of operations.
Results of Operations.
The following discussion is included to describe our consolidated financial position and results of operations. The consolidated financial statements and notes thereto contain detailed information that should be referred to in conjunction with this discussion.
- 15 - |
Year Ended November 30, 2004, Compared to Year Ended November 30, 2003
Revenue. Total revenue increased to $759,925 for the fiscal year ended November 30, 2004 compared to $365,166 for the fiscal year ended November 30, 2003. The 2004 revenues are attributable primarily to the $800,000 license fee that is being recognized over the seven-year agreement period and the $800,000 minimum royalty recognized as royalty revenue over the 16-month period from the inception of the license and distribution agreement with XenoTech in August 2003. We have negotiated a license agreement with Pfizer allowing them to continue to use our cell lines for research now that the collaborative research project that took place in 2002 has been completed that also generated revenues in 2004 and 2003.
Operating Expenses. Total operating expenses increased to $2,750,146 for the fiscal year ended November 30, 2004, from $1,973,887 for the fiscal year ended November 30, 2003, representing an increase of $776,259. Research and development expenses increased in fiscal year 2004 by $322,452, primarily attributable to an increase in research activity, reduced by grant proceeds of $103,058, and the Company issuance of options to purchase 900,000 shares of the Company's common stock to its Scientific Advisory Board that had a fair value of $192,763. Selling, general and administrative expenses increased by $450,455 in the fiscal year 2004, primarily attributable to the cost associated with the issuance of stock purchase warrants and options to the Board of Directors and for other consulting services. Depreciation and amortization did not change materially in fiscal year 2004 from 2003.
Other Income (Expense). Interest expense for the fiscal year ended November 30, 2004 was $85,950, which represents a decrease of $119,194 from the fiscal year ended November 30, 2003. Amortization of debt discount for the year ended November 30, 2004 was $60,368, representing a decrease of $190,983 from the fiscal year ended November 30, 2003. These decreases were attributable to a reduction in the outstanding debt through payments and conversions of convertible notes and accrued interest into the Company's common stock. Interest income for the fiscal year ended November 30, 2004 was $59,141 as compared to $63,971 in the prior fiscal year.
Net loss. Net loss for the fiscal year ended November 30, 2004, was $1,738,996 compared to a net loss of $1,984,053 for the prior year, representing a decrease in net loss of $245,057. The decrease in the net loss for the fiscal year ended November 30, 2004 was attributable to an increase in revenue, and the recognition of a reversal of a note receivable valuation allowance in the amount of $305,000, offset by an increase in research and development expenses and the costs of the issuance of stock purchase warrants and options to the Board of Directors and for financial consulting services. The net loss applicable to common stockholders for the fiscal year ended November 30, 2004 included a one-time non-cash charge of $1,721,144 due to the beneficial conversion feature attributable to the difference between the purchase price and the fair value of the common stock to which the Series I preferred stock issued in July 2004 is convertible.
Liquidity and Capital Resources.
The Company's cash needs have been managed primarily through the issuance of debt or equity instruments. During the fiscal year ended November 30, 2004, we had a net loss of $1,738,996. At November 30, 2004, we had cash of $1,311,879. As a result primarily of the inclusion of non-cash charges for consulting and services paid through the issuance of common stock and options and warrants with a fair value of $1,229,092 and depreciation and amortization of property and equipment and a license agreement of $169,739, net of the effects of deferred income of $654,349 recognized in revenue, our cash used in operating activities totaled $1,454,986. During the fiscal year, we were able to issue preferred stock for aggregate proceeds, net of issuance costs of $1,714,149, make net repayments of loans of $202,500, convert other notes and accrued interest of $594,406 to common stock and receive proceeds of $215,710 from the exercise of options and warrants. As described in Note 15 of the financial statements, on February 10, 2005 the Company completed a private placement offering for $4,000,000, thereby substantially improving its liquidity.
- 16 - |
Research Agreements
In October 2002, MultiCell Technologies was awarded a Phase I Small Business Innovation Research (SBIR) grant from the National Institutes of Health to study the production of therapeutic plasma proteins by immortalized, non-tumorigenic human hepatocytes. The aim of the SBIR award is to compare the function of MultiCell's hepatocyte-derived products to recombinant and plasma-derived therapeutic plasma proteins. The grant is for $139,314 and was completed in December 2004.
Notes Payable
During fiscal year 2004, the Company received a total of $78,500 from convertible promissory notes with interest accruing at 10% per annum. The principal and interest are payable from three to five years after the inception of the notes. The lenders may convert the principal and any unpaid interest due into the Company's common stock. The conversion prices vary from $.10 to $.20 per share. Additionally, the Company issued common stock warrants to the lenders exercisable at $.10 per share. However, the Company did not increase additional paid-in capital based on the fair value of the warrants or reduce the carrying value of the convertible promissory notes payable, because at the time of issuance, the fair value of the warrants was immaterial.
Item 7. FINANCIAL STATEMENTS
The full text of the Company's audited consolidated financial statements for the fiscal years ended November 30, 2004 and 2003 begins on page F-1 of this Report.
Item 8. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Item 8A. CONTROLS AND PROCEDURES
As of November 30, 2004, an evaluation was performed under the supervision and with the participation of the Company's management, including the CEO and President who is also the Treasurer, and the CFO, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on that evaluation, the Company's management including the above, concluded that the Company's disclosure controls and procedures were effective as of November 30, 2004. The Company's Form 10-QSB for the quarter ended May 31, 2004 reported that the Company's CEO, who at the time was also serving as the Acting Chief Financial Officer ("the Evaluating Officer") had concluded that more effective disclosure controls and procedures needed to be set in place regarding the timely recording and reporting of the Company's issuance of stock options and other equity instruments. In response, during the six months ended August 31, 2004 the Company had initiated a number of improveme nts in internal controls including the Company's engagement of a Chief Financial Officer to provide fiscal oversight and the consolidation of financial operations at the Company's Rhode Island headquarters. There was no other change in our internal controls over financial reporting during the quarter ended November 30, 2004 that has affected, or is reasonably likely to affect, our controls over financial reporting.
Item 8B OTHER INFORMATION.
None.
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PART III
Item 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Directors and Executive Officers of the Company as of February 10, 2005 were:
Name |
Age |
Position |
Date elected |
W. Gerald Newmin |
67 |
Co-Chairman, CEO, Treasurer, Secretary and Director |
December 1,1995 |
Edward Sigmond |
46 |
Director |
May 17, 2000 |
Ann Ryder Randolph |
58 |
Director |
June 21, 2002 |
Thomas A. Page |
71 |
Director |
September 11, 2003 |
Stephen Chang |
49 |
President and Director |
June 16, 2004 |
Ronald A. Faris |
52 |
Chief Science Officer, Senior Vice President |
January 27, 2004 |
Janice D. DiPietro |
47 |
Chief Financial Officer |
July 9, 2004 |
Anthony J. Cataldo |
54 |
Co-Chairman and Director |
February 1, 2005 |
W. Gerald "Jerry" Newmin began as a consultant to the Board of Directors of Exten in June 1995. On December 1, 1995, he was elected Chairman of the Board of Directors, Chief Executive Officer, and President of Exten. He currently serves as our Co-Chairman, Chief Executive Officer, Treasurer and Secretary. Mr. Newmin is Chairman, Chief Executive Officer, President, Secretary and a director of Xenogenics and a Secretary and director of MultiCell Technologies. Mr. Newmin is past Chairman of the Board of the Corporate Directors Forum, a non-profit organization of over 250 California Board members, which promotes excellence in corporate governance. He serves on the Board of Directors of San Diego Defcomm, a not-for-profit consortium of defense companies based in San Diego and DefenseWeb Technologies, Inc., a privately owned software development company based in San Diego. From 1987 to 1995, Mr. Newmin owned a management consulting firm that provided senior management servi ces to both public and private companies. From 1984 to 1987, Mr. Newmin was President of HealthAmerica Corporation, then the nation's largest publicly held HMO management company. From 1977 to 1984, he was President of International Silver Company, a diversified multi-national manufacturing company that he restructured. From 1973 to 1977, Mr. Newmin was Vice President and Western Regional Director for American Medicorp, Inc., and managed 23 acute care hospitals in the Western United States. From 1962 to 1973, at Whittaker Corporation, Mr. Newmin held senior executive positions, including Chief Executive Officer of Production Steel Company, Whittaker Textiles Corporation, Bertram Yacht Corp., Narmco Materials Corp., and Anson Automotive Corp., and was instrumental in Whittaker's entry into the United States and international health care markets. Mr. Newmin has a Bachelor's degree in Accounting from Michigan State University.
- 18 - |
Anthony J. Cataldo has held executive positions with a number of emerging growth and publicly traded companies. He was appointed Chairman of the Board of BrandPartners Group, Inc. (OTC BB: BPTR) in October 2003 and currently serves as Non-Executive Chairman and was instrumental in the turnaround of the company and increasing its market capitalization by in excess of 250%. He has served as Executive Chairman of Calypte Biomedical Corporation (AMEX: HIV) a publicly traded biotechnology company involved in developing and sale of urine based HIV-1 screening test from May 2002 through November 2004. Prior to Mr. Cataldo joining Calypte, the company was on the verge of filing Chapter 11. Mr. Cataldo was instrumental in the successful turnaround of Calypte's business and the move of the company's listing from the OTC BB to the American Stock Exchange as well as the increase in the market capitalization of the company to approximately $140 million. Mr. Cataldo has also served as the Chief Executive Officer and Chairman of the Board of Directors of Miracle Entertainment, Inc., a Canadian film production company, from May 1999 through May 2002 where he was the executive producer or producer of several motion pictures. From August 1995 to December 1998, Mr. Cataldo served as President and Chairman of the Board of Senetek, PLC, (OTC BB: SNTKY) a publicly traded biotechnology company involved in agerelated therapies. While Mr. Cataldo was with Senetek, the market capitalization of the company grew from $1.6 million to $320 million. From 1990 to 1995, Mr. Cataldo held various positions including Chairman and Chief Executive Officer with Management Technologies, Inc., a manufacturer and seller of trading system and banking software systems. He has also held the position of Executive Vice President of Hogan Systems, a banking software manufacturer and retailer. Mr. Cataldo has also served as President of Internet Systems, a pioneer in the Internet banking arena. Mr. Cataldo served in the United States Air Force from 1969 to 1973.
Edward Sigmond was elected to the Board of Directors of Exten in 1999. He has been in sales, marketing and operations management for the past 20 years. Mr. Sigmond has served as president of Kestrel Holdings, Inc. since its inception in 1997. His duties include all executive functions from financial oversight to marketing and management of business services. Kestrel Holdings, Inc. is the general partner of Kestrel Equity Partners, Ltd., which was formed to fund Exten and Xenogenics. Mr. Sigmond served as president of Kestrel Development, a Texas based real estate development company, from 1993 to 1998 when it was dissolved. From 1992 to 1996, Mr. Sigmond was President of American Machine and Bearing of Dallas, Texas. Prior positions included Assistant to the President of Alpha Aviation, Dallas, Texas, 1990-1992; Founder and President of Specialty Food Products, Arlington, Texas, 1987-1990; and Vice President/Regional Manager of Geodata Corporation, Houston, Texas 1981-1987. He has varied negotiation, sales, marketing, managerial and operational skills with existing and startup operations. He studied Marketing and Chemistry at Duquesne University.
Ann Ryder Randolph, a respected San Diego executive and consultant to the life sciences industry, was elected to the Board of Directors of MultiCell Technologies on June 21, 2002, and currently serves as Chair of the Audit Committee. Ms. Randolph is an associate with Regent Partners, LLC, a merchant bank in La Jolla, CA. She also serves on the boards of Allylix, Inc., a private biotech, serving as Chair of the Corporate Governance and Nominating Committee; the University of California, San Diego, Libraries; the American Liver Foundation in San Diego; and the Corporate Directors Forum (CDF) ), serving on the Nominating and Corporate Governance committees. Randolph was named Director of the Year by the CDF board in 2001. As the first managing director (1995-1999) and charter board member of BIOCOM (1993-1999), the regional trade association for life sciences, she was a public advocate for the 400 and growing San Diego companies BIOCOM represented , developing collaborations with gov ernment, academia, the service sector and industry to create a strong regional infrastructure for life sciences. While at BIOCOM, she developed a buying consortium for member companies and built BIOCOM into one of the largest regional biosciences trade associations in the world. She has been an executive with companies. Previously, she was principal of a medical strategic planning, business development and marketing firm (1985-1995) after leaving a similar position at Scripps Clinic and Research Foundation, now Scripps Clinic and The Scripps Research Institute, in La Jolla, California. Randolph has served on the San Diego Regional Economic Prosperity Committee, the San Diego Regional Economic Development Corporation's industrial land use committee, the Greater San Diego Chamber of Commerce public policy committee, the Airport Master Plan Public Working Committee, the California Centers for Applied Technologies Advisory Committee, and was a founding member of the High Tech Steering Committee. Ms. Randolph e arned Bachelor and Master of Arts degrees in English from the University of Louisville, Kentucky , and a Certificate in Finance from the University of California, San Diego. She has been a perennial bioscience and business student at San Diego universities and organizations for the last 25 years.
Thomas A. Page joined the Board as a Director on September 11, 2003. Mr. Page is Director Emeritus and former Chairman of the Board and CEO of Enova Corporation and San Diego Gas and Electric Company (now part of Sempra Energy). Mr. Page has been active in numerous industrial, community and governmental associations and has funded medical research. He is a director of the San Diego Regional Economic Development Corporation, Community National Bank, Sys Technologies, Targeted Molecules, and is an advisory director of Sorrento Ventures. Page has also served on the boards of The Scripps Research Institute and The Burnham Institute, two La Jolla-based biomedical research institutes of note. In 1998, the Corporate Directors Forum in San Diego honored Mr. Page as Director of the Year for Lifetime Achievement in Corporate Governance. Mr. Page earned a Bachelor of Science degree in civil engineering, a masters in industrial administration and was awarded a doctorate in management, all f rom Purdue University. He has been licensed as an engineer and as a certified public accountant (CPA). Mr. Page also serves on the University of California Presidents Council on the National Laboratories.
- 19 - |
Stephen Chang, Ph.D. joined the Board on June 16, 2004 and became President of the Company on February 10, 2005. Dr. Chang is currently Chief Executive Officer of privately held Astral Therapeutics, a San Diego biotechnology company developing novel therapies for diabetes and other autoimmune diseases. Dr Chang is also President of CURES, a coalition of patient advocates, biotechnology companies, pharmaceutical companies and venture capitalists dedicated to ensuring the safety, research and development of innovative life saving medications. Dr Chang is also an active board member of BIOCOM, San Diego's premier life sciences organization. Dr. Chang was chief science officer and vice president of Canji Inc./Schering Plough Research Institute in San Diego from 1998 to 2004, managing four large external biotech corporate partnerships with Transgene, Myriad Genetics, Genzyme and Immune Response. Dr. Chang's responsibility for development of a strategic plan for patents and an overall strategic plan plus representing research efforts to external corporate partners, to the FDA, and to the academic community will additionally be beneficial to MultiCell's efforts. From 1995 to 1997, Dr. Chang was director of research for Chiron Viagene, and Chiron Inc., where he headed four research departments: genetic programs, viral therapeutics and delivery, cancer therapeutics and gene transfer immunology and immunobiology. From 1988 to 1995, Dr. Chang served as director, viral and genetic therapeutics and senior principal scientist for Viagene, Inc. Dr. Chang earned his doctoral degree in Biological Chemistry, Molecular Biology and Biochemistry from the University of California, Irvine. He has filed more than 40 patents worldwide and is extensively published.
Ronald Faris, Ph.D. has been our Chief Science Officer since January 27, 2004. Dr. Faris joined the Company in May 2001 and served as President and Chief Science Officer of the MCT subsidiary until spring 2004. Dr. Faris is President and a director of MCT Rhode Island Corp. Prior to that, he consulted with the Company for two years. Dr. Faris recently worked as the Director of Pediatric Oncology Research at the Rhode Island Hospital, Providence Rhode Island and as an Associate Professor of Pediatrics and Pathology, Brown University. Dr. Faris received his Bachelor of Science degree in Biochemistry from Virginia Polytechnic Institute and State University and his Doctorate in Nutritional Toxicology/Biochemistry from Cornell University. He holds a patent on adult stem cells and has authored numerous publications related to hepatic research.
Dr. Janice D. DiPietro was appointed as our Chief Financial Officer in July 2004. Dr. DiPietro is Managing Partner of Tatum Partners and is responsible for the firm's practice in Boston and the New England area. Prior to joining Tatum Partners, Dr. DiPietro was Executive Vice President and Chief Financial Officer of NewDeal Inc, where she assisted it in securing in excess of $50 million of equity financing and positioning it for future growth by establishing critical financial and operational functions. Dr. DiPietro was also President of GreenPC, Inc., a subsidiary of NewDeal Inc engaged in high tech manufacturing, which began operations within 120 days of conception. Prior to this Dr. DiPietro founded JD Consulting and served as the firm's CEO for thirteen years, culminating in the successful sale of this practice. JD Consulting serviced early stage to mid-market clients in all aspects of financial, operational and strategic management and assisted clients in securing debt and eq uity financing, improving financial management and internal control, implementing state of the art information systems, restructuring operations as necessary and expanding into the global marketplace. Dr. DiPietro began her career with the Boston office of Ernst & Young where she advanced to the position of Senior Manager. While at Ernst & Young, Dr. DiPietro served as a Practice Leader in the firm's health care and technology practice. She also was a SEC reporting specialist, servicing large multi national clients. Dr. DiPietro graduated with honors from Bentley College and holds an MBA and Doctoral degree in Accounting from Boston University.
- 20 - |
Item 10. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning the compensation received for the fiscal years ended November 30, 2004, 2003, and 2002 for services rendered to the Company in all capacities by the Company's Chief Executive Officer and any officer with salary over $100,000 per year.
