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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q (Mark One)
[ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended ___________________________
or
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from October 1, 2003 to December 31, 2003
Commission file number 000-14242
CELSION CORPORATION
-------------------
(Exact name of registrant as specified in its charter)
DELAWARE 52-1256615
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10220-L OLD COLUMBIA ROAD, COLUMBIA, MARYLAND 21046-1705
---------------------------------------------------------
(Address of principal executive offices) (Zip code)
(410) 290-5390
(Registrant's telephone number, including area code)
FORMER ADDRESS: 10220-I OLD COLUMBIA ROAD, COLUMBIA, MARYLAND 21046-1705 AND
FORMER FISCAL YEAR COMMENCED OCTOBER 1 AND ENDED SEPTEMBER 30
-------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark whether the Registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act). Yes No X
--- ---
AS OF FEBRUARY 12, 2004, THE REGISTRANT HAD OUTSTANDING 150,650,287 SHARES OF
COMMON STOCK, $.01 PAR VALUE.
SEC 1296 (1-04) POTENTIAL PERSONS WHO ARE TO RESPOND TO THE COLLECTION OF
INFORMATION CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND
UNLESS THE FORM DISPLAYS A CURRENTLY VALID OMB CONTROL NUMBER.
TABLE OF CONTENTS
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND NOTES.
BALANCE SHEETS
STATEMENTS OF OPERATIONS
STATEMENTS OF CASH FLOWS
NOTES TO FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
ITEM 4. CONTROLS AND PROCEDURES.
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
EXHIBITS
3.1 CERTIFICATE OF INCORPORATION OF THE CORPORATION, AS AMENDED
(COMPILED)
3.2 BYLAWS OF THE CORPORATION, AS AMENDED (COMPILED)
11 STATEMENT RE. COMPUTATION OF EARNINGS PER SHARE.
31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO RULE
13A-14(A)/15D-14(A), AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002.
31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO RULE
13A-14(A)/15D-14(A), AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002.
32.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18
U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002.
32.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18
U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002.
2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
-----------------------------------------------------------------------
Index to Financial Statements
-----------------------------------------------------------------------
Page
-----------------------------------------------------------------------
Balance Sheets 4
December 31, 2003 and September 30, 2003
-----------------------------------------------------------------------
Statements of Operations for the 6
Three Months Ended December 31, 2003 and 2002
-----------------------------------------------------------------------
Statements of Cash Flows for the 7
Three Months Ended December 31, 2003 and 2002
-----------------------------------------------------------------------
Notes to Financial Statements 8
-----------------------------------------------------------------------
3
CELSION CORPORATION
BALANCE SHEETS
December 31, 2003 and September 30, 2003
ASSETS
December 31, September 30,
2003 2003
---- ----
(Unaudited)
Current assets:
Cash .......................................... $12,272,407 $11,410,533
Other receivables ............................. 16,753 90,927
Materials ..................................... 838,992 732,225
Work-in-process ............................... 37,308 51,156
Finished goods ................................ 41,410 41,410
Prepaid expenses .............................. 361,967 78,842
----------- -----------
Total current assets .................... 13,568,837 12,405,093
----------- -----------
Property and equipment - at cost:
Furniture and office equipment ................ 146,508 138,592
Computer hardware and software ................ 218,758 189,812
Laboratory and shop equipment ................. 212,379 172,006
Leasehold improvements ........................ 107,258 12,275
----------- -----------
684,903 512,685
Less accumulated depreciation .............. 296,068 275,361
----------- -----------
Net value of property and equipment ..... 388,835 237,324
----------- -----------
Other assets:
Deposits ..................................... 23,622 23,622
Prepaid inventory development costs ......... 417,453 417,218
Patent licenses (net of amortization) ....... 41,087 45,044
----------- -----------
Total other assets .......................... 482,162 485,884
----------- -----------
Total assets ......................... $14,439,834 $13,128,301
=========== ===========
4
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, September 30,
2003 2003
---- ----
(Unaudited)
Current liabilities:
Accounts payable - trade ......................................... $ 631,097 $ 883,218
Accrued noncash compensation ..................................... 153,316 125,395
Other accrued liabilities ........................................ 202,426 384,886
------------ ------------
Total current liabilities .................................. 986,839 1,393,499
------------ ------------
Stockholders' equity:
Common Stock $0.01 par value: 200,000,000 shares authorized,
148,034,473 and 143,101,134 shares issued and outstanding at
December 31, 2003 and September 30, 2003, respectively .............. 1,480,345 1,431,011
Additional paid-in capital ....................................... 72,204,867 67,582,174
Accumulated deficit .............................................. (60,232,217) (57,278,383)
------------ ------------
Total stockholders' equity ................................ 13,452,995 11,734,802
------------ ------------
Total liabilities and stockholders' equity .......... $ 14,439,834 $ 13,128,301
============ ============
See accompanying notes.
