Page
|
||
Prospectus
Summary
|
3
|
|
Risk
Factors
|
5
|
|
Use
of Proceeds
|
22
|
|
Forward-Looking
Statements
|
22
|
|
Selling
Security Holders
|
23
|
|
Plan
of Distribution
|
26
|
|
Description
of Securities to be Registered
|
28
|
|
Interests
of Named Experts and Counsel
|
28 | |
Description
of Business
|
30
|
|
Description
of Property
|
41
|
|
Legal
Proceedings
|
41
|
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
42
|
|
Market
Price of and Dividends on Registrant's Common Equity and Related
Stockholder Matters
|
52
|
|
Directors,
Executive Officers, Promoters and Control Persons
|
54
|
|
Changes
in Accountants
|
54
|
|
Executive
Compensation
|
55
|
|
Security
Ownership of Certain Beneficial Owners and
Management
|
57
|
|
Certain
Relationships and Related Transactions, and Corporate
Governance
|
58
|
|
Additional
Information
|
59
|
|
Indemnification
for Securities Act Liabilities
|
59
|
|
Legal
Matters
|
60
|
|
Experts
|
60
|
|
Unaudited
Financial Statements
|
F-1
|
|
Audited
Financial Statements
|
F-36
|
·
|
The
size, date and pace of filing, and focus of the
portfolio.
|
·
|
The
relative immaturity of this field of
study.
|
·
|
The
limited number of truly competitive portfolios of intellectual
property.
|
·
|
The
Company acknowledged certain defaults that have occurred under the
Debentures and documents executed in connection therewith (the
“Transaction Documents”).
|
·
|
The
Holders agreed to forbear from exercising their rights and remedies under
the Debentures and the Transaction
Documents.
|
·
|
The
obligation of the Holders to forbear from exercising their rights and
remedies under the Debentures and the Transaction Documents will terminate
on the earliest of (i) the date, if any, on which a petition for relief
under the date, if any, on which a petition for relief under the United
States Bankruptcy Code or any similar state or Canadian law is filed by or
against the Company or any of its subsidiaries or (ii) the date the
Forbearance Agreement is otherwise terminated or expires, it being
understood that the Holders holding 67% of the then outstanding principal
amount of the Debentures shall have the right to terminate the Forbearance
Agreement on 3 business days’ prior notice to the
Company.
|
·
|
The
Company provided a general release in favor of the
Holders.
|
·
|
The
Company agreed to issue to each Holder in exchange for such Holder’s
Debenture an amended and restated Debenture (the “Amended and Restated
Debentures”) in a principal amount equal to the principal amount of such
Holder’s Debenture times 1.35 minus any interest paid
thereon.
|
·
|
The
conversion price under the Amended and Restated Debentures was reduced to
$0.10, subject to further adjustment as provided therein (including for
stock splits, stock dividends, and certain subsequent equity
sales).
|
·
|
The
maturity date under the Amended and Restated Debentures was extended until
December 31, 2010.
|
·
|
The
Amended and Restated Debentures bear interest at the rate of 12% per
annum, which shall accrete to, and increase the principal amount payable
upon maturity.
|
·
|
The
Amended and Restated Debentures will begin to amortize on September 25,
2009 at a rate of 6.25% of the outstanding principal amount per month,
valued at the lesser of the then conversion price and 90% of the average
volume weighted average price for the ten prior trading
days.
|
·
|
The
Warrants were amended and restated (as amended and restated, the “Amended
and Restated Warrants”).
|
·
|
The
exercise price under the Amended and Restated Warrants was reduced to
$0.10 subject to further adjustment as provided therein (including for
stock splits, stock dividends, and certain subsequent equity
sales).
|
·
|
The
termination date under the Amended and Restated Warrants was extended
until June 30, 2014.
|
·
|
Each
Holder agreed not to convert more than 20% of such Holder’s outstanding
principal amount of Amended and Restated Debenture in any month during the
period from September 1, 2009 through January 31, 2010, provided, however,
that this limitation will terminate if (i)(a) the volume weighted average
price of the Company’s common stock for each of 5 consecutive trading days
is greater than $0.15 per share, and (b) the trading volume on such days
exceeds 7,500,000 shares per trading day, or (ii)(a) the volume weighted
average price for any one trading day is greater than $0.20 per share and
(b) the trading volume on such day exceeds 10,000,000
shares.
|
·
|
The
Company agreed to amend the Company’s articles of incorporation to
increase the number of authorized shares of Common Stock (the
“Amendment”). The Amendment was effected in accordance with the Consent
and Amendment on September 15,
2009.
|
·
|
The
Company agreed to increase the number of shares available for issuance
under the Company’s 2005 Stock Incentive Plan to 129,000,000 shares, by
September 18, 2009. The amendment to the 2005 Stock Incentive Plan was
timely effected on September 10,
2009.
|
·
|
The
Holders agreed to waive any event of default under the Debentures
resulting solely from (i) any adjustment to the conversion price of the
Debenture and exercise price of the Warrants that would result from the
reduction of the conversion price of certain securities of the Company
pursuant to the Stipulation of Settlement, dated March 11, 2009, between
the Company and Alpha Capital, and (ii) any failure by the Company to
reserve such number of authorized but unissued shares of common stock
issuable upon conversion of the Debentures and exercise of the
Warrants.
|
Common
Stock offered by the selling stockholders
|
Up
to 192,148,119 shares of Common Stock issuable upon exercise of
warrants.
|
Common
Stock outstanding prior to the offering
|
501,905,641
(1)
|
|
Common
Stock to be outstanding after the offering
|
694,053,760
assuming the full exercise of the warrants the underlying shares of which
are included in this
prospectus.
|
Use
of proceeds
|
We
will not receive any proceeds from the sale of the Common Stock
hereunder.
|
|
(1)
Based upon the total number of issued and outstanding shares as of
September 23, 2009.
|
·
|
we
will succeed in obtaining any patents in a timely manner or at all, or
that the breadth or degree of protection of any such patents will protect
our interests,
|
·
|
the
use of our technology will not infringe on the proprietary rights of
others,
|
·
|
patent
applications relating to our potential products or technologies will
result in the issuance of any patents or that, if issued, such patents
will afford adequate protection to us or not be challenged invalidated or
infringed, or
|
·
|
patents
will not issue to other parties, which may be infringed by our potential
products or technologies.
|
·
|
Our
ability to provide acceptable evidence and the perception of patients and
the healthcare community, including third party payors, of the positive
characteristics of our product candidates relative to existing treatment
methods, including their safety, efficacy, cost effectiveness and/or other
potential advantages,
|
·
|
The
incidence and severity of any adverse side effects of our product
candidates,
|
·
|
The
availability of alternative
treatments,
|
·
|
The
labeling requirements imposed by the FDA and foreign regulatory agencies,
including the scope of approved indications and any safety
warnings,
|
·
|
Our
ability to obtain sufficient third party insurance coverage or
reimbursement for our products
candidates,
|
·
|
The
inclusion of our products on insurance company coverage
policies,
|
·
|
The
willingness and ability of patients and the healthcare community to adopt
new technologies,
|
·
|
The
procedure time associated with the use of our product
candidates,
|
·
|
Our
ability to manufacture or obtain from third party manufacturers sufficient
quantities of our product candidates with acceptable quality and at an
acceptable cost to meet demand, and
|
·
|
Marketing
and distribution support for our
products.
|
·
|
The
continued progress and cost of our research and development
programs,
|
·
|
The
progress with pre-clinical studies and clinical
trials,
|
·
|
The
time and costs involved in obtaining regulatory
clearance,
|
·
|
The
costs in preparing, filing, prosecuting, maintaining and enforcing patent
claims,
|
·
|
The
costs of developing sales, marketing and distribution channels and our
ability to sell the therapies/products if
developed,
|
·
|
The
costs involved in establishing manufacturing capabilities for commercial
quantities of our proposed
products,
|
·
|
Competing
technological and market
developments,
|
·
|
Market
acceptance of our proposed
products,
|
·
|
The
costs for recruiting and retaining employees and consultants,
and
|
·
|
The
costs for educating and training physicians about our proposed
therapies/products.
|
·
|
Except
for certain permitted indebtedness, enter into, create, incur, assume,
guarantee or suffer to exist any indebtedness for borrowed money of any
kind, including but not limited to, a guarantee, on or with respect to any
of its property or assets now owned or hereafter acquired or any interest
therein or any income or profits
therefrom,
|
·
|
Except
for certain permitted liens, enter into, create, incur, assume or suffer
to exist any liens of any kind, on or with respect to any of our property
or assets now owned or hereafter acquired or any interest therein or any
income or profits therefrom,
|
·
|
Amend
our certificate of incorporation, bylaws or other charter documents so as
to materially and adversely affect any rights of holders of the Amended
and Restated Debentures and Amended and Restated
Warrants,
|
·
|
Repay,
repurchase or offer to repay, repurchase or otherwise acquire more than a
de minimis number of shares of our common stock or common stock
equivalents,
|
·
|
Enter
into any transaction with any of our affiliates, which would be required
to be disclosed in any public filing with the Securities and Exchange
Commission, unless such transaction is made on an arm's-length basis and
expressly approved by a majority of our disinterested directors (even if
less than a quorum otherwise required for board
approval),
|
·
|
Pay
cash dividends or distributions on any of our equity
securities,
|
·
|
Grant
certain registration rights,
|
·
|
Enter
into any agreement with respect to any of the foregoing,
or
|
·
|
Make
cash expenditures in excess of $1,000,000 per calendar month, subject to
certain specified exceptions.
|
·
|
Design
and conduct advanced clinical trials in the event that we reach clinical
trials;
|
·
|
Fund
research and development activities with
us;
|
·
|
Pay
us fees upon the achievement of milestones;
and
|
·
|
Market
with us any commercial products that result from our
collaborations.
|
·
|
The
FDA or similar foreign regulatory authorities may find that our product
candidates are not sufficiently safe or effective or may find our cell
culturing processes or facilities
unsatisfactory,
|
·
|
Officials
at the FDA or similar foreign regulatory authorities may interpret data
from preclinical studies and clinical trials differently than we
do,
|
·
|
Our
clinical trials may produce negative or inconclusive results or may not
meet the level of statistical significance required by the FDA or other
regulatory authorities, and we may decide, or regulators may require us,
to conduct additional preclinical studies and/or clinical trials or to
abandon one or more of our development
programs,
|
·
|
The
FDA or similar foreign regulatory authorities may change their approval
policies or adopt new regulations,
|
·
|
There
may be delays or failure in obtaining approval of our clinical trial
protocols from the FDA or other regulatory authorities or obtaining
institutional review board approvals or government approvals to conduct
clinical trials at prospective
sites,
|
·
|
We,
or regulators, may suspend or terminate our clinical trials because the
participating patients are being exposed to unacceptable health risks or
undesirable side effects,
|
·
|
We
may experience difficulties in managing multiple clinical
sites,
|
·
|
Enrollment
in our clinical trials for our product candidates may occur more slowly
than we anticipate, or we may experience high drop-out rates of subjects
in our clinical trials, resulting in significant
delays,
|
·
|
We
may be unable to manufacture or obtain from third party manufacturers
sufficient quantities of our product candidates for use in clinical
trials, and
|
·
|
Our
product candidates may be deemed unsafe or ineffective, or may be
perceived as being unsafe or ineffective, by healthcare providers for a
particular indication.
|
·
|
Clinical
trial results,
|
·
|
The
amount of cash resources and ability to obtain additional
funding,
|
·
|
Announcements
of research activities, business developments, technological innovations
or new products by companies or their
competitors,
|
·
|
Entering
into or terminating strategic
relationships,
|
·
|
Changes
in government regulation,
|
·
|
Disputes
concerning patents or proprietary
rights,
|
·
|
Changes
in revenues or expense levels,
|
·
|
Public
concern regarding the safety, efficacy or other aspects of the products or
methodologies being developed,
|
·
|
Reports
by securities analysts,
|
·
|
Activities
of various interest groups or
organizations,
|
·
|
Media
coverage, and
|
·
|
Status
of the investment markets.
|
Name
of Selling Stockholder
|
Beneficial
Ownership Before the Offering (1)
|
Percentage
of Ownership Before Completion of Offering
|
Shares
of Common Stock Included in Prospectus (2)
|
Beneficial
Ownership After the Offering
|
Percentage
of Ownership After Completion of Offering (3)
|
|
Newberg
Family Trust UTD 12/18/90
|
948,509
|
(4)
|
*
|
925,859
|
22,650
|
*
|
JMB
Capital Partners, LP
|
5,453,046
|
(5)
|
1.07%
|
2,777,576
|
2,675,470
|
*
|
J
Goldman Master Limited Partnership
|
8,010,290
|
(6)
|
1.57%
|
3,700,370
|
4,309,920
|
*
|
CAMOFI
Master LDC
|
26,360,479
|
(7)
|
4.99%
|
15,230,628
|
12,017,782
|
2.34%
|
Shapiro
Family Trust Dtd. 9.25.89
|
6,237,076
|
(8)
|
1.23%
|
3,018,340
|
3,218,736
|
*
|
G.
Tyler Runnels or Jasmine Niklas Runnels, Trustees Family
Trust
|
1,871,025
|
(9)
|
*
|
1,608,628
|
262,397
|
*
|
High
Tide, LLC
|
2,041,043
|
(10)
|
*
|
1,778,646
|
262,397
|
*
|
JMG
Triton Offshore Fund, Ltd
|
11,277,301
|
(11)
|
2.20%
|
6,624,373
|
4,652,928
|
*
|
JMG
Capital Partners, LP
|
11,205,419
|
(12)
|
2.18%
|
6,624,373
|
4,581,046
|
*
|
Cranshire
Capital, LP
|
7,505,538
|
(13)
|
1.47%
|
4,192,847
|
3,312,691
|
*
|
MM&B
Holdings, LLC
|
4,322,672
|
(14)
|
*
|
3,955,317
|
367,355
|
*
|
JGB
Capital, LP
|
1,146,777
|
(15)
|
*
|
898,555
|
248,222
|
*
|
Bristol
Investment Fund
|
22,884,810
|
(16)
|
4.36%
|
19,480,674
|
3,404,136
|
*
|
Overbrook
Fund, LLC
|
1,204,060
|
(17)
|
*
|
941,662
|
262,398
|
*
|
Portside
Growth and Opportunity Fund
|
3,000,719
|
(18)
|
*
|
2,349,975
|
650,744
|
*
|
Rockmore
Investment Master Fund, Ltd.
|
3,190,382
|
(19)
|
*
|
2,770,022
|
420,360
|
*
|
Smithfield
Fiduciary, LLC
|
26,360,479
|
(20)
|
4.99%
|
17,259,913
|
14,386,114
|
2.79%
|
Alpha
Capital Ansalt
|
9,338,040
|
(21)
|
1.83%
|
5,101,042
|
4,236,998
|
*
|
Midsummer
Investments, Ltd.
|
26,360,479
|
(22)
|
4.99%
|
19,027,990
|
11,576,670
|
2.25%
|
Bushido
Capital Master Fund
|
790,125
|
(23)
|
*
|
393,518
|
396,607
|
*
|
BCMF
Trustees, LLC
|
1,281,799
|
(24)
|
*
|
636,791
|
645,008
|
*
|
Ralph
Rabman
|
12,326
|
(25)
|
*
|
5,021
|
7,305
|
*
|
CFRR
Holdings, LLC
|
16,568
|
(26)
|
*
|
6,764
|
9,804
|
*
|
ACM
SPV, LLC
|
223,621
|
(27)
|
*
|
91,064
|
132,557
|
*
|
John
A. Kryzanowski
|
8,022,538
|
(28)
|
1.57%
|
3,885,542
|
4,136,996
|
*
|
DAFNA
|
452,927
|
(29)
|
*
|
452,927
|
-
|
*
|
Whalehaven
Capital Fund Limited
|
3,439,363
|
(30)
|
*
|
3,019,527
|
419,836
|
*
|
Portside
Growth and Opportunity Fund
|
1,255,732
|
(31)
|
*
|
1,237,684
|
18,048
|
*
|
Stonestreet,
LP
|
268,014
|
(32)
|
*
|
180,548
|
87,466
|
*
|
Anthem/CIC
Ventures Fund, LP
|
5,485,153
|
(33)
|
1.08%
|
1,811,595
|
3,673,558
|
*
|
Anthem
Ventures Annex Fund, LP
|
2,487,548
|
(34)
|
*
|
738,235
|
1,749,313
|
*
|
Evan
S. Malik
|
178,849
|
(35)
|
*
|
90,580
|
88,269
|
*
|
Gamma
Opportunity Fund Capital Partners LP Class A
|
641,913
|
(36)
|
*
|
226,449
|
415,464
|
*
|
Gamma
Opportunity Fund Capital Partners LP Class C
|
641,911
|
(37)
|
*
|
226,451
|
415,460
|
*
|
CAMHZN
Master LDC
|
8,286,905
|
(38)
|
1.62%
|
4,078,057
|
4,208,848
|
*
|
RHP
Master Fund, Ltd.
|
3,781,458
|
(39)
|
*
|
2,828,023
|
953,435
|
*
|
Brio
Capital, LP
|
3,859,045
|
(40)
|
*
|
1,864,828
|
1,994,217
|
*
|
Gemini
Master Fund, Ltd.
|
8,251,644
|
(41)
|
1.62%
|
3,903,994
|
4,347,650
|
*
|
Paragon
Capital, LP
|
7,451,301
|
(42)
|
1.46%
|
3,602,812
|
3,848,489
|
*
|
The
Black Diamond Fund, LLP
|
2,487,548
|
(43)
|
*
|
738,235
|
1,749,313
|
*
|
Chestnut
Ridge Partners, LP
|
3,700,883
|
(44)
|
*
|
3,060,634
|
640,249
|
*
|
PDPI
LLC
|
7,382,902
|
(45)
|
1.45%
|
6,112,902
|
1,270,000
|
*
|
T.R.
