(in thousands)
|
Product
Development
|
Recruiting
Services*
|
Total
|
|---|
Three Months Ended September 30, 2002 |
|
|
| |
|
| |
|
| |
|
Revenues from external customers | | |
| 1 |
|
| -- |
|
| 1 |
|
Intersegment sales | | |
| -- |
|
| -- |
|
| -- |
|
Collaborative, grant & other income | | |
| 17 |
|
| -- |
|
| 17 |
|
Interest income | | |
| 21 |
|
| -- |
|
| 21 |
|
Interest expense | | |
| -- |
|
| -- |
|
| -- |
|
Depreciation and amortization | | |
| 359 |
|
| -- |
|
| 359 |
|
Common stock and warrants issued for services | | |
| 88 |
|
| -- |
|
| 88 |
|
Equity in loss from minority-owned entity | | |
| (128 |
) |
| -- |
|
| (128 |
) |
Segment profit (loss) | | |
| (2,479 |
) |
| -- |
|
| (2,479 |
) |
Total assets | | |
| 11,146 |
|
| -- |
|
| 11,146 |
|
Capital expenditures | | |
| -- |
|
| -- |
|
| -- |
|
|
| |
Nine Months Ended September 30, 2003 | | |
Revenues from external customers | | |
| -- |
|
| -- |
|
| -- |
|
Intersegment sales | | |
| -- |
|
| -- |
|
| -- |
|
Collaborative, grant & other income | | |
| 40 |
|
| -- |
|
| 40 |
|
Interest income | | |
| 47 |
|
| -- |
|
| 47 |
|
Interest expense | | |
| -- |
|
| -- |
|
| -- |
|
Depreciation and amortization | | |
| 549 |
|
| -- |
|
| 549 |
|
Common stock and warrants issued for services | | |
| 1,822 |
|
| -- |
|
| 1,822 |
|
Equity in loss from minority-owned entity | | |
| (245 |
) |
| -- |
|
| (245 |
) |
Segment profit (loss) | | |
| (8,868 |
) |
| -- |
|
| (8,868 |
) |
Total assets | | |
| 19,389 |
|
| -- |
|
| 19,389 |
|
Capital expenditures | | |
| 2 |
|
| -- |
|
| 2 |
|
|
| |
Nine Months Ended September 30, 2002 | | |
Revenues from external customers | | |
| -- |
|
| 22 |
|
| 22 |
|
Intersegment sales | | |
| -- |
|
| -- |
|
| -- |
|
Collaborative, grant & other income | | |
| 1,151 |
|
| -- |
|
| 1,151 |
|
Interest income | | |
| 83 |
|
| -- |
|
| 83 |
|
Interest expense | | |
| -- |
|
| -- |
|
| -- |
|
Depreciation and amortization | | |
| 734 |
|
| -- |
|
| 734 |
|
Common stock and warrants issued for services | | |
| 337 |
|
| -- |
|
| 337 |
|
Equity in loss from minority-owned entity | | |
| (128 |
) |
| -- |
|
| (128 |
) |
Segment profit (loss) | | |
| (3,594 |
) |
| 5 |
|
| (3,589 |
) |
Total assets | | |
| 11,146 |
|
| -- |
|
| 11,146 |
|
Capital expenditures | | |
| -- |
|
| -- |
|
| -- |
|
* The activities of the Spectrum
Recruitment Research segment were terminated effective February 1, 2002.
9
Item 2. —
Management’s Discussion and Analysis of Financial Condition And Results of Operations
Forward Looking Statements
This report and other documents that
we file with the Securities and Exchange Commission contain forward looking statements
that are based upon our current expectations, beliefs, estimates, forecasts and
projections about us, our business and our future performance. In addition, we, or others
on our behalf, may make forward looking statements in press releases or written
statements, or in our communications and discussions with investors and analysts in the
normal course of business through meetings, webcasts, phone calls, and conference calls.
Words such as “expect,” “anticipate,” “outlook,”
“could,” “target,” “project,” “intend,”
“plan,” “believe,” “seek,” “estimate,”
“should,” “may,” “assume,” “continue,” or
variations of such words and similar expressions are intended to identify such forward
looking statements. These statements are not guarantees of future performance and involve
certain risks, uncertainties, and assumptions that are difficult to predict, including
without limitation those risks identified under “Risk Factors” set forth below.
We have based our forward looking statements on our management’s beliefs and
assumptions based on information available to our management at the time the statements
are made. We caution you that actual outcomes and results may differ materially from what
is expressed, implied, or forecast by our forward looking statements. Except as required
under the federal securities laws and the rules and regulations of the Securities and
Exchange Commission, we do not have any obligation and do not intend to update publicly
any forward looking statements after the distribution of this report, whether as a result
of new information, future events, changes in assumptions or otherwise..
Liquidity and Capital
Resources
At September 30, 2003, we had cash,
cash equivalents and short-term investments of $13,093,000 and net assets of $17,805,000
compared to $1,789,000 and $7,959,000, respectively, at December 31, 2002. Working capital
totaled $12,815,000 at September 30, 2003, compared to $1,638,000 at December 31, 2002. We
have committed approximately $7,667,000 of our cash and cash equivalents to the current
and future operations of our obesity and type II diabetes subsidiary. Accordingly, these
funds committed to that subsidiary are not available for other corporate purposes.
Subsequent to our merger with Global
Genomics Capital, Inc. (“Global Genomics”) in July 2002, we modified our
corporate business strategy by discontinuing any additional internal research and
development efforts for any of our then existing products or technologies. In October
2003, we licensed our co-polymer technologies, including FLOCOR, Opti-Vax and related
anti-infective products, on an exclusive basis to SynthRx, Inc., a Houston, Texas-based
biopharmaceutical company. Our spending for each of these technologies, which were the
principal technologies that we held prior to our merger with Global Genomics that we had
not already licensed to a third party, now will primarily relate to supporting the
licensee. We may also pursue product or technology acquisition opportunities, such as the
license agreements with the University of Massachusetts Medical School discussed below.