5
CELSION CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended December 31,
------------------------------------
2003 2002
---- ----
Operating expenses:
General and administrative .......... $ 856,968 $ 840,044
Research and development ............ 2,109,795 1,097,428
------------- -------------
Total operating expenses ......... 2,966,763 1,937,472
------------- -------------
Loss from operations ................. (2,966,763) (1,937,472)
Loss from disposal of property and
equipment ............................ (5,791) --
Interest income ...................... 18,720 2,651
------------- -------------
Loss before income taxes ............. (2,953,834) (1,934,821)
Income taxes ......................... -- --
------------- -------------
Net loss ............................. $ (2,953,834) $ (1,934,821)
Dividends on preferred stock ......... -- (53,313)
------------- -------------
Net loss attributable to common
stockholders ......................... $ (2,953,834) $ (1,988,134)
============= =============
Net loss per common share (basic) .... $ (0.02) $ (0.02)
============= =============
Weighted average shares outstanding .. 144,152,732 95,128,667
============= =============
See accompanying notes.
6
CELSION CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended December 31,
-------------------------------
2003 2002
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .............................................. $ (2,953,834) $ (1,934,821)
Non-cash items included in net loss:
Depreciation and amortization ...................... 31,149 24,875
Common Stock and stock options
issued for compensation and other operating expenses 219,115 132,957
Stock based compensation ........................... 647,656 --
Loss on disposal of property and equipment ......... 5,791 --
Net changes in:
Other receivables .................................. 74,174 84,493
Inventories ........................................ (92,919) (171,748)
Prepaid expenses ................................... (283,125) (196,541)
Prepaid inventory development costs ................ (235) 32,380
Accounts payable-trade ............................. (252,121) 299,054
Other accrued liabilities .......................... (154,539) (151,568)
------------ ------------
Net cash used by operating activities ........... (2,758,888) (1,880,919)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment .................. (184,493) (294)
------------ ------------
Net cash used by investing activities ............ (184,493) (294)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of stock issuances ............................ 3,805,255 1,503,000
Note payable ........................................... -- 500,000
Net cash provided by financing activities ........ 3,805,255 2,003,000
------------ ------------
NET INCREASE IN CASH .................................... 861,874 121,787
Cash at beginning of period ............................. 11,410,533 928,819
------------ ------------
Cash at end of the period ............................... $ 12,272,407 $ 1,050,606
============ ============
See accompanying notes.
7
CELSION CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The accompanying unaudited condensed financial statements of Celsion
Corporation (the "Company") have been prepared in accordance with accounting
principles generally accepted in the United States of America for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements. In the opinion of
management, all adjustments, consisting only of normal recurring accruals
considered necessary for a fair presentation, have been included in the
accompanying unaudited financial statements. Operating results for the
three-month period ended December 31, 2003 are not necessarily indicative of the
results that may be expected for any other interim period or for any full year.
For further information, refer to the financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 2003.
Note 2. Common Stock Outstanding and Per Share Information
For the three-month periods ended December 31, 2003 and 2002, per share
data is based on the weighted average number of shares of common stock, par
value $0.01 per share ("Common Stock"), outstanding. Outstanding warrants and
options which can be converted into Common Stock are not included, as their
effect is anti-dilutive.
Note 3. New Accounting Pronouncements
In December 2002, the Financial Accounting Standards Boards ("FASB")
issued Statement of Financial Accounting Standards (SFAS) No. 148, Accounting
for Stock-Based Compensation - Transition and Disclosure, an amendment of SFAS
No. 123, Accounting for Stock-Based Compensation. This statement was issued to
provide alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based compensation. In addition, this
statement amends the disclosure requirements of SFAS No. 123 to require
prominent disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results. The Company adopted the disclosure requirements
of SFAS No. 148 in 2003, and such adoption did not have a material effect on the
Company's reported results of operation, financial positions and cash flows.
