x
|
ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
For
the Fiscal Year Ended: December 31,
2009
|
¨
|
TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
For
the transition period from _________ to
_________.
|
Delaware
(State or other
jurisdiction
of incorporation or
organization)
|
04-3321804
(I.R.S. Employer Identification
No.)
|
One
Gateway Center, Suite 504
Newton,
Massachusetts 02458
(Address of principal executive
offices and zip code)
|
Title
of Class
|
Name
of each exchange on which registered
|
|
None
|
Not
Applicable
|
Large
accelerated filer ¨
|
Accelerated
filer ¨
|
Non-accelerated
filer ¨
|
Smaller
reporting company x
|
PART
I
|
|
|
Item
1.
|
Business
|
2
|
Item
1A.
|
Risk
Factors
|
10
|
Item
2.
|
Properties
|
22
|
Item
3.
|
Legal
Proceedings
|
22
|
PART
II
|
||
Item
4.
|
Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
|
22
|
Item
5.
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
25
|
Item
6.
|
Financial
Statements
|
31
|
Item
7.
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
57
|
Item
8A.
|
Controls
and Procedures
|
57
|
Item
8B.
|
Other
Information
|
58
|
PART
III
|
||
Item
9.
|
Directors,
Executive Officers, and Corporate Governance
|
59
|
Item
10.
|
Executive
Compensation
|
62
|
Item
11.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
65
|
Item
12.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
68
|
Item
13.
|
Principal
Accounting Fees and Services
|
69
|
PART
IV
|
||
Item
14.
|
Exhibits
|
70
|
|
·
|
When
added to cells, NOV-002 results in generation of a mild and transient
oxidative signal at the cell surface and intracellularly,
glutathionylation of redox-sensitive proteins and a range of
biochemical/molecular effects that are dependent on cell type and status,
leading to alteration of cell
functions.
|
|
·
|
In
tumor cells, redox modulation by NOV-002 has been shown to decrease the
rate of tumor cell proliferation. For example, in a human
ovarian tumor cell line (SKOV3), NOV-002 induced an intracellular
oxidative signal (as evidenced by generation of reactive oxygen species),
increased levels of active (i.e. phosphorylated) c-Jun N-terminal kinases
(a component of cell signaling pathways regulating proliferation) and
decreased the rate of tumor cell proliferation. This was also
accompanied by increased tumor cell
apoptosis.
|
|
·
|
Also
in tumor cells, NOV-002 decreased signaling through a redox-regulated
pathway known to control cell migration, invasiveness and metastasis and
inhibited invasiveness of a variety of human tumor cell
types.
|
|
·
|
In
animal tumor models, NOV-002 has been shown to increase anti-tumor immune
responsiveness and to inhibit tumor growth and enhance survival when
combined with chemotherapy.
|
|
o
|
In
a mouse model of colon cancer, NOV-002 significantly increased anti-tumor
response and survival when combined with chemotherapy
(cyclophosphamide).
|
|
o
|
In
a mouse model of melanoma where animals were treated with a form of
immunotherapy (adoptive T cell transfer) together with chemotherapy
(cyclophosphamide) the addition of NOV-002 significantly reduced the rate
of tumor growth and increased
survival.
|
|
o
|
In
a mouse ovarian cancer model, animals treated with NOV-002 alone showed a
significantly increased tumor-specific cellular immune response
(interferon gamma production) compared to control mice treated with a
saline vehicle.
|
|
·
|
In
contrast to these suppressive effects on tumors, similar redox modulation,
protein glutathionylation and cell signaling pathway effects from NOV-002
treatment resulted in increased proliferation in myeloid lineage cells
such as HL-60 cells. Furthermore, in vivo, NOV-002
treatment of chemosuppressed mice (using cyclophosphamide) led to
increased total bone marrow cell number and proliferation of multi-lineage
bone marrow progenitor cells (i.e., progenitor cells for white cells, red
cells and platelets).
|
|
•
|
Pre-clinical
laboratory tests, in
vivo pre-clinical studies, and formulation
studies;
|
|
•
|
The
submission to the FDA of an IND for human clinical testing, which must
become effective before human clinical trials can
commence;
|
|
•
|
Adequate
and well-controlled human clinical trials to establish the safety and
efficacy of the product;
|
|
•
|
The
submission of a New Drug Application (“NDA”) or Biologic Drug License
Application to the FDA; and
|
|
•
|
FDA
approval of the NDA or Biologic Drug
License.
|
|
·
|
the number of potential products
and technologies in
development;
|
|
·
|
continued progress and cost of
our research and development
programs;
|
|
·
|
progress with pre-clinical
studies and clinical trials;
|
|
·
|
the time and costs involved in
obtaining regulatory
clearance;
|
|
·
|
costs involved in preparing,
filing, prosecuting, maintaining and enforcing patent
claims;
|
|
·
|
costs of developing sales,
marketing and distribution channels and our ability to sell our
drugs;
|
|
·
|
costs involved in establishing
manufacturing capabilities for clinical trial and commercial quantities of
our drugs;
|
|
·
|
competing technological and
market developments;
|
|
·
|
market acceptance of our
products;
|
|
·
|
costs for recruiting and
retaining management, employees and
consultants;
|
|
·
|
costs for educating
physicians;
|
|
·
|
our status as a
Bulletin-Board-listed company and the prospects for our stock being listed
on a national exchange;
|
|
·
|
uncertainty and economic
instability resulting from terrorist acts and other acts of violence or
war; and
|
|
·
|
the condition of capital markets
and the economy generally, both in the U.S. and
globally.
|
|
·
|
demonstrating benefit from
delivery of each specific drug for specific medical
indications;
|
|
·
|
demonstrating through
pre-clinical and clinical trials that each drug is safe and effective;
and
|
|
·
|
demonstrating that we have
established viable Good Manufacturing Practices capable of potential
scale-up.
|
|
·
|
uncertainties arising from the
rapidly growing scientific aspects of drug therapies and potential
treatments;
|
|
·
|
uncertainties arising as a result
of the broad array of alternative potential treatments related to cancer,
hepatitis and other diseases;
and
|
|
·
|
anticipated expense and time
believed to be associated with the development and regulatory approval of
treatments for cancer, hepatitis and other
diseases.
|
|
·
|
the receipt of regulatory
clearance of marketing claims for the uses that we are
developing;
|
|
·
|
the establishment and
demonstration of the advantages, safety and efficacy of our
technologies;
|
|
·
|
pricing and reimbursement
policies of government and third-party payers such as insurance companies,
health maintenance organizations and other health plan
administrators;
|
|
·
|
our ability to attract corporate
partners, including pharmaceutical companies, to assist in commercializing
our intended products; and
|
|
·
|
our ability to market our
products.
|
|
·
|
cease selling, incorporating or
using any of our technologies and/or products that incorporate the
challenged intellectual property, which would adversely affect our ability
to generate revenue;
|
|
·
|
obtain a license from the holder
of the infringed intellectual property right, which license may be costly
or may not be available on reasonable terms, if at all;
or
|
|
·
|
redesign our products, which
would be costly and
time-consuming.
|
|
·
|
fail to adequately market our
products;
|
|
·
|
fail to satisfy financial or
contractual obligations to
us;
|
|
·
|
offer, design, manufacture or
promote competing products;
or
|
|
·
|
cease operations with little or
no notice.
|
|
·
|
announcements or press releases
relating to the biopharmaceutical sector or to our own business or
prospects;
|
|
·
|
regulatory, legislative, or other
developments affecting us or the healthcare industry
generally;
|
|
·
|
the dilutive effect of conversion
of our Series E or Series C preferred stock into common stock or the
exercise of options and
warrants;
|
|
·
|
sales by those financing our
company through convertible securities and warrants of the underlying
common stock, when it is registered with the SEC and may be sold into the
public market, immediately upon conversion or exercise;
and
|
|
·
|
market conditions specific to
biopharmaceutical companies, the healthcare industry and the stock market
generally.
|
|
·
|
the election of
directors;
|
|
·
|
the amendment of charter
documents;
|
|
·
|
issuance of blank-check preferred
or convertible stock, notes or instruments of indebtedness which may have
conversion, liquidation and similar features, or completion of other
financing arrangements including certain issuances of common stock;
or
|
|
·
|
the approval of certain mergers
and other significant corporate transactions, including a sale of
substantially all of our assets (and in the case of licensing, any
material intellectual property), or merger with a publicly-traded shell or
other company.