Annual Compensation |
Long Term Compensation |
|||||
Name and principal position |
Year |
Salary |
Bonus |
Other annual |
Restricted |
Securities |
W. Gerald Newmin,
|
2004 |
-0- |
-0- |
$66,750 (1) |
-0- |
250,000 |
Gregory F. Szabo
|
2004 |
$225,000 |
-0- |
$11,500(1) |
-0- |
-0- |
Ronald A. Faris
|
2004 |
$145,542 |
$50,000 |
-0- |
-0- |
500,000 |
Janice D. DiPietro |
2004 |
$46,676 |
-0- |
$9,375(4) |
-0- |
-0- |
(1) |
Represents the fair market value of shares of our common stock paid in lieu of cash based on the closing market price of our common stock on the date of approval by our board of directors. A total of 161,471; 958,754; and 458,656 shares were issued to Mr. Newmin in fiscal 2004, 2003, and 2002 respectively, and a total of 22,330; 812,011; and 474,951 shares were issued to Mr. Szabo in fiscal 2004, 2003, and 2002 respectively. |
(2) |
Mr. Szabo resigned as an officer and Director of our Company effective March 31, 2004. |
(3) |
Dr. DiPietro was elected Chief Financial Officer of our Company on July 9, 2004. |
(4) |
Represents fees paid to Tatum CFO Partners, LLP of which Dr. DiPietro is a Managing Partner. |
- 21 - |
Stock Option Grants in Fiscal Year 2004
During the fiscal year ended November 30, 2004, the Board of Directors granted Ronald A. Faris 500,000 stock options. Each of the six members of the Company's Board of Directors were awarded 250,000 options for a total grant of 1,500,000 in fiscal year 2004. In addition a total of 900,000 options were issued in 2004 to the six members of the Company's Scientific Advisory Board.
Stock Option Exercises and Fiscal Year-end Values
The following table presents information for the Named Executive Officers with respect to stock options exercised during fiscal year 2004 and unexercised options held as of the end of the fiscal year.
Aggregated Option Exercises In Fiscal Year 2004 And Fiscal Year End Option Values
Name |
Shares |
Value |
Number of Securities |
Exercise Price Value of |
W.Gerald Newmin |
325,000 |
$68,250 |
513,889/236,111 |
$61,250/63,750 |
Ronald A. Faris |
30,000 |
$2,400 |
1,261,667/708,333 |
$177,183/255,417 |
Compensation of Directors
Our bylaws authorize our board of directors to fix the compensation of directors for services related to their membership in board committees and allow the reimbursement of expenses of directors for their attendance at each meeting of our board of directors. On February 15, 2000, the board of directors resolved that each board member would receive the equivalent of $2,000 in our common stock for each board meeting in which such director participates. On June 15, 2004, the Board of Directors resolved to increase the compensation of directors to the equivalent of $3,000 in our common stock for each board meeting in which such director participates. Members of the Audit Committee receive the equivalent of $4,000 (Chairman) and $1,000 (member) in our common stock for each audit committee meeting in which such director participates. Members of the Compensation Committee receive equivalent of $1,000 (Chairman) and $500 (member) in our common stock for each compensation committee meeting in w hich such director participates. The number of shares issued for each meeting is based upon the closing price of our common stock on the date of the Board Meeting in question.
In addition to the per meeting stock grants, during fiscal year 2004, six members of the Scientific Advisory Board were each granted 150,000 options at $.25 and $.21 which vest over a three year period and expire June 14, 2009 and October 19, 2009. The Board of Directors were each granted options for 250,000 shares of common stock at $.27 per share. These options vest over three years and will expire on September 15, 2009. New members of the MultiCell Board of Directors are granted 250,000 options at the then market price. As such, Mr. Page was granted 250,000 options on September 11, 2003 at $.175 that vest over a three year period and expire September 11, 2007, and Mr. Chang was granted 250,000 on June 15, 2004 at $.25 that vest over a three year period and expire on June 14, 2007.
- 22 - |
Effective February 15, 2005 the Company entered into an employment agreement with Stephen Chang, Ph.D., as President, and a director and consulting agreement with Anthony Cataldo. Under the terms of these agreements both Dr. Chang and Mr. Cataldo will be paid $15,000 per month in a combination of stock and cash, plus directors fees of $3,000 for each board meeting attended. In the event that the Company terminates Dr. Chang's employment, without Cause (as defined in the agreements), or terminates his employment for Good Reason, he shall be entitled to receive severance pay in the form of salary continuation then in effect, less applicable deductions and withholdings, for a period of six (6) months. Dr. Chang was issued 5.0 million stock options under the Company's equity incentive plan at $.28 per share, the fair market value on date of grant. The stock options will vest monthly over three years and expire in five years. Mr. Cataldo was granted a warrant to purchase 10 million s hares of the Company's common stock at an exercise price of $.28 per share. Five million shares become exercisable in equal monthly installments over three years, or earlier in the event the remaining five million become exercisable as set forth below. Upon the closing of a round of equity financing that has been arranged by Mr. Cataldo with investors that were first introduced to the Company by Mr. Cataldo, equal to at least ten million dollars ($10,000,000) on terms acceptable to the Board, then five million (5,000,000) shares subject to the warrant shall become exercisable thirty (30) days after the closing date of such round of financing. Mr. Cataldo also received 250,000 stock options for joining the Company's board of directors at an exercise price of $.28 per share, the fair market value on the date of grant. The stock options and warrants granted to Dr. Chang and Mr. Cataldo will in no event be exercisable prior to the approval of an increase in the authorized common stock of the Company. Mr. Cat aldo also received a $150,000 payment under the agreement for services rendered in connection with the Company's $4 million fundraising. Mr. Cataldo's consulting services under the agreement may be terminated only for cause, as defined in the agreement.
Compliance with Section 16(a) of the Securities Exchange Act
Section 16(a) of the Exchange Act requires the Company's executive officers and directors, and persons who beneficially own more than ten percent of the Company's equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Officers, directors and greater than ten percent shareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.
Based solely on the review of copies of such reports furnished to the Company and written representations that no other reports were required, the Company believes that during the fiscal year ended November 30, 2004, the Company's executive officers, directors and all persons who own more than ten percent of a registered class of the Company's equity securities complied with all Section 16(a) filing requirements, except that Form 4 and Form 5 reports covering six transactions were filed late by the directors and officers of the Company..
Code of Ethics
The Company has adopted a formal Code of Ethics applicable to all Board members, executive officers and all employees which is available on our website at www.multicelltech.com.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS
Effective February 15, 2000, the Company adopted a 2000 Stock Incentive Plan and a 2000 Employee Benefit Plan which authorizes the granting of shares and options to employees, outside directors, consultants, and vendors. Under the Plans, awards are made in the form of restricted shares or options, which may constitute incentive stock options or non-statutory stock options. Only employees of the Company are eligible for the grant of incentive stock options. The total number of options and restricted shares that could have been awarded under the 2000 Stock Incentive Plan initially was 5,000,000. As of the first day of each calendar year commencing January 1, 2001, this total will automatically increase by 2% of the total number of common shares then outstanding or 500,000 shares, whichever is less. The option price, number of shares, grant date, and vesting period are determined at the discretion of the Company's Board of Directors. The exercise price of each ISO granted under t he plan must equal 100% of the market price of the Company's stock on the date of grant. The exercise price of each NSO grant under the plan cannot be less than 85% of the market price of the Company's stock on the date of grant. An option's maximum term is 10 years. As of November 30, 2004, the total number of options that were authorized for issuance under the 2000 Stock Incentive Plan had increased from 5,000,000 shares to 7,000,000. However, the Company has issued more options than were authorized under the 2000 Stock Incentive Plan. This was necessary to provide an incentive to key employees to stay with the Company or one of its subsidiaries. The Company obtained shareholder approval for an increase in the number of options authorized for issuance at its shareholder meeting.
Plan Category |
Number of Shares |
Weighted- |
Number of Options |
|||
Equity compensation plans approved by stockholders |
5,103,000 |
$0.14 |
0 |
|||
Equity compensation plans not approved by stockholders |
0 |
0 |
0 |
|||
Total |
5,103,000 |
$0.14 |
0 |
|||
- 23 - |
Effective June 16, 2004, The Company adopted a 2004 Equity Incentive Plan, which authorizes the granting of stock, awards to employees, directors, and consultants. The shares of common stock that may be issued pursuant to stock awards shall not exceed in the aggregate 15,000,000 shares of common stock plus an annual increase to be added on the first day of each Company fiscal year, beginning in 2005 and ending in (and including) 2013, equal to the lessor of the following amounts: (A) fifteen percent (15%) of the Company's outstanding shares of common stock on the day preceding the first day of such fiscal year, (B) 25,000,000 shares of common stock, or (C) an amount determined by the Board of Directors. The exercise price of each ISO granted under the plan must equal 100% of the market price of the Company's stock on the date of grant. The Board, in its discretion, shall determine the exercise price of each nonstatutory stock option. An option's maximum term is 10 years.
Plan Category |
Number of Shares |
Weighted- |
Number of Options |
|||
Equity compensation plans approved by stockholders |
2,400,000 |
$0.26 |
12,600,000 |
|||
Equity compensation plans not approved by stockholders |
0 |
0 |
0 |
|||
Total |
2,400,000 |
$0.26 |
12,600,000 |
|||
- 24 - |
The following table sets forth, as of January 21, 2004, certain information as to shares of our common stock owned by (i) each person known to beneficially own more than 5% of the outstanding common stock, (ii) each of our directors, and named executive officers, and (iii) all of our executive officers and directors as a group. Unless otherwise indicated, the address of each named beneficial owner is the same as that of our principal executive offices located at 55 Access Road, Suite 700, Warwick, RI, 02886.
Name and Address of |
Number of Shares |
Percentage of Class |
W. Gerald Newmin (3) |
29,197,696 |
16.83% |
Edward Sigmond (4)(5) |
7,331,305 |
4 .23% |
Kestrel Equity Partners Ltd. (6) |
6,914,000 |
3.98% |
The Estate of Hugo O. Jauregui (7) |
7,175,845 |
4.13% |
Ann Ryder Randolph (8) |
792,104 |
0.46% |
Ronald A. Faris (9) |
2,865,826 |
1.65% |
Thomas A. Page |
4,529,469 |
2.61% |
Monarch Pointe Fund, LTD (10) |
5,099,344 |
2.94% |
David Firestone (11) |
11,350,151 |
6.54% |
All executive officers and directors as a group (five persons) |
37,366,171 |
21.54% |
(1) |
Beneficial ownership has been determined in accordance with Rule 13d-3 under the Exchange Act. Pursuant to the rules of the Commission, shares of common stock that each named person and group has the right to acquire within 60 days pursuant to options, warrants, or other rights, are deemed outstanding for purposes of computing shares beneficially owned by and the percentage ownership of each such person and group. However, such shares are not deemed outstanding for purposes of computing the shares beneficially owned by or percentage ownership of any other person or group. |
(2) |
Unless otherwise noted, all shares listed are owned of record and the record owner has sole voting and investment power, subject to community property laws where applicable. |
(3) |
Includes 4,068,524 shares of our common stock owned by Mr. Newmin's spouse, over which Mr. Newmin disclaims beneficial ownership. Includes 534,721 shares issuable under options, which are exercisable on or within 60 days of January 21, 2005 and 8,860,000 shares in the form of convertible notes and warrants. |
(4) |
Includes 34,721 shares issuable under options, which are exercisable on or within 60 days of January 21, 2004. |
(5) |
Includes 6,914,000 shares of our common stock owned by Kestrel Equity Partners Ltd., for which Mr. Sigmond serves as Managing Partner. |
(6) |
Kestrel Equity Partners, Ltd. is a limited partnership investment fund; Ed Sigmond, one of our directors, is its Managing Partner. Its address is 2808 Cole Ave., Dallas, Texas 75204. |
(7) |
The trustees of the Estate are Candace L. Dyer, M.D. and Timothy Van Johnson. Does not include 263,345 shares of common stock owned by Dr. Dyer and 350,000 warrants, which are exercisable and convertible on or within 60 days of January 21, 2005. |
(8) |
Includes 284,721 shares issuable under options, which are exercisable on or within 60 days of January 21, 2005. |
(9) |
Includes 1,636,667 shares issuable under options which are exercisable on or within 60 days of January 21, 2005. |
(10) |
Includes an estimated 4,665,000 shares of common stock issuable upon the conversion of outstanding shares of our Series I Preferred Stock, and 1,864,477 shares of common stock issuable upon exercise of an outstanding warrant. Assumes a conversion price of $0.18 on the Series I Preferred Stock, which would be the applicable conversion price if the conversion occurred as of the date of this report. The selling stockholder has agreed not to convert Series I shares or to exercise warrants to the extent such holder's beneficial ownership of common stock will exceed 9.99% of the common stock then outstanding. The address for this selling stockholder is c/o Mercator Advisory Group LLC, 555 South Flower Street, Suite 4500 Los Angeles, CA 90071. |
(11) |
David F. Firestone is the managing member of Mercator Advisory Group, LLC, a California limited liability company ("MAG"). Mercator Momentum Fund, L.P. and Mercator Momentum Fund III, L.P. are private investment limited partnerships organized under California law. The general partner of each fund is MAG. Monarch Pointe Fund, Ltd. is a corporation organized under the laws of the British Virgin Islands. MAG controls the investments of Monarch Pointe Fund, Ltd. Assumes a conversion price of $0.18 on the Series I Preferred Stock, which would be the applicable conversion price if the conversion occurred as of the date of this report. The selling stockholder agreed not to convert Series I shares or to exercise warrants to the extent such holder's beneficial ownership of common stock will exceed 9.99% of the common stock then outstanding. The address for the selling shareholder is c/o Mercator Advisory Group, LLC, 555 South Flower Street, Suite 4500 Los Angeles, Ca. 90071. |
- 25 - |
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACATIONS
From August 2001 through November 2003, the Company borrowed an aggregate of $1,858,500 in order to finance the acquisition of MultiCell and for working capital. Of this amount, the Company borrowed $ 736,000 from Mr. Newmin, our Co-Chairman and Chief Executive Officer, and $50,000 from Mr. Szabo, Exten's former President. The notes bear interest at the rate of 10% per annum, with all principal and accrued interest due and payable in August 2004 and various dates in 2005.
During 2003, Mr. Newmin converted $157,000 of his loans plus accrued interest and Mr. Szabo converted his entire loan plus accrued interest into MultiCell Technologies, Inc. Common Stock. Mr. Newmin received a total of 1,036,306 shares and Mr. Szabo received 304,658 shares of stock.
During the current fiscal year, Mr. Newmin converted $113,000 of his loans plus accrued interest into MultiCell Technologies Inc. common stock. Mr. Newmin received a total of 705,700 shares.
The remainder of Mr. Newmin's loans originally due August 4, 2004, were extended for one additional year, to August 3, 2005. The loans may be converted prior to maturity into shares of our common stock at $.20 per share. In addition, Newmin received warrants to purchase 6,550,000 and 500,000 shares of our common stock, respectively, at an exercise price of $.10 per share.
- 26 - |
Item 13. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit No. |
Description of Exhibit |
4.1* |
Common Stock and Warrants to Purchase Common Stock -Subscription Agreement |
4.2* |
Exhibit D to Subscription Agreement |
4.3* |
Standstill Agreement |
10.1* |
Director and Consulting Agreement with Anthony J. Cataldo |
10.2* |
Employment Agreement with Stephen Chang, PH.D. |
23.1* |
Consent of Independent Registered Public Accounting Firm |
31.1* |
Certification of Chief Executive Officer Pursuant to Section 302 |
31.2* |
Certification of Chief Financial Officer Pursuant to Section 302 |
32.1* |
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 |
32.2* |
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 |
* Filed herewith
(a) Form 8-K
Subsequent to year end, on January 11, 2005 the Company filed a form 8-K with the Securities and Exchange Commission reporting that on December 30, 2004 the outstanding promissory note of $600,000 with Lexicor Medical Technologies, along with accrued interest of $5,000 had been paid in full to an escrow account for the Company. The funds were released from the escrow account to the Company on January 7, 2005.
On February 11, 2005 the Company filed a form 8-K with the Securities and Exchange Commission announcing that the Company had completed on February 10, 2005 a private placement offering. Pursuant to subscription agreements, originally signed on January 29, 2005 and subsequently amended on February 10, 2005, with 11 accredited investors, the Company received an aggregate of $4,000,000 and issued an aggregate of 26,666,668 shares of common stock; three year warrants to purchase an aggregate of 18,000,000 shares of stock at $.20 per share; and three year warrants to purchase an aggregate of 8,000,000 shares of common stock at $.30 per share, pursuant to Regulation D of the Securities Act of 1933, as amended. In connection with the offering, the Company entered into a registration rights agreement with the investors and agreed to file a registration statement for the resale of the common stock and the shares issuable upon exercise of the warrants within 90 days of the date of the agreement. Pu rsuant to the terms of the registration rights agreement, the Company is required to have the registration statement declared effective by the Securities and Exchange Commission within 150 days from the date of filing. (Exhibit 4.1 and 4.2) Effective February 10, 2005 in conjunction with this offering the Company entered into a series of standstill agreements, originally signed on January 29, 2005 and subsequently amended on February 10, 2005, with 27 of its security holders, including 7 members of the board of directors, wherein the security holders have agreed not to exercise an aggregate of 25,635,500 options and warrants, until such time as the Company has obtained shareholder approval to amend its certificate of incorporation to provide for additional authorized shares of common stock.(Exhibit 4.3) This 8-K also reported that the Company had entered into agreements with Anthony J. Cataldo on January 29, 2005 and Stephen Chang, Ph.D. on February 1, 2005, subject to the completion of the private placem ent described above, to serve as the Company's non - executive Co-Chairman of the Board and President, respectively.(Exhibit 10.1 and 10.2, respectively). Additional details are provided in Note 15.
- 27 - |
Item 14. PRINCIPAL ACCOUNTANTS FEES AND SERVICES
Audit Fees.
The aggregate fees billed for the fiscal years ended November 30, 2004 and 2003 for professional services rendered by J.H. Cohn LLP for the audit of the our annual financial statements and the review of the financial statements included in our quarterly reports on Form 10-QSB were $93,557 and $52,124, respectively.
Audit Related Fees.
The aggregate fees billed for the fiscal years ended November 30, 2004 and 2003 for assurance and related services rendered by J.H. Cohn LLP related to the performance of the audit or review of our financial statements were $34,617 and $7,054, respectively.
Tax and Other Fees.
The aggregate fees billed for the fiscal years ended November 30, 2004 and 2003 for services rendered by J.H. Cohn LLP in connection with the preparation of our federal and state tax returns were $15,272 and $450, respectively.