In April 2003 and May 2003, we
entered into exclusive license agreements with the University of Massachusetts Medical
School (“UMass”) covering potential applications for UMass’s proprietary
gene silencing technology in the treatment of specified diseases, including those within
the areas of ALS (also know as Lou Gehrig’s disease), obesity and type II diabetes,
covering a gene-based cancer therapy technology and covering a proprietary DNA-based
vaccine technology. RNA interference (RNAi), referred to as gene silencing, has been shown
to effectively silence a targeted disease-causing gene within a living cell. The
technology essentially uses ribonucleic acid (RNA) to selectively turn off the harmful
genes of infectious viruses or malignant tumor cells. In consideration of the licenses, we
made aggregate cash payments to UMass of approximately $204,000 and issued it a total of
1,828,359 shares of our common stock, which were valued for financial statement purposes
at $1,829,000. In September 2003, we agreed to make a further payment of $10,000
to UMass in connection with our receiving an exclusive license from UMass to
additional technology under one of these licenses. As part of our strategic alliance with UMass, we also agreed to fund
certain pre-clinical research at UMass relating to the use of its gene silencing
technology for the development of therapeutic products within the fields of obesity and
type II diabetes, ALS and human cytomegalovirus retinitis. Although we intend to
internally fund the early stage development work for certain gene silencing product
applications, we may seek as part of our corporate business strategy to secure strategic
alliances or license agreements with larger pharmaceutical companies to fund subsequent
development of these potential products.
10
In addition to our license with
SynthRx, we currently have three license agreements for our technologies – with Merck
& Co, Inc. (TranzFect), Vical, Incorporated (TranzFect), and Ivy Animal Health, Inc.
(CRL-8761). From the dates that we entered into these three agreements through September
30, 2003, we have received approximately $7,028,000 in upfront fees, milestone payments and annual
maintenance fees pursuant to these agreements, and have the potential to receive in excess
of $6,700,000 in additional milestone fees, plus additional maintenance fees and royalties on
eventual sales of approved products of from 1% to 5% of net sales by the licensees. Merck
continues to study the use of TranzFect with their HIV vaccine development program. We
have the potential to receive future milestone payments from Merck of up to $3,000,000 for
an HIV vaccine utilizing the TranzFect technology and, under certain circumstances, a
royalty equal to 1% of Merck’s net sales of an HIV vaccine product utilizing the
TransFect technology. In July 2003, Merck notified us that they were returning to us the
rights to the additional three infectious disease targets covered by our license
agreement. We intend now to seek additional licensees for these additional disease
indications.
We believe that we will have adequate
working capital to allow us to operate at our currently planned levels at least
through early 2005. Our strategic alliance with UMass may require us to make
significant expenditures to fund research at that medical institution relating to
developing therapeutic products based on that institution’s proprietary gene
silencing technology that has been licensed to us. The aggregate amount of these
expenditures under certain circumstances could range from approximately $1,400,000 to
$1,600,000 annually over the next three years. Our license agreements with UMass also
provide in certain cases for milestone payments based on the progress made by us in the
clinical development of products utilizing the licensed technologies and the marketing of
these products. These milestone payments could aggregate over time up to $12,255,000 if we
successfully complete the development of six separate products. We also have committed to
fund sponsored research at Massachusetts General Hospital (“Mass General”)
totaling approximately $279,000 during the first year and approximately $278,000 during
the second year of this program These potentially required sponsored research and
milestone payment expenditures could substantially exceed our current financial resources
and require us to raise additional capital or secure a licensee or strategic partner to
fulfill our obligations to UMass and Mass General and to complete the development of any
products based on the technologies that we have licensed from UMass.
We also may require additional
working capital in order to fund any product acquisitions that we consummate. Any
additional capital requirements may be provided by potential milestone payments pursuant
to the Merck and Vical licenses or by potential payments from future strategic alliance
partners or licensees of our technologies. However, Merck is at an early stage of clinical
trials of a product utilizing TranzFect, and Vical has not yet commenced any clinical
trials of a product utilizing TranzFect so there is likely to be a substantial period of
time, if ever, before we receive any further significant payments from Merck or Vical. We
may also pursue other sources of capital, although we do not currently have commitments
from any third parties to provide us with capital. The results of our technology licensing
efforts and the actual proceeds of any fund-raising activities will determine our ongoing
ability to operate as a going concern. These efforts are subject to market conditions and
our ability to identify parties that are willing and able to enter into such arrangements
on terms that are satisfactory to us. There is no assurance that such funding will be
available to finance our operations on acceptable terms, if at all.
Our ability to obtain future
financings through joint ventures, product licensing arrangements, equity financings or
otherwise is subject to market conditions and our ability to identify parties that are
willing and able to enter into such arrangements on terms that are satisfactory to us.
There can be no assurance that we will be able to obtain future financing from these
sources. Additionally, depending upon the outcome of our fund raising efforts, the
accompanying financial information may not necessarily be indicative of future operating
results or future financial condition.
Results of Operations
We recorded net losses of $2,907,000
and $8,868,000 for the three month and nine month periods ended September 30, 2003 as
compared to $2,479,000 and $3,589,000 for the same periods in 2002.
From 1996 to 2002, we marketed the
services of a small group of human resources professionals under the name of Spectrum
Recruitment Research (“Spectrum”) as a way of offsetting our cost of maintaining
this function. In February 2002 the operations of Spectrum were terminated and the rights
to use the Spectrum tradenames were transferred to Albert, Isaac & Alexander, Inc., a
consulting firm comprised of former Spectrum employees. No service revenues for Spectrum
were recorded during 2003. Service revenues related to Spectrum were $0 and $22,000 during
the three month and nine month periods ended September 30, 2002, respectively. Cost of
service revenues were $0 and $11,000 during the three month and nine month periods ended
September 30, 2002, respectively.
11
No license fee income has been
recorded during 2003. License fee income was $0 and $1,001,000 during the three month and
nine month periods ended September 30, 2002, respectively. License fees for 2002 consisted
primarily of a milestone fee received in the first quarter of 2002 from Merck related to
the commencement by Merck of a Phase I human clinical trial incorporating our TranzFect
technology.
Interest income was $20,000 and
$47,000 during the three month and nine month periods ended September 30, 2003, as
compared to $21,000 and $83,000 for the same periods of 2002. The variance generally
corresponds to fluctuating cash and investment balances and declining interest rates.
No grant income has been recorded
during 2003. Grant income was $0 and $46,000 during the three month and nine month periods
ended September 30, 2002. Costs related to grant income are included in research and
development expense and generally approximate the amount of revenue recognized. Grant
income recognized in 2002 primarily relates to SBIR (Small Business Innovative Research)
grants we received from the National Institutes of Health in support of our research and
development activities.
Other income was $13,000 and $40,000
during the three month and nine month periods ended September 30, 2003 as compared to
$17,000 and $103,000 for the same periods in 2002. Other income primarily consists of
subrental revenues for our former headquarters facility located in Atlanta, Georgia. The
decrease represents the effect of vacancy in the building during the first half of 2003.