Winston & Company, LLC
|
26,360,479
|
(46)
|
4.99%
|
32,087,898
|
2,623,970
|
*
|
Burril
& Company
|
142,110
|
(47)
|
*
|
142,110
|
-
|
*
|
Rodman
& Renshaw
|
214,457
|
(48)
|
*
|
214,457
|
-
|
*
|
Axel,
PhD
|
153,016
|
(49)
|
*
|
153,016
|
-
|
*
|
Pierce
Atwood, LLP
|
4,715,636
|
(50)
|
*
|
2,091,667
|
2,623,969
|
*
|
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
·
|
block
trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account;
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
·
|
privately
negotiated transactions;
|
·
|
settlement
of short sales entered into after the effective date of the registration
statement of which this prospectus is a
part;
|
·
|
broker-dealers
may agree with the selling stockholders to sell a specified number of such
shares at a stipulated price per
share;
|
·
|
Through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or
otherwise;
|
·
|
a
combination of any such methods of sale;
or
|
·
|
Any
other method permitted pursuant to applicable
law.
|
·
|
The
size, date and pace of filing, and focus of the
portfolio.
|
·
|
The
relative immaturity of this field of
study.
|
·
|
The
limited number of truly competitive portfolios of intellectual
property.
|
·
|
isolating
and purifying cell lines,
|
·
|
growing
stable cell lines in culture for long periods without
mutations,
|
·
|
manufacturing
cell lines in numbers sufficient for
therapy,
|
·
|
differentiating
ES cells into all of the cell types desired for therapies,
and
|
·
|
solving
the potential rejection of ES cells used in therapies due to
immuno-incompatibility with the
patient.
|
Medical Condition
|
Number of
Patients*
|
|
Cardiovascular
disease
|
70 million
|
|
Autoimmune
disease
|
50 million
|
|
Diabetes
|
18 million
|
|
Osteoporosis
|
10 million
|
|
Cancer
|
10 million
|
|
Alzheimer's
disease
|
4.5 million
|
|
Parkinson's
disease
|
1 million
|
|
Burns
(severe)
|
1.1 million
|
|
Spinal-cord
injuries
|
0.25 million
|
|
Birth
defects
|
0.15 million/year
|
·
|
Ability
to restore cardiac function through new muscle
formation
|
·
|
Ability
to prevent further decline of heart
function
|
·
|
No
risk immunological rejection of myoblasts due to autologous nature of the
therapy
|
·
|
Complementary
to and capable of improving outcomes of current therapeutic options for
heart disease
|
·
|
hematopoietic
cells for blood diseases and
cancer,
|
·
|
myocardial
and endothelial vascular tissue for cardiovascular
disease,
|
·
|
congestive
heart failure, myocardial infarction and other cardiovascular
disease
|
·
|
skin
cells for dermatological
conditions,
|
·
|
retinal
pigment epithelium cells as treatment for macular degeneration and retinal
pigmentosis,
|
·
|
neural
cells for spinal cord injury, Parkinson's disease and other
neuro-degenerative diseases,
|
·
|
pancreatic
islet ß cells for diabetes,
|
·
|
liver
cells for hepatitis and cirrhosis,
|
·
|
cartilage
cells for arthritis, and
|
·
|
lung
cells for a variety of pulmonary
diseases.
|
Number
Patent
|
Country
|
Filing
Date
|
Issue
Date
|
Expiration
Date*
|
Title
|
|||||
6,808,704
|
United
States (US)
|
09/06/2000
|
10/26/2004
|
09/6/2020
|
Method
for Generating Immune-Compatible Cells and Tissues Using Nuclear Transfer
Techniques
|
|||||
783162
|
Australia
(AU)
|
09/06/2000
|
01/12/2006
|
09/6/2020
|
Method
for Generating Immune-Compatible Cells and Tissues Using Nuclear Transfer
Techniques
|
|||||
265679
|
Mexico
|
09/06/2000
|
04/03/2009
|
09/06/2020
|
Method
for Generating Immune-Compatible Cells and Tissues Using Nuclear Transfer
Techniques
|
|||||
536786
|
New
Zealand (NZ)
|
09/06/2000
|
01/11/2007
|
09/6/2020
|
Method
for Generating Immune-Compatible Cells and Tissues Using Nuclear Transfer
Techniques
|
|||||
782385
|
AU
|
10/13/2000
|
11/3/2005
|
10/13/2020
|
Method
of Differentiation of Morula or Inner Cell Mass Cells and Method of Making
Lineage-Defective Embryonic Stem Cells
|
|||||
518191
|
NZ
|
10/13/2000
|
05/10/2004
|
10/13/2020
|
Method
of Differentiation of Morula or Inner Cell Mass Cells and Method of Making
Lineage-Defective Embryonic Stem Cells
|
|||||
516236
|
NZ
|
06/30/2000
|
08/07/2005
|
06/30/2020
|
Cytoplasmic
Transfer to De-Differentiate Recipient Cells
|
|||||
782286
|
AU
|
06/30/2000
|
10/27/2005
|
06/30/2020
|
Cytoplasmic
Transfer to De-Differentiate Recipient Cells
|
|||||
531844
|
NZ
|
09/06/2000
|
12/08/05
|
09/06/2020
|
Telomere
Restoration and Extension of Cell Life-Span in Animals Cloned from
Senescent Somatic Cells
|
|||||
519347
|
NZ
|
12/20/2000
|
11/11/2004
|
12/20/2020
|
Method
to Produce Cloned Embryos and Adults from Cultured
Cells
|
|||||
00818200.0
|
China
(CN)
|
12/20/2000
|
10/18/2006
|
12/20/2020
|
Method
to Produce Cloned Embryos and Adults from Cultured
Cells
|
|||||
5,453,366
|
US
|
03/15/1993
|
09/26/1995
|
09/26/2012
|
Method
of Cloning Bovine Embryos
|
|||||
6,011,197
|
US
|
01/28/1999
|
01/04/2000
|
03/06/2017
|
Method
of Cloning Bovines Using Reprogrammed Non-Embryonic Bovine
Cells
|
|||||
6,395,958
|
US
|
07/15/1999
|
05/28/2002
|
03/06/2017
|
Method
of Producing a Polypeptide in an Ungulate
|
|||||
5,496,720
|
US
|
02/10/1993
|
03/05/1996
|
03/05/2013
|
Parthenogenic
Oocyte Activation
|
|||||
5,843,754
|
US
|
06/06/1995
|
12/01/1998
|
12/01/2015
|
Parthenogenic
Bovine Oocyte Activation
|
|||||
6,194,202
|
US
|
03/04/1996
|
02/27/2001
|
02/10/2013
|
Parthenogenic
Oocyte Activation
|
|||||
6,077,710
|
US
|
10/21/1998
|
06/20/2000
|
02/10/2013
|
Parthenogenic
Oocyte Activation
|
|||||
5,346,990
|
US
|
03/12/1991
|
09/13/1994
|
09/13/2011
|
Sex-Associated
Membrane Proteins and Methods for Increasing the Probability that
Offspring will be of a Desired Sex
|
Number
Patent
|
Country
|
Filing
Date
|
Issue
Date
|
Expiration
Date*
|
Title
|
|||||
6,673,604
|
US
|
07/24/2000
|
01/06/2004
|
07/24/2020
|
Muscle
Cells and Their Use in Cardiac Repair**
|
|||||
6,432,711
|
US
|
11/01/1994
|
08/13/2002
|
08/13/2019
|
Embryonic
Stem Cells Capable of Differentiating into Desired Cell
Lines
|
|||||
2,174,746
|
Canada
(CA)
|
11/02/1994
|
04/24/2007
|
11/02/2014
|
Embryonic
Stem Cells Capable of Differentiating into Desired Cell
Lines
|
Number
Patent
|
Country
|
Filing Date
|
Issue Date
|
Expiration
Date*
|
Title
|
|||||
518365
|
NZ
|
10/27/2000
|
08/12/2004
|
10/27/2020
|
Gynogenetic
or Androgenetic Production of Pluripotent Cells and Cell Lines, and Use
Thereof to Produce Differentiated Cells and Tissues
|
|||||
782846
|
AU
|
10/27/2000
|
12/15/2005
|
10/27/2020
|
Gynogenetic
or Androgenetic Production of Pluripotent Cells and Cell Lines, and Use
Thereof to Produce Differentiated Cells and Tissues
|
|||||
5994619
|
US
|
12/16/1996
|
11/30/1999
|
04/01/2016
|
Production
of Chimeric Bovine or Porcine Animals Using Cultured Inner Cell Mass
Cells
|
|||||
5905042
|
US
|
04/01/1996
|
05/08/1999
|
04/01/2016
|
Production
of Chimeric Bovine or Porcine Animals Using Cultured Inner Cell Mass
Cells
|
·
|
the
cloning, development, manufacture and sale of cloned non-human animals,
including without limitation, bovine, hircine, ovine, porcine, equine
animals and ungulates (as well as any transgenic variance or enhancements
thereto) or products that are composed of, made in or derived, extracted
or isolated from cells or tissues of such animals for the production of
food or fiber, and the rendering of services or uses that relate to the
production of such products;
|
·
|
the
cloning, development, manufacture and sale of endangered species for
purposes of researching, aiding, reproducing or assisting in the
reproduction of such endangered
species;
|
·
|
the
cloning, development, and sale of hircine, ovine, feline, canine and
equine animals (as well as any transgenic variance or enhancements
thereto) for personal, business or commercial purposes, specifically
excluding the sale of these animals as scientific research laboratory
subjects; and
|
·
|
the
cloning, development, manufacture and sale of cloned equine animals (as
well as any transgenic variance or enhancements thereto) or products that
are composed of, made in or derived, extracted or isolated from cells or
tissues of such animals for non-therapeutic purposes, including but not
limited to, for use in agriculture, for use as food, for use as companion,
service, work or recreational animals, or for use as racing or other
equine event animals, and the rendering of services or uses that relate to
the production of such products.
|
·
|
the
research, development, manufacture and sale of human and non-human animal
cells for commercial research and
|
·
|
the
manufacture and selling of human cells for therapeutic and diagnostic use
in the treatment of human diabetes and liver diseases, and retinal
diseases and retinal degenerative
diseases.
|
·
|
the
research, development, manufacture and sale of human and non-human animal
cells and defined animal cell lines for commercial
research,
|
·
|
the
manufacture and selling of human cells for therapeutic and diagnostic use
in the treatment of human diabetes and liver diseases and retinal diseases
and retinal degenerative diseases,
and
|
·
|
the
use of defined animal cell lines in the process of manufacturing and
selling human cells for therapeutic and diagnostic use in the treatment of
human diabetes and liver diseases.
|
·
|
Level
1 inputs to the valuation methodology are quoted prices for identical
assets or liabilities in active
markets.
|
·
|
Level
2 inputs to the valuation methodology include quoted prices for similar
assets and liabilities in active markets, and inputs that are observable
for the asset or liability, either directly or indirectly, for
substantially the full term of the financial
instrument.
|
·
|
Level
3 inputs to the valuation methodology are unobservable and significant to
the fair value measurement.
|
Three
months ended June 30,
|
Three
months ended June 30,
|
|||||||||||||||
2009
|
2008
|
|||||||||||||||
%
of
|
%
of
|
|||||||||||||||
Amount
|
Revenue
|
Amount
|
Revenue
|
|||||||||||||
REVENUE
|
$
|
242,995
|
100.0
|
%
|
$
|
174,388
|
100.0
|
%
|
||||||||
COST
OF REVENUE
|
77,347
|
31.8
|
%
|
120,186
|
68.9
|
%
|
||||||||||
GROSS
PROFIT
|
165,648
|
68.2
|
%
|
54,202
|
31.1
|
%
|
||||||||||
RESEARCH
AND DEVELOPMENT EXPENSES AND GRANT REIMBURSEMENTS
|
1,138,258
|
468.4
|
%
|
2,786,870
|
1598.1
|
%
|
||||||||||
GENERAL
AND ADMINSTRATIVE EXPENSES
|
760,556
|
313.0
|
%
|
1,840,116
|
1055.2
|
%
|
||||||||||
OTHER
INCOME (EXPENSE)
|
(27,703,638
|
)
|
-11400.9
|
%
|
(1,016,633
|
)
|
-583.0
|
%
|
||||||||
NET
LOSS
|
$
|
(29,436,804
|
)
|
-12114.2
|
%
|
$
|
(5,589,417
|
)
|
-3205.2
|
%
|
Six
months ended June 30,
|
Six
months ended June 30,
|
|||||||||||||||
2009
|
2008
|
|||||||||||||||
%
of
|
%
of
|
|||||||||||||||
Amount
|
Revenue
|
Amount
|
Revenue
|
|||||||||||||
REVENUE
|
$
|
536,971
|
100.0
|
%
|
$
|
298,731
|
100.0
|
%
|
||||||||
COST
OF REVENUE
|
216,099
|
40.2
|
%
|
310,914
|
104.1
|
%
|
||||||||||
GROSS
PROFIT
|
320,872
|
59.8
|
%
|
(12,183
|
)
|
-4.1
|
%
|
|||||||||
RESEARCH
AND DEVELOPMENT EXPENSES AND GRANT REIMBURSEMENTS
|
1,438,025
|
267.8
|
%
|
6,649,253
|
2225.8
|
%
|
||||||||||
GENERAL
AND ADMINSTRATIVE EXPENSES
|
1,507,634
|
280.8
|
%
|
3,565,938
|
1193.7
|
%
|
||||||||||
LOSS
ON SETTLEMENT OF LITIGATION
|
4,793,949
|
892.8
|
%
|
-
|
0.0
|
%
|
||||||||||
OTHER
INCOME (EXPENSE)
|
(41,017,944
|
)
|
-7638.8
|
%
|
(4,881,702
|
)
|
-1634.1
|
%
|
||||||||
NET
INCOME (LOSS)
|
$
|
(48,436,680
|
)
|
-9020.4
|
%
|
$
|
(15,109,076
|
)
|
-5057.8
|
%
|
Six
months ended June 30,
|
||||||||
2009
|
2008
|
|||||||
Net
cash used in operating activities
|
$
|
(1,931,196
|
)
|
$
|
(3,754,418
|
)
|
||
Net
cash used in investing activities
|
(5,558
|
)
|
(168,549
|
)
|
||||
Net
cash provided by financing activities
|
1,809,761
|
2,790,122
|
||||||
Net
decrease in cash and cash equivalents
|
(126,993
|
)
|
(1,132,845
|
)
|
||||
Cash
and cash equivalents at the end of the period
|
$
|
689,911
|
$
|
33,271
|
·
|
On
December 1, 2008, we formed an international joint venture with CHA Bio
& Diostech Co., Ltd . (“CHA”), a leading Korean-based biotechnology
company focused on the development of stem cell technologies. CHA has
agreed to contribute $500,000 in working capital for the venture as well
as paying the Company an up-front license fee of $500,000. As of June 30,
2009, CHA has paid the Company the entire $500,000 towards payment of the
up-front license fee.