|
|
·
|
selling or otherwise granting any
rights with respect to all or substantially all of our assets (and in the
case of licensing, any material intellectual property) or the Company's
business and we shall not enter into a merger or consolidation with
another company unless we are the surviving corporation, the Series E
preferred stock remains outstanding, there are no changes to the rights
and preferences of the Series E preferred stock and there is not created
any new class of capital stock senior to the Series E preferred
stock;
|
|
·
|
redeeming or repurchasing any
capital stock other than Series E preferred stock or the related warrants;
or
|
|
·
|
incurring any new debt for
borrowed money in excess of
$500,000.
|
Fiscal Year 2008
|
High
|
Low
|
||||||
First
Quarter
|
$
|
0.82
|
$
|
0.43
|
||||
Second
Quarter
|
0.64
|
0.44
|
||||||
Third
Quarter
|
0.54
|
0.35
|
||||||
Fourth
Quarter
|
0.49
|
0.19
|
Fiscal Year 2009
|
High
|
Low
|
||||||
First
Quarter
|
$
|
0.60
|
$
|
0.30
|
||||
Second
Quarter
|
0.90
|
0.34
|
||||||
Third
Quarter
|
0.98
|
0.57
|
||||||
Fourth
Quarter
|
2.90
|
0.65
|
|
·
|
We
issued 11,745,779 shares of our common stock upon conversion of
approximately 140 shares of our Series E preferred stock, having an
aggregate stated value of approximately $7,000,000, and accumulated
undeclared dividends thereon.
|
|
·
|
We issued 7,191,132 shares of our
common stock upon the cashless exercise of warrants to purchase 11,865,381
shares of common stock. The warrants had an expiration date of
December 31, 2015 and an exercise price of $0.65 per
share.
|
|
·
|
We issued 226,544 shares of our
common stock upon the cashless exercise of warrants to purchase 317,350
shares of common stock. The warrants had an expiration date of
August 9, 2010 and an exercise price of $0.65 per
share.
|
|
·
|
We issued 35,106 shares of our
common stock upon the cashless exercise of warrants to purchase 75,000
shares of common stock. The warrants had an expiration date of
May 2, 2012 and an exercise price of $1.25 per
share.
|
|
·
|
We issued 366,492 shares of our
common stock upon the cashless exercise of warrants to purchase 991,516
shares of common stock. The warrants had an expiration date of March 7,
2011 and an exercise price of $1.72 per
share.
|
|
·
|
We issued 47,902 shares of our
common stock upon the cashless exercise of warrants to purchase 83,333
shares of common stock. The warrants had an expiration date of
May 2, 2012 and an exercise price of $1.25 per
share.
|
|
·
|
We issued 314,982 shares of our
common stock upon the cashless exercise of warrants to purchase 400,000
shares of common stock. The warrants had an expiration date of April 1,
2010 and an exercise price of $0.625 per
share.
|
|
·
|
We
issued 4,801,889 shares of our common stock upon conversion of
approximately 58 shares of our Series E preferred stock, having an
aggregate stated value of approximately $2,907,000, and accumulated
undeclared dividends thereon.
|
|
·
|
We
issued 662,584 shares of our common stock upon conversion of 28 shares of
our Series C preferred stock having an aggregate stated value of $336,000,
and accumulated undeclared dividends
thereon.
|
|
·
|
We issued 26,454 shares of our
common stock upon the cashless exercise of warrants to purchase an
aggregate of 201,462 shares of common stock. The warrants had
an expiration date of March 7, 2011 and an exercise price of $1.72 per
share.
|
|
·
|
We issued 121,476 shares of our
common stock upon the cashless exercise of warrants to purchase an
aggregate of 201,984 shares of common stock. The warrants had
an expiration date of August 9, 2010 and an exercise price of $0.65 per
share.
|
|
·
|
We issued 218,648 shares of our
common stock upon the cashless exercise of warrants to purchase an
aggregate of 320,000 shares of common stock. The warrants had
an expiration date of April 1, 2010 and an exercise price of $0.625 per
share.
|
|
·
|
We issued 38,223 shares of our
common stock upon the cashless exercise of warrants to purchase an
aggregate of 60,606 shares of common stock. The warrants had an
expiration date of October 3, 2010 and an exercise price of $0.65 per
share.
|
|
·
|
We sold 8,333,334 shares of our
common stock and warrants to purchase 2,916,668 shares of common stock at
an exercise price of $0.66 per share for gross proceeds of approximately
$5,500,000.
|
|
·
|
We sold 5,303,030 shares of our
common stock and warrants to purchase 1,856,062 shares of common stock at
an exercise price of $0.66 per share for gross proceeds of approximately
$3,500,000.
|
|
·
|
We issued 2,084,308 shares of our
common stock in exchange for outstanding warrants to purchase 6,947,728
shares of common stock at an exercise price of $1.82 per
share. These warrants had been issued in a March 2006
financing. The issuance was made pursuant to an exchange
agreement with each warrant holder and was exempt from registration under
Section 3(a)(9) of the Securities
Act.
|
|
·
|
We issued 3,137,119 shares of our
common stock upon conversion of approximately 39 shares of our Series E
preferred stock, having an aggregate stated value of approximately
$1,952,000, and accumulated undeclared dividends
thereon.
|
|
·
|
We issued 114,410 shares of our
common stock upon conversion of 5 shares of our Series C preferred stock,
having an aggregate stated value of $60,000, and accumulated dividends
thereon.
|
|
·
|
We issued 72,916 shares of our
common stock upon the cashless exercise of warrants to purchase an
aggregate of 262,503 shares of common stock. The warrants had
an expiration date of August 9, 2010 and an exercise price of $0.65 per
share.
|
|
·
|
We issued 6,112 shares of our
common stock upon the cashless exercise of warrants to purchase an
aggregate of 20,830 shares of common stock. The warrants had an
expiration date of August 9, 2010 and an exercise price of $0.65 per
share.
|
|
·
|
We issued 761,843 shares of our
common stock upon conversion of 35 shares of our Series C preferred stock,
having an aggregate stated value of $420,000, and accumulated dividends
thereon.
|
|
·
|
We sold 200 shares of our Series
E preferred stock and warrants to purchase 9,230,769 shares of our common
stock at an exercise price of $0.65 per share for gross proceeds of
approximately $10,000,000 and paying approximately $800,000 in fees and
expenses. In addition, 413.5 shares of our Series D preferred
stock and accumulated undeclared dividends thereon were exchanged for
445.442875 shares of our Series E preferred
stock.