During the fourth quarter of 2002, we accrued the estimated loss on the facility
represented by the difference between the total remaining lease obligations and estimated
operating costs through the remainder of the lease term, less estimated sublease income.
This accrual is being written off against the actual expenses as they occur.
Research and development expenses
were $1,459,000 and $3,732,000 during the three month and nine month periods ended
September 30, 2003, as compared to $67,000 and $743,000 for the same periods in 2002.
Subsequent to our merger with Global Genomics in July 2002, we modified our corporate
business strategy so that we have not pursued additional internal research and development
efforts for any of our then existing products or technologies, other than through
partnering or out-licensing this research and development work to outside parties. In
consideration of our license agreements with UMass (see discussion under “Liquidity
and Capital Resources”), we made cash payments to UMass and another medical
institution involved in developing the gene silencing technology of approximately
$239,000. We also issued a total of 1,828,359 shares of our common stock to UMass which
were valued for financial statement purposes at $1,829,000. The aggregate expense of
$2,068,000 was recorded during the second quarter of 2003. Research and development
expense during 2003 also includes a payment of $201,000 to UMass for sponsored research
related to developing therapeutic products in one area that are based on the gene
silencing technology that has been licensed to us by UMass. In connection with the
establishment of our obesity and type II diabetes subsidiary during 2003, we recorded
additional research and development expenses for the 5% minority interest of $350,000 held
by Dr. Michael P. Czech and research and development expense for our future commitment to
purchase that minority interest for 300,000 shares of our common stock in the amount of
$723,000. We expect our research and development expense to continue in the future at
levels at least equal to those for 2003, primarily as a result of our commitment to fund
research and development activities conducted at UMass and Mass General and the activities
of our obesity and type II diabetes subsidiary.
Depreciation and amortization expense
was $183,000 and $549,000 during the three month and nine month periods ended September
30, 2003, as compared to $359,000 and $734,000 for the same periods in 2002. The amounts
for 2003 consist almost entirely of amortization of intangible assets related to our
acquisition of Global Genomics in July 2002. During the fourth quarter of 2002, we
recorded an impairment loss equal to the net book value of most of our equipment and
related leasehold improvements associated with FLOCOR. As a result of the recognition of
this impairment charge, our property balances have been reduced to a nominal amount as of
December 31, 2002, and therefore, our depreciation expense related to these assets will be
nominal for the foreseeable future.
12
From time to time, we issue shares of
our common stock or warrants to purchase shares of our common stock to consultants and
other service providers in exchange for services. For financial statement purposes, we
value these shares or warrants at the fair market value of the stock or warrants granted,
or the services received, whichever is more reliably measurable, and we recognize the
expense in the period in which a performance commitment exists or the period in which the
services are received, whichever is earlier. During each of the periods presented in the
accompanying condensed consolidated statements of operations, certain vesting criteria of
stock purchase warrants issued to consultants were achieved, resulting in aggregate
non-cash charges of $165,000 and $991,000 during the three and nine month periods ended
September 30, 2003, and $88,000 and $229,000 during the same periods in 2002. We also
recognized non-cash charges of $19,000 and $831,000 during the three and nine month
periods ended September 30, 2003 and $0 and $108,000 during the same periods in 2002 for
shares of our common stock issued to consultants. These charges are combined and reported
as a separate line item on the accompanying condensed consolidated statements of
operations.
In connection with our merger with
Global Genomics, we terminated the services of all of our then current officers on July
16, 2002, resulting in total expenses recognized for severance, stay bonuses, accrued
vacation and other contractual payments of approximately $1,394,000.
Selling, general and administrative
expenditures were $1,030,000 and $2,610,000 during the three month and nine month periods
ended September 30, 2003, as compared to $481,000 and $1,496,000 for the same periods in
2002. Our new corporate business strategy contributed to the increase for 2003 resulting
in (a) a greater use of consultants for technical, financial and business development
advisory services and (b) a higher legal and accounting costs.
For the three month and nine month
periods ended September 30, 2003, we recorded $2,000 as the minority interest share in the
losses of our obesity and type II diabetes subsidiary. This amount is reported as a
separate line item in the accompanying condensed consolidated statements of operations.
We record our portion of the losses
of Blizzard Genomics on the equity method. For the three month and nine month periods
ended September 30, 2003, we recorded $87,000 and $245,000 as our share in the loss of
Blizzard Genomics. For the three month and nine month periods ended September 30, 2002, we
recorded $128,000 as our share in the loss of Blizzard Genomics. This amount is reported
as a separate line item in the accompanying condensed consolidated statements of
operations.
Related Party Transactions
In July 2002, the Company entered
into a services and facilities agreement with The Kriegsman Group (“TKG”) and
Kriegsman Capital Group (“KCG”), which was subsequently amended in January 2003
and July 2003, whereby TKG and KCG agreed to provide us with office space and certain
administrative services and TKG agreed to reimburse us for its use of certain of our
administrative personnel. TKG and KCG are owned by Steven A. Kriegsman, our President and
CEO. During the three month and nine month periods ended September 30, 2003, we paid
approximately $11,000 and $76,000 to TKG under this agreement. The charges are determined
based upon actual space used and estimated percentages of employee time used. We believe
that such charges approximate the fair value of the space and services provided. In
October 2003, the services and facilities agreement with TKG and KCG was terminated as
substantially all of the on-going operations of TKG and KCG have ceased.
Risk Factors
You should carefully consider the
following risks before deciding to purchase shares of our common stock. If any of the
following risks actually occur, our business or prospects could be materially adversely
affected and the trading price of our common stock could decline, and investors in our
securities could lose all or part of their investment. You should also refer to the other
information in this Quarterly Report, including our financial statements and the related
notes.
13
We Have Operated at a Loss and Will Likely Continue to Operate at a Loss For the Foreseeable Future
We have incurred significant losses
over the past five years, including net losses of approximately $8,868,000 for the nine
months ended September 30, 2003 (on an unaudited basis), and $6,176,000, $931,000 and
$348,000 for 2002, 2001 and 2000, respectively, and we had an accumulated deficit of
approximately $80,825,000 (on an unaudited basis) as of September 30, 2003. Our operating
losses have been due primarily to our expenditures for research and development on our
products and for general and administrative expenses and our lack of significant revenues.