In April 2003, FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities, to provide clarification on the
meaning of an underlying derivative, the characteristics of a derivative that
contains financing components and the meaning of an initial investment that is
smaller than would be required for other types of contracts that would be
expected to have a similar response to changes in market factors. This statement
is effective for contracts entered into or modified after June 30, 2003 and for
hedging relationships designated after June 30, 2003. In addition, all
provisions of this statement should be applied prospectively. The adoption of
SFAS No. 149 did not have a material impact on the Company's reported results of
operations or financial condition.
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity. SFAS
No. 150 establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances). Many of those instruments
were previously classified as equity. Some of the provisions of this statement
are consistent with the current definition of liabilities in FASB Concepts
Statement No. 6, Elements of Financial Statements. This
8
statement is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003. Thus, the Company adopted the provisions
of SFAS No. 150 for its fourth fiscal quarter beginning July 1, 2003. The
adoption of SFAS No. 150 did not have a material impact on the Company's
reported results of operations or financial condition.
In January 2003, the FASB issued FASB Interpretation ("FIN") 46,
Consolidation of Variable Interest Entities - an Interpretation of ARAB No. 51.
This interpretation provides guidance related to identifying variable interest
entities (previously known as special purpose entities or SPEs) and determining
whether such entities should be consolidated. Certain disclosures are required
if it is reasonably possible that a company will consolidate or disclose
information about a variable interest entity when it initially applies FIN 46.
This interpretation will be effective for the Company's quarter beginning
October 1, 2003. The Company has no investment in or contractual relationship or
other business relationship with a variable interest entity and therefore the
adoption of FIN 46 will not have any impact on our results of operations and
financial condition. However, if the Company enters into any such arrangement
with a variable interest entity in the future (or any entity with which we
currently have a relationship is reconsidered based on guidance in FIN 46 to be
a variable interest entity), the Company's reported results of operations and
financial condition will be affected.
Note 4. Fair Value Accounting for Stock Plans
The Company has long-term compensation plans that permit the granting
of incentive awards in the form of stock options. The Company had adopted the
disclosure-only provisions of Statement of Financial Accounting Standard
("SFAS") No. 148, which allows companies to continue to measure compensation
costs for stock options granted to employees using the value-based method of
accounting prescribed by APB Opinion No. 25 Accounting for Stock Issued to
Employees (APB 25). Celsion has elected to follow APB 25 and the related
interpretations in accounting for its employee stock options.
The following table illustrates the effect on net income and earnings
per share if the Company had applied the fair value recognition provisions of
Statement 123, to its stock-based employee plans:
Three Months Ended December 31,
-------------------------------
2003 2002
---- ----
Net loss attributable to common
stockholders, as reported ............... $ (2,953,834) $(1,988,134)
Add: Stock-based employee compensation
expense included in reported net
loss .................................... 647,656 --
Deduct: Total stock-based employee
compensation expense determined using the
fair value based method for all awards .. 711,910 199,617
------------- -----------
Pro forma net loss ...................... $ (3,018,088) $(2,187,751)
============= ===========
Loss per share:
Basic - as reported ..................... $ (0.02) $ (0.02)
============= ===========
Basic - pro forma ....................... $ (0.02) $ (0.02)
============= ===========
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
FORWARD-LOOKING STATEMENTS
Statements and terms such as "expect", "anticipate", "estimate",
"plan", "believe", and words of similar import, regarding the Company's
expectations as to the development and effectiveness of its technologies, the
potential demand for its products, and other aspects of its present and future
business operations, constitute forward- looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. Although the Company
believes that its expectations are based on reasonable assumptions within the
bounds of its knowledge of its business and operations, the Company cannot
guarantee that actual results will not differ materially from its expectations.