- 28 - |
Pursuant to the requirements of Section 13 or 15D 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,
MULTICELL TECHNOLOGIES, INC. |
By /s/ W. Gerald Newmin |
MULTICELL TECHNOLOGIES, INC. |
By /s/ Janice D. DiPietro |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature |
Title |
Date |
/s/ W. Gerald Newmin |
Co-Chairman, CEO, Treasurer and Secretary |
February 28, 2005 |
/s/ Stephen Chang |
President, Director |
February 28, 2005 |
/s/ Anthony Cataldo |
Co-Chairman, Director |
February 28, 2005 |
/s/ Janice D. DiPietro |
Chief Financial Officer |
February 28, 2005 |
/s/ Edward Sigmond |
Director |
February 28, 2005 |
/s/ Ann Ryder Randolph |
Director |
February 28, 2005 |
/s/ Thomas A. Page |
Director |
February 28, 2005 |
- 29 - |
Exhibit No. |
Description of Exhibit |
4.1 |
Common Stock and Warrants to Purchase Common Stock -Subscription Agreement |
4.2 |
Exhibit D to Subscription Agreement |
4.3 |
Standstill Agreement |
10.1 |
Director and Consulting Agreement with Anthony J. Cataldo |
10.2 |
Employment Agreement with Stephen Chang, PH.D. |
23.1 |
Consent of Independent Registered Public Accounting Firm |
31.1 |
Certification of Chief Executive Officer Pursuant to Section 302 |
31.2 |
Certification of Chief Financial Officer Pursuant to Section 302 |
32.1 |
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 |
32.2 |
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 |
- 30 - |
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm |
F2 |
Consolidated Balance Sheets |
F3 |
Consolidated Statements of Operations |
F5 |
Consolidated Statements of Stockholders' Equity |
F6 |
Consolidated Statement of Cash Flows |
F8 |
Notes to Consolidated Financial Statements |
F10 |
- F - 1 - |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
MultiCell Technologies, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of MultiCell Technologies Inc. and Subsidiaries as of November 30, 2004 and 2003, and the related consolidated statements of operations, stockholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of MultiCell Technologies, Inc. and Subsidiaries as of November 30, 2004 and 2003, and their results of operations and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
/s/ J. H. Cohn LLP
New York, NY
January 21, 2005, except
for Note 15 as to which
the date is February 10, 2005
- F - 2 - |
MULTICELL TECHNOLOGIES, Inc. and Subsidiaries
Consolidated Balance Sheets
November 30, 2004 and 2003
ASSETS |
||||||||||
2004 |
2003 |
|||||||||
Current assets: |
||||||||||
Cash and cash equivalents |
$1,311,879 |
$1,058,960 |
||||||||
Accounts and royalties receivable |
94,518 |
4,586 |
||||||||
Current portion of notes receivable |
595,000 |
0 |
||||||||
Other current assets |
35,143 |
18,544 |
||||||||
Total current assets |
2,036,540 |
1,082,090 |
||||||||
Equipment and improvements, net |
106,078 |
123,932 |
||||||||
License agreement, net of accumulated amortization of $424,886 and $292,454 |
2,008,507 |
2,140,939 |
||||||||
Notes receivable, net of current portion |
0 |
260,000 |
||||||||
Other assets |
98,142 |
123,692 |
||||||||
Total Assets |
$4,249,267 |
$3,730,653 |
||||||||
See accompanying notes on consolidated financial statements.
- F - 3 - |
MULTICELL TECHNOLOGIES, Inc. and Subsidiaries
Consolidated Balance Sheets
November 30, 2004 and 2003
LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||||
2004 |
2003 |
|||||||||
Current liabilities: |
||||||||||
Accounts payable and accrued expenses |
$478,310 |
$625,002 |
||||||||
Current portion of related party notes payable |
400,000 |
21,000 |
||||||||
Current portion of other notes payable |
0 |
260,000 |
||||||||
Current portion of deferred income |
119,486 |
735,296 |
||||||||
Other current liabilities |
130,959 |
37,196 |
||||||||
Total current liabilities |
1,128,755 |
1,678,494 |
||||||||
Non-current liabilities: |
||||||||||
Notes payable, net of current portion |
25,000 |
786,113 |
||||||||
Deferred income, net of current portion |
595,733 |
634,272 |
||||||||
Other liabilities |
4,733 |
172,603 |
||||||||
Total non-current liabilities |
625,466 |
1,592,988 |
||||||||
Total liabilities |
1,754,221 |
3,271,482 |
||||||||
Minority interest |
142,788 |
146,190 |
||||||||
Commitments and contingencies |
||||||||||
Stockholders' equity: |
||||||||||
Preferred stock, $.01 per value: 2,000,000 shares authorized, 18,000 shares designated as Series I Convertible Preferred issued and outstanding, liquidation value $100 per share |
180 |
0 |
||||||||
Common stock, $.01 par value: 200,000,000 shares authorized, 125,483,441 and 117,816,411 shares issued and outstanding |
1,254,832 |
1,178,162 |
||||||||
Additional paid-in capital |
21,784,368 |
16,386,717 |
||||||||
Deferred compensation costs |
0 |
(24,916) |
||||||||
Accumulated deficit |
(20,687,122) |
(17,226,982) |
||||||||
Total stockholders' equity |
2,352,258 |
312,981 |
||||||||
Total Liabilities and Stockholders' Equity |
$4,249,267 |
$3,730,653 |
||||||||
See accompanying notes on consolidated financial statements.
- F - 4 - |
MULTICELL TECHNOLOGIES, Inc. and Subsidiaries
Consolidated Statements of Operations
For The Years ended November 30, 2004 and 2003
2004 |
2003 |
|||||||||
Revenue |
$759,925 |
$365,166 |
||||||||
Operating expenses: |
||||||||||
Selling, general and administrative expenses |
1,775,646 |
1,325,191 |
||||||||
Research and development |
804,761 |
482,309 |
||||||||
Depreciation and amortization |
169,739 |
166,387 |
||||||||
Total operating expenses |
2,750,146 |
1,973,887 |
||||||||
Operating loss |
(1,990,221) |
(1,608,721) |
||||||||
Other income (expense): |
||||||||||
Loss on sale of equipment |
0 |
(1,522) |
||||||||
Interest expense |
(85,950) |
(205,144) |
||||||||
Amortization of discount on notes payable |
(60,368) |
(251,351) |
||||||||
Interest income |
59,141 |
63,971 |
||||||||
Amortization of discount on note receivable |
30,000 |
30,000 |
||||||||
Write-off of note receivable |
0 |
(12,353) |
||||||||
Minority interest in net loss of subsidiary |
3,402 |
1,067 |
||||||||
Reversal of note receivable valuation allowance |
305,000 |
0 |
||||||||
Total other income (expense) |
251,225 |
(375,332) |
||||||||
Net loss |
(1,738,996) |
(1,984,053) |
||||||||
Non-cash deemed dividend related to beneficial conversion feature of Series I Preferred stock |
(1,721,144) |
0 |
||||||||
Net loss applicable to common stockholders |
$(3,460,140) |
$(1,984,053) |
||||||||
Basic net loss per share applicable to common stockholders |
$(0.03) |
$(0.02) |
||||||||
Weighted average number of common shares outstanding |
121,618,543 |
106,086,899 |
||||||||
See accompanying notes on consolidated financial statements.
- F - 5 - |
MULTICELL TECHNOLOGIES, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
For The Years ended November 30, 2004 and 2003
Preferred Stock |
Common Stock |
||||||||
Shares |
Amount |
Shares |
Amount |
Additional |
Stock Subscriptions Receivable |
Deferred |
Accumulated |
Total |
|
Balance, November 30, 2002 |
101,024,904 |
$1,010,249 |
$14,724,007 |
$(70,000) |
$(24,916) |
$(15,242,929) |
$396,411 |
||
Issuance of common stock for services |
7,329,919 |
73,298 |
480,906 |
554,204 |
|||||
Partial extinguishment of receivable |
13,000 |
13,000 |
|||||||
Cancellation of stock subscriptions |
(570,000) |
(5,700) |
(51,300) |
57,000 |
0 |
||||
Conversion of convertible notes payable |
7,588,422 |
75,883 |
986,772 |
1,062,655 |
|||||
Stock options exercised |
2,443,166 |
24,432 |
246,332 |
270,764 |
|||||
Net loss |
(1,984,053) |
(1,984,053) |
|||||||
Balance, November 30, 2003 |
0 |
$0 |
117,816,411 |
$1,178,162 |
$16,386,717 |
$0 |
$(24,916) |
$(17,226,982) |
$312,981 |
Issuance of preferred stock |
20,000 |
200 |
1,713,949 |
1,714,149 |
|||||
Non-cash deemed dividend related to beneficial conversion feature of Series I Preferred stock |
1,721,144 |
(1,721,144) |
0 |
||||||
Conversion of preferred stock into common stock |
(2,000) |
(20) |
1,222,222 |
12,222 |
(12,202) |
0 |
|||
Issuance of common stock for services |
918,427 |
9,184 |
286,896 |
296,080 |
|||||
See accompanying notes on consolidated financial statements.
- F - 6 - |
MULTICELL TECHNOLOGIES, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
For The Years ended November 30, 2004 and 2003 (Continued)
Preferred Stock |
Common Stock |
||||||||
Shares |
Amount |
Shares |
Amount |
Additional |
Stock Subscriptions Receivable |
Deferred |
Accumulated |
Total |
|
Options issued for services |
530,575 |
530,575 |
|||||||
Warrants issued for services |
402,437 |
402,437 |
|||||||
Conversion of convertible notes payable |
3,884,381 |
38,844 |
555,562 |
594,406 |
|||||
Stock options and warrants exercised |
1,642,000 |
16,420 |
199,290 |
215,710 |
|||||
Amortization of deferred compensation |
24,916 |
24,916 |
|||||||
Net loss |
(1,738,996) |
(1,738,996) |
|||||||
Balance, November 30, 2004 |
18,000 |
$180 |
125,483,441 |
$1,254,832 |
$21,784,368 |
$0 |
$0 |
$(20,687,122) |
$2,352,258 |
See accompanying notes on consolidated financial statements.
- F - 7 - |
MULTICELL TECHNOLOGIES, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For The Years ended November 30, 2004 and 2003
2004 |
2003 |
|||||||||
Cash flows from operating activities: |
||||||||||
Net loss |
$(1,738,996) |
$(1,984,053) |
||||||||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
||||||||||
Depreciation and amortization |
169,739 |
166,387 |
||||||||
Amortization of discount on note receivable |
(30,000) |
(30,000) |
||||||||
Amortization of discount on notes payable |
60,368 |
251,351 |
||||||||
Write-off of note receivable |
0 |
12,353 |
||||||||
Amortization of deferred compensation |
24,916 |
0 |
||||||||
Common stock issued for services |
296,080 |
554,205 |
||||||||
Warrants issued for services |
402,437 |
0 |
||||||||
Options issued for services |
530,575 |
0 |
||||||||
Minority interest in loss of subsidiary |
(3,402) |
(1,067) |
||||||||
Loss on sale of equipment |
0 |
1,522 |
||||||||
Reversal of note receivable valuation allowance |
(305,000) |
0 |
||||||||
Changes in operating assets and liabilities: |
||||||||||
Accounts and royalties receivable |
(89,932) |
30,595 |
||||||||
Other current assets |
(16,599) |
7,482 |
||||||||
Other assets |
25,550 |
(11,857) |
||||||||
Accounts payable and accrued expenses |
(146,692) |
50,898 |
||||||||
Other current liabilities |
93,763 |
2,729 |
||||||||
Deferred income |
(654,349) |
1,339,468 |
||||||||
Other liabilities |
(73,444) |
52,908 |
||||||||
Net cash provided by (used in) operating activities |
(1,454,986) |
442,921 |
||||||||
See accompanying notes on consolidated financial statements.
- F - 8 - |
MULTICELL TECHNOLOGIES, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For The Years ended November 30, 2004 and 2003 (Continued)
2004 |
2003 |
|||||||||
Cash flows from investing activities: |
||||||||||
Purchase of equipment |
(19,454) |
(6,614) |
||||||||
Proceeds from sale of assets |
0 |
1,500 |
||||||||
Principal payments on notes receivable |
0 |
1,409 |
||||||||
Net cash used in investing activities: |
(19,454) |
(3,705) |
||||||||
Cash flows from financing activities: |
||||||||||
Proceeds from issuance of preferred stock, net |
1,714,149 |
0 |
||||||||
Proceeds from notes payable |
78,500 |
325,481 |
||||||||
Payments of notes payable |
(281,000) |
(33,392) |
||||||||
Proceeds from exercised options and warrants |
215,710 |
270,763 |
||||||||
Proceeds from subscribed stock |
0 |
13,000 |
||||||||
Net cash provided by financing activities |
1,727,359 |
575,852 |
||||||||
Net increase in cash and cash equivalents |
252,919 |
1,015,068 |
||||||||
Cash and cash equivalents, beginning of year |
1,058,960 |
43,892 |
||||||||
Cash and cash equivalents, end of year |
$1,311,879 |
$1,058,960 |
||||||||
Supplemental disclosures: |
||||||||||
Interest paid |
$58,635 |
$205,144 |
||||||||
Non-cash transactions: |
||||||||||
Conversion of convertible notes payable into common stock |
$594,406 |
$1,062,655 |
||||||||
Issuance of notes payable for accounts payable and accrued liabilities |
0 |
$16,608 |
||||||||
Cancellation of stock subscriptions |
0 |
$57,000 |
See accompanying notes on consolidated financial statements.
- F - 9 - |
MULTICELL TECHNOLOGIES, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended November 30, 2004 and 2003
Note 1 - Summary of Organization and Significant Accounting Policies
Organization - MultiCell Technologies, Inc. ("MultiCell"), which was named Exten Industries, Inc. until April 1, 2004, is in the business of the development and commercialization of hepatic cells, cell lines and associated products to be used in diagnostic and therapeutic applications. It acquired that business in September 2001 (see Note 5) and is generating revenues primarily from royalties derived from a manufacturing and distribution license agreement for its cell lines and from contractual research activities. MultiCell also operates two subsidiaries, MCT Rhode Island Corp. ("MCT"), which is a 100%-owned subsidiary formed on June 24, 2004 that has been inactive since its formation, and Xenogenics Corporation ("Xenogenics"), which is a 56.4%-owned subsidiary formed on June 24, 2004 that was incorporated in February 1997 to focus on the research and development of Sybiol technology. Xenogenics had not generated any revenues as of November 30, 2004. A s used herein, the "Company" refers to MultiCell, together with MCT and Xenogenics. Management considers the Company's activities to be in one segment related to liver disease/ liver cell biotechnology.
Basis of Consolidation - The consolidated financial statements include the accounts of MultiCell Technologies Inc. and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Cash and Cash Equivalents - The Company considers all unrestricted highly liquid investments purchased with a maturity of three months or less to be cash equivalents.
Fair Value of Financial Instruments - The carrying amounts of cash and cash equivalents, accounts and notes receivable, accounts payable, accrued expenses and notes payable approximate fair market value because of the short maturity of those instruments.
Credit Risk - It is the Company's practice to place its cash equivalents in high quality money market securities with one major banking institution. Periodically, the Company maintains cash balances at this institution that exceeds the Federal Deposit Insurance Corporation insurance limit of $100,000 per bank. The Company considers its credit risk associated with cash and cash equivalents to be minimal. The Company does not require collateral from its customers. The Company closely monitors the extension of credit to its customers while maintaining an allowance for potential credit losses. On a periodic basis, management evaluates its accounts receivable and, if warranted, adjusts its allowance for doubtful accounts based on historical experience and current credit considerations. However, accounts receivable at November 30, 2004 consist primarily of amounts due under contractual agreements. In the opinion of management, all accounts receivable at November 30, 2004 and 2003, related to contractual agreements are collectible; accordingly, the Company recorded no allowance for doubtful accounts.
- F - 10 - |
MULTICELL TECHNOLOGIES, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended November 30, 2004 and 2003 (Continued)
Note 1 - Summary of Organization and Significant Accounting Policies (Continued)
Revenue Recognition - The Company's revenues have been generated primarily from contractual research and royalties on the license for the sale of cells through its sale and distribution agreement with XenoTech LLC ("XenoTech"). Management believes such sources of revenue will be part of the Company's ongoing operations. In recognizing revenues the Company applies the guidance provided by SEC Staff Accounting Bulletin Topic 13, "Revenue Recognition" ("Topic 13"). Under the provisions of Topic 13, the Company recognizes revenue from commercial and government research agreements as services are performed, provided a contractual arrangement exists, the contract price is fixed or determinable and the collection of the contracted amounts is probable. In situations where the Company receives payment in advance of the performance of services, such amounts are deferred and recognized as revenue as the related services are performed. Deferred revenues associa ted with services expected to be performed within the 12-month period subsequent to the balance sheet are classified as current liabilities. Deferred revenues associated with services expected to be performed at a later date are classified as non-current liabilities.
Equipment and Improvements - Equipment and improvements are valued at cost. Improvements to leased properties are amortized using the straight-line method over their estimated useful lives or the remaining lease period, whichever is shorter. Depreciation for equipment and furniture is provided using the straight-line method over the estimated useful lives of the assets, generally three to five years.
License Agreements - Costs incurred to obtain license agreements are capitalized. The Company amortizes these costs on a straight-line basis over the term of the respective license agreement. Amortization totaled $132,432 for each of the years ended November 30, 2004 and 2003.
Impairment of long-lived assets - The impairment of long-lived assets that do not have indefinite lives, such as equipment and license agreements, is recognized when events or changes in circumstances indicate that the undiscounted cash flows estimated to be generated by such assets are less than their carrying value and, accordingly, all or a portion of such carrying value may not be recoverable. Impairment losses are then measured by comparing the fair value of assets to their carrying amounts. The Company did not record any charges for the impairment of long-lived assets in 2004 or 2003.
Stock-Based Compensation - Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation", provides for the use of a fair value based method of accounting for stock-based compensation. However, SFAS 123 has allowed an entity to continue to measure compensation cost related to stock and stock options issued to employees using the intrinsic value method of accounting prescribed by Accounting Principles Board Opinion 25 ("APB 25"), "Accounting for Stock Issued to Employees". Entities electing to continue to use the intrinsic value method must make pro forma disclosures of net income or loss and earnings or loss per share as if a fair value method of accounting had been applied. The Company has elected to continue to account for its stock-based compensation to employees under APB 25. The required pro forma information is included in Note 13.
- F - 11 - |
MULTICELL TECHNOLOGIES, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended November 30, 2004 and 2003 (Continued)
Note 1 - Summary of Organization and Significant Accounting Policies (Continued)
In accordance with the provisions of SFAS 123, all other issuances of common stock, stock options, warrants or other equity instruments to employees and non-employees as the consideration for goods or services received by the Company are accounted for based on the fair value of the equity instruments issued (unless the fair value of the consideration received can be more reliably measured). Generally, the fair value of any options, warrants or similar equity instruments issued will be estimated based on the Black-Scholes option-pricing model.
Research and Development Costs - Research and development costs are expensed as incurred. Such costs are offset by proceeds from research grants.