|
·
|
On
December 18, 2008, we entered into a license agreement with an
Ireland-based investor, Transition Holdings Inc. (“Transition”), for
certain of our non-core technology. Under the agreement, Transition agreed
to acquire a license to the technology for $3.5 million in cash. As of
June 30, 2009, we have received the entire $3.5 million in cash under this
agreement.
|
·
|
On
March 30, 2009, we entered into a license agreement with CHA under which
we will license our RPE technology, for the treatment of diseases of the
eye, to CHA for development and commercialization exclusively in Korea. We
are eligible to receive up to a total of $1.9 million in fees based upon
the parties achieving certain milestones, including us making an IND
submission to the US FDA to commence clinical trials in humans using the
technology. We received an up-front fee under the license in the amount of
$1,100,000. Under the agreement, CHA will incur all of the cost associated
with the RPA clinical trials in Korea. The agreement is part of the joint
venture between the two companies.
|
·
|
On
March 3, 2009, we entered into a $5 million credit facility (“Facility”)
with a life sciences fund. Under the agreement, the proceeds from the
Facility must be used exclusively for us to file an investigational new
drug (“IND”) for our retinal pigment epithelium (“RPE”) program, and will
allow us to complete both Phase I and Phase II studies in humans. An IND
is required to commence clinical trials. Under the terms of the agreement,
we may draw down funds, as needed for clinical development of the RPE
program, from the investor through the issuance of Series A-1 convertible
preferred stock. The preferred stock pays dividends, in kind of preferred
stock, at an annual rate of 10%, matures in four years from the initial
issuance date, and is convertible into common stock at $0.75 per share. As
of September 30, 2009, we have drawn down approximately $2,288,000 on this
facility.
|
·
|
On
May 13, 2009, the Company entered into another license
agreement with CHA under which the Company will license its proprietary
“single blastomere technology,” which has the potential to generate stable
cell lines, including RPE for the treatment of diseases of the eye, for
development and commercialization exclusively in Korea. We received an
upfront license fee of $300,000.
|
·
|
On
July 29, 2009, we entered into a consent, amendment and exchange agreement
with holders of our outstanding convertible debentures and warrants, which
were issued in private placements to the 2005, 2006, 2007 and 2008
debentures. We agreed to issue to each debenture holder in exchange for
the holder’s debenture an amended and restated debenture in a principle
amount equal to the principal amount of the holder’s debenture times 1.35
minus any interest paid thereon. The conversion price under the amended
and restated debentures was reduced to $0.10, subject to certain customary
anti-dilution adjustments. The maturity date under the amended and
restated debentures was extended until December 30, 2010. The amended and
restated debentures bear interest at 12% per annum. Further, we agreed to
issue to each holder in exchange for the holder’s warrant an amended and
restated warrant, which exercise price was reduced to $0.10, subject to
certain customary anti-dilution adjustments. The termination date under
the amended and restated warrants was extended until June 30, 2014.
Simultaneously with the signing of this agreement, we and the debenture
holders entered into a standstill and forbearance agreement, whereby the
debenture holders agreed to forbear from exercising their rights and
remedies under the original debentures and transaction
documents.
|
2008
|
2007
|
|||||||||||||||
%
of
|
%
of
|
|||||||||||||||
Amount
|
Revenue
|
Amount
|
Revenue
|
|||||||||||||
Revenue
|
$
|
787,106
|
100.0
|
%
|
$
|
647,349
|
100.0
|
%
|
||||||||
Cost
of Revenue
|
765,769
|
97.3
|
%
|
428,913
|
66.3
|
%
|
||||||||||
Gross
profit
|
21,337
|
2.7
|
%
|
218,436
|
33.7
|
%
|
||||||||||
Research
and development expenses and Grant reimbursements
|
8,530,408
|
1083.8
|
%
|
16,772,470
|
2590.9
|
%
|
||||||||||
General
and administrative expenses
|
5,009,418
|
636.4
|
%
|
6,781,705
|
1047.6
|
%
|
||||||||||
Non-operating
income (expense):
|
(20,385,024
|
)
|
-2589.9
|
%
|
7,437,014
|
1148.8
|
%
|
|||||||||
Net
loss
|
$
|
(33,903,513
|
)
|
-4307.4
|
%
|
$
|
(15,898,725
|
)
|
-2456.0
|
%
|
2008
|
2007
|
|||||||
Net
cash used in operating activities
|
$
|
(2,964,820
|
)
|
$
|
(16,031,464
|
)
|
||
Net
cash used in investing activities
|
(174,514
|
)
|
(139,873
|
)
|
||||
Net
cash provided by financing activities
|
2,790,122
|
8,648,117
|
||||||
Net
decrease in cash and cash equivalents
|
(349,212
|
)
|
(7,523,220
|
)
|
||||
Cash
and cash equivalents at the end of the period
|
$
|
816,904
|
$
|
1,166,116
|
Calendar
Quarter
|
High
Bid
|
Low
Bid
|
||||||
2007
First Quarter
|
$
|
1.19
|
$
|
0.54
|
||||
2007
Second Quarter
|
$
|
1.10
|
$
|
0.32
|
||||
2007
Third Quarter
|
$
|
0.52
|
$
|
0.26
|
||||
2007
Fourth Quarter
|
$
|
0.31
|
$
|
0.15
|
||||
2008
First Quarter
|
$
|
0.25
|
$
|
0.14
|
||||
2008
Second Quarter
|
$
|
0.13
|
$
|
0.06
|
||||
2008
Third Quarter
|
$
|
0.07
|
$
|
0.01
|
||||
2008
Fourth Quarter
|
$
|
0.05
|
$
|
0.02
|
||||
2009
First Quarter
|
$
|
0.29
|
$
|
0.04
|
||||
2009
Second Quarter
|
$
|
0.26
|
$
|
0.10
|
||||
2009
Third Quarter (as of October 7, 2009)
|
$
|
0.24
|
$
|
0.11
|
Plan Category
|
Number of
securities
to be issued
upon
exercise of
outstanding
options,
warrants and
rights
|
Weighted
average
exercise price of
outstanding
options,
warrants and
rights
|
Number of
securities
remaining
available
for issuance
under
equity
compensation
plans
(excluding
securities
reflected
in column (a))
|
|||||||||
(a)
|
(b)
|
(c)
|
||||||||||
Equity
compensation plans approved by security holders
|
23,496,705
|
(1)
|
$
|
0.52
|
16,030,589
|
(2)
|
||||||
Equity
compensation plans not approved by security holders
|
6,156,391
|
0.52
|
-
|
|||||||||
Total
|
29,653,096
|
0.52
|
16,030,589
|
(1)
|
Awards
for 2,492,000 options have been issued under the Advanced Cell
Technology, Inc. 2004 Stock Option Plan I ("2004 Plan 1"),
1,301,161 options have been issued under the Advanced Cell
Technology, Inc. 2004 Stock Option Plan II ("2004 Plan 2"
and together with the 2004 Plan I, the "2004 ACT Plans"), and
19,703,544 options have been issued under the 2005 Stock
Plan.
|
(2)
|
This
number included 308,000 shares available under the 2004 Plan I and
15,722,589 shares available under the 2005 Stock
Plan.
|
Name
|
Age
|
Position
|
||
William
M. Caldwell, IV
|
61
|
Chief
Executive Officer and Chairman of the Board of
Directors
|
||
Robert
P. Lanza M.D.
|
52
|
Chief
Scientific Officer
|
||
Alan
C. Shapiro, Ph.D.
|
63
|
Member
of the Board of Directors
|
||
Erkki
Ruoslahti, M.D., Ph.D.
|
68
|
Member
of the Board of Directors
|
||
Gary
Rabin
|
43
|
Member
of the Board of Directors
|
Salary
|
Bonus
|
Stock
Awards
|
Option
Awards
|
All
Other Compensation
|
Total
|
|||||||||||||||||||||
Name and Principal Position
|
Year
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
|||||||||||||||||||
William
M. Caldwell, IV
|
2008
|
350,000
|
-
|
-
|
-
|
995
|
(1)
|
350,995
|
||||||||||||||||||
Chief
Executive Officer and
|
2007
|
348,374
|
150,000
|
-
|
-
|
2,376
|
(1)
|
500,750
|
||||||||||||||||||
Chairman
of the Board of Directors
|
||||||||||||||||||||||||||
Robert
P. Lanza, M.D.,
|
2008
|
290,000
|
35,000
|
-
|
168,237
|
636
|
(1)
|
493,873
|
||||||||||||||||||
Chief
Scientific Officer
|
2007
|
342,805
|
50,000
|
-
|
28,910
|
483
|
(1)
|
422,198
|
||||||||||||||||||
Jonathan
F. Atzen
|
2008
|
78,077
|
-
|
93,669
|
1,598
|
3,001
|
(2)
|
176,345
|
||||||||||||||||||
Sr.
Vice President, General
|
2007
|
338,537
|
60,000
|
-
|
6,391
|
12,360
|
(3)
|
417,288
|
||||||||||||||||||
Counsel
and Secretary (3)
|
Fees Earned
|
Stock
|
Option
|
All Other
|
|||||||||||||||||||
or Paid in Cash
|
Awards
|
Awards
|
Compensation
|
Total
|
||||||||||||||||||
Name and Principal Position
|
Year
|
($)
|
($)
|
($)
|
($)
|
($)
|
||||||||||||||||
Alan
C. Shapiro, Ph.D.
|
2008
|
70,000
|
-
|
-
|
-
|
70,000
|
||||||||||||||||
Alan
G. Walton, Ph.D., D.Sc. (1)
|
2008
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||
Erkki
Ruoslahti, M.D., Ph.D.
|
2008
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||
Gary
Rabin
|
2008
|
- | - | - | - | - |
Number of
|
Number of
|
||||||||||||
Securities
|
Securities
|
||||||||||||
Underlying
|
Underlying
|
Option
|
Option
|
||||||||||
Unexercised
|
Unexercised
|
Exercise
|
Expiration
|
||||||||||
Options (#)
|
Options (#)
|
Price
|
Date
|
||||||||||
Name
|
Exercisable
|
Unexercisable
|
($)
|
($)
|
|||||||||
William
M. Caldwell, IV
|
651,161
|
(1)
|
-
|
0.25
|
12/31/2014
|
||||||||
Chief
Executive Officer and
|
1,903,112
|
(1)
|
-
|
0.85
|
1/31/2015
|
||||||||
Chairman
of the Board of Directors
|
|||||||||||||
Robert
P. Lanza, M.D.,
|
750,000
|
(2)
|
-
|
0.05
|
8/12/2014
|
||||||||
Chief
Scientific Officer
|
489,583
|
(3)
|
10,417
|
0.85
|
1/31/2015
|
||||||||
250,000
|
(2)
|
-
|
2.20
|
9/15/2015
|
|||||||||
896,552
|
(3)
|
3,103,448
|
0.21
|
2/7/2018
|
(1)
|
These
options held by Mr. Caldwell vest as follows: 25% vested immediately
upon grant with the remainder vesting in equal monthly installments over
30 months.
|
(2)
|
These
options held by Dr. Lanza vested in full as of December 31,
2006.
|
(3)
|
These
options held by Dr. Lanza vest in equal monthly installments over
48 months.
|
Number of
|
||||||||
Shares
|
||||||||
Beneficially
|
||||||||
Name and Address
of Beneficial Owner (1)
|
Owned
|
Percentage
(2)
|
||||||
5%
or Greater Stockholders
|
||||||||
None
|
||||||||
Directors
and Named Executive Officers
|
||||||||
William
M. Caldwell, IV
|
2,801,021
|
(3)
|
*
|
|||||
Robert
P. Lanza, M.D.
|
2,686,135
|
(4)
|
*
|
|||||
Alan
C. Shapiro
|
6,129,432
|
(5)
|
1.20
|
%
|
||||
Erkki
Ruoslahti
|
120,086
|
(6)
|
*
|
|||||
Gary
Rabin
|
1,862,960
|
(7)
|
*
|
|||||
Directors
and Executive Officers as a Group ( 5 Persons)
|
13,599,634
|
2.66
|
%
|
·
|
Any
of our directors or officers,
|
·
|
Any
person proposed as a nominee for election as a
director,
|
·
|
Any
person who beneficially owns, directly or indirectly, shares carrying more
than 5% of the voting rights attached to our outstanding shares of common
stock,
|
·
|
Any
of our promoters, and
|
·
|
Any
relative or spouse of any of the foregoing persons who has the same house
as such person.