We are likely to continue to incur operating losses until such time, if ever, that we
generate significant recurring revenues. Unless we are able to acquire products from third
parties that are already being marketed and that can be profitably marketed by us, it will
take a minimum of three years (and possibly longer) for us to generate recurring revenues,
since we anticipate that it will take at least several years before the development of any
of our licensed or other current potential products is completed, FDA marketing approvals
are obtained and commercial sales of any of these products can begin.
We Have No Source of
Significant Recurring Revenues, Which May Make Us Dependent on Financing to Sustain Our
Operations
Although we generated $3,751,000 in
revenues from milestone payments and license fees from our licensees during 2001 and
$1,051,000 from these sources during 2002, we do not have any significant sources of
recurring operating revenues. We will not have significant recurring operating revenues
until at least one of the following occurs:
We are likely to incur negative cash
from operations until such time, if ever, as we can generate significant recurring
revenues. Although we believe that we have adequate financial resources to support our
currently planned level of operations at least through early 2005, should we
thereafter be unable to generate recurring revenues, it is likely that we will become
dependent on obtaining financing from third parties to continue to meet our obligations to
the University of Massachusetts Medical School and maintain our operations, including our
planned levels of operations for our new obesity and type II diabetes subsidiary. We have
no commitments from third parties to provide us with any debt or equity financing.
Accordingly, financing may be unavailable to us or only available on terms that
substantially dilute our existing shareholders. A lack of needed financing could force us
to reduce the scope of or terminate our operations or to seek a merger with or be acquired
by another company. There can be no assurance that we would be able to identify an
appropriate company to merge with or be acquired by or that we could consummate such a
transaction on terms that would be attractive to our shareholders or at all.
Most of Our Revenues Have Been Generated by License Fees for TranzFect, Which May Not be a Recurring Source of Revenue
for Us
License fees paid to us with respect
to our TranzFect technology have represented 78%, 85% and 60% of our total revenues for
2002, 2001 and 2000, respectively. We have already licensed most of the potential
applications for this technology, and there can be no assurance that we will be able to
generate additional license fee revenues from any new licensees for this technology. Our
current licensees for TranzFect (Merck and Vical) may be required to make further
milestone payments to us under their licenses based on their future development of
products using TranzFect. However, Merck is at an early stage of clinical trials of a
product utilizing TranzFect, and Vical has not yet commenced any clinical trials of a
product utilizing TranzFect. Accordingly, there is likely to be a substantial period of
time, if ever, before we receive any further significant payments from Merck or Vical
under their TranzFect licenses.
14
We Have Changed Our Business
Strategy, Which Will Require Us in Certain Cases to Find and Rely Upon Third Parties for
the Development of Our Products and to Provide Us With Products
We have modified our prior business
strategy of internally developing FLOCOR and our other potential products not yet licensed
to third parties that we held prior to our merger with Global Genomics. We will now seek
to enter into strategic alliances, license agreements or other collaborative arrangements
with other pharmaceutical companies that will provide for those companies to be
responsible for the development and marketing of those products. In October 2003, we
licensed FLOCOR and our other co-polymer technologies, which were our principal
technologies that we held prior to our merger with Global Genomics that we had not already
licensed to a third party, to SynthRx, Inc. and entered into a strategic alliance with
that company. Although we intend to internally fund or carry out through our new obesity
and type II diabetes subsidiary the early stage development work for certain product
applications based on the gene silencing and other technologies that we have licensed from
the University of Massachusetts Medical School. We may seek to fund all of the later
stage development work for our potential ALS product that is based on our gene silencing
technology. The completion of the development and the manufacture and marketing of these
products will require substantial expenditures and other resources that we
currently do not possess and are likely to require in many cases that we enter into strategic alliances,
license agreements or other collaborative arrangements with larger pharmaceutical
companies for this purpose.
There can be no assurance that our
products will have sufficient potential commercial value to enable us to secure strategic
alliances, license agreements or other collaborative arrangements with suitable companies
on attractive terms or at all. If we enter into these arrangements, we will be dependent
upon the timeliness and effectiveness of the development and marketing efforts of our
contractual partners. If these companies do not allocate sufficient personnel and
resources to these efforts or encounter difficulties in complying with applicable FDA
requirements, the timing of receipt or amount of revenues from these arrangements may be
materially and adversely affected. By entering into these arrangements rather than
completing the development and then marketing these products on our own, we may suffer a
reduction in the ultimate overall profitability for us of these products. If we are unable
to enter into these arrangements for a particular product, we may be required to either
sell the product to a third party or abandon it unless we are able to raise sufficient
capital to fund the substantial expenditures necessary for development and marketing of
the product.
We will also seek to acquire products
from third parties that already are being marketed or have previously been marketed. We
have not yet identified any of these products. It may be difficult for us to acquire these
types of products with our limited financial resources, and we may incur substantial
shareholder dilution if we acquire these products with our securities. We do not have any
prior experience in acquiring or marketing products and may need to find third parties to
market these products for us. We may also seek to acquire products through a merger with
one or more privately held companies that own such products. Although we anticipate that
we would be the surviving company in any such merger, the owners of the private company
could be issued a substantial or even controlling amount of stock in our company.
Our New Obesity and Type
II Diabetes Subsidiary May Not Be Able to Develop Products
In order to develop new obesity and
type II diabetes products, our new subsidiary will first need to identify appropriate drug
targets and pathways. We will be using novel RNAi-based techniques to accelerate this
process, but there is no assurance that these techniques will accelerate our work or that
we will be able to identify highly promising targets or pathways using these techniques or
otherwise. Even if we are successful in identifying these targets or pathways, we will
need to then develop proprietary molecules that are safe and efficacious against these
targets. This development process and the clinical testing of our potential products will
take a lengthy period of time and involve expenditures substantially in excess of our
current financial resources. We currently plan to seek a strategic alliance with a major
pharmaceutical company at a relatively early stage in our development work to complete the
development, clinical testing and manufacturing and marketing of our obesity and type II
diabetes products, but we may not be able to secure such a strategic partner on attractive
terms or at all. We do not have prior experience in operating a genomic and
proteomic-based drug discovery company. Accordingly, we will be heavily dependent on the
prior experience and current efforts of Dr. Michael P. Czech, the Chairman of the
Scientific Advisory Board of our subsidiary, in establishing the scientific goals and
strategies of our subsidiary, and Dr. Mark A. Tepper, the President of our subsidiary, in
managing the operations of this subsidiary.