In evaluating such statements, readers should specifically consider the various
factors contained in the Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 2003, including, without limitation, unforeseen changes
in the course of research and development activities and in clinical trials;
possible changes in cost and timing of development and testing, capital
structure, and other financial items; changes in approaches to medical
treatment; introduction of new products by others; possible acquisitions of
other technologies, assets or businesses; and possible actions by customers,
suppliers, competitors and regulatory authorities. These and other risks and
uncertainties could cause actual results to differ materially from those
indicated by such forward-looking statements, including those set forth in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Risk Factors" contained in the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 2003, as well as those set forth below
and elsewhere in this Report.
GENERAL
Since inception, the Company has incurred substantial operating losses.
The Company expects operating losses to continue and possibly increase in the
near term and for the foreseeable future, as it continues its product
development efforts, conducts clinical trials and undertakes marketing and sales
activities for new products. The Company's ability to achieve profitability is
dependent upon its ability successfully to integrate new technology into its
thermotherapy systems, conduct clinical trials, obtain governmental approvals,
and manufacture, market and sell its new products. Major obstacles facing the
Company over the last several years have included inadequate funding, a negative
net worth, and the slow development of the thermotherapy market due to technical
shortcomings of the thermotherapy equipment available commercially. The Company
has not continued to market its older thermotherapy system, principally because
of the system's inability to provide heat treatment for other than surface and
sub-surface tumors, and has concentrated its efforts on a new generation of
thermotherapy products.
RESULTS OF OPERATIONS
Comparison of Three Months Ended December 31, 2003
and Three Months Ended December 31, 2002
There were no product sales for the three months ended December 31,
2003 or 2002. No product revenues are expected until the Company's equipment
incorporating new technologies receives the necessary approvals from
governmental regulatory agencies and the Company begins to market such
equipment.
General and administrative expense did not change materially for the
three months ended December 31, 2003, compared to the comparable period in 2002.
Research and development expense increased by 92% to $2,109,795 for the
current quarter from $1,097,428 for the three months ended December 31, 2002.
The increase of $1,012,367 in the current quarter was the result of recognition
of compensation expense related to employee stock options, salary, recruiting
and relocation expenses associated with new employees and increased business
development expenses for Benign Prostatic Hyperplasia (BPH),, liposome and gene
therapy.
The net increase in expenditures discussed above resulted in an
increase in the loss from operations for the three-month period ended December
31, 2003 of $1,029,291, or 53%, to $2,966,763 from $1,937,472 in the comparable
period during the prior fiscal year.
Interest income net of interest expense increased by 606% to $18,720
for the quarter ended December 31,
10
2003 from $2,651 during the comparable quarter in 2002. The increase of $16,069
was due to higher average cash balances, as a result of capital raising
activities during the intervening period.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, our expenses have significantly exceeded our revenues,
resulting in an accumulated deficit of $60,232,217 at December 31, 2003. We have
incurred negative cash flows from operations since our inception and have funded
our operations primarily through the sale of equity securities. As of December
31, 2003, we had cash of $12,272,407 and total current assets of $13,568,837,
compared with current liabilities of $986,839, resulting in a working capital
surplus of $12,581,998. As of September 30, 2003, we had $11,410,533 in cash and
total current assets of $12,405,093, compared with current liabilities of
$1,393,499, which resulted in a working capital surplus of $11,011,594 at the
fiscal year end. Net cash used in the Company's operating activities was
$2,758,888 for the three months ending December 31, 2003.
On December 12, 2003, the Company issued 4,550,000 shares of its Common
Stock and associated warrants to purchase 1,365,000 shares of its Common Stock
in connection with a private placement offering. The warrants issued to each
investor entitle such investor to purchase that number of shares of Common Stock
equal to 30% of the number of shares of Common Stock initially issued to the
investor in the offering. The warrants are exercisable at $1.25 per share of
Common Stock, subject to call under certain circumstances. In connection with
the private placement offering, the Company issued warrants to a finder to
purchase 473,200 shares of its Common Stock at an exercise price of $0.88 per
share. The Company realized gross proceeds in the amount of $4,004,000 and paid
a cash finders' fee in the amount of $320,320 in connection with the sale of
these securities. In addition, during the quarter, the Company issued a total of
196,500 shares of its Common Stock for cash consideration of $119,575 upon
exercise of outstanding stock purchase warrants. The warrants were exercised in
accordance with their respective terms at prices ranging from $0.54 to $0.65 per
share. The Company also issued 5,000 shares of its Common Stock for a cash
consideration of $2,000 upon exercise of a stock option.