|
Page
|
||||
Report
of Independent Registered Public Accounting Firm
|
32
|
|||
Balance
Sheets at December 31, 2009 and 2008
|
33
|
|||
Statements
of Operations for the Years Ended December 31, 2009 and
2008
|
34
|
|||
Statements
of Redeemable Preferred Stock and Stockholders’ Deficiency for the Years
Ended December 31, 2009 and 2008
|
35
|
|||
Statements
of Cash Flows for the Years Ended December 31, 2009 and
2008
|
36
|
|||
Notes
to Financial Statements
|
37
|
December 31,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
ASSETS
|
||||||||
CURRENT
ASSETS:
|
||||||||
Cash
and equivalents
|
$
|
8,769,529
|
$
|
1,262,452
|
||||
Prepaid
expenses and other current assets
|
102,923
|
129,785
|
||||||
Total
current assets
|
8,872,452
|
1,392,237
|
||||||
FIXED
ASSETS, NET
|
44,097
|
58,451
|
||||||
DEPOSITS
|
15,350
|
15,350
|
||||||
TOTAL
ASSETS
|
$
|
8,931,899
|
$
|
1,466,038
|
||||
LIABILITIES,
REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIENCY
|
||||||||
CURRENT
LIABILITIES:
|
||||||||
Accounts
payable and accrued liabilities
|
$
|
3,299,217
|
$
|
4,653,912
|
||||
Accrued
compensation
|
245,711
|
240,639
|
||||||
Accrued
dividends
|
2,902,963
|
1,689,322
|
||||||
Derivative
liability (see Note 2)
|
10,486,594
|
—
|
||||||
Deferred
revenue – current
|
33,333
|
33,333
|
||||||
Total
current liabilities
|
16,967,818
|
6,617,206
|
||||||
DEFERRED
REVENUE – NONCURRENT
|
400,000
|
433,333
|
||||||
COMMITMENTS
AND CONTINGENCIES
|
||||||||
REDEEMABLE
PREFERRED STOCK:
|
||||||||
Series
D convertible preferred stock, $0.00001 par value; no shares designated or
outstanding at December 31, 2009; 420 shares designated and 413.5 shares
issued and outstanding at December 31, 2008
|
—
|
13,904,100
|
||||||
Series
E convertible preferred stock, $0.00001 par value; 735 shares designated
and 548.26078125 shares issued and outstanding at December 31, 2009; no
shares designated or outstanding at December 31, 2008 (liquidation
preference $29,606,082 at December 31, 2009) (see Note 6)
|
18,459,619
|
—
|
||||||
Total
redeemable preferred stock
|
18,459,619
|
13,904,100
|
||||||
STOCKHOLDERS’
DEFICIENCY:
|
||||||||
Preferred
Stock, $0.00001 par value; 7,000 shares authorized: Series C 8% cumulative
convertible preferred stock; 272 shares designated; 204 and 272 shares
issued and outstanding at December 31, 2009 and 2008, respectively
(liquidation preference $3,157,920 at December 31, 2009)
|
—
|
—
|
||||||
Common
stock, $0.00001 par value; 225,000,000 shares
authorized; 69,658,002 and 43,975,656 shares issued and
outstanding at December 31, 2009 and 2008,
respectively
|
697
|
440
|
||||||
Additional
paid-in capital
|
49,175,853
|
40,204,112
|
||||||
Accumulated
deficit
|
(76,072,088
|
)
|
(59,693,153
|
)
|
||||
Total
stockholders’ deficiency
|
(26,895,538
|
)
|
(19,488,601
|
)
|
||||
TOTAL
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’
DEFICIENCY
|
$
|
8,931,899
|
$
|
1,466,038
|
Year Ended December 31,
|
||||||||
2009
|
2008
|
|||||||
REVENUES
|
$
|
96,314
|
$
|
125,968
|
||||
COSTS
AND EXPENSES:
|
||||||||
Research
and development
|
8,080,242
|
14,526,619
|
||||||
General
and administrative
|
2,182,253
|
2,190,366
|
||||||
Total
costs and expenses
|
10,262,495
|
16,716,985
|
||||||
LOSS
FROM OPERATIONS
|
(10,166,181
|
)
|
(16,591,017
|
)
|
||||
OTHER
INCOME (EXPENSE):
|
||||||||
Interest
income
|
1,013
|
130,611
|
||||||
Loss
on derivative warrants (see Note 2)
|
(12,114,371
|
)
|
—
|
|||||
Miscellaneous
|
6,233
|
9,000
|
||||||
Total
other income (expense)
|
(12,107,125
|
)
|
139,611
|
|||||
NET
LOSS
|
(22,273,306
|
)
|
(16,451,406
|
)
|
||||
PREFERRED
STOCK DIVIDENDS
|
(3,296,289
|
)
|
(2,092,102
|
)
|
||||
PREFERRED
STOCK DEEMED DIVIDENDS
|
(714,031
|
)
|
(4,417,315
|
)
|
||||
NET
LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS
|
$
|
(26,283,626
|
)
|
$
|
(22,960,823
|
)
|
||
BASIC
AND DILUTED NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS PER COMMON
SHARE
|
$
|
(0.53
|
)
|
$
|
(0.56
|
)
|
||
SHARES
USED IN COMPUTING BASIC AND DILUTED NET LOSS ATTRIBUTABLE TO COMMON
STOCKHOLDERS PER COMMON SHARE
|
49,910,010
|
41,100,883
|
REDEEMABLE
PREFERRED STOCK
Series B, D and E
Convertible
Preferred Stock
|
Common Stock
|
Series C Cumulative
Convertible
Preferred Stock
|
Additional
Paid-in
Capital
|
Accumulated
Deficit
|
Total
Stockholders’
Deficiency
|
|||||||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Par
Amount
|
Shares
|
Par
Amount
|
|||||||||||||||||||||||||||||||
BALANCE
AT JANUARY 1, 2008
|
300 | $ | 9,918,666 | 39,260,272 | $ | 392 | 272 | $ | — | $ | 37,370,959 | $ | (43,241,747 | ) | $ | (5,870,396 | ) | |||||||||||||||||||
Exercise
of stock options
|
— | — | 100,000 | 1 | — | — | 999 | — | 1,000 | |||||||||||||||||||||||||||
Compensation
expense associated with options issued to employees
|
— | — | — | — | — | — | 395,194 | — | 395,194 | |||||||||||||||||||||||||||
Compensation
expense associated with options issued to non-employees
|
— | — | — | — | — | — | 58,133 | — | 58,133 | |||||||||||||||||||||||||||
Issuance
of common stock in a private placement
|
— | — | 4,615,384 | 47 | — | — | 2,986,691 | — | 2,986,738 | |||||||||||||||||||||||||||
Issuance
of Series D redeemable convertible preferred stock and warrants, net of
issuance costs of $205,328
|
113.5 | 4,167,080 | — | — | — | — | 1,302,592 | — | 1,302,592 | |||||||||||||||||||||||||||
Adjustment
to record the carrying value of Series D redeemable convertible preferred
stock at market value on the date of sale
|
— | (181,646 | ) | — | — | — | — | 181,646 | — | 181,646 | ||||||||||||||||||||||||||
Fair
value of reduction in conversion and exercise price of Series B redeemable
convertible preferred stock and warrants
|
— | 3,876,912 | — | — | — | — | 722,049 | — | 722,049 | |||||||||||||||||||||||||||
Accretion
of deemed dividend associated with the reduction of conversion and
exercise prices on Series B redeemable convertible preferred stock and
warrants
|
— | (3,876,912 | ) | — | — | — | — | (722,049 | ) | — | (722,049 | ) | ||||||||||||||||||||||||
Dividends
paid on preferred stock
|
— | — | — | — | — | — | (402,780 | ) | — | (402,780 | ) | |||||||||||||||||||||||||
Dividends
accrued on preferred stock
|
— | — | — | — | — | — | (1,689,322 | ) | — | (1,689,322 | ) | |||||||||||||||||||||||||
Net
loss
|
— | — | — | — | — | — | — | (16,451,406 | ) | (16,451,406 | ) | |||||||||||||||||||||||||
BALANCE
AT DECEMBER 31, 2008
|
413.5 | 13,904,100 | 43,975,656 | 440 | 272 | — | 40,204,112 | (59,693,153 | ) | (19,488,601 | ) | |||||||||||||||||||||||||
Reclassification
of warrants to derivative liability (see Note 2)
|
— | — | — | — | — | — | (6,893,316 | ) | 5,894,371 | (998,945 | ) | |||||||||||||||||||||||||
Conversion
of Series C convertible preferred stock and accumulated dividends into
common stock
|
— | — | 1,538,837 | 15 | (68 | ) | — | 184,231 | — | 184,246 | ||||||||||||||||||||||||||
Conversion
of Series E convertible preferred stock and accumulated dividends into
common stock
|
(97.18209375 | ) | (3,213,056 | ) | 7,939,008 | 79 | — | — | 3,514,235 | — | 3,514,314 | |||||||||||||||||||||||||
Cashless
exercise of warrants
|
— | — | 483,829 | 5 | — | — | 1,000,957 | — | 1,000,962 | |||||||||||||||||||||||||||