|
June
30,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
(unaudited)
|
||||||||
ASSETS
|
||||||||
CURRENT
ASSETS:
|
||||||||
Cash
and cash equivalents
|
$
|
689,911
|
$
|
816,904
|
||||
Accounts
receivable
|
-
|
261,504
|
||||||
Prepaid
expenses
|
46,466
|
32,476
|
||||||
Deferred
royalty fees, current portion
|
182,198
|
182,198
|
||||||
Total
current assets
|
918,575
|
1,293,082
|
||||||
Property
and equipment, net
|
251,406
|
400,008
|
||||||
Investment
in joint venture
|
-
|
225,200
|
||||||
Deferred
royalty fees, less current portion
|
568,389
|
659,488
|
||||||
Deposits
|
2,170
|
-
|
||||||
Deferred
issuance costs, net of amortization of $289,790 and
$8,666,387
|
4,691,209
|
-
|
||||||
TOTAL
ASSETS
|
$
|
6,431,749
|
$
|
2,577,778
|
||||
LIABILITIES AND STOCKHOLDERS'
DEFICIT
|
||||||||
CURRENT
LIABILITIES:
|
||||||||
Accounts
payable
|
$
|
6,718,901
|
$
|
8,287,786
|
||||
Accrued
expenses
|
1,647,137
|
2,741,591
|
||||||
Accrued
default interest
|
4,826,991
|
3,717,384
|
||||||
Deferred
revenue, current portion
|
992,664
|
834,578
|
||||||
Advances
payable, other
|
130,000
|
130,000
|
||||||
2005
Convertible debenture and embedded derivatives, net of discounts of $0 and
$0
|
135,819
|
85,997
|
||||||
2006
Convertible debenture and embedded derivatives (fair value $2,733,345 and
$1,993,354)
|
2,733,345
|
1,993,354
|
||||||
2007
Convertible debenture and embedded derivatives (fair value $17,859,334 and
$7,706,344)
|
17,859,334
|
7,706,344
|
||||||
February
2008 Convertible debenture and embedded derivatives (fair value $1,775,904
and $1,757,470)
|
1,775,904
|
1,757,470
|
||||||
April
2008 Convertible debenture and embedded derivatives (fair value $8,165,561
and $4,066,505)
|
8,165,561
|
4,066,505
|
||||||
Warrant
and option derivative liabilities
|
26,334,356
|
2,655,849
|
||||||
Embedded
derivative liability
|
540,098
|
-
|
||||||
Deferred
joint venture obligations, current portion
|
130,644
|
167,335
|
||||||
Short
term capital leases
|
12,955
|
12,955
|
||||||
Notes
payable, other
|
468,425
|
468,425
|
||||||
Total
current liabilities
|
72,472,134
|
34,625,573
|
||||||
Deferred
joint venture obligations, less current portion
|
16,979
|
63,473
|
||||||
Deferred
revenue, less current portion
|
6,172,659
|
3,817,716
|
||||||
Total
liabilities
|
78,661,772
|
38,506,762
|
||||||
Series
A-1 redeemable convertible preferred stock, $0.001 par value; 50,000,000
shares authorized,
|
||||||||
181
and 0 shares issued and outstanding; aggregate liquidation value:
$1,841,109 and $0, respectively
|
1,579,994
|
-
|
||||||
Commitments
and contingencies
|
-
|
-
|
||||||
STOCKHOLDERS'
DEFICIT:
|
||||||||
Common
stock, $0.001par value; 500,000,000 shares authorized,
|
||||||||
499,905,641
and 429,448,381 issued and outstanding
|
499,906
|
429,448
|
||||||
Additional
paid-in capital
|
63,944,361
|
53,459,172
|
||||||
Accumulated
deficit
|
(138,254,284
|
)
|
(89,817,604
|
)
|
||||
Total
stockholders' deficit
|
(73,810,017
|
)
|
(35,928,984
|
)
|
||||
TOTAL
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
$
|
6,431,749
|
$
|
2,577,778
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Revenue (License fees
and royalties)
|
$
|
242,995
|
$
|
174,388
|
$
|
536,971
|
$
|
298,731
|
||||||||
Cost
of Revenue
|
77,347
|
120,186
|
216,099
|
310,914
|
||||||||||||
Gross
profit
|
165,648
|
54,202
|
320,872
|
(12,183
|
)
|
|||||||||||
Operating
expenses:
|
||||||||||||||||
Research
and development
|
1,138,258
|
2,786,870
|
1,574,865
|
6,754,422
|
||||||||||||
Grant
reimbursements
|
-
|
-
|
(136,840
|
)
|
(105,169
|
)
|
||||||||||
General
and administrative expenses
|
760,556
|
1,840,116
|
1,507,634
|
3,565,938
|
||||||||||||
Loss
on settlement of litigation
|
-
|
-
|
4,793,949
|
-
|
||||||||||||
Total
operating expenses
|
1,898,814
|
4,626,986
|
7,739,608
|
10,215,191
|
||||||||||||
Loss
from operations
|
(1,733,166
|
)
|
(4,572,784
|
)
|
(7,418,736
|
)
|
(10,227,374
|
)
|
||||||||
Non-operating
income (expense):
|
||||||||||||||||
Interest
income
|
137
|
1,317
|
1,758
|
8,166
|
||||||||||||
Interest
expense and late fees
|
(953,089
|
)
|
(8,540,674
|
)
|
(1,535,910
|
)
|
(12,747,290
|
)
|
||||||||
Charges
related to issuance of 2008 convertible debentures
|
-
|
(531,769
|
)
|
-
|
(1,217,342
|
)
|
||||||||||
Income
related to repricing of 2006 and 2007 convertible debentures and
warrants
|
-
|
847,588
|
-
|
847,588
|
||||||||||||
Adjustments
to fair value of derivatives
|
(26,701,374
|
)
|
7,206,905
|
(37,542,986
|
)
|
8,227,176
|
||||||||||
Losses
attributable to equity method investment
|
(49,312
|
)
|
-
|
(144,438
|
)
|
-
|
||||||||||
Loss
on modification of debentures
|
-
|
-
|
(1,796,368
|
)
|
-
|
|||||||||||
Total
non-operating income (expense)
|
(27,703,638
|
)
|
(1,016,633
|
)
|
(41,017,944
|
)
|
(4,881,702
|
)
|
||||||||
Loss
before income tax
|
(29,436,804
|
)
|
(5,589,417
|
)
|
(48,436,680
|
)
|
(15,109,076
|
)
|
||||||||
Income
tax
|
-
|
-
|
-
|
-
|
||||||||||||
Net
loss
|
$
|
(29,436,804
|
)
|
$
|
(5,589,417
|
)
|
$
|
(48,436,680
|
)
|
$
|
(15,109,076
|
)
|
||||
Weighted
average shares outstanding :
|
||||||||||||||||
Basic
|
499,905,641
|
153,438,333
|
476,926,873
|
124,654,606
|
||||||||||||
Diluted
|
499,905,641
|
153,438,333
|
476,926,873
|
124,654,606
|
||||||||||||
Loss
per share:
|
||||||||||||||||
Basic
|
$
|
(0.06
|
)
|
$
|
(0.04
|
)
|
$
|
(0.10
|
)
|
$
|
(0.12
|
)
|
||||
Diluted
|
$
|
(0.06
|
)
|
$
|
(0.04
|
)
|
$
|
(0.10
|
)
|
$
|
(0.12
|
)
|
Additional
|
Total
|
|||||||||||||||||||
Common
Stock
|
Paid-in
|
Accumulated
|
Stockholders'
|
|||||||||||||||||
Shares
|
Amount
|
Capital
|
Deficit
|
Deficit
|
||||||||||||||||
Balance
December 31, 2008
|
429,448,381
|
$
|
429,448
|
$
|
53,459,172
|
$
|
(89,817,604
|
)
|
$
|
(35,928,984
|
)
|
|||||||||
Convertible
debentures conversions
|
6,176,413
|
6,177
|
325,625
|
-
|
331,802
|
|||||||||||||||
Option
compensation charges
|
193,697
|
193,697
|
||||||||||||||||||
Issuance
of stock in settlement of accounts payable
|
39,380,847
|
39,381
|
5,259,767
|
5,299,148
|
||||||||||||||||
Issuance
of stock in payment of debt issue costs for Series A-1 redeemable
convertible preferred stock
|
24,900,000
|
24,900
|
4,706,100
|
4,731,000
|
||||||||||||||||
Net
loss for the six months ended June 30, 2009
|
-
|
-
|
-
|
(48,436,680
|
)
|
(48,436,680
|
)
|
|||||||||||||
Balance
June 30, 2009
|
499,905,641
|
$
|
499,906
|
$
|
63,944,361
|
$
|
(138,254,284
|
)
|
$
|
(73,810,017
|
)
|
Six
Months Ended June 30,
|
||||||||
2009
|
2008
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net
loss
|
$
|
(48,436,680
|
)
|
$
|
(15,109,076
|
)
|
||
Adjustments
to reconcile net loss to net cash
|
||||||||
used in operating activities:
|
||||||||
Depreciation
and amortization
|
232,752
|
211,893
|
||||||
Write-off
of uncollectible accounts receivable
|
-
|
25,000
|
||||||
Amortization
of deferred charges
|
91,099
|
433,413
|
||||||
Amortization
of deferred revenue
|
(536,971
|
)
|
(311,160
|
)
|
||||
Redeemable
preferred stock dividend accrual
|
31,348
|
-
|
||||||
Stock
based compensation
|
193,697
|
645,602
|
||||||
Amortization
of deferred issuance costs
|
289,790
|
2,896,649
|
||||||
Amortization
of discounts
|
10,230
|
9,525,843
|
||||||
Loss
on modification of debentures
|
1,796,368
|
-
|
||||||
Adjustments
to fair value of derivatives
|
37,542,986
|
(8,227,176
|
)
|
|||||
Charges
related to issuance of 2008 convertible debentures
|
-
|
1,217,342
|
||||||
Repricing
of 2006 and 2007 convertible debentures and warrants
|
-
|
(847,588
|
)
|
|||||
Shares
of common stock issued for services
|
-
|
8,616
|
||||||
Warrants
issued for consulting services
|
-
|
155,281
|
||||||
Charges
related to settlement of anti-dilution provision
|
-
|
15,581
|
||||||
Issuance
of note for services received
|
-
|
750,000
|
||||||
Shares
of common stock issued for financing costs
|
-
|
316,059
|
||||||
Non-cash
rent expense
|
-
|
254,231
|
||||||
Forfeiture
of rent deposits
|
-
|
88,504
|
||||||
Loss
on settlement of litigation
|
4,793,949
|
-
|
||||||
Loss
attributable to investment in joint venture
|
144,438
|
-
|
||||||
Amortization
of deferred joint venture obligations
|
(83,185
|
)
|
-
|
|||||
(Increase)
/ decrease in assets:
|
||||||||
Accounts
receivable
|
261,504
|
(4,767
|
)
|
|||||
Prepaid
expenses
|
(13,990
|
)
|
(39,192
|
)
|
||||
Increase
/ (decrease) in current liabilities:
|
||||||||
Accounts
payable and accrued expenses
|
(2,408,138
|
)
|
3,785,714
|
|||||
Accrued
default interest
|
1,109,607
|
4,813
|
||||||
Deferred
revenue
|
3,050,000
|
450,000
|
||||||
Net
cash used in operating activities
|
(1,931,196
|
)
|
(3,754,418
|
)
|
||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Purchases
of property and equipment
|
(3,388
|
)
|
(168,549
|
)
|
||||
Payment
of deposits
|
(2,170
|
)
|
-
|
|||||
Net
cash used in investing activities
|
(5,558
|
)
|
(168,549
|
)
|
||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Proceeds
from issuance of convertible notes
|
-
|
2,812,432
|
||||||
Payments
on notes and leases
|
-
|
(18,650
|
)
|
|||||
Payment
for issuance costs on note payable
|
-
|
(3,660
|
)
|
|||||
Proceeds
from issuance of Series A-1 redeemable convertible preferred
stock
|
1,809,761
|
-
|
||||||
Net
cash provided by financing activities
|
1,809,761
|
2,790,122
|
||||||
NET
DECREASE IN CASH AND CASH EQUIVALENTS
|
(126,993
|
)
|
(1,132,845
|
)
|
||||
CASH
AND CASH EQUIVALENTS, BEGINNING BALANCE
|
816,904
|
1,166,116
|
||||||
CASH
AND CASH EQUIVALENTS, ENDING BALANCE
|
$
|
689,911
|
$
|
33,271
|
||||
CASH
PAID FOR:
|
||||||||
Interest
|
$
|
-
|
$
|
2,504
|
||||
Income
taxes
|
$
|
514
|
$
|
-
|
||||
SUPPLEMENTAL
DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
|
||||||||
Issuance
of 45,030,046 shares of common stock in redemption of convertible
debentures
|
$
|
-
|
$
|
4,634,221
|
||||
Issuance
of 6,176,413 and 38,100,654 shares of common stock in conversion of
convertible debentures
|
$
|
331,802
|
$
|
5,915,442
|
||||
Issuance
of 24,900,000 shares of common stock in payment of convertible preferred
stock issuance costs
|
$
|
4,731,000
|
$
|
-
|
||||
Issuance
of 39,380,847 shares of common stock in settlement of
litigation
|
$
|
5,299,148
|
$
|
-
|
||||
Issuance
of 70,503 shares of common stock to settle an anti-dilution provision
feature of
|
||||||||
convertible debenture
|
$
|
-
|
$
|
15,581
|
||||
Issuance
of 1,200,000 shares of common stock upon cash-less exercise of employee
stock options
|
$
|
-
|
$
|
60,000
|
·
|
Between
September 29, 2008 and January 20, 2009, the Company settled certain past
due accounts payable by the issuance of shares of its common stock. In
aggregate, the Company settled $1,108,673 in accounts payable through the
issuance of 260,116,283 shares of its common
stock.
|
·
|
On
December 18, 2008, the Company entered into a license agreement with an
Ireland-based investor, Transition Holdings Inc. (“Transition”), for
certain of its non-core technology. Under the agreement, Transition agreed
to acquire a license to the technology for $3.5 million in cash. Through
December 31, 2008, the Company had received $2 million in cash under this
agreement. During the six months ended June 30, 2009, the Company received
$1.5 million in cash under this agreement. The Company expects to apply
the proceeds towards its retinal epithelium (“RPE”) cells program. See
Note 3.
|
·
|
On
March 30, 2009, the Company entered into a license agreement with CHA Bio
& Diostech Co., Ltd. (“CHA”) under which the Company will license its
retinal pigment epithelium (“RPE”) technology, for the treatment of
diseases of the eye, to CHA for development and commercialization
exclusively in Korea. The Company is eligible to receive up to a total of
$1.9 million in fees based upon the parties achieving certain milestones,
including the Company making an IND submission to the US FDA to commence
clinical trials in humans using the technology. The Company received an
up-front fee under the license in the amount of $1,100,000 during the
second quarter of 2009. Under the agreement, CHA will incur all of the
costs associated with the RPA clinical trials in Korea. The agreement is
part of continuing cooperation and collaboration between the two
companies. See Note 3.
|
·
|
On
March 11, 2009, the Company entered into a $5 million credit facility
(“Facility”) with a life sciences fund. Under the agreement, the proceeds
from the Facility must be used exclusively for the Company to file an
investigational new drug (“IND”) for its retinal pigment epithelium
(“RPE”) program, and will allow the Company to complete both Phase I and
Phase II studies in humans. An IND is required to commence clinical
trials. Under the terms of the agreement, the Company may draw down funds,
as needed for clinical development of the RPE program, from the investor
through the issuance of Series A-1 redeemable convertible preferred stock.
The preferred stock pays dividends, in kind of preferred stock, at an
annual rate of 10%, matures in four years from the initial issuance date,
and is convertible into common stock at $0.75 per share. As of August 10,
2009, the Company has drawn down approximately $2,169,000 on this
facility. See Note 11.
|
·
|
On
May 13, 2009, the Company entered into another license agreement with CHA
under which the Company will license its proprietary “single blastomere
technology,” which has the potential to generate stable cell lines,
including RPE for the treatment of diseases of the eye, for development
and commercialization exclusively in Korea. The Company received an
upfront license fee of $300,000. See Note
3.
|
·
|
On
July 29, 2009, the Company entered into a consent, amendment and exchange
agreement with holders of the Company’s outstanding convertible debentures
and warrants, which were issued in private placements to the 2005, 2006,
2007 and 2008 debentures. The Company agreed to issue to each debenture
holder in exchange for the holder’s debenture an amended and restated
debenture in a principle amount equal to the principal amount of the
holder’s debenture times 1.35 minus any interest paid thereon. The
conversion price under the amended and restated debentures was reduced to
$0.10, subject to certain customary anti-dilution adjustments. The
maturity date under the amended and restated debentures was extended until
December 30, 2010. The amended and restated debentures bear interest at
12% per annum. Further, the Company agreed to issue to each holder in
exchange for the holder’s warrant an amended and restated warrant, which
exercise price was reduced to $0.10, subject to certain customary
anti-dilution adjustments. The termination date under the amended and
restated warrants was extended until June 30, 2014. Simultaneously with
the signing of this agreement, the Company and the debenture holders
entered into a standstill and forbearance agreement, whereby the debenture
holders agreed to forbear from exercising their rights and remedies under
the original debentures and transaction
documents.
|
·
|
Management
anticipates raising additional future capital from its current convertible
debenture holders, or other financing sources, that will be used to fund
any capital shortfalls. The terms of any financing will likely be
negotiated based upon current market terms for similar financings. No
commitments have been received for additional investment and no assurances
can be given that this financing will ultimately be
completed.
|
·
|
Management
has focused its scientific operations on product development in order to
accelerate the time to market products which will ultimately generate
revenues. While the amount or timing of such revenues cannot be
determined, management believes that focused development will ultimately
provide a quicker path to revenues, and an increased likelihood of raising
additional financing.
|
·
|
Management
will continue to pursue licensing opportunities of the Company’s extensive
intellectual property portfolio.
|
Machinery
& equipment
|
4
years
|
|
Computer
equipment
|
3
years
|
|
Office
furniture
|
4
years
|
|
Leasehold
improvements
|
Lesser
of lease life or economic life
|
|
Capital
leases
|
Lesser
of lease life or economic life
|
·
|
Level
1 inputs to the valuation methodology are quoted prices for identical
assets or liabilities in active
markets.