15
We Will Be Reliant Upon
SynthRx to Develop and Commercialize FLOCOR
In October 2003, we licensed FLOCOR
and our other co-polymer technologies to SynthRx and acquired a 19.9% equity interest in
that newly formed biopharmaceutical company. SynthRx has only limited financial resources
and will have to either raise significant additional capital or secure a licensee or
strategic partner to complete the development and commercialization of FLOCOR and these
other technologies. SynthRx does not have any commitments from third parties to provide
the capital that it will require and there can be no assurance that it will be able to
obtain this capital or a licensee or strategic partner on satisfactory terms or at all.
Our prior Phase III clinical trial of
FLOCOR for the treatment of sickle cell disease patients experiencing an acute
vaso-occlusive crisis did not achieve its primary objective. However, in this study, for
patients 15 year of age or younger, the number of patients achieving a resolution of
crisis was higher for FLOCOR-treated patients at all time periods than for placebo-treated
patients, which may indicate that future clinical trials should focus on juvenile
patients. To generate sufficient data to seek FDA approval for FLOCOR will require
additional clinical studies, which will entail substantial time and expense for SynthRx.
The manufacture of FLOCOR involves obtaining new raw drug substance and a supply of the
purified drug from the raw drug substance, which requires specialized equipment. Should
SynthRx encounter difficulty in obtaining the purified drug substance in sufficient
amounts and at acceptable prices, SynthRx may be unable to complete the development or
commercialization of FLOCOR on a timely basis or at all.
Our Current Financial
Resources May Limit Our Ability to Execute Certain Strategic Initiatives
On September 30, 2003 we had
approximately $13,093,000 in cash and cash equivalents and approximately $12,815,000 in
working capital. Our cash and working capital position have significantly improved,
primarily as the result of our completing a $8,695,000 private equity financing in
September 2003, although we have used approximately $7,000,000 of the net proceeds of the
financing for the initial capital of our new obesity and type II diabetes subsidiary and
the balance of such proceeds are expected to be available for the future operating needs
of that subsidiary. Our recently modified product development strategy calls for seeking
strategic alliances and our other potential products that we had prior to our merger with
Global Genomics. Although we are not doing any further development work on TranzFect, our
two licensees for this technology (Merck & Co. and Vical Incorporated) are continuing
to do development work on product applications for this technology that could entitle us
to future milestone payments should they continue with this work and it successfully meets
the defined milestones, as well as future royalty payments should either of these
licensees commercialize products based on our technology. However, there can be no
assurance that our licensees will continue to develop or ever commercialize any products
that are based on our TranzFect technology.
Our strategic alliance with the
University of Massachusetts Medical School may require us to make significant expenditures
to fund research at that medical institution relating to developing therapeutic products
based on that institution’s proprietary technology that has been licensed to us. We
estimate that the aggregate amount of these sponsored research expenditures under certain
circumstances could range from approximately $1,400,000 to $1,600,000 annually over the
next three years. We have also agreed to fund approximately $557,000 of sponsored research
at Massachusetts General Hospital over the next two years. Our license agreements with the
University of Massachusetts Medical School also provide in certain cases for milestone
payments based on the progress made by us in the clinical development of products
utilizing the technologies licensed from the University of Massachusetts Medical School
and the marketing of these products. These milestone payments could aggregate over time up
to $12,255,000 if we successfully complete the development of six separate products.
Our potentially required expenditures
under our agreements with the University of Massachusetts Medical School, together with
the operating capital requirements of our new obesity and type II diabetes subsidiary and
our planned sponsored research funding for Massachusetts General Hospital, could
substantially exceed our current financial resources and require us to raise additional
capital or secure a licensee or strategic partner to fulfill our obligations to the
University of Massachusetts Medical School and to develop any products based on the
technologies that we have licensed from that medical institution or to continue the
operations of our new subsidiary at their currently contemplated level. If we are unable
to meet our various financial obligations under our license agreements with the University
of Massachusetts Medical School, we could lose all of our rights under these agreements.
We could also be forced to reduce the level of operations of our new subsidiary or
discontinue those operations if we had inadequate financial resources at that time.
16
If Our Products Are Not Successfully Developed and Approved by the FDA, We May Be Forced to Reduce or Terminate Our
Operations
Each of our products is in the
development stage and must be approved by the FDA or similar foreign governmental agencies
before they can be marketed. The process for obtaining FDA approval is both time-consuming
and costly, with no certainty of a successful outcome. This process typically includes the
conduct of extensive pre-clinical and clinical testing, which may take longer or cost more
than we or our licensees currently anticipate due to numerous factors such as:
difficulty in securing centers to conduct trials
difficulty in enrolling patients in conformity with required
protocols or projected timelines
unexpected adverse reactions by patients in trials
difficulty in obtaining clinical supplies of the product
changes in the FDA s requirements for our testing during the
course of that testing
inability to generate statistically significant data
confirming the efficacy of the product being tested
The gene silencing and other
technologies that we have acquired from the University of Massachusetts Medical School
have not yet been clinically tested by us, nor are we aware of any clinical trials having
been conducted by third parties involving similar gene silencing technologies. Our
TranzFect technology is currently in Phase I clinical trials that are being conducted by
our licensee, Merck & Co., as a component of a vaccine to prevent AIDS. Since
TranzFect is to be used as a component in vaccines, we do not need to seek FDA approval,
but the vaccine manufacturer will need to seek FDA approval for the final vaccine
formulation containing TranzFect. Our licensee, Merck & Co., has completed a
multi-center, blinded, placebo controlled Phase I trial of an HIV vaccine utilizing
TranzFect as a component. Although the formulation of this tested vaccine was generally
safe and well-tolerated and generated an immune response, the addition of TranzFect to the
vaccine did not increase this immune response. Moreover, the DNA single-modality vaccine
regimen with TranzFect when tested in humans yielded immune responses that were inferior
to those obtained with the DNA vaccines in macaque monkeys.