Issuance
of common stock in exchange for warrants
|
— | — | 2,084,308 | 21 | — | — | 1,625,739 | — | 1,625,760 | |||||||||||||||||||||||||||
Issuance
of common stock and warrants in a private placement, net of issuance costs
of $61,116
|
— | — | 13,636,364 | 137 | — | — | 8,938,747 | — | 8,938,884 | |||||||||||||||||||||||||||
Compensation
expense associated with options issued to employees
|
— | — | — | — | — | — | 437,066 | — | 437,066 | |||||||||||||||||||||||||||
Compensation
expense associated with options issued to non-employees
|
— | — | — | — | — | — | 427,271 | — | 427,271 | |||||||||||||||||||||||||||
Issuance
of Series E redeemable convertible preferred stock and warrants, net of
issuance costs of $795,469
|
200 | 6,297,323 | — | — | — | — | 2,907,208 | — | 2,907,208 | |||||||||||||||||||||||||||
Issuance
of Series E redeemable convertible preferred stock in payment of
accumulated dividends
|
31.942875 | 1,597,144 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Adjustment
to record the carrying value of Series E redeemable convertible preferred
stock at fair value on the date of sale
|
— | (125,892 | ) | — | — | — | — | 125,892 | — | 125,892 | ||||||||||||||||||||||||||
Fair
value of the extension of expiration date of warrants
|
— | — | — | — | — | — | 839,923 | — | 839,923 | |||||||||||||||||||||||||||
Accretion
of deemed dividend associated with the extension of expiration date of
warrants
|
— | — | — | — | — | — | (839,923 | ) | — | (839,923 | ) | |||||||||||||||||||||||||
Dividends
accrued on preferred stock
|
— | — | — | — | — | — | (3,296,289 | ) | — | (3,296,289 | ) | |||||||||||||||||||||||||
Net
loss
|
— | — | — | — | — | — | — | (22,273,306 | ) | (22,273,306 | ) | |||||||||||||||||||||||||
BALANCE
AT DECEMBER 31, 2009
|
548.26078125 | $ | 18,459,619 | 69,658,002 | $ | 697 | 204 | $ | — | $ | 49,175,853 | $ | (76,072,088 | ) | $ | (26,895,538 | ) |
Year Ended December 31,
|
||||||||
2009
|
2008
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net
loss
|
$
|
(22,273,306
|
)
|
$
|
(16,451,406
|
)
|
||
Adjustments
to reconcile net loss to cash used in operating
activities:
|
||||||||
Depreciation
and amortization
|
32,354
|
16,889
|
||||||
Loss
on disposal of fixed assets
|
—
|
6,472
|
||||||
Stock-based
compensation
|
864,337
|
453,327
|
||||||
Loss
on derivative warrants
|
12,114,371
|
—
|
||||||
Changes
in:
|
||||||||
Prepaid
expenses and other current assets
|
26,862
|
3,496
|
||||||
Accounts
payable and accrued liabilities
|
(1,354,695
|
)
|
(1,718,566
|
)
|
||||
Accrued
compensation
|
5,072
|
(108,773
|
)
|
|||||
Deferred
revenue
|
(33,333
|
)
|
466,666
|
|||||
Cash
used in operating activities
|
(10,618,338
|
)
|
(17,331,895
|
)
|
||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Purchases
of fixed assets
|
(18,000
|
)
|
(49,003
|
)
|
||||
Change
in restricted cash
|
—
|
1,184,702
|
||||||
Cash
provided by (used in) investing activities
|
(18,000
|
)
|
1,135,699
|
|||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Proceeds
from issuance of common stock, net
|
8,938,884
|
2,986,738
|
||||||
Proceeds
from issuance of Series D convertible preferred stock and warrants,
net
|
—
|
5,469,672
|
||||||
Proceeds
from issuance of Series E convertible preferred stock and warrants,
net
|
9,204,531
|
—
|
||||||
Dividends
paid to preferred stockholders
|
—
|
(740,280
|
)
|
|||||
Proceeds
from exercise of stock options
|
—
|
1,000
|
||||||
Cash
provided by financing activities
|
18,143,415
|
7,717,130
|
||||||
INCREASE
(DECREASE) IN CASH AND EQUIVALENTS
|
7,507,077
|
(8,479,066
|
)
|
|||||
CASH
AND EQUIVALENTS AT BEGINNING OF YEAR
|
1,262,452
|
9,741,518
|
||||||
CASH
AND EQUIVALENTS AT END OF YEAR
|
$
|
8,769,529
|
$
|
1,262,452
|
||||
SUPPLEMENTAL
DISCLOSURES OF NON-CASH FINANCING ACTIVITIES
|
||||||||
Dividends
accumulated on shares of Series E preferred stock exchanged or converted
into shares of common stock
|
$
|
1,898,402
|
$
|
—
|
||||
Dividends
accumulated on shares of Series C preferred stock converted into shares of
common stock
|
$
|
184,246
|
$
|
—
|
||||
Fair
value of derivative warrants upon adoption of new accounting
principle
|
$
|
998,945
|
$
|
—
|
||||
Fair
value of common stock issued in exchange for tender of derivative
warrants
|
$
|
1,625,760
|
$
|
—
|
||||
Fair
value of derivative warrants upon cashless exercise
|
$
|
1,000,962
|
$
|
—
|
||||
Exchange
of Series B for Series D preferred stock
|
$
|
—
|
$
|
9,918,666
|
||||
Exchange
of Series D for Series E preferred stock
|
$
|
13,904,100
|
$
|
—
|
||||
Relative
fair value of warrants issued to stockholders
|
$
|
4,835,727
|
$
|
1,302,592
|
2009
|
2008
|
|||||||
Office
and computer equipment
|
$
|
73,261
|
$
|
73,261
|
||||
Computer
software
|
43,896
|
25,896
|
||||||
Leasehold
improvements
|
4,095
|
4,095
|
||||||
Total
fixed assets
|
121,252
|
103,252
|
||||||
Less
accumulated depreciation and amortization
|
(77,155
|
)
|
(44,801
|
)
|
||||
Fixed
assets, net
|
$
|
44,097
|
$
|
58,451
|
|
·
|
Level 1: Input prices quoted in
an active market for identical financial assets or
liabilities.
|
|
·
|
Level 2: Inputs other than prices
quoted in Level 1, such as prices quoted for similar financial assets and
liabilities in active markets, prices for identical assets and liabilities
in markets that are not active or other inputs that are observable or can
be corroborated by observable market
data.
|
|
·
|
Level 3: Input prices that are
significant to the fair value of the financial assets or liabilities which
are not observable or supported by an active
market.
|
December 31, 2009
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Fair Value
|
|||||||||||||
Liabilities:
|
||||||||||||||||
Warrants
|
$
|
-
|
$
|
10,487,000
|
$
|
-
|
$
|
10,487,000
|
Offering
|
Outstanding
(as adjusted)
|
Exercise
Price
(as adjusted)
|
Expiration Date
|
||||||
2005
Bridge Financing
|
400,000 | $ | 0.625 |
April
1, 2010
|
|||||
2005
Issuance of Common Stock
|
560,826 | $ | 0.65 |
August
9, 2010
|
|||||
Series
A Preferred Stock (1)
|
909,090 | $ | 0.65 |
September
30, 2010
|
|||||
2006
Issuance of Common Stock
|
5,548,977 | $ | 1.72 |
March
7, 2011
|
|||||
Series
B Preferred Stock (2):
|
|||||||||
Purchasers
|
7,500,000 | $ | 0.65 |
December
31, 2015
|
|||||
Placement
agents
|
900,000 | $ | 1.25 |
May
2, 2012
|
|||||
Series
C Exchange
|
1,333,333 | $ | 1.25 |
May
2, 2012
|
|||||
Series
D Preferred Stock (3)
|
4,365,381 | $ | 0.65 |
December
31, 2015
|
|||||
Series
E Preferred Stock
|
9,230,769 | $ | 0.65 |
December
31, 2015
|
|||||
August
2009 Private Placement
|
4,772,730 | $ | 0.66 |
December
31, 2015
|
|||||
Total
|
35,521,106 |
|
(1)
|
Concurrent with the closing of
the sale of Series B Preferred Stock in 2007, all shares of Series A
Preferred Stock were exchanged for shares of Series C Preferred
Stock.
|
|
(2)
|
Concurrent
with the closing of the sale of Series D Preferred Stock in 2008, all
shares of Series B Preferred Stock were exchanged for shares of Series D
Preferred Stock.
|
|
(3)
|
Concurrent
with the closing of the sale of Series E Preferred Stock in 2009, all
shares of Series D Preferred Stock and accumulated unpaid dividends
thereon were exchanged for shares of Series E Preferred
Stock.