|
·
|
Level
2 inputs to the valuation methodology include quoted prices for similar
assets and liabilities in active markets, and inputs that are observable
for the asset or liability, either directly or indirectly, for
substantially the full term of the financial
instrument.
|
·
|
Level
3 inputs to the valuation methodology are unobservable and significant to
the fair value measurement.
|
Fair
Value Measurements at
|
||||||||||||||||
Fair
Value
|
June
30, 2009
|
|||||||||||||||
As
of
|
Using
Fair Value Hierarchy
|
|||||||||||||||
Derivative
Liabilities
|
June
30, 2009
|
Level
1
|
Level
2
|
Level
3
|
||||||||||||
Conversion
option - 2005 debenture
|
53,897
|
-
|
53,897
|
-
|
||||||||||||
2006
Convertible debenture and embedded derivatives
|
2,733,345
|
-
|
2,733,345
|
-
|
||||||||||||
2007
Convertible debenture and embedded derivatives
|
17,859,334
|
-
|
17,859,334
|
-
|
||||||||||||
February
2008 Convertible debentures and embedded derivatives
|
1,775,904
|
-
|
1,775,904
|
-
|
||||||||||||
April
2008 Convertible debenture and embedded derivatives
|
8,165,561
|
-
|
8,165,561
|
-
|
||||||||||||
Embedded
derivative liability
|
540,098
|
-
|
540,098
|
-
|
||||||||||||
Warrant
and option derivatives
|
26,334,356
|
-
|
26,334,356
|
-
|
||||||||||||
57,462,495
|
-
|
57,462,495
|
-
|
Expected
life in years
|
4.0
|
|||
Volatility
|
148
|
%
|
||
Risk
free interest rate
|
2.50
|
%
|
||
Expected
dividends
|
None
|
|||
Expected
forfeitures
|
13
|
%
|
3
Months Ended
|
6
Months Ended
|
|||||||||||||||
June
30,
|
June
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Genzyme
Transgenics Corporation
|
13
|
%
|
19
|
%
|
12
|
%
|
22
|
%
|
||||||||
Exeter
Life Sciences, Inc.
|
13
|
%
|
18
|
%
|
11
|
%
|
20
|
%
|
||||||||
Lifeline
Cell Technology
|
*
|
*
|
*
|
11
|
%
|
|||||||||||
Start
Licensing, Inc.
|
10
|
%
|
14
|
%
|
*
|
17
|
%
|
|||||||||
Terumo
Corporation
|
10
|
%
|
**
|
19
|
%
|
17
|
%
|
|||||||||
International
Stem Cell Corporation
|
10
|
%
|
**
|
12
|
%
|
*
|
||||||||||
Transition
Holdings, Inc.
|
21
|
%
|
**
|
18
|
%
|
**
|
||||||||||
CHA
Biotech Co., Ltd.
|
10
|
%
|
**
|
*
|
**
|
Current
assets
|
$
|
34,434
|
||
Noncurrent
assets
|
$
|
516,877
|
||
Current
liabilities
|
$
|
271,984
|
||
Noncurrent
liabilities
|
$
|
501,683
|
||
Net
revenue
|
$
|
13,389
|
||
Net
loss
|
$
|
(615,318
|
)
|
Balance,
December 31, 2008
|
$
|
225,200
|
||
Losses
attributable to investment
|
(144,438
|
)
|
||
Amortization
of premium
|
(80,762
|
)
|
||
Balance,
June 30, 2009
|
$
|
-
|
June
30,
|
December
31,
|
Increase
|
||||||||||
2009
|
2008
|
(Decrease)
|
||||||||||
Principal
Due
|
$
|
4,038,880
|
$
|
4,038,880
|
$
|
-
|
||||||
Fair
Value
|
$
|
8,165,561
|
$
|
4,066,505
|
$
|
4,099,056
|
June
30,
|
December
31,
|
Increase
|
||||||||||
2009
|
2008
|
(Decrease)
|
||||||||||
Note
A:
|
||||||||||||
Principal
Due
|
$
|
600,000
|
$
|
600,000
|
$
|
-
|
||||||
Fair
Value
|
1,479,921
|
1,464,558
|
15,363
|
|||||||||
Note
B:
|
||||||||||||
Principal
Due
|
$
|
120,000
|
$
|
120,000
|
$
|
-
|
||||||
Fair
Value
|
295,983
|
292,912
|
3,071
|
|||||||||
Total
Increase (Decrease)
|
$
|
18,434
|
June
30,
|
December
31,
|
Increase
|
||||||||||
2009
|
2008
|
(Decrease)
|
||||||||||
Principal
Due
|
$
|
6,739,215
|
$
|
6,984,297
|
$
|
(245,082
|
)
|
|||||
Fair
Value
|
$
|
17,859,334
|
$
|
7,706,344
|
$
|
10,152,990
|
June
30,
|
December
31,
|
Increase
|
||||||||||
2009
|
2008
|
(Decrease)
|
||||||||||
Principal
Due
|
$
|
1,854,875
|
$
|
1,941,595
|
$
|
(86,720
|
)
|
|||||
Fair
Value
|
$
|
2,733,345
|
$
|
1,993,354
|
$
|
739,991
|
June
30,
|
December
31,
|
Increase
|
||||||||||
2009
|
2008
|
(Decrease)
|
||||||||||
Principal
Due
|
$
|
81,922
|
$
|
81,922
|
$
|
-
|
||||||
Fair
Value
|
$
|
135,819
|
$
|
85,997
|
$
|
49,822
|
June
30,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
2005
debenture
|
$
|
29,434
|
$
|
22,121
|
||||
2006
debenture
|
666,434
|
524,284
|
||||||
2007
debenture
|
2,421,317
|
1,885,951
|
||||||
February
2008 debenture
|
258,687
|
194,420
|
||||||
April
2008 debenture
|
1,451,120
|
1,090,608
|
||||||
$
|
4,826,991
|
$
|
3,717,384
|
Black-Scholes
Assumptions
|
|||||||||||||||||||||||
at
Draw Date
|
|||||||||||||||||||||||
Draw
|
Draw
|
Dividend
|
Expected
|
Risk-Free
|
Expected
|
Fair
|
|||||||||||||||||
Amount
|
Date
|
Yield
|
Volatility
|
Rate
|
Life
(Yrs)
|
Value
|
|||||||||||||||||
$
|
1,100,000
|
4/6/2009
|
0
|
%
|
190
|
%
|
1.90
|
%
|
4.00
|
$
|
139,985
|
||||||||||||
87,000
|
4/28/2009
|
0
|
%
|
190
|
%
|
1.83
|
%
|
3.94
|
9,951
|
||||||||||||||
105,000
|
5/1/2009
|
0
|
%
|
190
|
%
|
2.03
|
%
|
3.93
|
12,007
|
||||||||||||||
81,036
|
5/19/2009
|
0
|
%
|
190
|
%
|
2.12
|
%
|
3.88
|
12,204
|
||||||||||||||
162,624
|
6/9/2009
|
0
|
%
|
190
|
%
|
2.86
|
%
|
3.83
|
28,428
|
||||||||||||||
131,644
|
6/15/2009
|
0
|
%
|
190
|
%
|
2.75
|
%
|
3.81
|
26,237
|
||||||||||||||
67,457
|
6/26/2009
|
0
|
%
|
190
|
%
|
2.53
|
%
|
3.78
|
20,145
|
||||||||||||||
75,000
|
6/29/2009
|
0
|
%
|
190
|
%
|
2.53
|
%
|
3.77
|
22,386
|
||||||||||||||
$
|
1,809,761
|
$
|
271,343
|
June
30,
|
Inception
|
Increase
|
||||||||||
2009
|
Dates*
|
(Decrease)
|
||||||||||
Principal
Due
|
$
|
1,809,761
|
$
|
1,809,761
|
$
|
-
|
||||||
Accrued
Dividend
|
31,348
|
-
|
31,348
|
|||||||||
Debt
Discount
|
(261,115
|
)
|
(271,343
|
)
|
10,228
|
|||||||
1,579,994
|
1,538,418
|
41,576
|
||||||||||
Less
current portion
|
-
|
-
|
-
|
|||||||||
Non-current
portion
|
$
|
1,579,994
|
$
|
1,538,418
|
$
|
41,576
|
||||||
Aggregate
liquidation value**
|
$
|
1,841,109
|
$
|
1,809,761
|
$
|
31,348
|
Weighted
|
||||||||||||||||
Weighted
|
Average
|
Aggregate
|
||||||||||||||
Average
|
Remaining
|
Intrinsic
|
||||||||||||||
Number of
|
Exercise
|
Contractual
|
Value
|
|||||||||||||
Warrants
|
Price
|
Life
(in years)
|
(000)
|
|||||||||||||
Outstanding,
December 31, 2008
|
129,397,951
|
$
|
0.26
|
3.23
|
$
|
-
|
||||||||||
Granted
|
-
|
-
|
||||||||||||||
Exercised
|
-
|
-
|
||||||||||||||
Forfeited
|
(211,000
|
)
|
$
|
1.44
|
||||||||||||
Outstanding,
June 30, 2009
|
129,186,951
|
$
|
0.27
|
2.74
|
-
|
|||||||||||
Vested
and expected to vest at June 30, 2009
|
129,186,951
|
$
|
0.27
|
2.74
|
-
|
|||||||||||
Exercisable,
June 30, 2009
|
129,186,951
|
$
|
0.27
|
2.74
|
-
|
Warrants
Outstanding
|
Warrants
Exercisable
|
||||||||||||||||||||
Weighted
|
Weighted
|
Weighted
|
|||||||||||||||||||
Average
|
Average
|
Average
|
|||||||||||||||||||
Exercise
|
Number
|
Remaining
|
Exercise
|
Number
|
Exercise
|
||||||||||||||||
Price
|
of
Shares
|
Life
(Years)
|
Price
|
of
Shares
|
Price
|
||||||||||||||||
$
|
0.17
|
95,630,311
|
3.00
|
$
|
0.17
|
95,630,311
|
$
|
0.17
|
|||||||||||||
0.32
|
11,148,147
|
2.19
|
0.32
|
11,148,147
|
0.32
|
||||||||||||||||
0.34
|
8,753,762
|
1.23
|
0.34
|
8,753,762
|
0.34
|
||||||||||||||||
0.38
- 0.40
|
5,902,908
|
3.84
|
0.39
|
5,902,908
|
0.39
|
||||||||||||||||
0.85
- 0.96
|
5,734,831
|
1.46
|
0.95
|
5,734,831
|
0.95
|
||||||||||||||||
2.20
|
72,917
|
2.13
|
2.20
|
72,917
|
2.20
|
||||||||||||||||
2.48
- 2.54
|
1,944,075
|
0.46
|
2.54
|
1,944,075
|
2.54
|
||||||||||||||||
129,186,951
|
129,186,951
|
Three Months Ended
June 30, 2009
|
Three Months Ended
June 30, 2008
|
|||||||
Embedded
Pipe derivatives - 9.05
|
$
|
33,954
|
$
|
79,309
|
||||
Pipe
Hybrid instrument – 9.06
|
569,326
|
280,948
|
||||||
Pipe
Hybrid- FAS 155 – 8.07
|
6,583,530
|
(1,518,774
|
)
|
|||||
Pipe
Hybrid- February 2008
|
245,421
|
195,270
|
||||||
Pipe
Hybrid- April 2008
|
3,623,936
|
141,105
|
||||||
Series
A-1 Preferred Stock conversion option
|
268,754
|
-
|
||||||
Original
warrants PIPE 2005 , excluding replacement warrants
|
257,479
|
141,407
|
||||||
Replacement
Warrants
|
1,583,911
|
912,776
|
||||||
Warrants
– PIPE 2006-investors
|
2,369,038
|
1,397,606
|
||||||
Warrants
– PIPE 2007-investors
|
4,975,723
|
3,338,410
|
||||||
Warrants
– PIPE 2008-investors
|
4,205,629
|
816,232
|
||||||
Other
Warrant Derivatives- 2005 and 2006
|
1,552,169
|
1,173,275
|
||||||
Other
Warrants Derivatives - 2007
|
432,504
|
249,341
|
||||||
$
|
26,701,374
|
$
|
7,206,905
|
Six Months Ended
June 30, 2009
|
Six Months Ended
June 30, 2008
|
|||||||
Embedded
Pipe derivatives - 9.05
|
$
|
49,822
|
$
|
168,857
|
||||
Pipe
Hybrid instrument – 9.06
|
826,711
|
695,790
|
||||||
Pipe
Hybrid- FAS 155 – 8.07
|
9,078,716
|
(1,301,276
|
)
|
|||||
Pipe
Hybrid- February 2008
|
18,434
|
258,632
|
||||||
Pipe
Hybrid- April 2008
|
3,622,043
|
141,105
|
||||||
Series
A-1 Preferred Stock conversion option
|
268,754
|
-
|
||||||
Original
warrants PIPE 2005 , excluding replacement warrants
|
368,033
|
156,014
|
||||||
Replacement
Warrants
|
2,427,804
|
956,978
|
||||||
Warrants
– PIPE 2006-investors
|
3,673,292
|
1,478,337
|
||||||
Warrants
– PIPE 2007-investors
|
7,632,265
|
3,286,787
|
||||||
Warrants
– PIPE 2008-investors
|
6,576,694
|
816,232
|
||||||
Other
Warrant Derivatives- 2005 and 2006
|
2,333,904
|
1,296,746
|
||||||
Other
Warrants Derivatives - 2007
|
666,514
|
272,974
|
||||||
$
|
37,542,986
|
$
|
8,227,176
|
Debenture
|
||||||||||||
Impact
on Debentures
|
Change
|
Face
Value
|
%
Change
|
|||||||||
2007
Debenture
|
$
|
1,319,354
|
$
|
6,739,214
|
20
|
%
|
||||||
April
2008 Debenture
|
$
|
477,014
|
$
|
4,038,880
|
12
|
%
|
Weighted
|
||||||||||||||||
Weighted
|
Average
|
Aggregate
|
||||||||||||||
Average
|
Remaining
|
Intrinsic
|
||||||||||||||
Number of
|
Exercise
|
Contractual
|
Value
|
|||||||||||||
Options
|
Price
|
Life
(in years)
|
(000)
|
|||||||||||||
Outstanding,
January 1, 2009
|
14,485,580
|
$
|
0.55
|
7.25
|
$
|
-
|
||||||||||
Granted
|
-
|
-
|
||||||||||||||
Exercised
|
-
|
-
|
||||||||||||||
Forfeited
|
-
|
-
|
||||||||||||||
Outstanding,
June 30, 2009
|
14,485,580
|
$
|
0.55
|
6.75
|
$
|
404
|
||||||||||
Vested
and expected to vest
|
||||||||||||||||
at
June 30, 2009
|
14,011,163
|
0.56
|
6.69
|
386
|
||||||||||||
Exercisable,
June 30, 2009
|
10,836,220
|
0.66
|
6.15
|
232
|
Weighted
|
||||||||
Average
|
||||||||
Grant
Date
|
||||||||
Fair
Value
|
||||||||
Shares
|
Per
Share
|
|||||||
Unvested
at January 1, 2009
|
4,769,159
|
$
|
0.23
|
|||||
Granted
|
-
|
-
|
||||||
Vested
|
(1,119,799
|
)
|
0.27
|
|||||
Forfeited
|
-
|
-
|
||||||
Unvested
at June 30, 2009
|
3,649,360
|
$
|
0.22
|
|
Options
Outstanding
|
Options
Exercisable
|
|||||||||||||||||||||
Weighted
|
Weighted
|
Weighted
|
|||||||||||||||||||||
Average
|
Average
|
Average
|
|||||||||||||||||||||
Exercise
|
Number
|
Remaining
|
Exercise
|
Number
|
Exercise
|
||||||||||||||||||
Price
|
of
Shares
|
Life
(Years)
|
Price
|
of
Shares
|
Price
|
||||||||||||||||||
$
|
0.05
|
820,000
|
5.12
|
$
|
0.05
|
820,000
|
$
|
0.05
|
|||||||||||||||
0.21
|
6,007,403
|
8.37
|
0.21
|
2,396,165
|
0.21
|
||||||||||||||||||
0.25
|
1,301,161
|
5.51
|
0.25
|
1,301,161
|
0.25
|
||||||||||||||||||
0.85
|
5,604,099
|
5.59
|
0.85
|
5,574,100
|
0.85
|
||||||||||||||||||
1.35
|
150,000
|
6.81
|
1.35
|
150,000
|
1.35
|
||||||||||||||||||
2.04
- 2.11
|
165,000
|
6.50
|
2.07
|
156,877
|
2.07
|
||||||||||||||||||
2.20
- 2.48
|
437,917
|
6.18
|
2.27
|
437,917
|
2.27
|
||||||||||||||||||
14,485,580
|
10,836,220
|
Year
1
|
$
|
225,281
|
||
Year
2
|
-
|
|||
Total
|
$
|
225,281
|
·
|
The
Company acknowledged certain defaults that have occurred under the
Debentures and documents executed in connection therewith (the
“Transaction Documents”).