If Blizzard Genomics
Fails to Successfully Commercialize Its Products, the Value of Our Assets Will Be
Adversely Impacted
Blizzard Genomics, Inc., which is
Global Genomics’ principal portfolio company, has not yet commercialized any of its
products. Although Blizzard Genomics plans, subject to obtaining adequate financing, to
introduce its first product, the I-Scan Imager, a low cost DNA chip reader, in 2004, it
may experience delays in completing the development of or commercially launching this
product. Blizzard Genomics’ products will be used in research laboratories and will
not require FDA approval prior to their being marketed. These products are likely to face
intense market competition from existing products or technologies and products or
technologies that are developed in the future. Blizzard Genomics is the licensee of
several U.S. patents, and is seeking additional patent protection for its products and
technologies. There can be no assurance, however, that the company will be able to secure
sufficient patent coverage for its products and technologies. The failure of Blizzard
Genomics to successfully commercialize its products or our earlier determination that such
commercialization is unlikely would require us to write down or write off the substantial
carrying value of Global Genomics’ investment in that company as part of our assets,
which would not affect our cash position or working capital but would have a materially
adverse effect on our stockholders’ equity
17
Blizzard Genomics May Be
Unable to Raise Sufficient Funding to Commercialize Its Products, Which Would Adversely
Impact the Value of Our Assets
Blizzard Genomics has no working
capital and is currently seeking to raise up to $2,000,000 in capital to fund the
commercial launch of the I-Scan Imager™ and for its working capital needs. Blizzard
Genomics has been unable to date to obtain this capital. Failure to raise at least a
portion of this capital could delay Blizzard Genomics’ commercialization of its
products and might force it in the near future to suspend or terminate its operations.
Should Blizzard Genomics raise at least $500,000 in capital, it believes that it would
have sufficient funding to begin commercial marketing of the I-Scan Imager™ but would
require additional capital to complete development of any other products and might need
additional capital to support its operations. Any significant delay in the
commercialization of Blizzard Genomics’ products or the cessation of its operations
would adversely affect the carrying value of Global Genomics’ investment in that
company as part of our assets, which would have a materially adverse effect on our
stockholders’ equity but which would not affect our cash position or working
capital. We may consider making a further investment in Blizzard
Genomics and have had preliminary discussions with that company concerning a potential
investment by us. However, we have no obligation to make any new investment in that
company.
We Are Subject to Intense
Competition That Could Materially Impact Our Operating Results
We and our strategic partners or
licensees may be unable to compete successfully against our current or future competitors.
The pharmaceutical, biopharmaceutical and biotechnology industry is characterized by
intense competition and rapid and significant technological advancements. Many companies,
research institutions and universities are working in a number of areas similar to our
primary fields of interest to develop new products. There also is intense competition
among companies seeking to acquire products that already are being marketed. Many of the
companies with which we compete have or are likely to have substantially greater research
and product development capabilities and financial, technical, scientific, manufacturing,
marketing, distribution and other resources than at least some of our present or future
strategic partners or licensees.
As a result, these competitors may:
- Succeed in developing competitive products earlier than we or our strategic
partners or licensees
- Obtain approvals for such products from the FDA or other regulatory agencies
more rapidly than we or our strategic partners or licensees do
Obtain patents that block or otherwise inhibit the
development and commercialization of our product candidates
- Develop treatments
or cures that are safer or more effective than those we propose for our
products
Devote greater resources to marketing or selling their
products
Introduce or adapt more quickly to new technologies or
scientific advances
Introduce products that make the continued development of our
product candidates uneconomical
Withstand price competition more successfully than our
strategic partners or licensees can
More effectively negotiate third-party strategic alliances or
licensing arrangements
Take advantage of other opportunities more readily than we
can
A number of medical institutions and
pharmaceutical companies are seeking to develop products based on gene silencing
technologies. Companies working in this area include Sirna Therapeutics, Inc., Alnylam, Inc., Benitec, Nucleonics, Inc. and a number of the multinational
pharmaceutical companies. A number of products currently are being marketed by a variety
of the multinational or other pharmaceutical companies for treating type II diabetes, including among
others the diabetes drugs Avandia by Glaxo SmithKline PLC, Actos by Eli
Lilly & Co., Glucophage by Bristol Myers Squibb Co., and Starlix by Novartis and the
obesity drugs Xenical by F. Hoffman-La Roche Ltd.
18
and Meridia by Abbott Laboratories. Many
major pharmaceutical companies are also seeking to develop new therapies for these disease
indications. At least one company, Alnylam, is seeking to develop a therapeutic product
for obesity and type II diabetes based on an RNAi technology. Companies developing HIV
vaccines that could compete with our HIV vaccine technology include Merck, VaxGen, Inc.,
Epimmune, Inc., AlphaVax, Inc. and Immunitor Corporation.
Although we do not expect FLOCOR to
have direct competition from other products currently available or that we are aware of
that are being developed related to FLOCOR’s ability to reduce blood viscosity in the
cardiovascular area, there are a number of anticoagulant products that FLOCOR would have
to compete against, such as tissue plasminogen activator (t-PA) and streptokinase (blood
clot dissolving enzymes) as well as blood thinners such as heparin and coumatin, even
though FLOCOR acts by a different mechanism to prevent damage due to blood coagulation. In
the sickle cell disease area, FLOCOR would compete against companies that are developing
or marketing other products to treat sickle cell disease, such as Droxia (hydroxyurea)
marketed by Bristol-Myers Squibb Co. and Decitabine, which is being developed by SuperGen,
Inc.
Our TranzFect technology will compete
against a number of companies that have developed adjuvant products, such as the adjuvant
QS-21 marketed by Aquila Biopharmaceuticals, Inc. and adjuvants marketed by Corixa Corp.
Blizzard Genomics’ products will compete with a number of currently marketed
products, including those offered by Axon Instruments, Inc., Affymetrix, Inc., Applied
Precision, LLC, Perkin Elmer, Inc. and Agilent Technologies, Inc.
We May Be Unable to
Protect Our Intellectual Property Rights, Which Could Adversely Affect the Value of Our
Assets
Obtaining and maintaining patent and
other intellectual property rights for our technologies and potential products is critical
to establishing and maintaining the value of our assets and our business. Although we
believe that we have significant patent coverage for our TranzFect technologies, there can
be no assurance that this coverage will be broad enough to prevent third parties from
developing or commercializing similar or identical technologies, that the validity of our
patents will be upheld if challenged by third parties or that our technologies will not be
deemed to infringe the intellectual property rights of third parties. We have a
non-exclusive license to a patent owned by the University of Massachusetts Medical School
and another institution that covers the general field of gene silencing. The specific
medical applications of the gene silencing technology and the other technologies that we
have licensed from the University of Massachusetts Medical School are covered by a number
of pending patent applications. However, other researchers have been active in the field
of gene silencing, and these researchers may hold or seek to obtain patents that could
make it more difficult or impossible for us to develop products based on the gene
silencing technology that we have licensed. Any litigation brought by us to protect our
intellectual property rights or by third parties asserting intellectual property rights
against us could be costly and have a material adverse effect on our operating results or
financial condition and make it more difficult for us to enter into strategic alliances
with third parties to develop our products or discourage our existing licensees from
continuing their development work on our potential products. If our patent coverage is
insufficient to prevent third parties from developing or commercializing similar or
identical technologies, the value of our assets is likely to be materially and adversely
affected.