Income Taxes - Deferred income taxes are provided for the estimated tax effects of temporary differences between income for tax and financial reporting. A valuation allowance is provided against deferred tax assets, where realization is uncertain. The income tax provision is the tax payable for the period plus or minus the change during the period in deferred tax assets and liabilities.
Loss Per Share - The Company computes basic and diluted loss per share amounts for 2004 and 2003 pursuant to Statement of Financial Accounting Standards No. 128, "Earnings Per Share". Basic loss per share is computed by dividing the net loss applicable to common stockholders by the weighted average common shares outstanding during each period. The Company has incurred losses during the years ended 2004 and 2003. The assumed effects of the exercise of outstanding stock options and warrants, and the conversion of convertible notes payable and convertible preferred stock were anti-dilutive and, accordingly, diluted per share amounts equal basic loss per share amounts and have not been presented in the accompanying consolidated statements of operations. The total number of common shares potentially issuable upon exercise or conversion excluded from the calculation of diluted loss per share for the years ended November 30, 2004 and 2003 was 48,211,056 and 35,385,430, respect ively.
Use of Estimates - The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the dates of these financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Risks and Uncertainties - Management believes that the Company's cash balance as of November 30, 2004 combined with the proceeds from the private placement completed on February 10, 2005 (see Note 15) and the royalties to be received from XenoTech, will be sufficient to fund operations at least through November 30, 2005, based on its expected level of expenditures. However, on a long-term basis, the Company is dependent on its ability to obtain continued financing from investors and new research grants to sustain the development and other activities necessary to commercialize new products. Management is seeking additional financing in order to fund its future activities. There is no assurance, however, that such financing will be available, if and when needed, or if available, that such financing will be completed on commercially favorable terms, or that such development and other activities in connection with its planned products will be successful.
- F - 12 - |
MULTICELL TECHNOLOGIES, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended November 30, 2004 and 2003 (Continued)
Note 1 - Summary of Organization and Significant Accounting Policies (Continued)
Environmental Remediation - Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations, and do not contribute to current or future revenue generation, are expensed. Liabilities are recorded when environmental assessments and/or remedial efforts are probable, and the costs can be reasonably estimated. Generally, the timing of these accruals coincides with the Company's commitment to a formal plan of action. As of November 30, 2004, no amounts have been accrued for environmental liabilities.
Note 2 - Notes Receivable
As of November 30, 2000, in connection with a letter of intent to purchase the outstanding common stock of Lexicor Medical Technology ("Lexicor"), the Company advanced a total of $600,000 for a note receivable from Lexicor and 83,333 common stock warrants. The Company allocated $17,500 to the warrants resulting in a discount on the note. The note has a stated interest rate of 10% per annum. Principal and interest were due and payable on May 31, 2001; however, according to its terms the note was automatically extended with principal and interest due January 2, 2005. Based upon Lexicor's financial condition as of November 30, 2001, the Company provided a valuation allowance of $305,000, thereby reducing the carrying amount of this long-term note receivable to $230,000. Lexicor made all the required interest payments through November 30, 2004 and it repaid the entire principal balance plus interest on January 7, 2005. As a result, the Company recognized in fiscal 2004 a cred it of $305,000 from the reversal of the valuation allowance.
As of April 17, 2001, in connection with a letter of intent to purchase Armstrong Industries, Inc., ("Armstrong") the Company advanced $15,000 to Armstrong for a note receivable that was due May 1, 2002. On June 27, 2002, the Company informed Armstrong that it no longer had any intention of acquiring them. Interest is due from June 1, 2001 on the unpaid principal at the rate of 12% per annum. Armstrong was unable to repay the note in full. The Company agreed to a monthly payment schedule to repay the debt. Beginning June 15, 2002, Armstrong agreed to pay $558.67 per month for 33 months. On August 15, 2003, after not having received a payment for six months, the Company decided to declare the note in default and wrote off the $12,353 balance of the note as a bad debt.
- F - 13 - |
MULTICELL TECHNOLOGIES, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended November 30, 2004 and 2003 (Continued)
Note 2 - Notes Receivable (Continued)
Notes receivable at November 30, 2004 and 2003 are comprised as follows:
2004 |
2003 |
||
Notes receivable |
$600,000 |
$600,000 |
|
Less: discounts to net present value |
(5,000) |
(35,000) |
|
Less: valuation allowance |
$0 |
(305,000) |
|
Net notes receivable |
595,000 |
260,000 |
|
Less: current portion |
595,000 |
0 |
|
$0 |
$ 260,000 |
||
Note 3- Equipment and Improvements
Equipment and improvements are valued at cost, less accumulated depreciation and amortization is comprised as follows:
2004 |
2003 |
||
Lab equipment |
$207,888 |
$193,720 |
|
Furniture and fixtures |
29,069 |
27,109 |
|
Equipment |
18,183 |
15,183 |
|
Leasehold improvements |
42,950 |
42,625 |
|
298,090 |
278,637 |
||
Less: Accumulated depreciation and amortization |
192,012 |
154,705 |
|
Equipment and Improvements, net |
$106,078 |
$123,932 |
|
Depreciation and amortization expense for equipment and improvements totaled $37,307 in 2004 and $34,063 in 2003.
Note 4 - Real Estate Held for Sale
The Company owns a parcel of undeveloped land near the Grand Canyon. The land was originally purchased in February 1992 for $1,654,000. During the fiscal year ended November 30, 1995, the Company tested the land for impairment and expensed all but the remaining fair market value of $47,200. The Company is currently in arrears on property taxes and interest in the amount of $177,000. A tax sale for property taxes is pending and as management has been unable to obtain an appraisal of the fair market value of the land, no decision has been made as to whether to pay the taxes in arrears. Real estate held for sale is included in other assets and unpaid property taxes are included in accrued expenses.
- F - 14 - |
MULTICELL TECHNOLOGIES, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended November 30, 2004 and 2003 (Continued
Note 5 - License Agreement
In September 2001, MultiCell completed the purchase of its cell line business and, as a result, it acquired an exclusive license agreement with Rhode Island Hospital for the use of four patents owned by the hospital for the use of four patents owned by the hospital related to liver cell lines and liver assist devices. The primary patent acquired and being utilized is for immortalized hepatocytes (see Note 6). The license agreement had a net carrying value of $2,008,507 and $2,140,939 as of November 30, 2004 and 2003, respectively, which represented the original cost of $2,433,343 allocated in connection with the acquisition, net of accumulated amortization of $424,886 and $292,454 at November 30, 2004 and 2003, respectively. The license agreement is being amortized over an estimated useful life of approximately 18 years. Amortization expense totaled $132,432 for each of the years ended November 30, 2004 and 2003. The Company will pay the hospital a 5% royalty on net sales derived from licenses based upon the patented technology, until it has paid a total of $550,000. As of November 30, 2004, no significant payments had been made under this license agreement. After royalties totaling $550,000 have been paid, the Company pays a 2% royalty instead of a 5% royalty for the life of the patent.
Note 6- XenoTech Agreement
In August, 2003, MultiCell signed an exclusive sales, manufacture and distribution agreement for the use of its cell lines by XenoTech, an unrelated party. The agreement, which is for a term of seven years, required XenoTech to make an initial non refundable payment of $800,000 to MultiCell in August 2003. This payment represented consideration for and a guarantee of Nosan's (XenoTech's distributor) right of first negotiation for distribution rights for the Asia Pacific Rim, should MultiCell successfully complete the development of its cell lines for the production of proteins, other cellular constituents and or drug like molecules. This $800,000 payment is being recognized by the Company as revenue over the 7 year term of the agreement.
Additional consideration under the August 2003 agreement included a $700,000 royalty prepayment. This prepayment is an advance against the minimum royalty payment of $800,000 for the first royalty period, which was 16 months, culminating on November 30, 2004. The subsequent 5 royalty periods will be 12 months and the last royalty period will be 8 months. XenoTech must bear all the costs for its manufacturing and sales activities and make specified minimum periodic royalty payments that total $18 million over the 7 year term of the agreement to maintain distribution exclusivity. The agreement requires XenoTech to make royalty payments to MultiCell of 17.5% of net sales for the direct sale of its cells and 34% of net sales derived from any sublicense agreements. The $700,000 advance was recognized as revenue over the initial 16 month period, ending November 30, 2004, as an offset to the $800,000 minimum royalty due for this period. As of November 30, 2004 a receivable of $94,518 representi ng the balance due under the minimum royalty of $100,000 less actual royalty payments of $5,482 received from XenoTech has been recorded.
- F - 15 - |
MULTICELL TECHNOLOGIES, INC. and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended November 30, 2004 and 2003 (Continued)
Note 7 - Income Taxes
The Company provides for income taxes using an asset and liability based approach. Deferred income tax assets and liabilities are recorded to reflect the tax consequences of temporary differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company had net deferred tax assets of approximately $4,342,400 and $3,910,800 at November 30, 2004 and 2003 relating primarily to the net operating loss carry-forwards generated by its operations. For financial statement purposes, the deferred tax assets have been fully offset by valuation allowances due to the uncertainties related to the extent and timing of the Company's future taxable income.
A reconciliation of the expected income tax benefit at the U.S. Federal income tax rate to the income tax benefit actually recognized for the years ended November 30, 2004 and 2003 is set forth below:
2004 |
2003 |
||
Expected income tax benefit |
$(591,259) |
$(674,578) |
|
Tax effect of nondeductible permanent differences |
223,849 |
86,578 |
|
State income benefit, net of federal tax |
(64,200) |
(102,800) |
|
Increase in valuation allowance |
431,610 |
690,800 |
|
Income tax benefit |
$0 |
$0 |
|
The Company's net operating loss carry-forwards expire as follows:
Year Loss Generated |
Balance of Loss Carry-forwards |
Year of Expiration |
November 30, 1999 and prior |
$5,264,158 |
2008 through 2019 |
November 30, 2000 |
1,025,963 |
2020 |
November 30, 2001 |
1,604,660 |
2021 |
November 30, 2002 |
1,516,313 |
2022 |
November 30, 2003 |
369,377 |
2023 |
November 30, 2004 |
1,815,312 |
2024 |
$11,595,783 |
||
Note 8 - Lease Commitments
The Company and its two subsidiaries lease a Warwick, Rhode Island facility that houses activities related to administration, research and development and manufacturing of human cells and cell lines. The Company had an operating lease that required aggregate monthly payments of $4,863 until it expired on July 31, 2004. The Company has leased the facility on a month to month basis since August 1, 2004. The Company is currently negotiating a new lease. The Company's future rental commitments under all of its other operating leases for equipment subsequent to November 30, 2004 total $2,379 in 2005 and $1,983 in 2006.
- F - 16 - |
MULTICELL TECHNOLOGIES, INC. and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended November 30, 2004 and 2003 (Continued)
Note 8 - Lease Commitments (Continued)
Rent expense under the Company's operating leases was $58,629 and $54,493 for the fiscal years ended November 30, 2004 and 2003, respectively
Note 9 - Notes Payable
Notes payable at November 30, 2004 and 2003 consisted of the following:
2004 |
2003 |
|||||||||
Xenogenics convertible promissory note payable with interest at 10%, due on April 17, 2001 |
$0 |
$10,000 |
||||||||
Xenogenics convertible promissory note payable to a related party with interest at 8%, due on November 10, 2000 |
0 |
15,000 |
||||||||
Promissory note payable to a medical supplier with interest at 5.25%, due on or before February 9, 2004 |
0 |
125,000 |
||||||||
Convertible promissory notes payable to investors with interest at 10%, due on varying dates in 2004, 2005 and 2006 (A) (D) |
0 |
127,481 |
||||||||
Convertible notes payable to a related party with interest at 10%, due in 2007 |
0 |
21,000 |
||||||||
Convertible promissory notes payable to related parties with interest at 10%, due on varying dates in 2004 and 2005 (B) (C) (D) |
425,000 |
689,000 |
||||||||
Promissory note payable with interest at 10% due June 10, 2004 |
0 |
100,000 |
||||||||
Advance payable to a related party (C) |
0 |
40,000 |
||||||||
Totals |
425,000 |
1,127,481 |
- F - 17 - |
MULTICELL TECHNOLOGIES, INC. and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended November 30, 2004 and 2003 (Continued)
Note 9 - Notes Payable (Continued)
|
||||||||||
2004 |
2003 |
|||||||||
Less: |
||||||||||
Unamortized discounts attributable to warrants and beneficial conversion rights issued with certain promissory notes payable |
0 |
(60,368) |
||||||||
Current portion of notes payable |
(400,000) |
(281,000) |
||||||||
Notes payable - long-term portion |
$25,000 |
$ 786,113 |
||||||||
(A) The notes were convertible into shares of the Company's common stock at prices that ranged from $.10 to $.20 per share. The Company issued notes in the principal amount of $78,500 and $127,481 in the years ended November 30, 2004 and 2003, respectively. In addition, the Company issued a total of 18,644,812 warrants to purchase common stock exercisable at $.10 per share to the lenders on the respective dates of the issuances of the notes including 1,209,812 and 2,116,250 in the years ended November 30, 2004 and 2003, respectively. These warrants may only be exercised if the note is converted. The Company initially increased additional paid-in capital by $127,236 in 2002, based on the estimated fair values of the warrants (the fair market values of warrants issued in 2003 and 2004 were not material) and reduced the carrying value of the convertible promissory notes payable by the same amount for the debt discount attributable to the fair value of the warrants. In addition, after the initial allocation of the loan proceeds to the relative fair values of the warrants and the notes in 2002, the fair value of the Company's common stock exceeded the effective conversion price of certain notes on their respective dates of issuance. Such excess, which represents beneficial conversion rights, totaled $39,837, which the Company recorded by increasing both debt discount and additional paid-in capital by that amount. The debt discount attributable to the warrants and the beneficial conversion rights was being amortized to interest expense over the term of the convertible notes. During 2004, notes with a carrying value of $224,376 ($205,981 of principal and $18,395 of accrued interest) were converted into 1,874,691 shares of common stock. During 2003, notes with a carrying value of $769,800 ($678,000 of principal and $91,800 of accrued interest) were converted into 5,143,332 shares of common stock. |
|
(B) These notes are convertible into shares of the Company's common stock at prices that range from $.10 to $.20 per share. During 2004, notes with a carrying value of $370,029 ($294,000 of principal and $76,029 of accrued interest) were converted into 2,009,692 shares of common stock. During 2003, notes with a carrying value of $181,937 ($157,000 of principal and $24,937 of accrued interest) were converted into 1,426,215 shares of common stock. |
- F - 18 - |
MULTICELL TECHNOLOGIES, INC. and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended November 30, 2004 and 2003 (Continued)
Note 9 - Notes Payable (Continued)
(C) This advance from a related party was converted in January 2004 into a convertible promissory note bearing interest at 10% that is included with the other outstanding convertible notes at November 30, 2004. |
|
(D) The Company is obliged to register for resale under the Securities Act of 1933 all of the shares issued upon conversion of these notes and the exercise of warrants issued in connection with these notes. |
Interest expense of $85,950 and $175,209 and amortization of debt discount of $60,368 and $251,351 were attributable to notes payable to related parties in the fiscal years ended November 30, 2004 and 2003, respectively.
The maturities of notes payable in years subsequent to November 30, 2004 are as follows:
Year Ending November 30 |
Amount |
2005 |
$400,000 |
2006 |
25,000 |
Total |
$425,000 |
Note 10 - Warrants
During the year ended November 30, 2003 an investor, who is also a director of a subsidiary of the Company, assisted the Company by finding a group of investors that purchased 10% convertible notes from the Company in the principal amount of $78,500 and, as a result, obtained the right to purchase a 10% convertible note from the Company in an equivalent principal amount under the same terms at anytime for one year following the receipt of the group's investment. On February 20, 2004, the investor exercised that right, and the Company received proceeds of $78,500 from the sale of the 10% convertible note, which would have required the payment of principal and interest in February 2007. Immediately upon issuance, the consultant exercised his right to convert the principal amount of the note into 785,000 shares of the Company's common stock at the stated conversion price of $0.10 per share. Pursuant to the agreement, the investor also received warrants to purchase 785,000 shares of the Com pany's common stock, which are exercisable at $.10 per share at anytime through February 2014.
In addition to the warrants to purchase 785,000 shares of the Company's common stock exercisable at $.10 per shares issued to the investor and warrants issued in connection with notes payable issued in the year ended November 30, 2004 described above, the Company issued warrants to purchase 696,667 shares of common stock for financial consulting services rendered at exercise prices ranging from $.06 to $.12 per share, warrants to purchase 5,000,000 shares of common stock in connection with the sale of convertible preferred stock and warrants to purchase 800,000 shares of common stock to the placement agent for the sale of the preferred stock during the year ended November 30, 2004. The warrants issued to the consultants will expire from January 2008 to January 2013. The Company recognized consulting fee expense of $ 402,437 for the fair value of the warrants determined using the Black-Scholes option pricing model. The warrants issued in connection with the sale of preferred stock will e xpire in July 2007. These warrants are exercisable at the lowest of (i) the average of the ten closing prices of the common stock on the OTC Bulletin Board during the 10 trading days immediately preceding the exercise date, or (ii) $.20 per share which was the closing price of the common stock on July 13, 2004, the date of issuance of the warrants.
- F - 19 - |
MULTICELL TECHNOLOGIES, INC. and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended November 30, 2004 and 2003 (Continued)
Note 10 - Warrants (Continued)
During the year ended November 30, 2004, 1,130,000 warrants were exercised at $.10 per share. No warrants were exercised during the year ended November 30, 2003. As of November 30, 2004 and November 30, 2003, warrants to purchase 26,342,729 and 21,622,917 shares of common stock were outstanding and exercisable at $.06 to $.20 per share and $.06 to $.10 per share, respectively.
Note 11 - Preferred Stock
The Company's Board of Directors has the authority, without further action by the stockholders, to issue up to 2,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions of these shares of preferred stock. The Board of Directors has designated 20,000 shares as Series I convertible preferred stock. On July 13, 2004, the Company completed a private placement of Series I convertible preferred stock. A total of 20,000 shares were sold to accredited investors at a price of $100 per share. The Series I shares are convertible at any time into common stock at 80% of the average trading price of the lowest three inter-day trading prices of the common stock for the ten days preceding the conversion date, but at an exercise price of no more than $.20 per share and no less than $.05 per share. The conversion of the Series I preferred stock is limited to 9.99% of the Company's common stock outstanding on the date of conversion. The Se ries I preferred stock does not have voting rights. The purchasers also received warrants to acquire up to 5,000,000 shares of the Company's common stock. The terms associated with the warrants are described in Note 10. In the event of any dissolution or winding up of the Company, whether voluntary or involuntary, holders of each outstanding share of Series I convertible preferred stock shall be entitled to be paid first out of the assets of the Company available for distribution to stockholders, an amount equal to $100 per share of Series I convertible preferred stock held. After such payment has been made in full, such holders of Series I convertible preferred stock shall be entitled to no further participation in the distribution of the assets of the Company.