|
·
|
The
Holders agreed to forbear from exercising their rights and remedies under
the Debentures and the Transaction Documents.
|
|
·
|
The
obligation of the Holders to forbear from exercising their rights and
remedies under the Debentures and the Transaction Documents will terminate
on the earliest of (i) the date, if any, on which a petition for relief
under the date, if any, on which a petition for relief under the United
States Bankruptcy Code or any similar state or Canadian law is filed by or
against the Company or any of its subsidiaries or (ii) the date the
Forbearance Agreement is otherwise terminated or expires, it being
understood that the Holders holding 67% of the then outstanding principal
amount of the Debentures shall have the right to terminate the Forbearance
Agreement on 3 business days’ prior notice to the
Company.
|
·
|
The
Company provided a general release in favor of the
Holders.
|
·
|
The
Company agreed to issue to each Holder in exchange for such Holder’s
Debenture an amended and restated Debenture (the “Amended and Restated
Debentures”) in a principal amount equal to the principal amount of such
Holder’s Debenture times 1.35 minus any interest paid
thereon.
|
|
·
|
The
conversion price under the Amended and Restated Debentures was reduced to
$0.10, subject to further adjustment as provided therein (including for
stock splits, stock dividends, and certain subsequent equity
sales).
|
·
|
The
maturity date under the Amended and Restated Debentures was extended until
December 31, 2010.
|
|
·
|
The
Amended and Restated Debentures bear interest at the rate of 12% per
annum, which shall accrete to, and increase the principal amount payable
upon maturity.
|
·
|
The
Amended and Restated Debentures will begin to amortize on September 25,
2009 at a rate of 6.25% of the outstanding principal amount per month,
valued at the lesser of the then conversion price and 90% of the average
volume weighted average price for the ten prior trading
days.
|
|
·
|
The
Company agreed to issue to each Holder in exchange for such Holder’s
Warrant an amended and restated Warrant (the “Amended and Restated
Warrants”).
|
·
|
The
exercise price under the Amended and Restated Warrants was reduced to
$0.10 subject to further adjustment as provided therein (including for
stock splits, stock dividends, and certain subsequent equity
sales).
|
|
·
|
The
termination date under the Amended and Restated Warrants was extended
until June 30, 2014.
|
·
|
Each
Holder agreed not to convert more than 20% of such Holder’s outstanding
principal amount of Amended and Restated Debenture in any month during the
period from September 1, 2009 through January 31, 2010, provided, however,
that this limitation will terminate if (i)(a) the volume weighted average
price of the Company’s common stock for each of 5 consecutive trading days
is greater than $0.15 per share, and (b) the trading volume on such days
exceeds 7,500,000 shares per trading day, or (ii)(a) the volume weighted
average price for any one trading day is greater than $0.20 per share and
(b) the trading volume on such day exceeds 10,000,000
shares.
|
|
·
|
The
Company agreed to amend its articles of incorporation to increase the
number of authorized shares of Common Stock (the “Amendment”). If the
Company does not receive the receive the requisite shareholder approval
for, and receive acceptance of the filing for, the Amendment by September
25, 2009, the Company shall pay to the Holders, monthly commencing on
September 25, 2009, until the Amendment is duly filed, liquidated damages
equal to 5% of the purchase price of the
Debentures.
|
·
|
The
Company agreed to increase the number of shares available for issuance
under the Company’s 2005 Stock Incentive Plan to 129,000,000 shares, by
September 18, 2009.
|
|
·
|
The
Holders agreed to waive any event of default under the Debentures
resulting solely from (i) any adjustment to the conversion price of the
Debenture and exercise price of the Warrants that would result from the
reduction of the conversion price of certain securities of the Company
pursuant to the Stipulation of Settlement, dated March 11, 2009, between
the Company and Alpha Capital, and (ii) any failure by the Company to
reserve such number of authorized but unissued shares of common stock
issuable upon conversion of the Debentures and exercise of the
Warrants.
|
December 31,
|
December 31,
|
|||||||
2008
|
2007
|
|||||||
(restated)
|
||||||||
ASSETS
|
||||||||
CURRENT
ASSETS:
|
||||||||
Cash
and cash equivalents
|
$
|
816,904
|
$
|
1,166,116
|
||||
Accounts
receivable
|
261,504
|
27,026
|
||||||
Prepaid
expenses
|
32,476
|
68,416
|
||||||
Deferred
royalty fees, current portion
|
182,198
|
341,274
|
||||||
Total
current assets
|
1,293,082
|
1,602,832
|
||||||
Property
and equipment, net
|
400,008
|
914,504
|
||||||
Investment
in joint venture
|
225,200
|
-
|
||||||
Deferred
royalty fees, less current portion
|
659,488
|
1,202,430
|
||||||
Deposits
|
-
|
115,192
|
||||||
Deferred
issuance costs, net of amortization of $8,666,387 and
$3,874,300
|
-
|
4,772,087
|
||||||
TOTAL
ASSETS
|
$
|
2,577,778
|
$
|
8,607,045
|
||||
LIABILITIES AND STOCKHOLDERS'
DEFICIT
|
||||||||
CURRENT
LIABILITIES:
|
||||||||
Accounts
payable
|
$
|
8,287,786
|
$
|
5,517,876
|
||||
Accrued
expenses
|
2,741,591
|
1,120,781
|
||||||
Accrued
default interest
|
3,717,384
|
-
|
||||||
Deferred
revenue, current portion
|
834,578
|
497,374
|
||||||
Advances
payable - other
|
130,000
|
130,000
|
||||||
2005
Convertible debenture and embedded derivatives, net of discounts of $0 and
$600,246
|
85,997
|
1,276,871
|
||||||
2006
Convertible debenture and embedded derivatives (fair value $1,993,354 and
$3,939,862)
|
1,993,354
|
1,625,327
|
||||||
2007
Convertible debenture and embedded derivatives (fair value $7,706,344 and
$3,874,026)
|
7,706,344
|
1,160,847
|
||||||
February
2008 Convertible debenture and embedded derivatives (fair value $1,757,470
and $0)
|
1,757,470
|
-
|
||||||
April
2008 Convertible debenture and embedded derivatives (fair value $4,066,505
and $0)
|
4,066,505
|
-
|
||||||
Warrant
and option derivatives, current portion
|
2,655,849
|
14,574
|
||||||
Deferred
joint venture obligations, current portion
|
167,335
|
-
|
||||||
Short
term capital leases
|
12,955
|
31,605
|
||||||
Notes
payable, other
|
468,425
|
468,425
|
||||||
Total
current liabilities
|
34,625,573
|
11,843,680
|
||||||
2006
Convertible debenture and embedded derivatives, less current portion (fair
value $0 and $3,447,230)
|
-
|
1,422,164
|
||||||
2007
Convertible debenture and embedded derivatives, less current portion (fair
value $0 and $7,748,052)
|
-
|
2,321,695
|
||||||
Warrant
and option derivatives, less current portion
|
-
|
13,011,751
|
||||||
Deferred
joint venture obligations, less current portion
|
63,473
|
-
|
||||||
Deferred
revenue, less current portion
|
3,817,716
|
1,534,485
|
||||||
Total
liabilities
|
38,506,762
|
30,133,775
|
||||||
Commitments
and contingencies
|
-
|
-
|
||||||
STOCKHOLDERS'
DEFICIT:
|
||||||||
Preferred
stock, $0.001 par value; 50,000,000 shares authorized, 0 issued and
outstanding
|
-
|
-
|
||||||
Common
stock, $0.001par value; 500,000,000 shares
authorized, 429,448,381 and 85,027,461 issued and
outstanding
|
429,448
|
85,027
|
||||||
Additional
paid-in capital
|
53,459,172
|
34,302,334
|
||||||
Accumulated
deficit
|
(89,817,604
|
)
|
(55,914,091
|
)
|
||||
Total
stockholders' deficit
|
(35,928,984
|
)
|
(21,526,730
|
)
|
||||
TOTAL
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
$
|
2,577,778
|
$
|
8,607,045
|
2008
|
2007
|
|||||||
(restated)
|
||||||||
Revenue (License fees
and royalties)
|
$
|
787,106
|
$
|
647,349
|
||||
Cost
of Revenue
|
765,769
|
428,913
|
||||||
Gross
profit
|
21,337
|
218,436
|
||||||
Operating
expenses:
|
||||||||
Research
and development
|
8,635,577
|
12,744,913
|
||||||
In-process
R&D expense - Mytogen
|
-
|
4,094,736
|
||||||
Grant
reimbursements
|
(105,169
|
)
|
(67,179
|
)
|
||||
General
and administrative expenses
|
5,009,418
|
6,781,705
|
||||||
Total
operating expenses
|
13,539,826
|
23,554,175
|
||||||
Loss
from operations
|
(13,518,489
|
)
|
(23,335,739
|
)
|
||||
Non-operating
income (expense):
|
||||||||
Interest
income
|
7,933
|
162,091
|
||||||
Interest
expense and late fees
|
(26,614,761
|
)
|
(21,023,663
|
)
|
||||
Finance
cost
|
(806,079
|
)
|
(15,400
|
)
|
||||
Charges
related to issuance of 2008 convertible debentures
|
(1,217,342
|
)
|
-
|
|||||
Charges
related to issuance of 2007 convertible debenture and
warrants
|
-
|
(3,871,656
|
)
|
|||||
Charges
related to repricing of 2005 convertible debenture and
warrants
|
-
|
(843,277
|
)
|
|||||
Income
related to repricing of 2006 and 2007 convertible debentures and
warrants
|
847,588
|
-
|
||||||
Adjustments
to fair value of derivatives
|
13,082,247
|
32,835,057
|
||||||
Losses
attributable to equity method investment
|
(20,930
|
)
|
-
|
|||||
Loss
on disposal of fixed assets
|
(227,543
|
)
|
-
|
|||||
Gain
(loss) on settlement
|
(5,436,137
|
)
|
193,862
|
|||||
Total
non-operating income (expense)
|
(20,385,024
|
)
|
7,437,014
|
|||||
Loss
before income tax
|
(33,903,513
|
)
|
(15,898,725
|
)
|
||||
Income
tax
|
-
|
-
|
||||||
Net
loss
|
$
|
(33,903,513
|
)
|
$
|
(15,898,725
|
)
|
||
Weighted
average shares outstanding :
|
||||||||
Basic
|
245,279,135
|
61,115,618
|
||||||
Diluted
|
245,279,135
|
61,115,618
|
||||||
Loss
per share:
|
||||||||
Basic
|
$
|
(0.14
|
)
|
$
|
(0.26
|
)
|
||
Diluted
|
$
|
(0.14
|
)
|
$
|
(0.26
|
)
|
Additional
|
Total
|
|||||||||||||||||||
Common Stock
|
Paid in
|
Accumulated
|
Stockholders'
|
|||||||||||||||||
Shares
|
Amount
|
Capital
|
Deficit
|
Deficit
|
||||||||||||||||
Balance
December 31, 2006 (Restated)
|
39,318,070
|
39,318
|
12,291,873
|
(40,015,366
|
)
|
(27,684,175
|
)
|
|||||||||||||
Convertible
debentures redemptions
|
19,243,386
|
19,243
|
6,879,914
|
-
|
6,899,157
|
|||||||||||||||
Convertible
debentures conversions
|
16,625,579
|
16,626
|
11,069,317
|
-
|
11,085,943
|
|||||||||||||||
Issuance
of stock in payment of board fees
|
35,909
|
36
|
20,716
|
-
|
20,752
|
|||||||||||||||
Option
compensation charges
|
-
|
-
|
531,113
|
-
|
531,113
|
|||||||||||||||
Issuance
of stock in payment of license fees
|
800,000
|
800
|
607,200
|
-
|
608,000
|
|||||||||||||||
Issuance
of stock in payment of employee bonuses
|
515,000
|
515
|
406,335
|
-
|
406,850
|
|||||||||||||||
Issuance
of stock to employees
|
340,000
|
340
|
16,660
|
-
|
17,000
|
|||||||||||||||
Issuance
of stock in payment of legal fees
|
85,000
|
85
|
67,915
|
-
|
68,000
|
|||||||||||||||
Issuance
of stock in acquisition of Mytogen
|
9,064,517
|
8,064
|
2,411,291
|
-
|
2,419,355
|
|||||||||||||||
Net
loss for the year ended December 31, 2007 (Restated)
|
-
|
-
|
-
|
(15,898,725
|
)
|
(15,898,725
|
)
|
|||||||||||||
Balance
December 31, 2007 (Restated)
|
85,027,461
|
$
|
85,027
|
$
|
34,302,334
|
$
|
(55,914,091
|
)
|
$
|
(21,526,730
|
)
|
|||||||||
Convertible
debentures redemptions
|
65,463,111
|
65,463
|
5,390,989
|
-
|
5,456,452
|
|||||||||||||||
Convertible
debentures conversions
|
39,741,987
|
39,743
|
6,121,900
|
-
|
6,161,643
|
|||||||||||||||
Issuance
of stock for debenture financing costs
|
14,710,329
|
14,710
|
791,369
|
-
|
806,079
|
|||||||||||||||
Option
compensation charges
|
-
|
-
|
527,243
|
-
|
527,243
|
|||||||||||||||
Adjustment
to fair value of derivatives
|
-
|
-
|
78,367
|
-
|
78,367
|
|||||||||||||||
Issuance
in respect of anti-dilution provision of convertible
debenture
|
70,503
|
71
|
15,510
|
-
|
15,581
|
|||||||||||||||
Issuance
of stock in payment of professional fees
|
1,002,291
|
1,002
|
212,847
|
-
|
213,849
|
|||||||||||||||
Issuance
of stock in settlement of accounts payable
|
220,735,436
|
220,735
|
5,818,877
|
-
|
6,039,612
|
|||||||||||||||
Issuance
of stock under stock incentive plan
|
1,497,263
|
1,497
|
140,936
|
-
|
142,433
|
|||||||||||||||
Issuance
of stock upon exercise of options
|
1,200,000
|
1,200
|
58,800
|
-
|
60,000
|
|||||||||||||||
Net
loss for the year ended December 31, 2008
|
-
|
-
|
-
|
(33,903,513
|
)
|
(33,903,513
|
)
|
|||||||||||||
Balance
December 31, 2008
|
429,448,381
|
$
|
429,448
|
$
|
53,459,172
|
$
|
(89,817,604
|
)
|
$
|
(35,928,984
|
)
|
2008
|
2007
|
|||||||
(restated)
|
||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net
loss
|
$
|
(33,903,513
|
)
|
$
|
(15,898,725
|
)
|
||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||
Depreciation
and amortization
|
402,867
|
386,643
|
||||||
Write-off
of uncollectible accounts receivable
|
30,782
|
-
|
||||||
Amortization
of deferred charges
|
702,018
|
407,391
|
||||||
Amortization
of deferred revenue
|
(798,310
|
)
|
(497,349
|
)
|
||||
Stock
based compensation
|
889,269
|
531,113
|
||||||
Amortization
of deferred issuance costs
|
4,792,087
|
3,874,300
|
||||||
Amortization
of discounts
|
17,871,392
|
17,052,016
|
||||||
Gain
on extinguishment of debt
|
-
|
(193,862
|
)
|
|||||
Adjustements
to fair value of derivatives
|
(13,082,247
|
)
|
(32,835,057
|
)
|
||||
Charges
related to issuance of February 2008 convertible notes
|
685,573
|
-
|
||||||
Mytogen
acquisition
|
-
|
4,094,736
|
||||||
Charges
related to issuance of April 2008 convertible notes
|
531,769
|
-
|
||||||
Charges
related to issuance of 2007 convertible debentures
|
-
|
3,871,656
|
||||||
Repricing
of 2005 convertible debentures and warrants
|
-
|
843,277
|
||||||
Repricing
of 2006 and 2007 convertible debentures and warrants
|
(847,588
|
)
|
-
|
|||||
Shares
of common stock issued for professional services
|
759,496
|
1,307,828
|
||||||
Shares
of common stock issued for board fees
|
-
|
20,752
|
||||||
Shares
of common stock issued for financing costs
|
806,079
|
-
|
||||||
Warrants
issued for consulting services
|
155,281
|
-
|
||||||
Charges
related to settlement of anti-dilution provision
|
15,581
|
-
|
||||||
Forfeiture