|
Original private placement
|
Shares of
Common Stock
Issued
|
Warrants
Exercised
|
Exercise
Price
|
Expiration Date
|
|||||||||
2005
Bridge Financing
|
218,648 | 320,000 | $ | 0.625 |
April
1, 2010
|
||||||||
2005
Common Stock
|
200,504 | 485,317 | $ | 0.65 |
August
9, 2010
|
||||||||
Series
A Preferred Stock
|
38,223 | 60,606 | $ | 0.65 |
October
3, 2010
|
||||||||
2006
Issuance of Common Stock
|
26,454 | 201,462 | $ | 1.72 |
March
7, 2011
|
||||||||
Total
|
483,829 | 1,067,385 |
December 31,
|
||||||||
2009
|
2008
|
|||||||
2000
Stock Option Plan
|
56,047
|
56,047
|
||||||
2006
Stock Incentive Plan
|
6,710,000
|
4,770,000
|
||||||
Options
issued outside of formalized plans
|
2,453,778
|
2,453,778
|
||||||
Warrants
|
35,521,106
|
28,102,033
|
||||||
Preferred
stock
|
50,406,149
|
36,829,192
|
||||||
Total
shares reserved for future issuance
|
95,147,080
|
72,211,050
|
Year Ended
December 31,
|
||||||||
2009
|
2008
|
|||||||
Employee
and director stock option grants:
|
||||||||
Research
and development
|
$
|
148,030
|
$
|
159,519
|
||||
General
and administrative
|
289,036
|
235,675
|
||||||
437,066
|
395,194
|
|||||||
Non-employee
consultants stock option grants and restricted stock
awards:
|
||||||||
Research
and development
|
328,614
|
24,131
|
||||||
General
and administrative
|
98,657
|
34,002
|
||||||
427,271
|
58,133
|
|||||||
Total
stock-based compensation
|
$
|
864,337
|
$
|
453,327
|
Year Ended
December 31,
|
||||||||
2009
|
2008
|
|||||||
Volatility
|
90
|
%
|
80
|
%
|
||||
Weighted-average
volatility
|
90
|
%
|
80
|
%
|
||||
Risk-free
interest rate
|
2.12
|
%
|
1.50%-3.28
|
%
|
||||
Expected
life (years)
|
5
|
5
|
||||||
Dividend
|
0
|
%
|
0
|
%
|
||||
Weighted-average
exercise price
|
$
|
0.75
|
$
|
0.46
|
||||
Weighted-average
grant-date fair value
|
$
|
0.53
|
$
|
0.30
|
Options
Outstanding
|
Weighted
Average
Exercise Price
|
Weighted
Average
Remaining
Contracted
Term in
Years
|
Aggregate
Intrinsic
Value
|
|||||||||||||
Outstanding
at January 1, 2008
|
4,847,651
|
$
|
0.67
|
8.1
|
$
|
1,308,961
|
||||||||||
Options
granted
|
2,560,000
|
$
|
0.46
|
|||||||||||||
Options
exercised
|
(100,000
|
)
|
$
|
0.01
|
||||||||||||
Options
canceled
|
(27,826
|
)
|
$
|
2.23
|
||||||||||||
Outstanding
at December 31, 2008
|
7,279,825
|
$
|
0.60
|
7.9
|
$
|
989,718
|
||||||||||
Options
granted
|
1,940,000
|
$
|
0.75
|
|||||||||||||
Options
exercised
|
—
|
|||||||||||||||
Outstanding
at December 31, 2009
|
9,219,825
|
$
|
0.63
|
7.5
|
$
|
17,650,255
|
||||||||||
Exercisable
at December 31, 2009
|
5,753,149
|
$
|
0.64
|
6.3
|
$
|
11,031,302
|
2009
|
2008
|
|||||||
Net
operating loss carryforwards
|
$
|
9,543,000
|
$
|
7,128,000
|
||||
Research
and development
expenses
|
14,906,000
|
13,681,000
|
||||||
Tax
credits
|
1,563,000
|
1,311,000
|
||||||
Capital
loss carryforward
|
340,000
|
340,000
|
||||||
Stock-based
compensation
|
650,000
|
449,000
|
||||||
Gross
deferred tax asset
|
27,002,000
|
22,909,000
|
||||||
Valuation
allowance
|
(27,002,000
|
)
|
(22,909,000
|
)
|
||||
Net
deferred tax asset
|
$
|
—
|
$
|
—
|
Year Ended
December 31,
|
||||||||
2009
|
2008
|
|||||||
Stock
options
|
9,219,825
|
7,279,825
|
||||||
Warrants
|
35,521,106
|
28,102,033
|
||||||
Conversion
of preferred stock
|
50,406,149
|
(1)
|
36,829,192
|
Original private placement
|
Shares of
Common Stock
Issued
|
Warrants
Exercised
|
Exercise
Price
|
Expiration Date
|
|||||||
2005
Bridge Financing
|
314,982
|
400,000
|
$
|
0.625
|
April
1, 2010
|
||||||
2005
Common Stock
|
226,544
|
317,350
|
$
|
0.65
|
August
9, 2010
|
||||||
2006
Issuance of Common Stock
|
366,492
|
991,516
|
$
|
1.72
|
March
7, 2011
|
||||||
Series
B Preferred Stock – Purchasers
|
4,545,447
|
7,500,000
|
$
|
0.65
|
December
31, 2015
|
||||||
Series
B Preferred Stock – Placement agents
|
35,106
|
75,000
|
$
|
1.25
|
May
2, 2012
|
||||||
Series
D Preferred Stock
|
2,645,685
|
4,365,381
|
$
|
0.65
|
December
31, 2015
|
||||||
Series
C Exchange
|
47,902
|
83,333
|
$
|
1.25
|
May
2, 2012
|
||||||
Total
|
8,182,158
|
13,732,580
|
ITEM
7.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
ITEM
8A.
|
CONTROLS
AND PROCEDURES
|
ITEM
8B.
|
OTHER
INFORMATION
|
Shares of Common Stock
|
Shares of Series E
Preferred Stock Voting on
an As-Converted Basis
|
|||||||||||||||
Voted For
|
Votes
Withheld
|
Voted For
|
Votes
Withheld
|
|||||||||||||
Stephen
A. Hill
|
40,580,322 | 843,732 | 8,609,712 | 0 | ||||||||||||
Harry
S. Palmin
|
40,571,904 | 852,150 | 8,609,712 | 0 | ||||||||||||
Michael
J. Doyle
|
40,580,322 | 843,732 | 8,609,712 | 0 | ||||||||||||
Sim
Fass
|
40,580,322 | 843,732 | 8,609,712 | 0 | ||||||||||||
James
S. Manuso
|
40,580,322 | 843,732 | 8,609,712 | 0 | ||||||||||||
David
B. McWilliams
|
40,580,322 | 843,732 | 8,609,712 | 0 | ||||||||||||
Howard
M. Schneider
|
40,580,322 | 843,732 | 8,609,712 | 0 |
ITEM
9.
|
DIRECTORS,
EXECUTIVE OFFICERS, AND CORPORATE
GOVERNANCE
|
Name
|
Age
|
Position
|
||
Stephen
A. Hill, B.M. B.Ch., M.A., F.R.C.S.
|
51
|
Chairman
of the Board
|
||
Harry
S. Palmin
|
40
|
President,
Chief Executive Officer and Director
|
||
Elias
B. Nyberg, DVM, BVSc, MACVS, MRCVS, MBA
|
55
|
Vice
President of Regulatory, Quality and Compliance
|
||
Christopher
J. Pazoles, Ph.D.
|
60
|
Vice
President of Research and Development
|
||
Joanne
M. Protano
|
41
|
Vice
President, Chief Financial Officer and Treasurer
|
||
Kristin
C. Schuhwerk
|
39
|
Vice
President of Clinical Development and Operations
|
||
Michael
J. Doyle (1) (2) (3)
|
51
|
Director
|
||
Sim
Fass, Ph.D. (1) (2) (3)
|
68
|
Director
|
||
James
S. Manuso, Ph.D.
|
61
|
Director
|
||
David
B. McWilliams (2) (3)
|
66
|
Director
|
||
Howard
M. Schneider (1) (3)
|
66
|
Director
|
Name and Principal Position
|
Year
|
Salary
($)
|
Bonus
($) (3)
|
Option
Awards ($) (4)
|
All other
compensation
($)
|
Total ($)
|
||||||||||||||||
Harry
S. Palmin (1)
|
2009
|
$
|
270,000
|
$
|
40,500
|
$
|
131,650
|
$
|
0
|
$
|
442,150
|
|||||||||||
President,
Chief Executive Officer
|
2008
|
$
|
270,000
|
$
|
40,500
|
$
|
110,560
|
$
|
0
|
$
|
421,060
|
|||||||||||
Christopher
J. Pazoles (1)
|
2009
|
$
|
235,000
|
$
|
35,250
|
$
|
105,320
|
$
|
0
|
$
|
375,570
|
|||||||||||
Vice
President of Research and Development
|
2008
|
$
|
235,000
|
$
|
35,250
|
$
|
55,280
|
$
|
0
|
$
|
325,530
|
|||||||||||
Elias
B. Nyberg (1) (2)
|
2009
|
$
|
225,000
|
$
|
33,750
|
$
|
78,990
|
$
|
0
|
$
|
337,740
|
|||||||||||
Vice
President of Regulatory, Quality and Compliance
|
2008
|
$
|
168,750
|
$
|
25,313
|
$
|
93,160
|
$
|
0
|
$
|
287,223
|
(1)
|
There has been no increase to
executive base salaries for
2010.
|
(2)
|
Dr.