Proceeds to the Company were $1,714,149, net of $285,851 of issuance costs, of which $902,388 was assigned to the 5,000,000 warrants, utilizing the Black-Scholes option pricing model. The terms associated with the warrants are described in Note 10. In connection with the issuance of the Series I convertible preferred stock and warrants, the Company recorded 1,721,144 related to the beneficial conversion feature on the Series I convertible preferred stock as a deemed dividend, which increased additional paid-in capital. The preferred stock issued included a beneficial conversion feature because the effective conversion price of the Series I convertible preferred stock was less than the fair value of the common stock on the date of issuance. The deemed dividend of $1,721,144 increased the loss applicable to common stockholders in the calculation of basic loss per common share.
- F - 20 - |
MULTICELL TECHNOLOGIES, INC. and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended November 30, 2004 and 2003 (Continued)
Note 11 - Preferred Stock (Continued)
During fiscal 2004, 2,000 shares of preferred stock were converted into 1,222,222 shares of common stock.
Note 12 - Common Stock Reserved for Future Issuance
At November 30, 2004 and 2003, the Company had reserved 48,211,056 and 35,385,430 shares of common stock, respectively, for potential future issuances upon exercise of outstanding warrants and options, and conversion of convertible notes payable outstanding as follows:
November 30, 2004 |
November 30, 2003 |
|
Warrants (Note 10) |
26,342,729 |
21,622,917 |
Stock options (Note 13) |
7,503,000 |
8,198,334 |
Preferred stock (Note 11) |
12,198,660 |
0 |
Convertible notes (Note 9) |
2,166,667 |
5,564,179 |
Totals |
48,211,056 |
35,385,430 |
At November 30, 2004, warrants to purchase 2,166,667 shares will become exercisable when related convertible notes payable are converted. All of the other warrants are exercisable in whole or in part, at any time and from time to time on or before the expiration date. These warrants are or will be exercisable at $.06 to $.20 per share and expire at various dates from November 2005 through 2014.
Note 13 - Stock Compensation Plans
2000 Stock Incentive Plan: Effective February 15, 2000, the Company adopted a 2000 Stock Incentive Plan and a 2000 Employee Benefit Plan which authorizes the granting of shares and options to employees, outside directors, consultants, and vendors. The 2000 Stock Incentive Plan and 2000 Employee Benefit Plan were approved by shareholders at the May 2000 annual meeting. Under the Plans, awards are made in the form of restricted shares or options, which may constitute incentive stock options ("ISO") or nonstatutory stock options ("NSO"). Only employees of the Company are eligible for the grant of incentive stock options. The total number of options and restricted shares that could have been awarded under the 2000 Stock Incentive Plan initially was 5,000,000. As of the first day of each calendar year commencing January 1, 2001, this total will automatically increase by 2% of the total number of common shares then outstanding or 500,000 shares, whichever is less. The option price, number of shares, grant date, and vesting period are determined at the discretion of the Company's Board of Directors. The exercise price of each ISO granted under the plan must equal 100% of the market price of the Company's stock on the date of grant. The exercise price of each NSO grant under the plan cannot be less than 85% of the market price of the Company's stock on the date of grant. An option's maximum term is 10 years. As of November 30, 2004, the total number of options that were authorized for issuance under the 2000 Stock Incentive Plan had increased from 5,000,000 shares to 7,000,000. However, the Company has issued more options than were authorized under the 2000 Stock Incentive Plan. This was necessary to provide an incentive to key employees to stay with the Company or one of its subsidiaries. The Company obtained stockholders' approval for an increase in the number of options authorized for issuance at its stockholders' meeting.
- F - 21 - |
MULTICELL TECHNOLOGIES, INC. and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended November 30, 2004 and 2003 (Continued)
Note 13 - Stock Compensation Plans (Continued)
2000 Employee Benefit Plan: On July 3, 2000, the Company filed with the Securities and Exchange Commission an S-8 registration statement (the "Registration Statement") in respect of its 2000 Employee Benefit Plan to register 35,000,000 shares of the Company's common stock issuable under the plan. One or more Performance Awards may be granted under the plan to any eligible person providing services to or for the Company. The value of such awards may be linked to the market value, book value or other measure of the value of the common stock or other specific performance criteria determined appropriate by the Board of Directors or the Compensation Committee (the "Committee"). The Board or the Committee may approve stock payments to eligible persons who elect to receive such payments in the manner determined by the Board or the Committee. The total number of shares that can be awarded under the 2000 Employee Benefit Plan is 35,000,000.
Prior to 2000, the Company had issued options with terms of up to 10 years and exercise prices of $.10 per share (the fair market value at the respective dates of grant) to various employees, officers and directors of the Company in return for various services rendered to the Company. None of these options remained outstanding at November 30, 2004 and 2003. Changes during the years ended November 30, 2004 and 2003 in stock options outstanding with respect to the 2000 plans for the Company were as follows:
2004 |
2003 |
|||||||||
Shares |
Weighted Average Exercise Price |
Shares |
Weighted Average Exercise Price |
|||||||
Options outstanding at beginning of year |
8,198,334 |
$0.10 |
9,555,000 |
$0.12 |
||||||
Granted |
500,000 |
$0.61 |
2,350,000 |
$0.09 |
||||||
Expired |
(3,083,334) |
$0.10 |
(1,263,500) |
$0.12 |
||||||
Exercised |
(512,000) |
$0.20 |
(2,443,166) |
$0.11 |
||||||
Options outstanding at end of year |
5,103,000 |
$0.14 |
8,198,334 |
$0.11 |
||||||
Options exercisable at end of year |
3,216,889 |
5,768,890 |
||||||||
- F - 22 - |
MULTICELL TECHNOLOGIES, INC. and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended November 30, 2004 and 2003 (Continued)
Note 13 - Stock Compensation Plans (Continued)
The following table summarizes information about stock options outstanding for the 2000 plans at November 30, 2004, all of which are at fixed prices:
Range of Exercise Prices |
Number Outstanding At 11/30/04 |
Weighted Average Remaining Contractual Life |
Weighted Average Exercise Price |
Number Exercisable At 11/30/04 |
$.06 - $.08 |
3,413,000 |
2.45 yrs |
0.08 |
2,054,668 |
$.115 - $.20 |
1,190,000 |
1.31 yrs |
0.13 |
1,037,222 |
$.51 - $.70 |
500,000 |
2.17 yrs |
0.61 |
125,000 |
5,103,000 |
3,216,890 |
|||
2004 Equity Incentive Plan: Effective June 16, 2004, the Company adopted an equity incentive plan, which authorizes the granting of stock awards to employees, directors, and consultants. The purpose of the plan is to provide a means by which eligible recipients of stock awards may be given the opportunity to benefit from increases in the value of the common stock through granting of incentive stock options, nonstatutory stock options, stock purchase awards, stock bonus awards, stock appreciation rights, stock unit awards and other stock awards. The shares of common stock may be issued pursuant to stock awards shall not exceed in the aggregate 15,000,000 shares of common stock plus an annual increase to be added of the first day of each Company fiscal year, beginning in 2005 and ending in (and including) 2013, equal to the lesser of the following amounts: (a) 15% of the Company's outstanding shares of common stock on the day preceding the first day of such fiscal year; (b) 25,000,000 sh ares of common stock; or (c) an amount determined by the Board. Incentive stock options may be granted only to employees. The exercise price of each ISO granted under the plan must equal 100% of the market price of the Company's stock on the date of the grant. A 10% stockholder shall not be granted an incentive stock option unless the exercise price of such option is at least 110% of the fair market value of the common stock on the date of the grants and the option is not exercisable after the expiration of five years from the date of the grant. The Board, in its discretion, shall determine the exercise price of each nonstatutory stock option. An option's maximum term is 10 years.
Changes during the year ended November 30, 2004 in stock options outstanding with respect to the 2004 plan for the Company were as follows:
Shares |
Weighted Average Exercise Price |
|||||
Options outstanding at beginning of year |
0 |
$0.00 |
||||
Granted |
2,400,000 |
$0.26 |
||||
Expired |
0 |
$0.00 |
||||
Exercised |
0 |
$0.00 |
||||
Options exercisable at end of year |
2,400,000 |
$0.26 |
||||
- F - 23 - |
MULTICELL TECHNOLOGIES, INC. and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended November 30, 2004 and 2003 (Continued)
Note 13 - Stock Compensation Plans (Continued)
The following table summarizes information about stock options outstanding for the 2004 plan at November 30, 2004, all of which are at fixed prices:
Range Of Exercise Prices |
Number Outstanding At 11/30/2004 |
Weighted Average Remaining Contractual Life |
Weighted Average Exercise Price |
Number Exercisable At 11/30/2004 |
$0.21 - $0.50 |
2,400,000 |
4.79 yrs. |
$0.26 |
212,500 |
SFAS 123 provides for the use of a fair value based method of accounting for stock-based compensation. However, SFAS 123 allows an entity to continue to measure compensation cost related to stock and stock options issued to employees using the intrinsic value method of accounting prescribed by APB 25. Entities electing to continue to use the intrinsic value method must make pro forma disclosures of net income or loss and earnings or loss per share as if a fair value method of accounting had been applied. In accordance with SFAS 123 and Statement of Financial Accounting Standards No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure." The Company and Xenogenics, its subsidiary (see Note 14), have elected to continue to account for their stock options issued to employees under APB 25. Since the exercise price of all of the options granted by the Company and its subsidiary to their employees has been equal to or greater than fair value, the Company has not recognized any earned or unearned compensation cost in its consolidated financial statements in connection with those options. The Company's historical net loss and basic net loss per share, and pro forma net loss and basic net loss per share, for the years ended November 30, 2004 and 2003 assuming compensation cost had been determined based on the fair value of all options at the respective dates of grant using a pricing model consistent with the provisions of SFAS 123 are set forth below:
2004 |
2003 |
||
Net loss applicable to common stockholders as reported |
$(3,460,140) |
$(1,984,053) |
|
Stock-based employee compensation expense assuming a fair value based method has been used for all awards |
148,230 |
248,082 |
|
Net loss - pro forma |
$(3,608,370) |
$(2,232,135) |
|
Basic loss per share as reported |
$(.03) |
$(.02) |
|
Basic loss per share - pro forma under SFAS 123 |
$(.03) |
$(.02) |
|
The fair value of each option granted by the Company was estimated on the date of grant using the Black-Scholes option pricing model, as permitted by SFAS 123, with the following weighted-average assumptions used for the years ended November 30, 2004 and 2003 as follows:
2004 |
2003 |
|
Dividend yield |
0% |
0% |
Expected volatility |
135% |
84% |
Risk-free interest rate |
2.9% |
2.9% |
Expected lives |
5.0 years |
3.0 years |
- F - 24 - |
MULTICELL TECHNOLOGIES, INC. and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended November 30, 2004 and 2003 (Continued)
Note 13 - Stock Compensation Plans (Continued)
In December 2004, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards No.123(R)("SFAS 123R"), "Share Based Payments", which amends SFAS 123 and will be effective for public companies that are small business filers for interim or annual periods beginning after December 15, 2005. The new standard will require us to expense employee stock options and other share-based payments. The FASB believes the use of a binomial lattice model for option valuation is capable of more fully reflecting certain characteristics of employee share options compared to the Black-Scholes options pricing model. The new standard may be adopted in one of three ways - the modified prospective transition method, a variation of the modified prospective transition method or the modified retrospective transition method. We are currently evaluating how we will adopt the standard and evaluating the effect that the adoption of SFAS 123(R) will have on our financial position and results of operations.
Note 14- Xenogenics Subsidiary and Minority Interest
As of November 30, 2004 and 2003, the Company owned 56.4% of the 2,659,004 outstanding common shares of Xenogenics, one of its subsidiaries.
Xenogenics had options to acquire 211,556 shares at $1.00 per share outstanding as of November 30, 2004 and 2003. The options had a weighted average contractual life of 2.5 years as of November 30, 2004.
Note 15- Subsequent Events
On February 10, 2005 the Company completed a private placement offering. Pursuant to subscription agreements, originally signed on January 29, 2005 and subsequently amended on February 10, 2005, with 11 accredited investors, the Company received an aggregate of $4,000,000 and issued an aggregate of 26,666,668 shares of common stock; three year warrants to purchase an aggregate of 18,000,000 shares of stock at $.20 per share; and three year warrants to purchase an aggregate of 8,000,000 shares of common stock at $.30 per share, pursuant to Regulation D of the Securities Act of 1933, as amended. In connection with the offering, the Company entered into a registration rights agreement with the investors and agreed to file a registration statement for the resale of the common stock and the shares issuable upon exercise of the warrants within 90 days of the date of the agreement. Pursuant to the terms of the registration rights agreement, the Company is required to have the registration sta tement declared effective by the Securities and Exchange Commission within 150 days from the date of filing. Effective February 10, 2005 in conjunction with this offering the Company entered into a series of standstill agreements, originally signed on January 29, 2005 and subsequently amended on February 10, 2005, with 27 of its security holders, including seven members of the Board of Directors, wherein the security holders have agreed not to exercise an aggregate of 25,635,500 options and warrants to purchase shares of common stock, until such time as the Company has obtained stockholder approval to amend its certificate of incorporation to provide for additional authorized shares of common stock.
- F - 25 - |
MULTICELL TECHNOLOGIES, INC. and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended November 30, 2004 and 2003 (Continued)
Note 15- Subsequent Events (Continued)
The Company also entered into an agreement on January 29, 2005, subject to the completion of the private placement described above, with Anthony J. Cataldo to serve as the Company's non-executive Co-Chairman of the Board and to provide consulting services in the field of fundraising on behalf of the Company. The agreement is for a term of three years and provides for Mr. Cataldo to receive a non-statutory stock option to purchase 250,000 shares of the Company's common stock at an exercise price of $.28 per share. Additionally, Mr. Cataldo will receive a monthly cash consulting fee of $15,000 and a one-time cash payment of $150,000 as compensation for services performed in connection with capital fundraising by the Company. Mr. Cataldo also was granted a five-year warrant to purchase 10,000,000 shares of the Company's common stock at $.28 per share. One half of the warrants become exercisable in equal monthly installments over the three year vesting period and the remainder become ex ercisable within 30 days of the Company closing an additional equity financing arranged by Mr. Cataldo of at least $10,000,000, provided that the warrant will not be exercisable until the Company's shareholders approve an increase in the Company's authorized common stock.
As of February 1, 2005, subject to the completion of the private placement described above, the Company entered into an agreement with Stephen Chang, Ph. D. to serve as the Company's President. The agreement provides that Dr. Chang will be employed at will by the Company, however in the event that the Company terminates the agreement without cause or Dr. Chang terminates the agreement for good reason, as set forth in the agreement, Dr. Chang will be entitled to receive severance pay in the form of 6 months compensation. The agreement further provides that Dr. Chang will receive $15,000 per month comprised of $10,000 in cash and $5,000 per month in shares of the Company's common stock issued under the 2004 Equity Incentive Plan (the "Plan"), calculated at the fair market value on the date of grant on a quarterly basis. The agreement also provides for Dr. Chang to receive incentive stock options to purchase 5,000,000 shares of the Company's common stock at an exercise price of $.28 per share (the "Option"), the fair market value of the Company's common stock on date of grant, under the Company's Plan. Subject to the terms of the Plan, the Option will be exercisable for a period of five years and vest monthly over a three year term as of the effective date of the agreement in equal increments.
- F - 26 - |
EXHIBIT 4.1
MultiCell Technologies, Inc.
Common Stock and Warrants to Purchase Common Stock
January ___ 2005
Mercator Advisory Group, LLC
555 South Flower Street, Suite 4200
Los Angeles, CA 90071
MultiCell Technologies, Inc., a Delaware corporation (the "Company"), hereby confirms its agreement with the persons and entities set forth on Exhibit "D" hereto and incorporated herein by reference (collectively, the "Purchasers") and Mercator Advisory Group, LLC ("MAG"), as set forth below.
The Common Stock and the Warrants are sometimes herein collectively referred to as the "Securities." This Agreement, the Registration Rights Agreement and the Warrant Agreements are sometimes herein collectively referred to as the "Transaction Documents."
The Securities will be offered and sold to the Purchasers without such offers and sales being registered under the Securities Act of 1933, as amended (together with the rules and regulations of the Securities and Exchange Commission (the "SEC") promulgated thereunder, the "Securities Act"), in reliance on exemptions therefrom.
In connection with the sale of the Securities, the Company has made available (including electronically via the SEC's EDGAR system) to Purchasers its periodic and current reports, forms, schedules, proxy statements and other documents (including exhibits and all other information incorporated by reference) filed with the SEC under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These reports, forms, schedules, statements, documents, filings and amendments, are collectively referred to as the "Disclosure Documents." All references in this Agreement to financial statements and schedules and other information which is "contained," "included" or "stated" in the Disclosure Documents (or other references of like import) shall be deemed to mean and include all such financial statements and schedules, documents, exhibits and other information which is incorporated by reference in the Disclosure Documents.
Each Purchaser and MAG agrees to the imprinting, so long as appropriate, of the following legend on the Securities (including the Common Stock and the Warrant Shares that it may acquire upon exercise of the Warrants):
The shares of stock evidenced by this certificate have not been registered under the U.S. Securities Act of 1933, as amended, and may not be offered, sold, pledged or otherwise transferred ("transferred") in the absence of such registration or an applicable exemption therefrom. In the absence of such registration, such shares may not be transferred unless, if the Company requests, the Company has received a written opinion from counsel in form and substance satisfactory to the Company stating that such transfer is being made in compliance with all applicable federal and state securities laws.
The legend set forth above may be removed if and when the Common Stock or the Warrant Shares, as the case may be, are disposed of pursuant to an effective registration statement under the Securities Act or in the opinion of counsel to the Company experienced in the area of United States Federal securities laws such legends are no longer required under applicable requirements of the Securities Act. The Common Stock, the Warrants, the and the Warrant Shares shall also bear any other legends required by applicable Federal or state securities laws, which legends may be removed when in the opinion of counsel to the Company experienced in the applicable securities laws, the same are no longer required under the applicable requirements of such securities laws. The Company agrees that it will provide each Purchaser, upon request, with a substitute certificate, not bearing such legend at such time as such legend is no longer applicable. Each Purchaser agrees that, in co nnection with any transfer of the Common Stock or the Warrant Shares by it pursuant to an effective registration statement under the Securities Act, such Purchaser will comply with all prospectus delivery requirements of the Securities Act. The Company makes no representation, warranty or agreement as to the availability of any exemption from registration under the Securities Act with respect to any resale of the Common Stock, the Warrants, or the Warrant Shares.