During the three months ended December 31, 2003, we expended
approximately $2,109,795 (including research and development outlays,
compensation expenses, including recruitment and relocation expenses for new
employees, expenses relating to previously repriced stock options and increased
business development costs for BPH, liposome and gene therapy products) for
clinical testing of our breast cancer, BPH and prostate cancer treatment
systems, as well as corporate overhead. For fiscal year ending December 31,
2004, we expect to expend approximately $10 million for clinical testing of our
breast cancer, prostate cancer and liver cancer treatment systems, as well as
corporate overhead, all of which we have funded, or expect to fund, from our
current resources. If, as currently anticipated, our BPH system is approved for
marketing during the course of fiscal 2004, funding could be generated from
product sales. The foregoing amounts are estimates based upon assumptions as to
the scheduling of institutional clinical research and testing personnel, the
timing of clinical trials and other factors which are not fully predictable or
within our control.
We anticipate that our available cash on hand will be sufficient to
fund our activities through December 31, 2004. However, our dependence on
raising additional capital beyond fiscal 2004 will continue at least until we
are able to begin marketing our new technologies. Our future capital
requirements and the adequacy of our financing depend upon numerous factors,
including the successful commercialization of our BPH 800 system and breast
cancer treatment systems, progress in product development efforts, progress with
pre-clinical studies and clinical trials, the cost and timing of production
arrangements, the development of effective sales and marketing activities, the
cost of filing, prosecuting, defending and enforcing intellectual property
rights, competing technological and market developments and the development of
strategic alliances for the marketing of our products. We will be required to
obtain additional funding through equity or debt financing, strategic alliances
with corporate partners and others, or through other sources not yet identified.
We do not have any committed sources of additional financing, and cannot
guarantee that additional funding will be available in a timely manner, on
acceptable terms, or at all. If adequate funds are not available, we may be
required to delay, scale back or eliminate certain aspects of our operations or
attempt to obtain funds through unfavorable arrangements with partners or others
that may require us to relinquish rights to certain of our technologies, product
candidates, products or potential markets or which otherwise may be materially
unfavorable to us. Furthermore, if we cannot fund our ongoing development and
other operating requirements, particularly those associated with our obligation
to conduct clinical trials under our licensing agreements, we will be in breach
of our commitments under those licensing agreements and could therefore lose our
license rights, which could have material adverse effects on our business.
11
On January 21, 2003, Celsion entered into an agreement with Boston
Scientific under which Boston Scientific will market and distribute the
Company's BPH 800 treatment system. In connection with this agreement, Boston
Scientific purchased 9,375,354 shares of Celsion Common Stock for an initial
investment of $5,000,000 and agreed to invest an additional $10 million in a
combination of equity and licensing fees upon Celsion meeting certain
milestones. Further investments by Boston Scientific would contribute to
Celsion's funding requirements for the future.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
We have conducted an evaluation of the effectiveness of the design and
operation of our disclosure controls and procedures (as such term is defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) under
the supervision of our Chief Executive Officer and Chief Financial Officer as of
the end of the fiscal quarter covered by this Quarterly Report on Form 10-Q.
Based on this evaluation, our Chief Executive Officer and Chief Financial
Officer have concluded that, as of December 31, 2003, our disclosure controls
and procedures were effective to ensure that information required to be
disclosed in reports that Celsion files or submits under the Exchange Act is
recorded, processed, summarized and reported in a timely manner. In designing,
implementing and evaluating our disclosure controls and procedures, our
management recognizes that any controls and procedures, no matter how well
designed and implemented, may not be effective in all circumstances. However, we
believe that our disclosure controls and procedures provide reasonable assurance
of achieving the desired disclosure control objectives.
There have not been any significant changes in our internal controls or
in other factors subsequent to the date the evaluation was completed that could
significantly affect such controls and no corrective actions have been required
with regard to significant deficiencies and material weaknesses.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
During the fiscal quarter ended December 31, 2003, the Company issued
5,000 shares of its Common Stock for a cash consideration of $2,000 upon
exercise of a stock option. Additionally, the Company issued the following
securities without registration under the Securities Act of 1933, as amended
(the "Securities Act"):
- On December 12, 2003, the Company issued 4,550,000 shares of its Common
Stock and associated warrants to purchase 1,365,000 shares of its
Common Stock in connection with a private placement offering. The
private placement offering was made exclusively to "accredited
investors" as that term is defined in Rule 501 under the Securities
Act. These securities were issued at a price of $0.88 per share and
associated fractional warrant. The warrants issued to each investor
entitle such investor to purchase that number of shares of Common Stock
equal to 30% of the number of shares of Common Stock initially issued
to the investor in the offering. The warrants are exercisable at $1.25
per share of Common Stock, subject to call under certain circumstances.