Nyberg’s employment with the Company commenced on April 1,
2008.
|
(3)
|
Bonus amounts for 2009 were paid
in 2010. Bonus amounts for 2008 were paid in
2009.
|
(4)
|
The fair value of each stock
award was estimated on the grant date using the Black-Scholes
option-pricing model. See Note 7 to the financial statements for a
description of the assumptions used in estimating the fair value of stock
options.
|
Individual Grants
|
||||||||||||||
Name
|
Year
of Grant
|
Number of
securities
underlying
unexercised
options
(#)
exercisable
|
Number of
securities
underlying
unexercised
options
(#)
unexercisable
|
Exercise or
base price
($/share)
|
Expiration
date
|
|||||||||
Harry
S. Palmin
|
2009
|
(1) |
—
|
250,000
|
$
|
0.75
|
12/8/2019
|
|||||||
2008
|
(2)
|
133,333
|
266,667
|
0.43
|
12/15/2018
|
|||||||||
2007
|
(2)
|
133,333
|
66,667
|
0.45
|
12/17/2017
|
|||||||||
2006
|
(2) |
150,000
|
—
|
0.91
|
12/11/2016
|
|||||||||
2005
|
(3)
|
250,000
|
—
|
0.01
|
1/31/2015
|
|||||||||
2005
|
(3) |
150,000
|
—
|
0.01
|
3/31/2015
|
|||||||||
2004
|
(4) |
330,000
|
—
|
0.01
|
4/1/2014
|
|||||||||
2003
|
(5) |
7,130
|
—
|
0.70
|
8/1/2013
|
|||||||||
|
||||||||||||||
Christopher
J. Pazoles
|
2009
|
(1) |
—
|
200,000
|
$
|
0.75
|
12/8/2019
|
|||||||
2008
|
(2)
|
66,666
|
133,334
|
0.43
|
12/15/2018
|
|||||||||
2007
|
(2) |
83,333
|
41,667
|
0.45
|
12/17/2017
|
|||||||||
2006
|
(2) |
100,000
|
—
|
0.91
|
12/11/2016
|
|||||||||
2005
|
(6) |
200,000
|
—
|
0.01
|
4/8/2015
|
|||||||||
2004
|
(7)
|
16,667
|
—
|
0.01
|
4/1/2014
|
|||||||||
|
||||||||||||||
Elias
B. Nyberg
|
2009
|
(1) |
—
|
150,000
|
$
|
0.75
|
12/8/2019
|
|||||||
2008
|
(2)
|
33,333
|
66,667
|
0.43
|
12/15/2018
|
|||||||||
2008
|
(8) |
100,000
|
—
|
0.58
|
4/1/2018
|
(1)
|
These
shares vest quarterly in increments of one-twelfth over three years from
the date of grant. The exercise price equals the closing price
on the date of grant.
|
(2)
|
These shares vest annually in
increments of one-third over three years from the date of
grant. The exercise price equals the closing price on the date
of grant.
|
(3)
|
These shares initially vested
over a two-year period. Pursuant to their terms, the shares
fully vested upon the completion of a non-bridge loan financing, which
occurred in the second quarter of 2005. The exercise price
equals the fair market value of our common stock on the date of grant as
determined by our board of
directors.
|
(4)
|
These shares initially vested
one-third upon grant and one-third annually over the following two years.
Pursuant to their terms, one additional year of vesting occurred upon the
completion of a non-bridge loan financing, which occurred in the second
quarter of 2005. The exercise price equals the fair market
value of our common stock on the date of grant as determined by our board
of directors.
|
(5)
|
These shares vest annually in
increments of one-third over three years from the date of grant. The
exercise price equals the fair market value of our common stock on the
date of grant as determined by our board of
directors.
|
(6)
|
These shares vested in increments
of one-fourth every six months over two years from the date of grant. The
exercise price equals the fair market value of our common stock on the
date of grant as determined by our board of
directors.
|
(7)
|
These shares represent the fully
vested portion of an option grant made to Mr. Pazoles in consideration of
consulting services delivered during 2004. Pursuant to their
terms, the shares vested at the completion of the consulting engagement
and expire ten years from the date of
grant.
|
(8)
|
These
shares were fully vested upon grant. The exercise price equals the closing
price on the date of grant.
|
Name and Principal Position
|
Year
|
Director
Fees
($) (2)
|
Option
Awards
($) (3)
|
All other
compensation
($)
|
Total ($)
|
|||||||||||||
Stephen
A. Hill, Chairman (1)
|
2009
|
$
|
39,500
|
$
|
42,128
|
$
|
—
|
$
|
81,628
|
|||||||||
Michael
J. Doyle, Director (1)
|
2009
|
32,500
|
42,128
|
—
|
74,628
|
|||||||||||||
Sim
Fass, Director (1)
|
2009
|
33,250
|
42,128
|
—
|
75,378
|
|||||||||||||
James
S. Manuso, Director (1)
|
2009
|
25,250
|
42,128
|
—
|
67,378
|
|||||||||||||
David
B. McWilliams, Director (1)
|
2009
|
26,000
|
42,128
|
—
|
68,128
|
|||||||||||||
Howard
M. Schneider, Director (1)
|
2009
|
38,250
|
42,128
|
—
|
80,378
|
(1)
|
As of December 31, 2009,
outstanding options to purchase common stock held by directors were as
follows: Dr. Hill 350,000; Mr. Doyle 350,000; Dr. Fass 350,000;
Dr. Manuso 300,000; Mr. McWilliams 402,778; Mr. Schneider
250,000.
|
(2)
|
Director fees include all fees
earned for director services including quarterly fees, meeting fees and
committee chairman fees.
|
(3)
|
The fair value of each stock
award was estimated on the grant date using the Black-Scholes
option-pricing model. See Note 7 to the financial statements
for a description of the assumptions used in estimating the fair value of
stock options.
|
ITEM
11.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
|
|
·
|
Each person known by us to be the
beneficial owner of more than five percent of our common
stock;
|
|
·
|
Each of our
directors;
|
|
·
|
Each executive officer named in
the summary compensation table;
and
|
|
·
|
All of our current directors and
executive officers as a
group.
|
Shares Beneficially Owned (4)
|
||||||||||||||||
Name and Address of Beneficial
Owner
|
Outstanding
|
Right to Acquire
|
Total
|
Percentage
|
||||||||||||
Purdue
Pharma, L.P. (1)
One
Stamford Forum
201
Tresser Blvd.
Stamford,
CT 06901-3431
|
13,636,364
|
0
|
13,636,364
|
15.1
|
||||||||||||
Knoll
Capital Management (2)
1114
Avenue of the Americas, 45th
Floor
New
York, NY 10036
|
4,462,234
|
9,247,776
|
13,710,010
|
13.8
|
||||||||||||
Harry
S. Palmin (3)
|
641,118
|
1,174,629
|
1,815,747
|
2.0
|
||||||||||||
Christopher
J. Pazoles
|
0
|
483,332
|
483,332
|
*
|
||||||||||||
Elias
B. Nyberg
|
0
|
145,832
|
145,832
|
*
|
||||||||||||
Stephen
A. Hill
|
0
|
250,000
|
250,000
|
*
|
||||||||||||
Michael
J. Doyle
|
0
|
250,000
|
250,000
|
*
|
||||||||||||
Sim
Fass
|
0
|
250,000
|
250,000
|
*
|
||||||||||||
James
S. Manuso
|
0
|
200,000
|
250,000
|
*
|
||||||||||||
David
B. McWilliams
|
0
|
302,778
|
302,778
|
*
|
||||||||||||
Howard
M. Schneider
|
100,000
|
150,000
|
250,000
|
*
|
||||||||||||
All
directors and officers as a group (11 persons)
|
741,118
|
3,798,234
|
4,539,352
|
4.8
|
*
|
Less than one
percent.
|
|
(1) Following
the financing transactions completed on August 25, 2009 and November 10,
2009 Purdue transferred its shares of common stock and warrants to
purchase common stock to Beacon Company (c/o Whitely Chambers, Don Street,
St. Helier, Jersey JE49WG, Channel Islands) and Rosebay Medical Company
L.P. (c/o Northbay Associates, 14000 Quail Springs Parkway #2200, Oklahoma
City, OK 73134), which are independent associated companies of
Purdue. The “Right to Acquire” column excludes shares issuable
on conversion of Series E preferred stock and upon exercise of warrants
issued in February, August and November 2009 as described in the table
below.