The Purchaser and MAG need not provide and the Company hereby waives any presentment, demand, protest or other notice of any kind, and the Purchaser and MAG may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such declaration may be rescinded and annulled by Purchaser and MAG at any time prior to payment hereunder. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.
An "Event of Default" shall include the Company's failure to: (a) file the Registration Statement with the SEC within 90 days after the Closing Date, (b) have the Registration Statement deemed effective by the SEC within 150 days after the date of filing of the Registration Statement; or (c) pay the Due Diligence Fee within three (3) days after the Closing.
IN THE EVENT OF DEFAULT, COMPANY SHALL PAY TO PURCHASERS, IN CASH, $2,667 FOR EACH DAY THAT THE DEFAULT CONTINUES UNTIL SUCH DEFAULT IS CURED. PURCHASERS AND COMPANY ACKNOWLEDGE AND AGREE THAT THEY HAVE MUTUALLY DISCUSSED THE IMPRACTICALITY AND EXTREME DIFFICULTY OF FIXING THE ACTUAL DAMAGES PURCHASERS WOULD INCUR IN THE CASE OF AN EVENT OF DEFAULT, AND THAT AS A RESULT OF SUCH DISCUSSION THE PARTIES AGREE THAT $2,667 FOR EACH DAY REPRESENTS A REASONABLE ESTIMATE OF THE ACTUAL DAMAGES WHICH PURCHASERS WOULD INCUR IN THE CASE OF AN EVENT OF DEFAULT. BY SIGNING THIS SUBSCRIPTION AGREEMENT, PURCHASERS AND COMPANY SPECIFICALLY AND EXPRESSLY AGREE TO ABIDE BY THE TERMS AND PROVISIONS OF THIS PARAGRAPH CONCERNING LIQUIDATED DAMAGES.
MultiCell Technologies, Inc.
Attention: W. Gerald Newmin
55 Access Road
Suite 700
Warwick, Rhode Island 02886
Fax 401-738-7561
Baratta & Goldstein
597 Fifth Avenue
New York, NY 10017
Attn: Joseph A. Baratta
Telephone: 212-750-9700
Fax: 212-750-8297
All such notices and communications shall be deemed to have been duly given: (i) when delivered by hand, if personally delivered; (ii) five business days after being deposited in the mail, postage prepaid, if mailed certified mail, return receipt requested; (iii) one business day after being timely delivered to a next-day air courier guaranteeing overnight delivery; (iv) the date of transmission if sent via facsimile to the facsimile number as set forth in this Section or the signature page hereof prior to 6:00 p.m. on a business day, or (v) the business day following the date of transmission if sent via facsimile at a facsimile number set forth in this Section or on the signature page hereof after 6:00 p.m. or on a date that is not a business day. Change of a party's address or facsimile number may be designated hereunder by giving notice to all of the other parties hereto in accordance with this Section.
By: ___________________________
Name: ____________________
Title: ____________________
ACCEPTED AND AGREED:
Mercator Momentum Fund, LP By: Mercator Advisory Group LLC
|
Mercator Momentum Fund III, LP By: Mercator Advisory Group LLC
|
Mercator Advisory Group, LLC |
Monarch Pointe Fund, Ltd. |
Telstar Limited By: ______________________________
|
Golden Mist Limited By: ______________________________ |
Pentagon Special Purpose Fund, Ltd. By: ______________________________ |
Search Capital
By: ______________________________ |
__________________________________ |
|
__________________________________ |
__________________________________ |
Direct and Indirect Subsidiaries of MultiCell Technologies, Inc.
Article I. Subsidiary |
Ownership % |
MCT Rhode Island Corp. |
100% |
Xenogenics Corporation |
56.4% |
Schedule B
Company Capitalization
November 30, 2004
Common Stock: |
||
Authorized Shares $.01 par value |
200,000,000 |
|
Shares Outstanding |
125,483,441 |
|
Preferred Stock: |
||
Authorized Shares $.01 par value |
2,000,000 |
|
Shares Outstanding |
18,000 |
|
Outstanding Stock Options: |
7,778,000 |
|
Convertible Notes ($425,000) |
2,166,667 |
|
Stock Purchase Warrants |
26,342,729 |
Schedule C
Other Arrangements
None
Schedule D
Violations
None
Schedule E
Use of Proceeds
Schedule F
Criminal Records and Bankruptcies
None
Exhibit C
Registration Rights Agreement
Exhibit D
Allocation of Common Stock and Warrants
Name |
Purchase Price |
Common Stock |
Warrants @ $0.20 |
Warrants @ $0.30 |
|
Mercator Momentum Fund, LP |
$ |
590,000 |
3,933,333 |
1,327,500 |
590,000 |
Mercator Momentum Fund III, LP |
$ |
407,000 |
2,713,333 |
915,750 |
407,000 |
Monarch Pointe Fund, Ltd. |
$ |
1,203,000 |
8,020,000 |
2,706,750 |
1,203,000 |
Mercator Advisory Group |
$ |
- |
- |
4,950,000 |
2,200,000 |
Telstar Limited |
$ |
500,000 |
3,333,333 |
2,250,000 |
1,000,000 |
Golden Mist Limited |
$ |
200,000 |
1,333,333 |
900,000 |
400,000 |
Search Capital |
$ |
300,000 |
2,000,000 |
1,350,000 |
600,000 |
Anthony Capozza |
$ |
100,000 |
666,667 |
450,000 |
200,000 |
Steve Capozza |
$ |
100,000 |
666,667 |
450,000 |
200,000 |
Mark Elliot Schlanger |
$ |
100,000 |
666,667 |
450,000 |
200,000 |
Pentagon Special Purpose Fund, Ltd. |
$ |
500,000 |
3,333,333 |
2,250,000 |
1,000,000 |
Total |
$ |
4,000,000 |
26,666,667 |
18,000,000 |
8,000,000 |
Exhibit E
Addresses for Notice to Purchasers
Addresses for Notice to Mercator Momentum Fund, LP, Mercator Momentum Fund III, LP, Monarch Pointe Fund, Ltd., and MAG:
with a copy to: |
|
Mercator Advisory Group, LLC |
David C. Ulich, Esq. |
Addresses for Other Purchasers:
Name |
Address |
Phone |
Fax |
Telstar Limited |
Registered Address: 1st Floor, International Building, Kumul Highway, Port Vila, Vanuatu |
|
852-2537-5208 |
Golden Mist Limited |
Registered Address: Suite 240, Barkly Wharf, Le Caudan Waterfront, Port Louis, Mauritius |
|
230-210-1109 |
Search Capital |
|
|
|
Anthony Capozza |
4660 La Jolla Valley Drive, Suite 1040, San Diego, CA 92122 |
858-875-4510 |
858-455-5133 |
Steve Capozza |
4660 La Jolla Valley Drive, Suite 1040, San Diego, CA 92122 |
858-875-4510 |
858-455-5133 |
Mark Elliot Schlanger |
|
941-927-1818 |
|
Pentagon Special Purpose Fund, Ltd. |
88 Baker Street, London, W1 U 6TQ, UK, Attention: Lewis Chester; With a copy to: Asset Managers Int'l Ltd., c/o Olympia Capital (Ireland) Limited, Harcourt Center, 6th Floor, Block 3, Harcourt Road, Dublin 2, Ireland |
44(207) 299-9999 |
44(207) 299-9988 |
EXHIBIT 4.2
EXHIBIT D
AGREEMENT dated as of January ___, 2005, between the entities listed on Exhibit "A" attached hereto and incorporation herein by reference (collectively, the "Subscribers") and MERCATOR ADVISORY GROUP, LLC ("MAG") (the Subscribers and MAG are referred to individually as a "Holder" and collectively as the "Holders"), and MultiCell Technologies, Inc. a Delaware corporation (the "Company").
WHEREAS, the Subscribers have purchased, for an aggregate of $4,000,000, an aggregate of 26,666,667 shares of Company Common Stock (the "Common Stock") from the Company par value $____ per share. ;
WHEREAS, each Subscriber and MAG has acquired Warrants (together, the "Warrants") from the Company, pursuant to which the Holders have the right to purchase in the aggregate up to 26,000,000 shares of the Common Stock through the exercise of the Warrants;
WHEREAS, the Company desires to grant to the Holders the registration rights set forth herein with respect to the 26,666,667 shares of Common Stock issued to the Holders and the shares of Common Stock issuable upon the exercise of the Warrants.
NOW, THEREFORE, the parties hereto mutually agree as follows:
The Company covenants and agrees as follows:
All such notices and communications shall be deemed to have been duly given: (i) when delivered by hand, if personally delivered; (ii) five business days after being deposited in the mail, postage prepaid, if mailed certified mail, return receipt requested; (iii) one business day after being timely delivered to a next-day air courier guaranteeing overnight delivery; (iv) the date of transmission if sent via facsimile to the facsimile number as set forth in this Section or the signature page hereof prior to 4:00 p.m. on a business day, or (v) the business day following the date of transmission if sent via facsimile at a facsimile number set forth in this Section or on the signature page hereof after 4:00 p.m. or on a date that is not a business day. Change of a party's address or facsimile number may be designated hereunder by giving notice to all of the other parties hereto in accordance with this Section.
[The balance of this page is intentionally left blank.]
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto as of the date first above written.
By: ____________________________________ |
Holders' Signatures on Following Page
HOLDERS
Mercator Momentum Fund, LP By: Mercator Advisory Group LLC _____________________ |
Mercator Momentum Fund III, LP By: Mercator Advisory Group LLC _____________________ |
Mercator Advisory Group, LLC By:_____________________ |
Monarch Pointe Fund, Ltd. By: _____________________ |
Telstar Limited By: ______________________________ |
Golden Mist Limited By: ______________________________ |
Pentagon Special Purpose Fund, Ltd. By: ______________________________ |
Search Capital By: ______________________________ |
__________________________________ |
|
__________________________________ |
__________________________________ |
Exhibit "A"
Subscribers
Mercator Momentum Fund, LP |
Mercator Momentum Fund III, LP |
Monarch Pointe Fund, Ltd. |
Mercator Advisory Group |
Telstar Limited |
Golden Mist Limited |
Search Capital |
Anthony Capozza |
Steve Capozza |
Mark Elliot Schlanger |
Pentagon Special Purpose Fund, Ltd. |
Exhibit "B"
Addresses for Notice to Mercator Momentum Fund, LP, Mercator Momentum Fund III, LP, Monarch Pointe Fund, Ltd., and address for notice to Mercator Advisory Group, LLC:
with a copy to: |
|
Mercator Advisory Group, LLC |
David C. Ulich, Esq. |
Addresses for Other Subscribers and Company:
Name |
Address |
Phone |
Fax |
Telstar Limited |
Registered Address: 1st Floor, International Building, Kumul Highway, Port Vila, Vanuatu |
|
852-2537-5208 |
Golden Mist Limited |
Registered Address: Suite 240, Barkly Wharf, Le Caudan Waterfront, Port Louis, Mauritius |
|
230-210-1109 |
Search Capital |
|
310-560-0004 |
|
Anthony Capozza |
4660 La Jolla Valley Drive, Suite 1040, San Diego, CA 92122 |
858-875-4510 |
858-455-5133 |
Steve Capozza |
4660 La Jolla Valley Drive, Suite 1040, San Diego, CA 92122 |
858-875-4510 |
858-455-5133 |
Mark Elliot Schlanger |
|
941-927-1818 |
|
Pentagon Special Purpose Fund, Ltd. |
88 Baker Street, London, W1 U 6TQ, UK, Attention: Lewis Chester; With a copy to: Asset Managers Int'l Ltd., c/o Olympia Capital (Ireland) Limited, Harcourt Center, 6th Floor, Block 3, Harcourt Road, Dublin 2, Ireland |
44(207) 299-9999 |
44(207) 299-9988 |
Company: |
Attention: W. Gerald Newmin, 55 Access Road, Suite 700, Warwick, Rhode Island 02886, With a copy to Baratta & Goldstein, 597 Fifth Avenue, New York, NY 10017, Attn: Joseph A. Baratta |
|
401-738-7561 and 212-750-8297 |
EXHIBIT 4.3
STANDSTILL AGREEMENT
AGREEMENT made this [ ] day of January 2005 by and between MultiCell Technologies, Inc., hereinafter referred to as "MULTICELL", and [ ], hereinafter referred to as "HOLDER".
W I T N E S S E T H:
WHEREAS, MULTICELL has issued certain securities consisting of convertible debentures, notes, preferred stock and/or warrants to HOLDER; and
WHEREAS, HOLDER has certain rights with respect to said securities; and
WHERAS, the parties understand that MULTICELL requires the within standstill agreement to issue common stock to obtain working capital for its business; and
WHEREAS, the parties are desirous of entering into this agreement.
NOW, THEREFORE, IN CONSIDERATION OF SUM OF $10.00 AND OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT OF WHICH IS HEREBY ACKNOWLEDGED, IT IS MUTUALLY AGREED AS FOLLOWS:
FIRST: The security issued to HOLDER, more specifically described as [ ] herein referred to as "SECURITY" is an authorized, subsisting, and binding obligation of MULTICELL, and MULTICELL and HOLDER agree to the following terms:
(a) HOLDER agrees that all rights granted to HOLDER with respect to said SECURITY to exercise the right granted under said SECURITY, to convert that SECURITY into shares of common stock of MULTICELL, par value $0.01, ("COMMON STOCK") will be delayed until such time as MULTICELL obtains shareholder approval to amend the MULTICELL articles of incorporation to provide for additional shares to be available in treasury for issuance (the "PROPOSAL").
(b) The postponement and/or suspension of the convertible feature of the SECURITY is subject to the investment and/or financing of a Private Placement of Common Stock by MULTICELL of the sum of up to $4 million on or before the close of business on January 31, 2005 (the "PIPE"). The terms of the investment and/or financing will have been agreed upon by MULTICELL and will be no less than $2 million.
(c) HOLDER understands and agrees that this standstill agreement is necessary so as to permit MULTICELL to undertake the PIPE and to insure that sufficient COMMON STOCK is available to subscribers in the PIPE.
(d) Upon completion of the PIPE, MULTICELL agrees that it will seek shareholder approval of the PROPOSAL.
SECOND: In the event that MULTICELL does not complete the PIPE as provided for herein on or before January 31, 2005 then in that event, the within standstill agreed upon by HOLDER will be considered terminated and not binding upon HOLDER and HOLDER will be entitled to all rights under the SECURITY issued to it.
THIRD: The within Agreement may not be changed, modified, or altered, except in writing, by the parties herein, and MULTICELL and HOLDER agree that they have taken the necessary corporate and/or other action required to authorize and confirm the within Agreement.
FOURTH: In the event that notice under the Agreement herein is required, said notice shall be made as follows:
If to MULTICELL, at: |
|
MultiCell Technologies, Inc. |
|
If to HOLDER, at: |
|
[ |
Notice shall be provided by facsimile, certified mail (return receipt requested), and regular mail, and be effective three (3) days from receipt of said notice by any of the parties herein.
The Remainder of This Page
Intentionally Left Blank
FIFTH: The within Agreement shall be governed by the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties have set their hands and seals on the day, month and year first above written.