of rent deposits
|
88,504
|
-
|
||||||
Loss
on disposal of fixed assets
|
227,543
|
-
|
||||||
Loss
on settlement of litigation
|
5,436,138
|
-
|
||||||
Loss
attributable to investment in joint venture
|
20,930
|
-
|
||||||
Amortization
of deferred joint venture obligations
|
(15,322
|
)
|
-
|
|||||
(Increase)
/ decrease in assets:
|
||||||||
Accounts
receivable
|
(265,260
|
)
|
39,293
|
|||||
Prepaid
expenses
|
35,940
|
42,812
|
||||||
Deferred
charges
|
-
|
(55,000
|
)
|
|||||
Increase
/ (decrease) in current liabilities:
|
||||||||
Accounts
payable and accrued expenses
|
5,355,228
|
976,712
|
||||||
Interest
Payable
|
3,722,198
|
-
|
||||||
Deferred
revenue
|
3,418,745
|
-
|
||||||
Net
cash used in operating activities
|
(2,964,820
|
)
|
(16,031,464
|
)
|
||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Purchases
of property and equipment
|
(174,514
|
)
|
(158,522
|
)
|
||||
Return
of deposits
|
-
|
18,649
|
||||||
Net
cash used in investing activities
|
(174,514
|
)
|
(139,873
|
)
|
||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Proceeds
from exercise of stock options
|
-
|
17,000
|
||||||
Proceeds
from issuance of convertible notes, net of cost
|
2,182,432
|
8,848,200
|
||||||
Payments
on convertible debentures
|
-
|
(139,123
|
)
|
|||||
Payments
on notes and leases
|
(18,650
|
)
|
(77,960
|
)
|
||||
Proceeds
from notes payable
|
630,000
|
-
|
||||||
Payment
for issuance costs on note payable
|
(3,660
|
)
|
-
|
|||||
Net
cash provided by financing activities
|
2,790,122
|
8,648,117
|
||||||
NET
DECREASE IN CASH AND CASH EQUIVALENTS
|
(349,212
|
)
|
(7,523,220
|
)
|
||||
CASH
AND CASH EQUIVALENTS, BEGINNING BALANCE
|
1,166,116
|
8,689,336
|
||||||
CASH
AND CASH EQUIVALENTS, ENDING BALANCE
|
$
|
816,904
|
$
|
1,166,116
|
||||
CASH
PAID FOR:
|
||||||||
Interest
|
$
|
-
|
$
|
10,016
|
||||
Income
taxes
|
$
|
1,549
|
$
|
-
|
||||
SUPPLEMENTAL
DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
|
||||||||
Issuance
of 65,463,111 and 19,243,386 shares of common stock in redemption of
convertible debentures
|
$
|
5,456,452
|
$
|
7,038,000
|
||||
Issuance
of 39,741,987 and 16,625,579 shares of common stock in conversion of
convertible debentures
|
$
|
6,161,643
|
$
|
8,391,000
|
||||
Issuance
of 70,503 shares of common stock to settle an anti-dilution provision
feature of convertible debenture
|
$
|
15,581
|
$
|
-
|
||||
Issuance
of 1,200,000 shares of common stock upon exercise of employee stock
options
|
$
|
60,000
|
$
|
-
|
||||
Issuance
of 220,735,436 shares of common stock in settlement of
litigation
|
$
|
6,039,612
|
$
|
-
|
||||
Issuance
of 35,909 shares of common stock in payment of board fees
|
$
|
$
|
21,000
|
|||||
Issuance
of 800,000 shares of common stock in payment of license
fees
|
$
|
$
|
608,000
|
|||||
Issuance
of 515,000 shares of common stock in payment of employee
bonuses
|
$
|
$
|
407,000
|
|||||
Issuance
of 85,000 shares of common stock in settlement of legal
fees
|
$
|
$
|
68,000
|
|||||
Issuance
of 8,064,517 shares of common stock in acquisition of
Mytogen
|
$
|
-
|
$
|
2,419,000
|
1.
|
ORGANIZATIONAL
MATTERS
|
·
|
On
April 4, 2008, the Company released closing escrow on the issuance of
$4,038,880 of its amortizing senior secured convertible debentures and
associated warrants. The purchasers purchased from the Company senior
secured convertible debentures and warrants to purchase shares of the
Company’s common stock. The net cash and cash in-kind received by the
Company related to this financing was
$2,212,432.
|
·
|
On
April 30, 2008 the Company received a one time payment of $300,000 from
Terumo International which extended their ability to commence a Phase I
Clinical Trial in Japan by one year.
|
·
|
On
May 31, 2008, the Company closed its Alameda, California and Charlestown,
Massachusetts facilities in an effort to streamline and focus on its most
advanced clinical programs as part of a cost reduction program designed to
reduce annual operating expenses by $5-6 million. In conjunction with the
cost reduction activities, the Company has not renewed its Alameda,
California sublease and has vacated its Charlestown, Massachusetts
facility.
|
·
|
On
June 17, 2008, the Company drew down $60,000 and received $50,000
(reflecting a 16.66% original issue discount) under Note B described in
Note 8 to the financial statements.
|
·
|
On
July 10, 2008, the Company granted an exclusive license to Embryome
Sciences, Inc., a wholly owned subsidiary of BioTime, Inc., to use its
“ACTCellerate” embryonic stem cell technology and a bank of over 140
diverse progenitor cell lines derived using that technology. Under the
agreement, the Company received an up-front payment of $470,000, and is
eligible to receive an 8% royalty on sales of products, services, and
processes that utilize the licensed technology. However, as discussed in
more detail in Note 18, in connection with unpaid rents ordered to be paid
to a landlord, the Company has assigned the landlord rights and interest
to 62.5% of all royalties on this contract, and 65% of all other
consideration payable under this license agreement until such time that
the Company has repaid amounts owed to the landlord that total
$475,000.
|
·
|
Between
September 29, 2008 and January 20, 2009, the Company settled certain past
due accounts payable by the issuance of shares of its common stock. In
aggregate, the Company settled $1,108,673 in accounts payable through the
issuance of 260,116,283 shares of its common
stock.
|
·
|
On
December 1, 2008, the Company and CHA Bio & Diostech Co., Ltd. (“CHA”), a leading
Korean-based biotechnology company focused on the development of stem cell
technologies, formed an international joint venture. The new company, Stem
Cell & Regenerative Medicine International, Inc. (“SCRMI”), will
develop human blood cells and other clinical therapies based on the
Company’s hemangioblast program, one of the Company’s core technologies.
CHA has agreed to contribute $150,000 cash and to fund operational costs
in order to conduct the hemangioblast program. Additionally, SCRMI has
agreed to pay the Company a fee of $500,000 for an exclusive, worldwide
license to the Hemangioblast Program. As of June 30, 2009, SCRMI has paid
the Company the entire $500,000 towards payment of the license fee. See
Note 6 for additional details of the joint
venture.
|
·
|
On
December 18, 2008, the Company entered into a license agreement with an
Ireland-based investor, Transition Holdings Inc. (“Transition”), for
certain of its non-core technology. Under the agreement, Transition agreed
to acquire a license to the technology for $3.5 million in cash. Through
December 31, 2008, the Company had received $2 million in cash under this
agreement. As of June 30, 2009, the Company has received the entire $3.5
million in cash under this agreement. The Company expects to apply the
proceeds towards its retinal epithelium (“RPE”) cells
program.
|
·
|
On
March 30, 2009, the Company entered into a second license agreement with
CHA under which the Company will license its retinal pigment epithelium
(“RPE”) technology, for the treatment of diseases of the eye, to CHA for
development and commercialization exclusively in Korea. The Company is
eligible to receive up to a total of $1.9 million in fees based upon the
parties achieving certain milestones, including the Company making an IND
submission to the US FDA to commence clinical trials in humans using the
technology. The Company received an up-front fee under the license in the
amount of $1,000,000 on April 1, 2009. Under the agreement, CHA will incur
all of the costs associated with the RPA clinical trials in Korea. The
agreement is part of continuing cooperation and collaboration between the
two companies.
|
·
|
On
March 11, 2009, the Company entered into a $5 million credit facility
(“Facility”) with a life sciences fund. Under the agreement, the proceeds
from the Facility must be used exclusively for the Company to file an
investigational new drug (“IND”) for its retinal pigment epithelium
(“RPE”) program, and will allow the Company to complete both Phase I and
Phase II studies in humans. An IND is required to commence clinical
trials. Under the terms of the agreement, the Company may draw down funds,
as needed for clinical development of the RPE program, from the investor
through the issuance of Series A-1 convertible preferred stock. The
preferred stock pays dividends, in kind of preferred stock, at an annual
rate of 10%, matures in four years from the initial issuance date, and is
convertible into common stock at $0.75 per share. As of June 30, 2009, the
Company has drawn down approximately $1,505,000 on this
facility.
|
·
|
On
May 13, 2009, the Company entered into a third license agreement with CHA
under which the Company will license its proprietary “single blastomere
technology,” which has the potential to generate stable cell lines,
including RPE for the treatment of diseases of the eye, for development
and commercialization exclusively in Korea. The Company received an
upfront license fee of $300,000.
|
·
|
Management
anticipates raising additional future capital from its current convertible
debenture holders, or other financing sources, that will be used to fund
any capital shortfalls. The terms of any financing will likely be
negotiated based upon current market terms for similar financings. No
commitments have been received for additional investment and no assurances
can be given that this financing will ultimately be
completed.
|
·
|
Management
has focused its scientific operations on product development in order to
accelerate the time to market products which will ultimately generate
revenues. While the amount or timing of such revenues cannot be
determined, management believes that focused development will ultimately
provide a quicker path to revenues, and an increased likelihood of raising
additional financing.
|
·
|
Management
will continue to pursue licensing opportunities of the Company’s extensive
intellectual property portfolio.
|
2.
|
RESTATEMENT
|
As Originally
Reported
|
Restated
|
Difference
|
||||||||||
December 31, 2007
|
||||||||||||
Balance
Sheet
|
||||||||||||
Deferred
issuance costs
|
$
|
5,107,599
|
$
|
4,772,087
|
$
|
(335,512
|
)
|
|||||
2005
Convertible debenture and embedded derivatives – current
portion
|
$
|
1,040,156
|
$
|
1,276,871
|
$
|
236,715
|
||||||
2006
Convertible debenture and embedded derivatives – current
portion
|
$
|
906,860
|
$
|
1,625,327
|
$
|
718,467
|
||||||
2007
Convertible debenture and embedded derivatives – current
portion
|
$
|
363,805
|
$
|
1,160,847
|
$
|
797,042
|
||||||
2006
Convertible debenture and embedded derivatives, less current
portion
|
$
|
793,504
|
$
|
1,422,164
|
$
|
628,660
|
||||||
2007
Convertible debenture and embedded derivatives, less current
portion
|
$
|
2,364,731
|
$
|
2,321,695
|
$
|
(43,036
|
)
|
|||||
Accumulated
deficit
|
$
|
(53,240,732
|
)
|
$
|
(55,914,091
|
)
|
$
|
(2,673,359
|
)
|
|||
Total
stockholders’ deficit at December 31, 2007
|
$
|
(18,853,371
|
)
|
$
|
(21,526,730
|
)
|
$
|
(2,673,359
|
)
|
As Originally
Reported
|
Restated
|
Difference
|
||||||||||
Year Ended December 31,
2007
|
||||||||||||
Statement
of Operations
|
||||||||||||
Interest
expense
|
$
|
(18,350,304
|
)
|
$
|
($21,023,663
|
)
|
$
|
(2,673,359
|
)
|
|||
Net
loss
|
$
|
(13,225,366
|
)
|
$
|
(15,898,725
|
)
|
$
|
(2,673,359
|
)
|
|||
Basic
and diluted loss per share
|
$
|
(0.32
|
)
|
$
|
(0.26
|
)
|
$
|
(0.06
|
)
|
|||
Weighted
average shares – basic and diluted
|
40,877,145
|
61,115,618
|
20,238,473
|
|||||||||
Statement of Cash Flows
|
||||||||||||
Net
loss
|
$
|
(13,225,366
|
)
|
$
|
(15,898,725
|
)
|
$
|
(2,673,359
|
)
|
|||
Amortization
of deferred issuance cost
|
$
|
3,538,788
|
$
|
3,874,300
|
$
|
335,512
|
||||||
Amortization
of discount
|
$
|
14,714,169
|
$
|
17,052,016
|
$
|
2,337,847
|
3.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
Machinery
& equipment
|
4
years
|
|
Computer
equipment
|
3
years
|
|
Office
furniture
|
4
years
|
|
Leasehold
improvements
|
Lesser
of lease life or economic life
|
|
Capital
leases
|
Lesser
of lease life or economic life
|
·
|
Level
1 inputs to the valuation methodology are quoted prices for identical
assets or liabilities in active
markets.
|
·
|
Level
2 inputs to the valuation methodology include quoted prices for similar
assets and liabilities in active markets, and inputs that are observable
for the asset or liability, either directly or indirectly, for
substantially the full term of the financial
instrument.
|
·
|
Level
3 inputs to the valuation methodology are unobservable and significant to
the fair value measurement.
|
Fair Value Measurements at
|
||||||||||||||||
Fair Value
|
December 31, 2008
|
|||||||||||||||
As of
|
Using Fair Value Hierarchy
|
|||||||||||||||
Derivative Liabilities
|
December 31, 2008
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
Conversion
feature - 2005 debenture
|
4,075
|
-
|
4,075
|
-
|
||||||||||||
2006
Convertible debenture and embeded derivatives
|
1,993,354
|
-
|
1,993,354
|
-
|
||||||||||||
2007
Convertible debenture and embedded derivatives
|
7,706,344
|
-
|
7,706,344
|
-
|
||||||||||||
February
2008 Convertible debentures and embedded derivatives
|
1,757,470
|
-
|
1,757,470
|
-
|
||||||||||||
April
2008 Convertible debenture and embedded derivatives
|
4,066,505
|
-
|
4,066,505
|
-
|
||||||||||||
Warrant
and option derivatives
|
2,655,849
|
-
|
2,655,849
|
-
|
||||||||||||
18,183,597
|
-
|
18,183,597
|
-
|
Year
Ended December 31,
|
||||||||
2008
|
2007
|
|||||||
Expected life in years
|
4.0
|
4.0
|
||||||
Volatility
|
148
|
%
|
163
|
%
|
||||
Risk
free interest rate
|
2.50
|
%
|
4.74
|
%
|
||||
Expected
dividends
|
None
|
None
|
||||||
Expected
forfeitures
|
13
|
%
|
13
|
%
|
2008
|
2007
|
|||||||
Genzyme
Transgenics Corporation
|
17
|
%
|
20
|
%
|
||||
START
Licensing, Inc.