|
|
(2) Includes
holdings of Knoll Special Opportunities II Master Fund Limited and Europa
International, Inc. (the “Knoll-affiliated Funds”). Shares in the “Right
to Acquire” column include shares of common stock issuable upon conversion
of Series E preferred stock, excluding accumulated unpaid
dividends. On February 26, 2010, the Knoll-affiliated Funds
provided to the Company notice of waiver of the conversion limitations on
the Series E preferred stock held by them. Such limitations are described
in footnote 4 to this table.
|
|
(3) Shares
owned by H. Palmin include 94,000 shares owned by his wife, Deanna
Palmin.
|
|
(4) The
terms of our Series E preferred stock and common stock purchase warrants
issued to the holders of Series E preferred stock provide that the number
of shares of common stock to be obtained by each of the holders of Series
E preferred stock and common stock purchase warrants, upon conversion of
the Series E preferred stock or exercise of the common stock purchase
warrants, cannot exceed the number of shares that, when combined with all
other shares of our common stock and securities owned by each of them,
would result in any one of them owning more than 4.99% or 9.99%, as
applicable in the certificate of designations and warrant agreement, of
our outstanding common stock, provided, however that this limitation may
be revoked by the stockholder upon 61 days’ prior notice to
us. For this reason, holders of our Series E preferred stock
who might otherwise have the right to acquire 5% or more of our common
stock have been omitted from this table to the extent that they have not
provided such a waiver. Such limitations do not apply in the
event of automatic conversion of Series E preferred
stock. Similar blocking provisions apply to outstanding shares
of our Series C preferred stock and common stock purchase warrants issued
to the holders of Series C preferred stock and therefore holders of our
Series C preferred stock who might otherwise have the right to acquire 5%
or more of our common stock have also been omitted from this
table.
|
Name and Address of Beneficial
Owner
|
Outstanding
Shares of
Common Stock
|
Shares of common
stock issuable upon
automatic
conversion of Series
E Preferred Stock
|
Total pro
Forma
Ownership
(1)
|
Pro forma
ownership
Percentage
(2)
|
||||||||||||
Xmark
Funds (3)
|
||||||||||||||||
90
Grove Street, Suite 201
|
||||||||||||||||
Ridgefield,
CT 06877
|
1,902,096 | 3,652,152 | 5,554,248 | 4.6 | % | |||||||||||
OrbiMed
affiliated funds (4)
|
||||||||||||||||
767
Third Avenue, 30th
Floor
|
||||||||||||||||
New
York, NY 10017
|
2,284,960 | 3,120,378 | 5,405,338 | 4.4 | % | |||||||||||
Knoll
affiliated funds (5)
|
||||||||||||||||
666
Fifth Avenue, Suite 3702
|
||||||||||||||||
New
York, NY 10103
|
4,462,234 | 9,247,776 | 13,710,010 | 11.3 | % | |||||||||||
Purdue
Pharma, L.P. (6)
|
||||||||||||||||
One
Stamford Forum
|
||||||||||||||||
201
Tresser Blvd.
|
||||||||||||||||
Stamford,
CT 06901-3431
|
13,636,364 | 15,384,614 | 29,020,978 | 23.8 | % |
(1)
|
Pro forma ownership does not
include accumulated undeclared dividends totaling approximately $1,633,000
at December 31, 2009 that had not yet been converted as of March 22,
2010. These accumulated undeclared dividends may be converted
into approximately 2,512,000 shares of common stock in connection with the
conversion of the associated remaining shares of Series E preferred
stock.
|
(2)
|
Based on 121,790,859 shares of
common stock outstanding, which reflects the number of shares of common
stock outstanding as of March 22, 2010 plus the total number of shares
issuable upon conversion of all of the outstanding shares of Series E
preferred stock (excluding shares issuable upon conversion of accumulated
undeclared dividends) at March 22,
2010.
|
(3)
|
Includes Xmark Opportunity
Partners, LLC, Xmark Opportunity Fund, Ltd., Xmark Opportunity Fund,
L.P., and Xmark JV Investment Partners,
LLC.
|
(4)
|
Includes OrbiMed Advisors LLC,
Caduceus Capital Master Fund Limited, Caduceus Capital II, LP, UBS
Eucalyptus Fund, L.L.C., PW Eucalyptus Fund, Ltd., and Summer Street Life
Sciences Investors LLC.
|
(5)
|
Includes Knoll Capital, Knoll
Special Opportunities Fund II Master Fund, Ltd., and Europa International,
Inc. As described in footnote 2 to the preceding table, on
February 26, 2010, the Knoll-affiliated Funds provided to the Company
notice of waiver of the conversion limitations on the Series E preferred
stock held by them.
|
(6)
|
Following the financing
transactions completed on February 11, 2009, August 25, 2009 and November
10, 2009, Purdue transferred its shares of Series E preferred stock,
shares of common stock and warrants to purchase common stock of Novelos to
Beacon Company and Rosebay Medical Company L.P., which are independent
associated companies of Purdue. Pro forma ownership of Purdue
excludes 14,003,499 shares of common stock issuable upon exercise of
warrants issued to Purdue in February, August and November 2009 as a
result of the blocker provisions described in footnote 4 to the preceding
table.
|
Plan category
|
Number of shares to
be issued upon
exercise of outstanding
options, warrants and
rights (#)
|
Weighted-average
exercise price of
outstanding options,
warrants and rights
($)
|
Number of shares
remaining available for
future issuance under
equity compensation plans
(excluding shares reflected
in column (a)) (#)
|
|||||||||
(a)
|
(b)
|
(c)
|
||||||||||
Equity
compensation plans approved by stockholders
|
6,766,047
|
$
|
0.65
|
3,290,000
|
||||||||
Equity
compensation plans not approved by stockholders
|
2,453,778
|
$
|
0.57
|
0
|
||||||||
Total
|
9,219,825
|
$
|
0.63
|
3,290,000
|
ITEM
12.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
ITEM
13.
|
PRINCIPAL
ACCOUNTING FEES AND SERVICES
|
2009
|
2008
|
|||||||
Audit
|
$ | 81,500 | $ | 81,500 | ||||
Audit
Related
|
5,005 | — | ||||||
Tax
|
— | — | ||||||
All
Other
|
— | — | ||||||
Total
|
$ | 86,505 | $ | 81,500 |
Incorporated
by Reference
|
||||||||||
Exhibit
No.
|
Description
|
Filed with
this
Form
10-K
|
Form
|
Filing Date
|
Exhibit
No.
|
|||||
2.1
|
Agreement
and plan of merger among Common Horizons, Inc., Nove Acquisition, Inc. and
Novelos Therapeutics, Inc. dated May 26, 2005
|
8-K
|
June
2, 2005
|
99.2
|
||||||
2.2
|
Agreement
and plan of merger between Common Horizons and Novelos Therapeutics, Inc.
dated June 7, 2005
|
10-QSB
|
August
15, 2005
|
2.2
|
||||||
3.1
|
Certificate
of Incorporation
|
8-K
|
June
17, 2005
|
1
|
||||||
3.2
|
Certificate
of Designations of Series E convertible preferred
stock
|
8-K
|
February
18, 2009
|
4.1
|
||||||
3.3
|
Certificate
of Designations of Series C cumulative convertible preferred
stock
|
10-QSB
|
May
8, 2007
|
3.2
|
||||||
3.4
|
Certificate
of Amendment of the Amended and Restated Certificate of
Incorporation
|
8-K
|
November
4, 2009
|
3.1
|
||||||
3.5
|
Amended
and Restated By-laws
|
8-K
|
August
26, 2009
|
3.1
|
||||||
10.1
|
Employment
agreement with Christopher J. Pazoles dated July 15, 2005
|
10-QSB
|
August
15, 2005
|
10.4
|
||||||
10.2
|
Employment
Agreement with Harry S. Palmin dated January 31, 2006
|
8-K
|
February
6, 2006
|
99.1
|
||||||
10.3
|
2000
Stock Option and Incentive Plan
|
SB-2
|
November
16, 2005
|
10.2
|
||||||
10.4
|
Form
of 2004 non-plan non-qualified stock option
|
SB-2
|
November
16, 2005
|
10.3
|
||||||
10.5
|
Form
of non-plan non-qualified stock option used from
February to May 2005
|
SB-2
|
November
16, 2005
|
10.4
|
Incorporated by Reference
|
||||||||||
Exhibit
No.