MULTICELL BIOMEDICAL CORPORATION
By: __________________________________________
HOLDER
By: __________________________________________
G:\2005\CLIENTS\MultiCell Technologies\Agreements\STAND STILL AGMTver2.doc
EXHIBIT 10.1
DIRECTOR AND CONSULTING AGREEMENT
This Director and Consulting Agreement (the "Agreement") is made and entered into as of the Effective Date (as defined in Section 1.1 below) by and between MultiCell Technologies, Inc., a Delaware corporation (the "Company"), and Anthony J. Cataldo, an individual ("Cataldo"). The Company and Cataldo may be referred to herein individually as a "Party" or collectively as the "Parties." |
||||
Recital |
||||
The Company desires Cataldo's services as Co-Chairman of its Board of Directors (the "Board") and to retain Cataldo as a consultant to the Company in the field of capital fundraising. Cataldo desires to serve as Co-Chairman of the Company's Board of Directors and to provide capital fundraising consulting services to the Company. In furtherance thereof, the Company and Cataldo desire to enter into this Agreement on the terms and conditions set forth below. |
||||
Agreement |
||||
In consideration of the foregoing recitals and the mutual promises and covenants herein contained, and for other good and valuable consideration, the Parties, intending to be legally bound, agree as follows: |
||||
1. |
Appointment to the Board of Directors. |
|||
1.1 |
Title and Responsibilities. Subject to the terms and conditions set forth herein, the Board agrees to appoint Cataldo to serve as Co-Chairman of the Board, and Cataldo hereby accepts such appointment, effective as of the date of this Agreement (the "Effective Date"). Cataldo will serve as Co-Chairman of the Board from the Effective Date until the earlier of his death, resignation or removal, in accordance with the Company's Bylaws. Cataldo will devote his best reasonable efforts and apply his professional expertise to the interests and welfare of the Company. Cataldo's rights, duties, and obligations as a director shall be governed by Delaware General Corporate Law and the Certificate of Incorporation and Bylaws of the Company, each as amended from time to time (together, the "Governing Documents"). |
|||
1.2 |
Director Stock Options. Upon the Effective Date of this Agreement, and subject to approval of the Board, pursuant to the terms of the Company's 2004 Equity Incentive Plan (the "Plan"), Cataldo shall be granted a nonstatutory stock option under the Plan to purchase 250,000 shares of the Company's common stock (the "Option") as compensation for his services as Co-Chairman of the Board. The Option will be governed by and granted pursuant to a separate Stock Option Agreement and the Plan. The exercise price per share of the common stock subject to the Option will be equal to twenty-eight cents ($.28) per share, the fair market value of the common stock on the date of grant, determined in accordance with the Plan. The Option will be subject to vesting over three (3) years, commencing on the Effective Date. Subject to the terms of the Plan and the Stock Option Agreement, one thirty-sixth of the shares will vest on the last day of each m onth following the Effective Date for a period of thirty-six (36) months, commencing with the last day of the first full month after the Effective Date. Subject to the terms of the Plan and the Stock Option Agreement, the Option shall be exercisable for a period of five (5) years from the date of grant; provided, however, that the Option shall not be exercisable until approval by the Board and stockholders of the Company of an increase in the number of shares of authorized common stock of the Company sufficient to cover the shares of common stock issuable upon exercise of the Option. |
|||
1.3 |
Director's Fees. For each meeting of the Board Cataldo attends, Cataldo shall receive $3,000 as a director's fee, payable in shares of the Company's common stock issued pursuant to the Plan, calculated at the fair market value on the date of grant in accordance with the Plan. Director's fees will be paid to Cataldo on a quarterly basis. |
|||
1.4 |
Mandatory Board Meeting Attendance. As Co-Chairman of the Board, Cataldo agrees to apply his best reasonable efforts to attend every meeting of the Board. Cataldo further agrees to attend no fewer than seventy-five percent (75%) of the meetings of the Board in person, and no more than twenty-five percent (25%) of such meetings by telephone or teleconference. |
|||
1.5 |
Indemnification. Cataldo shall receive indemnification as a director of the Company to the maximum extent extended to directors of the Company generally, as provided by the Governing Documents, and shall be included as an insured under the Company's Directors and Officers liability insurance policy. |
|||
2. |
Consultation Services. |
|||
2.1 |
Consulting Services and Term. In addition to his service as Co-Chairman of the Board, Cataldo shall provide consulting services to the Company in the field of capital fundraising, as well as other projects as may be assigned to Cataldo by the Board and agreed to by Cataldo, for a term of three (3) years from the Effective Date of this Agreement (the "Term"). The Company shall be entitled to Cataldo's consulting services at reasonable times and upon reasonable notice as requested by the Board. |
|||
2.2 |
Reports. Cataldo shall provide the Company and the Board with periodic reports, either verbal or written, concerning the status of the various projects assigned to him. |
|||
2.3 |
Consulting Fees. In consideration of Cataldo's consulting services, the Company agrees that during the Term of this Agreement it shall pay Cataldo a monthly fixed consulting fee of $15,000 per month, payable in cash on the first business day of each month in arrears. |
|||
2.4 |
Bonus Payment. Upon the Effective Date of this Agreement, Cataldo shall receive a cash bonus payment in the amount of $150,000 as compensation for prior services performed by Cataldo in connection with capital fundraising for the Company. |
|||
2.5 |
Consulting Warrants. Cataldo shall be awarded a warrant to purchase ten million (10,000,000) shares of the Company's common stock (the "Shares") at an exercise price of twenty-eight cents ($.28) per share, the fair market value of the common stock on the date of approval of the warrant by the Board (the "Warrant"). The Warrant shall be exercisable for a period of five (5) years from the date of issuance and shall become exercisable as follows: |
|||
(a) |
Subject to Section 2.5(c) below, five million (5,000,000) Shares shall become exercisable in equal monthly installments over three (3) years, commencing on the Effective Date. One thirty-sixth of the shares will become exercisable on the last day of each month following the Effective Date for a period of thirty-six (36) months, commencing with the last day of the first full month after the Effective Date; provided, however, that in the event that the remaining 5,000,000 Shares become exercisable pursuant to the provisions set forth in Section 2.5(b) below, then any then unexercisable Shares under this Section 2.5(a) shall also then become exercisable. |
|||
(b) |
Subject to Section 2.5(c) below, following the Effective Date of this Agreement, if the Company closes a round of equity financing that has been arranged by Cataldo with investors that were first introduced to the Company by Cataldo, equal to at least ten million dollars ($10,000,000) on terms acceptable to the Board, then five million (5,000,000) Shares shall become exercisable thirty (30) days after the closing date of such round of financing. |
|||
(c) |
Notwithstanding the foregoing, the Warrant shall (i) terminate on the earlier of termination of this Agreement or five (5) years from the date of issuance, and (ii) not be exercisable until approval by the Board and the stockholders of the Company of an increase in the authorized number of shares of common stock of the Company sufficient to cover the shares of common stock issuable upon exercise of the Warrant. |
|||
2.6 |
Business Expense Reimbursement. The Company shall reimburse Cataldo for all reasonable travel, entertainment or other documented expenses incurred by him in furtherance of or in connection with his services hereunder, in accordance with the Company's expense reimbursement policy as in effect from time to time. |
|||
2.7 |
Independent Contractor. The Parties understand and agree that Cataldo is an independent contractor and not an employee of the Company and that nothing in this Agreement is intended or should be construed to create an employer/employee relationship between Cataldo and the Company. Without limiting the generality of the foregoing, the Parties acknowledge that this Agreement is not a contract of employment within the meaning of Section 2750 of the California Labor Code and that Cataldo is not an employee of the Company for any purpose under the California Labor Code. Cataldo has no authority to obligate the Company by contract or otherwise outside the normal course of business without first clearing with the Chief Executive officer and/or President. Cataldo understands and agrees that he will not be an agent of the Company or authorized to make any representations, contract, or commitment outside the normal course of business without first clearing with the Chief Executive officer and/or President, including, but not limited to, the execution of consulting agreements, granting of Company equity or press releases, on behalf of the Company in any manner whatsoever to any third party or any employee of the Company that has not been authorized by the Board. Cataldo will not be eligible for any employee benefits, nor will the Company make deductions from Cataldo's fees for taxes (except as otherwise required by applicable law or regulation). Any taxes imposed on Cataldo due to activities performed hereunder will be the sole responsibility of Cataldo. |
|||
3. |
Proprietary Information and Nonsolicitation. |
|||
3.1 |
Proprietary Information. In exchange for the valuable consideration provided hereunder, Cataldo agrees to execute and abide by the Proprietary Information and Inventions Agreement attached hereto as Exhibit A. Pursuant to the Proprietary Information and Inventions Agreement, Cataldo understands that he must not use or disclose any confidential or proprietary information of the Company, among other things. |
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3.2 |
Nonsolicitation. During the Term of this Agreement and for one (1) year thereafter, Cataldo agrees that in order to protect the Company's trade secrets and confidential and proprietary information from unauthorized use, Cataldo will not, either directly or through others, solicit, recruit or attempt to solicit or recruit (a) any employee, consultant or independent contractor of the Company to terminate his or her relationship with the Company in order to become an employee, consultant or independent contractor to or for any other person or business entity; or (b) the business of any customer, supplier, service provider, vendor or distributor of the Company which was doing business with the Company, or listed on Company's customer, supplier, service provider, vendor or distributor list, during the Term of this Agreement or one (1) year immediately prior thereto. If any restriction set forth in this Section 3.2 is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable. |
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3.3 |
Return of Company Property. Upon the end of the Term or upon the Company's earlier request, Cataldo agrees to return to the Company all Company documents (and all copies thereof) and other Company property that he has had in his possession at any time, including, but not limited to, Company files, notes, drawings, records, business plans and forecasts, financial information, specifications, computer-recorded information, tangible property (including, but not limited to, computers), credit cards, entry cards, identification badges, and keys; and, any materials of any kind that contain or embody any proprietary or confidential information of the Company (and all reproductions thereof). |
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4. |
Outside Activities. |
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4.1 |
Investments and Interests. Except as permitted by Section 4.2, Cataldo agrees not to acquire, assume or participate in, directly or indirectly, any position, investment or interest known by Cataldo to be materially adverse or materially antagonistic to the Company, its business or prospects, financial or otherwise. |
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4.2 |
Activities. Except with the prior written consent of the Board, Cataldo will not during his tenure as a member of the Company's Board undertake or engage in any other directorship, employment, occupation or business enterprise in direct competition with the Company, other than ones in which Cataldo is a passive investor or other activities in which Cataldo was a participant prior to his appointment to the Board as disclosed to the Company. The Company acknowledges that Cataldo currently serves as Chairman of the Board of BrandPartners Group, Inc. |
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4.3 |
Other Agreements. Cataldo represents and warrants that his service on the Board and as a consultant to the Company will not conflict with and will not be constrained by any prior agreement or relationship between Cataldo and any third party. Cataldo represents and warrants that he will not disclose to the Company or use on behalf of the Company any confidential information governed by any agreement between Cataldo and any third party except in accordance with such agreement. During the Term, Cataldo may use, in the performance of his duties, only such information generally known and used by persons with training and experience comparable to his own and all information which is common knowledge in the industry or otherwise legally in the public domain. |
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5. |
Confidentiality. |
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5.1 |
Duty of Confidentiality. The provisions of this Agreement will be held in strictest confidence by Cataldo and the Company and will not be publicized or disclosed in any manner whatsoever; provided, however, that: (a) Cataldo may disclose this Agreement in confidence to his immediate family; (b) the Parties may disclose this Agreement in confidence to their respective attorneys, accountants, auditors, tax preparers, and financial advisors; (c) the Company may disclose this Agreement as necessary to fulfill standard or legally required corporate reporting or disclosure requirements; and (d) the Parties may disclose this Agreement insofar as such disclosure may be necessary to enforce its terms or as otherwise required by law. |
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6. |
Termination. |
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6.1 |
Termination of Directorship. Cataldo may resign from the Board at any time with or without advance notice, with or without reason. Cataldo may be removed from the Board at any time by the shareholders, for any reason, in any manner provided by the Governing Documents and applicable law. |
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6.2 |
Termination of Consultation Services. Cataldo may terminate his consulting services under this Agreement at any time, for any reason, by giving no less than thirty (30) days prior written notice to the Company. The Company may terminate Cataldo's consulting services under this Agreement "for cause" by delivery of written notice to Cataldo specifying the cause or causes relied upon for such termination. "For cause" shall be limited to the occurrence of any of the following events: |
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(a) |
If Cataldo is in material breach of any provision of this Agreement, including the Proprietary Information and Inventions Agreement attached hereto as Exhibit A; |
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(b) |
Cataldo's engaging or in any manner participating in any activity which is competitive with or intentionally injurious to the Company or which violates any provision of Sections 3, 4 or 5 of this Agreement; |
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(c) |
Cataldo's commission of any fraud against the Company or use or appropriation for his personal use or benefit of any funds or properties of the Company not authorized by the Board to be so used or appropriated; |
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(d) |
Cataldo's being convicted or found liable for any crime involving dishonesty or moral turpitude; |
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(e) |
An act of dishonesty by Cataldo intended to result in his gain or personal enrichment which causes material harm to the reputation of the Company or its affiliates; |
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(f) |
Cataldo personally engaging in illegal conduct which causes material harm to the reputation of the Company or its affiliates; |
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(g) |
Conduct by Cataldo which in the good faith and reasonable determination of the Board demonstrates gross unfitness to serve. |
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6.3 |
The obligations set forth in Sections 3, 4, 5, 6, and 7 will survive any termination or expiration of this Agreement. |
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7. |
General Provisions. |
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7.1 |
Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law. If any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision, and such invalid, illegal or unenforceable provision will be reformed, construed and enforced in such jurisdiction so as to render it valid, legal, and enforceable consistent with the intent of the Parties insofar as possible. |
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7.2 |
Assignment. The rights and liabilities of the Parties hereto shall bind and inure to the benefit of their respective successors, heirs, executors and administrators, as the case may be; provided, however, that, as the Company has specifically contracted for Cataldo's services, Cataldo may not assign or delegate Cataldo's obligations under this Agreement either in whole or in part without the prior written consent of the Company. The Company may assign its rights and obligations hereunder to any person or entity who succeeds to all or substantially all of the Company's business. |
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7.3 |
Entire Agreement. This Agreement constitutes the entire agreement between and among Cataldo and the Company with respect to his service as Co-Chairman of the Board and as a consultant to the Company. It supersedes any prior agreement, promise, representation, or statement written or otherwise between or among Cataldo and the Company with regard to this subject matter. It is entered into without reliance on any promise, representation, statement or agreement other than those expressly contained or incorporated herein, and it cannot be modified or amended except in a writing signed by the Parties. |
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7.4 |
Governing Law. All questions concerning the construction, validity and interpretation of this Agreement will be governed by the laws of the State of California as applied to contracts made and to be performed entirely within California. |
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7.5 |
Construction. This Agreement shall be deemed drafted by all Parties hereto and shall not be construed against any Party as the drafter of the document. |
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7.6 |
Counterparts. This Agreement may be executed in counterparts, any one of which need not contain the signature of more than one Party, but both of which taken together will constitute one and the same Agreement. Signatures transmitted via facsimile shall be deemed the equivalent of originals. |
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7.7 |
Arbitration. Any disputes, claims, causes of action, in law or equity, arising from or relating to this Agreement or its enforcement, performance, breach, or interpretation, will be resolved, to the fullest extent permitted by law, by final and binding confidential arbitration held in San Diego, California and conducted by Judicial Arbitration & Mediation Services ("JAMS"), under its then-existing Rules and Procedures. Nothing in this Section 7.7 is intended to prevent the Company or Cataldo from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration, as set forth in Section 7.8 below. Except as provided below, the Parties to any arbitration shall share equally any and all JAMS fees and costs for any such arbitration proceedings. The arbitrator shall have the power to award to the prevailing party in the arbitration the cost of the prevailing party's reasonable attorneys' fees and costs as set forth in S ection 7.9 below. If for any reason all or part of this arbitration provision is held to be invalid or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity or unenforceability will not affect any other portion of this arbitration provision, but this provision will be reformed, construed and enforced in such jurisdiction to render such invalid or unenforceable part or parts of this provision consistent with the general intent of the Parties insofar as possible. |
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7.8 |
Legal and Equitable Remedies. Because Cataldo's services are personal and unique and because Cataldo may have access to and become acquainted with the confidential and proprietary information of the Company, the Company shall have the right to enforce this Agreement and any of its provisions by injunction, specific performance or other equitable relief without prejudice to any other rights and remedies that the Company may have for a breach of this Agreement. |
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7.9 |
Attorneys' Fees and Costs. The prevailing party in any action or arbitration to enforce any rights under this Agreement shall be entitled to recover his or its reasonable attorneys' fees and costs incurred in connection with such action or arbitration. |
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7.10 |
Notices. Any notices required or permitted hereunder shall be given to the appropriate Party at the address listed in this Agreement, or such other address as the Party shall specify in writing pursuant to this notice provision. Such notice shall be deemed given upon personal delivery to the appropriate address; three days after the date of mailing if sent by certified or registered mail; when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient, if not, then on the next business day. |
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In Witness Whereof, the Parties hereto have executed this Agreement as of the date first written above. |
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MultiCell Technologies, Inc. |
Anthony J. Cataldo |
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By: ________________________ |
Signature: ________________________ |
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Address: 55 Access Road, Suite 700 |
Address: 1100 Hardman Avenue |
Exhibit A
PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered into effective as of February 1, 2005 (the "Effective Date") by and between MultiCell Technologies, Inc., a Delaware corporation (the "Company"), and Stephen Chang, Ph.D., an individual ("Chang"). The Company and Chang may be referred to herein individually as a "Party" or collectively as the "Parties." |
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Recital |
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The Company desires assurance of the association and services of Chang in order to retain his experience, skills, abilities, background and knowledge, and is willing to engage Chang's services on the terms and conditions set forth in this Agreement. Chang desires to be in the employ of the Company, and is willing to accept such employment on the terms and conditions set forth in this Agreement. |
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Agreement |
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In consideration of the foregoing recitals and the mutual promises and covenants herein contained, and for other good and valuable consideration, the Parties, intending to be legally bound, agree as follows: |
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1. |
Employment. |
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1.1 |
Term. The Company hereby employs Chang, and Chang hereby accepts employment by the Company, upon the terms and conditions set forth in this Agreement. Subject to Section 6 below, Chang shall be employed at will, meaning that either the Company or Chang may terminate this agreement and Chang's employment at any time, for any reason or no reason, with or without cause, without liability to the other save for wages earned through the effective date of termination. The obligations set forth in Sections 3, 5, 6 and 7 will survive any termination or expiration of this Agreement. |
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1.2 |
Title and Responsibilities. Chang shall have the title of President of the Company and shall serve in such other capacity or capacities as the Board of Directors of the Company (the "Board") and Chang may agree. Chang shall report to the Company's Chief Executive Officer, or if there is no Chief Executive Officer, then to the Board. Chang shall do and perform all services, acts or things necessary or advisable to manage and conduct the business of the Company and which are normally associated with the position of President, consistent with the Bylaws of the Company and as required by the Board or the officer to whom Chang shall report. Chang will devote his best reasonable efforts and apply his professional expertise to the interests and welfare of the Company. |
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1.3 |
Location. Unless the Parties otherwise agree in writing, Chang shall perform services pursuant to this Agreement at the Company's offices located in Warwick, Rhode Island, or at any other place at which the Company maintains an office; provided, however, that the Company may from time to time require Chang to travel temporarily to other locations in connection with the Company's business. |
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1.4 |
Indemnification. Chang shall receive indemnification as a corporate officer and a director of the Company to the maximum extent extended to the other officers and directors of the Company generally, as provided by Delaware General Corporate Law and the Certificate of Incorporation and Bylaws of the Company, and shall be included as an insured under the Company's Directors and Officers liability insurance policy. Chang shall be permitted to review the applicable indemnification agreement prior to execution of this Agreement. The Parties agree that in no event shall any indemnification be lower than that provided by Delaware General Corporate Law. |
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2. |
Compensation. |
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2.1 |
Base Salary. For Chang's services as President of the Company, the Company shall pay Chang a base salary ("Base Salary") equal to $15,000 per month as follows, subject to standard payroll deductions and withholdings: (a) $10,000 per month in cash, payable in regular periodic payments in accordance with Company policy and applicable law; and (b) $5,000 per month in shares of the Company's common stock issued pursuant to the Plan, calculated at the fair market value on the date of grant in accordance with the Plan, payable on a quarterly basis. |
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2.2 |
Stock Options. Upon the Effective Date of this Agreement, and subject to the terms of the Company's 2004 Equity Incentive Plan (the "Plan"), Chang shall be granted an option to purchase five million (5,000,000) shares of the Company's common stock at an exercise price of twenty-eight cents ($.28) per share, the fair market value of the common stock on the date of grant determined in accordance with the Plan (the "Option"). To the maximum extent possible, the Option shall be an Incentive Stock Option as such term is defined in Section 422 of the Internal Revenue Code of 1986, as amended. The Option will be governed by and granted pursuant to a separate Stock Option Agreement and the Plan. The Option will be subject to vesting over three (3) years and will begin to vest on the Effective Date. One thirty-sixth of the shares subject to the Option will vest on the last day of each month following the Effective Date for a period of thir ty-six (36) months, commencing with the last day of February 2005. Subject to the terms of the Plan and the Stock Option Agreement, the Option shall be exercisable for a period of five (5) years from the date of grant. |