In connection with the private placement offering, the Company issued
warrants to a finder to purchase 473,200 shares of its Common Stock at
an exercise price of $0.88 per share. The Company realized gross
proceeds in the amount of $4,004,000 and paid a cash finders' fee in
the amount of $320,320 in connection with the sale of these securities.
The shares issued are restricted stock, endorsed with the Company's
standard restricted stock legend, with a stop transfer instruction
recorded by the transfer agent. The certificates representing the
warrants have a similar restrictive legend. Accordingly, the Company
views the shares issued as exempt from registration under Sections 4(2)
and/or 4(6) of the Securities Act.
- During the quarter, the Company issued a total of 196,500 shares of its
Common Stock for cash
12
consideration of $119,575 upon exercise of outstanding stock purchase
warrants. The warrants were exercised in accordance with their
respective terms at prices ranging from $0.54 to $0.65 per share. These
shares are restricted stock, and the certificates representing such
shares are endorsed with Celsion's standard restrictive legend, with a
stop transfer instruction recorded by the transfer agent. Accordingly,
Celsion views the shares issued as exempt from registration under
Sections 4(2) and/or 4(6) of the Securities Act
- During the quarter, from time to time the Company also issued a total
of 62,567 shares of its Common Stock to four outside consultants for
services valued at $67,697. These shares are restricted stock, endorsed
with the Company's standard restricted stock legend, with stop transfer
instructions recorded by the transfer agent. Accordingly, the Company
views the shares issued as exempt from registration under Sections 4(2)
and/or 4(6) of the Securities Act.
- During the quarter, the Company issued a total of 96,334 shares of its
Common Stock to its non-employee directors for service as members of
the Board of Directors for fiscal year ended September 30, 2003. The
Company also issued 22,938 shares of its Common Stock to one of its
non-employee directors as expense reimbursement in lieu of cash. These
shares are restricted stock, endorsed with the Company's standard
restricted stock legend, with a stop transfer instruction recorded by
the transfer agent. Accordingly, the Company views the shares issued as
exempt from registration under Sections 4(2) and/or 4(6) of the
Securities Act.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
3.1 Certificate of Incorporation of the Corporation, as amended
(compiled)
3.2 Bylaws of the Corporation, as amended (compiled)
11 Statement Re. Computation of Earnings Per Share.
31.1 Certification of Chief Executive Officer pursuant to Rule
13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to Rule
13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K.
On December 3, 2003, the Company filed with the SEC a Current
Report on Form 8-K reporting, under Item 5, that, effective
December 31, 2003, it is changing its fiscal year end from
September 30 to December 31.
13
On December 19, 2003, the Company filed with the SEC a Current
Report on Form 8-K reporting, under Item 5, that on December
12, 2003, it completed a private placement of 4,550,000 shares
of its Common Stock, par value $0.01 per share and warrants to
purchase 1,365,000 shares of Common Stock (representing 30%
warrant coverage) exercisable at $1.25 per share. The
placement was priced at $0.88 per share and associated warrant
and yielded gross proceeds of approximately $4 million. The
proceeds from the private placement will, after the payment of
transaction costs, be used to continue the development of the
Company's heat-activated liposomes and Cancer Repair Inhibitor
(CRI) technologies and for working capital and general
corporate purposes through the end of 2004. The Company also
issued warrants to purchase approximately 437,200 shares of
Common Stock, exercisable at $0.88 per share, as compensation
to its finder.
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATE: February 17, 2004
CELSION CORPORATION
-------------------
Registrant
By: /s/ Augustine Y. Cheung
-----------------------
Augustine Y. Cheung
President and Chief Executive Officer
By: /s/Anthony P. Deasey
-----------------------
Anthony P. Deasey
Executive Vice President-Finance and
Administration
15