|
Description
|
Filed with
this
Form 10-K
|
Form
|
Filing Date
|
Exhibit
No.
|
|||||
10.6
|
Form
of non-plan non-qualified stock option used after May 2005
|
SB-2
|
November
16, 2005
|
10.5
|
||||||
|
||||||||||
10.7
|
Form
of common stock purchase warrant issued in March 2005
|
SB-2
|
November
16, 2005
|
10.6
|
||||||
10.8
|
Form
of securities purchase agreement dated May 2005
|
8-K
|
June
2, 2005
|
99.1
|
||||||
10.9
|
Form
of subscription agreement dated September 30, 2005
|
8-K
|
October
3, 2005
|
99.1
|
||||||
10.10
|
Form
of Class A common stock purchase warrant dated September 30,
2005
|
8-K
|
October
3, 2005
|
99.3
|
||||||
10.12
|
Consideration
and new technology agreement dated April 1, 2005 with ZAO
BAM
|
10-QSB
|
August
15, 2005
|
10.2
|
||||||
10.13
|
Letter
agreement dated March 31, 2005 with The Oxford Group, Ltd.
|
10-QSB
|
August
15, 2005
|
10.3
|
||||||
10.14
|
Form
of securities purchase agreement dated March 2, 2006
|
8-K
|
March
3, 2006
|
99.2
|
||||||
10.15
|
Form
of common stock purchase warrant dated March 2006
|
8-K
|
March
3, 2006
|
99.3
|
||||||
10.16
|
2006
Stock Incentive Plan, as amended
|
S-1/A
|
December
7, 2009
|
10.16
|
10.17
|
Form
of Incentive Stock Option under Novelos Therapeutics, Inc.’s 2006 Stock
Incentive Plan
|
8-K
|
December
15, 2006
|
10.1
|
||||||
10.18
|
Form
of Non-Statutory Stock Option under Novelos Therapeutics, Inc.’s 2006
Stock Incentive Plan
|
8-K
|
December
15, 2006
|
10.2
|
||||||
10.19
|
Form
of Non-Statutory Director Stock Option under Novelos Therapeutics, Inc.’s
2006 Stock Incentive Plan
|
8-K
|
December
15, 2006
|
10.3
|
||||||
10.20
|
Securities
Purchase Agreement dated April 12, 2007
|
10-QSB
|
May
8, 2007
|
10.1
|
||||||
10.21
|
Letter
Amendment dated May 2, 2007 to the Securities Purchase
Agreement
|
10-QSB
|
May
8, 2007
|
10.2
|
||||||
10.22
|
Registration
Rights Agreement dated May 2, 2007
|
10-QSB
|
May
8, 2007
|
10.3
|
||||||
10.23
|
Agreement
to Exchange and Consent dated May 1, 2007
|
10-QSB
|
May
8, 2007
|
10.5
|
||||||
10.25
|
Form
of Common Stock Purchase Warrant dated May 2, 2007 issued pursuant to the
Securities Purchase Agreement dated April 12, 2007
|
10-QSB
|
May
8, 2007
|
4.1
|
10.26
|
Form
of Common Stock Purchase Warrant dated May 2, 2007 issued pursuant to the
Agreement to Exchange and Consent dated May 2, 2007
|
10-QSB
|
May
8, 2007
|
4.2
|
||||||
10.27
|
Securities
Purchase Agreement dated March 26, 2008
|
8-K
|
April
14, 2008
|
10.1
|
||||||
10.28
|
Amendment
to Securities Purchase Agreement dated April 9, 2008
|
8-K
|
April
14, 2008
|
10.2
|
||||||
10.29
|
Registration
Rights Agreement dated April 11, 2008
|
8-K
|
April
14, 2008
|
10.3
|
||||||
10.30
|
Form
of Common Stock Purchase Warrant dated April 11, 2008 issued pursuant to
the Securities Purchase Agreement dated March 26, 2008
|
8-K
|
April
14, 2008
|
4.3
|
||||||
10.31
|
Warrant
Amendment Agreement dated April 11, 2008
|
8-K
|
April
14, 2008
|
10.5
|
||||||
10.32
|
Amendment
to Registration Rights Agreement dated April 11, 2008
|
8-K
|
April
14, 2008
|
10.4
|
||||||
10.33
|
Securities
Purchase Agreement dated August 14, 2008
|
8-K
|
August
18, 2008
|
10.1
|
||||||
10.34
|
Securities
Purchase Agreement dated February 11, 2009
|
8-K
|
February
18, 2009
|
10.1
|
||||||
10.35
|
Registration
Rights Agreement dated February 11, 2009
|
8-K
|
February
18, 2009
|
10.2
|
||||||
10.36
|
Series
D Preferred Stock Consent and Agreement to Exchange dated February 10,
2009
|
8-K
|
February
18, 2009
|
10.3
|
||||||
10.37
|
Warrant
Amendment Agreements dated February 11, 2009
|
8-K
|
February
18, 2009
|
10.4
|
||||||
10.38
|
Amendment
No. 2 to Registration Rights Agreement dated February 11,
2009
|
8-K
|
February
18, 2009
|
10.5
|
||||||
10.39*
|
Collaboration
Agreement dated February 11, 2009
|
10-K
|
March
30, 2009
|
10.39
|
||||||
10.40
|
Form
of Warrant Exchange Agreement dated August 21, 2009
|
8-K
|
August
26, 2009
|
10.5
|
||||||
10.41
|
Securities
Purchase Agreement dated August 25, 2009
|
S-1
|
September
15, 2009
|
10.41
|
||||||
10.42
|
Registration
Rights Agreement dated August 25, 2009
|
S-1
|
September
15, 2009
|
10.42
|
||||||
10.43
|
Common
Stock Purchase Warrant dated August 25,2009
|
S-1
|
September
15, 2009
|
10.43
|
10.44
|
Letter
Agreement with LP Clover Limited dated August 25, 2009
|
S-1
|
September
15, 2009
|
10.44
|
||||||
10.45
|
Letter
Agreement with Mundipharma International Corporation Limited dated August
25, 2009
|
S-1
|
September
15, 2009
|
10.45
|
||||||
10.46
|
Summary
of Phase 3 Clinical Trial Bonus Plan adopted on December 8,
2009
|
S-1/A
|
January
26, 2010
|
10.46
|
||||||
10.47
|
Consent
and Amendment Agreement dated January 21, 2010
|
S-1/A
|
January
26, 2010
|
10.47
|
||||||
31.1
|
Certification
of chief executive officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
X
|
||||||||
31.2
|
Certification
of chief financial officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
X
|
||||||||
32.1
|
Certification
of chief executive officer and chief financial officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
|
X
|
NOVELOS
THERAPEUTICS, INC.
|
||
By:
|
/s/ Harry S. Palmin
|
|
Harry
S. Palmin
|
||
Title: President,
Chief Executive Officer
|
||
Date:
|
March 30,
2010
|
By:
|
/s/ Harry S. Palmin
|
Harry
S. Palmin
|
|
Title: Chief
Executive Officer and Director (Principal Executive
Officer)
|
|
Date:
|
March 30, 2010
|
By:
|
/s/ Joanne M. Protano
|
Joanne
M. Protano
|
|
Title: Chief
Financial Officer (Principal Accounting Officer)
|
|
Date:
|
March 30, 2010
|
By:
|
/s/ Stephen A. Hill
|
Stephen
A. Hill
|
|
Title: Chairman
of the Board of Directors
|
|
Date:
|
March 30, 2010
|
By:
|
/s/ Michael J. Doyle
|
Michael
J. Doyle
|
|
Title: Director
|
|
Date:
|
March 30, 2010
|
By:
|
/s/ Sim Fass
|
Sim
Fass
|
|
Title: Director
|
|
Date:
|
March 30,
2010
|
By:
|
/s/ James S. Manuso
|
James
S. Manuso
|
|
Title: Director
|
|
Date:
|
March 30, 2010
|
By:
|
|
David
B. McWilliams
|
|
Title: Director
|
|
Date:
|
|
By:
|
/s/ Howard M. Schneider
|
Howard
M. Schneider
|
|
Title: Director
|
|
Date:
|
March 30,
2010
|