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2.3 |
Director's Fees. As a member of the Board, for each meeting of the Board Chang attends, Chang shall receive $3,000 as a director's fee, payable in shares of the Company's common stock issued pursuant to the Plan, calculated at the fair market value on the date of grant in accordance with the Plan. Director's fees will be paid to Chang on a quarterly basis. |
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2.4 |
Changes to Compensation. Chang's compensation may be changed from time to time by mutual written agreement of Chang and the Company. |
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2.5 |
Benefits. Chang shall, in accordance with Company policy and the terms of the applicable plan documents, be eligible to participate in benefits under any executive benefit plan or arrangement which may be in effect from time to time and made available to the Company's executive or key management employees, including but not limited to paid vacation and medical insurance. |
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2.6 |
Business Expense Reimbursement. The Company shall reimburse Chang for all reasonable travel, entertainment or other documented expenses incurred by him in furtherance of or in connection with his services hereunder, in accordance with the Company's expense reimbursement policy as in effect from time to time. |
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2.7 |
Employment Taxes. All of Chang's compensation shall be subject to customary withholding taxes and any other employment taxes as are commonly required to be collected or withheld by the Company in accordance with federal, state and local laws. |
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3. |
Proprietary Information and Nonsolicitation. |
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3.1 |
Proprietary Information. In exchange for the valuable consideration provided hereunder, Chang agrees to execute and abide by the Proprietary Information and Inventions Agreement attached hereto as Exhibit A. Pursuant to the Proprietary Information and Inventions Agreement, Chang understands that he must not use or disclose any confidential or proprietary information of the Company, among other things. |
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3.2 |
Nonsolicitation. During his employment by the Company and for one (1) year thereafter, Chang agrees that in order to protect the Company's trade secrets and confidential and proprietary information from unauthorized use, Chang will not, either directly or through others, solicit, recruit or attempt to solicit or recruit (a) any employee, consultant or independent contractor of the Company to terminate his or her relationship with the Company in order to become an employee, consultant or independent contractor to or for any other person or business entity; or (b) the business of any customer, supplier, service provider, vendor or distributor of the Company which was doing business with the Company, or listed on Company's customer, supplier, service provider, vendor or distributor list, during the term of this Agreement or one (1) year immediately prior thereto; except that this Section 3.2 shall not be deemed to be a no-hire provision and Chang shall be entitled to employ any indivi dual, whether a former or current employee of the Company, that first responds to advertisement by Chang, or his successor Company, or that first initiates contact with Chang or his successor Company. If any restriction set forth in this Section 3.2 is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable. |
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3.3 |
Return of Company Property. Upon termination of Chang's employment or upon the Company's earlier request, Chang agrees to return to the Company all Company documents (and all copies thereof) and other Company property that he has had in his possession at any time, including, but not limited to, Company files, notes, drawings, records, business plans and forecasts, financial information, specifications, computer-recorded information, tangible property (including, but not limited to, computers), credit cards, entry cards, identification badges, and keys; and, any materials of any kind that contain or embody any proprietary or confidential information of the Company (and all reproductions thereof). |
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4. |
Outside Activities. |
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4.1 |
Investments and Interests. Except as permitted by Section 4.2, Chang agrees not to acquire, assume or participate in, directly or indirectly, any position, investment or interest known by Chang to be materially adverse or materially antagonistic to the Company, its business or prospects, financial or otherwise. |
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4.2 |
Activities. Except with the prior written consent of the Board, Chang will not during his tenure as President of the Company or as a member of the Company's Board undertake or engage in any other directorship, employment, occupation or business enterprise in direct competition with the Company, other than ones in which Chang is a passive investor or other activities in which Chang was a participant prior to his appointment to the Board as disclosed to the Company and listed on Exhibit B. The Parties acknowledge and agree that Chang will continue to serve as Chief Executive Officer of Astral Pharmaceuticals, Inc. for a maximum period of ninety (90) days following the Effective Date of this Agreement, provided, however, that Chang shall devote no more than one (1) day per week to that obligation. |
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4.3 |
Other Agreements. Chang represents and warrants that his service as President of the Company and as a member of the Board will not conflict with and will not be constrained by any prior agreement or relationship between Chang and any third party. Chang represents and warrants that he will not disclose to the Company or use on behalf of the Company any confidential information governed by any agreement between Chang and any third party except in accordance with such agreement. During his employment, Chang may use, in the performance of his duties, only such information generally known and used by persons with training and experience comparable to his own and all information which is common knowledge in the industry or otherwise legally in the public domain. |
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5. |
Confidentiality. |
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5.1 |
Duty of Confidentiality. The provisions of this Agreement will be held in strictest confidence by Chang and the Company and will not be publicized or disclosed in any manner whatsoever; provided, however, that: (a) Chang may disclose this Agreement in confidence to his immediate family; (b) the Parties may disclose this Agreement in confidence to their respective attorneys, accountants, auditors, tax preparers, and financial advisors; (c) the Company may disclose this Agreement as necessary to fulfill standard or legally required corporate reporting or disclosure requirements; and (d) the Parties may disclose this Agreement insofar as such disclosure may be necessary to enforce its terms or as otherwise required by law. |
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6. |
Termination Without Cause Or For Good Reason. |
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6.1 |
Benefits Upon Termination Without Cause Or For Good Reason. In the event that the Company terminates Chang's employment without Cause (as defined below), or Chang terminates his employment for Good Reason (as defined below), Chang shall, upon delivery to the Company of an effective Release and Waiver in the form attached hereto as Exhibit C, be entitled to receive severance pay in the form of salary continuation of Chang's Base Salary then in effect, less applicable deductions and withholdings, for a period of six (6) months. |
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6.2 |
For Cause. "Cause" for the Company to terminate Chang's employment hereunder shall mean the occurrence of any of the following events, as determined by the Board in the exercise of its reasonable business judgment: |
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(a) |
Chang's repeated failure to satisfactorily perform his job duties within a reasonable period of time after a written demand for substantial performance is delivered to Chang by the Board and/or the Chief Executive Officer, which demand specifically identifies the manner in which the Board and/or the Chief Executive Officer believes that Chang has not substantially performed his duties; |
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(b) |
Chang's refusal or failure to follow lawful and reasonable directions of the Board, the Chief Executive Officer or the individuals to whom Chang reports; |
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(c) |
If Chang is in material breach of any provision of this Agreement, including the Proprietary Information and Inventions Agreement attached hereto as Exhibit A; |
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(d) |
Chang's engaging or in any manner participating in any activity which is competitive with or intentionally injurious to the Company or which violates any provision of Sections 3, 4 or 5 of this Agreement; |
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(e) |
Chang's commission of any fraud against the Company or use or appropriation for his personal use or benefit of any funds or properties of the Company not authorized by the Board to be so used or appropriated; |
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(f) |
Chang's being convicted or found liable for any crime involving dishonesty or moral turpitude; |
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(g) |
An act of dishonesty by Chang intended to result in his gain or personal enrichment which causes material harm to the reputation of the Company or its affiliates; |
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(h) |
Chang personally engaging in illegal conduct which causes material harm to the reputation of the Company or its affiliates. |
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6.3 |
Good Reason. "Good Reason" for Chang to terminate his employment hereunder shall mean the occurrence of any of the following events without his consent: |
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(a) |
a material adverse change in the nature of Chang's responsibilities, title or reporting level as they exist on the Effective Date of this Agreement; |
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(b) |
the relocation of the Company's executive offices or principal business location to a point more than sixty (60) miles from the Warwick, Rhode Island area; |
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(c) |
a reduction by the Company of Chang's base salary as initially set forth herein or as the same may be increased from time to time; |
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(d) |
any action by the Company (including the elimination of benefit plans without providing substitutes thereof or the reduction of Chang's benefits thereunder) that would substantially diminish the aggregate value of Chang's fringe benefits as they exist at such time; |
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(e) |
a failure by the Company to obtain from any successor, before the succession takes place, an agreement to assume the obligations and perform all of the terms and conditions of this Agreement; |
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(f) |
a bankruptcy or other liquidation proceeding by the Company. |
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6.4 |
Termination for Death or Disability. Chang's employment with the Company shall terminate effective upon the date of Chang's death or "Complete Disability." If Chang's employment shall be terminated by death or complete disability, the Company shall pay to Chang and/or his heirs, Chang's Base Salary and accrued and unused vacation benefits earned through the date of termination at the rate then in effect, less standard deductions and withholdings, and the Company shall thereafter have no further obligations to Chang and/or Chang's heirs under this Agreement. Complete Disability shall mean the inability of Chang to perform Chang's duties under this Agreement because Chang has become permanently disabled within the meaning of any policy of disability income insurance covering employees of the Company then in force. In the event the Company has no policy of disability income insurance covering employees of the Company in force when Chang becomes disabled, the term "Complete Disability" shall mean the inability of Chang to perform Chang's duties under this Agreement by reason of any incapacity, physical or mental, which the Board or the Chief Executive Officer, based upon medical advice or an opinion provided by a licensed physician acceptable to the Board or the Chief Executive Officer, as applicable, determines to have incapacitated Chang from satisfactorily performing Chang's usual services for the Company for a period of at least ninety (90) days during any 12 month period (whether or not consecutive). Based upon such medical advice or opinion, the determination of the Board or the Chief Executive Officer, as applicable, shall be final and binding, and the date such determination is made shall be the date of such Complete Disability for purposes of this Agreement. |
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7. |
General Provisions. |
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7.1 |
Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law. If any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision, and such invalid, illegal or unenforceable provision will be reformed, construed and enforced in such jurisdiction so as to render it valid, legal, and enforceable consistent with the intent of the Parties insofar as possible. |
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7.2 |
Assignment. The rights and liabilities of the Parties hereto shall bind and inure to the benefit of their respective successors, heirs, executors and administrators, as the case may be; provided, however, that, as the Company has specifically contracted for Chang's services, Chang may not assign or delegate Chang's obligations under this Agreement either in whole or in part without the prior written consent of the Company. The Company may assign its rights and obligations hereunder to any person or entity who succeeds to all or substantially all of the Company's business. |
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7.3 |
Entire Agreement. This Agreement, including Exhibit A, constitutes the entire agreement between and among Chang and the Company with respect to his service as a member of the Board and President of the Company. It supersedes any prior agreement, promise, representation, or statement written or otherwise between or among Chang and the Company with regard to this subject matter. It is entered into without reliance on any promise, representation, statement or agreement other than those expressly contained or incorporated herein, and it cannot be modified or amended except in a writing signed by the Parties. |
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7.4 |
Governing Law. All questions concerning the construction, validity and interpretation of this Agreement will be governed by the laws of the State of California as applied to contracts made and to be performed entirely within California. |
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7.5 |
Construction. This Agreement shall be deemed drafted by all Parties hereto and shall not be construed against any Party as the drafter of the document. |
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7.6 |
Counterparts. This Agreement may be executed in counterparts, any one of which need not contain the signature of more than one Party, but both of which taken together will constitute one and the same Agreement. Signatures transmitted via facsimile shall be deemed the equivalent of originals. |
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7.7 |
Arbitration. Any disputes, claims, causes of action, in law or equity, arising from or relating to this Agreement or its enforcement, performance, breach, or interpretation, will be resolved, to the fullest extent permitted by law, by final and binding confidential arbitration held in San Diego, California and conducted by Judicial Arbitration & Mediation Services ("JAMS"), under its then-existing Rules and Procedures. Nothing in this Section 7.7 is intended to prevent the Company or Chang from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration, as set forth in Section 7.8 below. Except as provided below, the Parties to any arbitration shall share equally any and all JAMS fees and costs for any such arbitration proceedings. The arbitrator shall have the power to award to the prevailing party in the arbitration the cost of the prevailing party's reasonable attorneys' fees and costs as set forth in Section 7.9 below. If for any reason all or part of this arbitration provision is held to be invalid or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity or unenforceability will not affect any other portion of this arbitration provision, but this provision will be reformed, construed and enforced in such jurisdiction to render such invalid or unenforceable part or parts of this provision consistent with the general intent of the Parties insofar as possible. |
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7.8 |
Legal and Equitable Remedies. Because Chang's services are personal and unique and because Chang may have access to and become acquainted with the confidential and proprietary information of the Company, the Company shall have the right to enforce this Agreement and any of its provisions by injunction, specific performance or other equitable relief without prejudice to any other rights and remedies that the Company may have for a breach of this Agreement. |
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7.9 |
Attorneys' Fees and Costs. The prevailing party in any action or arbitration to enforce any rights under this Agreement shall be entitled to recover his or its reasonable attorneys' fees and costs incurred in connection with such action or arbitration. |
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7.10 |
Notices. Any notices required or permitted hereunder shall be given to the appropriate Party at the address listed in this Agreement, or such other address as the Party shall specify in writing pursuant to this notice provision. Such notice shall be deemed given upon personal delivery to the appropriate address; three days after the date of mailing if sent by certified or registered mail; when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient, if not, then on the next business day. |
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In Witness Whereof, the Parties hereto have executed this Agreement as of the date first written above. |
||||
MultiCell Technologies, Inc. |
Stephen Chang, Ph.D. |
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By: ________________________ |
Signature: ________________________ |
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Address: 55 Access Road, Suite 700 |
Address: __________________ |
Exhibit A
PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
Exhibit B
LIST OF OUTSIDE ACTIVITIES
Exhibit C
RELEASE AND WAIVER
In consideration of the payments and other benefits set forth in Section 6 of the Employment Agreement dated February 1, 2005, to which this form is attached, I, Stephen Chang, Ph.D., hereby furnish MultiCell Technologies, Inc, (the "Company"), with the following release and waiver ("Release and Waiver").
In exchange for the consideration provided to me by the Employment Agreement that I am not otherwise entitled to receive, I hereby generally and completely release the Company and its directors, officers, employees, shareholders, partners, agents, attorneys, predecessors, successors, parent and subsidiary entities, insurers, affiliates, and assigns from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring prior to my signing this Release and Waiver. This general release includes, but is not limited to: (1) all claims arising out of or in any way related to my employment with the Company or the termination of that employment; (2) all claims related to my compensation or benefits from the Company, including, but not limited to, salary, bonuses, commissions, vacation pay, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other ownership interests in the Company; (3) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (4) all tort claims, including, but not limited to, claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (5) all federal, state, and local statutory claims, including, but not limited to, claims for discrimination, harassment, retaliation, attorneys' fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990, the federal Age Discrimination in Employment Act of 1967 (as amended) ("ADEA"), and the California Fair Employment and Housing Act (as amended).
I also acknowledge that I have read and understand Section 1542 of the California Civil Code which reads as follows: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor." I hereby expressly waive and relinquish all rights and benefits under that section and any law of any jurisdiction of similar effect with respect to any claims I may have against the Company.
I acknowledge that, among other rights, I am waiving and releasing any rights I may have under ADEA, that this Release and Waiver is knowing and voluntary, and that the consideration given for this Release and Waiver is in addition to anything of value to which I was already entitled as an executive of the Company. If I am 40 years of age or older upon execution of this Release and Waiver, I further acknowledge that I have been advised, as required by the Older Workers Benefit Protection Act, that: (a) the release and waiver granted herein does not relate to claims under the ADEA which may arise after this Release and Waiver is executed; (b) I have the right to consult with an attorney prior to executing this Release and Waiver (although I may choose voluntarily not to do so); and (c) I have twenty-one (21) days from the date of termination of my employment with the Company in which to consider this Release and Waiver (although I may choose voluntarily to execute this Release and Waiver earlier); (d) I have seven (7) days following the execution of this Release and Waiver to revoke my consent to this Release and Waiver; and (e) this Release and Waiver shall not be effective until the seven (7) day revocation period has expired.
If I am less than 40 years of age upon execution of this Release and Waiver, I acknowledge that I have the right to consult with an attorney prior to executing this Release and Waiver (although I may choose voluntarily not to do so); and (c) I have five (5) days from the date of termination of my employment with the Company in which to consider this Release and Waiver (although I may choose voluntarily to execute this Release and Waiver earlier).
I acknowledge my continuing obligations under my Proprietary Information and Inventions Agreement, a copy of which is attached hereto as Exhibit A. Pursuant to the Proprietary Information and Inventions Agreement I understand that among other things, I must not use or disclose any confidential or proprietary information of the Company and I must immediately return all Company property and documents (including all embodiments of proprietary information) and all copies thereof in my possession or control. I understand and agree that my right to the severance pay I am receiving in exchange for my agreement to the terms of this Release and Waiver is contingent upon my continued compliance with my Proprietary Information and Inventions Agreement.
This Release and Waiver, including Exhibit A hereto, constitutes the complete, final and exclusive embodiment of the entire agreement between the Company and me with regard to the subject matter hereof. I am not relying on any promise or representation by the Company that is not expressly stated herein. This Release and Waiver may only be modified by a writing signed by both me and a duly authorized officer of the Company.
Date: __________________ |
By: _______________________ |
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the registration statement on Form S-8 (No. 333-40752) previously filed by of MultiCell Technologies, Inc. of our report dated January 21, 2005, except for Note 15 as to which the date is February 10, 2005, on our audit of the consolidated financial statements of MultiCell Technologies, Inc. and subsidiaries as of November 30, 2004 and 2003 and for the years then ended, which report is included in this Annual Report on Form 10-KSB for the year ended November 30, 2004.
/s/ J.H. Cohn LLP
New York NY
February 24, 2005
Exhibit 31.1
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, W. Gerald Newmin, Chief Executive Officer of MultiCell Technologies, Inc. certify that:
1. I have reviewed this annual report on Form 10-KSB of MultiCell Technologies , Inc.;
2. Based on my knowledge, this annual 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 annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report;
4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b) 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
c) Disclosed in this annual report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's fourth fiscal quarter 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 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: February 28, 2005 |
By: /s/ W. Gerald Newmin |
Exhibit 31.2
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Janice D. DiPietro, Chief Financial Officer of MultiCell Technologies, Inc. certify that:
1. I have reviewed this annual report on Form 10-KSB of MultiCell Technologies , Inc.;
2. Based on my knowledge, this annual 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 annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report;
4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b) 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
c) Disclosed in this annual report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's fourth fiscal quarter 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 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: February 28, 2005 |
By: /s/ Janice D. DiPietro |
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of MultiCell Technologies, Inc. (the "Company") on Form 10-KSB for the fiscal year ended November 30, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, W. Gerald Newmin, Chief Executivel Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: |
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
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Dated |
February 28, 2005 |
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By: |
/s/ W. Gerald Newmin |
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Name: |
W. Gerald Newmin |
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Title: |
Chief Executive Officer |
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of MultiCell Technologies, Inc. (the "Company") on Form 10-KSB for the fiscal year ended November 30, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Janice D. DiPietro, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: |
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(1) |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
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Dated |
February 28, 2005 |
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By: |
/s/ Janice D. DiPietro |
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Name: |
Janice D. DiPietro |
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Title: |
Chief Financial Officer |