|
13
|
%
|
15
|
%
|
||||
Exeter
Life Sciences, Inc.
|
16
|
%
|
19
|
%
|
||||
Terumo
Corporation
|
25
|
%
|
N/A
|
|||||
International
Stem Cell Corporation
|
11
|
%
|
N/A
|
5.
|
PROPERTY
AND EQUIPMENT
|
2008
|
2007
|
|||||||
Machinery
& equipment
|
$
|
1,470,141
|
$
|
1,552,642
|
||||
Computer
equipment
|
436,541
|
424,612
|
||||||
Office
furniture
|
76,201
|
76,201
|
||||||
Leasehold
improvements
|
127,197
|
127,197
|
||||||
Capital
leases
|
51,235
|
238,754
|
||||||
Accumulated
depreciation
|
(1,761,307
|
)
|
(1,504,902
|
)
|
||||
Property
and equipment, net
|
$
|
400,008
|
$
|
914,504
|
6.
|
INVESTMENT
IN JOINT VENTURE
|
Current
assets
|
$
|
179,400
|
||
Noncurrent
assets
|
$
|
468,150
|
||
Current
liabilities
|
$
|
76,869
|
||
Noncurrent
liabilities
|
$
|
468,150
|
||
Net
revenue
|
$
|
2,450
|
||
Net
loss
|
$
|
(62,791
|
)
|
7.
|
CONVERTIBLE
NOTE PAYABLE—APRIL 2008
|
Fair
Value at
|
|||||||||||||||||
April
4,
|
December
31,
|
Increase
|
|||||||||||||||
Face
Amount
|
Net
Purchase Price
|
2008
|
2008
|
(Decrease)
|
|||||||||||||
$
|
4,038,880
|
$
|
3,218,232
|
$
|
4,570,649
|
$
|
4,066,505
|
$
|
(504,144
|
)
|
8.
|
CONVERTIBLE
NOTES PAYABLE—FEBRUARY 2008
|
Fair
Value at
|
||||||||||||||||||||
February
15,
|
December
31,
|
Increase
|
||||||||||||||||||
Face
Amount
|
Net
Purchase Price
|
2008
|
2008
|
(Decrease)
|
||||||||||||||||
Note
A
|
$
|
600,000
|
$
|
500,000
|
$
|
1,229,466
|
$
|
1,464,558
|
$
|
235,092
|
||||||||||
Note
B, Tranche 1
|
60,000
|
50,000
|
116,107
|
*
|
146,456
|
30,349
|
||||||||||||||
Note
B, Tranche 2
|
60,000
|
50,000
|
110,641
|
**
|
146,456
|
35,815
|
||||||||||||||
Total
|
$
|
720,000
|
$
|
600,000
|
$
|
1,456,214
|
$
|
1,757,470
|
$
|
301,256
|
*
|
Fair
value at March 17, 2008
|
**
|
Fair
value at June 17, 2008
|
9.
|
CONVERTIBLE
DEBENTURES—2007
|
December
31,
|
December
31,
|
|||||||
2008
|
2007
|
|||||||
2007
convertible debentures at fair value
|
$
|
7,706,344
|
$
|
11,622,078
|
||||
Original
issue discount
|
-
|
(6,063,955
|
)
|
|||||
Warrant
derivative discount
|
-
|
(2,075,581
|
)
|
|||||
Net
convertible debentures
|
$
|
7,706,344
|
$
|
3,482,542
|
||||
Less
current portion
|
(7,706,344
|
)
|
(1,160,847
|
)
|
||||
2007
convertible debenture and embedded derivatives - long term
|
$
|
-
|
$
|
2,321,695
|
10.
|
CONVERTIBLE
DEBENTURES—2006
|
December
31,
|
December
31,
|
|||||||
2008
|
2007
|
|||||||
2006
convertible debentures at fair value
|
$
|
1,993,354
|
$
|
7,386,912
|
||||
Original
issue discount
|
-
|
(3,777,403
|
)
|
|||||
Warrant
derivative discount
|
-
|
(562,018
|
)
|
|||||
Net
convertible debentures
|
$
|
1,993,354
|
$
|
3,047,491
|
||||
Less
current portion
|
(1,993,354
|
)
|
(1,625,327
|
)
|
||||
2006
convertible debenture and embedded derivatives - long term
|
$
|
-
|
$
|
1,422,164
|
11.
|
CONVERTIBLE
DEBENTURES—2005
|
December
31,
|
December
31,
|
|||||||
2008
|
2007
|
|||||||
2005
convertible debenture at face value
|
$
|
81,922
|
$
|
1,677,904
|
||||
Discounts
on debentures
|
||||||||
Original
issue discount
|
-
|
(152,073
|
)
|
|||||
Conversion
feature derivative
|
-
|
(193,084
|
)
|
|||||
Warrant
derivative
|
-
|
(245,825
|
)
|
|||||
Other
derivatives
|
-
|
(9,266
|
)
|
|||||
Net
convertible debentures
|
81,922
|
1,077,656
|
||||||
Embedded
derivatives
|
4,075
|
199,215
|
||||||
2005
convertible debentures and embedded derivatives
|
85,997
|
1,276,871
|
||||||
less
current portion
|
(85,997
|
)
|
(1,276,871
|
)
|
||||
2005
convertible debenture and embedded derivatives - long term
portion
|
$
|
-
|
$
|
-
|
12.
|
ACCRUED
DEFAULT INTEREST
|
Accrued
|
||||
Penalty
|
||||
Interest
|
||||
2005
debenture
|
$
|
22,121
|
||
2006
debenture
|
524,284
|
|||
2007
debenture
|
1,885,951
|
|||
February
2008 debenture
|
194,420
|
|||
April
2008 debenture
|
1,090,608
|
|||
$
|
3,717,384
|
13.
|
WARRANT
DERIVATIVES—OTHER
|
14.
|
WARRANT
SUMMARY
|
Weighted
|
||||||||||||||||
Weighted
|
Average
|
Aggregate
|
||||||||||||||
Average
|
Remaining
|
Intrinsic
|
||||||||||||||
Number of
|
Exercise
|
Contractual
|
Value
|
|||||||||||||
Warrants
|
Price
|
Life
(in years)
|
(000)
|
|||||||||||||
Outstanding,
December 31, 2007
|
104,700,522
|
$
|
0.29
|
3.55
|
$
|
495
|
||||||||||
Granted
|
31,870,465
|
0.15
|
||||||||||||||
Exercised
|
-
|
-
|
||||||||||||||
Forfeited
|
(7,173,036
|
)
|
0.25
|
|||||||||||||
Outstanding,
December 31, 2008
|
129,397,951
|
$
|
0.26
|
3.23
|
-
|
|||||||||||
Vested
and expected to vest at December 31, 2008
|
129,397,951
|
0.26
|
3.23
|
-
|
||||||||||||
Exercisable,
December 31, 2008
|
129,397,951
|
$
|
0.26
|
3.23
|
-
|
Warrants
Outstanding
|
Warrants
Exercisable
|
||||||||||||||||||||
Weighted
|
Weighted
|
Weighted
|
|||||||||||||||||||
Average
|
Average
|
Average
|
|||||||||||||||||||
Exercise
|
Number
|
Remaining
|
Exercise
|
Number
|
Exercise
|
||||||||||||||||
Price
|
of
Shares
|
Life
(Years)
|
Price
|
of
Shares
|
Price
|
||||||||||||||||
$
|
0.17
|
107,450,081
|
3.30
|
$
|
0.17
|
107,450,081
|
$
|
0.17
|
|||||||||||||
0.32
|
4,575,521
|
2.68
|
0.32
|
4,575,521
|
0.32
|
||||||||||||||||
0.38
- 0.40
|
9,409,526
|
4.08
|
0.38
|
9,409,526
|
0.38
|
||||||||||||||||
0.85
- 0.96
|
5,869,831
|
1.92
|
0.95
|
5,869,831
|
0.95
|
||||||||||||||||
2.20
|
72,917
|
2.63
|
2.20
|
72,917
|
2.20
|
||||||||||||||||
2.48
- 2.54
|
2,020,075
|
0.93
|
2.54
|
2,020,075
|
2.54
|
||||||||||||||||
129,397,951
|
129,397,951
|
15.
|
ADJUSTMENT
TO FAIR VALUE OF DERIVATIVES
|
December
31,
|
||||||||
2008
|
2007
|
|||||||
Embedded
Pipe derivatives - 9.05
|
$
|
(195,140
|
)
|
$
|
(795,772
|
)
|
||
Pipe
Hybrid instrument – 9.06
|
(937,712
|
)
|
(5,808,165
|
)
|
||||
Pipe
Hybrid- FAS 155 – 8.07
|
1,649,969
|
(374,039
|
)
|
|||||
Pipe
Hybrid- February 2008
|
351,897
|
-
|
||||||
Pipe
Hybrid- April 2008
|
(504,144
|
)
|
-
|
|||||
Original
warrants PIPE 2005 , excluding replacement warrants
|
(234,392
|
)
|
(891,167
|
)
|
||||
Replacement
Warrants
|
(1,402,947
|
)
|
(633,699
|
)
|
||||
Warrants
– PIPE 2006-investors
|
(2,238,905
|
)
|
(7,924,612
|
)
|
||||
Warrants
– PIPE 2007-investors
|
(5,262,623
|
)
|
(6,784,225
|
)
|
||||
Warrants
– PIPE 2008-investors
|
(2,178,210
|
)
|
-
|
|||||
Other
Warrant Derivatives- 2005 and 2006
|
(1,805,990
|
)
|
(7,182,045
|
)
|
||||
Other
Warrants Derivatives - 2007
|
(324,050
|
)
|
(1,598,056
|
)
|
||||
$
|
(13,082,247
|
)
|
$
|
(31,991,780
|
)
|
16.
|
STOCKHOLDERS’
EQUITY TRANSACTIONS
|
17.
|
STOCK-BASED
COMPENSATION
|
Weighted
|
||||||||||||||||
Weighted
|
Average
|
Aggregate
|
||||||||||||||
Average
|
Remaining
|
Intrinsic
|
||||||||||||||
Number of
|
Exercise
|
Contractual
|
Value
|
|||||||||||||
Options
|
Price
|
Life
(in years)
|
(000)
|
|||||||||||||
Outstanding,
January 1, 2007
|
12,874,163
|
$
|
0.71
|
8.20
|
$
|
1,771
|
||||||||||
Granted
|
1,300,000
|
0.75
|
||||||||||||||
Exercised
|
(340,000
|
)
|
0.05
|
|||||||||||||
Forfeited
|
(2,213,192
|
)
|
0.83
|
|||||||||||||
Outstanding,
December 31, 2007
|
11,620,971
|
$
|
0.78
|
7.16
|
$
|
255
|
||||||||||
Granted
|
11,875,734
|
0.21
|
||||||||||||||
Exercised
|
(1,200,000
|
)
|
0.05
|
|||||||||||||
Forfeited
|
(8,169,015
|
)
|
0.53
|
|||||||||||||
Outstanding,
December 31, 2008
|
14,127,690
|
$
|
0.51
|
7.71
|
$
|
-
|
||||||||||
Vested
and expected to vest at December 31, 2008
|
13,359,485
|
0.52
|
7.64
|
-
|
||||||||||||
Exercisable,
December 31, 2008
|
8,218,418
|
$
|
0.70
|
6.75
|
$
|
-
|
Weighted
|
||||||||
Average
|
||||||||
Grant
Date
|
||||||||
Fair
Value
|
||||||||
Shares
|
Per
Share
|
|||||||
Unvested
at January 1, 2008
|
783,814
|
$
|
0.46
|
|||||
Granted
|
11,875,734
|
0.21
|
||||||
Vested
|
(2,372,518
|
)
|
0.39
|
|||||
Forfeited
|
(4,377,758
|
)
|
0.26
|
|||||
Unvested
at December 31, 2008
|
5,909,272
|
$
|
0.24
|
Options
Outstanding
|
Options
Exercisable
|
||||||||||||||||||||
Weighted
|
Weighted
|
Weighted
|
|||||||||||||||||||
Average
|
Average
|
Average
|
|||||||||||||||||||
Exercise
|
Number
|
Remaining
|
Exercise
|
Number
|
Exercise
|
||||||||||||||||
Price
|
of
Shares
|
Life
(Years)
|
Price
|
of
Shares
|
Price
|
||||||||||||||||
$
|
0.05
|
922,000
|
5.62
|
$
|
0.05
|
922,000
|
$
|
0.05
|
|||||||||||||
0.21
|
7,440,000
|
9.11
|
0.21
|
1,667,586
|
0.21
|
||||||||||||||||
0.25
|
1,301,161
|
6.00
|
0.25
|
1,301,161
|
0.25
|
||||||||||||||||
0.35
|
65,000
|
7.53
|
0.35
|
39,271
|
0.35
|
||||||||||||||||
0.75
- 0.76
|
20,000
|
7.82
|
0.75
|
10,837
|
0.75
|
||||||||||||||||
0.85
|
3,197,112
|
6.09
|
0.85
|
3,173,779
|
0.85
|
||||||||||||||||
1.35
|
235,000
|
7.31
|
1.35
|
205,782
|
1.35
|
||||||||||||||||
2.04
- 2.11
|
295,000
|
6.99
|
2.07
|
251,352
|
2.07
|
||||||||||||||||
2.20
- 2.48
|
652,417
|
6.65
|
2.34
|
646,650
|
2.34
|
||||||||||||||||
14,127,690
|
8,218,418
|
18.
|
COMMITMENTS
AND CONTINGENCIES
|
Year
1
|
$
|
265,677
|
||
Year
2
|
89,910
|
|||
Total
|
$
|
355,587
|
19.
|
INCOME
TAXES
|
2008
|
2007
|
|||||||
Statutory
federal income tax rate
|
(34
|
)
%
|
(34
|
)
%
|
||||
State
income taxes, net of federal taxes
|
(6
|
)
%
|
(6
|
)
%
|
||||
Non-includable
items
|
8
|
%
|
(19
|
)
%
|
||||
Increase
in valuation allowance
|
32
|
%
|
59
|
%
|
||||
Effective
income tax rate
|
-
|
-
|
2008
|
2007
|
|||||||
Deferred
tax assets:
|
(Restated)
|
|||||||
Net
operating loss carryforwards
|
$
|
39,265,458
|
$
|
25,312,676
|
||||
Employee
non-qualified stock options
|
1,008,424
|
797,000
|
||||||
Deferred
interest and finance charges
|
43,000
|
43,000
|
||||||
Deferred
revenue
|
1,250,210
|
-
|
||||||
Capitalized
R&D costs
|
441,000
|
441,000
|
||||||
Valuation
allowance
|
(42,008,092
|
)
|
(26,593,676
|
)
|
||||
Net
deferred tax asset
|
-
|
-
|
Total
|
||||
Balance
at January 1, 2008
|
$
|
658,500
|
||
Increase
related to prior period tax positions
|
-
|
|||
Increase
related to current year tax positions
|
-
|
|||
Expiration
of the statuts of limitations for the assessment of taxes
|
-
|
|||
Other
|
-
|
|||
Balance
at December 31, 2008
|
$
|
658,500
|
2008
|
2007
|
|||||||
Current
federal income tax
|
$
|
-
|
$
|
-
|
||||
Current
state income tax
|
-
|
-
|
||||||
Deferred
taxes
|
15,414,416
|
9,192,476
|
||||||
Valuation
allowance
|
(15,414,416
|
)
|
(9,192,476
|
)
|
||||
$
|
-
|
$
|
-
|
Open Tax
|
||
Jurisdiction
|
Years
|
|
Federal
|
2001 - 2006
|
|
States
|
2001
- 2006
|
20.
|
RELATED
PARTY TRANSACTIONS
|
21.
|
SUBSEQUENT
EVENTS
|