We May Incur Substantial
Costs from Future Clinical Testing or Product Liability Claims
If any of our products are
alleged to be defective, they may expose us to claims for personal injury by
patients in clinical trials of our products or by patients using our
commercially marketed products. Even if the commercialization of one or more of
our products is approved by the FDA, users may claim that such products caused
unintended adverse effects. We currently do not carry product liability
insurance covering the use of our products in human clinical trials or the
commercial marketing of these products but anticipate that our licensees who are
developing our products will carry liability insurance covering the clinical
testing and marketing of those products. However, if someone asserts a claim
against us and the insurance coverage of our licensees or their other financial resources are inadequate to
cover a successful claim, such successful claim may exceed our financial
resources and cause us to discontinue operations. Even if claims asserted
against us are unsuccessful, they may divert management’s attention from our
operations and we may have to incur substantial costs to defend such claims.
19
Our Anti-Takeover
Provisions May Make It More Difficult to Change Our Management or May Discourage Others
From Acquiring Us and Thereby Adversely Affect Shareholder Value
We have a shareholder rights plan and
provisions in our bylaws that may discourage or prevent a person or group from acquiring
us without our board of directors approval. The intent of the shareholder rights plan and
our bylaw provisions is to protect our shareholders interests by encouraging anyone
seeking control of our company to negotiate with our board of directors.
We have a classified board of
directors, which requires that at least two stockholder meetings, instead of one, will be
required to effect a change in the majority control of our board of directors. This
provision applies to every election of directors, not just an election occurring after a
change in control. The classification of our board increases the amount of time it takes
to change majority control of our board of directors and may cause our potential
purchasers to lose interest in the potential purchase of us, regardless of whether our
purchase would be beneficial to us or our stockholders. The additional time and cost to
change a majority of the members of our board of directors makes it more difficult and may
discourage our existing shareholders from seeking to change our existing management in
order to change the strategic direction or operational performance of our company.
Our bylaws provide that directors may
only be removed for cause by the affirmative vote of the holders of at least a majority of
the outstanding shares of our capital stock then entitled to vote at an election of
directors. This provision prevents stockholders from removing any incumbent director
without cause. Our bylaws also provide that a stockholder must give us at least 120 days
notice of a proposal or director nomination that such stockholder desires to present at
any annual meeting or special meeting of stockholders. Such provision prevents a
stockholder from making a proposal or director nomination at a stockholder meeting without
us having advance notice of that proposal or director nomination. This could make a change
in control more difficult by providing our directors with more time to prepare an
opposition to a proposed change in control. By making it more difficult to remove or
install new directors, the foregoing bylaw provisions may also make our existing
management less responsive to the views of our shareholders with respect to our operations
and other issues such as management selection and management compensation.
Our Outstanding Options and Warrants and the Registrations of Our Shares Issued in the Global Genomics Merger and Our
Recent private Financings May Adversely Affect the Trading Price of Our Common Stock
As of November 10, 2003, there were
outstanding stock options and warrants to purchase 9,229,619 shares of our common stock
at exercise prices ranging from $0.01 to $7.75 per share. Our outstanding options and
warrants could adversely affect our ability to obtain future financing or engage in
certain mergers or other transactions, since the holders of options and warrants can be
expected to exercise them at a time when we may be able to obtain additional capital
through a new offering of securities on terms more favorable to us than the terms of
outstanding options and warrants. For the life of the options and warrants, the holders
have the opportunity to profit from a rise in the market price of our common stock without
assuming the risk of ownership. To the extent the trading price of our common stock at the
time of exercise of any such options or warrants exceeds the exercise price, such exercise
will also have a dilutive effect to our stockholders.
In August 2003, we registered a total
of 14,408,252 shares of our outstanding common stock and an additional 3,848,870 shares of
our common stock issuable upon exercise of outstanding options and warrants, which shares
and options and warrants were issued primarily in connection with our merger with Global
Genomics and the private equity financing that we completed in May 2003. We are in the
process of registering a total of 6,113,448 shares of our common stock, consisting of the
5,175,611 shares we issued or that are issuable upon exercise of the warrants that we
issued to the investors in connection with our $8,695,000 private equity financing in
September 2003, and an additional 937,837 shares of our common stock that we issued or
that are issuable upon the exercise of warrants having exercise prices ranging from $2.00
to $3.05 per share that we issued to certain other third parties. Both the availability
for public resale of these various shares and the actual resale of these shares could
adversely affect the trading price of our common stock.
20
We May Experience
Volatility in Our Stock Price, Which May Adversely Affect the Trading Price of Our Common
Stock
The market price of our common stock
has experienced significant volatility in the past and may continue to experience
significant volatility from time to time. Our stock price has ranged from $0.21 to $3.74
over the past three years. Factors such as the following may affect such volatility:
our quarterly operating results
announcements of regulatory developments or technological
innovations by us or our competitors
government regulation of drug pricing
developments in patent or other technology ownership rights
public concern regarding the safety of our products
Other factors which may affect our
stock price are general changes in the economy, financial markets or the pharmaceutical or
biotechnology industries.
Item 3. —
Quantitative and Qualitative Disclosures About Market Risk
Our financial intruments that are
sensitive to changes in interest rates are our investments and cash equivalents. As of
September 30, 2003, we held no investments other than amounts invested in money market
accounts. We are not subject to any other material market risks.
Item 4. –
Controls
and Procedures
Our Chief Executive Officer and Chief
Financial Officer, after evaluating the effectiveness of our disclosure controls and
procedures (as defined in Securities Exchange Act Rule 13a-15(e)) as of the end of the
quarterly period covered by this Form 10-Q, have concluded that the Company’s
disclosure controls and procedures are adequate and effective to reasonably ensure that
material information relating to us can be gathered, analyzed and disclosed on a timely
basis in the reports that we file under the Securities Exchange Act. There were no
significant changes made during our most recently completed fiscal quarter in our internal
control over financial reporting that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
PART II -
OTHER INFORMATION
Item 1 – Legal
Proceedings
On October 1, 2003, we were served
with a lawsuit filed by Madison & Wall Worldwide, Inc. (“M&W”) in
Circuit Court in Seminole County, Florida (Madison & Wall Worldwide vs. CytRx
Corporation). M&W is seeking damages of in excess of $700,000 in this lawsuit based on alleged breaches by us
of a contract under which M&W was to provide certain financial public relations and
other services to us. These alleged breaches include our failure to deliver 350,000 shares
of our common stock to M&W that M&W claims it was entitled to under this contract.
We believe this lawsuit is without merit and intend to vigorously contest this matter.
Item 2 — Changes in
Securities and Use of Proceeds
In September 2003, we issued a total
of 4,140,486 shares of our common stock and warrants to purchase a total of 1,035,125
shares of our common stock at $3.05 per share to twenty institutional investors and four
accredited investors for total cash consideration of $8,695,000. The shares of common
stock and warrants were issued in reliance upon an exemption from registration under the
Securities Act of 1933 provided by Regulation D. Cappello Capital Corp., Maxim Group LLC,
Cardinal Securities, LLC, Dunwoody Brokerage Services, Inc., J.P. Turner & Company,
LLC and Gilford Securities Inc. acted as the placement agents for the foregoing private
placement in September 2003. We issued warrants to nine employees of Cappello
Capital Corp. to purchase a total of 427,203 shares of our common stock at $2.10
per share; we
21
issued warrants to Cardinal
Securities to purchase 17,858 shares of our common stock at $3.05 per share; we
issued warrants to four employees of Dunwoody Brokerage Services to purchase
11,429 shares of our common stock at $3.05 per share; we issued warrants to
Gilford Securities to purchase 2,858 shares of our common stock at $2.10 per
share; we issued warrants to J.P. Turner to purchase 12,739 shares of our common
stock at $2.67 per share; and we issued warrants to Maxim Group and one employee
of Maxim Group to purchase 77,000 shares of our common stock at $2.10 per share.
The warrants were issued to these firms and their employees in reliance upon an
exemption from registration under the Securities Act of 1933 provided by
Regulation D.
In August 2003, we agreed to issue and in October 2003 we completed the
issuance to J.P. Turner & Company LLC of 275,000 shares of our common stock and
warrants to purchase 82,500 shares of our common stock at $2.00 per share in
connection with an extension of an agreement pursuant to which that firm
provides us with certain investment banking services. The shares of commons
stock and warrants were issued in reliance upon an exception from regulation
under the Securities Act of 1933 provided by Regulation D.
In July 2003, we issued 111,859
shares of our common stock to an individual upon his cashless exercise of a warrant to
purchase 200,000 shares of our common stock and 70,339 shares of our common stock to a
second individual upon his cashless exercise of a warrant to purchase 141,388 shares of
our common stock. In September 2003, we issued 102,084 shares of our common stock to an
investment banking firm upon its cashless exercise of a warrant to purchase 160,000 shares
of our common stock and 73,037 shares of our common stock to an individual upon his
cashless exercise of a warrant to purchase 176,735 shares of our common stock. The shares
of common stock issued to the foregoing individuals, and investment banking firm were
issued in reliance upon an exemption from registration under the Securities Act of 1933
provided by Regulation D.
Item 6. —
Exhibits
and Reports on Form 8-K
(a) Exhibits
The exhibits listed in the
accompanying Index to Exhibits are filed as part of this Quarterly Report on Form 10-Q.
(b) Reports on Form 8-K
On September 17, 2003, we filed a
Current Report on Form 8-K disclosing the completion of a private placement of our common
stock and warrants to purchase shares of common stock.
22
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:
November
11,
2003 |
CYTRX
CORPORATION
By:
/s/
C.
Kirk
Peacock
C.
Kirk
Peacock
Chief
Financial
Officer
(Principal
Financial
Officer)
|
23
INDEX TO EXHIBITS
Exhibit Number
|
|
Description
|
4.1 |
|
Form
of Common Stock Purchase Warrant between Company and each of the investors in
the September 16, 2003 private placement (incorporated herein by reference to
Exhibit 4.1 to the Company’s current report on Form 8-K filed on September 17,
2003) |
10.1 |
|
Form
of Securities Purchase Agreement, dated as of September 15, 2003, between the
Company and the Purchasers identified on the signatory page thereof
(incorporated herein by reference to Exhibit 10.1 to the Company’s current
report on Form 8-K filed on September 17, 2003) |
10.2 |
|
Form
of Registration Rights Agreement, dated as of September 15, 2003, between the
Company and the Purchasers identified on the signature page thereof
(incorporated herein by reference to Exhibit 10.2 to the Company s current
report on Form 8-K filed on September 17, 2003) |
10.3 |
|
Amended and Restated License Agreement dated as of September 15, 2003 between
University of Massachusetts Medical School and Company covering inhibition of
gene expression in adipocytes using interference RNA, certain data bases, the
use of endoplasmic reticulum stress response pathway of adipose cells to enhance
whole body insulin sensitivity, and receptor-activated reporter systems. + |
10.4 |
|
Second Amendment to Investment Banking Agreement dated as of August 13, 2003
between J.P. Turner & Company, LLC and the Company. |
10.5 |
|
Agreement dated as of July 17, 2003 between Dr. Louis J. Ignarro and the
Company. |
10.6 |
|
Employment Agreement dated as of August 1, 2003 between C. Kirk Peacock and the
Company. |
10.7 |
|
Employment Agreement dated as of September 17, 2003 between Mark A. Tepper and
Araios, Inc. |
10.8 |
|
Agreement of Settlement and Release dated August 8, 2003 among Corporate Capital
Group International Ltd., Inc, Peter Simone and the Company. |
10.9 |
|
Confirming letter dated September 19, 2003 to the engagement agreement dated May
16, 2003 between Cappello Capital Corp. and the Company |
10.10 |
|
Preferred Stock Purchase Agreement dated as of September 16, 2003 between Araios,
Inc. and the Company. |
10.11 |
|
Stockholders Agreement dated as of September 17, 2003 among Araios, Inc., Dr.
Michael Czech and the Company. |
10.12 |
|
Private Placement Agent Agreement dated September 15, 2003 between Dunwoody
Brokerage Services, Inc. and the Company |
10.13 |
|
Private Placement Agent Agreement dated September 15, 2003 between Gilford
Securities Incorporated and the Company |
10.14 |
|
Agreement dated as of September 16, 2003 between Maxim Group, LLC and the
Company |
31.1 |
|
Certification Pursuant to 15 U.S.C. Section 7241, as Adopted Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 |
32.1 |
|
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 |
+
Certain portions of this exhibit have been
omitted pursuant to a request for confidential treatment filed with the
Securities and Exchange Commission. Omitted portions have been filed separately
with the Securities and Exchange Commission.
24